African Export-Import Bank (Afreximbank) and the Africa Petroleum Producers’ Organisation (APPO) have signed the establishment document for the Africa Energy Bank (AEB) in Cairo with an initial sum of $5bn.

The new entity’s primary focus will be financing oil and gas projects in Africa at a time when Western banks are under pressure to avoid financing projects that have a high carbon footprint.

The signing ceremony was held at the Egyptian Ministry of Petroleum and Mineral Resources after more than two years of negotiations.

A memorandum of understand (MoU) regarding the formation of the AEB was originally signed in May 2022.

After intense negotiations about where the bank would be headquartered, Cairo was picked as the location.

The AEB has been structured as an independent and supranational pan-African energy development bank and is scheduled to start operations in July.

Now that the establishment documents have been signed by the two founding institutions, at least two member countries now need to sign and ratify the establishment documents.

In a statement, Afreximbank said: “The AEB was created to address the impending funding crisis in the African oil and gas industry, triggered by the global energy transition.

“Traditional financiers, on whom Africa has relied for decades, are withdrawing support, particularly in Africa, citing climate change concerns as the primary reason.”

It added: “The AEB’s primary objective is to fill the imminent void that the withdrawal of funding for oil and gas projects in Africa by the traditional financiers could cause to the industry.”

Egypt’s oil minister, Tarek El Molla, who is also a member of the APPO Ministerial Council, said: “It is a great honour to witness the establishment of the Africa Energy Bank.

“This moment marks a significant milestone in our continent’s journey towards energy independence and sustainable development.

“By harnessing our collective resources and expertise, we are paving the way for a brighter, more prosperous future for all Africans.

“The collaboration between Afreximbank and APPO is a testament to our unwavering commitment to powering Africa’s growth and ensuring energy security for generations to come.

Nj Ayuk, the executive chairman of the energy advocacy group African Energy Chamber, said: “The AEC is proud to see organisations such as APPO and Afreximbank taking concrete steps towards financing African energy projects.

“Despite ongoing pressure to relinquish fossil fuel financing and redirect capital towards renewables, these organisations are promoting a just transition in Africa – one that prioritises Africa’s development and recognises the role oil and gas plays.

“The Africa Energy Bank will play a catalysing role in expanding the energy industry in Africa while driving sustainable and equitable growth for the continent’s population.”