Can Africa’s New Energy Bank Power the Continent While Protecting the Planet?

A historic shift is on the horizon as Africa prepares to launch its own energy bank to finance oil and gas projects. With Western institutions pulling back from fossil fuel investments, the Africa Energy Bank (AEB) aims to bridge the funding gap, ensuring the continent’s energy security. However, as the world transitions to green energy, experts warn that Africa must balance its energy ambitions with urgent climate considerations.

First announced in June 2023, the AEB is a joint initiative by the African Export-Import Bank (Afreximbank) and the African Petroleum Producers’ Organization (APPO), representing 18 oil-producing nations. The bank’s headquarters in Abuja, Nigeria, is set to begin operations by the end of March 2025.

With initial capital of $1.5 billion from member states including Nigeria, Angola, and Libya and a further $14 billion commitment from Afreximbank, the AEB aims to secure $120 billion in assets over the next five years. These funds will support projects ranging from offshore oil exploration to gas-fired power plants, addressing Africa’s pressing energy needs.

Despite being rich in natural resources, 600 million Africans about 43% of the population lack access to electricity, according to the International Energy Agency (IEA). Industrial development remains stunted, with Africa’s manufacturing sector consuming only 16.8% of total energy, compared to the global average of 42.2%.

To power its future, Africa must increase energy supply fivefold, yet it faces mounting pressure to transition away from fossil fuels. Under the 2015 Paris Agreement, nations pledged to limit global warming below 2°C, pushing international financial institutions to halt funding for oil and gas projects.

The World Bank stopped financing fossil fuel extraction in 2019, and in 2022, legal action from environmental activists forced Shell to abandon exploration off South Africa’s coast. Critics argue that Africa must avoid becoming a dumping ground for “stranded assets” oil and gas projects that could become obsolete as the world embraces renewable energy.

African leaders argue that the continent’s energy transition must be unique, considering its historical minimal contribution to global emissions (only 4%). Arkebe Oqubay, former advisor to Ethiopia’s Prime Minister, insists that Africa should not be held to the same climate standards as industrialized nations, stating:

“Africa’s economic resources are underdeveloped. You cannot suddenly move into the green transition without first securing energy for industrialization.”

Similarly, APPO Secretary-General Omar Farouk Ibrahim maintains that the AEB is Africa’s response to Western divestment from hydrocarbons:

“Africa cannot afford to abandon its resources simply because foreign investors no longer find them profitable.”

While fossil fuels offer an immediate solution, Africa holds immense renewable energy potential. The International Renewable Energy Agency (IRENA) reports that Africa’s solar, wind, and geothermal energy capacity is 1,000 times greater than projected electricity demand by 2040. Experts argue that, instead of doubling down on oil and gas, Africa should leverage existing energy infrastructure to transition toward green industrialization.

Fadhel Kaboub, an economics professor at Denison University (USA), warns against the risk of economic entrapment:

“Relying on fossil fuels for export only perpetuates Africa’s dependency. The real opportunity lies in using these resources to build a renewable energy economy.”

For Africa, energy is not just about electricity it’s about economic independence. With over 60% of sub-Saharan nations in debt distress, fossil fuel exports remain a critical revenue source. However, experts urge African leaders to adopt a regional approach where energy projects are integrated across borders to support large-scale industrialization.

The success of the AEB will depend on its ability to strike a balance providing immediate power solutions while investing in long-term sustainability. Can Africa achieve this equilibrium? Or will the bank become another tool for short-term economic survival at the cost of future prosperity?

The AEB’s official launch is expected by the end of Q1 2025. Will it be a game-changer for Africa’s energy future or another missed opportunity? The world is watching.

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