Africa-Press – Nigeria. The war on Iran has reshaped the global energy search, as supply disruptions and heightened risks in the Middle East have led investors to turn to Africa as a new front for securing fuel and supply chains. Bloomberg indicates that the continent is increasingly viewed as a more attractive alternative for long-term investments in oil, gas, and renewable energy.
Andrew Herring, head of the energy and electricity sector at a British unit of a global firm, stated that executives who previously questioned whether to enter African markets are now seeking to rapidly inject capital to secure supply chains.
Herring added, “The African risk premium that had deterred many institutional investors is now being compared to the premium of Middle Eastern volatility.” He continued, “For a growing number of global players, Africa has become the most fundable bet for long-term energy stability.”
The African risk premium is the additional cost demanded by investors or international lenders for investing their money in African countries compared to investing in more stable nations like the United States or Europe.
Multiple Advantages
Bloomberg points out that Africa’s appeal stems from several factors, most notably the geographical diversity of hydrocarbon producers (oil and gas), possessing large untapped reserves of fossil fuels both onshore and offshore, as well as vast potential for renewable energy generation.
Countries like Algeria, Egypt, Libya, Nigeria, and Angola are already supplying global oil and gas markets while seeking to increase production, while other emerging nations are preparing to join the list of producers.
Among the direct beneficiaries of the supply shock is Nigerian billionaire Aliko Dangote, Africa’s richest man, as Bloomberg reported that his $20 billion Nigerian refinery has received numerous orders due to the widening gap between supply and demand in the global market.
The agency added that Dangote’s expansion plans include building a massive new fuel processing facility in Tanzania to serve the East African market, reflecting a bet on sustained regional demand and the increasing importance of refining crude within the continent.
Existing Challenges
However, the path is not without risks, and Bloomberg cites Mozambique as an example, where both Total and ExxonMobil have suspended giant gas projects for years due to security challenges and threats from ISIS.
Total announced the resumption of work on the project in January, while ExxonMobil’s decision remains pending, highlighting that capital is not only seeking resources but also stability.
Bloomberg believes that African nations need to provide political clarity, reduce risks, and accelerate investors’ ability to achieve returns if they want to convert the interest sparked by the war on Iran into long-term wealth.
As energy supplies struggle to pass through the Strait of Hormuz and markets seek alternative barrels, Africa finds itself facing a rare opportunity that may not remain available for long.
