Africa pursuing energy banking as investors withdraw fossil fuels funding

• The western countries have halted overseas fossil fuel financing, a decision that has raised the alarm among Africa’s largest exporters of hydrocarbons
• A BP Statistical Review of World Energy 2021 reveals that oil and gas produced about 48 per cent of Africa’s total electric power generation in 2020
• At the COP26 climate summit held in Glasgow, the United Kingdom, in November, several countries agreed to stop the direct public financing for overseas fossil fuel development and extraction by the end of this year

The western countries have halted overseas fossil fuel financing, a decision that has raised the alarm among Africa’s largest exporters of hydrocarbons, who sees the creation of an African Energy Bank as a way out to fund fossil fuels in Africa.

To prevent catastrophic climate change, environmental and financial organisations and governments across Europe and America have insisted that developing nations in Africa must immediately transition from fossil fuel production and usage to renewable energy developments such as solar, wind, and hydrogen.

Despite the fear that fossil fuels could cause irreversible changes in the climate, plans are ongoing to create a new kid on the block, a Pan-African energy bank, that can fund the diminishing oil and gas investment and drive up production across the continent.

Read: South Africa discovers huge offshore gas deposits, has

Local media reports in Nigeria revealed that the African Export-Import Bank (Afreximbank) and the Nigerian National Petroleum Corporation are exploring the idea of establishing an “African Energy Bank.”

African governments have been pushing for fossil fuel development to boost access to electric power for their citizens. Some governments also believe that oil and gas production plays a crucial role in their medium-term energy transition plans.

Read: Ngali Mining to explore hydrocarbons in Lake Kivu

“We have noticed that a number of the big industrialised countries and financial institutions are now defunding oil and gas projects, which would be a huge blow for countries such as ours that want to see gas as a transition fuel,” said Nigerian foreign minister, Geoffrey Onyeama.

The move to create the continental energy bank has been praised by the African Energy Chamber, which stated that the bank’s value could not be overstated, despite the large amounts of capital needed to implement the transition.

“Through institutions like the African Energy Bank and local oil and gas companies, Africa will boost new and already existing project developments, ensure reliable financing channels for oil and gas and position the continent as a giant exporter of hydrocarbons, all while creating critical capital opportunities for renewable energy projects,” the industry lobby group added.

The African Energy Bank funding fossil fuels in Africa narrative comes five months after Nigeria’s minister for petroleum resources, Timpire Sylva, called for governments across the continent to look into the realisation of the initiative.

“If we are to insist on the exploration of our gas and oil reserves when the globe is cutting down on investments, we must set a financial institution (an African Energy Bank) to develop the oil and gas sector,” Sylva said in September last year.

At the COP26 climate summit held in Glasgow, the United Kingdom, in November, several countries agreed to stop the direct public financing for overseas fossil fuel development and extraction by the end of this year and encourage clean energy expansion instead.

African governments have been pushing for fossil fuel development to boost access to electric power for their citizens. Some governments also believe that oil and gas production plays a crucial role in their medium-term energy transition plans.

Currently, many African countries rely substantially on gas and oil for their electricity needs. A BP Statistical Review of World Energy 2021 reveals that oil and gas produced about 48 per cent of the continent’s total electric power generation in 2020.

Some experts are questioning how interested parties in the African Energy Bank will find the necessary capital when Africa’s major petroleum producers are suffering from a dangerous lack of investment in recent years. A substantial number of projects will take a halt after investors withdraw funding fossil fuels in Africa.

Robert Besseling, the founder and chief executive of specialist intelligence company Pangea Risk, said that Africa’s oil production has been dominated by giant producers such as Nigeria, Angola, DRC, Gabon and Equatorial Guinea. They all have high operation costs, depleting fields, and insufficient foreign investment.

An African Energy Bank faces challenges of investment and climate change resistance which would shrink the realisation of the dream of funding fossil fuels in Africa.

Read: African NGOs call to stop growth of coal, oil and gas at African Union Summit.