The Africa Energy Bank (AEB) – a supranational institution spearheaded by the African Petroleum Producers Organization (APPO) and the African Export-Import Bank (Afreximbank) – is preparing to open its doors to projects and businesses in 2025.
Aimed at addressing funding gaps within Africa’s energy industry, the institution is poised to play an instrumental role in ensuring Africa’s energy resources are both monetized and maximized for the benefit of the continent.
As the continent tackles with an energy crisis, the AEB will fundamentally change how projects are financed, laying the foundation for a new era of energy security continent-wide.
The AEB was born out of a vital need to introduce new sources of financing for African energy projects – from upstream oil and gas to renewable energy and power infrastructure to green hydrogen and petrochemicals.
Currently, the continent’s energy finance gap is estimated to measure between $31 billion and $50 billion, and the global energy transition has seen financing – specifically for fossil fuel projects – reduced even further.
Concurrently, despite promises of receiving billions in climate financing from the global north, Africa receives less than 3% of global energy investment, highlighting a fundamental challenge given that over 600 million people are living without access to electricity across the continent.
To address this challenge, APPO and Afreximbank introduced the concept of the AEB in 2022, signing the requisite documents for its establishment in June 2024. With an initial share capital of $5 billion, the bank will focus predominantly on financing energy projects.
Nigeria’s capital city of Abuja was selected as the headquarters of the bank in July 2024, with the institution expecting to accept applications from early-2025. The priority beneficiaries of the bank’s services will be the states that have ratified their documents for the establishment of the institution, with ratifications currently in the advanced stage.
APPO and Afreximbank represent the primary contributors to the bank’s financing, with additional financing secured from APPO member states and other financial institutions. Notably, the bank is seeking $83 million from each of APPO’s 18 signatories, amounting to $1.5 billion. Additionally, the AEB is seeking to partner with up to 700 banks in Africa to chart a profitable pathway for the African energy sector.
Representing the first of its kind in Africa, the AEB offers Africa a saving grace as the global energy transition makes financing projects that much more challenging. Despite holding over 125 billion barrels of proven crude reserves and 620 trillion cubic feet of natural gas reserves, Africa struggles with lengthy project approvals, construction delays and red tape, most of which can be accredited to financing.
Through the AEB, African countries and companies stand to accelerate the pace of energy development continent-wide, reduce the reliance on foreign capital while maximizing resource development for the benefit of generations to come.
The AEB could not come at a better time for Africa. While countries such as Angola, Libya, Nigeria and the Republic of Congo have long-been major producers, efforts to address natural production declines have seen a rise in new discoveries.
At the same time, exploration efforts in frontier markets have highlighted a wealth of untapped opportunities, such as Namibia’s prolific Orange Basin; the offshore MSGBC Basin; Zimbabwe’s onshore Cabora Bassa Basin; and South Africa’s onshore Karoo Basin. Drilling activity and rig demand have been on the rise in Africa, with the continent rapidly emerging as one of the world’s most promising deepwater plays.
In the natural gas sector, Africa is well-positioned to become a leading global supplier. The continent represents 13% of global reserves, with LNG exports measuring just over 40 million tons per annum.
The sector is currently undergoing an $800-billion, 20-year upstream capital expenditure program, resulting in several world-class LNG facilities. Additionally, the continent is projected to account for more than half of the world’s FLNG capacity brought online between 2023-2027.
Without these resources, Africa’s efforts to industrialize and electrify its economies will be significantly impacted – highlighting the fundamental role of the AEB in providing project financing for African LNG.
“The value and role of the AEB cannot be overstated. By providing accessible and tailored financing solutions, the AEB ensures that African energy projects – whether in oil, gas, or renewables – receive the support they need to thrive. This institution is not just about financing; it is about empowering Africa to unlock its vast energy potential, drive industrialization and make energy poverty a thing of the past,” stated Omar Farouk Ibrahim, Secretary General of APPO.
Source: Energy Chamber