The drop in oil prices will affect African financial markets, says the IMF

Jan 21, 2015

The institution warns that the effects of the oil prices slide will be felt by emerging markets.

The continuing decline in oil prices could impact on emerging financial markets, including South Africa, Egypt and Nigeria, according to the International Monetary Fund (IMF).

"They could face a reversal in capital flows. With the sharp fall in oil prices, these risks have risen in oil exporters, where external and balance sheet vulnerabilities have increased, while oil importers have gained buffers," the IMF said in a statement.

It added that the decline in oil prices and commodity prices explains the downward revision of growth prospects for sub-Saharan Africa.

Still, some investors believe that the decline in oil prices presents some opportunities in Africa. Helios Investment Partners, a private equity fund focused on Africa, has for the first time raised more than $1 billion (€860 million).

The London-based group said the record size of the fund signals the growing appetite for the continent.

Tope Lawani, Helios co-founder, said in an interview with the Financial Times that in the near term many African countries were going to suffer an "adverse impact" on their currencies as capital flew back to the US in a context of sharply lower commodities prices.

But he claimed that the downturn would turn into an opportunity for investors holding large amounts of US dollars, such as Helios. “It is an excellent time to invest: asset values are going to come down."ADNFCR-2976-ID-801771155-ADNFCR