Why Nigeria’s Infrastructure Projects Need the Right Mix of Capital

Infrastructure projects do not fail only because funding is scarce. They also fail when the money is structured wrongly. Two similar solar projects can face very different borrowing costs when one uses guarantees, equity and long-term debt effectively while the other relies on commercial debt to carry every risk. A sound capital stack assigns each risk to the investor best able to absorb it. Senior lenders should fund predictable cash flows, while equity, guarantees, concessional funding and subordinated debt cover higher-risk areas such as early development, construction, currency exposure and weak off-taker credit. For Nigeria, better financial structures could help renewable-energy and infrastructure projects reach completion faster and at lower cost. Governments can support this through stable regulations, credible guarantees and clear currency rules, while development finance institutions can target the specific risks that keep private investors away. The key question is not simply how much money a project needs. It is whether each layer of funding is designed for the risk it is being asked to carry.

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