FSD Africa has recently announced a significant investment of $10 million into Infracredit, a Nigerian-based infrastructure credit enhancement facility. This investment is aimed at unlocking climate-aligned infrastructure development across Nigeria by addressing the funding gap and encouraging private sector participation in the sector.

Infracredit’s credit enhancement model works by enabling projects to achieve higher credit ratings and lower borrowing costs, consequently attracting more funding from the private sector. The ultimate goal is to foster a conducive environment for sustainable infrastructure development and to address the financial barriers that often hinder such projects.

 

Infracredit’s Risk-Sharing Facility: Bridging Financing Gaps in Infrastructure Projects

According to the World Bank’s 2022 Public Finance Review Report, Nigeria’s physical infrastructure deficit is expected to reach $3 trillion in 30 years. With the gap expected to take 300 years to close at the current rate of expenditure allocation. This highlights both the low-quality of infrastructure (ranked 132 out of 137 countries for infrastructure in the 2018 Global Competitive Index) and limitation of annual budgetary allocations. 

Infracredit aims to conduct fundraising in series aiming to reach a total capital base of $50 million from various funders, in addition to this injection of capital from FSD Africa. So far, their portfolio boasts a wide range companies executing projects focused on sustainability notably:

• Lekki Free Trade Zone in Lagos state
• Shiroro Hydroelectric power plant in Niger state
• Darway Coast Project (Clean Energy Programme) in Imo state

This new initiative is set to expand infra credit’s focus to include sustainable housing.According to Estate Intel’s 2022 Africa Green Building Fact Sheet, green buildings in cities such as Lagos still remain the outliers rather than the norm accounting for 6% total real estate stock across office, residential and industrial sectors in the city. 

Through this investment in Infracredit’s Risk Sharing Backstop Facility (RSBF), more investment can be directed towards local-institutional investments via bonds into viable early-stage or green-field climate-aligned infrastructure projects.

 

Continued Investment is Crucial for Bridging Sustainable Infrastructure Gap

Nigeria’s infrastructure financing challenge, estimated at $221 billion in 2022 according to the World Bank, is not only immense but also urgent. Through FSD Africa’s investment in InfraCredit’s sustainable infrastructure projects, Nigeria can witness the delivery of more green and climate-aligned projects. According to Estate Intel’s Green Matrix Ranking, Nigeria ranks second in Africa for green readiness especially in the built environment underpinned by legislative adoption towards green buildings and the move to Net Zero by 2060. As such, the conditions for such projects in the country are high, and will be readily adopted once supplied.

This collaboration underscores the importance of innovative financial solutions in driving economic growth and addressing critical development challenges. As FSD Africa continues to champion sustainable financial sector development, its partnership with Infracredit sets a promising precedent for future endeavors aimed at transforming Africa’s sustainable infrastructure landscape.

 

Estate Intel loves your feedback! Let the Estate Intel Insights team know what you think about FSD Africa’s $10 million into Infracredit’s Risk-Sharing Facility by sending an email to [email protected].

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