By Lucy Ogalue, News Agency of Nigeria (NAN)
Amid deepening global economic uncertainty, African economies are revisiting a persistent challenge–how to sustain development finance in the face of contracting international capital and escalating fiscal strain.
From the lingering effects of global inflation and supply chain disruptions to geopolitical tensions and energy market instability, external shocks continue to expose the vulnerability of many African economies.
The concern has become so significant that the African Development Bank (AfDB) is considering an emergency support package to help countries cushion the impact of rising food, fuel and fertiliser costs resulting from global tensions.
Yet beyond immediate crisis response, a broader conversation is unfolding across the continent.
Policymakers, economists and development finance experts are increasingly asking whether Africa can reduce its dependence on external borrowing and fund a larger share of its development from its own resources.
The debate featured prominently at the 2026 Annual Meetings of the AfDB Group in Brazzaville, Republic of Congo, where discussions centred on the continent’s estimated 400 billion dollar annual development financing gap.
In spite of shrinking foreign aid and mounting debt crises, a fresh perspective is emerging: Africa may already hold far more internal wealth and potential than the world realises.
The challenge, experts say, is not merely the absence of capital but the ability to mobilise, coordinate and deploy domestic savings and institutional funds effectively.
At the centre of this shift is the growing argument that Africa must rethink its development financing model.
Prof. Kevin Urama, Chief Economist and Vice-President for Economic Governance and Knowledge Management at the AfDB, has been one of the leading voices in this debate.
According to Urama, African countries can mobilise an additional 469 billion dollars annually through improved tax administration and stronger compliance, without increasing tax rates.
“Strengthening digital tax systems, improving efficiency and enhancing public service delivery will significantly expand fiscal space while improving trust between citizens and governments.
“The issue is not about increasing tax rates. It is about improving efficiency and strengthening compliance.”
His argument reflected a broader policy shift across African institutions, where attention was moving from external borrowing to domestic resource mobilisation, institutional strengthening and financial governance reform.
Beyond tax revenue, another major opportunity lies in Africa’s vast pool of domestic institutional capital.
Recent estimates from African development finance institutions suggest that pension funds, sovereign wealth funds, insurance companies and commercial banks across the continent collectively manage about four trillion dollars in assets.
According to Dr Grace Amah, an economic expert, only a fraction of this capital is invested in long-term development projects such as infrastructure, energy, agriculture and industrialisation.
“Instead, much of these funds remain concentrated in short-term instruments or are being invested outside the continent.”
“Redirecting even a small share of these resources can significantly transform Africa’s growth trajectory,” she said.
Nigeria, for instance, is often cited as a key case study due to its large pension industry, sovereign wealth fund and expanding financial sector.
Urama has repeatedly argued that Nigeria and other African countries could unlock significant development capital if appropriate regulatory frameworks, risk-sharing mechanisms and investment pipelines are established.
In response to these challenges, the AfDB is championing a new framework known as the New African Financial Architecture for Development (NAFAD).
The initiative aims to strengthen cooperation among African financial institutions, reduce fragmentation and improve the mobilisation of domestic savings for development.
The AfDB President, Dr Sidi Ould Tah, said the continent must move decisively from aid dependency to investment-led development.
Tah stressed that development finance should act as a catalyst rather than a substitute for domestic effort.
“Africa must shift from aid dependence to investment-driven growth and development finance should catalyse private capital rather than replace domestic efforts.
“Every dollar of development finance should be used to attract additional private investment and unlock Africa’s vast domestic capital pools,” he said.
The NAFAD initiative has already gained backing from African financial institutions, including deposit and investment funds, which say it could help unlock larger pools of capital for development.
Managing Director of the Niger Deposit and Investment Fund, Assoumane Mourjatou, said NAFAD would strengthen Africa’s development financing mechanisms.
“This will be done by improving the mobilisation of domestic resources and encouraging institutional investor participation.
“The initiative will also help reduce reliance on external financing,” she said.
Across the continent, deposit funds are increasingly being viewed as critical vehicles for converting idle savings into productive investment.
Development Finance Institutions are also central to the emerging strategy.
Senior African finance leaders have called for coordinated efforts to unlock about 250 billion dollars in assets held by DFIs to support electricity access and infrastructure development across the continent.
The discussions formed part of Mission 300, a joint initiative of the AfDB and the World Bank Group aimed at connecting 300 million Africans to electricity by 2030.
Participants said Africa must increasingly rely on its own capital to finance its development agenda.
The Chief Executive Officer of the African Guarantee Fund (AGF), Constant N’zi, said African commercial banks alone hold about 2.5 trillion dollars in assets.
“There is 2.5 trillion dollars sitting in the balance sheets of African commercial banks.
“The mandate of AGF is to unlock that capital to finance the economy” N’zi said.
He, however, said the challenge was not availability of capital but the mechanisms to de-risk and channel it into productive sectors.
Beyond public institutions, attention is also shifting to the private sector as a driver of growth.
At a Private Sector Forum in Brazzaville, development leaders emphasised that Africa’s transformation would depend on stronger regional businesses, deeper intra-African trade and industrial diversification.
AfDB Director-General for Central Africa, Léandre Bassolé, said the private sector must become a central engine of Africa’s economic transformation.
He called for stronger links between African savings, institutional investors and development projects.
“The private sector is not a peripheral actor in development. It must become one of the central engines of Africa’s economic transformation.
“We must create mechanisms capable of connecting African savings, institutional investors, commercial banks, development institutions, financial markets and transformative projects
“We must also focus on partnerships, innovation and private enterprise as pathways to Africa’s economic transformation,” Bassole said.
Other stakeholders stressed the importance of implementing the African Continental Free Trade Area (AfCFTA) and the Pan-African Payment and Settlement System to deepen regional integration and reduce trade barriers.
Representatives from international partners, including the Japan Bank for International Cooperation, noted that Africa’s growth potential and market size continue to attract global interest.
The United Nations Development Programme (UNDP) also contributed to the broader debate, calling for a shift from pilot projects to scalable development models.
Dr Jide Okeke of UNDP said Africa must focus on building sustainable enterprises rather than merely tracking employment figures.
He also stressed that Africa’s development capital should not be viewed purely in financial terms, but should include human, natural and fiscal capital.
According to him, Africa’s transformation depends on the ability of institutions to scale what already works rather than repeatedly testing new pilots without implementation.
While mobilising new resources remained central to the debate, experts also cautioned that how funds are used was equally important.
The AfDB chief economist warned that debt sustainability depended not only on how much was borrowed but on the quality and purpose of borrowing.
Urama argued that borrowed funds should be invested in productive assets that generated economic returns, rather than consumption or recurrent expenditure.
“Infrastructure, energy and industrial investments are more likely to expand productivity, create jobs and strengthen long-term growth,’’ he said.
Across all discussions, a common theme emerged: Africa’s development challenge is increasingly about coordination, governance and efficient use of existing resources rather than scarcity alone. (NANFeatures)