Africa Has the Energy. But Who Will Finance It?
More than 150 oil and gas projects are reportedly stalled amid tightening international finance and persistent investment risks across the continent.
By Sola Adebawo
Africa does not have an energy-resource problem. It has an energy-financing problem.
The continent is estimated to hold about 125 billion barrels of proven oil reserves and around 620 trillion cubic feet of natural gas. Yet, according to the Independent Petroleum Producers Group, more than 150 critical oil and gas projects across Africa are currently stalled as financing becomes harder to secure.
At the same time, hundreds of millions of Africans still live without reliable electricity, industries operate below potential because of inadequate power, and governments spend scarce foreign exchange importing refined products or supporting inefficient energy systems.
A continent this rich in energy should not remain this poor in energy access.
The International Energy Agency estimates that Africa will require more than $200 billion in annual energy investment by 2030 to meet its energy and development needs. Yet the continent still attracts less than 3 per cent of global energy investment despite accounting for roughly one-fifth of the world’s population.
The issue, therefore, is not simply what lies beneath African soil. It is whether Africa can mobilise enough capital, on reasonable terms, to develop commercially viable energy resources.
Africa is not one investment jurisdiction. Nigeria, Angola, Senegal, Namibia, Mozambique, Libya and Côte d’Ivoire present different combinations of geology, regulation, infrastructure and political risk. But the persistence of financing constraints across the continent points to a wider structural problem.
International banks, development finance institutions and institutional investors have progressively tightened fossil-fuel financing policies as pressure grows to align capital with global decarbonisation goals.
Africa has felt the impact.
Upstream oil and gas investment on the continent fell from about $68 billion in 2016 to approximately $37 billion in 2025.
It is tempting to explain this simply by saying Western financiers are abandoning Africa because of climate ideology.
There is truth in that argument, but only part of the truth.
Global capital has not abandoned hydrocarbons. The IEA expects global energy investment to reach roughly $3.4 trillion in 2026, with about $1.2 trillion still flowing into oil, gas and coal. Major hydrocarbon projects continue to attract capital in the Middle East, North America, Latin America and elsewhere.
The more uncomfortable truth is that capital has become far more selective about where it accepts hydrocarbon risk.
African projects often compete against projects in jurisdictions with more predictable regulation, stronger infrastructure, more stable currencies and greater confidence in contract enforcement.
Capital may have values, but capital also has memory.
It remembers policy reversals, currency restrictions, regulatory delays, security disruptions and projects that cost more and take longer than expected.
This does not absolve a global financial system whose transition policies sometimes fail to reflect Africa’s development realities. But neither does it absolve African governments of the responsibility to make their jurisdictions cheaper and safer places in which to deploy capital.
If decarbonisation were the only problem, renewable projects across Africa should be flooded with capital.
They are not.
The cost of capital for renewable projects in Africa can be two to three times higher than in advanced economies. Investors continue to cite sovereign risk, currency volatility, weak utilities, payment uncertainty and regulatory inconsistency.
Africa’s energy-financing problem is partly imported. It is also home-grown.
This is why the Africa Energy Bank, now expected to commence operations in October 2026, matters.
Created by the African Petroleum Producers Organisation and Afreximbank and headquartered in Abuja, the institution is intended to support investment in oil, gas, LNG, refining, pipelines and other energy infrastructure that is becoming harder to finance through conventional international channels.
But neither its importance nor its limitations should be misunderstood.
Even a multibillion-dollar institution will remain small relative to Africa’s annual energy-investment requirement. It cannot replace international capital, and it should not try to.
Its more strategic role should be catalytic: providing anchor capital, de-risking commercially credible projects, structuring difficult transactions and crowding in pension funds, sovereign wealth funds, commercial banks, private investors and export-credit agencies.
Its success should therefore be measured not simply by how much it lends, but by how much additional capital every dollar on its balance sheet can mobilise.
There is another challenge.
Across Africa, international oil companies have increasingly sold mature assets to indigenous operators. Nigeria has been among the clearest examples.
Greater local ownership is good for capability development and long-term participation. But ownership transfer has financial consequences.
A global oil major can finance a multibillion-dollar project through a strong balance sheet and deep international capital markets. An indigenous operator acquiring the same asset may inherit excellent reserves but face a much higher cost of capital.
The danger is that Africa may succeed in transferring ownership without transferring financial capability.
That is why Africa needs more than one energy bank. It needs an energy-finance ecosystem.
Domestic capital markets must deepen. Pension funds and sovereign wealth funds need properly structured channels through which long-term capital can participate without compromising fiduciary discipline. Commercial banks require stronger project-finance capability. Reserve-based lending, infrastructure funds, insurance capital and private credit must all become more sophisticated.
But financial sovereignty must not become financial sentimentality.
African capital should not be used to rescue weak projects simply because international capital has walked away from them. If a project is commercially unsound, transferring the risk from foreign investors to African pensioners, depositors or taxpayers does not make it sovereign. It simply makes the eventual loss more local.
Africa should challenge capital-allocation frameworks that inadequately reflect its development circumstances. But demanding fair access to finance is different from demanding that capital ignore risk.
Nor should the argument be that every African oil or gas project must be developed.
Some will fail the tests of economics, carbon competitiveness or long-term demand. The development case will be stronger for gas supporting power and industry, brownfield optimisation and commercially competitive projects with lower emissions intensity than for high-cost, long-cycle developments vulnerable to changing demand.
Africa’s ultimate objective should not be hydrocarbon sovereignty for its own sake.
It should be energy sovereignty: the capacity to choose and finance the energy mix that best supports development, affordability, security and an orderly transition.
Nigeria sits squarely inside this challenge.
The country has significant reserves, growing indigenous operator capacity, enormous domestic demand and a regulatory framework that has undergone major reform since the Petroleum Industry Act. NUPRC says recent measures have helped unlock more than $10 billion in upstream investment.
That progress matters.
But markets ultimately price implementation, continuity and outcomes, not legislation alone.
Investors do not finance geology in isolation. They finance confidence.
IEA Executive Director Fatih Birol said in Abuja this week that Nigeria could potentially double energy investment within five years while stressing the growing importance of trust in today’s global energy market.
The cost of capital is often the financial expression of institutional trust.
Ultimately, this is not an argument about balance sheets. Financing determines whether power plants get gas, factories receive reliable energy, jobs are created and households pay less for energy insecurity.
Africa is right to challenge a global financial architecture that may constrain its development choices.
But the continent must also challenge itself.
The strategic question is not whether Africa can replace Western financiers with African financiers.
That question is too small.
The real question is whether Africa can build the trust, institutions and financial depth that make its energy projects competitive for capital on their own merits.
Africa already has much of the energy that its economies, and indeed the world, will continue to need.
What it must now build is the credibility, financial depth and institutional discipline to convert that energy into development.
Sola Adebawo is an energy industry executive and strategic advisor with nearly three decades of experience across Africa’s oil and gas sector. He is the Chief Executive Officer of Hyphen Partners Limited, a specialist advisory firm focused on policy and regulatory intelligence, strategic communications, market entry, stakeholder strategy, institutional and executive positioning in complex and highly regulated industries. His writing explores reform, political economy, leadership, the relationship between institutions and public life as well as the institutional forces shaping Africa’s development. He is an author, scholar and ordained minister.
