External Financing Policies and Sustainable Energy Development in Africa: Evidence from Sub-Sahara African Countries

Abstract

Energy is a fundamental pillar for economic advancement, particularly in
high-growth economies. However, Sub-Saharan Africa (SSA) is facing a
worsening energy crisis compared to other regions globally. These energy
sector challenges not only affect people’s living standards but also hinder
economic growth, employment prospects, and investments in the region.
Despite having abundant energy resources, SSA struggles to adequately
power its homes and businesses, necessitating the exploration and utilization
of these resources to their full potential. The persistent energy crisis can be
attributed to the inability of energy organisers to comprehend the complex
macroeconomic elements that shape the development of energy. Nonetheless,
substantial external financing has been absorbed by the sector in the past two
decades. This study explores the influence of external financing policies,
namely official development assistance, private participation in infrastructure,
and foreign direct investment, on energy development within selected SSA
nations from 1990 to 2021. Using the panel autoregressive distributed lag
model, the empirical findings suggest that official development assistance
hampers energy development in SSA, while foreign direct investment and
private participation in infrastructure influence energy development in the
long run. These outcomes imply that policymakers in SSA need to focus
more and prioritize domestic financial development to ensure increase
investment toward achieving sustainable energy development.