By Ruth Olurounbi
The African Development Bank Group (AFDB) will invest as much as N15.4 billion ($10 million) in Nigeria’s power and energy sectors via the Chapel Hill Denham Nigeria Infrastructure Debt Fund (NIDF) and transaction will be financed through the bank’s ordinary capital resources allocated for private sector operations financing, the bank said in a statement, Wednesday.
“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,” the bank’s Vice President for Power, Energy, Climate Change and Green Growth, Amadou Hott said.
The bank expects that the investment will “deliver significant development outcomes and 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,” according to the statement.
NIDF provides long-term financing for infrastructure projects in Nigeria that is denominated in the local currency, playing critical role in correcting the current tenor and currency mismatch that is prevalent in infrastructure financing in Nigeria.
“The bank’s investment in the NIDF will catalyze private sector investments and is expected to unlock up to NGN134 billion from the private sector, especially from pension fund administrators who have already invested N15.4 billion in NIDF. This is the first unit trust investment by the bank, with expectations to replicate similar investments across the African continent,” the statement also read.
Wale Shonibare, Director of the Energy Financial Solutions Department of the fund said: “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.”
The Fund has registered a programme for issuance of up to two billion units with par value of NGN200 billion and has since inception raised an aggregate capital of more than N19.15 billion and currently has a portfolio of eight infrastructure loans.