The head of the United Nations agency promoting economic progress in developing states has advised oil producing countries in Africa to seriously pursue economic diversification policies, warning of consequencies of declining oil prices on their economy.
The UN therefore called for African countries to look beyond the oil industry for financial growth.
In its 2016 Report on Economic Development in Africa
the UN Conference on Trade and Development (UNCTAD), warned of rising public debt in nations in the region that are major oil and gas producers such as Nigeria and Tanzania.
The study noted how the external debt for the average African country grew to $443 billion or roughly 22 per cent of gross national income by 2013.
Mukhisa Kituyi, Secretary-General of UNCTAD, who gave the advise observed that most countries in Africa are mired with massive debts due to the low prices of oil and gas.
Other nations in the region are in danger of going through greater political instability, he noted.
“These countries should take notice of these low commodity prices to diversify their economies,” said Kituyi, according to Xinhua, at the close of an UNCTAD conference in the Kenyan capital city of Nairobi.
For example, the Ghanaian public debt doubled between 2007 and 2015 in order to feed the country’s promising oil sector. The plummeting price of crude in recent years changed the scenario with some analysts believing Ghana could soon default on its massive debt.
Junior Davis, one of the authors of the study, explained that there are at least five countries in “debt distress.” But the real problem is how in recent years the accumulation of debt has grown exponentially throughout the African region.
“The rate of debt has outstripped growth in most countries. So we are raising a red flag, Davis warned.
The report concluded that African countries should focus more on other revenue streams such as remittances, which reached nearly $64 billion in 2014, and public–private partnerships.
It also recommended taking steps to reduce illegal finance flows that can be as high as $50 billion per year.
According to Kenya’s Daily Nation, members states at the UNCTAD reached key agreements that allow the body to advise countries on policies related to the implementation of social development goals (SDGs) to be achieved by 2030.
The deals also detail the obligations countries must comply with in order to fulfill the SDGs on areas such as economic development, the environment, and poverty.