Roads & Highways Financing in Nigeria - Key Legal Considerations
According to the World Bank, up to 80% of Nigerian roads are in poor condition, and only about 30% are paved. According to the National Integrated Infrastructure Master Plan (NIIMP) and the African Development Bank, Nigeria has an infrastructure financing gap of over $3 trillion, and it needs to spend at least $100 billion annually for the next 30 years to close this gap. Given ongoing budget constraints, the Nigerian government is now actively courting private capital as a strategy for roads and highways financing in Nigeria.
This legal update focuses on some of the more commonly utilized roads and highway financing structures in Nigeria, excluding multilateral financing sources such as those provided by the World Bank, African Development Bank (AfDB), and China EXIM Bank, which, though significant, are not the focus of this review.
1. EPC+F
Increasingly, the Nigerian government seeks partners who bring not just technical know-how, but also financing capacity. Under EPC+F (Engineering, Procurement, Construction + Financing) models, contractors design and build road infrastructure and also arrange the upfront financing, which the government repays over time. Typically, the construction company would only be expected to finance a percentage of the costs. The EPC + F model is particularly attractive to the Nigerian Government because of the benefit of off-balance sheet financing. The EPC+F reduces reliance on public borrowing and, therefore, presents an opportunity for foreign construction firms with access to credit markets.
2. Public-Private Partnerships (PPPs)
PPPs have become a cornerstone of roads and highways financing in Nigeria since the early 2000s. The most common PPP structure for roads and highways financing in Nigeria is the Design-Build-Finance-Operate (DBFO) model. A notable example is the Lekki-Epe Expressway, Lagos, Nigeria’s first toll road PPP. While controversial, the PPP model used for the Lekki Expressway proved that user-pay models are a viable way to finance roads and highways in Nigeria. Leveraging past successes, Nigeria’s Government has rolled out and awarded a number of toll-based concession models to improve maintenance, revenue recovery, and private operator viability through the Highway Development and Management Initiative (HDMI).
3. Sukuk Bonds: Project-Tied Islamic Finance
Since 2017, Nigeria has issued Sukuk bonds. These are sharia-compliant instruments that fund specific road projects. These bonds have financed over ₦600 billion in projects, covering more than 70 roads across Nigeria.
4. Infrastructure Tax Credit Scheme
The Infrastructure Tax Credit Scheme is an innovative roads and highways financing model that allows private firms to finance road projects and recover the cost as a tax credit. The scheme is particularly attractive for large corporates with significant tax exposure.
How We Can Help
Our infrastructure and construction practice supports EPC contractors, PPP developers, toll operators, and infrastructure funds entering or expanding in Nigeria. We offer full legal advisory on project finance, PPPs, and tax credit structures, including contract drafting, due diligence, compliance reviews, bid support, regulatory clearance, and dispute resolution.
Balogun Harold's insights are shared for general informational purposes only and do not constitute legal advice. For tailored guidance, please contact our Construction & Infrastructure Lawyers at bhlegalsupport@balogunharold.com.
Olu A.
LL.B. (UNILAG), B.L. (Nigeria), LL.M. (UNILAG), LL.M. (Reading, U.K.)
Olu is a Partner at Balogun Harold.
olu@balogunharold.com
Kunle A.
LL.B. (UNILAG), B.L. (Nigeria), LL.M. (UNILAG), Barrister & Solicitor (Manitoba)
Kunle is a Partner at Balogun Harold.
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