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Nigeria

Nigerian Financial Institution

$480 million
Banking
SPG
Proposed

Project Facts

Project Facts

Project Facts

Nigeria
Project ID
12981
Strategic Priority Area
IDA
Guarantee Holder
Special Purpose Vehicle to be established
Investor Country
Cayman Islands
Environmental Category
FI
Date SPG Disclosed
May 29, 2015
Projected Board Date
November 06, 2015
Project Type
Non-SIP
Fiscal Year
2015

Project description

This summary covers lending from a special purpose vehicle (SPV) to a Nigerian financial institution. MIGA is proposing to provide coverage for a share of IFC financing guaranteed by an international commercial financial institution, $325 million principal and $25 million past due coupon payment, against the risks of expropriation of collateral rights and transfer restriction. Funding would be channeled to the Nigerian financial institution by IFC through the SPV to be specifically established for this transaction in a permissible jurisdiction for the World Bank, in order to accommodate the project’s secured funding nature.

The project involves expansion of operations of the financial institution in Nigeria by enabling up to $375 million of borrowing. Loan proceeds will be used by the financial institution for its general capital expansion, including to provide medium and long-term financing to Nigerian enterprises. The project also aims to provide hard currency liquidity to Nigeria at a time when the country’s issuers faces somewhat challenging international funding conditions, due to declining oil revenues.

Environmental Categorization

The project is a category FI-1 under MIGA’s Policy on Environmental and Social Sustainability. The project is a secured financing to support the financial institution’s long-tenor lending for general corporate purposes with the aim of further diversifying its balance sheet loan exposures, including for projects that are typically high risk with the potential for significant adverse environmental and social risks and impacts that need to be adequately managed. Therefore, the overall portfolio risk for this project is considered high. The identified applicable requirements are MIGA’s Exclusion List, the applicable national social and environmental laws in Nigeria, and MIGA’s Performance Standards.

Development Impact

MIGA’s proposed guarantee will enable the international commercial financial institution to provide a larger amount of financing (in a form of guarantee to IFC) than it would have done on uncovered basis, which will benefit the Nigerian financial institution. The transaction will enable the bank to further diversify its balance sheet exposures and improve the asset-liability management profile of its balance sheet by making available longer tenor funding than is currently available to Nigerian financial institutions.

MIGA’s proposed support for this transaction is aligned with the agency’s strategic priority of supporting investments into countries eligible for concessional financing from the International Development Association.