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AfCFTA: Infrastructure Crucial For Energy Access.

If the Continental Free Trade Area agreement means anything to Africa’s oil and gas sector and its players, that would be the potential it has to augment energy access to the numerous resources resting beneath the continent for the development of each of the 54 states. Such potential could only be actualized with the presence of adequate critical infrastructure – the kind whose presence, sufficiency, and quality have been problematic right from the onset.

Oil and gas are important for the continent’s industrialization, and for solving energy poverty via gas-to-power developments. This is why state parties to the Agreement are hopeful each of them can take advantage of the opportunities present in the AfCFTA to build the necessary infrastructure and optimize their access to energy.

Thankfully, there are available some sub-regional collaborations whose formation and collective resolve is to pool individual national resources together to promote and guarantee quality energy access to their respective states. 

The West Africa Gas Pipeline-WAGP and the West Africa Power Pool-WAPP are examples of these regional establishments in Western Africa that have been around for the last decade.  Observations on the operations of these cross-border facilities can serve as a guide for developing other such infrastructure that needs to be laid under the Free Trade Area.

West Africa Gas Pipeline;

For the last ten years, the WAGP has been in operation across Nigeria, Togo, Benin, and Ghana, and transports purified natural gas used as fuel for power generation and industrial applications to the foundation customers. 

Experiences of the pipeline’s operation indicate the presence of great stakeholder management not only with ministries of member states, and shippers but also with off-takers. 

These engagements involve real-time open communication and collaboration among stakeholders which allow the parties to deal with emerging challenges and explore more opportunities for strengthening the system.  One can also witness a coordinated regulatory environment with harmonized legal and fiscal policies across the four member states of the WAGP.

The pipeline’s operation also attests to the need for a common vision or business case for the development of such infrastructure which accounts for market dynamics of demand and supply in each member state and also guarantees a return on investments as well as harmonized tariff expectations. 

The WAGP case also warns stakeholders to be cautious of what analysts at the Africa Centre for Energy Policy call the ‘dollarisation’ of oil and gas investment attraction for gas infrastructure. 

Rather investments must be related to the local currency that would create linkages with the local economy to ensure value retention for African countries beyond the cause of oil and gas. Such a situation has effects on tariffs and is among the fiscal implications for cross-border infrastructure.

What Stakeholders Can Do;

Regarding policy reforms, African governments must develop an investment regime that drives independent operators and regulators over the region devoid of government control and their budget interests.  The continent needs to develop and adopt a modern law that is municipalized by each country to address the fiscal implications of cross-border infrastructure. 

This modern law must be driven by regional economic-based or multi-country-based cost builder policy to accelerate gas-to-power generation. Development finance institutions should support the development of refinery capacity through innovative funding arrangements to reduce the export of crude and increase the local refinery of crude products. 

They can also extend credit lines to facilitate the trade of oil and gas products. Yet still, funding institutions need also to create and deploy digital platforms that facilitate cross-border payments and trade information to fix liquidity constraints of multiple currency trades, as the Africa Exim Bank is currently doing. They can also consider lowering or waiving the single limit to allow local banks to finance big-ticket oil and gas infrastructure.

Business and accountability actors must be actively involved in monitoring the implementation of the AfCFTA to ensure that the policies adopted at the regional level are effectively transmitted at the municipal level.