Low Oil Prices Good For Kenyan Economy

The news that the world oil prices have fell to their lowest levels in a period of 12 years is both good news and bad news to the African economies.

It is bad news to African economies that produce and export oil because this spells low income for the countries.

Countries like Nigeria and Sudan who are among the giant oil exporters in Africa are going to miss out in revenue from the oil exports.

For countries like Kenya, the drop in oil prices could be good news to the economy of the country but only if the country takes advantage of it.

Kenya relies heavily on the importation of crude oil from other countries and since many sectors rely on oil for survival, the product is, therefore, a crucial ingredient.

Kenya can reduce the money spent on import by more than 10 billion as a result of low oil prices and channel the funds to other economic projects.

Kenya has had an imbalanced trade while comparing the imports and exports. Often, the imports are higher than the exports and this was the main reason that lead to the weaker shilling.

Kenya can also take this opportunity to lower the inflation rate by more than five percent. Most sectors, especially the manufacturing sector depend on oil to run their systems. With low oil prices, there is low cost of productions and this should lead to the lowering of product prices especially food prices. Low inflation leads to higher economic growth because many households will not be spending much on food and this leads to savings and investments.

According to the World Bank, the economy of Kenya is prone to grow from the current 4.7 percent to 6 percent as a result of the low oil price, a major engine in the economic growth.

Article by Juma Fred.