From Uche Usim, Abuja
The Nigeria Sovereign Investment Authority (NSIA) and GuarantCo have established an infrastructure credit enhancement facility to enhance the credit quality of local currency debt instruments (mainly in the form of corporate/infrastructure bonds) issued by eligible entities (corporates and state governments) to finance credit-worthy infrastructure projects in Nigeria.
Uche Orji, the Chief Executive Officer and Managing Director of NSIA who disclosed this yesterday in Abuja said: “The establishment of InfraCredit brings to fruition, one of the key pillars of NSIA’s infrastructure investment strategy, which seeks to facilitate the creation of and investments in institutions that contribute to infrastructure development in Nigeria. It is expected that InfraCredit will enhance Nigeria’s capacity to attract and unlock latent pools of capital from pensions and insurance for infrastructure investment into key sectors of the Nigerian economy.
“The establishment of InfraCredit is a culmination of nearly two years of constructive partnership between NSIA, GuarantCo and PIDG and we are pleased with the outcome,” he noted.
Conceptualised in 2014, InfraCredit, according to both firms, is intended as a sustainable framework for stimulating infrastructure investments in key sectors of the Nigerian economy, adding that its successful operation will foster the development of the Nigerian debt capital markets.
InfraCredit, whose Chief Executive is Chinua Azubike, will be capitalised with up to $200 million composed of paid-in equity and “second loss” contingent capital.
NSIA has committed to subscribe $25 million (naira equivalent) of the paid in equity, with other investment interests to be sourced largely from institutional investors and international finance institutions. GuarantCo has executed a Callable Capital Funding Facility Agreement providing $50 million of the contingent capital and will act as lead arranger for a further $50 million to be sourced from international DFIs with high investment grade ratings. InfraCredit is expected to become fully operational by Q2 2017.
Incorporated as a private limited liability company based in Lagos, Nigeria, InfraCredit will run on a commercial basis guided by international best practices and local governance standards. Its board of directors will comprise representatives of NSIA, GuarantCo, institutional investors and independent members.
In his statement, Chris Vermont, Non-Executive Director and former CEO of GuarantCo said, “InfraCredit is a ground-breaking initiative that will unlock domestic investment in Nigeria’s infrastructure on a scale not previously seen.”
He further added that, “the local pension fund market is expanding by $2 billion equivalent each year and there is significant demand for low risk alternatives to government securities. InfraCredit is a step change in the balanced development of Nigeria’s capital markets and the wider economy.”