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AfDB invests $15 million in NSIA-backed InfraCredit

12 Apr 2019, 04:05 pm
Financial Nigeria
AfDB invests $15 million in NSIA-backed InfraCredit

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The investment package will be used to support infrastructure financing in Nigeria through the domestic debt capital market.

Chinua Azubike, Chief Executive Officer, Infrastructure Credit Guarantee Company

The African Development Bank’s (AfDB) Board has approved a $15 million investment package to Infrastructure Credit Guarantee Company (InfraCredit). The investment package will be used to support infrastructure financing in Nigeria through the domestic debt capital market.

InfraCredit is an infrastructure credit guarantee company set up by the Nigeria Sovereign Investment Authority and GuarantCo, a Private Infrastructure Development Group company. The AfDB said its investment in InfraCredit will catalyse local institutional investor funds, including pension funds, into financing long-term infrastructure projects through the local bond markets.

The investment package comprises of a subordinated loan of $10 million and a risk-sharing facility of $5 million. The subordinated loan will boost InfraCredit’s qualifying capital base, while the proposed risk-sharing arrangement will improve its capacity to expand its guarantee business. In 2018, the Africa Finance Corporation (AFC) and KfW – German Development Bank – made up to $60 million investment in InfraCredit. The AFC made a $25 million equity investment, while KfW invested $35 million subordinated unsecured capital in InfraCredit.

The AfDB, in a statement on Friday, explained that this intervention will help to stimulate local currency financing across diverse infrastructure transactions, thereby improving economic diversification and competitiveness, as well as promoting equitable growth and 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.

“This adds to the Bank’s existing initiatives to mobilize domestic institutional savings and stimulate non-sovereign local debt capital market in Nigeria,” said Stefan Nalletamby, AfDB’s Director of Financial Sector Development. “The Bank’s support will strengthen the capital base of InfraCredit, underpinning the expansion of the company’s core business of guaranteeing bonds issued to fund infrastructure projects.”

He added that the investment package will ultimately help to increase private sector financing, through the local capital markets, for critical infrastructure projects in key sectors, including energy, agriculture, water, health and education.

Established in 2017, InfraCredit provides local currency guarantees to enhance the credit quality of debt instruments issued to finance creditworthy infrastructure assets in Nigeria. The company aims to support up to $1.25 billion in infrastructure financing over the next few years.

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