The Central Bank of Nigeria (CBN)’s efforts to boost economic diversification will get a significant boost when the Infrastructure Development Company (Infra-Co) Plc takes off in the third quarter of this year, writes TONY CHUKWUNYEM

During the first half of last year, the Central Bank of Nigeria (CBN), like its counterparts in most parts of the world, was quite busy trying to come up with policies to help mitigate the impact of COVID-19 crisis on the economy. Thus, after announcing the initial COVID-19-induced intervention measures in March, the apex bank, the following month, unveiled plans to float an infrastructure development firm to be named InfraCo Plc with an equity take-off capital of N15 trillion. Announcing the initiative, CBN Governor, Mr. Godwin Emefiele, said the proposed company, which will be managed by an independent infrastructure fund manager, would play a key role in boosting economic diversification and thereby helping to insulate the country from external shocks such as the COVID-19 crisis. He said: “This fund will be utilised to support the Federal Government in building the transport infrastructure required to move agriculture products to processors, raw materials to factories and finished goods to markets, as envisaged at the CBN Going for Growth Roundtable in March 2020.”

FG’s approval

The CBN Governor also gave an update on the Infra-Co during a media briefing on the outcome of the Monetary Policy Committee (MPC) meeting in July last year. He revealed that the Federal Government had approved the take-off of the establishment of the company and that members of the MPC had applauded the government’s action. He said at the time that “this entity, which will be wholly focused on Nigeria and Nigerians alone, will be co-owned by the CBN, the Africa Finance Corporation (AFC) and the Nigeria Sovereign Investment Authority (NSIA), but exclusively managed by an Independent Infrastructure Fund Manager (IIFM) that will mobilise local and foreign capital to support the Federal Government in building the transport infrastructure required to move agriculture and other products to processors, raw materials to factories and finished goods to markets. “The sum of N15 trillion is projected over five years for the initial run. The committee noted with satisfaction the CBN’s immediate work on the updates and timelines for the establishment of this much-needed entity.”

Search for asset managers

Having obtained Federal Government’s approval for the project, CBN and its partners embarked on a search for asset managers that would run the company. In fact, when the initial deadline set for Expression of Interest from qualified asset managers active in the infrastructure sector lapsed on March 16 this year, it was extended by two weeks to March 30. While the search was on, the Presidency announced that President Muhammadu Buhari had approved the government’s seed capital of N1 trillion for InfraCo, disclosing that the infrastructure company will be wholly focused on critical infrastructure investment in the country, under a public-private partnership. According to the Presidency, Infra-Co, which will be wholly focused on critical infrastructural investments in Nigeria, will raise funding from CBN, Nigeria Sovereign Investment Authority, pension funds, and local and foreign private sector development finance institutions. It also stated that the board of the Infra-Co would be chaired by the CBN governor, while the board will include the MD of NSIA; President of Africa Finance Corporation, representatives of Nigerian Governors Forum and Ministry of Finance and three independent directors from the private sector. At an investors’ webinar held in Abuja last Tuesday, however, the Vice President, Professor Yemi Osinbajo, disclosed that government had hired four asset managers to run Infra-Co. The firms are Netherlands–based Sanlam Infraworks, AIIM, a unit of South Africa’s Old Mutual Group, Chapel Hill Denham, Tripple A consortium, comprising AfricaPlus Partners and Arc Asset Management, as well as Afrinvest West Africa. Also speaking at the webinar, Emefiele announced that Infra-Co would take off in the third quarter of this year, adding that the Federal Government had approved KPMG as the financial adviser to the company.

Boost for FDI

flows Analysts generally welcomed the CBN governor’s announcement as they noted that the country has for too long grappled with poor infrastructure, which has affected economic growth and development. For instance, in their reaction, analysts at CSL Research predicted that the take-off of Infra-Co would lead to an improvement in Foreign Direct Investment (FDI) flow into the country’s economy. They, however, emphasised that “a lot of effort must be put into ensuring that the implementation does not suffer from the usual bottlenecks associated with state promoted projects. In particular, the use of funds and monitoring of approved projects to completion is critical for success.” Expressing support for the initiative, the CSL Research analysts stated: “In our view, the idea of Infra-Co is laudable as it conforms with our highly-touted model of infrastructure financing in Nigeria, that minimises bureaucracy and maximises efficiency. “Collaborating with the private sector to bridge the widening infrastructure deficit appears the only viable option given Nigeria’s current weak fiscal position and elevated borrowings. “Looking forward, we see this paving the way for an eventual improvement in foreign direct investment flow into the Nigerian economy. The current infrastructural deficit raises the cost of doing business, forcing many businesses to relocate to other favourable climes or wind up. The CBN governor, Godwin Emefiele, noted that many local and international private fund managers have shown interest in being part of the project.” Citing the projection by Moody’s that Nigeria would need more than $3.00 trillion over the next 30 years to finance its infrastructural deficit, the analysts noted that Nigeria’s growing infrastructure deficit continues to be a major concern among economic experts and stakeholders “as poor infrastructure is one of the biggest impediments to smooth business operations and capital inflows into the country. “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 exploit its vast amount of natural and human resources towards achieving a broad-based, sustainable and inclusive growth,” they added.

Infrastructure finance office

However, while the COVID-19 crisis may have led to the creation of Infra-Co, CBN, even before the advent of the pandemic, was already actively supporting infrastructural development in the country, with intervention funds such as the N300 billion Power and Aviation Intervention Fund (PAIF). In addition, it has reviewed the prudential guidelines to recognise the peculiarities of long term financing, which is needed for infrastructural projects. Indeed, as the apex bank notes in a statement on its website, in order to effectively address the challenge of inadequate infrastructure, it established the Infrastructure Finance Office on March 01, 2010. According to the regulator, “the mandate of the Office is to, among others, evolve a sustainable financing framework to stimulate long-term financing for infrastructure development in the country.”

Conclusion

With the infrastructure company widely expected to facilitate the development of critical infrastructure across the country, including public asset development, infrastructure rehabilitation and reconstruction and also drive investments in cuttingedge infrastructure projects for roads, rail, power and other key sectors, stakeholders told New Telegraph at the weekend that they are counting down to the take-off of the company.