Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.

Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.


Africa feels the pinch from rising oil, weaker currencies

16 May 2015, 11:11

London - Several African countries are suffering this year from a double-whammy of higher oil prices and weakening currencies, with Ghana and parts of eastern Africa taking the hardest knock from the surge in inflation.

While Africa is home to oil powers such as Nigeria and Angola, much of the continent is reliant on energy imports, and even producing nations often import gasoline and other fuels.

Oil prices have had a roller-coaster ride over the past year, tumbling to about $45 per barrel in January from $115 last June, but bouncing 50 percent off that trough to around $65.

For African oil importers, last year's crude price drop tempered the damage inflicted by a stronger dollar. But now, many are grappling with rising oil prices along with a depreciation of their own currencies versus the dollar.

As a result, for much of Africa, the cost of oil has risen far more in local currency terms than in dollars, as this graphic shows: http://link.reuters.com/qeg74w

While the dollar has eased recently, it is up 17 percent in the past 12 months, contrasting with a 40 percent oil price drop. Yet since January, both are up - the greenback has risen almost 4 percent while crude has gained 16 percent.


"The longer you have that double-whammy of rising oil prices and weakening currencies, the more pressure there is," said Angus Downie, head of Economic Research at Ecobank.

"It all comes down to who manages the exchange rate the best, and what level of foreign exchange reserves they have."

One of the worst hit is Ghana, which is just establishing itself as an oil exporter. Its cedi currency has tumbled almost 20 percent since the start of the year, meaning oil priced in cedi has soared 43 percent.

Facing a 17 percent inflation rate and more pressure on the cedi, Ghana raised interest rates by 100 basis points this week to 22 percent, one of the highest in the world.

Also read: Reprieve for consumers as global food prices fall

Oil importers across eastern Africa are also being hit.

"The biggest impact will be in east Africa," said Cavan Osborne, portfolio manager at Old Mutual Global Investors, citing Tanzania, Uganda and Kenya where currencies have depreciated between 6 and 13 percent in 2015.

"We will see some slower economic growth out of that region because the oil price is rising again."

 Exporters are not being spared

Nigeria has seen crude prices rise by 27 percent in naira terms. This puts the squeeze on the continent's largest economy which imports 80 percent of what it consumes, including fuel.

With crude revenues tumbling, Nigeria's hard currency reserves are down by a fifth over the past year - lower than most other big emerging economies, as this graphic shows: http://link.reuters.com/huf76v

For the latest on national news, politics, sport, entertainment and more follow us on Twitter and like our Facebook page!

- Reuters

Tags africa oil

Read News24’s Comments Policy

Comment on this story
Comments have been closed for this article.

Read more from our Users

Submitted by
Wilson Ochieng
Apologise for attack on Auditor G...

Apologise for attack on Auditor General, President Uhuru Kenyatta is told by Kisumu Senator Anyang Nyong'o. Read more...

Submitted by
Wilson Ochieng
Quit if you can't fight corruptio...

An MP has told President Uhuru Kenyatta to quit office if he cannot fight corruption. Read more...

Submitted by
Wilson Ochieng
Investigate Uhuru, Ruto for corru...

Investigate President Uhuru Kenyatta and DP William Ruto's offices over corruption, CORD leader Raila Odinga has said. Read more...

Submitted by
Victor Tinto
Its a 1 horse race to State House...

Its a 1 horse race to State House, DP William Ruto has mocked the CORD Coalition. Read more...

Submitted by
Victor Tinto
Enjoy your time left in power, We...

CORD Co Principal Moses Wetangu'la has told the Jubilee Coalition to enjoy its last few months in power before it is voted out in the 2017 elections. Read more...

Submitted by
Victor Tinto
Stop hiding in State House and sa...

ODM MP's have called on President Uhuru Kenyatta to release drought aid and to stop sitting on public funds. Read more...