Nations across Sub-Saharan Africa are heavily reliant on raw materials, with many countries exporting them unprocessed. This leaves them exposed to external forces beyond their control, including global price fluctuations, supply-chain disruptions, and currency volatility. The impact is felt directly in domestic economies, affecting households, businesses, and public finances. When global prices for crude oil, cocoa, or other commodities rise, nations without local processing bear the costs, importing economic instability alongside their exports.
Nigeria's economy is a prime example, with crude oil accounting for a significant portion of its exports. In 2024, mineral fuels, including oil, made up approximately 86.8 percent of the country's total export value. In contrast, refined petroleum exports represented a mere 2.4 percent of total export revenue, highlighting a significant gap in domestic processing. Ghana's economy also relies heavily on raw commodity exports, with crude petroleum, gold, and cocoa forming the bulk of its exports in 2023. However, only a small percentage of cocoa-related exports were processed into finished goods, indicating a missed opportunity for revenue.
The ongoing Middle East war has exacerbated these pressures, driving up energy and shipping costs and threatening economic stability across the region. Many countries in Sub-Saharan Africa are struggling to cope with the rising costs of imports, including refined products and energy.
The Middle East war has laid bare the vulnerabilities of nations that rely heavily on raw commodity exports. Nigeria's failure to refine its crude oil domestically is a case in point, with the country bearing the brunt of global price fluctuations. The consequences are felt by households, businesses, and public finances, with the country's economy suffering from the instability. Ghana's experience with cocoa exports also highlights the missed opportunities for revenue that come with not processing raw materials locally. The World Bank data shows that the average share of manufacturing in GDP across the region is a paltry 11.5 percent, indicating a significant gap in domestic processing. It is high time for nations in Sub-Saharan Africa to rethink their reliance on raw commodity exports and invest in domestic refining and manufacturing to reduce their vulnerability to external shocks.
