Continental group the African Petroleum Producers Organization (APPO), in collaboration with multilateral financial institution the African Export-Import Bank (Afreximbank) has signed the requisite documents for the establishment of the Africa Energy Bank – an institution set up to facilitate, promote and finance the development of oil, gas and energy industries in Africa
As the voice of the African energy sector, the African Energy Chamber (AEC) commends the efforts by APPO and Afreximbank to not only establish such an important financial institution but to fast-track its creation. The AEC believes that the Africa Energy Bank will play a central role in strengthening energy access and growth in Africa by providing the financing needed to get large-scale projects off the ground.
Despite the role oil and gas has and will continue to play in Africa, global efforts to transition to alternative sources of fuel have created a significant investment gap worldwide. In recent years, fossil fuel funding has been declining rapidly, while IOCs divest their oil and gas assets, favoring more strategic investments. At the same time, Africa still faces an energy crisis, with more than 600-million lacking access to electricity and over 900 million lacking access to clean cooking solutions.
The International Energy Agency estimates that delivering modern energy to the entire continent will require up to $25-billion in annual spending until 2030, highlighting a significant opportunity for financiers.
The Africa Energy Bank aims to directly address funding challenges by providing an African solution to financing energy projects. With $5-billion in initial capital raised from African signatories, the institution aims to close the funding gap by providing capital to oil and gas projects across the continent. In a relatively short period of time, the institution has garnered substantial interest from African governments and development financial institutions, all of which recognize its role in funding future projects.
APPO secretary-general Omar Farouk Ibrahim announced in March 2024 that the bank had already started receiving funds from APPO member states – underscoring the level of interest in supporting its establishment. The bank is seeking approximately $83-million from each of APPO’s 18 signatories, amounting to almost $1,5-billion.
With the establishment of the bank, African countries will not only be able to benefit from a new source of financing but will be able to reduce their reliance on foreign capital. Between 2016 and 2021, over 88% of the general financing of the 24 largest fossil fuel companies in Africa was foreign funded. showcasing the level of reliance on foreign institutions.
This has left the continent susceptible to foreign policies and capital trends, leading to difficulty in raising capital despite the urgency of oil and gas development. With the Africa Energy Bank, project developers can tap into African-raised funds, therefore driving project forward.
“The AEC is proud to see organizations such as APPO and Afreximbank taking concrete steps towards financing African energy projects,” says NJ Ayuk, executive chairman of the AEC. “Despite ongoing pressure to relinquish fossil fuel financing and redirect capital towards renewables, these organisations are promoting a just transition in Africa – one that prioritises Africa’s development and recognizes the role oil and gas plays.
“The Africa Energy Bank will play a catalyzing role in expanding the energy industry in Africa while driving sustainable and equitable growth for the continent’s population,” he adds.