FSD Africa, InfraCredit Invests £10 Million In Risk-Sharing Facility

FSD Africa in collaboration with InfraCredit has invested £10 million in a first-of-its-kind risk-sharing facility, Risk-sharing Backstop Facility (RSBF). The credit line is designed to unlock funding for sustainable infrastructure development in Nigeria.

With the increased accessibility of finance for climate-aligned infrastructure projects, the facility seek to accelerate Nigeria’s economic and social development as well as deliver on its climate goals.

In a statement, RSBF plans to mobilise short and medium-term local institutional investment into critical and climate-aligned infrastructure projects that have a reliable business model and are ready to expand but struggle with a higher perception of risk without this form of credit enhancement.

According to the International Monetary Fund (IMF), an estimated $3 trillion is required by Nigeria 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.

According to the statement, “The RSBF will address this perception of high risk by providing backstop support to investors alongside InfraCredit’s guarantees, thereby providing early-stage greenfield climate-aligned infrastructure ventures which are at a construction stage and too early for additional capital to be secured via a bond issue, with more time in which to start generating stable predictable cash flow and demonstrate their status as being long-term bankable.

“The current 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. As part of any funding application all projects will be rigorously assessed on their environmental credentials.”

FSD Africa Invest (FSDAi) has disclosed that it is pleased to be undertaking this investment in partnership with an established player in the sustainable infrastructure financing space, InfraCredit – a business with a capitalisation of $209 million, and a series of AAA ratings from local rating agencies.

“Indeed, since its inception in 2017, InfraCredit has built an exemplary record supporting strategic Nigerian infrastructure projects, having written ₦145 billion (approximately $315 million) of guarantees underwriting bond issuances by eleven companies distributed across the power, transportation and logistics, ICT/telecommunications, gas to power, LPG clean cooking and input to infrastructure sectors. All of these issues have been fully subscribed, some by more than 160 per cent by domestic pension funds and insurance companies.”

FSDAi, which is backed by UK aid through the Foreign, Commonwealth and Development Office (FCDO) with a total capital base of $131 million, has a track record of backing innovation and being prepared to take risks to address financial market failures to bring about sustainable economic growth.

According to the statement, FSDAi’s £10 million investment in the RSBF is intended to galvanise finance and direct it to landmark infrastructure projects that will help create exponential economic, social and environmental benefits for Nigeria. This investment, therefore, aligns with one of FSD Africa’s primary objectives – developing capital markets by tackling blockages in the system.

It stated, “The facility has been carefully designed to support sustainable infrastructure initiatives which boast a reliable business model and are ready to expand but lack the necessary capital to do so. This delay or deferral of expansion projects due to unavailable capital creates a bottleneck that slows Nigeria’s progress towards solutions for some of the country’s most pressing, and transformational, infrastructure needs.

“The RSBF will raise funding in series, initially from FSDAi, but eventually from other funders, aiming to reach a total capital base of up to $50 million.”

Also, CIO of FSD Africa Investments, FSD Africa, Anne-Marie, stated that, “FSDAi’s partnership with InfraCredit on the bridge-to-bond facility introduces a de risking financing solution to mobilise short and medium-term local institutional investment into critically needed infrastructure projects that are currently considered un-bankable without alternative credit enhancement. 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.’’

CEO of InfraCredit, Chinua Azubike, also expressed delight saying: “I am delighted to work with FSD Africa on an innovative facility which will support much needed but underfinanced projects realising their ultimate goals and purpose. 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.”

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