Infracredit, African Trade Insurance Partner On Risk Sharing, Access To Debt Financing

Specialised infrastructure credit guarantee institution in Nigeria, InfraCredit, on Tuesday said it has signed a Memorandum of Understanding (MoU) to partner the African Trade Insurance Agency (ATI), a pan-African multilateral development finance institution that provides risk solutions, on risk-sharing that will enhance access to long-term local currency debt financing for infrastructure development in Nigeria.

Under the MoU, InfraCredit and ATI share risks within the context of their respective mandates, policies, resources and instruments, to provide credit guarantees, co-guarantees and counter-guarantees/reinsurance, as applicable, on eligible infrastructure financing transactions.

To demonstrate the potential impact of this strategic partnership, both parties recently entered into a risk sharing arrangement on a 10-year N10bn infrastructure bond (US$24m equivalent) issued in February 2022 by a Nigeria based digital telecommunications infrastructure company, and a first-time issuer in the debt capital markets.

InfraCredit provided a first loss guarantee for the infrastructure bonds, while ATI provided a second loss counter guarantee on 50% of principal repayments on the bonds to InfraCredit. The infrastructure bond was rated “AAA” by Agusto and Co. and GCR, and was oversubscribed by domestic pension funds.

Speaking during the signing of the MoU in Nairobi, the Chief Executive Officer of InfraCredit, Chinua Azubike, assured that “one of the vital strategies of InfraCredit towards addressing the significant infrastructure financing deficit in Nigeria is to grow our guarantee capacity through risk sharing partnerships with development finance institutions like ATI, by leveraging their capacity to share our long-term risks.

“The success of our initial risk-sharing transaction serves as a strong demonstration effect of the potential impact. Our aim is to scale up towards underwriting larger infrastructure projects and mobilising more domestic credit from local institutional investors to support key priority infrastructure sectors in Nigeria,” he added.

Also speaking during the ceremony, Manuel Moses, CEO of ATI, stressed the necessity for the development of Infrastructure which “remains a major challenge in Africa and ATI is enthused to enter into this partnership with InfraCredit.

“We intend to support the acceleration of investments across the sector, which is a bedrock and an enabler for productivity and sustainable economic growth on the continent. This risk sharing agreement will not only deepen and strengthen our strategic relationship with InfraCredit but it will also provide an opportunity for mobilising financing in local currencies for infrastructure development, building a better Nigeria for tomorrow,“ he stressed.

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