16th January 2017
First for Nigeria as GuarantCo partners with sovereign wealth fund to boost infrastructure investment
Innovative new venture which will unlock pension fund capital to overcome project finance challenges
PIDG’s unique local currency guarantee firm GuarantCo has established a new company with the Nigerian Sovereign Investment Authority (NSIA) to encourage the country’s pension funds to invest in infrastructure bonds.
In a first for Nigeria and PIDG, InfraCredit will provide guarantees to improve the credit rating of infrastructure projects seeking to raise funding.
The new company, which held its first board meeting last week, will overcome some of the challenges facing infrastructure finance in the country.
“InfraCredit is a ground-breaking initiative that will unlock domestic investment in Nigeria’s infrastructure on a scale not previously seen,” said InfraCredit Non-Executive Director and former GuarantCo CEO Chris Vermont. “Encouraging investment in local currency is key for the development of Nigeria’s capital markets and the wider economy.”
The lack of private sector investment in infrastructure is a crucial bottleneck to growth in Nigeria and other low-income countries where PIDG works.
The initiative also benefited from a returnable grant from PIDG's Technical Assistance Facility. "We hope to establish similar partnerships in other countries where PIDG operates and scoping will begin shortly” Mr Vermont added.
Currently most Nigerian pension funds and insurance companies are reluctant to invest in infrastructure, feeling the risk is too high. The capacity of the domestic banking sector to provide capital of sufficient tenor is also often constrained.
Nigeria needs an investment of US$127bn in infrastructure over the next five years. Activating fresh sources of capital will help close this gap.
“Attracting capital from pension funds will provide a substantial boost to Nigerian infrastructure,” said PIDG CEO Philippe Valahu. “GuarantCo’s work through InfraCredit is an important part of PIDG’s wider efforts to find innovative ways to mobilise more private sector investment in infrastructure and support sustained economic growth in low-income countries.”
InfraCredit is due to be fully operational in Q2 2017 and will support projects across a wide range of sectors including power, transport, water and ICT and telecoms.
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InfraCredit’s website will soon be going live. Check regularly for news and updates.