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The African Development Bank (AfDB) has warned that West Africa’s persistent development financing gap is less about a shortage of capital and more about the region’s inability to effectively mobilise, allocate and channel existing resources into productive investments.
In its West Africa Economic Outlook 2026 report, themed “Mobilising West Africa’s Development Financing at Scale in a Fragmented World,” the continental lender estimated that the region requires between $90 billion and $100 billion annually to achieve its development objectives. However, it argued that structural inefficiencies in financial intermediation continue to undermine progress.
Financing Gap Rooted in Structural Weaknesses
According to the report, West Africa’s challenge goes beyond raising additional funding. Instead, the AfDB said the region is failing to convert available domestic savings into productive capital capable of driving sustainable economic growth.
The bank described the situation as an “intermediation failure,” where existing financial resources are poorly mobilised, fragmented and inefficiently allocated, limiting their impact on infrastructure development, industrialisation and job creation. It noted that gross capital formation in West Africa has remained around 23–24% of GDP, well below the 33% or more typically recorded in middle-income economies.
Domestic Revenue Holds the Greatest Potential
The AfDB identified domestic resource mobilisation as the most immediate and underutilised tool available to governments across the region.
It described West Africa’s tax performance as critically low compared to both African and global standards, arguing that strengthening tax collection systems and broadening the tax base could unlock substantial resources for development.
The report also called for a review of tax incentives and exemptions, noting that countries such as Senegal and Côte d’Ivoire forgo significant portions of their gross domestic product annually through tax expenditures. It highlighted Nigeria’s TaxPro-Max digital tax platform as an example of how technology can improve tax administration and revenue generation.
Global Financing Conditions Becoming More Difficult
The warning comes as governments across West Africa contend with a more challenging international financing environment.
Rising global interest rates and higher borrowing costs have made it increasingly expensive for countries to access funds from international capital markets, reducing the attractiveness of external debt as a primary financing source.
Against this backdrop, the AfDB urged governments to place greater emphasis on strengthening domestic financial systems and attracting long-term local investment.
Four Reforms Could Unlock Billions
To close the financing gap, the AfDB outlined four major policy priorities it believes could significantly improve development financing across West Africa.
The first is expanding the tax base while rationalising tax expenditures to improve government revenues.
Secondly, the bank called for greater transparency in managing revenues generated from natural resources through sovereign wealth funds and stronger fiscal frameworks, particularly in resource-rich countries such as Nigeria, Ghana and Senegal.
The third recommendation focuses on integrating the informal economy into the formal financial system. According to the report, the informal sector accounts for approximately 91.6% of employment across West Africa, representing a significant untapped source of tax revenue and economic activity.
Finally, the AfDB urged governments to redirect domestic institutional savings—including pension funds and insurance assets—from short-term government securities toward long-term productive investments. It also encouraged deeper regional capital market integration through initiatives such as the Bourse Régionale des Valeurs Mobilières (BRVM) and the planned West African Securities Market Integration Council.
Public Investment Efficiency Still a Concern
Beyond mobilising additional capital, the report highlighted inefficiencies in public spending as another obstacle to development.
According to the AfDB, Africa’s average public investment efficiency score of 0.59 suggests that $41 out of every $100 spent on public investment fails to generate productive capital.
The bank described this efficiency gap as substantially higher than the global average and stressed that improving project execution and governance would be just as important as securing new funding.
Inclusive Financing Remains Essential
The findings align with broader concerns raised by investors and policymakers over limited access to development finance across the region.
In Nigeria, stakeholders at the 4th Gender Impact Investment Summit earlier this year highlighted a $6.75 billion financing gap affecting women-led businesses, young entrepreneurs and persons with disabilities. They argued that expanding inclusive financing mechanisms would play a critical role in unlocking economic growth and supporting broader development objectives.
Rethinking Development Finance
The AfDB concluded that West Africa’s development ambitions cannot be achieved through external borrowing alone.
Instead, governments must strengthen domestic revenue generation, improve financial intermediation, enhance public investment efficiency and deepen regional capital markets to ensure available resources are channelled into productive sectors.
As global financial conditions become increasingly uncertain, the report argues that the region’s greatest opportunity lies not in finding new sources of capital, but in making better use of the resources it already possesses.
