First Bank of Nigeria Limited is at the frontline in developing products that support power and infrastructure sector in the country. AMAKA IFEAKANDU looks at the bank’s efforts at supporting power/infrastructure sectors through products development.
Across the world, infrastructure development is a critical enabler for productivity and sustainable economic growth. It contributes significantly to human development, poverty reduction, and the attainment of the Millennium Development Goals (MDGs).
A recent report showed that Investment in infrastructure accounts for over half of the recent improvement in economic growth in Africa and has the potential to achieve even more.
For Africa, the need for adequate infrastructure – secure energy, efficient transport, reliable communication systems, resilient sanitation, and affordable housing—is particularly apparent and obvious.
Without doubt, the vast infrastructure deficit in a country is a constraint on its growth, but also an opportunity to leapfrog to new, more efficient technologies.
So, as a country becomes more urbanised, public goods become easier and cheaper to deliver to a more geographically concentrated population.
Government initiatives for infrastructure development
In Nigeria, there have been many initiatives to drive infrastructure development, with varying levels of success. The latest initiative by the federal government is the establishment of the Infrastructure Corporation of Nigeria (InfraCorp), which aims to raise $36.7 billion for projects and will be driven by some of the country’s top institutions.
InfraCo’rp, established with seed capital of N1trillion (about $2.6 billion) and was promoted by the Central Bank of Nigeria, the Nigerian Sovereign Investment Agency (NSIA) and the Africa Finance Corporation (AFC), a multilateral financial institution.
InfraCorp mandate, is to finance public asset development, rehabilitate old assets and construct new ones. The Central Bank of Nigeria has signed a term sheet with InfraCorp and four independent asset managers to develop the country’s infrastructure.
The four independent infrastructure asset managers are Sanlam InfraWorks; Africa Infrastructure Investment Managers (AIIM); AAA Consortium; and Chapel Hill Denham.
The government target is not only focusing on new infrastructure but on the rehabilitation of existing assets and the completion of longstanding projects that have failed to gain traction under previous governments, including the infamous 3,050 MW Mambilla hydropower project, stalled for more than 40 years despite significant budgetary allocations for it over decades, the 11.9km second Niger Bridge – now scheduled to be completed in 2022 – and the 130km Lagos to Ibadan Expressway.
Another major initiative was the Infrastructure Development Fund (PIDF), launched in 2020 to invest specifically in road and power projects.
Infrastructure in an economy
A country having good quality infrastructure is necessary not only for faster economic growth but also to ensure inclusive growth.
The inclusive growth will lead to the alleviation of poverty and reduction in income inequality in the country.
The availability of good quality infrastructure raises productivity levels in the economy and brings down costs of the enterprises. Besides, adequate infrastructure helps to expand trade not only within a country by improving transport facilities but also promote foreign trade through improvement of ports and airports. It also helps to diversify production by the firms as they are able to get the required supplies of raw materials and other inputs from the places where these are available in abundance.
However, with improved infrastructure the firms can produce goods in accordance with the demands of the people of different regions and countries.
Also, the expansion in infrastructure facilities such as irrigation, rural electrification, roads and road transport will promote agricultural growth and setting up of agro-processing industries. These general infrastructure facilities will help farmers and owners of processing industries to get their requirements of raw materials, fertilisers and other inputs at cheap rate and also help them to bring their products to the markets which are located in big towns and cities.
For poor farmers, improved infrastructure will reduce their input cost and increase agricultural production and reduce traders’ monopoly by improving their access to markets. It is a known fact that majority of farmers today are cut off from national and international markets, because of poor infrastructure and lack of access to market.
Better transport means greater access to public resources including schools, hospitals and other health facilities”. therefore having adequate infrastructure facilities will ensure sustained growth of employment in agriculture and small-scale rural industries and bring prosperity in the rural areas and in this way ensure inclusive growth. This will also help to prevent the mass exodus of the rural people to urban areas where they cause problems of urban congestion, growth of slums and acute housing shortage.
First Bank’s support
First Bank of Nigeria Limited, Nigeria’s premier and leading financial services provider, is one of the nation’s financial institutions with the muscle to support the Power and Infrastructure sector in the country. The bank achieved this through a variety of products and solutions tailored towards meeting the respective needs of project promoters. Some of the products developed by the bank to support the sector include; Corporate or On-Balance Sheet Finance, Project finance, senior debt, subordinated and/or mezzanine debt, bridging finance, financial advisory services, working capital support, acquisition Finance, structured Trade and commodity finance, Bonds and Guarantees, Intervention Funds Financing as well as import and export finance.
Unlocking Power and Infrastructure Sector
Listing its products for financing, FirstBank said unlocking the Power and Infrastructure sector remains a key driver to economic growth in Nigeria, and supporting this sector remains one of its major focus and contributions as a business and reliable financial institution in Nigeria.
The bank is supporting both the private and public sectors in creating new and expanding existing infrastructure and understanding that advising them on project development, innovative investment options and debt solutions, will ultimately help deliver quality output.
As a subsidiary of the FBNHoldings, the bank has built a long history of reputation and expertise in working with project sponsors in developing new financing and investment strategies to optimise the viability while maximising returns for new projects. The Advisory team of the group has continued to collaborate with private and institutional investors in reviewing their respective capital plans, turning public and private strategies into defined projects, and helping to guide projects from concept to early stage feasibility work, while delivering on commercial structuring and financial modelling.
The group remains the reference institution in its capacity and capabilities to help project sponsors and investors to structure, negotiate and execute complex infrastructure investment transactions by developing market mechanisms to generate competition for investments and ensuring that competitive tension is present in the negotiation and structuring of all projects receiving its support. The bank also provides support to the key sub-sectors in the transport industry – public transportation, roads & toll roads, rail & light rail transit, seaport and airport development, pipeline construction and water utilities among others.
Key focus sectors
And in doing this noble work of helping to facilitate the development of the nation’s comatose infrastructure, the bank is mindful of the planet and the need to pursue an eco-friendly and sustainable approach in its decision-making process in line with global best practices and sustainable environmental and social business practices, especially, towards infrastructure development and Power/Energy management.
In the supporting infrastructure development, the bank has special interest in some sectors, especially in Power Generation, Transmission and Distribution, Smart metering schemes.
Other areas of interest are renewable Energy, Transport, Gas Transport, Storage and Supply, Construction, Infrastructure Components & Equipment Mining, Water & Waste Management Services.
Structuring &arranging solutions
Also, the bank is of the view that industry experience is needed to creatively develop structured financial solution to deliver on complex projects. As a member of First Bank Holdings, First Bank has excellent access to debt and equity capitals through local and international financial markets to drive projects through completion and beyond.
The bank has over 124 years of proven ability to tailor financial products to meet individual stakeholders’ need and project requirements with ability to structure, underwrite and hold significant debt positions sets the bank apart and can help to enhance it’s customers’ competitiveness and exploit growth opportunities.
Apart from having long term advisory support for critical infrastructure projects, it has unrestricted access to senior secured corporate loans and mezzanine debt to public-private partnerships and project financing while access to pool of experienced professional staff to guide clients in structuring market acceptable and bankable projects.
With the level of support offered by FirstBank in the development of the nation’s moribund infrastructure, it is hoped that similar organisations will come up to and render similar support to bail the nation out of its present moribund infrastructure.