AFC says Africa’s $1.1trn institutional capital should be deployed to finance infrastructure

The Africa Finance Corporation (AFC) says the continent’s $1.1 trillion institutional capital pool should be redirected to finance long-term infrastructure development and drive industrial growth.

The AFC spoke in its 2025 state of Africa’s infrastructure report, titled ‘Mobilising Domestic Capital’.

Institutional capital refers to the funds held by institutions like investment firms.

Launched on Thursday, the report said institutional investors across the continent — including pension and insurance companies, sovereign wealth funds, and public development banks — continue to invest in low-risk, short-term instruments rather than deploy capital into the real economy.

“Africa’s renewed focus on domestic resource mobilization should be viewed as a necessary rebalancing — towards maximizing the value of internal capital while using external resources more strategically,” the report stated.

It noted that development models across the continent have long relied on foreign capital as the main growth engine.

However, the corporation said global evidence shows that external financing works best when it complements, rather than substitutes, domestic capital.

“Mobilizing domestic resources at scale is now an urgent policy priority,” the report said.

“[The] AFC’s new research conservatively estimates the value of Africa’s domestic capital pools at $4 trillion. This includes approximately $1.1 trillion in institutional capital, $2.5 trillion in commercial banking assets, and more than $470 billion in external reserves.”

The AFC said one of the biggest barriers to mobilising domestic capital is that most African countries lack the regulatory clarity and financial instruments needed to redirect capital flows.

“With over $777 billion in assets under management, pension funds and insurance companies hold substantial potential to finance long-term development. Yet they remain a major untapped source of development finance for Africa,” AFC said.

The lender said countries like South Africa, Nigeria, and Kenya are beginning to align savings with development needs, but their “progress is slow.”

NIGERIA AS A MODEL FOR MARKET-BASED REFORMS

The report highlighted Nigeria as an example of how market-based de-risking mechanisms can help mobilise pension capital for infrastructure investment without enforcing rigid allocation mandates.

“As of early 2025, Nigeria’s pension assets under management (AUM) stood at N22.8 trillion (approximately $14.2 billion)—one of the largest pools of institutional capital on the continent,” it said.

AFC said while recent progress shows promise, infrastructure investment had long been constrained by credit and liquidity risks.

“Allocations to infrastructure grew from just N1.2 billion (0.02% of AUM) to over N242 billion (1% of AUM), equivalent to about $155 million, thanks to targeted credit enhancement tools such as InfraCredit,” it added.

‘AFRICA MUST PRIORITISE REGIONAL INTEGRATION, CROSS-BORDER INVESTMENTS’

Speaking at the report’s launch, Samaila Zubairu, president and CEO of AFC, said global geopolitical realignments — particularly around supply chain security and domestic reindustrialisation — present a unique opportunity for Africa.

“As the world retools its economies and focuses on secure supply chains, Africa becomes not just relevant, but essential,” Zubairu said.

“However, to seize this moment, we must move beyond exporting raw materials and start transforming them locally to create quality jobs and grow domestic savings.”

Zubairu stressed the importance of African nations taking ownership of their development agendas and demonstrating credibility as investment destinations.

“We need to fund our own development. That means creating viable structures like InfraCredit in Nigeria and replicating them across the continent. We are leading conversations in Kenya, and in Southern and Central Africa, to scale this success.”

The AFC boss also underscored the need for stronger regulatory frameworks and structured financial intermediation to effectively channel domestic capital into infrastructure projects.

Also, Lerato Mataboge, African Union (AU) commissioner for infrastructure and energy, echoed Zubairu’s sentiments and called for deeper collaboration among African nations.

“No single country or sector can solve Africa’s infrastructure challenges alone,” she said.

“We must prioritise regional integration, harmonised policy frameworks, and cross-border investments.”

She urged stakeholders to view infrastructure not as a cost but as an investment in Africa’s future.

“The AFC report proposes practical steps such as scaling energy capacity, integrating transport networks, and deepening financial market intermediation,” Mataboge added.

The commissioner pledged the AU’s continued support for the AFC’s vision, emphasising the need for synergy in strategy, implementation, and shared infrastructure ownership.