Afreximbank injects $3bn into refining despite climate pledge

Despite the climate commitment made by the African Export-Import Bank (Afreximbank) at COP29 in Azerbaijan last November, the bank recently launched a $3 billion revolving intra-African oil trade financing programme to finance the purchase of refined petroleum products by African and Caribbean oil buyers.

According to Afreximbank’s statement, the financing programme was launched to address Africa’s persistent reliance on imported refined petroleum products. Due to inadequate refining, these products account for US$30 billion annually in petroleum import costs, according to the bank.

As a revolving facility, the bank expects it to finance about US$10 billion to US$14 billion of Intra-African petroleum imports.

“This programme seeks to leverage the growing refining capacity that Afreximbank has helped establish across the continent, while aligning with the objectives of the African Continental Free Trade Area (AfCFTA) agreement, which includes facilitating intra-African trade, promoting industrialisation, and creating jobs on the continent.

“By deploying innovative trade finance and supply chain solutions tailored to key stakeholders’ needs in terms of tenure, price format and logistics requirements, this initiative supports Afreximbank’s strategic goals of advancing energy security, strengthening regional value chains, and fostering economic resilience within the continent and the Caribbean,” the statement said.

Professor Benedict Oramah, President of Afreximbank, said the programme would galvanise efforts to make the Gulf of Guinea a key refining hub.

“Whilst the programme will have a direct impact on the volume of the refined petroleum products produced and consumed in Africa, it will also have a multiplier effect on the downstream petroleum value chain as it will catalyse critical investments in shipping and marine logistics for intra and extra African trade of crude oil and refined products.

“The multiplier effect will also be seen in marine cargo insurance and other ancillary businesses within the sector. We want to see an increased proportion of the about 4 mbpd of crude oil produced in the Gulf of Guinea refined in Africa,” he added.

Reducing African import dependency

Etulan Adu, a production engineer at Italian oil major Eni told Gas Outlook that the initiative is set to significantly impact energy security in Africa and the Caribbean by bolstering regional petroleum value chains and enhancing economic resilience.

He said that by encouraging local refineries, the programme aims to lessen reliance on foreign refineries and producers of various petroleum products, thereby reducing exposure to geopolitical risks and the unpredictable nature of global energy markets.

“Countries like Malawi have praised the initiative, looking forward to decreased import dependency and stronger regional supply chains. Ultimately, this effort strives to create a more stable and self-sufficient energy landscape, benefiting the citizens and economies alike across the African continent.

“It is the birth of a new market system financed to self-proof Africa from the global shocks in terms of importation of petroleum products which has eroded foreign exchange reserves over the past decades. Building local refinery capacity, ensuring sustainable supply and strong financing to run the operations of an intra-African system is fundamental to ensuring the success of this programme,” he added.

Ayodeji Stephen, Lead Consultant of HydroGEM Energy Advisory, said Afreximbank plays a pivotal role in financing refining infrastructure to shift from exporting crude oil to producing refined products domestically, with the Gulf of Guinea, particularly Nigeria and Angola, at the forefront. He told Gas Outlook that Afreximbank’s strategy targets a continental refining capacity of 1.3 million bpd, with ambitions to reach 3 million bpd in the medium-term.

“Currently, Africa refines less than 20% of the 4 million bpd of crude produced in the Gulf of Guinea. Nigeria’s refineries could theoretically meet West Africa’s petrol demand (500,000–600,000 bpd), but logistical constraints, ageing storage facilities, and distribution challenges necessitate continued imports.

“Angola’s refineries are likely to satisfy domestic needs and support neighbours like Zambia, while East and Central Africa remain import-dependent due to limited infrastructure. If projects like Dangote and Lobito achieve full capacity, West Africa could attain fuel self-sufficiency within a decade, though systemic bottlenecks must be addressed,” he added.

Climate goals push back

McKinsey and the International Energy Agency project that Africa’s overall energy demand will rise significantly by 2040 due to population growth and industrialisation. Adu said this projection indicates a significant upward trend in Africa’s oil demand. While the anticipated growth in oil demand suggests economic opportunities for African nations, he said it also poses challenges for achieving global climate goals set by the Paris Agreement.

“The discussion surrounding Africa’s energy transition is complex, with many advocating for the continent’s right to develop its fossil fuel resources in light of significant energy poverty and economic needs. Proponents argue that utilising oil and gas can drive development while emphasising Africa’s minimal historical contribution to global emissions,” he said.

“Yet, there are concerns about the risk of “fossil fuel lock-in,” where substantial investments in oil infrastructure could become stranded assets amid a global shift toward decarbonisation. This tension between immediate development needs and long-term climate action is shaping the discourse on oil consumption and energy strategies across Africa,” he added.

Adu further said that as African leaders navigate this intricate landscape, they face the challenge of balancing urgent economic growth demands with the growing necessity for sustainable energy practices. “The path forward requires careful consideration of how to leverage fossil fuel resources for development while mitigating potential impacts on climate commitments.”

Stephen raised concern that oil is likely to dominate Africa’s energy mix for the next two to three decades, particularly for transport and industry, due to substantial investments and economic dependencies. He said the $23 billion Dangote Refinery, Angola’s Lobito Refinery, and Afreximbank’s $3 billion programme, represent long-term commitments to oil refining.

“Nigeria’s reliance on oil for 90% of export revenue and Angola’s similar dependence reinforce this trajectory. With fuel demand projected to reach 2.8 million bpd by 2040, and electric vehicles comprising less than 1% of Nigeria’s fleet, liquid fuels remain critical.”

He said rising oil consumption underscores the tension with climate commitments, as African nations prioritise economic development within a “just” transition framework.

“Afreximbank’s dual focus on oil and green rhetoric, evident at COP29 and its 2024 Energy Transition Seminar, suggests a pragmatic balancing act to maintain donor support while addressing immediate energy needs,” said Stephen.

“Geopolitical risks, such as Houthi attacks or global crude supply disruptions, could amplify the programme’s importance or expose vulnerabilities. Africa’s energy future is a complex interplay of survival, growth, and environmental responsibility, with Afreximbank’s initiatives playing a pivotal role in shaping its trajectory,” he ended.

(Writing by Samuel Ajala; editing by Sophie Davies)