With Nigeria and Angola seeking international loans to help ease their oil pain, investors are hoping that any loans will lead to a revision of their worrisome economic policies.
With recent reports suggesting low oil prices are here to stay, major producers are pulling out a number of stops in order to outlast a devastating slide that has seen many pushed to the brink.
Some, like Saudi Arabia, have reached into their foreign currency reserves while running an ever-widening budget deficit. Meanwhile, Russia, as well as having impressive reserves, has rolled out painful cuts and is considering ways to divest its stake in state-owned companies.
Yet for smaller oil-dependent producers, there is no such luxury. Not only have their dollar reserves run dry, but they can ill-afford to make further cuts or sell major stakes in state-owned oil companies, seen as the lifeblood of their economies. Without these options, their future looks bleak.
It is a fact not lost on international observers: asked recently what kept her awake, Christine Lagarde, managing director of the IMF, said she worries about the fate of low-income oil producers. And with IMF economists issuing fresh warnings that commodity shocks could weaken banks in developing countries, raising the likelihood of a commodity-driven financial crisis, those concerns seem well-founded.
Facing this harsh reality, and with few options left, Nigeria and Angola have approached the World Bank for loans. These loans would be painful for the local populace, but would be welcomed by western analysts and investors, not least because should could bring much-needed revisions to some of the countries' worrying economic policies.
Confronting a new reality
With no sign of an imminent oil recovery, producers are being forced to confront a new reality. Gone is the boom that lifted the fortunes of oil producers the world over, from Azerbaijan to Angola, Gabon to the Gulf. Instead, the next few months are likely to provide a stern test for some, and a fight for survival for others.
That is the case for Nigeria and Angola, two countries hit hardest by the precipitous fall in prices. Heavily reliant on black gold - oil production accounts for over 1/3 of their total GDP and nearly 90% of their export revenue - both find themselves in survival mode.
In Angola, where oil has been instrumental in the reconstruction of its peacetime economy, the effect has been devastating; last year, parliament voted to cut the budget by 25%.
Meanwhile, inflation has mushroomed to 14% and the country's currency, the kwanza, has sunk to record lows. Unable to implement further cuts, the government seems helpless.
Things are little better in Nigeria, either, where Africa's largest economy faces a yawning budget deficit of some $15 billion, or 3% of GDP this year. Growth has also been revised down to around 3.25% in 2016, according to the IMF, having hit 6% last year. And there are no promises that parliament will pass an ambitious budget aimed at stimulating a flagging economy through infrastructure outlays; many question the government's $38 per barrel priced in for 2016.
Seemingly oblivious, President Muhammadu Buhari has refused to let Nigeria's currency float, complicating importers' ability to access foreign exchange and resulting in a flight of investors which, as well as driving down growth, has made any recovery even trickier.
International loans: a mixed blessing?
Given their slumping fortunes, these countries are now seeking loans abroad. Desperate to avoid an IMF rescue program, Nigeria has started exploratory discussions with the World Bank about borrowing to plug its $15 billion budget deficit. Abuja is seeking a package composed of around $3.5 billion, with $2.5 billion coming from the World Bank and an additional $1 billion from the African Development Bank.
Last week, it was also announced that Buhari's government would scrap plans to issue further Eurobonds, instead seeking a $2 billion loan from China. Buhari hopes the deal will be wrapped up next month, though how receptive Beijing is, or what conditions it imposes, remains unclear.
Angola has also been in discussions with the World Bank and is seeking $500 million. If finalized, the loans would likely be priced at below-market rates.
They would also have far-reaching consequences. While the packages would not come with the same strings attached as any IMF bailout - typically sweeping structural reforms - the World Bank has recommended that Nigeria and Angola let their currencies devalue further; both states have parallel currency markets, with the street value of their notes swapping hands at far less than their fixed rate.
This means any loan package may be conditional on currency floats and the lifting of foreign exchange restrictions.
Moreover, although the World Bank issues loans independently from the IMF, it still needs the fund's endorsement to go ahead. So, even the World Bank wanted to issue an unconditional loan, it could get rebuffed, especially given Lagarde's stinging criticism over fiscal policies in Nigeria and Angola recently.
In any case, with economists declaring further devaluations are nearly inevitable (Angola has already devalued its kwanza recently), international loans could act as a catalyst. For Angola, which like Russia has already let its currency depreciate over the past year, that may not be so bad.
But for Nigeria, whose leaders have refused to let the naira float - burning through foreign reserves along the way - there will be an exacting toll; the country imports far more than it exports, meaning deprecation would lead to painful inflation, hitting the poor hardest. And, as GRI reported, rising unemployment and poverty would likely spark further unrest and play into the hands of groups such as Boko Haram.
No pain, no gain
In the short-term, though, while devaluations would hurt their poor, they would also restore investor confidence and give Nigeria and Angola some respite against continuing low oil prices. Facing economic ruin, these countries must confront reality rather than hope for a miracle.