Algeria could lose 87% of oil revenue and Nigeria more than 60% as global demand falls, report warns

The figures were reported by the Guardian on Tuesday⁠, drawing on research by climate and foreign-policy think tank E3G.

They are projections rather than predictions of certain losses. The outcome will depend on the speed of the energy transition, future oil prices, production costs and the ability of exporting countries to diversify their economies.

E3G’s underlying Playing the Oil Endgame⁠ report⁠ examines how governments and markets could respond as global oil consumption reaches a plateau and subsequently begins to contract.

Why Algeria and Nigeria are vulnerable

Oil and gas revenue supports public spending, foreign-exchange earnings and government budgets across both countries.

Algeria remains heavily dependent on hydrocarbons, with state-owned Sonatrach central to its economy. The country has continued investing in oil and gas to serve European buyers seeking alternatives to Russian supplies.

Nigeria is also pursuing higher production. The government wants to increase crude output to approximately three million barrels a day by 2030, well above recent levels, while attracting new capital to exploration, natural gas and refining.

International Energy Agency executive director Fatih Birol recently said Nigeria could double energy investment within five years as wars involving Iran and Ukraine encourage buyers to seek additional suppliers. The projection was reported by Reuters⁠.

The two positions are not necessarily contradictory. New production could generate substantial revenue before global demand weakens, particularly if Algeria and Nigeria can supply oil at competitive costs.

The risk is that expensive projects may begin producing just as buyers become more selective.

A competition to be among the last suppliers

Oil demand is broadly expected to plateau or peak between 2030 and 2035, although forecasts vary considerably.

A declining market does not mean that the world stops consuming oil immediately. It means producers compete more aggressively for a smaller pool of demand.

Countries with low production costs, large financial reserves and the ability to offer reliable supplies would be better positioned. Rich Gulf producers may be able to cut prices or withstand extended periods of weaker revenue.

Nigeria and Algeria have less room to absorb such a shock.

E3G identifies them among a group of significant exporters whose financial and political buffers are more limited. Across the world, 17 producing countries receive more than 40% of government revenue from oil and gas.

The think tank developed its report over several years and used simulations involving more than 100 participants from governments, international organisations, academia and civil society. It considered several possible transition paths between 2028 and 2040 rather than presenting a single forecast.

What the percentages do, and do not,mean

The projected 87% loss for Algeria and decline of more than 60% for Nigeria require further explanation before publication as national financial forecasts.

The precise base year, oil-price assumptions and definition of “oil revenue” should be obtained from E3G. A reduction in gross export revenue would not necessarily equal an identical decline in government income.

The report nevertheless highlights a serious strategic question- should African producers accelerate investment to earn as much as possible before demand weakens, or avoid placing more public money into assets that could struggle to recover their costs?