Cranes line the skyline of downtown Luanda, Angola. (Nichole Sobecki for The Washington Post)

Over the past four years, oil-producing countries have experienced a wild ride. After oil prices exceeded $110 per barrel for Brent crude in 2014, they suddenly dropped to $50 per barrel in early 2015 and to $35 per barrel by January 2016, leaving most producers unable to balance their budgets. Observers suggested that falling oil revenue could provoke political crises, as governments implemented spending cuts that could endanger their popular support. However, since last summer, oil prices have risen steadily. For the past month, Brent crude has surpassed $75 per barrel.

How have oil-producing countries navigated the recent price collapse? Most analysis has focused on Persian Gulf oil producers, such as Saudi Arabia, or the cautionary tale of Venezuela. But what about the half-dozen significant sub-Saharan African oil producers? While these countries produce less oil than their Gulf counterparts, they face similar challenges in the face of low oil prices, as many of them are equally dependent on petroleum revenue. My research shows that these countries were in a particularly perilous position after the price collapse because of swift consumption of their already limited foreign reserves.

Reserves and vulnerability

Foreign reserves — which consist of foreign currency and financial assets held by a country’s central bank — help oil producers survive price downturns by acting as a rainy-day fund. When oil revenue falls below countries’ fiscal break-even points, governments can dip into these reserves to sustain social and military spending, securing themselves against internal and external threats.

In 2014, some oil producers possessed abundant foreign reserves. Saudi Arabia, for example, held over $23,000 per person. These countries were well positioned to ride out a price collapse.

In contrast, sub-Saharan Africa’s oil producers had little financial buffer. Equatorial Guinea held the largest reserves of all the region’s oil producers. Yet, at $2,574 per person, these were barely one-tenth the size of Saudi Arabia’s. Gabon and Angola, which held the next largest reserves, possessed $1,321 and $1,045 per person, respectively. Nigeria held $212 per person because of its large population, while Chad and South Sudan possessed less than $100 per person.

Figure 1: Foreign reserves per capita, 2014

Data sources: IMF; World Bank. Includes all countries that depended on oil for more than 5 percent of GDP in 2014, excluding Turkmenistan.

Comparing reserve consumption

After the 2014 price collapse, some producers quickly burned through massive amounts of foreign reserves. Between 2014 and 2016, Saudi Arabia consumed more than $7,100 per person. Qatar’s reserves also dropped precipitously, falling by $6,000 per person. In contrast, producers in sub-Saharan Africa consumed much smaller volumes of reserves: at most, $2,500 per person and, more commonly, less than $1,000 per person. Unsurprisingly, these small figures attracted limited attention, relative to the drain on Gulf producers’ foreign assets.

Figure 2: Foreign reserve consumption by volume, 2014 and 2016

Data sources: IMF; World Bank

However, in percentage terms, sub-Saharan African producers consumed far larger shares of their foreign reserves than their Gulf counterparts. Between 2014 and 2016, Chad exhausted 99.3 percent of its reserves. Equatorial Guinea consumed 98 percent, Congo Republic, 86.2 percent, South Sudan, 84.6 percent, and Gabon, 69.8 percent. These eye-popping figures are far greater than the percentages consumed by Gulf oil producers, including Kuwait, Saudi Arabia, Qatar and Iraq, which utilized 10 to 36 percent of their foreign reserves. They are also substantially larger than the figures for Nigeria and Angola, sub-Saharan Africa’s two largest oil producers.

Figure 3: Foreign reserve consumption by percentage, 2014-2016

Data sources: IMF; World Bank. Data note: Ecuador, Egypt, Oman and the UAE had positive reserve growth during this time period.

On the brink?

Why did sub-Saharan Africa’s smaller producers consume such large percentages of their foreign reserves? One possible explanation is these countries’ low initial reserve volumes; they simply had fewer assets to consume when prices dropped. Another explanation is their lack of alternative means of compensating for revenue shortfalls. Small producers cannot easily borrow their way out of fiscal crises, as they lack massive oil reserves or output to use as collateral. As a result, drawing down foreign reserves may be their only viable response to a price collapse. In contrast, major producers such as the Persian Gulf states, Algeria, Libya, Nigeria and Angola have other options.

By the end of 2016, the last year data are available, many of sub-Saharan Africa’s smaller oil producers had eliminated their financial buffers. Since then, their reserve consumption has likely slowed, for three reasons. First, countries such as Chad and Equatorial Guinea had few reserves left to consume. Second, as oil prices recovered, the gap between producers’ resource revenue and their budgetary commitments narrowed, reducing their need to consume foreign reserves. Third, producers had more time to adapt to cheap oil, enabling them to lower their fiscal break-even points by increasing the efficiency of oil production.

Nonetheless, should oil prices fall again, Chad, Equatorial Guinea, Congo Republic, South Sudan and Gabon will no longer be able to draw on foreign reserves to compensate for revenue shortfalls. Nor are they likely to generate further efficiency gains. Instead, they will be forced to implement spending cuts to balance their budgets, which could have far more destabilizing consequences.

Whether these consequences include forceful regime change or state failure will depend on the cuts’ duration, severity and targets. Most of these governments are not at risk of a popular uprising, no matter how far oil prices fall. They redistribute little of their oil revenue to the general population, so a drop in petroleum income will merely reinforce the status quo, rather than provoke widespread, grass-roots opposition.

However, if spending cuts affect domestic patronage networks, they could be far more dangerous. These networks sustain governments’ hold on power by buying off potential political opponents. Reducing petroleum payouts could therefore weaken patrons’ attachments to ruling regimes and provoke elite-led revolts. In addition, if producer regimes reduce spending on domestic security apparatuses, it could compromise their ability to defend themselves against these internal threats.

Political instability is not inevitable for sub-Saharan Africa’s smaller oil producers. However, by including these countries in conversations about cheap oil, analysts can more accurately gauge the consequences of low oil prices, the countries most vulnerable to them, likely thresholds for political instability and ways to moderate the next oil bust’s negative effects.

Emily Meierding is an assistant professor of national security affairs at the Naval Postgraduate School in Monterey, Calif. The views expressed here are her own and do not necessarily reflect those of the Department of the Navy, the Department of Defense or the U.S. Government. You can follow her @EMeierding