The oil price spike following Russia’s invasion of Ukraine has been described as producing divergent effects on the currencies of Africa’s major oil producers, including Angola and Nigeria.
A report by AZA, Africa’s largest non-bank currency broker by trading volume, noted that Angola, currently Africa’s third-largest oil producer, has seen its currency, the Kwanza, jump nearly 15% against the dollar in the past month, making it the world’s best-performing currency.
The report however shows that Libya, Africa’s second-largest producer, has seen its currency, the Dinar fall by 1.7% over the same period. The Libya situation is attributed in part to the fact that the country’s central bank has been buying dollars, but also because oil output has declined after militias shut down two oil fields, including the country’s largest, Sharara.
Nigeria has a different situation, the report said. In Nigeria, which is Africa’s biggest oil producer, the Naira has appreciated only marginally from a record low in the unofficial market.
The report noted that since the Central Bank of Nigeria (CBN) stopped foreign exchange sales to Bureau de Change operators in July 2021, the potential uplift from higher crude export revenue on CBN reserves no longer feeds through to the unofficial rate. The situation now reflects solely on that of dollar demand and supply.
“The impact on the real economy is more mixed: Nigeria exports crude oil but it imports the refined product for fuel, creating higher import prices that risk accelerating inflation.
“Nigeria is thus currently facing a revenue challenge when in fact the country should be heading to the bank with excess earnings from the higher income made possible by the higher oil prices.
“Thus, while the government used a benchmark price of $62 per barrel for revenue projection in the 2022 budget, the country will not enjoy any form of windfall in the current high-price environment.
“What could have accrued to the excess crude account to act as a stabilization fund is being frittered away in the importation of refined products, now at higher prices,” the report stated.
Nigeria’s four refineries have a daily refining capacity of 445,000 barrels of oil. The report noted that all of that local refining capacity is lost to the nation, with the consequence that the country now depends on imports to meet local requirements.
This has contributed in part to the current scarcity and rise in the price of diesel, which has become a threat to the local businesses, the report stated further.
“Many of them are now struggling to operate their machines with diesel at a price of over N700 per litre.”
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