ECOWAS Bank’s West Africa Outlook Pushes Intra-Regional Investment

ECOWAS. Bigstock (1)

This year’s WADO report takes the theme, “Navigating Global Shocks through Structural Transformation and Trade,” its macroeconomic outlook taking in the effects of COVID-19 and the war in Ukraine including price inflation and other socio-economic pressures. With demand for energy rising at over 8% per annum for West Africa, home to the world’s fastest growing human population, securing sufficient power supply at affordable prices, especially for smaller nations, is a challenge.

Every MSGBC nation holds a universal electrification target of 2030 or 2025, and here the WADO report’s primary interventions really come into their own – combatting price inflation by increasing local production capacities naturally forming the groundwork but complementing this industrial nationalization approach with regional synergies: trade and investment towards structural transformation.

Guinea Conakry, for example, is building a $300 million liquefied natural gas (LNG) import terminal, the first in the basin, to benefit from the affordable regional power commodity exports starting next year with the launch of 2.5 million tons per annum in initial LNG projects. The terminal will take in up to 2GW equivalent in exported LNG from Senegal and Mauritania, directing these massive energy resources into the local bauxite industry – an aluminium ore for which it controls one third of global reserves.

Per recent legislative reforms, bauxite producers in Conakry must now process the ore in situ before export, multiplying its value sixfold as a boon to the national economy. The half-dozen refineries under development, opening 3-6 years from now, will be served by an abundant supply of power to meet their demands, delivered direct to the port of Kamsar. Conakry has 22 offshore blocks to launch in its first and latest tender round, The Gambia 7, Guinea-Bissau 5, Senegal as many as a dozen and Mauritania 28, meaning next year’s LNG resources are likely to be just the tip of the iceberg- the basin already holding almost 1/3 of Africa’s discovered gas reserves.

Regional integration and value chains have created a win-win for Conakry, Senegal and Mauritania and others will follow. Just this year, Senegal decreed that a minimum 10% of revenues from its energy industry will be directed in FONSIS, its Sovereign Wealth Fund, for re-investment into the domestic power sector – $500 million by 2025. However, with this legislation also came the news that up to 25% of these energy sector re-investments may be made in regional markets.

It’s clear that the basin’s investment opportunities are world-class, and per the International Energy Agency’s Africa Energy Outlook preceding WADO last month, financing must be doubled by 2030 to meet the continent’s power and climate goals. As the WADO report has made clear to all 15 ECOWAS nations, regional integration and investment may well be the way forward in achieving power-backed spring-boarded development for socio-economic prosperity across the basin. Undoubtedly, more will be heard on this at MSBGC 2022.

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Onur Yilmaz

Onur Yilmaz

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