According to the World Bank, global remittances to low- and middle-income countries reached a record $685 billion in 2024, with Africa receiving approximately 5.8%. Nigeria alone accounted for $4.22 billion, representing a significant source of external financing. Countries such as Egypt ($29 billion) and Ghana ($6.65 billion) also benefit heavily from diaspora inflows. However, these remittances are primarily used for household consumption rather than large-scale investments.

READ ALSO: Diaspora Investments and Urban Farming: A Growing Opportunity for Africa

The introduction of diaspora bonds could shift this dynamic, directing a fraction of these funds towards national development projects. Israel, for example, has raised over $44 billion since launching its diaspora bond programme in 1951. India followed suit, successfully raising $11 billion through diaspora bonds during its economic crisis in 1991. If African nations replicate these models, they could unlock billions in new development funds.

The Potential of Diaspora Bonds in Africa

Africa’s diaspora community is one of its most significant assets. With over 50 million Africans living abroad, many have accumulated wealth and are willing to contribute to their home countries’ development. Unlike traditional foreign aid, diaspora bonds offer a direct and stable source of funding, as investors are emotionally and culturally tied to their homelands.

Ethiopia provides a noteworthy case study. The country issued its first diaspora bond in 2008, raising millions to finance the Grand Ethiopian Renaissance Dam (GERD). Although challenges such as low subscription rates persisted, the initiative demonstrated the potential for mobilising diaspora resources. Similarly, Kenya launched its own diaspora bond in 2011 to fund infrastructure projects, though results were mixed due to limited investor confidence. By learning from these experiences, African governments can refine their approaches to attract more investors.

Challenges and Risks

Despite its potential, the success of diaspora bonds hinges on trust, governance, and financial stability. Many African governments struggle with issues of corruption, mismanagement, and political instability, discouraging diaspora members from investing. For instance, Ethiopia’s diaspora bond faced scepticism due to concerns about government transparency. To mitigate these risks, governments must adopt best practices, ensuring proper financial accountability, offering competitive interest rates, and fostering investor confidence through clear legal frameworks.

Nigeria presents a notable example. In 2017, the Nigerian government successfully issued a $300 million diaspora bond with an interest rate of 5.625%, targeting Nigerians in the U.S., U.K., and Europe. The bond was well received, proving that structured policies and transparent governance can attract diaspora investments.

A Global Perspective on Diaspora Bonds

Africa is not alone in leveraging diaspora bonds. Countries such as China and the Philippines have experimented with similar instruments to boost national development. China’s global diaspora has played a crucial role in financing the country’s economic rise, with expatriates heavily investing in national industries and infrastructure. The Philippines has also encouraged its overseas workforce, which remits over $30 billion annually, to invest in homeland projects. These global examples highlight that when effectively structured, diaspora bonds can become a reliable financing mechanism. Africa’s challenge is to instil confidence among its diaspora communities and create investment-friendly environments.

Unlocking Africa’s Financial Potential

To fully harness diaspora bonds, African nations must adopt strategic policies. First, governments should strengthen financial institutions, ensuring transparency and accountability. Establishing independent monitoring bodies to oversee bond utilisation will boost investor trust. Second, African countries must offer attractive incentives such as tax breaks and high-yield returns to make diaspora bonds competitive in global financial markets. Third, marketing and outreach efforts should be intensified. Many African diaspora members are unaware of these investment opportunities, underscoring the need for targeted campaigns, digital platforms, and partnerships with financial institutions abroad.

If well implemented, diaspora bonds could provide Africa with an alternative financial strategy to fund critical infrastructure, drive economic growth, and reduce dependency on foreign loans. The time has come for African nations to view their diaspora communities not just as remittance senders but as strategic investors in the continent’s future. By doing so, Africa can unlock billions in untapped capital, turning the vision of self-sustaining development into a reality.

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Globally, solar energy is leading the investment race. In 2024 alone, solar photovoltaics (PV) attracted over $500 billion in investments, surpassing all other electricity generation sources combined. Hydropower, despite its historical dominance, is witnessing a decline in new investments, with only $130 billion annually allocated for expansion.

READ ALSO: Africa’s Journey towards a Solar-Powered Future

Solar energy’s installed capacity reached 1.5 terawatts (TW) in 2023, overtaking wind energy and closing in on hydropower’s 1.4 TW capacity. However, hydropower remains the largest source of renewable electricity, generating over 4,200 terawatt-hours (TWh) annually, while solar contributes approximately 1,300 TWh, according to the 2024 International Renewable Energy Agency (IRENA) report.

Efficiency-wise, hydropower surpasses solar with a capacity factor of 40-60%, compared to 15-25% for solar. This means hydropower plants generate electricity more consistently than solar farms, which rely on sunlight availability.

The African Context: Hydropower’s Legacy vs. Solar’s Disruption

Africa has long relied on hydropower, which accounts for nearly 70% of the continent’s renewable electricity (African Development Bank, 2023). The Grand Ethiopian Renaissance Dam (GERD), expected to generate 6.45 gigawatts (GW), exemplifies Africa’s hydropower ambitions. Similarly, Inga III in the Democratic Republic of the Congo has the potential to add another 11 GW to Africa’s grid.

Yet, hydropower faces significant challenges. Africa’s hydropower potential is heavily reliant on river systems like the Nile, Congo, and Zambezi, which are vulnerable to climate change-induced droughts. Countries such as Zambia and Zimbabwe experienced severe blackouts in 2019 and 2022 due to low water levels at the Kariba Dam.

Conversely, solar energy is rapidly gaining traction. Egypt, South Africa, and Morocco are spearheading large-scale solar projects, with Egypt’s Benban Solar Park (1.65 GW) ranking among the largest in the world. Africa’s solar potential is immense, with daily irradiation levels exceeding 5.5 kWh/m², making it one of the sunniest continents. In 2024, solar PV capacity in Africa surpassed 14 GW, a threefold increase since 2018.

Cost and Feasibility: Which Is More Practical for Africa?

Cost is a decisive factor. The levelised cost of electricity (LCOE) for solar PV dropped to $0.04/kWh in 2024, compared to $0.07/kWh for large-scale hydropower. This decline is driven by technological advancements and economies of scale, making solar more financially attractive.

Solar also offers flexibility. Unlike hydropower, which requires multi-billion-dollar infrastructure and long gestation periods, solar farms can be deployed quickly. For instance, Kenya’s Garissa Solar Plant (50 MW) was completed in less than two years, whereas large dams often take a decade or more.

However, hydropower provides energy storage and grid stability, which solar lacks. Hydropower’s ability to store excess energy in reservoirs makes it crucial for balancing Africa’s intermittent renewables, especially in regions with underdeveloped battery storage technology.

Environmental Considerations: Sustainability and Climate Impact

Environmental sustainability is a key concern. Hydropower projects often lead to deforestation, displacement of communities, and ecosystem disruption. The Merowe Dam in Sudan displaced over 50,000 people, and Ghana’s Akosombo Dam altered the Volta River ecosystem.

Solar, in contrast, has a lower ecological footprint. However, the production of solar panels relies on rare earth minerals like lithium and cobalt, raising concerns about unsustainable mining practices in countries such as the Democratic Republic of the Congo.

Africa’s Best Bet: A Balanced Approach

The verdict? Neither hydropower nor solar alone can power Africa’s green future. A hybrid approach is essential.
Solar should be the dominant energy source due to its declining costs, scalability, and abundance. Investments in decentralised solar mini-grids can rapidly expand access to electricity in rural areas.

Hydropower must play a complementary role, particularly for grid stability and energy storage. Future investments should focus on small and run-of-river hydropower projects, which minimise environmental and social impacts.

Energy storage and grid modernisation are critical. Expanding battery storage solutions and investing in grid infrastructure will maximise the benefits of solar energy and mitigate its intermittency.

Shaping Africa’s Renewable Energy Future

Africa stands at an energy crossroads. While hydropower has historically been the backbone of the continent’s renewable energy, solar is emerging as the more cost-effective and scalable solution. A strategic blend of solar dominance and hydropower stability, supported by investments in battery storage and transmission infrastructure, will be the most viable path towards a sustainable and resilient green future.

As the sun rises on Africa’s energy revolution, it is clear that solar energy, with the right policies and investments, will lead the continent’s transition towards a cleaner, more prosperous future.

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EPRA Director General Daniel Kiptoo said that the country is still in the process of commissioning the trade.

Director Kiptoo disclosed this in an interview with the Press in Kenya.

He further explained that Kenya has signed a 25-year deal with the Horn of Africa nation to start importing electricity in a bid to edge out the expensive power from the national grid and also ensure the country meets peak demand.

“High tariffs charged by independent power producers have squeezed Kenya Power’s ability to lower the cost of electricity.”

“We began power trade with Ethiopia yesterday. After the commissioning, our initial imports will be 150 megawatts then will upscale to 300 megawatts in the next three years,” said Kiptoo.

The DG noted that the cost of importing electricity from Ethiopia is competitive and lower than the country’s average generation cost.

Kenya Power buys the bulk of electricity from Kenya Electricity Generating Company (KenGen) at Sh5.3 per kilowatt-hour but other IPPs have priced their power as high as Sh195 for the same unit.

KenGen accounts for 70 per cent of the electricity supplied to Kenya Power with the 21 IPPs supplying the balance. The electricity imports could mean lower costs of electricity in the long run.

Kiptoo also revealed that Kenya could soon start exporting electricity to Ethiopia once it grows its geothermal capacity.

“The line between Wolayta Sodo and Suswa is a two-way line therefore we are hoping that once we develop our geothermal capacity, we will be able to also sell power to Ethiopia,” he said.

According to the energy regulator, Kenya currently has a geothermal capacity of 863 megawatts.

The USD500 million line to Kenya has the capacity to transmit 2,000 megawatts of electricity, potentially earning Ethiopia as much as USD100 million annually.

The Grand Ethiopian Renaissance Dam, a giant hydro-power dam on a Nile River tributary, began generating electricity earlier this year, a project Ethiopia sees as key to economic development.

The USD5 billion dam will be able to generate 5,150 megawatts of electricity once completed in 2024 and Ethiopia has signed supply agreements with Kenya, Sudan, Djibouti, Somaliland, Tanzania and South Sudan.

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