The Managing Director/ Chief Executive Officer, Chapel Hill Denham Group, Mr. Bolaji Balogun, has said that over the next decade, Nigeria will require N28 trillion to fund infrastructure from private sources. Balogun, who stated this while delivering a paper on ‘Accessing Debt Capital Market for Infrastructure Financing, Opportunities and Challenges,’ at the FMDQ Nigerian Debt Capital Markets workshop in Lagos, said N2.8 trillion would be required annually in the next 10 years to fund infrastructure gap.
He noted that the current financing approach was neither sustainable nor scalable. Balogun said that banking sources were unable to meet the growing financing need in Nigeria’s infrastructure requirements, as banks would have to grow loans at circa 20 per cent per annum to meet this requirement, compared to circa nine per cent 2009- 14 CAGR.
He noted that tighter regulatory requirements under Basel III rules would increase the pricing and reduction in supply of long term bank debt, restricting longdated bank lending in the absence of long term deposits. Balogun said that using domestic capital sources as alternative source of financing was necessary to make infrastructure sustainable and viable.
He listed option for sustainable DCM structure to include project bonds and infrastructure debt funds.
Balogun noted that infrastructure equity was more suitable to private equity, SWFs and large family offices with greater exposure to the asset class and expertise in infrastructure financing.
He said given the relatively early stage of infrastructure financing in Nigeria, infrastructure debt funds perhaps represent the best near term approach for pension funds and other institutions to invest in infrastructure debt.
The Federal Government has also been urged to float a sovereign ‘Sukuk’ by tapping into the international market to raise funds to address the country’s infrastructure challenges.
The Managing Director, Lotus Capital Limited, Mrs. Hajara Adeola, who stated this on Wednesday at the two-day workshop, said that sovereign Sukuk was critical to the development of the Nigeria non-interest capital market. Sukuk is an Islamic financial certificate similar to a bond in Western finance that complies with Sharia, the Islamic religious law.
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