A Review of the Nigerian Energy Industry

Algeria reassures citizens as oil price plummets

10 December 2014, Algiers – With a falling price of oil, questions about the state budget are beginning to arise in Algiers as 99% of the country’s foreign currency revenues come from oil.

But authorities say they are in control of the situation.

Crude oil prices“Algeria’s financial balance will not be affected by the fall in the price of oil [because] the government has mechanisms that can deal with this kind of situation,” Finance Minister Mohamed Djellab said on December 1st.

In his opinion, “thanks to its prudent policy for more than the last ten years, Algeria has successfully repaid its debts and thus increased its capacity to deal with the new economic situation and built up significant foreign currency reserves.”

On Sunday (December 7th), the head of Sonatrach said the oil giant would maintain its 90 billion dollar development plan for 2015-2019 despite the price decline.

Trade Minister Amara Benyounes also reassured Algerians, saying that this fall in the price of oil would not impact the aid and subsidies for the most deprived segments of society that form part of the government’s manifesto.

“This year, there will be over 60 billion dollars of welfare payments and tens of thousands of homes will be allocated,” he told journalists.

Despite these assurances, there are still concerns over the Algerian economy’s ability to withstand the drop in the price of oil.

 Sid Ahmed Ghozali, a former prime minister and one-time CEO of Sonatrach, said in an interview with Tout sur l’Algérie on December 3rd that a fall in prices would “only exacerbate the deterioration of our economy, which began a long time ago for reasons that are more fundamental than oil prices”.

“This oil price is by no means the only factor on which our finances depend,” Ghozali said, adding that other factors included “the way in which we mine our deposits, the rate of recovery of existing reserves, and then there are non-oil resources, which have reached a dramatically low level. The combination of these factors is more important than the price.”

Nazim Zouioueche, an energy expert, said that Algeria had no choice but to use up its foreign currency reserves to avert a deficit.

This course of action is made all the more necessary by the fact that “oil revenues for this year are estimated at 60 billion dollars, while imports will be slightly higher. This means that we will spend more than we earn”, he said.

Former presidential candidate Ali Benflis expressed his “deep concern about the continuing drop in the prices of hydrocarbon products, about which the authorities have done nothing and whose effects they are continuing to play down while the spectre of a serious financial crisis looms on the horizon”.

The public shared this concern.

“Algeria must think about diversifying its economy,” said economics student Amine Saouli. “The country has great economic potential. Sectors such as industry, agriculture, fisheries and tourism could be effective and dependable stopgaps.”

Imene Bechouche, a public-sector worker, said she hoped that the price drop would “not cause the government to adopt a restrictive economic policy, which would jeopardise the social achievements of the past few years”

– Magharebia

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