RISKS AND REWARDS

Nigeria 2019 | FINANCE | INTERVIEW

Anyone in a position to influence broader market outcomes must first contend with the necessity of a cultural revolution in terms of risk perceptions

Opuiyo Oforiokuma
BIOGRAPHY
An infrastructure specialist with over 30 years’ experience gained across the UK, Europe, the Americas, Asia, Australia, and Africa, Opuiyo Oforiokuma manages the ARM-Harith, which is focused on investing in West African transportation, energy, and utilities projects. The fund is currently invested in power generation projects in Nigeria and Ghana, including the pioneering 459MW Azura-Edo IPP, and has renewable energy, water, transportation, and telecoms projects in the pipeline. Previously managing director/CEO of the Lekki PPP Toll Road Concession in Nigeria, Oforiokuma led that project through its financial close, execution, and successful exit. He has held other senior roles in the UK, Latin America, and US.

What projects have you completed since establishing the company?

Since closing the fund, we have invested equity in two major projects. One is in Nigeria, the Azura-Edo independent power plant (IPP), a 459-MW open cycle power generation plant constructed on the outskirts of Benin City in Edo State. The project went into commercial operation in May 2018 and has since been contributing between 6 and 9% to the national grid. The second project is in Ghana, also in power generation. It is called the Amandi IPP, a 200-MW combined cycle power plant that we are currently constructing in Aboadze, in the country's Western Region. That should supply power to Ghana in 2019. We are in the process of closing a port deal in Ghana that, when complete, will provide world-class ship and oilrig repairs and maintenance facilities. It will be critical and value enhancing for ship operators, because today many vessels operating in West African waters are compelled to go to Spain or South Africa for maintenance services owing to the lack of such facilities locally.

What geographical areas and sectors do you focus on?

Geographically, we focus on West Africa. In terms of sectors, we have three pillars: transportation, energy, and utilities. In transportation, we are interested in everything from toll roads and bridges to airports, seaports, and railways. In energy, we have power generation assets and are also focused on processing gas-to-power. Utilities include water and wastewater treatment and management and selected parts of telecoms and data traffic. We currently have projects in all those spaces in our pipeline.

How challenging is it to find local investors willing to invest in infrastructure?

Infrastructure as an asset class has long been known to international investors, where the latter struggle is with the risk profile of Nigeria and other countries in the region. Conversely, while local investors are familiar with the risk profile of the country, they often struggle to understand the complexities of the infrastructure, legal, and financing aspects. This is partly owing to the environment in which we operate in Nigeria; political and regulatory risk is an issue, and roads, power, water, healthcare, and every other strand of infrastructure is currently in poor condition and insufficient for Nigerians' needs. Historically, it has been the privy of government to be the sole providers of infrastructure. Only recently, with us among the pioneers, has private investment started to come into that space. The involvement of private investors sometimes makes end users reluctant to pay. For example, if there is a belief that this would be lining private pockets or fueling corruption. But there have also been genuine concerns about whether value for money is being provided through such privately financed infrastructure projects. Without proper funding, including through people paying tax or paying directly through tariffs or tolls, the country's infrastructure is bound to remain dilapidated. Another issue with local investors is that they do not want their funds to be tied down for a 25 or 30-year concession because of the short economic cycles historically driven by high inflation, high currency volatility, and political uncertainty. People are not yet fully accustomed to taking long-term investment exposure. We need an entire cultural transformation to get people to understand it can be done. Finally, there is a lack of a maintenance culture. The entire ecosystem of someone providing, regulating, and maintaining it is essential for infrastructure to be sustainable.