Angola’s GDP is plotted along the light blue line – it steadily increases over the time period, overtaking Libya and the Democratic Republic of Congo. It sees a small spike in nominal GDP during the 2008 financial crash, though this is a result of the depreciation of the USD.
The Democratic Republic of Congo, severely affected by civil wars between 1994 and 2003 as well as in patches since, and Gabon and Equatorial Guinea, both very small geographically, have had low levels of GDP growth compared to the other OPEC Nations.
Although the oil and gas sector accounts for 20% of Algeria’s GDP, which has grown by roughly $125 billion since 2000, the country’s economy has closely tracked oil price since the turn of the millennium.
Oil reserves in Libya are the largest in Africa, yet it produces 350,000 less barrels than Nigeria per day, likely due to conflict and political upheaval occurring in the country since the Arab Spring. Libya saw an GDP low in 2002 at around $20.48 billion, and 6 years later peaked at $87.14 billion.
Nigeria is West Africa’s biggest producer of petroleum, and it is the success story of the nations shown with its GDP increasing 8 fold between 2000 and 2014. It saw the largest increase in GDP out of the OPEC nations following the 2008 financial crash, and a large spike in 2014 where it became the largest economy in Africa. 2 million barrels of oil are extracted in the Niger Delta – costing $28.99 to extract each barrel of oil in Nigeria. This is significantly lower than the North Sea oil (at $44.33) but over three times more expensive than in Saudi Arabia (at $8.98).
The Brent Crude Oil Price has fluctuated dramatically in the period for a multitude of reasons, including changes in demand; increasing scarcity; changes in production costs; natural disasters and conflict in oil-producing countries. The financial crash in 2008 saw the highest price of oil, at almost $140 dollars per barrel. After this spike, suppliers were eager to find and extract more, contributing to the dramatic drop which continued into much of 2017.
What does the chart show?
The chart compares GDP of African OPEC nations against oil price between 2000 and 2018. On the left-hand axis is GDP in billions of current USD, and on the right-hand axis is Brent Crude Oil Price also in current USD. Oil price was taken as the price on 30th June (or the closest working day) each year, is measured in dollars per barrel and is not seasonally adjusted.
Why is the chart interesting?
Algeria, an upper-middle income country per the World Bank, is currently ranked as one of the most important economies in the Middle East and Northern Africa region. In the past two decades, Algeria has successfully managed to achieve 20% poverty reduction, with a GDP of $180.69 billion USD in 2018. However, growth is expected to taper, averaging at 1.2% in 2017-2019 in real terms. There has been concern recently regarding the risk of political instability in Algeria, as a result of the President Bouteflika seeking his fifth term in office despite poor health and waning popularity.
The country’s petroleum deposits, as well as some gas, are found in the Eastern Sahara. This is exported to sea ports around the world, with approximately 90% going to western Europe. As for non-oil activity, industry and enterprise in the country has been hampered by the reticence of MNCs to invest. Algeria is a country where extensive government authorisation is required by those looking to operate, something that is not without friction. The continued reduction in oil price coupled with sluggish growth in household demand and high levels of unemployment (at 11.7% in 2018) has hampered economic progress.
Currently ranked as a lower-middle-income economy by the World Bank, Angolan annual GDP reached $106 billion in 2018, and inflation is at a staggering 16.94%. The southern African nation hosts a population of more than 28.8 million within its 1.247 million square kilometre area, although population growth has not kept pace with its regional neighbours. As the 60th largest exporting economy in the world, Angola’s main export partnership is with China (constituting more than 40% of total exports), although other recipients of its oil include United States, India and France. In 2017, Angola sustained a positive trade balance of $19.9 billion USD. In 2008, China invested $5-7 billion in Angola in return for crude oil.
Following their independence from the Portuguese, Angola experienced civil conflict from 1975 until 2002. The 27-year war was between two former anti-colonial movements, MPLA and UNITA. With its wealth being mainly in diamonds and oil, Angolan groups found no difficulty in trading these resources for arms. President João Lourenco was elected in 2017 and has attempted to attract foreign investment via monetary policy measures to boost consumption. This has helped achieve the budget surplus in 2018, which may lead to greater input into public services and development of its infrastructure. However, more remains to be done as large proportions of the population live without sufficient access to basic services and resources. Contrary to the standard of living for locals, Luanda, its capital, was ranked as the ‘most expensive city for expats’ in 2017, ahead of Hong Kong, suggesting the presence a very small, but very affluent group of outside investors. Political stability has been maintained since the end of the civil war in 2002. The country now awaits its first set of popular elections in 2020.
Equatorial Guinea, situated between Gabon and Cameroon, has a population of 1.2 million with the area of 28,051 square kilometres. The country is currently ranked as upper-middle income by the World Bank, with a GDP value of $13.317 billion USD in 2018 and an inflation rate of 1.3%.
President Teodoro Mbasogo has served for the last 39 years, cementing his position as the longest-serving head of state in sub-Saharan Africa. The country’s total export value is around $7.5 billion USD in 2018, moving up by 6.8% from 2017. Crude petroleum and gas together make up 87% of total exports. Oil itself accounts for 90% of government revenue, and is predominantly sent to Spain.
Mobil, an American oil company, first discovered oil in Equatorial Guinea in 1995, leading to rapid extraction infrastructure development. However, very little of this new-found oil wealth has reached the population, as 50% remain unable to access to clean water and the country does not fare well on the UN human development index. Many suspect that individuals in President Mbasogo’s regime enrich themselves with the country’s oil wealth, but this is unlikely to occur without the complicity of the investing organisations.
Democratic Republic of Congo
The largest Francophone country in Africa is currently ranked as a lower middle-income by the World Bank, with a GDP of $47.228 billion USD that is set to grow by 3.2% in real terms. Having gained independence in 1960, the country has experienced troubled times as the aftermath of the Second Congo War rages on, one that has cost the most lives of any conflict since World War 2. Despite this, the economy has managed to perform well, although again the population do not reap the benefits.
The DRC possesses vast economic potential due to its abundance of valuable minerals (such as Coltan), water and energy.
Currently, the DRC’s main export partners are Indonesia (52%), China (42%), and India (6.1%), which all receive crude petroleum. Oil does is not the largest export, only taking up 5.9%. Vital components in electronics, cobalt and copper all contribute the majority of the Congolese economy, altogether amounting to about 84.1% of the country’s export market.
This upper middle-income country hosts a population of around 2.1 million people, with a GDP of just over $17 billion USD according to World Bank figures. The population is relatively sparse compared to neighbouring countries, with forest covering 85% of the land. The economy is mainly focused on the mass exportation of oil and minerals, as well as shipping. Gabon currently holds the position as the fifth largest oil producer in Africa, having maintained strong economic growth for the past decade. The country has projected GDP growth at 3.4% by the end of this quarter.
As for the country’s political framework, the government follows as a republican structure, whereby the president may appoint their own prime minister. The government intends to create more incentives for foreign investors, to boost the non-oil sectors of the country’s economy. Consumer demand in Gabon is supressed by poverty, indeed a 2012 McKinsey report highlights that 30% of the population remain ‘vulnerable’, with monthly incomes below the guaranteed minimum wage of 80,000 Central African Francs (equivalent to $150 USD).
Libya is located in the northern region of Africa. It has a GDP of $48.32 billion USD, with projections for growth at 1.5% in 2020. The inflation rate is -1.6%, meaning that Libya is currently experiencing deflation and is seeing an increase in the real value of money.
Libya gained its independence from foreign rule in 1951, and, in 2011, the 42-year rule of Colonel Muammar Gaddafi ended. After a period with no authority in full control, the country was divided into political and military factions which fight over control of its oil fields. The Second Libyan Civil War started in 2014 and is ongoing.
Libya’s main trading partners are Italy (its former colonial power), Germany, France, Spain and Turkey – with its main exports being natural gas, petroleum products and oil.
Nigeria is the most populous country in Africa and has an array of natural resources including petroleum, tin, iron ore, coal, natural gas, hydropower and arable land. It has a GDP of $397.27 billion USD and is expected to have a 2% annual growth. Inflation is high at 11.22%. The government, led by President Muhammadu Buhari, faces the growing challenge of preventing the country from breaking apart along ethnic and religious lines, as well as dealing with militant Islamist group Boko Haram which is fighting to overthrow the government and create an Islamic state.
With its main exports being crude oil and refined products, Nigeria’s main trading partners are the UK, Germany, the USA, Japan and France. As well as this, multinational companies such as Google, Nestle and Shell have been operating there for many years.
The Nigerian economy increased during the oil boom of the 1970s, however, the standards of living did not improve in the country. As oil production and revenue rose, the government became heavily reliant on oil revenue for income and neglected to develop alternative sources to maintain economic stability.
Week 31, 2019