Final project for the Unlocking Investment and Finance in Emerging Markets and Developing Economies

1. HYPOTHETICAL
FINANCE AND
INVETSMENT
STRATEGIES IN NIGERIA
By: Oyeyinka Akande

2. OUTLINE
Infrastructural Development in
Nigeria
Proposed Vehicle to Fund Specific
Infrastructural Gap
Proposed Implementation Strategy
to Attract Additional Capital

3. Nigeria is a developing economy with gross domestic product (GDP) growth of 2.38% in 2018 from a base of 2.11%
in 2017, representing an increase of 0.27%. The GDP in Nigeria was worth US$397.30 billion and represented 0.64%
of the world economy.
In providing infrastructural development to the country’s population of over 190.9 million people, it is important to
proffer solutions of accessing long term capital to bridge immediate funding gaps.
Recently, Nigeria came up with a policy to diversify the economy away from crude oil dependency which contributes
up to 80% of the nation’s net receivables.
The intention is to increase efficiency in other domestic sectors towards achieving export of commodities product or
mined. Sectors of immediate focus include i.) Mining ii.) Agriculture iii.) Services.
INFRASTRUCTURAL
DEVELOPMENT IN
NIGERIA
2.11%
2.38%
2017 2018
GROSS DOMESTIC PRODUCT (GDP) GROWTH
0.21%
• Nigeria is a developing economy with gross domestic product (GDP) growth of 2.38% in
2018 from a base of 2.11% in 2017, representing an increase of 0.27%. The GDP in Nigeria
was worth US$397.30 billion and represented 0.64% of the world economy.
• In providing infrastructural development to the country’s population of over 190.9 million
people, it is important to proffer solutions of accessing long term capital to bridge
immediate funding gaps.
• Recently, Nigeria came up with a policy to diversify the economy away from crude oil
dependency which currently contributes up to 80% of the nation’s net receivables.
• The intention is to increase efficiency in other domestic sectors towards achieving export of
commodities produced or extracted. Sectors of immediate focus include i.) Mining ii.)
Agriculture iii.) Services iv.) Manufacturing and semi processing of agro allied products.

4. PROPOSED
VEHICLE TO FUND
SPECIFIC
INFRASTRUCTURAL
GAP
5
INFRASTRUCTURAL
PROJECTS IN
NIGERIA
Greenfield
Brownfield
• In achieving the above, and in connecting all the
productive and extractive sectors of the country
together, the government recently established the
Millennium Infrastructure Development Fund
(MIDF).
• The entity is set up to accelerate the execution of
certain critical infrastructure projects, key to the
development of Nigeria’s economy and increasing
GDP growth up to double digits in the next decade.
• The MIDF will hence consist of a composite of
funds obtained from; i) FGN Annual Budget
Receipts ii) Bank of Infrastructure liabilities, whilst
additional capital will be raised through bilateral(s)
from multilateral development banks/ export
import banks and local/ international capital banks
through the issuance of infrastructural bonds.
• Access to the commercial debt market (third party
financing) for road projects on a purely non-recourse
project finance basis is currently being challenged.
There is evidence that recent trends in financing road
projects have evolved over the past few years with more
Public Private Partnership (PPP) infrastructure projects
being executed through innovative State/ Sovereign/
Domestic and International Public & Private funded
initiatives leading to structures as build own operate
and transfer (“BOOT”) as opposed to commercial non-
recourse project finance with attendant contingent
State / Sovereign obligations.
• The initial capital outlay proposed by the government is
expected to crowd-in finance from the private sector.
This is most important at this stage both for the
government and populace, as interest payments on
existing debt service consumes up to 20% of annual
budget whilst in instances of principal repayments being
included in debt service, 60% of annual revenues could
be fully utilized for debt repayment. This reduces the
free cash needed to keep the government operational
and meet activities such as education, health, security
etc.
Nigeria
Federation
N0.59 trillion
Bank of
Infrastructure
N0.10 trillion
NEXIM Banks
N1.50 trillion
Private
investors
N0.37 trillion
AVAILABLE FUNDING SOURCES FOR PIDF

5. Nigeria is a developing economy with gross domestic product (GDP) growth of 2.38% in 2018 from a base of 2.11%
in 2017, representing an increase of 0.27%. The GDP in Nigeria was worth US$397.30 billion and represented 0.64%
of the world economy.
In providing infrastructural development to the country’s population of over 190.9 million people, it is important to
proffer solutions of accessing long term capital to bridge immediate funding gaps.
Recently, Nigeria came up with a policy to diversify the economy away from crude oil dependency which contributes
up to 80% of the nation’s net receivables.
The intention is to increase efficiency in other domestic sectors towards achieving export of commodities product or
mined. Sectors of immediate focus include i.) Mining ii.) Agriculture iii.) Services.
PROPOSED
IMPLEMENTATION
STRATEGY TO
ATTRACT
ADDITIONAL
CAPITAL
• In reducing the burden on the government revenue, it would be prudent for Nigeria to approach the
Multilateral Investment Guarantee Agency (MIGA) to provide a guarantee for a possible Infrastructure Bond
issuance.
• This will assist in two ways by improving the credit rating of the proposed bond and also mitigating against
political risk for suitable foreign investors.
• Another key success factor towards execution of the MIDF will be the establishment of an appropriate
governance and reporting framework. The Board must be able to show clarity in the following areas:
 Ensuring that funds are generated and utilized in line with impact investing guidelines;
 Transparency in the sources and uses of funds;
 Efficiency of how funds are prudently utilized;
• To augment government receipts in times of repayment shortfall, and to further provide revenues for road
maintenances post road construction, tolls should be introduced along these routes. This is expected to
provide a buffer for revenue sources to the Bond holders, who will be senior in cashflows from the government
and toll revenues, whilst the other lending parties shall be subordinated.
• Technology will also be introduced to record the number of cars passing through the various routes and cross
checked with balances in collection accounts. Prior to the release of funds from this account, the Lender’s
security Trustees will seek the Bond holders concurrence before authorizing use of funds. This creates ample
cash balance denominated in Naira whilst the Nigerian government can also provide guarantees that accrued
funds will be converted to dollars thereby to ensuring investors can be (re)paid via loan repayments or
dividends.

6. THANK YOU
Oyeyinkaakande@gmail.com