The escalating conflict between the U.S., Israel, and Iran has sent global oil prices climbing, creating a sharp divide in the economic outlook for Sub-Saharan Africa. According to a new report from Bloomberg Economics, while a handful of oil-exporting nations stand to gain, the majority of the region faces severe inflationary risks and currency devalued.
Strengthening Balances, only three major economies in the region are expected to see an improvement in their current account balances if oil prices maintain a floor of roughly $85 per barrel: Angola: Forecasted to be the biggest winner, with a potential surplus boost of 3.3% of GDP. Nigeria: Poised to benefit from both crude oil sales and a shift toward becoming a fuel exporter. The 650,000 barrel-a-day Dangote Refinery is a key factor here, with potential exports heading as far as Europe. Ghana: Rounding out the trio of nations expected to see strengthened fiscal positions.
Inflation and Interest Rates for the rest of the continent, the narrative is much bleaker. High energy costs act as a “tax” on growth, leading to: Higher fuel prices drive up the cost of transport and food.
Currency Weakness: Increased demand for foreign exchange to pay for imports puts pressure on local currencies. Rate Hikes: Central banks may be forced to raise interest rates to combat rising prices, stifling domestic investment.
Bloomberg economist Yvonne Mhango identified the Democratic Republic of Congo, South Africa, and Kenya as being among the most vulnerable to this shock. South Africa faces a particularly difficulties. The country’s current account balance is expected to take a hit equivalent to 1% of its GDP.
There are growing concerns that major suppliers like India and Oman might curb exports to prioritize their own domestic needs. Data from the Central Energy Fund indicates imminent fuel price hikes, which has traders already betting on a potential interest-rate increase later this month.
The volatility is underscored by the rapid price movement in early March. Brent crude jumped from $72 on February 28 to $85 by March 3, a direct reflection of the geopolitical instability in the Middle East.
