West Africa faces $100bn annual development need but misallocates capital, AfDB warns
By Aboki Forex —
West Africa needs between $90 billion and $100 billion every year to meet its development goals, yet the region is not short of funds. The African Development Bank says the real problem is poorly mobilised, fragmented and misallocated capital.
The warning is contained in the AfDB's West Africa Economic Outlook 2026 report, themed Mobilising West Africa’s Development Financing at Scale in a Fragmented World. The bank said the region's financing gap reflects an intermediation failure, where existing capital and savings are not being effectively mobilised, allocated or converted into productive investment.
Financing gap is an intermediation failure
The AfDB report identifies domestic resource mobilisation as the most urgent and underutilised lever available to West African governments. It calls the region's tax performance “critically low” relative to continental and global benchmarks.
“West Africa needs an estimated USD 90-100 billion annually to meet its development goals, yet gross capital formation has stagnated at around 23-24% of GDP, a figure far below the 33%+ average for middle-income economies,” the report stated.
On the nature of the gap, the report was blunt: “The gap is best read not as an external shortfall awaiting donor or market financing, but as the measure of the region’s structural inability to convert its own savings into productive capital.”
“The region’s challenge is therefore twofold: capital that exists but is poorly mobilised, allocated, and intermediated; and growth that is robust but not yet transformative, generating insufficient productivity, quality employment, and durable poverty reduction,” the report added.
Four policy levers to mobilise funds
The report comes as West African governments face a more difficult external financing environment. Higher global interest rates and elevated borrowing costs have made it harder and more expensive to raise money in international capital markets. The AfDB argues the region must rely more on domestic sources of capital.
The bank identified four policy levers with the greatest potential to mobilise large-scale development finance:
First, broadening the tax base and rationalising tax expenditures. The report notes that Senegal foregoes 4.2% of GDP and Côte d’Ivoire 2.9% of GDP annually in tax expenditures, while digital tax tools such as Nigeria’s TaxPro-Max have already demonstrated measurable gains.
Second, transparently harnessing natural capital rents through sovereign wealth funds in Nigeria, Ghana and Senegal, and embedding extractive taxation more firmly within medium-term fiscal frameworks across resource-rich economies.
Third, formalising the informal sector, which the report estimates accounts for 91.6% of regional employment.
Fourth, redirecting domestic institutional savings, particularly pension assets and insurance reserves, away from short-dated government securities toward productive long-term investment vehicles. This should be supported by regional capital market integration through the BRVM and the planned West African Securities Market Integration Council.
Poor returns on public investment
The report also flags significant inefficiency in existing public investment. Africa’s average public investment efficiency score of 0.59 implies that $41 of every $100 of public spending fails to translate into productive capital. The report describes this efficiency gap as “far above the global average of 14%.”
What it means for Nigeria
The AfDB’s findings mirror concerns raised at Nigeria’s 4th Gender Impact Investment Summit earlier this year. Investors and policymakers warned that the country faces a $6.75 billion financing gap that continues to limit access to capital for women, young entrepreneurs and persons with disabilities. They argued that closing this gap through more inclusive financing and gender-lens investing is essential to unlocking broader economic growth.
For Nigeria, the report strengthens the case for expanding the tax net and channelling pension assets into long-term projects, rather than relying on costly foreign borrowing.