Africa’s Capital Paradox: Why Exporting Our Own Capital Is Costing Us Scale, Power And Prosperity

Ebenezer Onyeagwu

A wildlife ranger once described a rescued lion that had been raised in captivity since birth. Despite its massive frame, powerful muscles, and majestic presence, the lion paced nervously within the narrow confines of a small enclosure. When the day finally came for its release into the wild, the gate was opened wide – the path to freedom clear and unobstructed. Yet the lion hesitated. Not because the wilderness was too vast or too dangerous, but because it had forgotten its own strength. Its entire life had been conditioned by the limits of its enclosure. What restrained it was not metal bars, but a mindset.

Africa’s economic story mirrors that lion. The continent possesses tremendous wealth – from sovereign reserves and mineral endowments to the rising savings of its people and the expanding profits of global corporations operating on its soil. Yet, for decades, Africa has been conditioned to believe that its development must be financed from outside, while its own capital sits offshore, powering the growth of other regions.

But like the lion, Africa is strong enough to walk into its own destiny. It only needs to remember its strength.

In his recent article, “Africa’s $4 Trillion Mindshift,” published in THISDAY on November 7, 2025, Aigboje Aig-Imoukhuede underscores that Africa’s economic transformation must begin with a profound shift in mindset – from dependency to confidence, from capital flight to capital retention. He contends that Africa holds over US$4 trillion in financial assets which, if redirected toward domestic development, could redefine the continent’s destiny.

Across Africa, a growing cadre of visionary private-sector leaders already exemplify this shift. Figures such as Aliko Dangote and Abdul Samad Rabiu in West Africa; Nassef Sawiris and Mohamed Mansour in North Africa; Strive Masiyiwa, Patrice Motsepe and Koos Bekker in Southern Africa; Vimal Shah and Manu Chandaria in East Africa amongst others are demonstrating through enterprise building, long-term capital commitment, and institution-building – that African wealth can be successfully mobilised, reinvested, and scaled within the continent. Their collective example reinforces a powerful truth: Africa’s future will not be built by external benevolence, but by the deliberate reinvestment of African capital in African opportunities.

This essay extends that conversation by interrogating Africa’s Capital Paradox: why exporting our own capital is costing us scale, power, and prosperity. It examines the structural, policy, and perceptional dynamics that keep African capital abroad—and offers practical pathways to bring it home.

Africa generates substantial capital from multiple sources: sovereign reserves held by central banks; pension and insurance funds with long-term horizons; commercial bank deposits; corporate retained earnings; commodity export proceeds; and diaspora remittances exceeding US$95 billion annually. Conservative estimates place African pension and insurance assets at over US$1.5 trillion, alongside growing sovereign wealth and stabilisation funds across the continent. By any objective measure, Africa is not capital-poor – it is capital-misaligned.

The paradox deepens when one examines borrowing costs. Africa routinely borrows from the very same global markets where its own capital is invested – yet at dramatically higher prices. While African reserves and pension assets held abroad often earn 2 – 4%, African sovereign Eurobonds are commonly issued at 8 – 12%, and during periods of stress have exceeded 14 – 18%. African corporates face even steeper costs. In effect, Africa lends cheaply to the world and borrows back its own money expensively – paying a crushing risk premium to access capital it helped finance.

Structural Dynamics: How the System Moves African Capital Outward

At a structural level, Africa’s capital paradox is embedded in the architecture of its financial systems. African savings – whether pension assets, insurance premiums, bank deposits, or sovereign reserves – are largely intermediated through external markets. Pension funds allocate disproportionately to OECD assets; central banks park reserves in low-yield foreign instruments; multinational corporations repatriate profits earned locally; and high-net-worth individuals hold wealth offshore as a hedge against domestic fragility. Even diaspora remittances often exit African economies almost as quickly as they enter, financing imports rather than domestic production. Collectively, these structures ensure that African capital is routinely exported, intermediated elsewhere, and returned – if at all – only at a premium. Africa, in effect, funds global liquidity while starving its own financial institutions of scale.

Policy Dynamics: Rules That Discourage Retention and Reward Flight

Policy choices have reinforced these structural weaknesses. Conservative investment guidelines restrict pension and insurance funds from allocating meaningfully to domestic infrastructure, private equity, or long-term productive assets. Fragmented capital markets limit cross-border investment within Africa, forcing institutional capital to seek depth and liquidity abroad. Weak public investment management frameworks undermine confidence that domestically deployed capital will be efficiently used. In some jurisdictions, inconsistent macroeconomic policies, regulatory uncertainty, and opaque foreign-exchange regimes further incentivise capital flight. While many of these policies were designed to protect capital, their unintended consequence has been to export it – locking Africa into dependence on foreign financing while its own savings remain underutilised at home.

Perception Dynamics: Risk, Confidence, and the Psychology of Capital

Perhaps the most corrosive dynamic is perceptual. Africa is widely – and often unfairly—priced as high risk, including by Africans themselves. Years of governance failures, corruption scandals, policy reversals, and macroeconomic instability have entrenched a narrative of fragility. This perception inflates risk premiums, drives precautionary offshore holdings, and normalises the belief that capital is safer abroad than at home. Over time, this becomes self-fulfilling: capital flight weakens domestic markets, shallow markets increase volatility, and volatility reinforces the perception of risk. What restrains African capital, therefore, is not merely economics – but confidence.

The Cost of Exporting Capital: Why Africa Lacks Scale

Exporting African capital systematically denies the continent the scale required to build globally competitive institutions. When African savings are intermediated abroad, domestic banks, asset managers, pension funds, insurers, and capital markets are starved of long-term liquidity, depth, and balance-sheet capacity. Without scale, institutions cannot underwrite large projects, absorb risk efficiently, invest in technology, or develop sophisticated products; nor can markets generate the liquidity and price discovery that attract further capital. This structural undercapitalisation explains why African financial institutions remain marginal in global rankings – not because of lack of talent or ambition, but because the capital they generate is allowed to compound elsewhere. Scale is cumulative: the more capital that stays and circulates domestically, the larger institutions become, the lower risk premiums fall, and the more capital is attracted in return.

By exporting its own savings, Africa interrupts this virtuous cycle and locks itself into financial smallness in a world where size confers stability, influence, and power.

Corruption, particularly at sovereign and sub-sovereign levels, further compounds the challenge. Where governance is weak, capital earmarked for infrastructure, energy, health, and education is often diverted or misapplied. Corruption does not merely steal resources; it sabotages Africa’s ability to retain, recycle, and scale its own capital – and reinforces the very perceptions that justify punitive risk pricing.

Across Africa today, there are airports half-built, factories abandoned, hospitals without equipment, and power plants stalled—not because money does not exist, but because African money is elsewhere or poorly governed. Like a family that sends its savings abroad and then takes an expensive loan to fix its own leaking roof, Africa pays twice: once through lost opportunity, and again through debt and distrust.

Practical Pathways: How African Capital Comes Home

Redomiciling African capital requires deliberate, coordinated action rather than aspiration. First, pension and insurance regulations must be recalibrated to allow prudent but meaningful allocations to domestic infrastructure, private credit, and long-term productive assets within professionally governed vehicles. Second, sovereign reserves and stabilisation funds should ring-fence defined portions for Africa-focused development instruments – co-invested alongside DFIs and anchored by transparent mandates, independent oversight, and clear return benchmarks. Third, regional capital markets must be deepened and integrated to enable African savings to move efficiently across borders, creating scale, liquidity, and risk diversification within the continent rather than exporting it abroad. Fourth, African Development Finance Institutions must evolve from balance-sheet lenders into market builders – structuring platforms that crowd in domestic institutional investors, standardise project preparation, and enforce rigorous governance and disclosure. Finally, public investment management systems must be strengthened to eliminate leakage, restore value-for-money discipline, and rebuild trust, while consistent macroeconomic and foreign-exchange policies anchor confidence. Capital returns home not when it is compelled, but when credible institutions, transparent rules, and investable pipelines make staying rational, competitive, and rewarding.

African capital also demands that Africa embrace the next frontier of financial architecture. The rise of digital assets and tokenisation presents a generational opportunity to re-engineer how capital is accumulated, mobilised, and circulated within the continent. For the first time, African capital need not travel abroad to become liquid, investable, or globally relevant. Through tokenisation, Africa can transform real economic assets – such as infrastructure projects, commodities, trade receivables, real estate, data centres, and future cash flows – into fractional, transparent, and digitally native investment instruments accessible to pension funds, institutional investors, the diaspora, and domestic savers alike. This architecture collapses distance, lowers participation thresholds, reduces intermediation costs, and reconnects African savings directly to African productive assets. When anchored in strong regulation, governance, custody, and investor-protection frameworks, digital asset ecosystems can enable continuous capital motion within Africa – where savings become investments, investments build scale, and scale restores confidence. Rather than exporting capital to be validated and priced elsewhere, Africa can validate its own assets, price its own risk, and compound its own wealth at home. In this sense, tokenisation does not merely modernise finance; it offers a structural pathway for Africa to deepen its capital markets, strengthen its institutions, and transition from a passive supplier of global liquidity to an active architect of its own financial destiny.

History offers clear lessons. Europe rebuilt after World War II by mobilising domestic savings. The United States built the world’s deepest capital markets by recycling household and pension savings. East Asia rose on the back of high domestic savings, disciplined capital allocation, and strong institutions. None waited for foreign capital to lead.

The call of this moment is therefore moral as much as economic. It demands a conscious decision by Africans to stop exporting belief in themselves alongside their capital, and to rebuild confidence in African institutions through integrity, discipline, and long-term thinking. This imperative finds powerful expression in the advocacy – that Africa’s transformation begins when Africans deliberately choose to retain, trust, and deploy their own capital at home. Development, in this framing, is not merely a function of access to finance, but of conviction: the courage to believe in Africa, govern capital responsibly, and back that belief with action.

The African Union’s Agenda 2063 – “The Africa We Want” – envisions a prosperous, integrated, and self-reliant continent driven by its own citizens and institutions. That vision will remain aspiration rather than achievement unless African capital comes home, is well governed, and is put to work with discipline and transparency. Only then will Africa build institutions of global scale, reduce its risk premium, and fully realise The Africa We Want.

•Dr. Ebenezer Onyeagwu is a Pan-African Banker and economic thought leader, and a strong advocate for the mobilisation and redomiciliation of African capital to drive sustainable development.