How AfDB is funding Africa's energy progress

From the newsletter

The African Development Bank is doubling down on its role as a key driver of energy sector reform across Africa, with the recent loan of $144 million to Niger aimed at reforming the country's energy sector laws. The Bank is also part of an initiative with the World Bank, aiming to connect 300 million people and update energy sector policies in at least a dozen countries.

• Niger is among the countries with the lowest electricity access, at just 20%, half of Africa’s average. It is part of the Mission 300 initiative, which gives it access to the program’s $40 billion funding pool for energy sector development.

• Policy gaps remain a major barrier to attracting investment in Africa’s energy sector. Less than five countries currently have progressive policies that enable private sector participation across the energy supply chain, and Niger is not among them.

More details

• This funding to Niger marks the first phase of its Energy Sector Governance and Competitiveness Support Program, which aims to tackle severe power shortages, reform outdated energy laws, and strengthen governance in the energy sector. The program targets increasing electricity access to 30% by 2026 and raising the manufacturing sector’s contribution to GDP from 2.5% to 3.8%. These goals will be supported by the development of 240 MW of solar capacity, with 50 MW expected to come online by December 2026.

• Yet, even as renewable energy investment gathers pace globally, many African countries remain on the sidelines due to restrictive policy environments. Even those with relatively advanced frameworks often face political interference and limited political will, discouraging private investors who see the revenue potential in renewables. This policy uncertainty has left much of Africa stuck in a persistent electricity deficit.

• While some regions, particularly North Africa, have made notable progress in electrification, with some like Egypt and Morocco achieving universal access, others, especially Sub-Saharan Africa, continue to face significant challenges. About 18 of the 20 countries with the largest electricity access deficits are located in Sub-Saharan Africa. Nigeria, the Democratic Republic of Congo (DRC), and Ethiopia together account for nearly one-third of the global population living without electricity.

• The AfDB and World Bank are seeking to change this. Through the Mission 300 program, their goal is not only to connect 300 million Africans to electricity by 2030 but also to strengthen energy governance by updating national energy compacts, creating legal frameworks for mini-grids, and establishing platforms to scale off-grid energy investment.

• Since the beginning of the year, the AfDB has committed more than $1 billion to support Africa’s energy transition, with a significant share directed toward grid infrastructure and policy development. Recent interventions include $282 million for Zanzibar’s undersea power line this month and $475 million last month to strengthen energy sector governance and infrastructure improvement in South Africa. 

• But better policies alone will not be enough to spark a major shift in Africa’s energy sector. Real transformation will require stronger institutional capacity, deeper regional grid integration, and greater access to financing for small and medium-sized energy developers who are best suited to connect the rural communities. Above all, political will and continuity of reforms across successive governments will be critical to ensure sustained progress. The AfDB is already playing a dual role as both financier and policy advisor, linking funding to policy improvements through conditional lending.

Our take

• African countries often experience frequent policy interference, which undermines investor confidence. The AfDB could help enforce the continuity of reforms across political cycles through conditional lending to boost investor confidence.

• African countries with the least electricity access and poorest economic development need to focus not only on connecting households but also on powering local industries, such as those in agro-processing and small businesses. This is essential to maximise economic impact and job creation.

• While grid expansion is essential, most of the unelectrified population lives far from the grid and will take time to gain access. Governments need to scale up private sector-led mini-grids and off-grid solutions, which are often the fastest and least costly ways to reach such communities. This can be supported by clear legal frameworks and subsidies.