The pan-African institution is expected to help alleviate the funding shortage for oil and gas projects on the continent, amidst increasing disengagement of international donors from fossil fuel investments.
Nigeria Selected as Host
Nigeria has been chosen as the host country for the headquarters of the African Energy Bank (AEB), a new pan-African institution dedicated to financing oil and gas projects in Africa. This announcement was made by the Nigerian Minister of Petroleum Resources, Heineken Lokpobiri, on Thursday, July 4th, 2024.
Minister’s Statement
“I am delighted to announce that Nigeria has been selected to host the headquarters of the African Energy Bank. This prestigious honor is a testament to our country’s leadership and commitment in the energy sector,” the minister stated on his official Facebook page.
“The African Energy Bank will be the cornerstone of financing energy projects across Africa, promoting innovation, sustainability, and economic growth,” he added.
Other Contenders
Three other countries were in the running to host the headquarters: Algeria, Benin, and Ghana. Côte d’Ivoire and South Africa did not meet all the necessary requirements.
At the end of May, the Nigerian government ratified the bank’s charter and approved a $100 million contribution to the institution’s capital, exceeding the $83.33 million required for member states.
Reducing Funding Gaps
The establishment of the African Energy Bank was announced in May 2022 by the African Export-Import Bank (Afreximbank) and the African Petroleum Producers’ Organization (APPO). The new institution, initially capitalized with $5 billion, is expected to help reduce the funding shortage for oil and gas projects in Africa.
International Disengagement from Fossil Fuels
This comes at a time of increasing disengagement of international donors from fossil fuel investments. During COP26 in Glasgow, around twenty developed countries pledged to end overseas financing of fossil fuel projects without carbon capture technologies by the end of 2022.
Shifting Focus of Financial Institutions
In 2017, the World Bank Group announced the end of financing for upstream oil and gas activities after 2019, with exceptions for least developed countries where it undeniably promotes energy access for the poor and aligns with the country’s commitments under the Paris Agreement. The European Investment Bank (EIB) also committed to ending financing for fossil fuel projects by the end of 2021.
Challenges for African Oil Companies
Facing mounting pressure, international oil and gas companies are increasingly divesting from African assets due to environmental, political, and security risks. Meanwhile, few African national oil companies have the resources to fill the growing funding gap.