Publish Date : 18-Apr-2019
The Board of the African Development Bank has approved a $15-million investment package to Infrastructure Credit Guarantee Company (InfraCredit), to support infrastructure financing through the domestic debt capital markets in Nigeria.
The investment package to InfraCredit is comprised of a subordinated loan of $10 million and a risk sharing facility of up to $5 million. This 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.
InfraCredit was 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.
The African Development Banks investment in InfraCredit will catalyze local institutional investor funds, including pension funds, into financing long-term infrastructure projects through the local bond markets. The investment boosts InfraCredits 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, the African Development Bank 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. InfraCredits operations will catalyze infrastructure investments in critical sectors such as renewable energy, housing, transportation, agricultural infrastructure, and telecommunications, which are critical for the countrys economic development. These also align with the Banks High 5 agenda.
Stefan Nalletamby, the Banks Director of the Financial Sector Development said, The Banks support will strengthen the capital base of InfraCredit, underpinning the expansion of the Companys core business of guaranteeing of bonds issued to fund infrastructure projects. This adds to the Banks 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 Banks 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 Nigerias economic resilience.
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