African oil-producing countries, under the African Petroleum Producers Organization (APPO), have established the African Energy Bank (AEB) with an initial capitalization of $5 billion. This new institution aims to address the funding shortfall in African energy projects amidst a decline in investment. However, the AEB faces significant challenges as it adapts to the evolving global oil and gas market.

Nigeria’s Minister of State for Petroleum, Heineken Lokpobiri, highlighted the funding issue as a major obstacle for African oil-producing nations. At a recent APPO meeting in Abuja, he mentioned that the Energy Bank was proposed as a solution to this problem.

Afreximbank and the African Energy Foundation are also providing financial support. However, it remains uncertain whether the AEB’s initial capitalization will be sufficient to close the industry’s funding gap.

Marcel Okeke, a former chief economist of Zenith Bank, acknowledges the potential of the AEB but also points out the likely challenges it will face, including possible teething problems. He raises concerns about how the AEB might secure additional capital if needed and suggests that it may have to seek support from non-African investors, such as the African Development Bank.

Investment in Nigeria’s oil and gas sector has declined sharply, dropping from $27 billion in 2014 to $6 billion in 2022, according to the Nigerian Upstream Petroleum Regulatory Commission. Some international oil companies have exited Nigeria due to a challenging business environment and economic instability, a trend that is also affecting other African countries.

Okeke also notes the global shift toward alternative energy sources and the increasing political sensitivity surrounding oil and gas. This transition could impact the AEB’s ability to attract support, as alternative energy may become a more prominent focus.