FSD Africa Investments (FSDAi), in collaboration with InfraCredit, have invested £10m into a risk-sharing backstop facility designed to unlock local currency funding for sustainable infrastructure development in Nigeria.
The Risk Sharing Backstop Facility will address the challenge of low credit enhancement by mobilising local institutional investment via bonds into viable early-stage or green-field climate-aligned infrastructure projects.
According to FSDAi, by increasing the accessibility of finance for the ‘climate-aligned’ infrastructure projects, the facility will help Nigeria accelerate its social and economic development, and green economic transition as well as deliver on its climate goals.
“FSDAi’s partnership with InfraCredit on the bridge-to-bond facility introduces a de-risking financing solution to mobilize short and medium-term local institutional investment into critically needed infrastructure projects that are currently considered un-bankable without alternative credit enhancement,” Anne-Marie Chidzero, chief investment officer at FSD Africa Investments said.
She stated that moreover, as Africa’s economies struggle to mobilise capital to develop key climate mitigation and sustainable power generation projects, this facility comes as a timely and much-needed intervention for Nigeria’s infrastructure landscape.’
According to International Monetary Fund, Nigeria requires an estimated $3 trillion to finance its infrastructure deficit over the next 30 years. Despite the large amount of liquidity in the local market to fund a significant portion of this, infrastructure receives relatively little.
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FSDAi undertaking the £10m investment in partnership with InfraCredit is backed by the UK International Development through the Foreign, Commonwealth and Development Office.
James Cleverly, United Kingdom’s foreign secretary said this investment further demonstrates the UK’s commitment and contribution to Nigeria’s transition to clean energy and builds on decades of UK leadership in mobilising support for climate-related infrastructure challenges.
“Just like the successes of British International Investment and our Private Infrastructure Development Group, I am optimistic that InfraCredit will continue to grow and mobilise even more private sector capital to invest in better, greener infrastructure,” Cleverly stated.
InfraCredit’s current investments and project pipeline demonstrates the breadth and variety of projects this facility will support, with projects ranging from distributed renewable energy services for urban residences to commercial and industrial renewable projects, edge-certified green housing, and e-mobility infrastructure.
The Risk Sharing Backstop Facility will raise funding in series, initially from FSDAi, and eventually from other funders with an aim to reach a total capital base of up to $50 million. This investment, therefore, aligns with one of FSD Africa’s primary objectives of developing capital markets by tackling blockages in the system.
“I am delighted to work with FSD Africa Investments on an innovative facility which will support much-needed but underfinanced projects in realising their ultimate goals and purpose,” Chinua Azubike, chief executive officer of InfraCredit said.
“Smart use of catalytic capital can dramatically increase the role of private capital and local intermediaries in investing in Nigeria’s sustainable infrastructure space and help the country develop responses to the significant challenges which confront it from the deteriorating environment and ecology to an unstable energy mix and severe social inequality,” Azubike added.
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