The World Bank has said that oil-abundant countries in Africa exhibit the largest downsizing in investments. The multilateral lender stated this in the April 2023 Africa Pulse report.
According to the report, investment growth deceleration has been observed across various groups of countries in Sub-Saharan Africa, depending on their extent of resource abundance and fragility.
“Oil-abundant countries exhibit the largest and most persistent downswing in investment relative to the other groups. After exhibiting annual average growth of nearly 8% from 2010 to 2013, oil-abundant countries on average have experienced a contraction in investment since the 2014 to 2015 plunge in international oil prices,” The report stated.
The World Bank report further noted that a downturn in investment is also sharp among metal-abundant countries in the sub-Saharan African region. Meanwhile, non-resource-abundant countries showed the slowest deceleration of investment growth.
Their annual average rate declined from 6.3% in 2010 and 2013 to 2.2% in 2020 and 2021 (which is still well below their long-term average growth of 6.1%).
According to the World Bank report, investment growth stayed below the long-term average across fragile countries in the aftermath of the plunge in commodity prices. The report stated that the sharp drop in investment growth in the SSA region is evident across public, private, and foreign investments.
The growth of investment, regardless of the type of agent that undertakes it (public, private, or foreign), lies below the long-term average (2000 – 2019) in most of the years under analysis. The report revealed that the decline in private investment growth was relatively larger (from 5.9% in 2014 and 2015 to 3.1% in 2020 and 2021).
Public investment growth showed a decline from 3.3% in 2014 and 2015 to 1.6% in 2020 and 2021). Meanwhile, foreign direct investment (FDI) has contracted on average since the onset of the 2014 and 2015 plunge in commodity prices. It shifted from annual average growth of 1.9% in 2014 and 2015 to a contraction of 3.7% in 2016 and 2019, and an even larger downswing at 5.1% per year, after the onset of the Coronavirus (Covid-19) pandemic in 2020 and 2021.
During the February 2023 Sub-Saharan Africa International Petroleum Exhibition and Conference (SAIPEC) in Lagos state, the Group Chief Executive Officer of the Nigerian National Petroleum Company (NNPC) Limited, Mele Kyari said decreasing investments in hydrocarbon ventures cannot guarantee global energy security in the near future.
He advocated for an inclusive policy that guarantees access to finance and low-carbon technologies as the key to sustaining global energy security and equitable growth.
Kyari also highlighted the following factors that could ramp up oil investments in sub-Saharan Africa:
- Building partnerships in achieving a sustainable energy industry in Africa. This involves countries, companies and other stakeholders working together to develop innovative solutions that meet the energy needs of the continent.
- The application of cutting-edge technologies, such as the use of robotic drilling systems for unmanned operations, the deployment of cognitive computing in upstream operations, and super-specialized sensors for real-time monitoring and maximization of reservoir yields.
According to the World Bank report earlier cited, the contraction of foreign direct investments (FDIs) since 2016, can be attributed to declining and volatile international prices of extractives as well as insufficient investments in new or mature exploration and production oil fields.
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