Africa Finance Corporation (AFC), a leading development finance institution focused on Africa’s infrastructure, is preparing to make a major comeback in the Islamic bond market. After almost a decade, AFC is targeting $300 million in financing through the sale of an Islamic bond, aiming to tap into growing investment interest from Gulf nations eager to support infrastructure projects across Africa.
AFC Returns to Islamic Bond Market After Seven Years
The Nigerian-based AFC, which has been a key player in financing infrastructure across Africa, is making its return to the Islamic bond market with a $300 million issuance that complies with Islamic law (sharia). The bond sale, which is expected to close by the end of 2024, is being coordinated by First Abu Dhabi Bank, with support from lenders like Emirates NBD Capital and SMBC.
AFC, which first issued Islamic bonds in 2017, is turning back to this market after seeing growing interest from the Gulf region. These countries are increasingly looking to finance and develop infrastructure in Africa, and AFC is in a prime position to capitalize on this trend. The development finance institution has already seen a notable uptick in participation from Middle Eastern investors in its debt offerings.
AFC’s Role in Africa’s Infrastructure Growth
Founded in 2007 and headquartered in Lagos, Nigeria, AFC is owned by African governments, banks, and private equity funds. It has become a critical source of financing for Africa’s infrastructure, filling a gap left by traditional institutions like the African Development Bank (AfDB). AFC has provided over $13 billion in funding for projects in 36 African countries. The corporation focuses on large-scale infrastructure projects across the continent, including in sectors like energy, transport, and telecommunications.
Samaila Zubairu, CEO of AFC, explained that the institution’s growing ties with Gulf nations reflect a larger shift in African financing. In recent months, AFC has seen “a lot more interest” from investors in the Middle East. For example, 15% of its $500 million Eurobond issued last month was allocated to investors from the Gulf region.
This growing participation is part of AFC’s strategy to strengthen its relationship with Gulf nations and deepen its role in supporting infrastructure projects throughout Africa.
Strengthening Ties with Gulf Nations
The recent increase in interest from Gulf investors is no coincidence. AFC has worked hard to strengthen its ties with these nations, which are eager to diversify their economies and invest in African infrastructure.
Earlier this year, AFC signed a memorandum of understanding (MOU) with the Saudi Export-Import Bank, followed by a similar agreement with the Saudi Fund for Development. These partnerships are aimed at boosting trade between Saudi Arabia and AFC’s member countries. Saudi Arabia, under its Vision 2030 plan, is shifting away from oil dependency, and African nations are well-positioned to help supply materials for this ambitious diversification effort. Zubairu sees this as a huge opportunity for both Africa and the Gulf.
“The collaboration with Saudi Arabia is pivotal for us,” said Zubairu. “African nations have a wealth of resources that can support Saudi Arabia’s Vision 2030. We are already seeing this vision come to life through the partnerships we’ve formed.”
AFC’s Financing Goals and Future Plans
Looking ahead, AFC aims to end 2024 with a total of $2.8 billion in debt financing. The organization has an even more ambitious target of raising $4 billion by 2025 to fund infrastructure projects across the continent. AFC’s growth strategy includes expanding joint-financing opportunities with new shareholders, including Angola’s sovereign wealth fund.
AFC is also working with Kenya’s CPF Financial Services to explore opportunities for co-investments with the nation’s pension funds in major infrastructure projects. This collaboration could help unlock new sources of capital for large-scale initiatives across Africa.
As part of its broader strategy to increase investments and expand its shareholder base, AFC is also exploring selling up to 24% of its shares to investors outside Africa. Last year, AFC sold a 3.25% stake to Turkiye Ihracat Kredi Bankasi for $110 million, marking the first sale of AFC shares to a non-African sovereign investor.
AFC’s Key Role in Africa’s Future
Africa’s infrastructure needs are vast, and institutions like AFC are central to bridging the funding gap. With a strong track record of supporting energy, transport, and industrial projects, AFC continues to play an essential role in Africa’s economic growth. The organization’s proactive approach to tapping into the growing interest from Gulf investors is positioning it to be a key player in the region’s infrastructure future.
The upcoming $300 million Islamic bond sale is just one of the many ways AFC is deepening its connections with international investors and bringing much-needed capital to African nations. As Africa continues to develop and expand, AFC’s ability to leverage partnerships with the Gulf and beyond will be crucial to ensuring sustainable growth for the continent.
Conclusion:
AFC’s return to the Islamic bond market represents more than just a financing opportunity; it’s a sign of the growing collaboration between Africa and the Gulf region in funding much-needed infrastructure development. As the corporation aims to raise billions in the coming years, it is poised to drive more investment into Africa’s future.
I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.
