As a result, Nigeria and Angola have turned to non-U.S. The fluctuation in oil prices parallels the trends in exports (see chart below). exports to those two countries, mirroring declines in global oil prices. dollar reserves has led to a decrease in U.S. In Nigeria and Angola, where oil exports generate 90 percent of foreign exchange earnings, dollar shortages have delivered a competitive advantage to U.S. Angola’s kwanza has depreciated more than 400 percent since 2010, falling an additional 22.5 percent since the beginning of 2020. Prices had not recovered to their pre-2014 level when the pandemic began to affect the global oil market in January 2020, and the naira has depreciated more than 7 percent further since February 2020. For example, the Nigerian currency, the naira, depreciated 140 percent between 20 as the average annual closing price for West Texas International crude oil fell from $79.48 to $39.68 per barrel. When export revenue streams slow, currency exchange rates depreciate and foreign exchange decreases. That was the second largest drop since World War II.ĭownload larger size chart (1025 pixels by 1141, 72 dpi) More recently, oil prices fell more than 42 percent in March and April 2020 during the onset of the COVID-19 pandemic. During the Great Recession of 2007 to 2009, the price of crude oil fell more than 25 percent in October 2008. Between January 2014 and June 2021, there were 37 periods of oil-price declines, averaging about 10 percent. Frequent changes in global oil prices expose these two countries to broad economic instability. For example, Nigeria and Angola, Africa’s two largest oil-producing countries, earn 70 to 75 percent of export revenue from oil. export growth, it also reflects economic volatility in Sub-Saharan Africa, where 41 of 46 countries rely almost entirely on commodity exports. While this is potentially positive for U.S. export destinations in Sub-Saharan Africa, such as Nigeria and Angola, have some of the highest per capita incomes in the region. Markets Dependent on Trade of a Single Commodity Are Volatile and Vulnerable These commodities are consumed increasingly by a growing number of middle-income households throughout the Sub-Saharan African region. In the context of agricultural trade, these shocks disrupt the country’s ability to import primary commodities such as poultry, wheat, or rice. But when global economic shocks such as the COVID-19 pandemic cause that commodity’s price to drop, the volatility has consequences for development. When the price of a country’s primary export commodity is at a peak, incoming revenue provides resources to finance increases in public consumption, as well as urban development projects vital to keeping pace with the region’s rising urbanization rates. Through the lens of the Coronavirus (COVID-19) pandemic, the research illuminated the economic development challenges related to a lack of economic diversification in Sub-Saharan African countries.ĭownload larger size chart (1025 pixels by 1011, 72 dpi) Researchers at USDA’s Economic Research Service sought to identify the conditions that might indicate whether a market is insulated from this type of economic volatility, focusing on prominent U.S. This reduces demand for agricultural goods and diminishes a commodity-dependent country’s ability to trade effectively. Gross Domestic Product (GDP) declines, as does consumer income. If global prices drop, income and foreign exchange earned through exports fall. When countries rely on the exports of a single commodity, significant fluctuations in international prices for that commodity can leave them vulnerable to economic shocks. For example, most Sub-Saharan African countries depend almost exclusively on revenues and foreign exchange from the export of a high-value commodity such as oil. Despite being markers for significant market growth, these traits also can be symptomatic of economic development struggles that jeopardize stability in trade relationships. Sub-Saharan Africa is a region characterized by economies with growing populations, rising per capita incomes, and increasing urbanization. Imports of these commodities through 2031 are expected to continue below pre-COVID era projections. Without the foreign exchange credits to import foods that the United States exports, such as wheat, rice, and poultry, Sub-Saharan Africa’s food imports fell during the COVID-19 pandemic. Single-commodity exporters, particularly of oil, are especially vulnerable to downturns in commodity prices as occurred with the oil price collapse during the COVID-19 pandemic’s onset. Many Sub-Saharan African economies are reliant on exports of a single, high-value commodity as the primary source of export revenue.
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