By Dipo Olowookere
A $15-million investment package has been approved by the board of African Development Bank (AfDB) to support infrastructure financing through the domestic debt capital markets in Nigeria.
The facility was given to Infrastructure Credit Guarantee Company (InfraCredit), founded by the Nigerian Sovereign Investment Authority (NSIA) in collaboration with GuarantCo (part of the Private Infrastructure Development Group). These initial investors have been joined by the Africa Finance Corporation (AFC) and KfW, the German Development Bank.
A statement issued by the AfDB explained that the investment package to InfraCredit comprises a subordinated loan of $10 million and a risk sharing facility of up to $5 million, noting that the intervention will promote local currency infrastructure financing, and further development of the domestic capital market.
InfraCredit is a specialized infrastructure credit guarantee company, established to enhance local currency debt instruments – mainly bonds, to finance eligible infrastructure projects in Nigeria. This is intended to uplift the credit rating of such bonds, allowing institutional investors to include them in their portfolios.
AfDB’s investment in InfraCredit is expected to catalyse local institutional investor funds, including pension funds, into financing long-term infrastructure projects through the local bond markets.
The investment boosts InfraCredit’s qualifying capital base through the subordinated loan; it also improves its capacity to expand its guarantee business through the proposed risk sharing arrangement.
Through this intervention, AfDB is helping to stimulate local currency financing across diverse infrastructure transactions, thereby improving economic diversification and competitiveness, as well as promoting more equitable growth, strengthening local value chains and financial markets in Nigeria.
InfraCredit’s operations will catalyse infrastructure investments in critical sectors such as renewable energy, housing, transportation, agricultural infrastructure, and telecommunications, which are critical for the country’s economic development, which also align with the bank’s High 5 agenda.
Stefan Nalletamby, AfDB’s Director of the Financial Sector Development said, “The bank’s support will strengthen the capital base of InfraCredit, underpinning the expansion of the company’s core business of guaranteeing of bonds issued to fund infrastructure projects.
“This adds to the bank’s existing initiatives to mobilize domestic institutional savings and stimulate non-sovereign local debt capital market development in Nigeria.
“This ultimately helps to increase private sector financing for critical infrastructure projects in key sectors including energy, agriculture, water, health and education, through local capital markets”.
The transaction will also result in the leverage and enhancement of the scope and impact of the bank’s interventions alongside private sector financing, especially from pension funds as well as from co-investment partners.
InfraCredit aims to support up to $1.25 billion in infrastructure financing over the next few years, by involving the private sector in infrastructure financing, essential to Nigeria’s economic resilience.
