Second Order Effects
The coronavirus (Covid-19 aka “the Rona”) which caused significant damage to the economy and loss of life has left Africa mostly untouched. However, the continent is especially vulnerable to the global economy as the various countries are export-dependent.
Additionally, the ongoing oil price war between Russia and Saudi Arabia is giving us a real life example of the proverb “when elephants fight it is the grass which gets trampled”. This has created the perfect storm.
Nigeria and Angola, Africa’s two biggest oil producers, have assumed prices of $57 and $55 a barrel in their budgets
respectively. Brent crude is currently around $33.
Additionally, as a result of the ongoing economic malaise many Nigerians are selling Naira in exchange for Dollars, in order to avoid losing money. This has led to a dollar shortage in Nigeria, and a further drop in the value of the Naira.
For Nigeria, which depends on oil for 60% of fiscal revenue and 90% of foreign exchange, that’s a disaster. Angola is even more reliant on the fuel. Every time an oil crisis comes about, noise is made about the need to diversify African economies away from oil. It is always a shame to waste a good crisis.
A Sad Day