Fund Managers

Infrastructure: Capital Market Stakeholders Seek Alternative Funding

Worried by budgetary pressure and reduction in the level of public funds,  stakeholders in the Nigerian capital market are calling for alternative sources of financing to support infrastructure development

They spoke on Thursday at a webinar session targeted at the infrastructure sector and organised by FMDQ Debt Capital Markets Development Project 2025 Infrastructure Finance Sub-Committee.

The webinar was themed, ”Leveraging the Debt Capital Markets for Infrastructure Development”.

Mr Bola Onadele, Chief Executive Officer, FMDQ Group, said at the webinar that the debt capital market provided a key avenue through which infrastructure growth could  be fostered to promote economic development.

Onadele said alternative sources of financing were required to support infrastructure development, given the reduction in the level of public funds available due to budgetary pressures.

He said that increased public debt to GDP and the inability of the public sector to deliver a more efficient investment spending, with the presence of competing priorities, called for alternative source of financing.

Onadele said that infrastructure development was critical for economic growth, reduced poverty, job creation as well as improving the wellbeing of the citizenry.

According to him, the McKinsey Global Institute estimates that $3.3 trillion must be spent annually through 2030 to address Africa’s huge Infrastructure gap.

He said that according to the IFC, bridging the huge infrastructure gap in emerging markets economies, estimated at $1.3 trillion per year, is vital to attaining the United Nations Sustainable Development Goals.

“Infrastructure development is a key driver for progress across the continent and a critical enabler for productivity and sustainable economic growth.

“Traditionally, infrastructure investments have been financed with public funds by governments; they being the key players given the inherent public good nature of infrastructure,” he said.

Onadele said it was necessary for the private sector to play a role in ensuring that the necessary capital was channeled into this extremely vital area, to drive the much-needed growth.

He noted that private sector financing was critical and the capital market needed to be harnessed to raise alternate finance to be deployed to diverse projects through issuance of long term securities.

Onadele said access to financing ranked as a top challenge in infrastructure development, according to a PricewaterhouseCoopers survey.

He said that the existence of an enabling political and regulatory environment was also important in attracting both local and foreign investors into the infrastructure development sphere.

Onadele said the Federal Government had been supportive in creating an enabling environment for infrastructure development through different initiatives.

These, he said, included the establishment of the Infrastructure Credit Guarantee Company Limited (“InfraCredit”).

He said that government had “actively encouraged Public-Private Partnerships (PPP) which are an effective way of transferring life-cycle costs of infrastructure off public-sector budgets and simultaneously creating investable assets for the private sector.”

Mr Bolaji Balogun, Chief Executive Officer, Chapel Hill Denham & Chair, Steering Committee, FMDQ Debt Capital Markets Development Project, said government budget could not be enough for infrastructure development.

Balogun said $35/$40  billion  was needed annually to address infrastructure problem, noting that, government budget was completely inadequate.

“We are only scraping the surface: only if investment in infrastructure grows by 15 to 18 per cent a year can we reach eight per cent economic growth.

“Unlocking institutional capital domestically, regionally and globally is the only way to deliver infrastructure for Africa,” he said.

Speaking on market solutions, Balogun stressed the need for listed products, diversification, green investments and Shariah investments.

According to him, institutions seek portfolio risk and not individual project risk by investing through collective investment scheme.

He said capital markets could bridge the gap by packaging a portfolio of investments to provide the attractive portfolio that institutions sought.

Mr Chidi Izuwah, Director-General, Infrasturcture Concession Regulatory Commission, said COVID-19 had changed the national policy, hence the need to plan along with that.

Izuwah said the debt capital market was very crucial for infrastructure growth and development.

According to him, there is the need to draw a difference between financing infrastructure and funding.

“We need roads across our country in order to build a functional society and we need to have the humility to look across the world to see what people have done,” Izuwah stated.

Also speaking, Dr Farouk Aminu, Head, Investment , Supervision Department, National Pension Commission, said the commission had made a lot of changes from 2014 till date.

Aminu said the commission had been involved in a lot of initiatives to promote infrastructure investment in the country.

Prof. Gbolaham Elias, Principal Partner, G. Elias & Co, called for coherent regulatory framework for investors to come into the country.

Elias said the cost of purchasing securities was high, noting that foreign investors, especially, were not comfortable with that. (NAN)


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