Non-Fungible Tokens (NFTs) and the future of raising capital in Africa – TechEconomy.ng

Since January, I’ve been approached by investors and project owners alike who want to fund projects or keep business flowing. At the same time, I tried to use available data to estimate the gap between infrastructure and energy financing.

The number we used up to 2025 is $250 billion per year. With Africa’s population projected to double by 2050, we can expect that figure to reach into the trillions unless the continent finds a way to successfully develop and fund energy projects to provide access to electricity and electricity to ensure the infrastructure expansion across the board.

Over the past few months, I’ve made a few observations, the most important of which is that not all businesses are created equal.

Many investors want renewable projects, but only trade above a certain size — $2 million, for example, is not enough for many larger investors, even though this project size timeframe is much shorter and can have immediate impact.

A project valued at more than $2 billion is more attractive in terms of financing returns, but the timeframe to project completion could be as much as a decade.

Overall, there is reluctance to get involved in hydrocarbon projects, although there are about a dozen markets actively promoting their blocks, which could be easily integrated into existing infrastructure in oil and gas hotspots.

Given the huge funding gap, I truly believe there is an opportunity to revolutionize the way projects are funded.

My thesis is that more African energy projects should be crowdfunded in either fiat or digital currency and non-fungible tokens (NFTs) to ensure these projects are developed, especially the smaller ones.

This could work in two ways. First, through crowdfunding debt. A project must take on debt in order for a project to start. All agreements and feasibility studies have been completed and the project has a government agreed duration of 30 years.

Investors can lend the project money at a fixed percentage of the return over a period of two to three years. The project is funded and investors get a great return on their money. Some projects could generate returns of up to 30% if successful.

Second, through crowdfunding equity. A project must raise a percentage of equity funding to attract larger institutions that will structure and borrow the rest.

The project’s owners have already invested all of their working capital in conducting pre-feasibility studies and there is little scope for government guarantees due to historical mismanagement of funds.

Investors can crowdfund an equity stake in the project and make the project more attractive to institutions. Shareholders will later receive annual dividends over the life of the project. With off-take arrangements from the start of the project, this could make the deal even sweeter.

Neither is revolutionary, since both strategies are often used in the start-up scene. However, given the investment gap and how few Africans are involved in their own energy future, this could prove to be an interesting theory.

Then I think I started to get a little creative. I gave some attention to crypto, blockchain, web3 and NFTs. I’m by no means an expert and I was mostly uninterested in the NFT pump until I started hearing about it in action.

NFTs can be used to prove authenticity and ownership, and this has immediate utility in the world of event ticket resale and luxury fashion. A few weeks ago, I read some articles about Miami real estate tokenization, where investors could “mint” a real estate token that gave them fractional ownership of the building. There must be an analog link between the certificate and the token, but after that the token is on the blockchain and can be transferred to future owners.

In this respect, the entry barrier is significantly lower. Instead of finding a 10% down payment on an apartment, real estate NFTs could be minted for as little money as the creator dictates.

Could this be applied to African energy projects? I think so!

Let’s consider the above scenarios with a Web3 lens, such as B. the energy value NFT – Debt. In this context, the project raises capital via a cryptocurrency.

Ethereum-based technology makes sense, especially Polygon or Solana. Investors mint an NFT on energy debt to raise capital for the project. NFT holders are rewarded for holding the NFT throughout the life of the debt by earning additional cryptocurrency interest known as a payout.

The NFT can be sold to a new owner on the blockchain at any time, and the sale can also trigger smart contracts that ensure a royalty to the project owner or the broader community where the project takes place.

Second, let’s look at the energy value NFT – Equity. This is where it could get interesting. If you are tokenizing an entire asset – such as Whether it’s a solar farm, an oil block, or a biogas plant, it means anyone (with access to a smartphone, WiFi, and a cryptocurrency) can own a piece of a real asset. What I like about this idea is the democratization of energy asset ownership.

It’s not just energy companies, financial institutions and governments that can own our infrastructure, but anyone, including everyday Africans and people in the diaspora. While NFTs can’t pay a dividend since they just prove ownership, the value of the NFT will naturally increase over time as a project comes online and into cash flow.

Owning 1,000 tokens of a pre-production block of oil becomes far more valuable when the asset is producing, especially at $100 a barrel. Token holders can be rewarded in cryptocurrency or fiat distributions when cashing out.

I think the most important thing here is ownership transparency and the transparency that sets the continent up for long-term success. When token holders are also constituents in the project environment, it brings an additional layer of accountability and governance.

An NFT could include voting rights, and future sales generate royalties that are funneled back into the local community.

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