The African Development Bank (AfDB) has stated that West Africa needs between $90 billion and $100 billion annually to achieve its development goals, but argues that the region’s biggest challenge is not a lack of financial resources. Instead, the bank says the main obstacle is the inability to effectively channel existing savings into productive investments that drive long-term economic growth.
In its West Africa Economic Outlook 2026, the AfDB explains that financial institutions, including banks, pension funds, insurance companies, and capital markets, are not efficiently directing available capital toward infrastructure, industry, and other productive sectors. The report calls for stronger financial intermediation to unlock domestic investment potential.
Despite strong economic performance, with West Africa projected to grow by 4.7% in 2026, investment levels remain below those of middle-income economies. Gross fixed capital formation has remained at around 23% to 24% of GDP, significantly lower than the average 33% recorded in many developing economies. According to the AfDB, this investment gap limits productivity, job creation, and long-term poverty reduction.
The report also identifies domestic resource mobilization as a major priority. While tax revenues have improved across parts of the region, they remain below regional targets. The AfDB highlights tax exemptions, informal economic activity, and weak tax administration as key factors reducing government revenue and limiting investment capacity.
Another concern is the allocation of institutional savings. Pension funds and insurance companies continue to invest heavily in short-term government securities rather than financing infrastructure, manufacturing, and other productive sectors. The bank recommends greater use of long-term institutional capital to support sustainable economic development and regional capital market integration.
The AfDB further notes that public investment efficiency remains a significant challenge across Africa. With an average efficiency score of 0.59, the report estimates that 41 cents of every public investment dollar fails to generate productive assets due to project execution weaknesses. Improving project management and implementation could significantly increase the economic impact of public spending while attracting greater private-sector investment.
Although the report acknowledges that reforms such as expanding the tax base and reducing tax exemptions may face political resistance, it emphasizes that improving domestic financial systems and investment efficiency will be critical for achieving sustainable development across West Africa.
The latest assessment reinforces the African Development Bank’s view that stronger financial governance, better capital allocation, and improved investment execution are essential to closing the region’s development financing gap and accelerating long-term economic transformation.
