• Monday, July 15, 2024
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InfraCredit, ATIDI sign N37bn local currency guarantee deal on risk sharing

GCR re-affirms Infracredit’s AAA credit rating, outlook stable

InfraCredit, a specialised infrastructure credit guarantee institution in Nigeria, and the African Trade & Investment Development Insurance (ATIDI) have signed a local currency counter-guarantee agreement on a portfolio risk-sharing arrangement of N37 billion ($40.7 million).

The agreement aims to support seven infrastructure portfolio companies of InfraCredit across seven sectors including energy, healthcare, manufacturing (inputs to infrastructure) and logistics, according to a statement.

“The signing of the counter-guarantee agreement is in line with the Memorandum of Understanding executed by the two institutions in March 2022,” the statement said.

It said InfraCredit and ATIDI agreed to collaborate and work together as risk-sharing partners, within the context of their respective mandates, policies, resources and instruments, to provide credit guarantees, co-guarantees and counter-guarantees/reinsurance, as applicable, on eligible infrastructure financing transactions.

“This portfolio counter guarantee arrangement follows from the established strategic partnership between InfraCredit and ATIDI on a transaction basis, the first being the risk-sharing arrangement on a 10-year 10-billion-naira digital infrastructure bond ($24 million equivalent) issued in 2022 and subscribed by domestic pension funds,” it added.

According to the statement, Nigeria’s government aims to increase its infrastructure stock to up to 70 percent of GDP in line with peer emerging market countries, “which requires an annual spending of above seven of GDP over the next 30 years to close the infrastructure gap, therefore increasing institutional investor funding of infrastructure is crucial.”

“Currently, within the Nigerian pension fund industry only around 1.5 percent of total assets are invested in infrastructure debt even though pension funds are permitted to invest up to 35 percent of their assets in corporate debt,” it said.

It added that credit enhancements, such as debt guarantees, on infrastructure project financings will help attract interest from lower risk appetite investors like pension funds.

Speaking on the signing of the agreement, Chinua Azubike, CEO of InfraCredit said, “We are proud of the growth of our partnership with ATIDI, through this second risk-sharing transaction, a first of its kind local currency portfolio counter-guarantee transaction.”

“This will enhance InfraCredit’s capacity to issue more guarantees that will reduce the cost of capital and crowd in larger scale domestic credit, particularly from local pension funds and insurance investors to finance infrastructure development in Nigeria,” he said.

Manuel Moses, CEO of ATIDI, said ATIDI is committed to supporting InfraCredit in mitigating risks associated with infrastructure financing, thus catalysing investment, and fostering development in a vital sector.

“The portfolio counter guarantee provides a vital layer of protection, instilling confidence among investors and stakeholders while enabling InfraCredit to expand its reach and impact in facilitating access to affordable financing for critical infrastructure projects nationwide.”