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 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.
The signing ceremony comes ahead of the continent’s biggest energy event – African Energy Week: Invest in African Energy – which aims to drive new investment across the continent’s energy value chain. Uniting investors and projects developers with African energy projects, the event has long advocated for the establishment of an Africa Energy Bank, and in 2024, the conference will further unpack the role the institution will play across the continent.
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 international oil companies divest their oil and gas assets, favouring more strategic investments.
At the same time, Africa still faces an energy crisis, with more than 600 million lacking access to electricity and more than 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 recognise 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 projects forward.
“The AEC is proud to see organisations such as APPO and Afreximbank taking concrete steps toward financing African energy projects. Despite ongoing pressure to relinquish fossil fuel financing and redirect capital toward renewables, these organisations are promoting a just transition in Africa – one that prioritises Africa’s development and recognises the role oil and gas plays. The Africa Energy Bank will play a catalysing role in expanding the energy industry in Africa while driving sustainable and equitable growth for the continent’s population,” states NJ Ayuk, executive chairperson of the AEC.
