Development Lenders Move to Cut Risk Premiums on African Energy
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Development lenders are working to lower the premium investors charge on African energy projects, where the cost of capital for utility-scale clean power runs two to three times higher than in advanced economies, according to the International Energy Agency (IEA). New lending data shows African projects default less often than that premium suggests, and guarantee providers are expanding to cover the risks commercial lenders price most heavily. The Invest in African Energy (IAE) Forum, taking place in Paris from May 11-13, 2027, will bring together the lenders, insurers and governments whose decisions set the cost of capital for African energy.
In October 2025, the Global Emerging Markets Risk Database Consortium published default data from 29 multilateral development banks and development finance institutions (DFIs), showing that private lending in Sub-Saharan Africa had an average default rate of 6.05% between 1994 and 2024. The region also recorded the highest recovery rate of any, at more than 78%, while Moody's data, based on a smaller sample, ranks Africa and the Middle East as having the lowest default rates on infrastructure debt.
Lenders who price African projects off sovereign credit ratings are therefore charging for losses the market has not historically produced. IAE 2027's Investor Circles will bring DFIs and sovereign wealth funds together with commercial banks to work through financing structures on specific projects, where more accurate risk data can translate into lower borrowing costs.
Guarantee providers are expanding at the same time. In May 2026, the World Bank Group Guarantee Platform, housed at the Multilateral Investment Guarantee Agency (MIGA), set a target to more than double its annual guarantee issuance in Africa to $6.4 billion by 2030, aiming to mobilize $23 billion in private capital. Guarantees lower the return a lender needs by covering political and credit risks it would otherwise price in, and MIGA's lifetime issuance passed $100 billion in April 2026 with up to $1.48 billion in guarantees for AMEA Power's renewable energy portfolio across Africa, the Middle East and Central Asia.
The 2026 conflict in the Gulf has also changed how investors compare regions. Andrew Herring, Chairman for Energy and Power at insurance broker Marsh's UK business, said in April that the Africa risk premium is "now being weighed against the Middle East volatility premium," with more global players viewing Africa as a bankable long-term option. IAE 2027 opens on May 11 with a Business-to-Government (B2G) Day, where African governments and national oil companies will present licensing rounds and project opportunities directly to those investors.
Governments control the part of the premium tied to country risk, including fiscal terms and regulatory stability, and a Ministerial Capital Roundtable at IAE 2027 will put African energy ministers in front of investors on both. On May 13, the Commodities and Capital Allocation Forum will bring trading houses, insurers and financial institutions together to examine how risk pricing and insurance shape where capital goes in African energy.
The Invest in African Energy Forum returns to Paris for its fifth edition on 11–13 May 2027. To sponsor or register as a delegate, contact sales@energycapitalpower.com. For more information, visit www.invest-africa-energy.com.