IFC Plans More Nigeria Investment, $1 Billion in Bond Sale

LAGOS (Capital Markets in Africa)- The World Bank’s private-lending arm plans to boost investments in Nigeria by about 20 percent as Africa’s second-biggest oil producer tries to recover from a recession.

The International Finance Corp. is looking to invest about $1.2 billion in Nigeria for the year through June 2018 using equity or debt the IFC raises itself or that it mobilizes from other sources, Country Manager Eme Lore said in a March 22 interview in Lagos, the commercial capital.

“You have a growth story that we think will turn around in the 4 to 5 percent range in the medium-term,” Lore said. The IFC is “very bullish about what can happen in a number of sectors,” including electricity and manufacturing, she added.

Nigeria is increasing investments in power, agriculture and transport infrastructure to help its economy recover after the price of crude, its main export, tumbled 68 percent from a record in 2008 and attacks by militants on oil facilities in the Niger delta cut output. Both factors contributed to gross domestic product shrinking 1.5 percent in 2016, the first contraction in more than two decades.

Power Support
The government, led by President Muhammadu Buhari, earlier this month released an economic blueprint to boost growth to 7 percent and reduce the inflation rate to less than 10 percent by 2020. S&P Global Ratings, which affirmed a B assessment for the country this month, said the economy will probably grow at 1.5 percent this year, citing rising crude output and fiscal spending.

Low electricity generation is highlighted as being among the biggest challenges to companies in the West African nation. The IFC is working with the World Bank to provide a “sizable package of investment and support” measures for the power sector, Lore said. “We’re currently having conversations to figure out what all the stakeholders need.”

Nigeria sold 17 state-owned power utilities in 2013 to attract investment needed to expand the grid and end constant blackouts. Yet, private investors have had their businesses affected by the increasing amount owed to them by government, an inability to obtain foreign exchange to import equipment and militant attacks on gas-supply installations.

Bond Program
The IFC expects the country’s Securities and Exchange Commission to this year give approval to start a long-term, local-currency bond program that will allow it to issue the equivalent of as much as $1 billion, Lore said. The bond, which would mature in five to seven years, has been delayed because of market conditions and regulatory approvals, she said.

The lender sold its first Nigerian local-currency debt in 2013, raising 12 billion naira ($38 million) after investor demand was more than double the offer.

The bonds will enable the IFC to meet the need of clients that want to borrow in naira owing to foreign-exchange volatility, Lore said. The currency has dropped 36 percent since the Central Bank of Nigeria in June removed a 197-199 peg against the greenback. The naira gained 0.6 percent to 313.18 at 6:33 a.m. in Lagos Tuesday.

“With the exchange-rate environment now, people are rethinking” options to borrow in dollars or naira, Lore said. “We have some clients who are interested in naira, so it’s really to build up that pipeline of clients.”