In 1996, Equatorial Guinea and its 1.5 million inhabitants struck black gold. ExxonMobil announced the discovery of a major oil field some 50km off the country’s coast, near the border with Nigeria.

The Zafiro oilfield came on stream in 1996, producing up to 280,000 barrels of oil per day (bpd). This output was added to the production from other smaller fields.

Petrodollars were soon pouring in, and the country’s wealth multiplied by more than 10. Per capita GDP rose from $400 in 1996 to almost $20,000 in 2008, two and a half times that of South Africa during the same period, and almost equivalent to that of Portugal (around $25,000 in 2008).

Unfortunately, this windfall only benefitted a small number of people.

The problem is not oil, but how wealth is distributed in these countries

In 2006, according to the latest available statistics from the World Bank, nearly eight out of 10 Equatorial Guineans were living below the extreme poverty line. That’s a bitter irony for a country with so many resources.

“Millions and millions of barrels of oil have been extracted, yet the population is still stuck in extreme poverty,” says Marc-Antoine Eyl-Mazzega, the director of the Centre for Energy and Climate at the French Institute of International Relations (IFRI). “It raises the question of governance and transparency in the use of resources.”

Run with an iron fist by Teodoro Nguema Obiang Mangue for almost half a century, Equatorial Guinea is considered to be one of the 10 most corrupt countries in the world, according to Transparency International, an NGO which estimates that in Africa, only Somalia and South Sudan are worse off. The situation is all the more worrying given that oil production has begun to decline since its peak in the mid-2000s.

From 306,000 bpd in 2010, it fell to 140,000 bpd in 2021, then to 118,000 bpd in 2022, an average decline of 7.4% per year. The country has been in chronic recession for the last 10 years, and by 2022 its GDP per capita had fallen to just over $7,000. With fitting symbolism, ExxonMobil has announced that it will leave the country in early 2024.

 

The petro-state’s history is a textbook case. After decades of prosperity, Equatorial Guinea risks being left with little or nothing. One of its only factories is a brewery. Malabo, the capital, does have a few luxury hotels and banks, but the construction sector is in dire straits, hit hard by the fact that public investment has dried up.

All things considered, the situation in Equatorial Guinea echoes the one in Chad, which has the 10th largest proven oil reserves on the continent. It became a major exporter in the early 2000s when production from the Doba oil fields in the south came on stream via a pipeline running through Cameroon to the Atlantic coast.

Production of 150,000 to 200,000 bpd remains modest compared with what neighbouring Libya and Nigeria supply to world markets. But oil immediately became a central part of the Chadian economy, quintupling the size of GDP.

Stuck at the bottom of the rankings

Today, the oil sector accounts for 30% of GDP, 86% of export revenues and 62% of budget revenues. Despite this boon, “Chad has remained stuck at the bottom of the energy access rankings”, notes a study by the Centre on Global Energy Policy at Columbia University in New York, published in February and directed by researcher Harry Verhoeven.

“Since 2003, desperately poor Mali and Niger have increased their access to electricity more significantly (to 50% and 18% of their populations respectively) than Chad, despite starting from similarly low levels in 2000 and facing similar geographical challenges,” the study says.

So the oil bonanza has not been synonymous with better access to electricity, and even less so with economic emergence. Yet these arguments are at the heart of the pleas from African oil lobbies. “African states should exploit their oil and gas resources to stimulate growth, create opportunities (employment, income) and reduce energy poverty,” says NJ Ayuk, president of the African Energy Chamber (AEC). The Cameroonian lawyer admits, however, that for this to become a reality, producer countries must demonstrate “transparent and responsible governance”.

“This means putting in place solid regulatory frameworks and anti-corruption measures designed to ensure oil and gas revenues help to irrigate the economy as a whole,” Ayuk says. “The problem is not oil, but how wealth is distributed in these countries,” says Faten Aggad, the director of the African Future Policies Hub. “Oil won’t make any difference until governance improves.”

The leaders of the new oil-producing countries, from Côte d’Ivoire to Senegal, Namibia and Uganda, have a major responsibility on their hands: transforming their countries’ oil wealth into either a blessing or a curse.