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Oil producing countries have experienced a rise in political risk, finds Aon’s 2015 political risk map, which focuses on emerging markets.

Only seven countries managed to reduce risk compared to last year, while the commodity price decline was a common factor in most of the 12 countries that were downgraded. Oil prices may be stabilising at around US$60 a barrel, but the impact of the steep price drop was felt across many producing countries outside the GCC, particularly in Africa and Latin America.

Among them is Nigeria, crowned as Africa’s biggest economy less than a year ago, but currently suffering from a fall in revenues from trade of oil and natural gas. “It’s time to adjust expectations about Nigeria,” Mike Liu, quantitative country analytics director at Roubini Global Economics, tells GTR. “The country’s assets look vulnerable”, continues his colleague Rachel Ziemba, emerging markets senior director. A lack of policy will affect growth even in resilient parts of the economy, they say, and spending cuts will hamper public investments – regardless of the result of the presidential elections to be held at the end of the month.

Also in West Africa, Ghana was downgraded to a medium-high risk, as the country’s economic and political deterioration increased the risk of sovereign non-payment and exchange transfer. Only recently Ghana struck a three-year deal with the International Monetary Fund (IMF) worth about US$940mn in instalments to stabilise the economy, which relies on exports of gold, oil, and cocoa. The Ghanaian economic growth rate dropped from approximately 8% a year to 4.2% in 2014 due to the commodity prices fall, and is estimated at 3.5% in 2015.

Delays in project implementation in the natural gas and coal industries have also raised risk in Mozambique to medium-high. Ziemba explains that coal producers have been experiencing difficult years, and the country has only recently joined the coal party. Despite the relative progress since the election held last October, investors are advised to be cautious.

Particularly concerning to the analysts is Venezuela, a very high-risk country in an otherwise fairly stable region which has benefited from new reforms and US-led growth. As the Venezuelan economy relies heavily on oil revenues, the falling oil prices have led to a currency devaluation and sky-rocketing inflation. Overall, “the country’s huge debt burden does not look sustainable even if oil prices rise again”, says Ziemba. The government has been restricting access to foreign currency in an attempt to refinance its foreign debt, affecting private sector imports of various products and causing shortages of basic materials and goods. The situation keeps worsening, prompting Venezuela to barter part of the oil sold to Uruguay for goods and services, as Reuters reported on Tuesday (March 3).

With the notable exceptions of Malaysia and Vietnam, Asian countries like India, Indonesia and even Pakistan (which was downgraded from high to very high) “will particularly benefit from low oil prices,” says Ziemba. However, a cause for concern in the region is territorial conflict and nationalist tendencies, which have increased supply chain disruption risk and the possibility of policy mistakes, according to the report.

Aon’s annual political risk map is developed in co-operation with Roubini Global Economics. It evaluates nine risk categories (exchange transfer, legal and regulatory, political interference, political violence, sovereign non-payment, supply chain disruption, risks to doing business, banking sector vulnerability, and risks to fiscal stimulus) against six risk ratings (low, low to medium, medium, medium to high, high, very high) across 163 countries.