The African Development Bank (AfDB) Group has granted approval for the release of $10 million in the Chapel Hill Denham Nigeria Infrastructure Debt Fund (NIDF) to fast-track the execution of the country’s infrastructure investment projects, particularly in power and energy sectors
The NIDF is the first and the only listed local currency infrastructure debt fund in Africa with expectations to replicate similar investments across the African continent.
A statement released by the Bank on the fund indicated that the transaction was financed through the bank’s ordinary capital resources allocated for private sector operations financing and it is expected to deliver significant development outcomes, especially private sector development through support to industrialization and diversification from conventional oil and gas.
The investment will also help to strengthen capital markets harness domestic financial resources to fund critical infrastructure and human development by providing and improving access to basic services and significantly boost the country’s infrastructure stock.
According to the development finance institution, the NIDF will also target investments in other key infrastructure sub-sectors such as transportation and logistics and contribute to inclusive growth by supporting infrastructure development in Nigeria, which faces significant infrastructure deficits.
Presenting the project to the Board, the Bank’s Vice President for Power, Energy, Climate Change and Green Growth, Amadou Hott, underscored the importance of the crowding-in effect to fill the infrastructure-financing gap in Nigeria in order to achieve universal energy access.
He said: “The Bank’s investment in NIDF will have a demonstration crowding-in other Nigerian institutional investors. This will enable the Bank to fill critical gaps in infrastructure financing, especially in the energy sector.”
It is projected also that the AfDB’s investment in the NIDF would catalyze private sector investments and unlock up to NGN134 billion from the private sector, especially from Pension fund administrators who have already invested NGN15.4 billion in NIDF.
The NIDF provides long-term financing for infrastructure projects in Nigeria that is denominated in the local currency (Naira). It plays a critical role in correcting the current tenor and currency mismatch that is prevalent in infrastructure financing in Nigeria.
The Director of the Energy Financial Solutions Department, Wale Shonibare, captured this in his presentation at the event saying that “NIDF is addressing the issues of currency and tenor mismatch in infrastructure projects in Nigeria by providing loans that are denominated in the local currency, Naira, with proceeds in Naira, and also closely matching the loan tenor to the life of the asset.”
Established in June 2017, the NIDF is structured as a permanent capital vehicle. Its units are listed on the FMDQ OTC Exchange, Nigeria, and regulated by the Securities & Exchange Commission.
The Fund has registered a programme for issuance of up to two billion Units with par value of NGN200 billion. Since its inception, it has raised an aggregate capital of more than NGN19.15 billion and currently has a portfolio of eight infrastructure loan.
