The Nigeria Sovereign Investment Authority (NSIA) and local currency guarantee provider GuarantCo have co-launched a credit guarantee company to boost infrastructure development in Nigeria.
Under the name InfraCredit (Infrastructure Credit Guarantee Company), the new facility will provide guarantees to enhance the credit quality of local currency debt instruments in Nigeria, mainly in the form of corporate and infrastructure bonds to finance creditworthy infrastructure projects.
InfraCredit is expected to become fully operational by the second quarter of 2017. It will be capitalised with up to US$200mn, comprising paid-in equity and second loss contingent capital.
NSIA says it has committed to provide US$25mn naira-equivalent of the paid-in equity. Other investment interests will be sourced from institutional investors and international finance institutions.
GuarantCo, a part of the Private Infrastructure Development Group (PIDG), has provided US$50mn of the contingent capital, and will act as lead arranger for an additional US$50mn, which will be sourced from international development finance institutions with high investment grade ratings.
NSIA’s CEO and managing director Uche Orji says the launch of InfraCredit is a culmination of a two-year partnership between NSIA, GuarantCo and PIDG: “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,” he says. “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.”
Chris Vermont, non-executive director and former CEO of GuarantCo, describes the new facility as a “ground-breaking initiative that will unlock domestic investment in Nigeria’s infrastructure on a scale not previously seen”.
“The local pension fund market is expanding by US$5bn-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,” he says.
InfraCredit’s board of directors, which includes representatives of NSIA, GuarantCo, institutional investors and independent members, has appointed Chinua Azubike as the company’s CEO, effective January 11.
Azubike has more than 14 years of experience in corporate finance and debt capital markets roles, recently as the managing director at Dunn Loren Merrifield Advisory Partners, an investment-banking firm based in Lagos.