BusinessDay

InfraCorp, Nigeria’s infrastructure ‘game changer’ debuts

Three very powerful institutions- the Central Bank of Nigeria (CBN), Nigeria Sovereign Investment Authority (NSIA) and Africa Finance Corporation (AFC) are behind Nigeria’s Infrastructure Corporation Plc (InfraCorp) which is set to revolutionise the country’s infrastructure space.

With an initial N1trillion equity capital, and huge prospect of galvanizing thrice as much in private funding over the next 3 years, and up to N14 trillion for infrastructure investments into the Africa’s largest economy by 2030, InfraCorp has officially taken off.

Everything is set. The pioneer Chief Executive Officer – Lazarus Angbazo who brings over 25 years experience in infrastructure project development, investments, capital raising, setting up new businesses; and leading global management teams – has been appointed.

Four highly experienced asset managers — Sanlam InfraWorks; Africa Infrastructure Investment Managers (AIIM); a consortium of Afrinvest Asset Management Africa Plus Fund Partners, and ARC Asset Management; and Chapel Hill Denham — have also been appointed.

Together with external legal advisors — Olaniwun Ajayi, Kenna Partners, and Ukiri & Lijadu — InfraCorp has commenced negotiation of the term sheet and management agreement to be entered into with each of these four Asset Managers.

Read also: InfraCorp officially commences operations with N1trn capital

InfraCorp will support and enable the fund managers to mobilize funds and investments of projects across the critical focus sectors, including, energy, industrial, agricultural, telecommunications, technology, transport, logistics, and social infrastructure.

A high caliber, ten-member board, chaired by the CBN governor, Godwin Emefiele, who has been at the front of championing the Infracorp course, has also been selected.

The board will be governed by a suite of governance documentation, to ensure a world class structure that positions the corporation to attract the required financing for its mandate and has since held its inaugural meeting in February where key ratifications and decisions were made. The staff is being recruited and everything needed to set this very important institution above failure is being done.

Emefiele calls Infracorp “a game changer”. He holds that “Nigeria, as the most populous nation and the largest economy in Africa, deserves top-notch infrastructure to attract even more foreign investments, and that a vehicle like InfraCorp is what is needed.

“In recognition of the role improved infrastructure can play in the development of our economy, along with the need to leverage private sector capital in funding and closing the over N35 trillion infrastructure deficit in Nigeria, CBN, NSIA and AFC have now operationalized InfraCorp.”

I am pleased that after months of structuring and stakeholder engagements, the promoters have set up a world class board and appointed a highly experienced CEO to drive InfraCorp,” Emefiele whose focus has been to drive a people-oriented Central bank had explained.

‘InfraCorp expects to raise N15 trillion of capital over the next few years leveraging on the Promoters N1 trillion of committed capital to significantly close the huge gap.

President Buhari who hopes to see infrastructure become a key legacy of his eight years, All Progressives Congress rule calls InfraCorp “a growth catalyser”.

Ken Ife, a Professor and Chief Economic Strategist in the ECOWAS Commission, says it is the answer to private sector engagement in Nigeria’s public infrastructure landscape. Johnson Chukwu, CEO, Cowry Assets sees its enormous potential, explaining that, since Infrastructure is an enabler of the industrial sector, it which will spur Foreign Direct Investments, drive needed foreign exchange earnings and conserve outflows and create jobs.

A government-backed infrastructure investment vehicle, InfraCorp is being set up at a critical time in Nigeria’s life when lack of infrastructure has been one of the biggest drags on development. While the economy struggles, the country needs all the possible investments to spur growth numbers, experts say.

With over 200 million population and growing, Nigeria has a total infrastructure stock valued at only 35 percent of its GDP, significantly below that of South Africa at 87 percent of GDP; and the emerging economy average of 70 percent, according to the Debt Management Office.

The paucity of investment in physical and social infrastructure over the years has continued to limit the growth potential of Africa’s largest economy, restricting its ability to tap its vast amount of natural and human resources towards achieving a broad based, sustainable and inclusive growth.

Estimates from the Nigerian Investment Promotion Commission (NIPC) indicate that Nigeria needs over USD2.8trn in infrastructure investment over the next 30 years.

According to President Muhammadu Buhari, some $1.5 trillion will be required over the next ten years to fill the huge gap. But government revenues have been low and successive capital budgetary allocations have not made any appreciable difference.

With this understanding, InfraCorp is designed to run as a Public, Private Partnership (PPP), a financing structure which authorities have struggled to effectively implement over the years.

The promoters have already put down N1 trillion – with the CBN contributing up to 70 percent of the seed money, and the NSIA and AFC the 30% balance. The remaining N14trilion is anticipated from the private sector, and according to Emefiele, the money is “largely available locally.”

Interestingly, InfraCorp will operate from the Capital City Abuja and Nigeria’s commercial hub, Lagos, and will tap funds from the country’s well over N13trillion pensions assets, the banking industry and then international financing like the Eurobond to make up needed financing.

“We have done our scoping, we believe that a substantial portion of the N15 trillion is available locally. There is a lot of liquidity today not just in the banking industry; there is also a lot of liquidity that is currently held by our pension funds managers.

“I understand that the size of Nigeria’s pension fund is over N13 trillion. I am told that in another three to five years, it would rise to almost N20 trillion to N25 trillion.

“There is a lot of local capital and liquidity in Nigeria and we would begin by talking to people, the institutions that have this liquidity,” Emefiele explained.

“Out of the N14 trillion that will be debt, we imagine that we should be looking at say, eight to nine trillion available within the Nigerian banking industry and the pension fund administrators.

“And of course, the rest will be raised through foreign debt like Eurobond and so on. But we want to look back home first.”

He said in other countries where infrastructure corporations have worked, pension funds have been used to develop the infrastructure of those countries.

“Emerging market economies have used private sector funds coming from either pension fund managers or the banking industry to set an example of what we, stand ready to deploy and support infrastructure development, and in this course,” he pledged.

The CBN Governor, however warned ahead that in order to attract the needed investments, the infrastructure that will be built under InfraCorp will have to be paid for by the users.

“The important thing is that we must begin to come to a realisation that for us to have good infrastructure, we will need to make them commercially viable, which means we have to really pay for them.”

InfraCorp’s core mandate is to tackle Nigeria’s infrastructure deficit and generate a growth multiplier- effect across critical sectors.

Vice President Yemi Osinbajo believes that with the credibility of the actors that rally InfraCorp – the CBN, NSIA, AFC – and the quantum of resources that will be deployed, it will make a major contribution to meeting the infrastructural needs of the Nigerian economy while promoting public-private partnership.

Angbazo, founding Chief Executive Officer and Managing Director said InfraCorp’s specific mission is to harness opportunities for infrastructure development in the country by originating, structuring, executing and managing end-to-end bankable projects.

“These projects would be managed privately by asset managers that are private entities and they would do this in partnership with public and private sector participants to provide long and attractive investment returns required not just in terms of financial returns but also in terms of social impact,” he explained.

Angbazo further notes the Corporation as a catalyst to unlock private capital by leveraging local and international pools of capital and an enabler for economic growth and development by driving local capacity building, inclusive growth and development with impact.

According to him, huge financing is urgently required to build the infrastructure that Nigeria deserves, “and the good news is that much of this investment is compatible with competitive returns for investors through leveraging the expertise, relationships, and blended finance models.”

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