In a move to bridge the widening gap in oil and gas financing, several African oil-producing nations, under the aegis of the African Petroleum Producers Organization (APPO), are gearing up to launch a $5 billion energy bank by next year in Abuja, Nigeria’s capital. The organization has secured 45% of the necessary startup capital to create a financial institution aimed at sustaining the continent’s oil sector amid a global shift towards cleaner energy.
Omar Farouk Ibrahim, Secretary General of APPO, made the announcement during the Angola Oil & Gas conference in Luanda, highlighting the commitment of countries like Angola, Nigeria, and Ghana as initial backers.
“We have come a long way. I believe we are the first development bank to progress from conceptualization to near fruition in just over two years,” he said.
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This move, which underscores the urgency African nations feel in securing resources for oil production, comes amid a global push for a shift to cleaner energy, which has seen traditional investors turning away from fossil fuels.
The energy bank’s mission is to fill the funding gap left by international financiers who have begun to pull back from investments in crude oil and other fossil fuels, opting instead to focus on low-carbon energy projects to meet climate change goals. The African Export-Import Bank (Afrexim Bank), the key financier behind the initiative, signed a memorandum of understanding with APPO in June, marking a significant step toward establishing the bank.
The timing of this new institution comes as African nations grapple with the dual challenge of addressing climate change while pursuing economic development. Countries like Angola and the Democratic Republic of Congo (DRC) are finding it increasingly difficult to secure financing for oil projects through international capital markets, where climate concerns dominate investment strategies. The energy bank, once operational, would provide much-needed financial support for oil-producing countries to continue tapping into their resources.
Between Economic Prosperity and Climate Commitments
This latest development reflects a broader tension that African nations face: the pressure to reduce carbon emissions versus the immediate need for economic growth and energy security. Last year, at the Africa Climate Summit in Kenya, African leaders called for increased taxation on carbon emitters, signaling their acknowledgment of the climate crisis.
However, the resolution to push ahead with the energy bank runs counter to some of the key recommendations made at the summit, which emphasized the need to curb fossil fuel reliance.
Against this backdrop, African countries find themselves at a critical juncture: the dilemma of striking a balance between the global movement towards achieving net-zero greenhouse gas emissions by mid-century and pursuing fossil fuel projects for economic growth. In nations like Nigeria, Angola, and Ghana, oil remains a cornerstone of their economies, contributing to export revenues, job creation, and foreign exchange earnings.
For these countries, completely abandoning fossil fuels could spell economic disaster, a sentiment shared by Sanjeev Gupta, the Executive Director of Financial Services at the African Finance Corporation (AFC).
Gupta, in an interview with Reuters, maintained that the AFC would continue to invest in fossil fuels despite warnings from global development institutions about climate change. “Africa has significant development needs,” Gupta stated, making it clear that the continent cannot simply pivot away from oil without risking severe economic repercussions.
Voices of Resistance Against Climate Hypocrisy
Many see the push for an energy bank and continued fossil fuel investments as not just about securing financing—but about challenging what some African leaders see as a double standard.
In a 2022 opinion piece, former Nigerian President Muhammadu Buhari called out Western nations for what he termed the “hypocrisy” of urging African countries not to exploit their own oil and gas reserves while those same nations had built their economies on fossil fuels. Bola Tinubu, Nigeria’s current president, has echoed these concerns, advocating for a more balanced partnership in addressing global climate challenges.
“We can’t be asked to keep our resources in the ground while others have enriched themselves from theirs,” Buhari wrote, noting the disparity between Africa’s development needs and the global pressure to reduce fossil fuel reliance.
The African Export-Import Bank (Afrexim Bank) has also raised concerns over the potential fallout from divesting in fossil fuels. According to the bank, this could lead to a loss of up to $30 billion in Nigeria’s Gross Domestic Product (GDP), a dire consequence for a country that depends heavily on oil exports. The bank’s warning aligns with the broader sentiment that fossil fuels while contributing to emissions, remain indispensable to meeting Africa’s energy needs in the short term.
The Road Ahead for Africa’s Energy Bank
The establishment of this energy bank is seen as a bold decision by African oil-producing nations to control their narrative and safeguard their economic interests in an era of shifting global priorities. This means that while the rest of the world accelerates toward clean energy solutions, Africa is walking a tightrope between sustaining its economic prosperity through fossil fuels and responding to climate change.
Against this backdrop, African leaders see the energy bank as more than just a financial institution. To them, it represents a platform for asserting the continent’s right to develop on its own terms.