By Gifeon Osaka
The recent decision to site the Africa Energy Bank (AEB) in Nigeria has continued to generate interests among industry stakeholders who have described the decision as a transformative moment for the continent’s energy landscape.
It would be recalled that the decision to site the headquarters of the Africa Energy Bank in Nigeria was made during the 45th Extraordinary Session of the APPO Ministerial Council – held virtually on July 4, 2024, and chaired by the Minister of Hydrocarbons of the Republic of Congo Mr. Bruno Jean Richard Itoua. The decision followed a review by the AEB Headquarters Ministerial Selection Committee, which evaluated criteria including socio-economic factors, safety, security, and accessibility. The thorough selection process underscored the careful consideration given to Nigeria’s capabilities and strategic importance. Nigeria emerged as the preferred host nation amid stiff competition from Ghana, Benin, Algeria, South Africa, and Cote d’Ivoire.
In May, Valuechain reported that President Bola Tinubu approved a $100m investment by Nigeria for shares in the Africa Energy Bank. The Federal Ministry of Petroleum Resources (FMPR) which announced the approval said the move had positioned Nigeria favourably to win the bid to host the multilateral bank, which will finance Africa’s hydrocarbon deposits of oil, gas, and condensates and support energy transition and net zero 2060 commitments.
The Permanent Secretary, FMPR, Nicholas Ella, had at the time said that the $100m investment from four agencies of the Ministry of Petroleum Resources, exceeded the minimum equity requirement of $83.33m for shares in the bank.
Nigeria’s selection highlights its robust energy sector and its strategic vision for the continent’s energy future such that the establishment of the bank would mark a transformative era in meeting Africa’s energy needs.
One of the biggest challenges facing African oil-producing countries has been funding, and this challenge compelled many of these African countries to come together to find solutions to financing oil and gas investments in the continent. Based on that, the idea of the Africa Energy Bank was conceived.
The African Petroleum Producers Organization (APPO)– alongside the Pan-African financial institution, the African Export-Import Bank (Afreximbank) -established the Africa Energy Bank (AEB) to not only address the financing challenges faced by the sector but also ensure Africa’s energy security.
The initiative behind the AEB aligns with the broader objectives of the African Union’s Agenda 2063, aiming for a prosperous and self-sustaining Africa. The Bank would be instrumental in providing the necessary financial backbone for energy projects that would drive growth and development across the continent.
The goal of establishing the AEB was to support oil and gas projects that have been struggling with financing due to the ongoing energy transition as global financers shift investment towards alternative energy sources. The establishment of the AEB will support Africa’s energy security by ensuring a reliable supply of energy from both traditional and renewable sources, contributing to a more diversified African energy sector.
Funding for major oil and gas projects in Africa
Several major oil and gas projects in Africa are currently in various stages of development and require significant funding to proceed. These projects span across different African countries which include; upstream (exploration and production) and midstream (transportation, refining, and storage) developments.
The bank is therefore expected to facilitate access to funding for these energy projects; thereby catalyzing economic growth and enhancing energy security.
Some of the major oil and gas projects underway in Africa – such as the Mozambique LNG, the East African Crude Oil Pipeline (EACOP), Uganda’s Lake Albert Development, Senegal’s Sangomar Field Development, Senegal-Mauritania Greater Tortue Ahmeyim (GTA) LNG Project, South Africa’s Brulpadda and Luiperd Gas Fields, Egypt’s Zohr Gas Field Expansion, Nigeria LNG Train 7 Project and many others – it is interesting to know the role the AEB will play to support these projects by ensuring access to necessary financing.
The Mozambique LNG project, led by TotalEnergies, is one of the largest liquefied natural gas (LNG) developments in Africa. It involves the extraction of natural gas from offshore fields in the Rovuma Basin and the construction of onshore liquefaction plants. The project is estimated to cost around $20 billion. The project requires continued financing for infrastructure development, including liquefaction trains, pipelines, and export facilities.
The East African Crude Oil Pipeline (EACOP) is a significant project intended to transport crude oil from Uganda’s Lake Albert oil fields to the Tanzanian port of Tanga. The pipeline will be approximately 1,443 kilometers, making it the longest heated pipeline in the world. The total cost of the project is estimated at $3.5 billion, with funding required for construction, environmental management, and community compensation.
The Senegal-Mauritania Greater Tortue Ahmeyim (GTA) LNG Project is a major offshore LNG development that involves the extraction of gas from deep-water fields on the maritime border between Senegal and Mauritania. The project is being developed by BP and Kosmos Energy. The project, which is expected to cost about $4.8 billion in its first phase, requires continued funding for offshore platforms, floating LNG (FLNG) facilities, and export infrastructure.
South Africa’s Brulpadda and Luiperd Gas Fields, discovered by TotalEnergies are located offshore South Africa in the Outeniqua Basin. These fields hold significant potential for gas production and could contribute to South Africa’s energy needs. Substantial investment is needed for further exploration, development drilling, and infrastructure to bring the gas to market.
Egypt’s Zohr Gas Field Expansion Zohr gas field, located in the Mediterranean Sea, is the largest gas discovery in Egypt. It is already producing gas, but ongoing expansion efforts are aimed at increasing production capacity. Continued investment is required for additional drilling, infrastructure upgrades, and the expansion of processing facilities.
Nigeria LNG Train 7 Project is an expansion of the existing Nigeria LNG facility on Bonny Island. This project aims to increase the facility’s LNG production capacity by adding a seventh liquefaction train. The project requires about $10 billion in funding for construction, procurement of equipment, and expansion of supporting infrastructure.
AEB benefits for Nigeria
When fully operational in September, the $5bn Africa Energy Bank, with its headquarters in Nigeria, will be the largest single foreign direct investment inflow into the country in over two decades.
The Bank ecosystem will rank as the third largest bank in Africa and will be the most prominent bank in Nigeria in terms of shareholders’ funds. It will significantly boost Nigeria’s Gross Domestic Product, employment, financial architecture, inclusion, and propel economic diversification while supporting foreign exchange management strategies.
The bank would pivot the development exploration and investment initiatives by independent petroleum producers, commercial service providers, legal and local content drivers, and technology and skills development that would leverage the bank’s proximity to the market and scale up production and capacity.
Nigeria’s financial services industry and capital markets will enjoy streamlined depths and flows for syndication, product development, and asset liquefaction, factoring all relevant services to hydrocarbon markets, positioning Nigeria as the main financial hub for oil and gas downstream, midstream, and upstream investment funding by mitigating the headwinds from climate change and energy transition optics with positive multipliers.
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 Nigeria’s Vision 2030 ambitions.
The Bank, upon take-off, is expected to attract an additional $2bn equity in classes B and C from African sovereign wealth funds, national oil companies, and other institutional investors.
Strategic location with far-reaching impact
Beyond its role as a financial institution, the AEB is poised to be a powerful catalyst for local content development across Africa. The strategic location of the bank underscores the continent’s commitment to harnessing its abundant resources and building a robust, self-sustaining energy sector.
Africa’s energy sector has long been dominated by foreign investments and multinational corporations. While these entities have played a crucial role in developing Africa’s vast energy resources, the continent has often been left with little in terms of local ownership, expertise, and value creation. The Africa Energy Bank is changing this narrative by prioritizing local content—ensuring that Africans are at the forefront of the sector’s development.
The AEB’s presence in Nigeria is expected to leverage the country’s expertise in oil and gas, to foster an environment where African companies can thrive and compete on a global scale.
Nigeria stands as a powerhouse in Africa’s oil and gas sector, with decades of experience and expertise that have positioned it as a leader on the continent. As the largest oil producer in Africa and one of the top oil-exporting countries globally, Nigeria’s vast reserves and established infrastructure have been central to its dominance in the industry.
Nigeria’s oil and gas industry dates back to the 1950s, with significant development and expansion over the years. The country has built extensive expertise in exploration, production, refining, and distribution. Its experience spans various terrains, including onshore, offshore, and deep-water, making it a key player in complex and high-stakes oil operations.
Nigeria’s superpower status in Africa is not just about production volumes but also its influence in the region. The country plays a pivotal role in the Organization of the Petroleum Exporting Countries (OPEC), often shaping discussions and decisions that impact global oil markets. Additionally, Nigeria’s strategic investments in pipelines, refineries, and LNG projects extend its reach and influence across the continent and beyond.
Local content development—ensuring that the benefits of resource extraction are retained within the host country—is critical for Africa’s economic growth. Local content, in this context, refers to the participation of local businesses, workforce, and resources in the energy value chain. It encompasses everything from local manufacturing of equipment and services provided by African companies to the employment and training of African workers. Historically, African countries have struggled with the “resource curse,” where foreign companies dominate the extraction and commercialization of natural resources, leaving little value within the continent. The AEB being in Nigeria will aim to provide financial support that prioritize local businesses, suppliers, and labour in energy projects.
One of the primary ways the AEB will catalyze local content is by facilitating access to capital for indigenous companies to enable them to compete effectively and take a leading role in the energy sector. In many African nations, local energy firms face significant barriers to entry, including limited access to financing, which often hinders their ability to participate in large-scale energy projects. Traditional financial institutions have often been reluctant to fund projects with perceived high risks, particularly those spearheaded by local entities. The African Energy Bank addresses this gap by providing tailored financial products and services designed to meet the unique needs of the African energy sector. No doubt the presence of the AEB in Nigeria is also expected to spur industrialization across the continent. By prioritizing local procurement and encouraging the development of homegrown supply chains, the AEB will help build a robust manufacturing base that can produce the goods and services needed by the energy industry. This will not only reduce dependency on foreign imports but also create jobs and stimulate economic growth in various sectors.
Moreover, the AEB’s focus on capacity building will ensure that African workers and businesses are equipped with the necessary skills and knowledge to participate fully in the energy industry. Through partnerships with educational institutions and vocational training centres, the bank will support initiatives that develop a skilled workforce capable of driving innovation and maintaining high standards within the industry.
The AEB’s impact on local content development will extend beyond traditional oil and gas projects. As Africa increasingly turns to renewable energy to meet its growing power needs, having the bank in Nigeria will play a pivotal role in financing and supporting local companies in the clean energy sector. By investing in solar, wind, and hydroelectric projects, the AEB will help African countries transition to a more sustainable energy future while ensuring that the benefits of these projects are retained within the continent.
In Nigeria, for example, the AEB could support the growth of a local solar industry, providing funding to startups that manufacture solar panels and other components. This would create a new wave of green jobs, further contributing to the continent’s economic diversification.
The siting of the AEB in Nigeria also represents a significant step toward greater regional cooperation and economic integration. By serving as a Pan-African institution, the bank will foster collaboration among African nations, encouraging joint ventures and cross-border projects that drive local content development on a continental scale. This regional approach will help standardize local content policies, making it easier for African companies to operate across borders and tap into new markets.
In doing so, the Africa Energy Bank is not only fueling Africa’s energy needs, but also its aspirations for self-reliance, innovation, and global leadership.
