oil & gas

US Strikes on Iran Send Oil Prices Soaring, Threatening African Economies

By [Your Name], International Editor, nouvelles-du-monde.com

The recent US-led airstrikes on Iran are reverberating far beyond the Middle East, threatening to destabilize economies across Africa already grappling with inflation and fragile recoveries. Within hours of the strikes on February 28, Brent crude oil jumped over 20%, peaking above $82 a barrel – the sharpest increase since the 2022 invasion of Ukraine. While prices have eased slightly, the surge underscores Africa’s vulnerability to geopolitical shocks and the potential for renewed economic hardship.

For many African nations, the jump in crude oil prices translates directly into higher costs for gasoline, increased transportation fares, and rising food prices. Most African countries import refined petroleum products, meaning global crude price fluctuations quickly impact domestic economies. Africa collectively imports over 120 million tonnes of these products annually, at a cost of approximately $90 billion, according to Aliko Dangote, President/Chief Executive of Dangote Industries Limited.

“Oil shocks travel in days,” the article states, highlighting the speed with which international events impact daily life. Rising fuel costs put pressure on foreign exchange reserves and weaken local currencies, creating a vicious cycle of increasing import costs. This isn’t simply a market fluctuation; it’s a “silent tax” on everyday life, impacting households and small businesses.

The African Union has already voiced concerns, with Chairperson Mahmoud Ali Youssouf calling for “restraint, urgent de-escalation, and sustained dialogue” to protect energy markets and food security. However, financial markets often react before diplomatic efforts can take hold.

Nigeria’s Complex Position

The situation is particularly nuanced for Nigeria, Africa’s largest crude oil producer. While higher crude prices should boost government revenues, the country still imports a significant portion of its refined fuel. This means Nigerian consumers feel the pinch of global price increases even as the state benefits from stronger crude earnings.

The newly operational Dangote Refinery, capable of processing 18 million barrels of crude monthly, presents a potential solution, but its impact remains uncertain. Higher international crude prices increase the refinery’s input costs, potentially leading to higher domestic petrol prices unless profit margins are reduced. Olatide Jeremiah, CEO of Petroleumprice, noted the paradox: “Nigeria is the largest crude oil producer in Africa and at the same time hosts the biggest refinery on the continent.” Yet, imported products still account for a significant portion of national consumption.

Regional Impacts and Inflation Risks

Beyond Nigeria, East Africa is bracing for fuel price increases of around 100 shillings per litre if global prices remain elevated. Landlocked economies, heavily reliant on imported fuel transported over long distances, are particularly vulnerable.

In South Africa, the rand has already weakened as investors seek safer assets. Economists warn that sustained oil prices above $80 could reverse recent progress on inflation, narrowing the scope for interest rate cuts and squeezing consumers already burdened by high electricity costs. If oil reaches $100 a barrel, policymakers could face renewed risks of stagflation – weak economic growth coupled with rising prices.

A Recurring Vulnerability

The current crisis underscores a long-standing vulnerability: Africa’s deep exposure to external energy shocks. While some suggest this moment could accelerate investment in renewable energy and domestic refining capacity, such structural reforms take years to implement.

Experts are closely monitoring two key factors: the stability of tanker traffic through the Gulf and whether oil prices settle below $90 per barrel or climb into triple-digit territory. Prolonged high energy costs could widen fiscal deficits and strain public debt in several African economies still recovering from the pandemic.

As Professor Raymond Parsons of North West University cautioned, “The biggest immediate impact…will inevitably be the elevated uncertainty about global oil prices, and hence the prospect of higher fuel costs in the months ahead.”