The Nigeria Sovereign Investment Authority (NSIA) and GuarantCo have entered into an arrangement to explore the potential creation of a Nigerian Credit Enhancement Facility (NCEF) with the specific objective of attracting the investment interest of a pool of capital for whom safety is paramount. Such capital includes the pension funds, insurance companies and Sovereign Wealth Funds.

A key barrier preventing these forms of capital from investing in infrastructure projects is the absence of an appropriate credit enhancement mechanism that helps bring infrastructure projects up to a credit quality that represents appropriate investments for their stakeholders. The NCEF being floated by NSIA and GuarantCo, a development finance fund whose key objective is encouraging private sector involvement in the domestic financing of infrastructure projects and promoting local capital market development in low income countries, would provide credit enhancement for critical infrastructure projects by improving their credit ratings to investment grade. Such a vehicle could also potentially attract international capital.

NSIA and GuarantCo see this partnership as a potential catalyst for unlocking long-term patient capital, typically required by infrastructure projects to be commercially successful. It is expected to have positive effects on the Nigerian economy given the strong correlation between critical infrastructure and accelerated economic growth.

Speaking on the partnership, Mr. Uche Orji, Managing Director and CEO of NSIA, stated: “One of the statutory mandates of the NSIA is the enhancement of Nigeria’s infrastructure and in fulfilling this mandate we are desirous of establishing the necessary institutional frameworks and sustainable enablers that will attract long term capital necessary for this purpose. We are excited about the potential role this partnership can play in revolutionising the extant model of infrastructure development in Nigeria; now and into the future.”

Mr. Chris Vermont, Head of GuarantCo at FMFM (Frontier Markets Fund Managers), said: “GuarantCo shares NSIA’s vision for mobilising new sources of finance for infrastructure through creating a Nigerian Credit Enhancement Facility. We are proud to be partnering NSIA as they map out a prudent but ambitious pathway for Nigeria. We hope our experience of best practice across many markets can be combined with NSIA’s local expertise in the service of the country.”

•Photo shows NSIA MD and CEO, Uche Orji.