West Africa needs between $90 billion and $100 billion annually to meet its development goals, yet the region continues to struggle with poorly mobilised, fragmented and misallocated capital rather than a genuine shortage of funds, according to the African Development Bank (AfDB).
Nairametrics reported that the bank gave the warning in its West Africa Economic Outlook 2026 report themed Mobilising West Africa’s Development Financing at Scale in a Fragmented World.
The AfDB 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.
The AfDB report identifies domestic resource mobilisation as the most urgent and underutilised lever available to West African governments, calling 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 financing 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 AfDB also said West Africa’s development challenge extends beyond simply raising more money. It said the region is failing to effectively mobilise and channel available capital into productive sectors.
“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 said.
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 for many countries in the region to raise money in international capital markets.
Against this backdrop, the AfDB argues that the region must rely more on domestic sources of capital.
The AfDB identified four policy levers it says offer the greatest potential to mobilise large-scale development finance for West Africa in a fragmented global environment.
The first is broadening the tax base and rationalising tax expenditures, with the report noting that Senegal foregoes 4.2 per cent of GDP and Côte d’Ivoire 2.9 per cent of GDP annually in tax expenditures, while digital tax tools such as Nigeria’s TaxPro-Max have already demonstrated measurable gains.
The second is 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.
The third is formalising the informal sector, which the report estimates accounts for 91.6 per cent of regional employment.
The fourth is redirecting domestic institutional savings, particularly pension assets and insurance reserves, away from short-dated government securities toward productive long-term investment vehicles, supported by regional capital market integration through the BRVM and the planned West African Securities Market Integration Council.
The report also flagged significant inefficiency in how existing public investment is deployed, noting that 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, an efficiency gap the report describes as “far above the global average of 14%.”
The AfDB’s findings mirror concerns raised by stakeholders 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.
