Acknowledging the looming crisis in the oil sector as a direct consequence of the coronavirus pandemic, the African Energy Chamber urges African States to put in place a fiscal moratorium.
Extraordinary circumstances call for extraordinary measures. This is, in essence, the message of the African Energy Chamber to the hydrocarbon-producing countries of the continent. In a press release released on March 18, the inter-professional organization of energy and mining professions in Africa, noting the « difficult times for African oil and gas » due to « coronavirus and low prices, » urges African states to find as soon as possible « ways to reduce the burden » on companies in the sector. Indeed, with a barrel of Brent oil trading below $26 a barrel, oil prices have fallen by nearly 60 percent since the start of the Covid-19 pandemic. An unprecedented collapse in the contemporary history of commodity markets.
As a result, according to the African Energy Chamber, Africa is expected to lose more than $110 billion in taxes, oil exports, jobs and contracts with local companies over the next three months. This is a critical situation which, as the organisation points out, comes on top of previous difficulties faced by players in the sector in Africa, such as « low profitability » and « difficult access to financing for oil and gas projects ». Among the avenues proposed by the EAC are « the cancellation or deferral of tax payments for up to three months to African-owned service companies, local exploration and production companies and all international and local companies working on exploration programmes ». Strong tax measures that, according to the organization, will « enable employers to pay salaries, improve their liquidity and reduce some of the revenue losses while minimizing job losses ».
Evolution of Brent’s barrel price since the beginning of the year: an unprecedented collapse
But it is not certain that all the countries concerned will have the means to implement these support programmes. With a barrel of debt that seems to be settling permanently below $30, nations such as Algeria, Nigeria, Congo or Libya – which have national budgets based on a barrel of debt of $50 or even more than $60 – are already seeing their economies hit hard. This will further reduce the financial room for manoeuvre.