Nigeria is facing a chronic infrastructure deficit that could erode the gains of the ongoing reforms, slow economic growth, and further strain citizens’ living standards.
Africa’s most populous nation has an infrastructural gap estimated at $100 billion annually and projected to reach $878 billion by 2040, according to a report by credit rating agency Augusto&Co. The size of the gap means budget funding alone won’t cut it.
The country needs a more creative and sustainable means of financing to bridge what the World Bank says it would require investment spending of $3 trillion over the next 30 years to bridge.
Nigeria’s current infrastructure stock constitutes only 30 percent of GDP, far below the World Bank’s benchmark of 70 percent. Similarly, the nation ranks behind 23 other African countries on the African Development Bank’s Africa Infrastructure Development Index (AIDI), underscoring the need to increase investment spending on infrastructure to remain competitive.
Mobilising private capital like the idle pension funds or Sukuk Sharia Compliant instruments could be a game-changer for a country undergoing its boldest strings of reforms since independence.
A Sukuk, an Islamic type of bond specifically used in Nigeria for infrastructure projects, has gained traction in recent times after its first issuance in 2017, worth N100 billion.
While the federal government and state governments like Osun, Katsina, and Gombe have tapped into the instruments for infrastructural financing, the new Investment and Securities Act 2025 now gives local governments explicit authority to issue municipal bonds and Sukuk in what’s expected to drive development at the grassroots levels, according to Akeem Oyewale, chief executive officer of Marble Capital.
“Nigeria needs humongous infrastructure development over the next couple of years. The benefits of issuing Sukuk are huge if we have all three tiers of government in that space,” Oyewale said in an interview on Channels recently.
But structural and capacity cum leadership understanding of its issuance could limit success and investors’ appeal, especially at the local government levels, Oyewale said.
The federal government’s allocation of N5.99 trillion (10.8% of the 2025 budget) for infrastructure, though doubled year-on-year, is inadequate compared to the $100 billion annual target set by the Master Plan. Addressing this deficit means increased private-sector investment.
However, private investment in Nigerian infrastructure has been low, totaling $8.4 billion from 2013 to 2023, compared to South Africa’s $17.2 billion, data from Augusto&Co show.
Institutional assets, including pension and insurance funds, now exceed $100 billion. Yet less than 5 percent is invested in infrastructure, compared to 15 percent in South Africa.
Private equity and venture capital flows to Nigeria reached $1.2 billion in 2023; however, a significant portion of this was directed towards infrastructure.
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“A trust deficit drives this underinvestment; policy inconsistency, currency volatility, and weak contract enforcement all weigh heavily,” Teslim Abass, an infrastructure investment analyst wrote in an opinion piece in June, 2025 on BusinessDay.
Abass cited limited data availability, policy uncertainty, currency volatility, perceived risks as some of the factors holding private capital in infrastructural development.
Private capital mobilisation has worked elsewhere. India’s highway sector attracted $20 billion in private investment between 2018 and 2023, resulting in 50,000 kilometres of new roads. Nigeria has a dynamic private sector and a growing institutional investor base.
Deficits in power, health, transport stall growth
Nigeria, Africa’s top crude producer, is targeting a 7 percent annual growth in the next two years and an economy worth $1trillion by 2030.
But with widespread infrastructural gaps, the ambitious growth plan may be stalled.
The country’s infrastructure challenges are vast. Nigeria’s road network, crucial for trade and mobility, spans around 195,000 kilometres.
Yet over 70 percent of these roads are in poor condition, according to the Federal Ministry of Works.
This gap is driving up transportation costs, delaying deliveries, and limiting access to markets, especially for small businesses and farmers, which further stokes of living crisis for Nigerians, whose spending power has been eroded.
Despite being the cheapest means of transportation and capable of moving freight and passengers across longer distances more efficiently, rail transport constituted less than 1 percent of the transportation industry’s contribution to Nigeria’s gross domestic product (GDP) in 2023, which further intensifies the load on roadways.
Power generation remains a bottleneck. Installed capacity stands at 12,500 megawatts (MW), but average output is just 4,000 MW due to transmission losses and gas supply issues. This leaves Nigeria’s per capita electricity consumption at just 144 kilowatt/hour (kWh) annually, far below the global average of 3,131 kWh, according to the World Bank.
Limited power generation means businesses spend an estimated $29 billion yearly on backup energy sources like diesel generators, data from the International Finance Corporation revealed.
“This considerable deficit hampers economic growth, sustainable development, and poverty alleviation,” Augusto&Co wrote in a recent report.
Dideolu Falobi, managing director of Kresta Laurel, a Lagos- based electro-mechanical company argued that investors are willing to pour in billions in capital for infrastructure if the country’s justice system is overhauled to guarantee investors security.
“One of the biggest challenges we have with infrastructure funding is our legal system. A legal system that doesn’t guarantee justice on time discourages investors,” Falobi said.
“Nigeria has a very good Return on Investment. People will bring in funds when there’s a system that makes people feel secure.”
