FSDAi, InfraCredit invest $13m in Nigeria’s green projects

FSD Africa Investments (FSDAi), has announced a £10 million (nearly $13 million) investment into a pioneering risk-sharing backstop facility in partnership with InfraCredit. The initiative is set to bolster local currency funding for sustainable infrastructure development in Nigeria.

The innovative facility (RSBF) aims to resolve the issue of low credit enhancement. It plans to do this by encouraging local institutional investment through bonds into early-stage or green-field climate-aligned infrastructure projects.

It is anticipated to amplify the availability of finance for climate-aligned infrastructure projects. Consequently, Nigeria can look forward to accelerating its socio-economic development, transition to a green economy, and achieve its climate objectives.

FSDAi, backed by the UK International Development through the Foreign, Commonwealth and Development Office (FCDO), expressed excitement over this £10 million investment in collaboration with InfraCredit, a prominent entity in sustainable infrastructure financing.

InfraCredit’s existing investments and project pipeline portray the diversity and scope of projects this facility will support. The projects range from distributed renewable energy services for urban residences to commercial and industrial renewable projects, edge-certified green housing, and e-mobility infrastructure.

The RSBF plans to source funding in series, initially from FSDAi and subsequently from other funders, aiming to achieve a total capital base of up to $50 million. This investment thus aligns with FSD Africa’s primary goals of developing capital markets by addressing system blockages.

UK foreign secretary, James Cleverly, commented, “This investment exemplifies the UK’s commitment and contribution to Nigeria’s shift to clean energy. Just like the successes of British International Investment and our Private Infrastructure Development Group, I am hopeful that InfraCredit will continue to grow and attract more private sector capital to invest in superior, greener infrastructure.”

Anne-Marie, chief investment officer, FSD Africa Investments, FSD Africa, said, “Our partnership with InfraCredit introduces a derisking financing solution that can mobilise short and medium-term local institutional investment into infrastructure projects currently viewed as un-bankable without alternative credit enhancement.

“This facility comes as a timely intervention for Nigeria’s infrastructure landscape as African economies struggle to mobilise capital for climate mitigation and sustainable power generation projects.”

Chinua Azubike, chief executive of InfraCredit, added, “We’re delighted to partner with FSD Africa Investments on this innovative facility, supporting underfinanced projects to achieve their objectives. The smart use of catalytic capital can significantly boost the role of private capital and local intermediaries in Nigeria’s sustainable infrastructure space, helping the country confront significant challenges such as a deteriorating environment, unstable energy mix, and severe social inequality.”

According to the IMF, Nigeria needs an estimated US$3 trillion to finance its infrastructure deficit over the next 30 years. However, less than 2% of pension fund assets are directed towards infrastructure investment, mainly due to the preference for more liquid, less complex investment instruments like government bonds.

The United Nations Office for Project Services, UNOPS, UN Environment Programme and the University of Oxford have highlighted that infrastructure accounts for about 79% of total greenhouse gas emissions.

Therefore, an integrated approach is required to decarbonise sectors, financial markets and economies. The lack of investment available for early-stage, or “greenfield” projects, particularly climate-aligned infrastructure projects, continues to be a challenge due to perceived high risks.

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