The Nigeria Sovereign Investment Authority (NSIA) and GuarantCo, a development finance fund 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 as 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.
To address this gap, GuarantCo is partnering with the Nigeria Sovereign Investment Authority to explore the potential for establishing a Nigerian Credit Enhancement Facility that 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 the 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.