The Board of the African Development Bank (AfDB) 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.
This was disclosed by the bank in a statement signed by its Chief Communications Officer, Communication and External Relations Department, Chawki Chahed.
The investment package to InfraCredit is comprised of a subordinated loan of $10 million and a risk sharing facility of up to $5 million.
According to the AfDB, the intervention will promote local currency infrastructure financing and further development of the domestic capital market.
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InfraCredit is a specialised infrastructure credit guarantee company, established to enhance local currency debt instruments – mainly bonds, to finance eligible infrastructure projects in Nigeria.
It 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).
The initial investors have been joined by the Africa Finance Corporation (AFC) and KfW, the German Development Bank. 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 statement read in part: “The investment boosts InfraCredit’s 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 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.”
The bank stated that InfraCredit’s operations will catalyse infrastructure investments in critical sectors, including renewable energy, housing, transportation, agricultural infrastructure, and telecommunications, which are critical for Nigeria’s economic development.