5 major African economies to be affected by fossil fuel phase-down
While the result may not fully meet the aspirations of many nations pushing for a clear fossil fuel “phase-out” directive, it marks a historic development. For the first time, there was a pronouncement to shift away from oil and gas, the foundational fuels that have driven the global economy for decades and contributed heavily to the earth’s rapidly changing climate.
What this development means is that countries whose economy is dependent on fossil fuels must consider diversification for their economy to stay vibrant. Failure to do so exposes them to the risk of reduced investment and a shrinking market for their fossil products.
Many African countries fall into this group and could see less money coming in from oil in the future. This is bound to intensely affect many of the continent’s economies already caught in the web of heavy debt and dwindling revenue.
However, African countries argue that they have the right to harness their natural resources and progress, just like wealthier nations. Nonetheless, this approach is unsustainable, particularly from an investment perspective. Engaging in the production of fossil products or investing in projects without a viable market poses significant risks.
OPEC believes oil demand will grow to 116 million barrels per day (bpd) by 2045 from 102 million bpd today. By contrast, the International Energy Agency, which represents industrialised energy consumers, sees oil demand declining to 93 million bpd by 2030 and 55 million bpd by 2050.
While several oil-producing economies on the continent would be affected, some would suffer more.
Below are 5 major African economies that could be heavily affected by the phase-down of fossil fuels:
1. Nigeria
Nigeria is Africa’s main oil producer. It plays a pivotal role in Nigeria’s economy, contributing significantly to government revenue and foreign exchange earnings. The country heavily relies on oil exports to sustain its budget, making it vulnerable to fluctuations in global oil prices. Oil accounts for 90 percent of its foreign exchange earnings and finances 80 percent of the total government revenue.
2.Libya
As one of Africa’s leading oil producers, Libya’s economy is deeply intertwined with the fossil fuel industry. A shift away from oil and gas would likely result in decreased demand and investment in Libya’s primary export, impacting its economic stability. Libya’s real GDP per capita is among the highest in Africa due to its vast oil and gas reserves. Hydrocarbons make up around 95 percent of exports and government revenue.
