A coalition of African nations is preparing to launch the Africa Energy Bank, a financial institution aimed at funding oil and gas projects across the continent. This initiative comes as Western financial institutions increasingly withdraw from fossil fuel investments due to climate change concerns. The bank, which was announced last June, is a collaborative effort between the African Export-Import Bank (Afreximbank) and the African Petroleum Producers’ Organization (APPO), which comprises 18 oil-exporting countries.
The Africa Energy Bank is designed to enhance economic growth by improving energy supply in Africa, where millions still lack access to electricity despite the continent’s vast natural resource wealth. The founders of the bank view it as a crucial support system for energy development, especially in light of the challenges posed by climate activism and the global shift towards low-carbon energy sources. Critics, however, argue that investing in fossil fuels may lead to stranded assets and increased debt for African nations as the world transitions to renewable energy.
Under the 2015 Paris Agreement, countries pledged to limit global temperature rises, leading to increased scrutiny on fossil fuel reliance. The World Bank ceased financing oil and gas extraction in 2019, and legal challenges have halted projects in some regions, such as Shell’s marine exploration off South Africa’s coast. Environmental advocates argue for a shift away from extractive industries, emphasizing the need for sustainable development practices.
Omar Farouk Ibrahim, secretary-general of APPO, acknowledges the need to balance climate change mitigation with economic stability, stressing the importance of energy access for Africa’s development. Currently, around 600 million people in sub-Saharan Africa lack electricity, highlighting the urgency of addressing energy shortages. The continent’s energy supply would need to increase significantly to support industrialization and lift many out of poverty.
The Africa Energy Bank will be headquartered in Abuja, Nigeria, with plans to secure $120 billion in assets over the next five years. Participating countries, including Nigeria, Angola, and Libya, have each committed $83 million, aiming to raise a total of $1.5 billion. Afreximbank will contribute an additional $14 billion, with further funding expected from sovereign wealth funds and international banks.
African leaders argue that their energy needs are distinct from those of developed nations, as the continent has historically contributed minimally to global carbon emissions. They assert the right to develop natural resources, which include significant reserves of oil and gas. Experts suggest that Africa should leverage its fossil fuel resources to transition toward renewable energy, as the continent possesses vast potential for solar, wind, and geothermal energy.
Fadhel Kaboub, an economist, emphasizes that Africa’s energy shortages hinder economic development, calling for a shift from raw material exports to a green industrial revolution powered by renewable energy. He argues that without a comprehensive long-term strategy, African nations risk remaining trapped in a cycle of dependency on fossil fuel exports.
As the Africa Energy Bank prepares to launch, it stands at the intersection of urgent energy needs and the pressing demand for sustainable development, reflecting the broader challenges faced by the continent in balancing economic growth with environmental responsibility.