Africa faces rising fiscal strain as fossil fuel dependence deepens market exposure

African governments are facing growing fiscal pressure as new research shows that dependence on fossil fuels is leaving national budgets exposed to swings in global energy prices.

A series of studies released by the Fossil Fuel Treaty Initiative examines six countries and finds that both exporters and importers are struggling to manage the financial impact of oil and gas.

The reports say that producers lose revenue quickly when prices fall, while importers face higher inflation and rising subsidy costs when prices rise. The findings suggest that the structure of many African economies makes them vulnerable to these shifts.

Dr Jessica Omukuti of the University of Oxford says the link between public finances and global markets is now a central concern. “When government revenues depend heavily on fossil fuels for exports, or import and depend on them for energy generation, then your public finances get tied to global commodity prices,” she says.

Nigeria is one of the countries most exposed. Oil has shaped its economy for decades, yet more than eighty million people still lack electricity.

Theft, vandalism and falling output have reduced revenues. Dr Zainab Aliyu of Reimagine Change says the country must act while demand for oil remains steady. “For Nigeria, the question is no longer whether it should transition; it has become imperative. It is a fiscal survival strategy.”

Kenya generates most of its electricity from renewable sources but still spends heavily on imported fuel. Between 2021 and 2024, the government spent KSh169 billion (US$1.21 billion), to stabilise pump prices.

Tracy Tunge of University College London says fossil fuel income is too small to ease the country’s debt burden. She notes that even at full output in the Turkana fields, “it would still take up to fifty to one hundred and thirty one years to repay the debt.”

Angola, Senegal and Tanzania face different pressures. Angola’s transition plans are slowed by political centralisation and reliance on foreign consultants. Senegal risks stranded assets after large investments in gas infrastructure. Tanzania could lock itself into long term fossil fuel dependence if a forty two billion dollar LNG project proceeds.

Across the continent, the reports highlight a gap between resource wealth and energy access. Africa has large reserves of oil and gas, yet around six hundred million people still lack electricity.

The studies recommend gradual subsidy reform, stronger fiscal planning and investment in sectors that can create more stable income. Renewable power, food processing, green manufacturing and digital services are identified as areas with strong growth potential.

The authors also say that domestic reforms will not be enough. Dr Amiera Sawas, head of research and policy at the Fossil Fuel Treaty Initiative, says countries will need international support to manage the shift. She argues that the proposed treaty could help unlock finance, technical assistance and debt relief.

The findings come as governments prepare for a second global meeting on the energy transition next year. The outcome report from the first conference, released during London Climate Action Week, shows growing interest in a coordinated approach to reducing fossil fuel dependence.

OPA News Agency | One Planet Agency