The Oil producing Angola in the Southern part of Africa faces what Nigeria faced 12months ago; a distortion in its exchange rate with a difference between the official markets and the parallel black markets. One dollar through the official window buys you 166 kwanza, while one dollar through the black market buys you 400 kwanza. Nigeria faced the same challenge 12months ago, when the distortion between the official and black markets was as much as the official markets trading at 306 with the parallel market ranging from 450 through to 510.
The Central Bank Governor of Angola, Jose de Massano Junior announced in Luanda “We will stop having a fixed foreign exchange, we will adopt a floating regime of foreign exchange”. Angola faces exactly the same challenges and has been applying the exact same responses to an exchange rate crisis like using its foreign reserves that was sitting at $26bn to defend the currency kwanza, with no success so far, even though the external reserves has dropped to $14bn.
Angola relies on Oil receipts for 80% of its government revenue, 90% of its inflow and 50% of its GDP. Angola is a $194bn economy that has been growing at an average of 10% on the back of rising oil prices since 2002 when its 27 year old civil war that started in 1975 ended. The state national oil company Sonangol reports that it produces up to 1.8m barrels of crude oil daily, however the government that until now has being led by the family dynasty Jose Eduardo dos Santos until recently when succession saw power transferred to Joao Lourenco, reports that the oil price rout in 2015/2016 that saw prices drop to as low as $28 per barrel caused ripples across the economic structures of the government, upsetting government revenues, its ability to fund its budget, capital project funding, foreign direct investments into the economy as a result of a currency crisis that was driven by the widening of gap between the official and street window of the kwanza, that until now has been pegged in a fixed exchange rate regime to the US Dollar.