Africa: Caught in crude’s crossfire by Oxford Economics

The oil price flux
We recently published a Research Briefing in which we discussed the effects of oil price volatility on the global economy, and particularly, should Brent crude oil prices remain at $140 pb for two months. In this scenario, Brent crude oil prices whipsaw to $133 pb in Q2 2026 before dipping to $87 pb in Q3, bringing the full-year average to just over $94 pb in 2026. Over the short term, oil prices are likely to fall again as hostilities cease, supply through the Strait resumes, and as the global supply glut reasserts itself as the dominant driver of prices.

The most immediate energy impact of the war is the closure of the Strait of Hormuz, through which around 17 mbpd of oil normally flows. However, the market entered the shock with a surplus of around 2 mbpd, offering a crucial buffer. Moreover, global supply is now less concentrated and more diversified in the Middle East than it was during previous oil shocks, making a short-lived disruption easier to counter.

The International Energy Agency (IEA) announced a record 400-million-barrel release of oil from emergency reserves, marking the largest coordinated stock release in the IEA’s history. This release could partially offset the disruption from the Strait’s closure for about two months, thus cushioning, but not entirely cancelling out, the shock. Still, it signals that policymakers are preparing for a more prolonged disruption to flows through the Strait. Alternative pipelines in the region should also be considered – we estimate that pipelines in the UAE and Saudi Arabia could reroute approximately 6 mbpd. However, that still leaves around 11 mbpd requiring an alternative transport route.

For this Research Briefing, we will consider the impacts on key macroeconomic indicators in 2026 across a range of African nations in a scenario in which global oil prices surge to $140 pb over a two-month period.

Usual winners and losers emerge
Economic growth winners are few and far between: Across the board, real GDP growth broadly holds up, despite slowing. Naturally, oil exporters like Nigeria and Algeria gain from higher oil prices. That said, Algeria stands to gain more. Oil revenues in the North African nation account for the lion’s share of government revenue, at around 46% in 2024 (compared with 16% in Nigeria that year). The fiscal transmission of higher oil prices to economic growth is thus stronger in Algeria than in Nigeria.

Nigeria’s oil output is also constrained by long-standing issues such as sabotage, underinvestment and operational disruptions in the Niger Delta. Despite being the continent’s largest oil producer, Nigeria also imports a significant share of oil – over the first 10 months of 2025, the country imported 42.3 million barrels of crude from the US alone.

On the flip side, real GDP growth in Botswana, Zambia, Ghana and South Africa stands to slow by the largest margins. Across all countries where the price shock has a negative impact, higher oil prices will ultimately drive-up production costs and consumer prices, adversely impact consumption demand, and put external balances under strain.

Headline inflation to follow oil prices’ upward charge
Across all countries, CPI inflation increases notably above our baseline predictions for 2026 in the worst-case scenario.

In Botswana, the transportation subindex carries the largest weight in the CPI at 23.4 out of 100, meaning rising global oil prices will have an outsized impact on domestic prices in the landlocked nation. On the other hand, the island nation of Mauritius imports all its fuel, leaving it vulnerable to supply chain shocks, higher shipping costs, and rising global commodity prices.

Although Ghana produces limited volumes of oil, the West African nation relies extensively on refined petroleum imports. What’s more, Ghana’s Tema Oil Refinery cannot process crude oil from the Jubilee oil field due to technical constraints, with the country’s Ministry of Energy commenting earlier this month that the plant’s configuration prevents it from accommodating the characteristics of oil from the Jubilee field.

In Nigeria, the impact of surging global oil prices is relatively limited. One would think that the behemoth Dangote Refinery’s supply of refined petroleum would mitigate the impact of elevated global oil prices. However, according to the Dangote Refinery’s chief executive, David Bird, the plant does not receive discounted crude despite the West African nation’s naira-for-crude initiative, leaving the refinery exposed to oil price fluctuations. Even under the naira-for-crude arrangement, Nigerian oil is mostly purchased at international benchmark prices. Moreover, Bonny Light prices – the oil primarily produced in Nigeria’s Niger Delta – also move with Brent crude oil prices. The country has historically imported most of its refined petroleum needs; however, the Dangote Refinery has transformed its petroleum landscape, with fuel supplied by domestic refineries rising from 63% of the local fuel market in January to 92% in February.

The Gulf region is also a key producer of fertilisers, with around one-third of global seaborne fertiliser passing through the Strait of Hormuz. Consequently, global fertiliser prices are expected to rise, pushing up food price inflation. Gulf nations are notable producers of nitrogen fertilisers, which primarily depend on natural gas burned at high pressure in the presence of hydrogen to synthesise ammonia. Moreover, second-order impacts need to be considered, as producers elsewhere often lack key ingredients for fertiliser production. For example, fertiliser companies in India, Bangladesh and Pakistan have had to stop production after natural gas supplies from Qatar were cut off. Apart from nitrogen, Gulf states produce around 20% of phosphate fertilisers and a quarter of global sulphur. Fertiliser producers require sulphur to convert phosphate rock into a liquid that crops can absorb.

Rising global oil prices, coupled with exchange rate weakness amid heightened geopolitical tensions, would likely prompt monetary authorities to pause their easing cycle or even lift policy rates in some instances. These dynamics are especially pronounced in countries that rely on fuel imports, where higher energy prices are transmitted rapidly to transport, electricity, and food costs, ultimately prompting a re-pricing of inflation expectations and more cautious monetary policy aimed at stabilising currencies and containing second-round price pressures.

The old central bank doctrine of “looking beyond” energy shocks no longer holds universally. The post-Covid-19 era showed that inflation expectations can quickly become unanchored, triggering second-order effects on wages and broader pricing. Moreover, the inflationary shock following Russia’s invasion of Ukraine in 2022 hit households across Africa hard – something no government on the continent would want to relive.

A race to the bottom of the barrel
Historically, the continent has had to rely on oil imports to meet its demand deficit. However, even if the continent were able to meet its oil demand through domestic production, oil still needs to be refined. The crisis in the Middle East has sparked concerns that nations across Africa will run out of fuel. In 2023, Africa produced around 1.8 mbpd of refined petroleum (versus an installed capacity of 3.2 mbpd), with the African Development Bank noting that the continent imported around 40% of its refined petroleum needs during the year before.

The African Energy Chamber (AEC) noted that Africa’s refined petroleum demand stood at around 4 mbpd in 2024, with Egypt, South Africa, Nigeria and Algeria being the largest consumers. The AEC also stressed that, despite a raft of refining projects across the continent, Africa will remain short on petrol, diesel and jet fuel – net diesel imports are projected to rise to just under 1.8 mbpd by 2050, while net petrol imports are forecast to surpass 1.5 mbpd.

Africa has emerged as the most structurally exposed region. A prolonged crisis in the Middle East could expose the continent’s limited fuel stockpiles and heavy reliance on refined petroleum imports – around 38% of refined fuels imported by Africa in 2024 came from the Middle East. Most countries maintain relatively small strategic reserves. Even in South Africa – the continent’s most industrialised nation – the policy requires maintaining reserves equivalent to two months. Licensed manufacturers and wholesalers are required to hold 14 days of refined products in reserve.

Fuel buffers across much of the continent are significantly smaller than in South Africa. In Botswana, for example, the government’s strategic reserves hold about nine days’ worth of fuel, lower than the 15-day maximum storage capacity. Landlocked nations are particularly vulnerable since they rely on imports through neighbouring ports. Even large oil producers are not immune: in 2025, Nigeria maintained petroleum reserves sufficient to cover around 30 days of supply, prompting government plans to expand strategic stockpiles to safeguard the economy from global supply shocks.

According to Kpler, diesel inventories across the continent are reaching critical levels, meaning the point at which supply stress begins to surface has already been passed. For jet fuel and petrol, inventory levels are also expected to reach crisis levels soon. It is estimated that in a scenario in which there is no release of strategic petroleum reserves and with waivers for Russian crude extended only to India, Africa has 41 days until 50% of its crude inventories are drawn down and 65 days until 80% is used. With the IEA’s oil stockpile release, the question now turns to how it will be allocated. If a market mechanism is followed, African nations with low inventory levels could face very high prices. On the flip side, if the allocation is based on need, it might push Africa to the front of the line.

Contact author: Brendon Verster, Senior Economist – bverster@oxfordeconomics.com