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Nigeria requires new approaches for infrastructure development 14 Jan 2025

During his first presidential media chat on 23 December 2024, President Bola Tinubu defended his administration's decision to borrow from international financial institutions to finance Nigeria's budgets. He highlighted the nation's crumbling infrastructure, emphasising that the loans would be directed towards critical areas such as road networks, technology, and power development. Tinubu's acknowledgment of the deteriorating infrastructure underscores the severe hardships faced by citizens and businesses.

The deplorable state of Nigeria's road networks severely hampers the movement of raw materials and farm produce, driving up transport costs and escalating food prices. Tragically, over 6,000 road accidents, resulting in about 3,000 fatalities, were recorded in 2023 alone. The energy sector, plagued by chronic underinvestment and inefficiency, saw the national grid collapse multiple times in 2024, becoming a national embarrassment and forcing greater reliance on generators. Various estimates indicate that bridging Nigeria's public infrastructure deficit will require an investment of between $2.3 trillion and $3 trillion over the next 30 years.

The Tinubu administration's response to this crisis has largely followed the traditional playbook of public funding through budgetary allocations. The 2025 budget proposal allocates N4.06 trillion to infrastructure development, yet this represents a mere fraction of the annual investment of $150 billion needed to bridge the infrastructure gap. Alas, the government's ability to ramp up infrastructure investment has been severely constrained amid crushing debt service burden of N15.81 trillion, which accounts for 33% of total expenditure, making it clear that Nigeria's infrastructure crisis demands urgent and innovative solutions beyond public funding.

The administration acknowledges the critical need to attract private investments in infrastructure. However, its current approach, exemplified by the Lagos-Calabar Coastal Highway project, reveals significant limitations and contradictions. With an estimated cost of N15.4 trillion (approximately N4.4 billion per kilometre), the project operates under an Engineering, Procurement, Construction plus Finance (EPC+F) model, requiring substantial government counterpart funding of up to 30%.

While presented as an innovative financing approach, the project has drawn criticism for its opacity and questionable procurement process. More fundamentally, its prioritisation amid pressing infrastructure needs across the country has sparked legitimate concerns about resource allocation and project selection criteria. Critics argue that the massive investment could be better directed toward rehabilitating existing road networks, where over 70% of federal roads are in poor condition.

The challenges extend beyond mere funding constraints. Nigeria's infrastructure crisis is fundamentally an institutional problem, characterised by weak project implementation capacity, poor maintenance culture, and inadequate governance frameworks. The impact of these institutional deficiencies is evident in the persistent underperformance of capital expenditure. By the third quarter of the 2024 fiscal year, less than 35% of allocated capital expenditure for Ministries, Departments and Agencies had been disbursed. This disconnect between allocation and implementation reflects deep-rooted issues in project management, procurement processes, and institutional capacity.

The social cost of these infrastructure deficits falls disproportionately on lower-income groups. A World Bank study found that poor infrastructure – including electricity, water, roads, and information and communications technology (ICT) – in Sub-Saharan Africa reduces productivity by up to 40% and annual economic growth by two percentage points, with small businesses and informal sector workers bearing the heaviest burden.

In Nigeria, this translates to millions of micro-entrepreneurs and small-scale farmers facing severe constraints in accessing markets, leading to post-harvest losses estimated at 45% of agricultural output. The infrastructure gap has also created a two-tier society where affluent neighbourhoods invest in private infrastructure solutions, from boreholes to solar systems, while low-income communities face a compounding cycle of deprivation. For the urban poor and rural communities, inadequate infrastructure has become a poverty trap, limiting access to markets, healthcare, and economic opportunities.

Comparative evidence from other developing economies suggests alternative approaches to infrastructure development. India has successfully leveraged Public-Private Partnerships (PPPs) in its transportation and energy sectors, establishing regulatory frameworks that protect public interest while attracting private capital. For instance, India's Hybrid Annuity Model (HAM) for highway development shares revenue risks between government and private partners, while requiring private operators to maintain quality standards through performance-linked payments.

Brazil has integrated infrastructure development with broader economic policies, creating a comprehensive logistics network that supports industrial growth. The country's Investment Partnership Programme (PPI) has successfully attracted over $150 billion in private investment since 2016 by offering standardised contracts and streamlined approval processes for infrastructure projects.  

Perhaps most instructive is South Korea's transformation from a poor country to an industrial powerhouse by leveraging strategic infrastructure investments that prioritised economic corridors and export-oriented industries. China's experience also offers valuable lessons in infrastructure-led development. The country's success in mobilising both public and private resources for infrastructure development, coupled with strong project execution capabilities, has transformed its physical and economic landscape.

A key innovation has been China's municipal investment vehicles, which allow local governments to leverage land assets to finance infrastructure projects, while maintaining strict performance metrics and completion timelines. While China's state-led model may not be directly applicable to Nigeria, its emphasis on clear strategic priorities and robust implementation mechanisms is instructive.

Efforts to attract private investment in Nigeria's water sector have been characterised by significant challenges. Over 90% of water systems currently remain under government control, highlighting a reliance on public sector management and funding and exemplifying the missed opportunities. Similar patterns exist in other infrastructure segments, where institutional barriers, regulatory uncertainties, and political risks have deterred private capital. The experience with privatisation in the power sector further illustrates the challenges of transitioning from public to private management without adequate institutional frameworks and regulatory capacity.

The path forward demands a fundamental reimagining of Nigeria's approach to infrastructure development. First, urgent reforms are needed to strengthen institutional capacity for project implementation and maintenance. This includes establishing robust project selection criteria, enhancing procurement processes, and implementing effective monitoring and evaluation systems. A crucial first step could be the creation of an independent infrastructure planning commission to depoliticise project selection, ensuring decisions are based on economic and social merit.

Furthermore, modern project management systems with real-time monitoring capabilities should be implemented to track progress and identify bottlenecks early. Clear maintenance protocols and dedicated funding mechanisms for completed projects are essential to deliver sustained value. These reforms must be underpinned by strengthened anti-corruption measures in procurement processes to ensure the transparent and efficient use of resources.

Second, Nigeria needs to develop more sophisticated financing mechanisms to attract private capital while protecting public interests. This includes establishing a comprehensive regulatory framework for PPPs across all infrastructure sectors, providing the clarity and certainty private investors need. Risk-sharing mechanisms should be created to attract institutional investors, especially for projects in challenging sectors. The government should develop innovative financing instruments that tap into pension funds and other domestic long-term capital, reducing reliance on external borrowing. Such innovation must be supported by enhanced capacity within government agencies to structure and manage complex infrastructure transactions.

Third, infrastructure planning must emphasise social impact assessment. This involves going beyond cost-benefit analyses to consider the effects on various social groups and communities. A comprehensive framework should be developed with clear metrics for measuring benefits across different demographics. Community participation should be integrated into planning and implementation, ensuring projects address actual needs. Robust mechanisms for ongoing monitoring of social outcomes are essential, allowing for adjustments based on real-world impact.

Nigeria's current infrastructure crisis is both a formidable challenge and a unique opportunity. While the scale of the deficit is daunting, it also creates the imperative for innovative solutions that go beyond traditional public funding models. Achieving success will require not only new financing mechanisms but also fundamental institutional reforms to transform how infrastructure projects are selected, implemented, and maintained.

The road ahead is undoubtedly tough, but the cost of maintaining the status quo – in terms of economic stagnation, social hardship, and missed opportunities – is too high. The infrastructure challenge demands more than incremental changes; it requires a bold reimagining of government's approach to infrastructure development. The question is whether this administration will heed mounting public concerns about project prioritisation, procurement transparency, and the sustainability of its infrastructure financing strategy.

Martins Hile is a sustainability strategist and editorial consultant.