In the midst of challenges and concerns plaguing regions like Nigeria, the imperative need for critical infrastructure development in developing nations has taken center stage. DataPro Nigeria, a technology-driven credit rating agency, recently hosted the 2023 International Rating Webinar. The event aimed to shed light on various avenues available to sovereign states and sub-national entities for securing the essential capital required for infrastructure development.

The digital gathering attracted a diverse audience, including Capital Market Operators, representatives from State Governments, and other influential stakeholders from around the world. The theme, “The Role of Subnationals and Credit Rating Agencies in Infrastructure Development,” delved into strategies for unlocking financial resources for sub-national entities involved in infrastructure projects and how Credit Rating Agencies (CRAs) can contribute to bolstering economic prosperity.

During a panel discussion guided by DataPro’s Chief Operating Officer, Prince Oladele Adeoye, a group of financial experts provided valuable insights. The panel included Mr. Peter Onyango, Chief Investment Officer of the African Development Bank; Mr. Adeniran Ajakaiye, Managing Director of Africa Plus Partners; and Mr. Egie Akpata, Director and Co-owner of UCML Capitals Limited. They deliberated on the topic “Subnational Finance for Infrastructure: Key Considerations.”

The panelists unanimously agreed that the success of infrastructure financing is closely intertwined with the sustainability of such projects. They underscored the challenges faced by the capital market, including political interference and the limited investment grade ratings for Nigerian states. To address these challenges, the panelists proposed a strategy involving private sector investment in sub-national infrastructure development, commencing with smaller projects to demonstrate profitability and successful private sector participation before embarking on larger endeavors.

The discussion also explored various financing options available to sub-national entities for infrastructure development. These options encompass borrowing from banks and financial institutions, as well as raising debt instruments. However, it was acknowledged that the financial viability of many sub-national entities limits their potential to secure funding through these traditional means. Other financing options discussed included Public-Private Partnerships, leveraging grants from international organizations, innovative financing via Special Purpose Vehicles (SPVs), and enhancing revenue collections.

While banks were recognized as a viable source of funding for infrastructure projects, they often fall short in financing long-term, comprehensive infrastructure development. Consequently, the capital markets play a pivotal role in adopting equity financing for long-term infrastructure projects.

The panel also shed light on the African Development Bank’s (AFDB) contribution to bridging the infrastructure gap in Africa. The AFDB’s role involves creating an enabling environment and supportive policy framework, collaborating with national and sub-national governments, the private sector, and providing equity investment, loans, grants, guarantees, and technical assistance. These efforts strengthen infrastructure development across member countries and mobilize resources for infrastructure financing.

Furthermore, the panelists stressed the importance of evaluating a project’s bankability, considering factors like the state’s financial stability, legal framework, political stability, security, economic conditions, and alignment with the sub-national’s core expertise. Bankable projects are currently limited at the state level in Nigeria, primarily due to their relatively short governance terms of eight years. This underscores the critical role of rating agencies in project financing, especially in assessing the viability of such projects.

The event featured a keynote address by Mr. Kehinde Ogundinmu, the Managing Director/CEO of Nigeria Mortgage Refinance Company Plc, who emphasized the pivotal role of infrastructure development in enhancing economic growth and social well-being. He highlighted the challenge of securing funding for infrastructure development, which governments and policymakers worldwide are grappling with. Successful infrastructure delivery, he argued, demands close collaboration among various stakeholders, each with its own agenda and interests.

In his welcome address, Mr. Abimbola Adeseyoju, the founder of DataPro, highlighted the event’s purpose as an annual platform for stakeholders within the Capital Market and related sectors of the economy to brainstorm how the African continent, including West African countries and Nigeria, can harness the value offered by the Credit Rating Industry to promote economic development and prosperity. He emphasized the crucial connection between infrastructure development and the quality of life, expressing the need to accelerate infrastructure development to halt brain drain and alleviate poverty.

In a goodwill message, Mr. Lamido Yuguda, the Director General of the Securities and Exchange Commission (SEC), represented by Mr. Abdulkabir Abass, Director of Registration and Exchange, commended DataPro Limited for its commitment to organizing webinars aimed at developing Nigeria’s debt capital market. He stressed the role of credit rating agencies in infrastructure development by providing independent assessments of the creditworthiness of sub-national governments and other borrowers. He also mentioned SEC’s initiatives to reposition the Nigerian Capital market to better support infrastructure development and protect investors.

In conclusion, the synergy between sub-national governments and credit rating agencies was highlighted as a potential catalyst for sustainable infrastructure development, a favorable investment climate, and the country’s pursuit of rapid transformation.