The African Petroleum Producers Organization (APPO), and the African Export-Import Bank (Afreximbank), have signed the requisite documents for the establishment of a $5bn Africa Energy Bank.
The proposed bank is an institution set up to facilitate, promote, and finance the development of Africa’s hydrocarbon deposits of oil and gas, and condensates and support energy energy transition and net zero 2060 commitments.
The African Energy Chamber (AEC), in a statement on Monday, confirmed that the signing ceremony was held in Cairo, Egypt on Monday, marking the official creation of the institution.
The AEC, a major voice in the African energy sector in its remarks, commended the efforts by APPO and Afreximbank for not only establishing the financial institution, but also fast-tracking its creation.
The bank is also seeking approximately $83m from each of APPO’s 18 signatories, amounting to almost $1.5bn, while Afrexim Bank’s board on the other hand, has committed to invest $1.250bn.
The $5bn AEB is expected to grow its assets to over $120bn in seven years, thus becoming a source of sustainable FDI for Nigeria that supports the vision 2020 ambitions.
The AEC in the statement, expressed the belief that the African Energy Bank, will play a role in strengthening energy access and growth in Africa by providing the financing needed to get large-scale projects off the ground.
It stated that despite the role oil and gas has, and will continue to pay in Africa, global efforts to transition to alternative sources of fuel, have created a significant investment gap worldwide.
AEC emphasized that Africa still faces an energy crisis, with more than 60 million lacking access to electricity, and over 900 million lacking access to clean cooking solutions.
It said, “This is happening amidst a rapid decline in fossil fuel funding, while IOCs divest their oil and gas assets, favouring more strategic investments.
“The International Energy Agency estimates that delivering modern energy to the entire continent will require up to $25bn in annual spending until 2030, highlighting a significant opportunity for financiers.
The Africa Energy Bank is expected to directly address funding challenges by providing an African solution to financing energy projects.
“With $5 billion in the 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.
The proposed bank has started receiving substantial interest from African governments and development financial institutions, with the APPO’s Secretary General, Omar Ibrahim, announcing that the bank had started receiving funds from APPO’s member states.
The Executive Chairman of the AEC, NJ Ayuk also said 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.