The African Export-Import Bank (Afreximbank) and the Africa Petroleum Producers’ Organisation (APPO) have announced the signing of an agreement to establish the Africa Energy Bank with an initial capital of $5 billion.

The bank is intended to eradicate energy poverty on the continent.

The agreement and charter of the bank were inked by Benedict Oramah, President of Afreximbank, and Omar Farouk Ibrahim, Secretary General of APPO on June 4, at the Ministry of Petroleum and Mineral Resources of Egypt.

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The Africa Energy Bank (AEB) aims to fill the imminent void that the traditional financiers' withdrawal of funding for oil and gas projects in Africa could cause to the industry.

According to Afreximbank, the new institution has been structured as an independent and supranational pan-African energy development bank whose operations are expected to commence in July.

"We are enormously proud to be co-investing in this new vehicle and for taking the lead role in advising on the management and implementation process with the operational launch set to commence in July,” Oramah said.

Africa is estimated to possess more than 125 billion barrels of proven crude oil reserves and over 600 trillion cubic feet of proven gas reserves.

Yet, the continent has the largest proportion of the world’s population living without access to modern energy.

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According to the African Energy Commission, crude oil production in Africa is estimated at almost 10 million barrels per day, representing about 10 per cent of global crude oil production.

About 75 per cent of the production is exported as crude while the majority of oil products are imported, which makes Africa the only continent in the world which is a net exporter of crude oil as well as a net importer of petroleum products.

Omar Farouk Ibrahim, APPO Secretary General, insisted that Africa cannot afford to abandon oil and gas in a hurry given the limited energy access on the continent.

He believes the bank comes as Africa’s response to the imminent funding challenge that the global paradigm shift from fossil fuels to renewable energies poses to the oil and gas industry in Africa.

"For too long Africa’s oil and gas industry has been dependent on extra-African funding. We came to take foreign financing of our oil and gas projects for granted, until the advent of energy transition made us realise that those on whom we have depended for many decades have decided to abandon us,” he said.

For the bank’s operations to take off, at least two member countries need to sign and ratify the Establishment Documents. Although started by Africa, shareholding is open to all investors.