Africa’s richest oil nations knocking on IMF, World Bank’s doors for funding to fight COVID-19

Apr 26, 2020 News

By Kiana Wilburg

By GDP ranking, Nigeria and Angola are among the top 10 wealthiest nations in Africa. But these nations, which are also some of the largest oil producers in that continent, are now at the doorsteps of international financing institutions, with urgent appeals for emergency funding to survive the COVID-19 pandemic.

(Sourced from https://nairametrics.com/)

Nigeria, Africa’s largest crude oil exporter, saw its revenues tumble with the fall in oil prices which started in January. It is now at the mercy of the International Monetary Fund (IMF) which it has approached for a US$3.4B bailout. It has also asked the World Bank for US$2.5B along with US$1B from the African Development Bank.
IMF’s Managing Director, Kristalina Georgieva, has since noted that Nigeria’s economy is being threatened by the twin shocks of the COVID-19 pandemic and the associated sharp fall in international oil prices while noting that the current administration is taking a number of measures aimed at containing the spread of the virus.
With respect to Angola, Africa’s second largest oil producer, two-thirds of its crude is sold to China and it relies heavily on oil revenue. As a consequence of the oil price collapse, the country has cut its national budget and now looks to international agencies for assistance.
According to the IMF, Angola has reported more than 23 confirmed cases of COVID-19, of which two were deaths, and six marked as recoveries. Due to the increase of confirmed cases, the Angolan Health Ministry announced the application of the civil requisition law, requiring retired healthcare professionals to report to service and reinforce the health sector. The World Bank is currently working with the authorities to provide financing for medical supplies and equipment. The United Nations is also providing technical and financial support and, on April 14, last, the UN’s resident coordinator in Angola announced an additional grant of US$ 12.5 million to combat COVID-19.
Other considerable producers like Chad and Gabon, have also requested help during these turbulent times.
Chad has since requested an IMF rapid credit facility disbursement, for budgetary and payment support. This newspaper understands that discussions were completed with Chadian Minister of Finance and Budget, Tahir Hamid Nguilin some days ago with a decision due this month. (https://iclg.com/alb/11307-african-countries-receive-imf-support-for-covid-19)
In the case of Gabon, this African nation has received USD$147 million to ease pressures caused by the drop in oil prices. Authorities there have since said that the COVID-19 pandemic and collapse in oil prices have weakened the macroeconomic outlook, with the possibility that the pandemic could turn more severe and persistent than anticipated with lasting impact on commodity prices, growth, and fiscal and external positions.
GRIPPED BY CORRUPTION
Prior to the economic pains unleashed by COVID-19, Nigeria, Angola, Gabon, and Chad, have suffered significantly from chronic acts of corruption. Instead of being used to lift its people out of abject poverty or deposited into Sovereign Wealth Funds for hard times, billions of dollars in oil revenues were funneled into the pockets of a selected few.
Extensive research shows for example that Chad’s oil revenues go solely into the hands of the State and is disproportionately distributed to an inner circle of the government’s close allies who are chosen based on their ethnic, religious, family or other affiliation. In order to visibly redistribute the oil income, the State often increases the civil service apparatus or undertakes infrastructure-building projects. But only a restricted number of insiders benefit from contracts for the latter. (https://www.bicc.de/uploads/tx_bicctools/brief41.pdf)
According to a December 2019 report by the IMF, Gabon has a sizeable endowment of natural resources. In fact, the financial institution said that the country’s oil has helped it become one of Africa’s richest countries, with a per capita GDP in excess of US$7,500 in 2018. Be that as it may, the Fund said that the benefits of economic growth are yet to reach all segments of society, with a third of citizens living below the poverty line and an unemployment rate of over a quarter of young people. It said that key challenges to achieving sustainable and more inclusive growth include weak governance and corruption, and ineffective institutions. It also noted that the authorities there have placed a high emphasis on tackling corruption. However, a 2019 Transparency International survey revealed that 80 percent of respondents still felt that corruption had become worse in the past few months.
In the case of Angola, oil has been a blessing for the friends and family of former President Jose Eduardo dos Santos while the rest of the nation remains desperately poor. The former President who served from 1979 to 2017 paved the way for his daughter, Isabel, to become Africa’s richest woman. She opened a shell company, and within a two-year span, the former President gave his daughter several contracts, four of which were worth over US $22 billion. As for his son, he was put in charge of Angola’s Sovereign Wealth Fund and allegedly transferred US$500 million from the fund to an account in Britain. As a result of the rape of the oil resources, Angola has had to turn to the International Monetary Fund (IMF) for a loan to restructure and diversify its economy. The Fund said that the US$3.7B loan will cover a period of three years and will not only be dedicated to the diversification of the economy but also to curb corruption.
In Nigeria, Africa’s richest oil producer, the situation is no different. Perhaps, one might argue that it may be worse. According to the World Bank’ statistics, 80% of Nigeria’s energy revenues only benefit one percent of the population. Corruption was cited as the main cause, with the net effect being widespread poverty.
Oxfam America, a confederation of 19 independent charitable organizations, has also been alarmed at the scale of corruption in this African nation. In a special study it did on Nigeria, it was found that the combined wealth of Nigeria’s five richest men amounts to US$29.9 billion—more than enough to end extreme poverty at a national level. Further computations by Oxfam also showed that between 1960 and 2005, about US$20 trillion was stolen from the treasury by public office holders. This is larger than the GDP of the United States in 2012 (about US$18 trillion).
As a result of the mistakes made with the oil and gas resources, Oxfam noted that 57 million Nigerians lack safe water, over 130 million lack adequate sanitation, and the country has more than 10 million children out of school.
The country now waits with bated breath as the IMF considers its request for a US$3.4B bailout to survive the COVID-19 pandemic.