AfDB invests $10m into the Chapel Hill Denham Nigeria Infrastructure Debt Fund

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The Board of Directors of the African Development Bank Group has approved a Naira investment equivalent to US$ 10 million in Chapel Hill Denham Nigeria Infrastructure Debt Fund (NIDF).

This investment aims to meet the country’s infrastructure investment needs, including in the power and energy infrastructure sectors. NIDF is the first and the only listed local currency infrastructure debt fund in Africa.

The transaction is financed through the Bank’s ordinary capital resources allocated for private sector operations financing. It is expected to deliver significant development outcomes – private sector development through support to industrialization and diversification from conventional oil and gas. It will also help to strengthen capital markets harness domestic financial resources to fund critical infrastructure and human development by providing and improving access to basic services.

The Bank Group’s investment in NIDF will significantly boost the country’s infrastructure stock, including increased clean gas distribution and power generation (including through renewable energy) capacities. NIDF will also target investments in other key infrastructure sub-sectors such as transportation and logistics. The fund will meaningfully contribute to inclusive growth by supporting infrastructure development in Nigeria, which faces significant infrastructure deficits. Consequently, the funding will help improve the quality of life and the business environment.

The Project is aligned with the African Development Bank’s New Deal on Energy for Africa and High 5 priorities, particularly “Light Up and Power Africa”, “Industrialize Africa” and “Improve the Quality of Life for the People of Africa”. The project is also aligned with the Bank’s Climate Change Action Plan, which focuses on supporting infrastructure development and prioritizes the power sector and private sector development. The private Sector Operations strategy emphasizes the provision of equity capital to catalyze and crowd-in financing from external parties, which the Fund will achieve by tapping into financing from local institutional investors such as pension funds, insurance companies and asset managers.

Presenting the project to the Board, the Bank’s Vice President for Power, Energy, Climate Change and Green Growth, Amadou Hott, underscored the importance of the crowding-in effect to fill the infrastructure-financing gap in Nigeria in order to achieve universal energy access. “The Bank’s investment in NIDF will have a demonstration crowding-in other Nigerian institutional investors. This will enable the Bank to fill critical gaps in infrastructure financing, especially in the energy sector,” he said.

The Bank’s investment in the NIDF will catalyze private sector investments and is expected to unlock up to NGN134 billion from the private sector, especially from Pension fund administrators who have already invested NGN15.4 billion in NIDF. This is the first unit trust investment by the Bank, with expectations to replicate similar investments across the African continent.

NIDF provides long-term financing for infrastructure projects in Nigeria that is denominated in the local currency (Naira). It plays a critical role in correcting the current tenor and currency mismatch that is prevalent in infrastructure financing in Nigeria. The Director of the Energy Financial Solutions Department, Wale Shonibare addressed this in his presentation saying: “NIDF is addressing the issues of currency and tenor mismatch in infrastructure projects in Nigeria by providing loans that are denominated in the local currency, Naira, with proceeds in Naira, and also closely matching the loan tenor to the life of the asset.”

Established in June 2017, the NIDF is structured as a permanent capital vehicle. Its units are listed on the FMDQ OTC Exchange, Nigeria, and regulated by the Securities & Exchange Commission. The Fund has registered a programme for issuance of up to two billion Units with par value of NGN200 billion. Since its inception, it has raised an aggregate capital of more than NGN19.15 billion and currently has a portfolio of eight infrastructure loans.

The NIDF is sponsored by Chapel Hill Denham, an independent investment bank in Nigeria and managed by Chapel Hill Denham Management Limited.

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