Nigeria’s central bank governor Charles Soludo has announced that the Africa Finance Corporation, a private sector funding and advisory group along the lines of the IFC, will be up and running by the end of the year.
Soludo told Emerging Markets that the Central Bank of Nigeria has already put up $5000 million for what will be initially a $2 billion fund. However he said that as private sector investors increase their share, the governments would get out of the fund as quickly as possible. “What is unique about this fund is that it isn’t going to be run by governments so it isn’t another ADB [African Development Bank],” he said.
The aim of the Africa Finance Corporation is to finance much-needed infrastructure projects across the country, a market worth at least $24 billion a year according to Soludo.
Capital inflows to Africa, which were $30.4 billion net last year, are at a record high. Foreign direct investment made up the bulk of this, with net inflows of $23.2 billion, and net portfolio inflows were $4.5 billion. Investment from China has also increased steadily, most of it in the oil sector, but there are nearly 700 Chinese firms operating in 49 countries in everything from roads to hotels. However, said Soludo, “The need is still huge and this new system is in place to do that.” The Finance Corporation will begin with several infrastructure projects in Nigeria.
African exporters have seen government revenue and corporate profits rise on the back of record world oil and commodity prices, and now have the funds to invest.
The Corporation will operate “the way the IFC does,” providing loans, equity, structured finance and advice to private companies that meet corporate governance and environmental standards. “We will operate in partnership with the international financial institutions,” he added.
Soludo said that the business plan for the Corporation is in place, and that international banks have expressed an interest in investing. A chief executive and board of directors will be appointed by the end of the year, to be based in the Corporation’s headquarters in Lagos. The first funded projects should begin at the start of 2007.