Nigeria and Angola, Sub-Saharan Africa’s biggest oil producers alone could lose $65 billion in income just as about 20 million jobs are at risk in Africa as the continent’s economies are projected to shrink this year due to the impact of the coronavirus pandemic, according to an African Union (AU) study.
African oil exporters are expected to see their budget deficits double this year while their economies shrink 3 percent on average, the report adds.
In Nigeria, skeletal activities are being carried out in all the oil fields because of the pandemic. The current drop in oil prices is hitting the country hard, making a big dent in government revenues and threatening the viability of upstream projects.
According to Petroleum Economist, the country is bracing to take a big hit from the collapse in oil prices resulting from the end of the Opec+ agreement and the Covid-19 pandemic. She is particularly vulnerable as it has yet to fully recover from the previous crash in 2014.
So far, Africa accounts for just a fraction of total cases of the disease which has infected more than one million people worldwide, according to a Reuters tally.
But African economies are already facing an impending global economic downturn, plummeting oil and commodity prices and an imploding tourism sector.
Before the onset of the pandemic, continent-wide gross domestic product (GDP) growth had been projected by the African Development Bank to reach 3.4percent this year.
However, in both scenarios modelled by the AU study – seen by Reuters and entitled “Impact of the coronavirus on the Africa economy” – GDP will now shrink.
Under what the AU researchers deemed their realistic scenario, Africa’s economy will shrink 0.8percent while the pessimistic scenario said there would be a 1.1percent dip.
Up to 15percent for foreign direct investment could disappear. The impact on employment will be dramatic.
“Nearly 20 million jobs, both in the formal and informal sectors, are threatened with destruction on the continent if the situation continues,” the analysis said.
African governments could lose up to 20 to 30percent of their fiscal revenue, estimated at 500 billion in 2019, it found.
Exports and imports are meanwhile projected to drop at least 35percent from 2019 levels, incurring a loss in the value of trade of around $270 billion. This at a time when the fight against the virus’ spread will lead to an increase in public spending of at least $130 billion.
Africa’s oil producers, which have seen the value of their crude exports plunge in past weeks will be among the worst hit.
African oil exporters are expected to see their budget deficits double this year while their economies shrink 3percent on average.
Africa has in recent years been among the fastest-growing regions in the world for tourism. But with borders now closed to prevent the disease’s spread and entire airlines grounded, the sector has been almost entirely shut down.
Countries where tourism constitutes a large part of GDP will see their economies contract by an average of 3.3percent this year. However, Africa’s major tourism spots Seychelles, Cape Verde, Mauritius, and Gambia will shrink at least 7 percent.
“Under the average scenario, the tourism and travel sector in Africa could lose at least $50 billion due to the covid-19 pandemic and at least 2 million direct and indirect jobs,” the AU study said.
Remittances from Africans living abroad – the continent’s largest financial inflow over the past decade – are unlikely to cushion the blow.
“With economic activity in the doldrums in many advanced and emerging market countries, remittances to Africa could experience significant declines,” the analysis found.
Olusola Bello with agency report
