22-09-04
It is a golden opportunity: billions of dollars in windfall earnings for a clutch of African countries thanks to sky-high oil prices. The International Monetary Fund reckons Africa's oil producers should gain around $ 15 bn per year for every $ 10 rise in crude prices and insist they should use the money to cut poverty, build infrastructure and achieve sustainable growth.
But the windfall also carries risks of economic overheating and inflation as a
result of large spending programmes, and the potential to fan corruption,
especially with funds likely to go to the notoriously opaque construction
sector, analysts say.
On his second visit to the continent in three months as IMF managing director, Rodrigo Rato said the fund was talking to oil producing countries to ensure they spend the extra cash in a transparent way that helps the poor.
"The challenge throughout the Gulf of Guinea is for a greater awareness of
how much money is actually brought in by oil and gas to the governments, as a
pre-factor before you can then say 'you have that money, how do you now spend
it?'," said Alex Vines, head of the Africa programme at Britain's Royal
Institute for International Affairs.
Sub-Saharan Africa's biggest oil producers, Nigeria and Angola, ranked in the last 10 of Transparency International's 2003 corruption perception survey. Third biggest Equatorial Guinea was not even ranked in the survey due to lack of data.
But there are reasons for optimism, especially in Nigeria, which has set aside $
2,5 bn in extra earnings from exporting crude at prices above its budgeted $ 25
per barrel. US crude contracts have reached nearly $ 50 in August.
Finance Minister Ngozi Okonjo-Iweala says sticking to the $ 25 a barrel
budget has helped balance the books, and insists the windfall cash will be spent
on new infrastructure and social projects to alleviate poverty in Africa's most
populous nation. Even Rato concedes such big cash injections into developing
economies pose macroeconomic and inflationary risks -- fears shared by some
analysts.
"There is a lack of absorptive capacity, the system is not capable of
managing a large inflow of funds efficiently. The moment the windfall is spent
we are going to see some serious overheating in the economy," said Bismarck
Rewane of the Financial Derivatives Company in Lagos.
Rewane also worries that despite efforts to improve accountability under a fiscal responsibility bill, the windfall cash may not be put to best use once it is channelled through Nigeria's 36 states and 774 local governments.
"There will be a long process of persuasion, training and educating to go
from the reckless ways of the past to the prudent ways of the future," he
said. "You can have as many acts as you want but the question is who is
going to enforce them."
Angola also has a long way to go to improve transparency and efficiency in spending oil dollars, but Robert Bunyi, economist on the Africa desk at South Africa's Standard Bank, said the IMF would have extra leverage on thegovernment as it negotiates a lending programme that should unblock bilateral aid. Angola has budgeted for $ 23 a barrel, and the deputy prime minister said higher prices brought in $ 275 mm extra in the first six months, saying higher estimates in excess of $ 1 bn from some analysts were wrong.
Government sources say much of the windfall cash is being channelled straight
into paying off expensive oil-backed loans taken out during a civil war that
lasted nearly three decades.
Source: The Free Press Of Namibia