AfDB: Championing inclusive growth across Africa. A blog by the former Chief Economist and Vice-President
For the past decade, Africa has had strong growth. A new economic momentum has been created. The continent weathered the financial crisis and has bounced back. But headline economic growth is not enough. Deliberate policies to reduce inequalities and promote inclusion are now needed more than ever before. It is time to focus on what people want: decent work, a living wage, access to basic service, more democracy and accountable governments. Africa and its people aim to be a pole of growth in the decades ahead. Read more
Oil prices have remained persistently high and volatile in the past few years and according to estimates they may remain so at least until 2014. The Brent crude spot price, which averaged US $112 per barrel in 2012, is projected to remain above US $100 per barrel at an average of US $108 and US $101 per barrel in 2013 and 2014, respectively (U.S.). High oil prices may dampen the global economy which is still struggling to recover from the 2008 financial crisis.
Africa’s power sector is facing many challenges, mainly due to insufficient generation capacity which has limited electricity supply, resulting in low access. The main obstacle to the increase in electricity generation capacity is the high cost of producing electricity, forcing governments to subsidize consumption.
Over the past decade, global use of renewable energy sources (solar, wind, hydropower, geothermal, biomass, and biofuel) for generation of electricity has grown significantly, reaching 19% of total power generation in 2010 compared with 14% in 2002. The rise in the use of renewable energy has mainly been driven by increased awareness of effects of climate change and governments’ incentive programs aimed at enhancing the development and the use of green energy.
Over the course of 2011, some African countries took steps to drawdown on expensive and unsustainable fuel subsidy programs. Recently, Nigeria joined the ranks of Ghana and Guinea by slashing fuel subsidies to align domestic fuel prices with international prices.
The argument for the removal of fuel subsidies is based on the notion that poorly targeted consumption subsidies deprive the country of scarce resources critical to other priority sectors. Globally, fuel subsidies amounted to USD 410 billion in 2010 as energy prices rebounded strongly. In 2011, fuel consumption subsidies in Nigeria, Cameroon and Ghana cost USD 7.5 billion, USD 600 million, and USD 276 million, respectively. The fuel subsidy was the equivalent of 30% of total federal government expenditure in Nigeria, and approximately 12% and 3% of federal government budget in Cameroon and Ghana, respectively. This sharply contrasts with the proportion of public spending on health in those countries.