Nigeria’s infrastructure ambition is not constrained by vision, but by the financing architecture. The public sector balance sheet, which has been the primary source of financing, has become very tight, while financing from the private sector is available and increasing, with a focus on long-term, naira-denominated assets. Hence, the challenge lies in effectively connecting this capital to bankable projects at scale and with discipline. Project bonds, created, structured and distributed by investment banks, are the instruments required to bridge the country’s infrastructure needs.
The scale of the need is clear. Nigeria’s Revised NIIMP (2020–2043) estimates ~US$2.3 trillion, about US$100bn, a year is required annually for the next 30 years to lift infrastructure to 70% of GDP. Africa’s pensions, insurers and sovereign funds already hold over US$1.1 trillion that can be mobilised for this purpose, but they require new and innovative approaches to enhance their participation in addressing this challenge.
Nigeria continues to finance inherently long-dated assets through the issuance of local currency public bonds, Sukuk and Eurobonds. This approach creates a heavy burden on the government’s balance sheet while sometimes causing refinancing risk and FX exposures, where naira cash flows service dollar liabilities. It has also led to the slow conversion of the pipeline of identified projects because many infrastructure projects have not been prepared, appraised and structured to attract the private sector.
Project bonds are debt securities issued by project SPVs and serviced from project cash flows, typically secured by concessions, offtake agreements, or availability payments. Unlike typical bonds (corporate or government), which are backed by the sponsor’s balance sheets, project bonds are backed by the cash flow generated by the financed project. They often have longer duration, are tradeable, aligned with the long operating life of infrastructure projects and best suited for pension and insurance investors.
Globally, this type of instrument has been used to finance major projects such as toll roads, power plants, and social infrastructure. For example, in Latin America, transportation and energy projects have been financed through project bonds from local and international investors, through the 144A market, a U.S. framework that allows companies to access large institutional investors without going through a full public offering. Similarly, in India, rupee-denominated project bonds have benefited from partial credit guarantees provided by institutions like Crédit Agricole Corporate and Investment Bank, which help lower investment risk and attract more investors.
In practice, project bonds can be structured in two ways: (i) as a take-out instrument, refinancing bank or DFI construction loans once an asset has reached operational stability; or (ii) as a bond issued from day one for brownfield or late-stage greenfield projects where revenue visibility is high, often supported by credit enhancements such as guarantees.
In both cases, the instrument achieves the same outcome: aligning long-term, project cash flows with the long-term liabilities of domestic institutional investors.
1. Nigeria is not starting from zero. Regulatory infrastructure is already in place. The Securities and Exchange Commission (SEC) has issued detailed rules governing Project Bonds and Infrastructure Funds, creating standardized issuance structures aligned with global best practice and familiar to institutional investors. The SEC is also mulling the inclusion of the proposed rules on Credit Enhancement Service Providers in the existing rules of the Commission.
2. Market benchmarks are already available. The sovereign yield curve, published by the Debt Management Office (DMO) through its regular monthly auctions, provides a transparent reference point for pricing. This curve serves as the base risk-free rate, against which project bond spreads can be calibrated to reflect construction, operating, and sector-specific risks.
3. The National Pension Commission (PenCom) has revised its Regulation on the investment of Pension Fund Assets, increasing the amount of the country’s N25.9 trillion pension assets to be allocated to infrastructure.
4. InfraCredit has established a robust local-currency guarantee framework, supporting an aggregate guaranteed portfolio of approximately ₦270 billion. The portfolio carries a weighted average tenor of ~8 years, with demonstrated capacity to extend maturities up to 20 years. (InfraCredit 2025)
Merchant banks sit at the nexus of origination, structuring, underwriting, and distribution, and they need to work with projects sponsors, financiers and government to develop a pipeline of bankable infrastructure projects. A pipeline of bankable infrastructure projects is important to attract investors as they prefer to invest in an economy with a recognizable pipeline. A pipeline also suggests that a structured and well-thought-out approach was adopted, and the projects would have identified all the major risks and the proposed mitigants to address the identified risks.
This “banks-as-catalysts” model, an economic framework that states banks can play an active and creative role in promoting industrialization and economic development, particularly in emerging markets, can be adopted to structure and mobilise domestic private finance into Infrastructure projects.
At Coronation, we believe the identification, structuring and testing of bankable infrastructure projects are the constraints to mobilization of private capital into the infrastructure space. We bring an integrated platform across Financial Advisory, Capital Mobilization, Commercial Debt, Private Debt and Alternative Financing to identify, structure, underwrite and distribute infrastructure debt into domestic institutions. The Bank works with DFIs, guarantee providers and other banks to scale issuance. Our franchise has supported infrastructure debt issuances via the capital markets, likewise Nigerian corporates and the Government.
If you are considering the issuance of a project bond or you want to discuss pipeline readiness, kindly contact [email protected] or call 020-01279760.
Taiwo Olatunji, CFA is the Group Head of Investment Banking at Coronation Merchant Bank