Uche Orji, CEO, NSIA |
The
Sovereign Wealth Fund is
setting up a company in partnership with London-based local currency guarantee
firm GuarantCo to enable pension
funds to invest in Nigerian infrastructure bonds, its chief executive, Uche Orji, has said.
The
new business will be launched in a few weeks' time and aims to overcome some of
the challenges facing the financing of infrastructure projects in Africa's most
populous nation.
"The
company will provide enhancements for infrastructure bonds, and we believe this
will make an effective platform for Nigerian pension funds to invest in
them," said Orji, chief executive of the Nigeria Sovereign Investment Authority (NSIA), which has some $1.25
billion under management.
GuarantCo
facilitates infrastructure development in low income countries by providing
credit guarantees denominated in local currency to financial institutions and
bond investors. It is funded by Britain, Switzerland, Sweden, the Netherlands
and Australia, and specialises in frontier market infrastructure.
Poor
infrastructure and access to capital is a major bottleneck to growth in
Nigeria, and the government has identified infrastructure investment as a major
priority. Unlocking
fresh sources of capital will help, with Nigeria's pension fund assets at $26.4
billion at December 2015, according to data from Nigeria's National Pension Commission. Orji said that currently, when municipalities want to issue bonds
to fund infrastructure projects, most pension funds won't buy them because the
credit rating of the issuer isn't strong enough.
The
new venture will provide a form of monoline insurance, giving a guarantee and
allowing pension funds and insurance companies to invest. "The
NSIA cannot give guarantees by itself, so we have created a company that can do
this," he explained.
The
tie-up is the latest in a series of partnerships for the NSIA. In August, it
announced agreements with Old Mutual
Investment Group and UFF Agri-Fund
to establish two funds to invest in real estate and agriculture respectively.
Orji
said these could make their first investments in the first quarter of 2017. The
Agri-Fund aims to improve Nigeria's food security and is seeking investments in
farms, storage and irrigation infrastructure for everything from arable crops
to dairy farming and fish farming.
"That
is more advanced in terms of being able to make an investment, and the first
quarter is likely to be very busy," Orji said.
The
real estate fund is targeting commercial property such as offices, hospitality,
logistics and industrial parks.
The
NSIA also signed a strategic partnership agreement with its Moroccan peer, Ithmar Capital, to co-operate on
bilateral investments.
These
include a Trans-African gas pipeline which it is envisaged will support the
creation of industrial hubs. Orji said this was an ambitious project but it
would be cheaper and more effective than trying to build LNG facilities across
Africa to export Nigeria's gas. (Authority)
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