FSD Africa Invests £10m in InfraCredit’s Risk-sharing Facility

FSD Africa has invested £10million into a first-of-its-kind risk sharing facility in collaboration with InfraCredit, which is designed to unlock funding for sustainable infrastructure development in Nigeria.

By increasing the accessibility of finance for “climate-aligned” infrastructure projects, the facility will help to accelerate Nigeria’s economic and social development, as well as deliver on its climate goals.

According to a statement, the Risk-sharing Backstop Facility (RSBF) aims to mobilise short and medium-term local institutional investment into critically needed 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.

The statement noted that the need for infrastructure investment in Nigeria is vast. According to the IMF, it requires an estimated US$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. For example, less than 2% of pension fund assets are deployed towards infrastructure investment mainly because pension fund administrators have generally had a preference for more liquid, less complex investment instruments such as government bonds.

 “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 cashflow and demonstrate their status as being long-term bankable, ”the statement noted.

Commenting, CIO of FSD Africa Investments, FSD Africa, Anne-Marie, said, “FSDAi’s partnership with InfraCredit on the a bridge-to-bond facility introduces a derisking 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, said: “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. ‘’