PETER DANIEL ONIMISI (Ph.D.)
Association of African Development Finance Institutions (AADFI)
Abidjan, Republic of Côte d’Ivoire
Abstract
Africa’s annual development-financing shortfall has escalated to more than $1.3 trillion, driven by rising debt-service costs, a deteriorating external financing environment, and the structural limits of foreign-currency borrowing. This article argues that local-currency financing and the deliberate deepening of domestic capital markets have become the principal strategic response available to African economies and their development finance institutions (DFIs). The article examines how the African Development Bank’s New African Financial Architecture for Development (NAFAD) — endorsed under the April 2026 Abidjan Consensus — is emerging as the continent’s organising framework for the response to capital mobilization challenge. Drawing on continent-wide data, the NAFAD framework, institutional innovation in the DFI sector, and Nigeria’s pension industry as a detailed case study, the paper examines the architecture required for functioning local-currency capital markets, the evolving role of African DFIs as market-builders rather than lenders of last resort, and the structural constraints — inflationary pressure, shallow private-sector market instruments, and fragmented investor bases — that must be overcome. Nine policy directions are identified, including anchoring continental coordination on NAFAD, strengthening debt management offices, scaling DFI-backed credit-enhancement mechanisms such as the recapitalisation of the African Trade and Investment Development Insurance (ATIDI), and expanding local-currency hedging capacity. The article concludes that the raw material for this transformation — an estimated $4 trillion in African institutional capital — already exists; the harder work lies in building the institutional infrastructure, of which NAFAD is now the continent’s principal coordinating framework, to deploy it productively.
Keywords: Domestic resource mobilization; local-currency financing; capital market development; development finance institutions; Africa; pension funds; debt sustainability; blended finance