The sub-Saharan Africa region is expected to register a strong growth of 4 per cent in its regional fuel consumption over 2022, climbing to 2.03 million barrels per day (mb/d) from 1.90 million barrels per day in 2019, soaring past pre-pandemic levels.
The uptick in the region’s fuel consumption is buoyed by the corresponding rise in the region’s vaccine rollout which is expected to gather speed this year, the result of which governments will be able to further localize lockdown restrictions.
“Our Country Risk team expect regional GDP growth to accelerate to 3.8 per cent, fuelled by an increase in consumer and business activity. However, economic growth will be uneven across the region and vulnerabilities resulting from the pandemic will persist.”
Fitch Solutions
According to Fitch, significant downside risks to the forecast arises where potential emergence of new variations of Covid-19 in SSA should they entail a return to national lockdowns or strict restrictions on movement. “This risk is exacerbated if new variants prove resistant to Covid-19 vaccines.”
On a country-specific level, Nigeria and South Africa which accounted for 53 per cent of regional fuel demand in 2021, will continue to be the highest contributors to SSA’s fuel demand growth, owing to the relative size of their economies.
According to Fitch’s Country Risk team, Nigeria and South Africa are forecast to register robust real GDP growth in 2022 of 3.6 per cent and 2.1 per cent respectively, which supports expectation for strong refined fuels demand from both countries.
This will lead to contributions of approximately 1.07 million b/d to SSA’s overall fuel consumption of 2.03 million b/d in 2022. Key demand drivers include strong country demographics, expanding construction and industrial sectors, as well as robust private consumption growth.
South Africa, Nigeria to experience high fuel consumption
Compared to regional peers, South Africa has made moderate progress with its vaccination programme, with 34 per cent of its population having received at least one dose of the Covid-19 vaccine as of February 20, 2022.
However, its progress still lags that of the world average of 62 per cent and well behind that of many developed markets such as the UK and US. However, the country’s COVID-19 restrictions since December 2021, has been at level one classification, the lowest level and involves minimal restrictions on movement.
As a result, Fitch noted that this supports the country’s expectation for a 3 per cent increase in South Africa’s refined fuels consumption in 2022, to reach 534,171 b/d.
“We note that longer delays to the domestic vaccine rollout or the uncontrolled spread of more infectious variants throughout 2022 could weigh on the country’s fuel demand over the near term, should it lead to the reintroduction of social distancing measures or strict lockdown rules.”
Fitch Solutions
Fitch’s positive stance of a strong growth in refined fuels demand from Nigeria is “in spite of weak progress with the government’s vaccination program”. Only 7 per cent of the country’s population have received at least one dose of the COVID-19 vaccines as of January 29, 2022.
However, considering 2021 estimates for refined fuels consumption in Nigeria, there was an increase of 8 per cent, despite lockdown measures implemented at various degrees throughout the year to curb the spread of the COVID-19 pandemic.
Fitch said it is upbeat about Nigeria’s fuel consumption, as fuels demand in Nigeria weathers the storm of the pandemic throughout 2022, supported by strong economic growth and an expansion in the country’s construction and manufacturing industries.
On the whole, and over the long term, SSA’s refined fuel demand will continue on an uptrend averaging 4.6 per cent growth year-on-year over the 10-year forecast period, to reach 3.0 million b/d in 2031.
“Our Country Risk team forecast SSA’s real GDP growth to average 3.7 per cent year-on-year between 2022 and 2031, which will be accompanied by an expansion in infrastructure and manufacturing across the region, bolstering a strong demand for refined fuels.”
Fitch Solutions
