Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
A coalition of oil-producing African countries is seeking $5bn to launch an “energy bank” that would fund projects on the continent, as frustration grows over the reluctance of western institutions to bankroll fossil fuel initiatives because of environmental concerns.
The 18-member African Petroleum Producers’ Organization hopes the lender can begin operating in early 2025, according to Haytham El Maayergi, executive vice-president of global trade at the African Export-Import Bank, a partner in the project.
Africa’s oil producers have encountered funding restrictions from traditional western backers, including multilateral institutions whose rules increasingly bar them from oil and gas investing. The World Bank stopped financing upstream oil and gas projects in 2019 while the African Development Bank, which has the US as its number two shareholder, does not put money into fossil fuel projects.
El Maayergi, however, insisted that “Africa’s context is totally different from what you find elsewhere” because its resources had not been fully developed and it had made only a minimal contribution to climate change.
“[These] are countries at a development stage where you cannot suddenly move into green [transition] . . . you cannot just say funding is cut and they can’t do oil,” he said in an interview. El Maayergi said there were other projects in Africa that were unconnected to fossil fuels, such as electricity infrastructure, that also needed funding.
Standard Chartered last year pulled out of a billion-dollar deal to finance a pipeline to carry crude from landlocked Uganda to the Tanzanian coast after the proposed project became a target for environmental activists.
Campaigners say such funding blocks serve to exacerbate energy poverty in Africa, a continent where 600mn people lack access to electricity and almost 1bn people still cook with dirty energy sources such as charcoal and firewood.
They argue that Africa should be allowed to exploit its oil and gas resources to kick-start industrialisation because it has hardly contributed to rising global carbon emissions.
The African Energy Chamber, an advocacy group, has argued that Africa has the “sovereign right” to develop its natural resources — which according to the group includes 125bn barrels of oil and 620tn cubic feet of natural gas — in a “balanced and sustainable” manner.
The 18 countries in the Africa Energy Bank project, which include Nigeria, Angola and Libya, are each being asked to contribute $83mn, raising almost $1.5bn. This would be matched by the African Export-Import Bank.
The remainder of the funds will be sought from other sources including Gulf states, banks and other institutions, sovereign wealth funds, cash-rich traders and international banks interested in taking an equity stake.
El Maayergi did not cite any specific projects in need of funding that had been blocked over environmental concerns, but warned that the shift away from fossil fuel meant Africa should take pre-emptive steps.
“It’s not as easy as before,” he said of financing for oil and gas projects. “We know that, with time, with the trends we’re seeing across fossil fuel funding, the context of Africa might be lost,” he added. “We need to have a different timeline strategy . . . it’s pre-emptive for us.”
Petroleum ministers in the consortium are expected to meet early next month to finalise plans for the new energy bank that will be headquartered in Nigeria’s capital, Abuja.