June 22, 2024
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RENEWABLE ENERGY

APPO, Afreximbank Sign $5bn Funding Document For Africa Energy Bank

The African Petroleum Producers Organization (APPO) and the African Export-Import Bank (Afreximbank) have signed the necessary documents to establish a $5 billion Africa Energy Bank. This new institution aims to facilitate, promote, and finance the development of Africa’s hydrocarbon resources, including oil, gas, and condensates, while also supporting energy transition initiatives and net-zero commitments by 2060.

The African Energy Chamber (AEC) announced on Monday that the signing ceremony took place in Cairo, Egypt, officially marking the creation of the Africa Energy Bank. The AEC, a key advocate for the African energy sector, praised APPO and Afreximbank for their swift efforts in establishing the bank.

The bank seeks contributions of approximately $83 million from each of APPO’s 18 member countries, totaling nearly $1.5 billion. Additionally, Afrexim Bank’s board has committed to investing $1.25 billion. The $5 billion Africa Energy Bank aims to grow its assets to over $120 billion within seven years, positioning itself as a sustainable source of foreign direct investment (FDI) for Nigeria and supporting its Vision 2020 ambitions.

The AEC expressed confidence that the African Energy Bank will enhance energy access and growth across Africa by providing the necessary financing for large-scale projects. Despite the ongoing significance of oil and gas in Africa, global transitions to alternative fuels have led to a substantial investment gap. The AEC highlighted that over 60 million Africans lack access to electricity, and more than 900 million lack clean cooking solutions.

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The AEC noted that this situation is exacerbated by a rapid decline in fossil fuel funding as international oil companies (IOCs) divest from oil and gas assets in favor of more strategic investments. According to the International Energy Agency, delivering modern energy to the entire continent will require up to $25 billion in annual spending until 2030, presenting a significant opportunity for financiers.

The Africa Energy Bank is expected to address these funding challenges by providing an African-led solution for financing energy projects. According to Channels, with $5 billion in initial capital from African signatories, the bank aims to close the funding gap for oil and gas projects across the continent.

The proposed bank has already attracted substantial interest from African governments and development financial institutions. APPO’s Secretary General, Omar Ibrahim, announced that member states have begun contributing funds. AEC Executive Chairman NJ Ayuk emphasized that the bank will enable African countries to access new financing sources and reduce their reliance on foreign capital.

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