West Africa’s biggest development challenge is not a shortage of money but the region’s inability to channel available capital into productive investments, according to the African Development Bank (AfDB).
In its West Africa Economic Outlook 2026 report, the bank said the region requires between $90 billion and $100 billion annually to achieve its development goals. However, weak financial intermediation, poor capital allocation and fragmented financing systems continue to limit investment despite the availability of domestic savings.
The AfDB said gross capital formation has remained stuck at about 23% to 24% of gross domestic product (GDP), well below the more than 33% recorded by many middle-income economies. Rather than reflecting a lack of financing, the gap points to structural weaknesses that prevent savings from being converted into long-term investments capable of driving economic transformation.
According to the report, domestic resource mobilisation remains the region’s most underutilised financing tool. The bank described tax collection across West Africa as critically low. It urged governments to broaden their tax bases, reduce unnecessary tax exemptions and strengthen digital tax administration to boost public revenue.
The AfDB also called on resource-rich countries to make better use of revenues from oil, gas and minerals through transparent sovereign wealth funds and stronger fiscal governance. It said governments should also encourage greater formalisation of the informal economy, which accounts for more than 90% of employment in the region, to expand the tax base and improve access to finance.
Another recommendation focused on redirecting long-term domestic savings held by pension funds and insurance companies toward productive investments instead of short-term government securities. The bank said deeper regional capital market integration would help mobilise more private capital for infrastructure and industrial development.
The report also highlighted significant inefficiencies in public investment. According to the AfDB, Africa’s average public investment efficiency score stands at 0.59, meaning that about $41 of every $100 spent on public investment fails to generate productive capital. Improving project selection, execution and governance would significantly increase the impact of existing public spending, it said.
With global borrowing costs remaining elevated, the AfDB said West African economies can no longer rely heavily on external financing to fund development. Instead, governments must improve the mobilisation and allocation of domestic capital to unlock sustainable growth, create jobs and reduce poverty across the region.
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Emmanuel Abara Benson is a business journalist and editor covering artificial intelligence, global markets, and emerging technology.
He has previously worked with Business Insider Africa and Nairametrics, reporting on finance, startups, and innovation.
His work focuses on AI, digital economy, and global tech trends.
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