AfDB Approves $15m Loan For Infrastructure Financing In Nigeria

Posted by Eric Ojo Business News, Latest Headlines Friday, May 19th, 2023

(AFRICAN EXAMINER) – African Development Bank (AfDB) has approved a $15 million subordinated loan to Infrastructure Credit Guarantee Company Limited (InfraCredit) to strengthen its capital base and help close Nigeria’s infrastructure financing gap.

InfraCredit is a specialized Nigerian credit guarantee company that mobilizes long-term capital from institutional investors, including pension fund and insurance companies, to support infrastructure projects.

The financing will enable InfraCredit to leverage domestic capital markets to bolster access to long-term local currency infrastructure financing in Nigeria.

Moreover, it complements a 2019 investment into InfraCredit made by the AfDB and other partners to help unlock domestic institutional capital for infrastructure.

The loan comes at a time when InfraCredit is seeking to raise capital to finance an additional $375 million in infrastructure over the next few years, primarily by leveraging private sector financing.

Lamin Barrow, Director General of AfDB’s Nigeria Country Department, Lamin Barrow said the bank is pleased to continue to support an innovative financial institution like InfraCredit, which according to him, has objectives that align closely with AfDB’s priorities to mobilize institutional financing for the delivery of infrastructure for Nigeria in key sectors including transport, energy, water, agriculture and infrastructure.

“The company’s green finance track record and commitments under its Clean Energy Transition Strategy and Roadmap and Green Finance Framework fits with the AfDB’s commitments to promote low-carbon development and mitigation, leveraging climate finance from private sector sources”, he said.

In his response, the Chief Executive Officer (CEO) of InfraCredit, Chinua Azubike said: “We are delighted and very pleased with the confidence that AfDB has demonstrated in the opportunity ahead for InfraCredit to scale its development impact of unlocking domestic institutional investments for long-term local currency infrastructure finance in Nigeria that will create jobs and support local economic growth.

“This second round investment will strengthen our guarantee issuing capacity and bring AfDB’s total investments in InfraCredit to $25 million, which is a strong signal of commitment to the long-term growth of InfraCredit and the Nigerian economy”.

AfDB’s Director for Financial Sector Development, Ahmed Attout noted that the support demonstrates the bank’s continuing confidence in InfraCredit and recognition of the role it plays in Nigeria’s infrastructure development.

“The African Development Bank is committed to capacitating the various players within Africa’s capital markets and stimulating the mobilization of long-term funding into Africa’s infrastructure”, he added.

The partnership advances a number of strategic objectives under the bank’s current Country Strategy Paper for Nigeria, which includes helping to stimulate local currency bond market financing across diverse infrastructure sectors, as well as enhancing economic diversification and competitiveness in the country.

The strategy also prioritizes delivery of infrastructure for transport, energy, water and sanitation, agriculture, industry and social development.

Notably, the intervention is also aligned with the Nigeria’s National Development Plan which envisages strong private sector resource mobilization and participation in the delivery of the priorities of the plan including for investment in infrastructure, promotion of financial sector and capital market development in the country.

By de-risking local currency debt instruments (primarily bonds), InfraCredit channels financing to infrastructure projects, including green and climate-aligned projects in Nigeria.

InfraCredit was founded in 2016 by the Nigerian Sovereign Investment Authority in collaboration with GuarantCo (part of the Private Infrastructure Development Group).