African oil giant, Angola, is planning to half its oil price benchmark in the 2015 budget due to the sustained fall in global oil prices. According to the country’s finance ministry, the cabinet has asked parliament to revise down the oil price assumption to $40 per barrel from its earlier projection of $81 per barrel.
The new benchmark would slash $14 billion from the budget, said a statement by the finance ministry, which was obtained by Reuters on Monday. The national assembly has until the end of next month to approve the changes, but the measures are almost certain to be passed as the country has no option than to overhaul its budget to deal with the severe drop in expected revenue.
Angola, Africa’s second largest oil exporter, has been hit hard by the over 50 percent collapse in global oil prices. The once bubbling economy is now having to deal with austerity measures because its growth in the past decade has been almost entirely driven by oil production. Another oil dependant and Africa’s largest producer — Nigeria — is also struggling with the grossly depleted oil revenue. The West African country, in December, cut its oil benchmark to $65 per barrel, but in light of the further drop of oil prices, it may again need to revise its benchmark.
The oil crisis has also triggered a currency crises in Angola and Nigeria. Angola’s Kwanza fell to an all-time low on almost a daily basis last month while the Naira, last week, touched down to the record low of N210 to a dollar in the parallel market, almost 30 percent worse than in January last year.