Another resource which Africa is perhaps less noted for is oil. And it could become a serious source of finance for development in certain countries.
With a total estimate of more than 100 billion barrels, Africa held nearly a tenth of the world’s oil reserves in 2003. There are a total of 13 oil-producing countries on the continent. Nearly half of these are in north Africa.
For the African Economic Outlook, oil producers in sub-Saharan Africa can be divided into three categories; the old ones where production is in decline are Congo, Cameroon and Gabon. Then there are those where production is still on the increase: Angola and Nigeria, which is the continent’s biggest producer. The new members of the club are Equatorial Guinea, Chad and Sa~ o Tomé.
OPEC member Nigeria is one of the top ten oil producers in the world, with an output of over 2 million barrels per day. Moreover, according to the IEA, west Africa, together with Latin America, will contribute to most of the non-OPEC production increase until 2030. Africa as a whole is expected to see an increase in oil supply of 4.9 million barrels per day by 2020.
So how can this strong position be used for development? Many oil countries have suffered from the so-called “oil curse”, finding themselves heavily indebted and impoverished. According to the African Economic Outlook, some oil-producing countries are now seeking to take advantage of the high prices prevailing since 2003, to make better use of surplus revenue from this windfall and to improve transparency and governance in the oil sector.
A first step is cleaning up corruption. Some countries have signed up to the Extractive Industries Transparency Initiative (EITI), a programme that encourages governments and private companies to share information regarding their oil income. Several nations now have specific regulations for the use of oil revenue. In Nigeria and Congo, the budget is based on a very conservative estimate of the price of oil. Any surplus is deposited in a special account with the central bank.
In Algeria, the government’s budget for 2005 calls for a significant reduction of the primary non-oil deficit in order to reduce the government’s dependence on volatile oil income. Of course, high oil prices mean recent windfall gains for some, but because they mean higher import prices, many African oil importers will still see them as a curse. RJC
©OECD Observer No 249, May 2005
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