The countries include Ghana, South Africa, Egypt, Benin, Ivory Coast, and Algeria, who are currently mounting resistance against a decision in favor of Nigeria.
Although stakeholders support Nigeria’s bid considering that there are more than 600 million people in Africa without any access to electricity and some 900 million without access to clean cooking fuels, and many of these are in Nigeria, which is the largest oil producer on the continent.
This makes it a logical candidate for the African Energy Bank which will have an initial capital of $5 billion.
Despite these considerations, Nigeria is facing monumental opposition from neighbors and other countries to its bid for the headquarters of the Africa Energy Bank, a proposed initiative to support investments in the continent’s hydrocarbon system.
The final decision on the location of the new institution is due to be made by the end of this month and some fierce lobbying has been going on in the run-up to that decision.
The concept of an African energy bank originated with the African Petroleum Producers’ Organization, with help from the African Export-Import Bank.
The new institution is seen as essential for the future of the African energy industry as it is expected to provide financing for projects that international lenders are shunning for reasons related to the energy transition.
That attitude has pitted Africa against the developed world, as the latter tries to convince the former to not develop its significant and as of yet largely untapped oil and gas resources because of the transition.
African leaders, on the other hand, overwhelmingly want to develop those local resources, citing the fact that the developed world became developed thanks to oil and gas and thanks to the wealth those enabled can now afford to transition while Africa cannot.
The African Energy Bank will launch by June 30 after selecting a host nation this month and hopes to raise an initial $5 billion from African signatories, international financiers and Middle Eastern states, its head told S&P Global Commodity Insights.
Formed out of a partnership between the African Petroleum Producers Organization (APPO), which represents the continent’s petrostates, and the African Export-Import Bank (Afreximbank), the institution hopes to fund oil and gas projects on the continent amid a damaging financing squeeze in recent years.
Speaking in an interview on the sidelines of an energy conference in Accra, Ghana on March 12, Omar Farouk Ibrahim, APPO’s secretary-general, said, “A number of investors and countries in the Middle East that believe that the oil and gas industry has a future we’re waiting in the wings to supply financing.”
The institution’s headquarters will be selected by the end of March, he said, with six member states including Ghana jostling for host status. Mohamed Aoun, Libya’s oil minister, is chairing the committee to select the headquarters, which met virtually March 11.
Matthew Opuko Prempeh, Ghana’s energy minister, told S&P Global that Ghana was one of the only countries that fulfilled all the criteria, adding that site visits had already taken place.
“We have already started receiving funds from our member countries,” Ibrahim said. “By the end of this month we expect a decision on who will host the headquarters. By 30th June we expect the bank to be set up.”
Sources speaking on condition of anonymity told S&P Global that only Nigeria and Angola had so far supplied initial funds to the project, at around $20 million each.
The bank is seeking $83 million from each of the 18 signatories, amounting to almost $1.5 billion.
Once set up, the bank will be able to fund oil and gas projects in Africa, despite Western financing drying up in recent years due to the global shift away from fossil fuels.
“The whole idea of establishing the African energy bank stems from the realisation that those on whom Africa has been depending for the last 70-100 years for finance to explore, produce and process its oil and gas have been essentially Western and they have decided as a result of the global paradigm shift towards renewables to end fossil fuel funding, particularly in Africa,” said Ibrahim.
Afreximbank has emerged as a leader in hydrocarbon project funding recently, but Ibrahim said that caused issues among some of its shareholders.
“Afreximbank cannot continue the way it is funding oil and gas projects. There is a lot of pressure on it from other investors in the bank who do not share the vision. By partnering with us they have excised everything about oil and gas from their portfolio,” he said. “Financers of Afreximbank are not just Africans or people who share our vision.”
Advocacy For Energy Bank Of Nigeria
As the competition for hosting the AEB, sustains, another in-country campaign is springing up calling for the establishment of Energy Bank of Nigeria (EBN).
The Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), in the forefront of the advocacy is asking the federal government to consider the EBN, initiative to facilitate the funding of productive ventures in the downstream oil sector such as refineries.
The national president of PETROAN, Dr Billy Gillis-Harry, posited that the energy bank should be funded to the tune of $15 billion at the minimum to be able to cater to the funding needs of players in the oil and gas industry.
He also said the association is currently in talks with three foreign oil refiners from the United States, Kazakhstan and Asia to partner it in building a new refinery in Nigeria, with the federal government expected to support the project with some form of sovereign guarantee.
He provided further explanation that setting up the energy bank in Nigeria would enable marketers like PETROAN members to embark on projects that are more beneficial to the country’s economy by enhancing production in key sectors like the petroleum downstream and midstream sector.
According to him, the PETROAN, had communicated their advocacy to President Bola Tinubu on the need to have the energy bank in the country, noting that that bank had become critical for the country.
“It’s not like marketers are not interested in making efforts in building refineries. We are willing and we need some supports. That is why we advocate that government should set up the Energy Bank of Nigeria and fund it at least to the tune of $15 billion so that such ventures can also be funded. So, just like the Bank of Industry, Bank of Agriculture, we should have an Energy Bank of Nigeria.
“We have communicated to the president and we are hoping to have interaction with him on this issue. But everybody has seen the need for setting up that energy bank.
“We are talking to the National Assembly, we are talking to the State Assemblies, we are talking to stakeholders in the business, and PETROAN is the one championing it. So, we hope that our members can make their minimal contribution on equity basis in Nigerian naira,” he stated.
He said having that energy bank working in Nigeria would help to build confidence among foreign investors and multilateral financial institutions like the African Development Bank (AfDB) who would want to invest in the country.
He argued that the energy bank of Nigeria would act as a local institution that will warehouse and safeguard any kind of investment coming into the country.
With the bank established and functioning in the country, the PETROAN boss said it would become easier for them to start carrying out productive projects in the downstream oil sector.
He said lack of access to funding, coupled with the low capital outlay of marketers have made it difficult for them to build a refinery.
According to him, to build a refinery of about 50,000 barrels per day as of today requires building a minimum capital outlay of over $3 billion.
He said, “How many marketers in Nigeria have $3 billion as their capital base? 50,000 barrels per day refinery will be able to bring at least about 700,000 litres of Premium Motor Spirit (PMS), some diesel, some kerosene, some aviation fuel.
“The cost of building a 50,000 barrels per day refinery will even be much more than $3 billion, and so you need that kind of money. Where are you going to get it?
Speaking on the new refinery bid by his association the president said the government needed to support the idea, explaining that that informed their request for partnership with the government as they already have foreign partners that are willing to invest in the project.
He said PETROAN is already discussing with three refineries abroad to give them technical and financial support to be able to build a refinery in Nigeria.
According to him, the three firms from the US, Kazakhstan and Asia are willing to partner but would need the Nigerian government to support the project through some sort of sovereign guarantee.
Gillis-Harry further said, “So, that is what we have been telling the government and that’s why we said, declare state of emergency on the (government-owned) refineries and partner with the private sector to make the refineries work and be beneficially productive for every part of the country.
“We are talking to US, we are talking to Kazakhstan, and we are also talking to Asians. Both the foreign partners and the government are willing but there are conditions.
“That’s why I just told you that first of all, to raise that kind of capital, we need government to give some level of sovereign guarantee for the refineries to work. And government has now given the value that if you build a refinery, you must have crude oil from that catchment area.”
He said a project like building a refinery requires making some level of initial commitments and investments by the promoters and the host government, while the technical partners take the rest of the costs.
“So, the technical partners will always want to see that the government of the country will support that. That’s where we are,” he stated.
He said PETROAN was not alone in the project as it was also working in collaboration with other marketers and industry associations in the downstream industry whom he said were all willing to make their equity contributions to support the venture.
He added, “PETROAN is the one championing it, so it’s not only PETROAN. It is for all retail outlet owners, and don’t forget that PETROAN is an amalgam of all the associations.”
