Africa Energy Bank: Will Nigeria miss another great opportunity?

Sopuruchi Onwuka

The delay in the full funding and activation of the highly anticipated African Energy Bank (AEB) clearly falls into pattern with the inability of African countries to muster critical collaborative thrust in pushing collective agenda; it reinvents the mold of resilient neocolonial stereotype that associates Africa with low capacity for solving pressing domestic problems.

But beneath the prevailing discomfort of weak political will and lethargic response to the AEB cash call lies a huge economic and commercial opportunity which Nigerian government, private and institutional fund managers stand to take in the fate, fortunes and future of the bank which Nigeria’s Omar Farouk Ibrahim and his team at African Petroleum Producers Organization (APPO) have worked relentlessly to establish.

The bank which was robustly canvassed at numerous platforms for petroleum policy debate proposes to decolonize financing of the African petroleum industry, secure energy justice from the global policy roundtables that promote migration of demand from fossil fuels, resolve Africa’s energy poverty, and guarantee energy security for the continent’s growing population.

Propositions for the establishment of the AEB came in the face of intense global pressure on Western multilateral lenders and international oil companies to decelerate financing of new petroleum development in support of the prevailing transition of demand to greener and cleaner energy.

The energy transition movement championed by European countries is in compliance to global accords brokered by the United Nations Framework Convention on Climate Change (UNFCCC) through the Conference of Parties (COP).  From earlier accords like the Kyoto Protocol to the more recent Paris Agreement, new deadlines continue to come into force on energy transition. The pressures gets more intense as the world blames emissions from traditional fuels for extreme weather conditions that scientists blame on global warming.

Whereas there is agreement that global warming is as old as the industrial age, the campaign for energy transition coincides with steep declines in Europe’s petroleum and coal production capacity as well as the continent’s growing dependence on the oil market where price escalation which began from $28 barrels per barrel in 2003 reached a new peak at over $118 per barrel in 2008.

With Europe paying the bills at the international oil market and the producing countries smiling home with huge oil income, it becomes logical that the industrialized countries of the world would naturally seek independence from the oil market by diverting funding towards the development of sustainable energy options.

With falling foreign direct investments, draught of development funds and potential narrowing of international market windows, rapid energy transition therefore means that Africa’s significant 125.3 billion barrels of proven crude oil reserves and over 650 trillion cubic feet (TCF) of natural gas reserves could lose value if there is no internal operating and financing capacity.

Worse still, the campaign for energy transition and associated funding squeeze have caught Africa in the middle of energy poverty and oil gloom. Most of the continents’ oil exporters are still very poor and unable to finance development of infrastructure for domestic energy distribution.

Recent developments have made it suddenly clear that African governments paid little attention to domestic energy requirements and are now in dire need petroleum income for long term energy security and economic development agenda. This realization is amplified by the growing uncertainty around international investments. The situation has created the paradox of debilitating energy poverty in petroleum exporting countries. And despite hosting vibrant petroleum activities, over 600 million Africans still lack electricity access; and the supply gap is projected to widen with the continent’s fast growing population and rapid urbanization. 

Analyst at strategic conferences held across Africa since 2020 had vigorously canvassed for Africa focused banks that would replace international multilateral lenders and deep pocked companies in catering for the funding needs of the petroleum industry. And these industry propositions laid agenda for APPO in launching strong continental oil diplomacy that currently translates to establishment of the AEB.

But persuading governments in the continent to live up to their cash commitments has proved more difficult than signing ceremonies.  Our findings show that the 18 committed APPO member countries with obligation to make financial contribution for take-off of the AEB are slow in responding with cash. It was gathered that only few countries including Nigeria, Angola and Ghana are able to pay up by the first quarter of the year when the bank was originally scheduled to activate.

Other African countries like Algeria, Benin, the Republic of Congo, Equatorial Guinea, and Ivory Coast have also restated their commitment to make cash contributions.

The Secretary General of APPO, Dr Omar Farouk Ibrahim, who has worked tirelessly to forge intra-continental treaties and commitments to shield Africa’s petroleum industry from international funding interdiction, continues to pledge that the bank would soon take off at its proteome head office in Abuja. In a discussion with the Oracle Today in Cape Town, South Africa, Dr Farouk had projected that the AEB would be up early in the first quarter of 2025.

At the Nigerian International Energy Summit (NIES) in February, the Minister of State for Petroleum Resources in charge of Oil, Senator Heineken Lokpobiri, declared that a few hitches holding the take of the AEB would soon be resolved to enable its smooth take off. And just recently at the Nigerian Oil and Gas Opportunity Forum (NOGOF), pledges continued on how imminent the bank would roll out its services.

The Oracle Today reports that whereas the APPO secretariat, with the assistance of its consultants, has finalized all the arrangements and administrative structure for the bank; the vital hurdle remains to muster the critical volume of funds required for the AEB to effectively launch off into the business of providing capital for petroleum players.

The initial target was to raise some $5 billion to enable the bank start business while more funding would be expected from operating profits and remittances from new investors. And thus, APPO members are committed in a pact by APPO’s Council of Ministers to contribute $83 million each towards the bank’s capitalization.

Whereas it is obvious that the biggest hitch to speedy take-off of the AEB is the slow response to cash call by committed countries, analysts point at the possibility of tapping into the continent’s huge private and institutional capital trapped in central banks, sovereign wealth and pension funds.

For instance, policymakers and bankers at the recent Africa CEO Forum have called for ways to unlock part of some $4 trillion tied up in institutional funds to substitute international credit windows that are linked to climate action.

In addition, the funds sitting with pension administrators and banks have been calculated to exceed immediate cash need required by governments and private players in the energy sector to promote conventional and new energy programmes required to decolonize the African energy industry.

At recent industry events in Abuja and Houston, it was announced that the equity investment bank, Africa Export Import Bank (AfreximBank), has committed to invest significant $14 billion to boost the existing $5 billion commitment by member countries and propel the AEB towards takeoff. Thus, the combination of equity funding from AfDB and APPO subscriptions hold the propect to support the take-off of AEB with $19 billion.

Closer home, the Oracle Today reports that the capital shopping for AEB also presents significant opportunity for Nigeria which hosts the headquarters of the bank in an environment replete with idle cash reserves presently dumped in sundry private and institutional funds.

Nigeria leads the African petroleum industry with its vast exploration data, number of oilfields, and volumes of commodity reserves. The country is also in the forefront of pushing local content implementation in the continent. The programme evolves innovative financial solutions to uncertainties associated with current portfolio realignments by international oil companies in the country.

Government had envisaged the need for local capacity development in the critical sectors of the socio-economy including petroleum, power, maritime, education and infrastructure; and evolved dynamic funding mechanisms to guarantee financing of programmes that deliver on the objectives of policies.

And to address the omnipresent financing impediments envisaged in delivering the programme objectives, numerous funding arrangements have been designed and mostly domiciled with regulators to lead funding collaboration in the industry.

The Nigerian Content Fund (NCF) is harnessed and administered by the Nigerian Content Development and Monitoring Board (NCDMB) which utilizes the Bank of Industry (BOI) and the African Export-Import (Afrexim) Bank in providing low interest credit facilities to businesses that execute industry projects in-country.

There is also the Cabotage Fund which is domiciled with the Nigerian Maritime Administration and Safety Agency (NIMASA) for financing local capacity growth and credit lines in the linked marine industry.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) also hosts the Nigerian Exploration Fund, while the sister Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) manages the Nigerian Downstream Petroleum Infrastructure Fund (NDPIF).

There are numerous other funds outside of or linked to the petroleum industry which may have receded to rear of public awareness due to their dormancy. One of them is the Nigerian Sovereign Wealth Fund which is managed by Nigerian Sovereign Wealth Fund Investment Authority.

There is also the Nigerian Pension Fund which topped $20.41bn in December 2023. This pool of fund from contributory pension schemes is managed by the National Pension Commission.

Pension funds and foreign reserves are huge enough to significantly address vast funding gaps in the upstream, midstream and downstream energy and infrastructural projects required to advance economic growth, boost business environment and address energy poverty.

In the traditional banking system, Nigerian banks have significantly ramped up their deposits with the Central Bank of Nigeria (CBN) by 1,578 percent year-on-year to N53.5 trillion in the first five months of 2025.

The huge stash-away, according to the CBN, indicates excess liquidity in the financial system or huge dormant cash available for sovereign investments through the CBN as the commercial banks take advantage of the Standing Deposit Facility (SDF) amid fewer lending opportunities.

At the recent Africa CEO Forum in Abidjan, industry captains spent huge time at sessions brainstorming on best possible ways to plug into dormant institutional funds to drive urgent and viable economic programmes.

Chief Executive Officer of the Africa Finance Corporation, Samaila Zubairu, cited the outcome of a research that highlights the difficulty of channeling of institutional funds to flow into projects. He advised governments to adopt the InfraCredit model which, according to him, supports pension fund investments in with a capital base from the Nigerian Sovereign Investment Authority.

The CEOs had noted that the Sub-Saharan Africa’s pension funds sit on about $350 billion capital that was yet to be deployed to alternatives. It was also noted that pension funds in the six largest Sub-Saharan African markets are projected to grow to $7.3-trillion by 2050, adding that pension funds are a formidable source of capital to finance the continent’s transformation.

With high viability potential of the AEB and the promises of quick returns indicated by the market, The Oracle Today reports that Nigerian private and institutional funds could be efficiently harnessed for the prevailing opportunity to mop up equity stakes and thereby provide the needed momentum to launch off the AEB without further delay.

Thanks to the NCDMB which has directly involved in diverse financial empowerment mechanisms that propel local expertise in delivering key national economic aspirations in the energy industry, there are now templates on how idle funds trapped in institutional frameworks could be unleashed to translate polices to palpable projects, facilities, infrastructures and commodities.

With over $20 billion sitting in Nigerian pension funds, some N53.5 trillion bank deposits with the CBN and many more of such idle funds yet untapped at Nigerian institutions, time has come for the government to tap into the nation’s huge dormant funds to capture greater equity stakes in the Africa Energy Bank. Apart from providing sustainable finance lines for the energy industry, the full economic opportunities of hosting a multilateral financial institution of its status in incalculable!