Innovative project financing: The role of public-private Partnerships

Building and sustaining critical infrastructure requires not only sound policies but also strategic collaboration. There is no gainsaying the fact that infrastructure is the bedrock of economic progress and social transformation, yet Nigeria, like in many other African climes, faces a considerable infrastructural deficit that limits the region’s ability to harness and realise its full potential. In exploring the opportunities that lie in closing the gap, innovative financing models play a critical role, of which PPP is a case in point.

Africa’s ambition for infrastructure development is undeniable, yet the financing gap remains a significant challenge. According to the African Development Bank (AfDB), bridging the continent’s infrastructure deficit requires $130 billion to $180 billion annually, but current funding falls short by $68 billion to $108 billion each year. The most pressing needs lie in water and sanitation (41% of the gap), electricity supply, and transport access (28% each). Without urgent action, inadequate infrastructure will continue to hinder foreign direct investment, regional value chain development, and Africa’s full integration into the global economy.

In 2020, only 42.2 percent of infrastructure investment in African countries was financed by national governments. However, limited revenue streams, volatile commodity prices, and concerns over debt sustainability often restrict public spending capacity. This underscores the urgent need for more sustainable, diversified, and innovative financing models to accelerate Africa’s infrastructure development and economic transformation.

One of the key innovative approaches for financing and managing large-scale projects is through partnerships between the government and private investors. Public-Private Partnerships (PPPs) have become a key mechanism for bridging the gap between public needs and private sector innovation, ensuring sustainable development and economic progress in Nigeria.

Conceptually, PPP is a collaborative effort between government entities and private sector organisations to manage, develop, and finance public infrastructure projects. In Nigeria, this model has gained significant traction as the government acknowledges the limitations of relying solely on public funding for infrastructure development.

Trajectory of PPP in infrastructure financing in Nigeria

PPPs represent a transformative shift in the country’s infrastructure sector, leveraging private sector resources, expertise, and efficiency to complement government efforts. These partnerships provide a structured framework for delivering essential infrastructure projects, from roads and railways to energy and healthcare while minimising the financial burden on public coffers. It can be an effective tool for closing the infrastructural gap by leveraging limited public funds, attracting private sector investment, and introducing operational inefficiencies and technology from the private sector. In essence, the PPP model offers better quality services and enhances economic growth.

“PPPs represent a transformative shift in the country’s infrastructure sector, leveraging private sector resources, expertise, and efficiency to complement government efforts.”

The journey of PPPs in Nigeria took a decisive turn in the early 2000s when the government began to actively explore alternative financing models. A major milestone was achieved in 2008 with the establishment of the Infrastructure Concession Regulatory Commission (ICRC), under the ICRC Act of 2005. This regulatory body was created to provide a structured framework for private sector participation, ensuring transparency, efficiency, and accountability in infrastructure projects. The ICRC’s role has been instrumental in fostering confidence among investors and streamlining the implementation of PPP initiatives across the country.

Some notable examples of successful PPP project executions that have significantly contributed to infrastructural development in Nigeria are shown below.

Successful PPP projects in Nigeria

Impact of PPPs on Nigeria’s economy and human capital

Public-Private Partnerships have had a profound impact on Nigeria’s economy and human capital development. By attracting private investment, PPPs have alleviated the financial burden on the government, enabling the execution of large-scale infrastructure projects that would otherwise be unfeasible. These projects have stimulated economic growth by improving connectivity, reducing transportation costs, and enhancing access to energy and healthcare services.

For instance, the Lekki-Epe Motorway Toll Road and the Lekki Deep Sea Port have significantly boosted trade and commerce in Lagos State, creating a ripple effect on the national economy. Similarly, the Azura-Edo Independent Power Project and the Kainji & Jebba Hydro Electric Power Plants have increased Nigeria’s electricity generation capacity, supporting industrial growth and improving the quality of life for millions of Nigerians.

In terms of human capital, PPPs have created thousands of jobs during both the construction and operational phases of projects. For example, the Murtala Muhammed Airport Terminal 2 (MMA2) and the Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline have provided employment opportunities for skilled and unskilled workers, contributing to poverty reduction and skills development. Additionally, improved infrastructure has enhanced access to education and healthcare, indirectly boosting human capital development.

Lessons from other African countries

While Nigeria has recorded notable successes in its PPP projects, there is still significant room for improvement, particularly in terms of cost efficiency, job creation, and overall project impact. By examining the achievements of other African nations, Nigeria can draw valuable insights to refine its PPP framework and maximise the benefits of these collaborations.

1. South Africa’s Westown Development: This R15 billion ($800 million) initiative between Pietermaritzburg and Durban demonstrates how PPPs can drive urban expansion, attract investment, and create jobs. Nigeria can learn from South Africa’s emphasis on urban regeneration and job creation to ensure that PPP projects deliver broader socio-economic benefits.

2. Kenya’s Nairobi motorway: The 27-kilometre toll road connecting Jomo Kenyatta International Airport (JKIA) to Nairobi’s Westlands has transformed transportation, eased congestion, and created thousands of jobs during its construction. Nigeria can adopt Kenya’s model of integrating job creation and efficiency into infrastructure projects.

3. Ghana’s Royal Ghana Gold Refinery: This PPP project highlights the importance of value addition in resource-based economies. By refining gold locally instead of exporting raw materials, Ghana has boosted national earnings, reduced smuggling, and created employment opportunities. Nigeria, with its vast natural resources, can replicate this model to maximise the economic benefits of its resource sector.

BDI commentary

To reduce the public sector’s burden in infrastructure investment, greater private sector participation—through Public-Private Partnerships (PPPs) and privatisation—is essential. However, several barriers discourage private investment, including:

· Limited access to affordable financing due to an underdeveloped credit and venture capital market.

· Security challenges, corruption, and governance issues.

· Weak economic incentives in certain sectors.

· Regulatory inconsistencies and unpredictable policy enforcement, creating uncertainty for investors.

· Inadequate public sector capacity to design and execute PPP projects.

Addressing these challenges is critical for unlocking private sector investment and ensuring the successful implementation of Nigeria’s infrastructure master plan. Key actions must focus on policy consistency, governance reforms, investment-friendly incentives, and strengthening public-private collaboration.

However, Nigeria can further optimise its PPP framework by learning from the successes of other African countries. Emphasising cost efficiency, job creation, and value addition in resource-based projects will ensure that PPPs deliver maximum socio-economic benefits. With continued commitment to transparency, accountability, and strategic collaboration, PPPs can play a pivotal role in transforming Nigeria’s economy and improving the quality of life for its citizens.