CNN’s Larry Madowo reports that oil price spikes triggered by the war with Iran could have a catastrophic impact on African nations.
Even Africa’s most advanced economy, South Africa, is exposed to the oil price shocks, which could cause higher fuel costs, rising inflation and renewed pressure on currencies.
The government in Kenya is reassuring citizens that there are no immediate fears of a fuel shortage, and prices are yet to spike.
Many Governments across Africa are reassuring their citizens that they have stocks to last them for the time being. But they can’t make long term guarantees because many African nations depend on imported refined petroleum from the gulf.
This conflict just crossed the 12-day mark, and economist Kwame Owino tells Madowo that African nations should start preparing for a catastrophic scenario,
“while no African countries are directly involved in the conflict, we still suffer quite substantially. Governments need to adjust. So, for instance, the government of Kenya has some of the highest taxes globally on fuel prices so adjusting fiscal policy to allow for greater affordability is important, even if it means that government will have a lower take.”
Africa’s most advanced economy, South Africa, is one of those exposed to the oil price shocks. One South African airline, Flysafair, announced it would be adding a temporary dynamic fuel surcharge after jet fuel prices rose by 70% in one week at South African airports. Other airlines, including national carrier South African airways, said they were monitoring prices.
Nigeria is Africa’s most populous nation and one of the largest economies. It is also a crude oil producer, so it’s likely to cash in on the increase in global oil prices. But Nigeria still imports refined petroleum, so it is not immune from the shocks that the global markets are seeing.
The bigger picture here is that African economies are more fragile than stronger, more advanced economies.
Owino says, “these economies are small and fragile. They are dependent on those imports. So when there’s a global conflict, it affects these economies. And African economies also tend to recover slowly, much slower to have a slower path of recovery.”
Fuel prices are holding steady right now. But if the conflict with Iran drags on, just about everything here in Kenya and across the African continent will get more expensive, adding more pain for African consumers.
