African Export-Import Bank (Afreximbank) has launched a $3 billion financing programme called the ‘Revolving Intra-African Oil Trade Financing Programme’ to support the purchase of refined petroleum products by buyers in Africa and the Caribbean.
This initiative addresses the continent’s heavy reliance on oil imports from outside Africa, which costs up to $30 billion annually due to insufficient local refining capacity, according to the lender.
But as Africa gradually builds its refining capacity, the financing project will encourage regional patronage. “We expect it to finance about $10 billion to $14 billion of Intra-African petroleum imports,” Afreximbank said on Monday.
Key products to be traded under the new $3 billion financing programme are refined petroleum products, including Premium Motor Spirit (PMS), Automotive Gas Oil (AGO), Heavy Fuel Oil (HFO), jet fuel, and kerosene. Refineries operating in Africa are eligible.
Nigeria, Africa’s largest nation, is home to the largest single train refinery in the world, owned by billionaire industrialist Aliko Dangote. The facility is capable of refining 650,000 barrels of oil per day, with funding support from Afreximbank.
Additionally, Angola is on track to enhance its refining capacity with the $6.6 billion Lobito refinery, which, when completed, will be its largest at 200,000 bpd, building on the groundwork laid by the existing 60,000 bpd Cabinda Refinery.
Further investments include the refurbishment of the Port Harcourt Refinery, which has a capacity of 210,000 bpd, alongside the recently approved BUA and Azikel refineries in Nigeria.
These investments are strategic, the bank said, noting that they are forward steps targeted at creating over 1.3 million bpd refining capacity and helping to convert the Gulf of Guinea from an exporter of crude oil into an important refining hub for the continent and the world.”
The revolving fund is designed predominantly to provide essential trade finance, in terms of tenure, price format and logistics requirements, to oil traders, financial institutions, and governmental bodies, including those state-owned enterprises mandated to import refined petroleum products from African refineries.
Afreximbank said the project will promote industrialisation and create jobs under the aegis of the African Continental Free Trade Area (AfCFTA).
President of Afreximbank, Benedict Oramah, projects that the programme “will have a direct impact on the volume of the refined petroleum products produced and consumed in Africa.”
He assured that it will create a multiplier effect by enhancing marine cargo insurance and the downstream petroleum value chain, catalysing critical investments in shipping and marine logistics for intra- and extra-African trade of crude oil and refined products.
“We want to see an increased proportion of the about 4mbpd of crude oil produced in the Gulf of Guinea refined in Africa,” Oramah said.
President of the Republic of Malawi, Lazarus Chakwera, sees the purchase of funding as a “clear demonstration of Africa’s resolve to take charge of its own energy future.”
He said the programme will strengthen regional supply chains to Malawi and keep the value and money flowing within the continent. “Most importantly, it will deliver real impact to our citizens by ensuring more stable and affordable access to refined petroleum products, which are essential to Malawians’ daily life and economic productivity,” he said.
Approved applicants for the fund will be able to draw from the global facility once they complete Know Your Customer (KYC) checks and meet other required conditions.
Access will be granted through structured trade finance instruments, including the issuance or confirmation of Letters of Credit (LCs) in favour of African refineries, the discounting of those LCs to give suppliers faster access to cash, and in some cases, direct prepayment or advances to eligible refineries on behalf of buyers.
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