The Gambian financial sector prepares to support the development of new energies

The Gambia’s economy has long been focused on agriculture, foreign remittances and tourism, which accounted for up to 20% of GDP before COVID-19. However, in light of the relatively recent and large-scale oil and gas discoveries between 2014 and 2017 in neighboring countries like Senegal and Mauritania, there has been a resurgence of investor interest in the opportunities. exploration in other countries of the MSGBC basin. Among them, The Gambia is well positioned to attract FDI, thanks to the continuous improvement of its investment climate and a post-COVID-19 recovery that is already underway.

The Gambian energy sector, although still in its early stages of development, nevertheless has considerable potential as a future source of government revenue. US State Department analysts note that significant progress is being made in the energy sector thanks to oil and gas exploration campaigns, a strong focus on renewable energies (particularly solar power) and the development of other types of natural resources such as heavy sands, which hold heavy mineral reserves.

The Gambia’s financial sector will play an important role in the country’s transition to a more energy-based economy over the next decade. It currently comprises 12 commercial banks, including an Islamic bank, and is supervised by the Central Bank of The Gambia. The sector is dominated by subsidiaries of Nigerian banks, although these subsidiaries are quite independent from their parent institutions and are generally majority owned by Gambian entities.

The banking system is very liquid and most banks are profitable. The majority of banks operating in The Gambia meet the requirements of the Central Bank in terms of capital adequacy and liquidity. However, due to the capital intensive nature of oil and gas exploration, as well as renewable energy projects, The Gambia’s national financial sector alone is not sufficient to ensure adequate project finance. As a result, the authorities are seeking to tap into other sources of capital, either through bilateral loans or through ongoing cooperation with multilateral financial institutions.

In recent years, the Gambian financial sector has experienced impressive growth and diversification, consisting of commercial banks, insurance companies, foreign exchange bureaus, microfinance institutions and other non-bank financial companies. However, commercial banks dominate the industry, controlling over 90%. There are currently at least seven banks with an average foreign ownership of over 60%. In terms of scope of business, banks operate mainly in the Greater Banjul region, with a few branches and agencies located in other parts of the country. The other regions of the country are mainly served by microfinance institutions.

International organizations such as the World Bank Group, the African Development Bank and OPEC have all played an active role in providing funds to The Gambia to modernize its electricity and transport infrastructure, as well as giving its energy sector a role of greater contribution to the national economy.

Last June, the OPEC Fund for International Development signed a $ 20 million loan agreement with The Gambia to co-finance the extension of the Bertil-Harding highway. The modernization of road infrastructure aims to improve safety, reduce travel time and costs, and facilitate access to markets, social amenities and jobs for more than 520,000 people in the Greater Banjul region. In addition to the loan, public sector commitments from the OPEC Fund in The Gambia total nearly $ 128 million to support energy, transport, education and multisectoral projects.

The OPEC Fund was established by OPEC member countries in 1976 with a distinct goal: to foster development, strengthen communities and empower people. The action of the OPEC Fund focuses on the financing of projects that meet essential needs, such as food, energy, infrastructure, employment (in particular concerning SMEs), drinking water, sanitation, health and education. To date, the OPEC Fund has committed over $ 22 billion to development projects in more than 125 countries, with a total project cost estimated at $ 187 billion.

The World Bank Group also plays an important role in financing projects in The Gambia aimed at improving access to energy and water. In June 2020, the Board of Directors of the World Bank approved a $ 43 million grant from the International Development Association for the Electricity Restoration and Modernization Project in The Gambia.

“Although the Gambia National Utility Company (NAWEC) has significantly improved its operational and financial performance in recent years, the company has yet to achieve financial sustainability. This support will build on the government’s ongoing efforts to strengthen the electricity and water sectors, ”noted the World Bank.

“The additional funding will further strengthen NAWEC’s transmission and distribution network, provide additional support to transform NAWEC into an efficient and solvent utility, and extend the scope of the project to the water sector. More specifically, more than 1.6 million people will have obtained or improved access to electricity; 17 km of transmission lines will be built or rehabilitated; and 20 grid-connected photovoltaic systems with storage will be installed.

The Gambia does not yet have its own stock market and does not have the necessary mechanisms to channel large volumes of portfolio investment. This is one of the reasons why the Gambian Investment and Export Promotion Agency (GIEPA) is particularly important in attracting new capital flows to the strategic sector which will shape the development of the Gambian economy over the course of the next decade. GIEPA is the national agency responsible for the promotion and facilitation of private sector investments in the country, and identifies very promising sub-sectors within the energy value chain.

Meanwhile, the Gambia Renewable Energy Center (GREC) was established by the Gambian authorities to collaborate with interested entities for the development of renewable energies through research and development. The Gambian government is encouraging the use of other energy sources, with the deployment of solar photovoltaic (PV) equipment increasing for industrial, commercial and domestic uses (the country receives an average of 2,500 hours of sunshine per year). In addition, the use of biomass is increasing, although it tends to be limited to agricultural wastes such as sawdust, peanut shells and straw. The use of wind turbines to power water pumps is also gaining ground across the country.

GIEPA outlined high potential energy investment opportunities, which include increasing installed power generation capacity and improving efficiency, in order to reduce the high cost of energy. The Gambia also needs new capital investments to improve the condition of transmission and distribution systems, which are currently experiencing significant technical losses and unmetered consumption estimated at around 40%. Finally, The Gambia aims to encourage greater use of green energy, in particular through solar photovoltaic and wind energy projects.

The government of The Gambia and its national oil company, Gambia National Petroleum Company, will send a high-level delegation to participate in the upcoming MSGBC Oil, Gas & Power 2021 conference and exhibition to be held in Dakar, Senegal (December 13-14) . The Gambian delegation will present emerging investment opportunities in the country’s energy sector, as well as the role of new synergies derived from enhanced regional cooperation between MSGBC Basin member countries.

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