Africa Energy Bank opens new chapter for financing Africa’s energy projects 

Business a.m.

The African Petroleum Producers Organization (APPO) and the African Export-Import Bank (Afreximbank) have sealed an agreement to establish the Africa Energy Bank, an institution tasked with accelerating the development of the continent’s oil, gas, and energy industries.

The collaboration was formalised during a signing ceremony held recently in Cairo, Egypt,  officially launching the Africa Energy Bank, which will be charged with supporting and funding Africa’s efforts to harness its vast energy potential.

The African Energy Chamber (AEC), a leading voice in the African energy sector, welcomed the establishment of the Africa Energy Bank, hailing the collaboration between APPO and Afreximbank as a major milestone in the continent’s quest for energy security and development.

In a statement released after the signing ceremony, the AEC commended the efforts of both parties to establish the Africa Energy Bank, describing it as an essential catalyst for financing energy projects across the continent.

While fossil fuels, such as oil and gas, continue to play a crucial role in powering Africa’s economies, the global push towards greener energy sources has created an investment dilemma in the energy sector, with many investors shying away from fossil fuel-based projects.

This trend has resulted in an investment gap, which threatens to hamper Africa’s ability to capitalise on its vast energy resources.

As the world increasingly shifts its focus towards renewable energy, major international oil companies (IOCs) have been divesting from their traditional fossil fuel assets in favor of more sustainable alternatives, leaving a significant funding gap in the energy sector, particularly in Africa.

According to recent statistics, over 600 million Africans are living without electricity, while more than 900 million still rely on harmful and inefficient fuels for cooking.

According to analysts, Africa’s energy challenges present a unique opportunity for financiers and investors to not only support the continent’s economic development but also reap significant financial rewards in the process.

The International Energy Agency, in a report, showed that bridging Africa’s energy gap requires an investment of about $25 billion per year until 2030, highlighting  the vast potential of the continent’s energy market, especially for investors willing to participate in both fossil fuel and renewable energy projects.

To this end, The Africa Energy Bank is poised to revolutionise the continent’s energy sector by addressing the financing challenges that have hindered the development of Africa’s energy resources.

The institution, with its initial capital of $5 billion, will offer a novel African solution to energy financing by investing in a wide range of oil and gas projects across the continent. By tapping into African capital and channeling it towards energy development, the Africa Energy Bank aims to overcome the challenges associated with foreign investments and drive the continent’s energy sector forward.

The Africa Energy Bank’s innovative financing model has captured the attention of African governments and development finance institutions, resulting in a surge of interest in supporting its establishment.

Omar Farouk Ibrahim, the institution’s secretary general, revealed that APPO member states have already started contributing funds, signifying their commitment to ensuring the bank’s success.

Historically, African countries have been heavily dependent on foreign capital to finance their energy projects, with over 88 percent of financing coming from foreign sources in the past six years. This overreliance has left the continent vulnerable to external factors such as foreign policies and capital markets trends, hindering the development of the sector despite the urgent need for energy infrastructure.

With a capital target of approximately $83 million from each of its 18 signatories, the Africa Energy Bank aims to amass almost $1.5 billion, positioning itself as a major player in Africa’s energy financing landscape.

NJ Ayuk, executive chairman of the AEC, said the chamber is proud to see organizations such as APPO and Afreximbank taking concrete steps towards financing African energy projects. 

Ayuk noted that despite ongoing pressure to relinquish fossil fuel financing and redirect capital towards renewables, these organisations are promoting a just transition in Africa that prioritises Africa’s development and recognizes the role oil and gas plays. 

He added, “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.”