The African Development Bank (AfDB) has approved a $14.12m facility supporting Nigeria’s membership of the African Trade Insurance Agency (ATI). ATI provides political risk insurance for investment into member countries, using host government equity as collateral. Membership of ATI could allow as much as $5bn worth of investment into Nigeria to be insured by 2020, according to the AfDB.
ATI chief underwriting officer John Lentaigne told African Energy that Nigeria is targeting a $50m equity contribution, which would make it one of the largest shareholders in the institution. The AfDB loan is intended as an initial contribution. The country still needs to complete several legal procedures before membership is finalised, including signing the ATI treaty and participation agreement, which will require parliamentary approval.
“Given the pending elections, ATI believes that sometime around the third quarter of 2019 is realistic [to complete the process]”, Lentaigne said.
ATI hopes to play a significant role in the power sector, where the government counter indemnities required for partial risk guarantees from institutions such as the World Bank Group and AfDB have been a thorny issue. Government reticence about the put-call option agreement for the Azura-Edo gas power plant caused long delays while nearly all solar power projects stalled after the government inserted a lower tariff as a condition for guarantees.
“ATI is now amongst the largest financial and country risk guarantors on the African continent and certainly the most diversified by portfolio and product spread”, Lentaigne said. “We have a range of products that specifically target the power sector, including our KfW-backed liquidity facility and our European Investment Bank-backed Africa Energy Guarantee Facility. Together these facilities have a proven ability to mobilise critical power sector investment.”
