Chad: Lower oil revenues elevating country economic risks

02 March 2017

There will be a continued risk of attacks by militant group Boko Haram in Chad in 2017, as its military proceeds with regional collaboration against the group. Country economic risks will remain heightened, although concessional funding will reduce non-payment risks in the short term. International energy companies face a challenging investment environment after a USD 74 billion fine was handed to ExxonMobil in October 2016.

Security Environment

The Chadian military plays a significant role in combatting Islamist militant group Boko Haram in Nigeria, which has created a risk of cross-border retaliatory attacks. Government and commercial assets around Lake Chad and the capital N’Djamena will remain a prominent target for these raids, whilst commercial energy assets in the south of the country are less likely to be attacked, as they fall outside the group’s operational reach.

There is a reduced risk of interstate conflict between Chad and its neighbouring countries, partly due to its collaboration with Nigeria, Niger and Cameroon in countering the threat posed by Boko Haram. This collaboration has raised the terrorism risk in Chad after Boko Haram declared ‘war’ on the country in November 2015. On 5 January 2017, Chad closed its border with Libya in an effort to curtail the influx of militants into Chad. 

In addition, the closure of the Chad-Libya border will likely constrain the movement of the Front pour l’Alternance et la Concorde au Tchad (FACT), the opposition militia group, reducing the risk of civil war in the country. Libyan National Army (LNA) airstrikes against FACT are indicative of collaboration between Chad and the LNA in this area. Most recently, there have been a series of incursions by the military into Libya and it is suspected that these actions are intended to remove FACT from its bases in southern Libya.

Trading Environment

Country economic risks will remain elevated in Chad over the medium term. Suppressed hydrocarbons prices will continue to have a negative effect on the oil-dependent economy, weakening the country’s fiscal position and dragging on economic growth. Oil revenues fell by 80% between 2015 and 2016, to around USD 40.6 million, with lower prices exacerbated by a fall in production. The economy is forecasted to contract by 0.3% in 2017, following an estimated 3.5% contraction in 2016. 

Over the long term, growth is expected to average a modest 3.1% annually up to 2025, with oil production forecasted to fall from 143,500 barrels per day (b/d) in 2016 to 108,800 b/d in that period. Regional insecurity and heightened political risks will preclude significant international investment, further impacting on the country’s economic growth outlook. Sovereign credit risks are heightened in Chad, although continued access to an Extended Credit Facility (ECF) from the International Montary Fund (IMF) will reduce non-payment risks in the short term. In November 2016 the completion of an IMF review of the ECF led to the disbursement of an additional USD 61 million. Further confirmed support from the World Bank, the European Union and the African Development Bank will be required to ensure budgetary stability in 2017.

Investment Environment

There are significant legal and regulatory risks under President Idriss Déby, creating a challenging operating environment for hydrocarbons companies. In October 2016 a consortium headed by US firm ExxonMobil was handed a record USD 74 billion fine by the High Court over the payment of royalties, which is likely to lead to an extended appeals process. This will weigh significantly on investor sentiment, adding to historically tense relations between the government and international oil firms. Under the IMF ECF the country will also look to improve its tax base, potentially leading to an increasing tax burden for international firms. There is an elevated risk of expropriation and contractual agreement repudiation for international companies operating in the country. In 2015 the Chinese
National Petroleum Company faced the forced renegotiation of a contract, leading to increasing royalties payments to the government, who also took over 25% of production at the Ronier oil field.

In this month's risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Iran, Angola, Ecuador and Lebanon, all of which have been the subject of recent enquiries from JLT's client base.


The monthly Risk Outlook is supported by JLT’s proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 60 international sources of data.

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For further information, please contact Eleanor Smith, Political Risk Analyst on +44 (0)121 626 7837 or email