A Capital Market Infrastructure Fund Could Jumpstart Project Development In Nigeria - Mary Uduk

Monday, December 09, 2019 / 1:37 PM / SEC Nigeria / Header Image Credit: EveryEvery NG

The Nigerian Securities and Exchange Commission (SEC) has said that the creation of an infrastructure fund through the capital market could help in closing the infrastructure gap in the country.

Acting Director-General of the SEC, Ms. Mary Uduk, stated  this at the annual conference  of the Capital Market Correspondents Association of Nigeria (CAMCAN), over the weekend in Lagos

The Acting DG, who was represented by the Head External Relations Department of SEC, Mr. Sufian Abdulkarim, said that international capital markets are the largest and deepest pool of financing in the world, and in conjunction with local capital markets, represent an untapped source of funds for infrastructure projects. She noted that capital markets could make a huge contribution to economic development by designing effective transaction structures.

Uduk said the government could not be the sole provider/promoter of infrastructure projects, adding that private sector investment in the infrastructure sector is also required.

According to her, "Given the need to bridge the infrastructure deficit and the challenges of financing it, the county needs to leverage alternative sources of infrastructure financing, such as the capital market. Given the government's bid to reverse the current growth trend, diversify the economy and develop infrastructure, there is no better time than now to leverage the capital market for sourcing of infrastructure development financing.

"The capital market provides an enabling environment for private investments in infrastructure projects and the SEC is doing its part to foster this through the implementation of the Capital Market Master Plan (2015-2025). The plan's major objective is to transform the Nigerian capital market, making it competitive, while contributing towards the nation's development through funds mobilization.

The Acting DG said the Nigerian capital market has been used to raise funds since 1946, when the colonial government floated the first 300,000 pounds loan stock to fund the local administration, "Today, the Nigeria capital market has broadened and become more sophisticated".

"There are various sources of funds available in the capital market which can be harnessed for infrastructure development, some of which are Pension Funds, Real Estate Investment Trusts (REITs), Collective Investment Schemes (CIS) amongst others. In addition, various capital market instruments can be used for infrastructure financing, amongst which are the infrastructure project bonds, Sukuk, infrastructure debt bonds, green bonds and revenue bonds". 

She stated that over the years, several state governments had issued sub-national bonds to finance infrastructure projects. 

The Federal Government of Nigeria (FGN), she said, also channels some of the proceeds of its general bond issuance towards financing infrastructure, although it had no dedicated infrastructure project bond. 

However, she noted that there is a departure from this trend as the FGN issued two (2) sovereign Sukuk consisting of N100bn in 2017 and another N100bn in 2018 solely for infrastructure development, as well as two (2) green bonds in 2017 and 2019 valued at N10.6bn and N15bn respectively.

"Before then, the Osun state government had issued Sukuk in 2013 for the construction of schools. The major justification for Sukuk issuance in Nigeria is the need to close the vast infrastructure funding gaps across the country because it is asset-based or project-based. Other projects that can use Sukuk include; Mass Housing, Road, Railway and Airport construction, Construction of Schools, hospitals, acquisition of meters for DISCOs, and equipment for generating companies amongst others," she added. 

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