Africa unveils Sh650 billion bank to plug oil and gas funding gap

Africa unveils Sh650 billion bank to plug oil and gas funding gap - Afreximbank and APPO formally establish the Africa Energy Bank. (Photo/ Afreximbank X)

The establishment follows years of efforts by Afreximbank and APPO to create an African-led financing institution capable of supporting energy projects that have struggled to attract funding from international lenders.

Africa has launched a $5 billion (Sh649.85 billion) energy bank to finance oil and gas projects as international lenders retreat from fossil fuels, leaving the resource-rich continent struggling to secure funding for its growing energy needs.

The Africa Energy Bank, jointly established by the African Export-Import Bank (Afreximbank) and the African Petroleum Producers’ Organisation (APPO), is expected to provide an alternative source of financing for projects that have increasingly struggled to attract capital from traditional international financiers.

The institution comes as Africa faces an expanding energy deficit, with about 600 million people still lacking access to electricity, while rapid population growth, urbanisation and industrialisation are expected to push demand higher over the coming decades.

The Independent Petroleum Producers Group estimates that the continent requires approximately $200 billion (Sh25.99 trillion) in annual energy investments to meet its development needs.

However, investment in African oil and gas projects has been declining, falling from $68 billion (Sh8.84 trillion) in 2016 to approximately $37 billion (Sh4.81 trillion) in 2025, reflecting the growing reluctance of international financiers to support fossil fuel developments.

The establishment follows years of efforts by Afreximbank and APPO to create an African-led financing institution capable of supporting energy projects that have struggled to attract funding from international lenders.

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The funding gap presents a major challenge for African economies seeking to expand electricity access, develop industries and improve energy security while also meeting global climate commitments.

Although the continent possesses significant renewable energy potential, investment in clean energy infrastructure remains limited.

Africa accounts for about 60 per cent of the world's best solar power potential but has only a small share of installed solar generation capacity.

This has created pressure on governments to balance the transition towards cleaner energy with the immediate need for reliable and affordable power, particularly as oil and gas continue to underpin several African economies.

The new bank, however, faces the challenge of matching its relatively modest initial capital with the scale of investment required.

The Sh649.85 billion funding pool represents only a fraction of the estimated annual financing needs.

S&P Global has warned that the continent must improve its ability to turn investment interest into projects that can attract financing, or risk worsening energy poverty and losing opportunities for economic growth.

“With a limited pool of capital available, only the most bankable initiatives advance, forcing hard prioritisation and sidelining many projects that are economically viable and socially desirable,” S&P Global said.