Equatorial Guinea’s Oil Curse: Can Malabo De-risk an Economy in Steep Decline?

A Government Falls, an Economy Falters: Inside Equatorial Guinea’s Crisis

Vice-President Teodoro Nguema Obiang Mangue’s announcement that the government would resign after achieving scarcely 10 percent of its targets was a rare flash of political accountability in a nation ruled by the world’s longest-serving president. It also laid bare the precarious state of an economy that, for decades, surfed on a tide of petrodollars.

The discovery of the giant Zafiro field in the mid-1990s propelled the small Central African country into sub-Saharan Africa’s highest per-capita income bracket, funding gleaming infrastructure in Malabo and Bata. Today, the picture is starkly different: a 5.7 percent economic contraction in 2023 deepened to a 6.4 percent decline in 2025, and the World Bank forecasts an average 3.5 percent contraction in 2027. Hydrocarbon production accounts for 39 percent of GDP, 76 percent of exports, and 86 percent of government revenue, but maturing wells and lengthy maintenance shutdowns have sent output into a tailspin. Output fell 14 percent in the first three quarters of 2025, and a 25 percent year-on-year plunge in the third quarter underlined that this is not a temporary dip but a structural decline.

Non-oil sectors remain paralyzed. Agriculture, forestry, and fishing together contribute only 2.9 percent of GDP; the country imports 80 percent of its food. Education spending languishes at 0.9 percent of GDP against a regional average of 4.1 percent, health spending is a meagre 0.7 percent, and there is no national social-assistance programme. The result is a society under severe strain, with an estimated 61 percent of the population below the poverty line in 2025.

The International Monetary Fund projects hydrocarbon production to decline by an average of 6.5 percent annually until 2030, and overall GDP to shrink by 0.8 percent per year. Meanwhile, net foreign assets at the regional central bank fell from US$810 million at end-2024 to US$632 million by August 2025, and a staff-monitored programme requires fiscal adjustment of 2.3 percentage points of non-hydrocarbon GDP in 2026 and 1.5 percentage points thereafter to keep public debt below 50 percent of GDP. The window for de-risking is narrowing fast.

Why Malabo’s Oil Decline Is Structural and What Reforms Must Overcome

The production precipice

The oil-driven boom is over, and the numbers are brutal. IMF forecasts of sustained 6.5 percent annual output declines mean that the sector will provide diminishing revenues even if prices hold steady. With 86 percent of government income tied to hydrocarbons, the fiscal base is eroding in tandem. Temporary stoppages, like those that caused the 25 percent year-on-year plunge in the third quarter of 2025, will become more frequent as infrastructure ages. This is a structural challenge: without a step-change in exploration success, the state’s financial engine will stall.

The governance discount

Malabo’s persistent opacity magnifies the risk premium for any external investor. Despite seven new production-sharing contracts signed since 2023—including a multi-billion-dollar deal with ConocoPhillips—the government still does not publish asset declarations of public officials, contrary to longstanding commitments. The World Bank flags legal uncertainty, land-titling problems, and severely limited access to credit as barriers that stifle private-sector investment. For sovereign bondholders, the failure to build transparency into the fiscal framework casts serious doubt on the credibility of the IMF-backed adjustment programme. Without restoring trust, even well-designed reforms will struggle to attract the capital needed for diversification.

The non-oil illogic

Diversification rhetoric cannot mask the reality that the non-oil economy is a flickering candle. Agriculture, forestry, and fishing account for just 2.9 percent of GDP, yet forestry covers 87 percent of national territory. The sector’s contribution has declined because of a near-total absence of local processing capacity. The World Bank has identified sustainable forestry as a plausible diversification pathway, but that depends on “effective fiscal instruments” and improved forest governance—both of which are currently absent. Meanwhile, domestic credit to the private sector has halved from 10.5 percent of GDP in 2021 to 5.9 percent in 2023, confirming a dysfunctional banking system and low financial inclusion. Without a functioning financial sector, even viable non-oil businesses will remain starved of capital.

The human-capital basement

Any attempt to build a diversified economy rests on a foundation that does not exist. Education spending at 0.9 percent of GDP and health at 0.7 percent are among the lowest in the world. The absence of a national social-assistance programme means that economic shocks transmit directly into destitution. The poverty rate of 61 percent is not an outlier; it is a structural feature of a rent-based economy that has never invested in its people. Higher spending alone will not fix this if outcomes do not improve, but the current starting point makes even marginal progress look formidable.

The Investment Calculus: Opportunities, Risks, and a Shortening Window

For investors weighing upstream opportunities:

• The EG Ronda licensing round, offering 24 blocks until September 2026, presents genuine high-return potential. A US$50 million well on block EG-08 could unlock an estimated US$2 billion in net present value, and regional drilling success rates are as high as 90 percent. The Chevron-operated Alen platform and the EG LNG terminal provide spare infrastructure capacity that lowers development costs.
• However, this potential must be priced against a hydrocarbon output decline of 14 percent in 2025 and an IMF forecast of 6.5 percent annual declines to 2030. Any new production will at best offset a shrinking base, not add to net revenue unless the decline rate is aggressively tackled.
• Governance risks remain acute. The refusal to publish asset declarations and persistent legal uncertainty mean contracts can be subject to unpredictable administrative actions. A realistic risk premium is essential, and due diligence must encompass not just subsurface geology but the political and regulatory landscape.
• Tax measures required under the IMF programme—fiscal adjustment of 2.3 percentage points of non-hydrocarbon GDP in 2026—may raise the cost of doing business. Investors should model the impact of these adjustments on project economics.

For policymakers:

• Operationalising the Anti-Corruption Commission and publishing asset declarations are not just transparency commitments; they are prerequisites for lowering the governance discount that inflates the cost of capital for the entire economy.
• The IMF programme’s fiscal consolidation must be accompanied by rationalisation of tax exemptions, simplification of tax procedures, and a strategy to curtail subsidies to state-owned enterprises. Without these, the adjustment risks suffocating the non-oil private sector before it can expand.
• Creating a stabilisation fund to manage oil-price volatility would help insulate the budget from commodity shocks and give the government fiscal space to pursue diversification without abrupt stop-start cycles.
• The idea of an investment-promotion agency modelled on Costa Rica’s experience is sensible, but only if matched by streamlined regulations, infrastructure investment, and workforce training. It cannot function in an environment where domestic credit to the private sector is collapsing and land titling remains unresolved.