EAIF increases lending to Nigeria fertilizer plant project “of prime strategic importance”
The Emerging Africa Infrastructure Fund (EAIF) has increased its lending to Indorama Eleme Fertilizer and Chemicals Ltd (IEFCL). EAIF has backed the construction of the company’s new US$1.2 billion fertilizer plant at Port Harcourt, Nigeria. It is the world’s largest single stream fertilizer plant. A substantial part of the facility is already producing 600 million metric tonnes of fertilizer a year. When fully operational, it will produce 1.4 million tonnes annually, helping to fulfil rapidly growing demand for fertilizer in Nigeria and West Africa.
IEFCL’s Port Harcourt plant has substantially reduced the need for fertilizer imports, and the location is ideally placed to service both domestic and international markets. This benefits the Nigerian economy through foreign exchange savings and boosts export earnings. The plant has created new employment in its manufacturing, distribution, marketing, sales, management and administration functions. Local suppliers and sub-contractors also benefit from servicing the needs of the business.
EAIF considers the new plant to be of prime strategic importance to the development of agriculture in Nigeria and neighbouring countries. Indorama Eleme is a well-established business that has been operating in the region since 2006.
Since construction of the project began, there has been a severe US$ liquidity crisis affecting a number of Nigerian banks. This has had an impact on the ability of some of the local institutions to meet US$ funding commitments to many infrastructure projects where the capital expenditure is denominated in US$, which was the case with the IEFCL project.
To ensure that the project was capitalised as originally required, removing financing uncertainty and ensuring delivery of the developmental benefits of the plant, EAIF agreed to take over the debt financing obligation of a local bank. Consequently, EAIF’s lending to IEFCL has increased from US$30 million to US$48.8 million. In reaching its decision, EAIF’s board took into account the stature of the company, its track record, supportive equity owners, the support of other debt providers and the fundamental economic development importance of the plant.
While agriculture is a core part of the economies of many African nations, productivity in the sector is comparatively much lower than in many other regions of the world, in terms of absolute production and adding value. More readily available secure supplies of affordable fertilizer are an essential component in improving crop yields and making more produce available for mass market consumption.
Improving food production security also has a direct bearing on fighting famine and poverty and the economic and political instability such conditions often foster.
EAIF made its first loan of US$30 million, which was part of a US$800 million debt facility provided by several financial institutions, in February 2013.
EAIF is part of the Private Infrastructure Development Group (PIDG). Seven governments (and The World Bank) currently contribute funds to PIDG. In the case of EAIF, support comes from the governments of the UK, The Netherlands, Sweden and Switzerland, as well as private sector banks, the German development finance institution KfW and FMO, its Dutch equivalent.
EAIF is managed by Investec Asset Management (IAM), one of the largest third party investors in private equity, credit, public equity and sovereign debt across the African continent.