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Libya's economy, which depends on oil for almost all its income, faces a persistent paradox: widespread poverty despite Africa's largest oil reserves and substantial daily production. The core of the issue lies in how oil revenues are collected and spent amid a country divided by rival governments.

The process begins with the National Oil Corporation collecting oil and gas sales proceeds in U.S. dollars, depositing them into accounts at the Libyan Foreign Bank. These funds are then transferred to the Central Bank of Libya in Tripoli, recorded as state revenue, and converted into Libyan dinars. The official exchange rate is 6.36 dinars to the dollar, significantly different from the parallel market rate of 9.12 dinars. The Finance Ministry then authorizes spending, with the central bank releasing funds.

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The Libyan economy is a clear example of how excessive dependence on natural resources can become a complex financial crisis.

Libya's oil export revenues have fluctuated, reaching approximately $18 billion in the first half of the current year, nearly double the previous year's figure, partly attributed by an oil expert to the war involving Iran. However, economists like Ayoub al-Farsi from the University of Benghazi highlight that excessive reliance on natural resources, combined with political fragmentation and a lack of diversification, creates a complex financial crisis.

Al-Farsi explains that Libya operates on a rentier-state model, where oil exports are the primary source of treasury funding and foreign currency. This dependence has led to deep structural distortions, marginalizing agriculture and industry, expanding an unproductive state bureaucracy, and fostering a heavy reliance on imports. Critics also point to a market dominated by a few traders and importers, stifling local production. Protests across Libya frequently question the destination of oil money and the reasons for widespread economic hardship in an energy-rich nation.

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Where is the oil money going? Why are people struggling in an energy-producing country?