What funding instruments are available to oil producing countries in Africa?
African countries do not have access to sufficient foreign exchange reserves to source oil to meet their own requirements, let alone for export, and as such have ironically been dependent on the importation of oil. A lack of funds has also meant no investment in the infrastructure required to refine any crude oil. In order to fund development of their industries, many oil producing countries in Africa have turned to reserve based lending as a means to an end. African countries generally have limited capacity to refine. While such oil producing countries generate small quantities of refined product, they are left with large amounts of crude product which they need to export. This offers an opportunity to compensate companies conducting exploratory work with off-take arrangements. Once the seismic have been conducted, and the reserves properly determined, the government is in a position to assign offtake arrangements to a bank to generate cash. The government is thus given net present va
