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🇳🇬 Nigeria /Energy & Infrastructure

Hotel investor seeks better financing for construction projects

From The Punch · () English

Summarized by DistantNews. Read the original for the full story.

At a glance

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  • A hotel investor is calling for improved development financing models in Nigeria, particularly for the construction and hospitality sectors.
  • The current financing system places a heavy burden on private investors, with loan repayments often starting before projects generate revenue.
  • The investor highlighted that despite plans for 10 hotels in 15 years, only two have been established in 13 years due to funding challenges.

Olufemi Okenla, Chairman and CEO of HDV Nigeria Limited, which owns Ibis Lagos Ikeja and Ibis Lagos Lekki, has urged for enhanced development financing for businesses, especially within the construction and hospitality industries. Okenla made these remarks in Lagos on Friday during the unveiling of the 120-room Ibis Lagos Lekki.

There is an issue that we private investors need to sit with the banking sector to form a kind of a very viable project financing model. The current model in the country is not effective. It’s like a model of the winner takes it all.

— Olufemi OkenlaDescribing the need for a new project financing model.

He stressed the need for the government and banking sector to collaborate on a project financing model that adequately supports long-term investments. Okenla criticized the current financing structure, stating it imposes an excessive burden on private investors. A key issue is that banks often require loan repayments to begin before projects have started generating revenue, a model he described as "winner takes it all."

The issue of the moratorium period is that if you have a project financing, you should not start paying back anything until the project has reached cash flow. But that is not what is happening in our country.

— Olufemi OkenlaExplaining the problem with current loan repayment structures.

Okenla argued that Nigeria's financing system should align with the country's developmental goals. He pointed to development banks in other economies that offer concessionary funding and repayment schedules tied to project cash flows. "The issue of the moratorium period is that if you have a project financing, you should not start paying back anything until the project has reached cash flow. But that is not what is happening in our country," he stated.

If I tell you the amount we have paid in project financing, before even opening, it runs to billions. It’s not millions. It runs to billions that we pay to banks for the little money we took from them. So to me, that is not a strategy to develop, to build our country.

— Olufemi OkenlaIllustrating the high cost of financing before project launch.

He revealed that HDV Nigeria Limited had initially aimed to establish 10 mid-scale hotels within 15 years of signing a Memorandum of Understanding with Accor in 2008. However, funding and other obstacles have significantly slowed this expansion, resulting in only two hotels being completed over 13 years. Despite these setbacks, the company remains committed to growing its hotel portfolio, noting that its two Lagos facilities have provided 285 internationally branded hotel rooms, addressing a gap in Nigeria's capacity for hosting major international conferences and events.

It was supposed to be 10 hotels in 15 years, but we’ve only been able to do two in 13 years. So we missed the target.

— Olufemi OkenlaHighlighting the impact of funding challenges on expansion plans.
About this summary

Originally published by The Punch. Summarized and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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