How Covid-19 has exposed oil producing countries

Sunday May 17 2020


By Victoria Nyeko

Since government closed Entebbe International Airport amid the Covid-19 pandemic, more than 1,000 expatriates working in Uganda have been evacuated. The foreign nationals include a substantial number from Sweden, Canada and the United States of America (USA), among others.

According to Per Lindgärde, the Swedish ambassador to Uganda, “the decision to evacuate our nationals is a temporary measure following the global outbreak and people will be allowed to return as soon as the situation normalises, although, I do not know when.”

The evacuation of expatriates in such large numbers makes you wonder what area of work they were engaged in. Could it have been in construction, manufacturing, non-governmental organisations (NGOs)?

If Uganda had started oil production, as it was expected a few years ago before we engaged is a series of postponements, then a big number of the expatriates on the list could have been those working on the oil and gas sector.

As a result, at this point of Covid-19 pandemic, it would be possible that all oil investments, operations and production would have been forced to come to a halt.

Is it possible that the hand of God has protected Uganda’s oil by keeping it in the ground?


Although Uganda is currently counting economic losses, just like all the other countries, if we had joined the list of African oil producing countries – given that we had already started taking high-interest loans to build infrastructure – then the impact could have been much higher in this period of Covid-19 and the general oil price collapse.

Covid-19 has particularly affected oil producing countries heavily reliant on oil for basic survival. The US, a nation known for thriving on its domestic oil sector, faced for the first time in history a complete collapse of oil prices to minus $37.63 (-Shs142,000) a barrel in April.

This means producers were forced to pay customers Shs142,000 a barrel to take away unwanted oil. But US president Donald Trump had to negotiate with other major oil producers Russia and Saudi Arabia to decrease production.

Covid-19 has, therefore, for now removed the shine away from being an oil producing country. Furthermore, Covid-19 has exposed significant vulnerabilities and weakness for oil producing nations.

According to Prof Jason Bordoff, the founding director for the Centre on Global Energy Policy, Columbia University, “the idea that we are energy dominant or independent is a fallacy since the global market’s effect on the USA reveals in oil prices rises, we feel the pain, and in oil prices collapse, we need to call Moscow for help.”

In 2016, Saudi Arabia’s crown prince Mohammed bin Salman made an optimistic commitment aimed at enabling the country survive without oil. The thought process was that the world’s largest crude oil exporter must transition, and quickly, away from solely being dependent on oil and strengthen other sectors such as tourism and entertainment.

Covid-19 has unexpectedly left oil producing countries in desperate economic situations, with a few in some cases heading for life support.

Ecuador is laying off government workers and Nigeria is looking for almost $7 billion (Shs26 trillion) emergency loan.
Uganda is currently surviving without oil money. This crisis clearly reveals we need to develop others sectors such as agriculture and manufacturing and prioritise it over oil.
We can learn from the mistakes of other oil producers.

Ms Victoria Nyeko is a media commentator.