African Energy Boom Sparks Power Grab in Senegal.
By Abdoulaye Ndiaye and Jonathan Grady
As Senegal stands on the cusp of an energy boom with its recent discovery of substantial oil and natural gas reserves, the nation faces a pivotal crossroads between economic prosperity and the risk of descending into autocracy. The energy boom's significance extends beyond Africa toward Europe’s ongoing struggle with Russian aggression, holding promise to help European nations reduce Russian oil and natural gas influence with a new supplier. This juncture also comes at a time when governments with strong Western ties across Africa are falling following a series of coups, amplifying concern for Senegal, a former French colony with strong Western ties dealing with its own growing instability. With the government’s ongoing enforcement of crackdowns and imprisonment of opposition members ahead of next year’s election, Senegal’s political institutions are in jeopardy.
This raises a pressing concern that the forthcoming export revenues will be used to aggressively consolidate power, leading to further autocratic behavior, and endangering the opposition. Our review of the fund structure recently put forth by the government to manage the expected billions finds a concerning lack of guardrails for how the export revenues will be managed. Countering these challenges, we propose a pragmatic financial solution by structuring the management of Senegal’s forthcoming export revenues. We advocate for the implementation of a sovereign wealth fund inspired by Norway’s transparent and successful model. Such a fund would serve as a safeguard against misuse for political gain and help stem a deteriorating political environment before a critical tipping point.
With Senegal and neighboring Mauritania sitting on 100 trillion cubic feet of natural gas, their abundant natural resource wealth has not gone unnoticed on the world stage. European leaders and senior American officials, including German Chancellor Olaf Scholz, Polish President Andrzej Duda, and U.S. Treasury Secretary Janet Yellen, have each visited Senegal with a keen interest in diversifying European energy sources away from Russian exports. Senegal's initial gas field coming online, with enough to supply gas-dependent Germany for several years, further solidifies its position on the global energy map. Moreover, Chinese President Xi Jinping’s recent commitment to investing in Senegalese infrastructure projects and expanding agricultural exports to China underscores China's growing strategic interest in the nation. The increasing focus from Washington to Beijing raises the stakes for the country’s future stability.
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Abdoulaye Ndiaye is an Assistant Professor of Economics at NYU Stern School of Business.