Infrastructure development has assumed a focal point in the activities of governments at all levels in Nigeria. Infrastructure generally has to do with the fixed and tangible assets on which other intangibles can be built on. Not limited in scope, it includes the provision of Housing, Power (electricity), Transport, Education, Communication, and Technology.
Ngozi Okonjo-Iweala, former coordinating minister of the economy and minister for finance, last year estimated that Nigeria needs N10.63 trillion ($67 billion) for road upgrades, bridge repairs, the energy sector, hospitals and schools. The Africa Infrastructure Country Diagnostic (AICD) Report for 2011 estimates that Nigeria requires sustained spending of $14.2 billion per annum over the next decade in order to address the infrastructure challenge.
Ernest Shonekan, chairman, Board of Infrastructure Concession Regulatory Commission (ICRC), had stated at the inaugural meeting of the Africa Public Private Partnership (APPP) network hosted by ICRC, that there was a yawning investment gap of about $31billion required yearly to fund infrastructure development in sub-Saharan Africa.
Therefore, as a result of the huge funding requirement for present and future infrastructural development and its attendant impact on survival and growth of businesses in Nigeria, experts believe that traditional funding methods can no longer suffice as the traditional fund providers; different levels of government do not have such resources at their disposal.
In view of this, Private Finance Initiatives (PFI) and Public Private Partnerships (PPP) are being adopted to meet the funding challenge. In Nigeria, PFI and PPP are relatively new models for public project finance and deposit money banks remain the formal source of finance for driving PFI among enterprises. Banks have three social and economic functions: to collect and secure savings and other deposits; to finance the economy by giving out credits; and to facilitate payments and to transfer funds. Their role is to reduce the gap between supply (the money deposited and potentially available) and demand (the money needed for investment) that exists between idle money and productive investment.
In recent times, an increasing number of socio-economic projects bordering on infrastructural and natural resources’ rejuvenation and business growth and expansion initiatives have been developed and financed through equity and medium-to-long term loan packages by commercial banks. In the last half decade, leading commercial banks in the country have continued to make strong marks in the area of project financing.
For banks that have been on the scene for years, it is expected that playing big in the project financing landscape would be seen as a game of experience and financial might, built up over years of profitable operations in the country – a case of bailing out a structure that has heavily fed them fat in the past. However, a quick look at the country’s project financing market shows commendable influence being exerted by a few new players, who ordinarily, would have been considered as greenhorns without the required skill, stamina and skill to play in the intricate game of project financing. Leading in this wise is Heritage Bank, which entered the market about twenty four months ago.
Since its foray into the Nigerian, financial sector, Heritage Bank has played a pivotal and leading role in the equity and project financing market, arranging in excess of $2 billion of debt facilities either as lead or sole financier or financial adviser. The field of engagement has equally been diversified; covering economic sectors such as MSME, Entertainment and Arts, Education, Oil and Gas, Aviation and Haulage and Public Sector.
For instance, the bank has midwived over USD100 million in funding for a variety of transactions in the film and entertainment industry from 2013 to date. These include Bloomberg TV Africa (the Pan African TV by Bloomberg LLP), Free-to-Air TV Broadcast Rights in Nigeria for the 2014 FIFA World Cup, HIP TV (a Pan African TV Music Channel broadcast on satellite TV which was funded from scratch) and a variety of other investments spanning content, platforms and production.
Also, the innovative multi-billion naira MSME Investment Protection Fund (InPF), which is a non-collateralised funding option with embedded insurance to address the default risk inherent in the SME Finance scheme, remains a strong differentiating indicator of the Heritage Bank approach to SME funding in the country.
However, the recent successful finance of Forte Oil Plc’s acquisition of 100 brand new Mercedes Benz product delivery trucks for haulage, logistics and product transportation across the Country as well as the Project Finance Facility to PIPP LVI GENCO to set up a 6.5MegaWatts Captive Power Generating Plant and a 25km Distribution Network to power Public Utilities in Lekki, V/I and Ikoyi represent giant strides by the relatively young Heritage Bank which had already financed similar and bigger projects in Port Harcourt and Abuja in deals worth several billions of Naira in the last 12 months.
Speaking on the significance of Heritage Bank’s project finance initiatives, Executive Director, Manila Banking, Niyi Adeseun noted: “For us at Heritage Bank, our core business philosophy as a timeless wealth partner to our customers is captured in our mission to create, transfer and preserve wealth. Our support efforts through project financing in the various sectors of the economy is one of the platforms that underscore our resolve and readiness to make a mark in the financial sector as a major pivot of socio-economic transformation of our country.” Continuing, he explained, “For instance, in the Oil and Gas industry, our interventions span the downstream sector areas of product importation, supply, engineering and many more while we are also gradually getting really involved in the upstream as well. We have financed a few of such projects in Port Harcourt and we have a couple of them also in Abuja”.
Akin Akinfemiwa, group chief executive officer, Forte Oil Plc, lauded Heritage Bank on its project financing portfolio. According to him, “We appreciate the strategic role of Heritage Bank in financing the acquisition of our latest 100 world-class product delivery trucks which, to us, is a very strategic investment that will substantially increase our capacity to grow our revenue and profitability and ultimately maximise value for our stakeholders”.
It is indeed very clear that due to Nigeria’s rich entrepreneurial culture, its dynamic economic landscape is characterised by a high level of local and international trade which has continued to witness growth over the years. This has been generating and will, possibly, continue to generate high demand for innovative commercial and corporate finance services.
HOPE MOSES-ASHIKE
