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Esteban Obiang struck 20 minutes from time at Stade omnisport de Douala to lift the National Thunder to second place in Group E.
The result also condemned Algeria to a first defeat in this competition since a 2-1 reverse against Tunisia in 2017, while it must now beat Cote d'Ivoire in its final group game to have any chance of progressing to the knockout stages.
Despite only enjoying 33 per cent of the possession, Equatorial Guinea had the better first-half chances. Oscar Siafa drew a smart save out of Rais M'Bolhi, while Iban Salvador's rasping long-range drive was just wide of the target.
Algeria had the ball in the net at the other end, but Baghdad Bounedjah was denied by the offside flag.
The Desert Warriors continued to dominate possession, but were hit by a 70th-minute sucker punch as a low corner was flicked on by Josete Miranda, before Obiang applied the finishing touch at the far post.
Algeria pushed for the equaliser as the clock ticked down, but was unable to preserve its nine-match unbeaten run at the Africa Cup of Nations and is still seeking its first goal in this year's event.
