Africa Energy Bank wants to increase Africa’s energy supply to stimulate economic growth.
A group of African countries plans to launch the Africa Energy Bank to finance oil and gas projects since Western institutions were unwilling to make more investments in fossil fuels.
Last June, the African Export-Import Bank (Afreximbank) and the African Petroleum Producers Organization (APPO), a coalition of 18 oil-exporting countries, announced the soon-to-be-launched Africa Energy Bank, which has been so long in the books.
The bank wants to increase Africa’s energy supply to stimulate growth. Its founders see it as a lifeline in a country rich in natural resources.
But climate activists have questioned the logic behind increasing reliance on fossil fuels.
They argue that oil and gas projects built today will soon become useless stranded assets when the world is shifting towards low-carbon alternatives. It only adds a burden on the country’s balance sheet.
Under the 2015 Paris Agreement, hundreds of countries, including Africa, have committed to keeping world temperatures below 2 degrees Celsius above pre-industrial levels. Since then, governments and businesses have been facing increased pressure to reduce their dependency on fossil fuels.
In 2019, the World Bank stopped funding oil and gas extraction. In 2022, a high court ordered Shell to stop marine exploration activity in South Africa after facing legal challenges from environmental groups.
Happy Khambule, a senior campaigner for Greenpeace Africa, encouraged people to stop the destructive colonial legacy of extractivism in which companies chose profits over people and the planet.
On the other hand, Africa is dying of energy needs. In recent years, the number of sub-Saharan Africans without access to electricity has increased. International Energy Agency reports that around 43% of Africans have no electricity in 2023.
The energy supply needs to increase fivefold to support large scale industrial projects to bring most Africans out of poverty, where one-third live on less than $1.90 per day. (Estimates may vary)
The African Energy Bank could be an answer to African energy problems.
Nigeria’s Minister of State for Petroleum Resources, Heineken Lokpobiri, informed the reporters that the bank is getting ready and expected to take off by the end of March. It will have its headquarters in Abuja, Nigeria’s capital.
Nigeria, Angola, and Libya are part of the Africa Energy Bank. They plan to do projects from offshore oil exploration to new gas-fired power plants.
Each country has contributed $83 million, with $1.5 billion raised. On top of that, trade credit company Afreximbank will provide $14 billion.
Lokpobiri hopes the Africa Energy Bank will raise $120 billion in assets during the next five years. Sovereign wealth funds, commodity merchants, and foreign banks are looking to buy more stocks to provide additional funding.
Many African leaders feel the need for more industrial development and are against the ideology of Western financial bankers who advocate regulations that prevent conventional energy projects.
Arkebe Oqubay, a former advisor to Prime Minister Abiy Ahmed of Ethiopia, claims that Africa has less developed economic resources. So, it cannot contribute to much climate change.
Africa is responsible for only 4% of the world’s carbon emissions and has suffered disproportionately from severe weather conditions.
He adds that Africa does not have a strong moral need to reduce emissions.
An advocacy group called the African Energy Chamber has also argued that Africa has the ‘right’ to exploit its natural resources, which they claim comprise 620 trillion cubic feet of natural gas and 125 billion barrels of oil.
Oqubay stated that African countries have the right to increase their oil and gas capabilities, and the international community cannot restrict them unless renewable energy funding is readily available to them, but still, fossil fuels are not the way of the future.
Fadhel Kaboub, an associate professor of economics at Denison University in the United States, described Africa’s energy scarcity as a ‘development constraint.’ Africa’s weak power sector restricts the manufacturing of steel, cement, and fertilizer, which are all needed for economic growth.
The world’s gross domestic product (GDP) per capita increased by 15% between 2014 and 2024, but sub-Saharan Africa’s GDP per capita reduced by over 10% from $1,936 to $1,700.
Kaboub claims that Africa needs more energy to climb up the development ladder. He believed Africa should use its fossil fuel infrastructure to build out its renewable energy potential. Africa has everything: solar, wind, geothermal resources, critical minerals to build green technologies.
International Renewable Energy Agency claims that Africa has the potential to generate renewable energy from current technologies, but the cost would be 1000 times more than the estimated demand for electricity in 2040.
Kaboub counters that by saying he agrees with the constraints to realizing Africa’s renewable energy capacity but not with the high cost, referring to the reports that state that wind and solar are cheaper to produce than fossil fuels.
He argues that the pressure to develop is because of the debt.
The World Bank estimates that about 60% of sub-Saharan African countries face financial problems. According to Kaboub, the primary economic activity for oil producers in Africa is the export of fossil fuels to repay their loan obligations.
He said that African governments are trapped economically by supplying gas and oil for the industrial processes of other countries.
Kaboub believes that Africa’s long-term economic goal is not to be adequately presented by development banks. And that tactic might be the green industrial revolution, where renewable energy sources help power domestic manufacturing.
