N1trn  Seed Funding Disbursement Delays  Nigeria’s InfraCorp

The Infrastructure Corporation of Nigeria (Infracorp) is yet to fully take off due to a delay in disbursing the initial seed money of N1 trillion to the four fund managers that will manage the company’s assets.

Touted as a game changer for Nigeria’s decrepit infrastructure, Infracorp is a government-backed infrastructure investment vehicle established and co-owned by the  by the Central Bank of Nigeria (CBN), Africa Finance Corporation and Nigeria Sovereign Investment Authority.

“Each of the four appointed fund managers has to receive N250 billion each first before the real work can start but that has not happened because the CBN has not disbursed the N1 trillion promised,” a source familiar with the matter told BusinesDay.

Sanlam InfraWorks; Africa Infrastructure Investment Managers; a consortium of Afrinvest Asset Management Africa Plus Fund Partners and ARC Asset Management; and Chapel Hill Denham were the four fund managers appointed to manage InfraCorp.

“It’s after the fund managers have received that, that they will start raising the additional N14 trillion in tranches,” another source said.

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The infrastructure initiative, first put forward by a committee of governors and later hijacked by the CBN, is supposed to harness opportunities for infrastructure development in Nigeria by originating, structuring, executing, and managing end-to-end bankable projects.

InfraCorp is to mainly leverage public-private partnerships to unlock assets for the development and completion of projects.

Its core mandate is to tackle Nigeria’s infrastructure deficit and generate a growth multiplier effect across critical sectors.

By supporting project development, financial structuring, and private-capital mobilisation, InfraCorp is also expected to help combat issues of underemployment and under-investment in critical nation-building assets.

With a population in excess of 200 million, according to UN estimates, Nigeria has a total infrastructure stock valued at only 35 percent of its GDP, significantly below that of South Africa at 87 percent of GDP; and the emerging economy average of 70 percent, according to the Debt Management Office.

The paucity of investment in physical and social infrastructure over the years has continued to limit the growth potential of Africa’s largest economy, restricting its ability to tap its vast amount of natural and human resources towards achieving a broad based, sustainable and inclusive growth.

Estimates from the Nigerian Investment Promotion Commission indicate that Nigeria needs over $2.8 trillion in infrastructure investment over the next 30 years.

Nigeria will need to mobilise sufficient domestic capital to make a dent in bridging a gaping infrastructure deficit that has stifled private investments and held back economic growth in Africa’s most populous nation.

The country’s challenges with foreign exchange have made attracting foreign capital into infrastructure a tad difficult but domestic capital provides a leeway, according to experts who spoke at the Chapel Hill Denham Investing in Development conference.

“In a world running short of private capital,there are lots of untapped potentials in the Nigeria domestic market that can fund bankable infrastructure projects,” Phil Southwell, partner at Chapel Hill Denham, said at the event on Wednesday.

Lazarus Angbazo, CEO of InfraCo, said there is no idle foreign capital that can fix Nigeria’s infrastructure gap estimated at N36 trillion yearly for the next 30 years.

“We need to crowd in capital with structures to attract domestic investors, we need to develop local support for bankable infrastructure projects,” Angbazo said.

Mobilising domestic capital also lays down a marker that will be crucial in attracting foreign capital, according to Andrew Alli, former CEO of the Africa Finance Corporation.

“There is a strong need to mobilise local investment instruments for infrastructure development,” he said. “Nigeria needs to mobilise local investments for infrastructure funding; this has an indirect way of attracting limited foreign investment.”

He added, “By putting your own money into it, it attracts foreign investors and sets the tone of the investment.”

He noted that the current federal government’s pattern of seeking local investment in dollars will discourage locals from investing.

“Why is the government selling its assets in dollars to local investors? If your interest rate is lower than inflation rate, it discourages people from investing into your country,” Alli said.

Karl Toriola, CEO of MTN Nigeria, said the domestic telecom sector has what it takes to continue delivering double-digit growth that will help lift Africa’s biggest economy despite macroeconomic headwinds.

“It’s been a challenging macroeconomic environment, nevertheless I believe in the entrepreneurial skills of our young population to deliver creative solutions that will fix the infrastructure gap,” Toriola said.

“Our youths are building business models that are innovative and creative that will make firms like MTN look conservative.”