Over the last decade, the Atlantic Ocean off the coast of western and southern Africa has become one of the most promising oil-exploration areas in the world. Six countries in the area are by now well-established oil producers, and more are to join their ranks in the near future. Oil-producing countries are faced with some of the same challenges as other natural resource-based countries, but their difficulties seem to be accentuated by the peculiar nature of oil markets and oil production. The main challenges come from the high volatility of oil prices, the enclave nature of the oil sector, the exhaustibility of oil reserves, and the high concentration of revenue flows from the oil sector, which invites rent-seeking behavior and may lead to governance problems. In the past, many oil-producing countries have been disappointed in their expectations that favorable resource endowments would lead to rapid improvements in development indicators. This paper focuses on the policies that have been and should be implemented by the oil-producing countries. It summarizes proceedings of the Workshop on Macroeconomic Policies and Governance in Sub-Saharan African Oil-Exporting Countries, hosted jointly by the African Department of the International Monetary Fund and the Africa Region and the Oil and Gas Policy Unit of the World Bank. The workshop brought together high-level policymakers from African oil-producing countries during April 29-30, 2003, in Douala, Cameroon.

The paper discusses macroeconomic and oil sector policy, and governance issues in the six oil-producing countries--Angola, Cameroon, the Republic of Congo, Equatorial Guinea, Gabon, and Nigeria-as well as the newcomer Chad, which had started production by mid-2003. The main objectives are to (1) give an overview of the general policy issues in oil-producing countries, (2) describe actual practice in the countries, and (3) discuss African policymakers' perspectives and an agenda for further discussions. Issues of policy formulation related to the oil sector will be discussed in eight sections, in line with the workshop agenda, after a general introduction of economic indicators in Chapter 2. The following four sections describe macroeconomic policy issues, under the headings macroeconomic policy (Chapter 3); fiscal policy formulation (Chapter 4); persistent surpluses and accumulation of assets (Chapter 5); and exchange rate regimes and competitiveness (Chapter 6). These are followed by two sections on governance issues, namely, institutional oversight of the oil sector (Chapter 7) and transparency requirements (Chapter 8). The concluding section presents a summary of relevant policy issues. In each section of the paper, a general background discussion lists issues to be considered in policy formulation. This is followed by a description of current practice in the countries as seen by Bank and IMF staff, and a third subsection consisting of policy recommendations, together with a summary of the discussions during the Douala workshop with African policymakers.