The nation's policy space is once again filled with narrow criticisms from politically motivated individuals and advocacy groups that strongly condemn the federal administration's infrastructure policy debts, with a deceptive aim to mislead the public against the government. Our examination of all criticisms in this regard reveals a fallacy of generalization, lacking a viable alternative solution to the historical challenges inherent in Nigeria's infrastructure deficit and its detrimental impact on the economy and development.
Understanding the Infrastructure Challenge
Infrastructure development, in the context of this policy statement, includes the construction and maintenance of physical structures such as roads, bridges, power supply, transportation systems, and other facilities that enable economic activity and improve citizens' quality of life. Nigeria's infrastructure challenges are immense. Road networks, essential for trade and mobility, span about 195,000 kilometers. However, over 70 percent of these roads are in poor condition, increasing transportation costs, delaying deliveries, and limiting market access, especially for small businesses and farmers. Nigeria's rail infrastructure is also inadequate. Despite recent investments, the country has only 3,500 kilometers of operational tracks, insufficient for a population exceeding 220 million. Installed power capacity is 12,500 MW, but actual operational output often averages only 4,000 MW, leaving Nigeria's per capita electricity consumption at just 144 kWh annually, far below the global average of 3,131 kWh. Businesses spend an estimated $29 billion annually on backup energy sources, including diesel generators. This infrastructure insufficiency contributed to the exit of companies such as GSK and P&G over the years.
Valuation of Nigeria's Infrastructure Deficit
Nigeria's productivity and standard of living have been attributed to inadequate infrastructure over the years. While there is broad agreement on this point, there are varying estimates of the true value of the country's infrastructure deficit. The World Bank, which classifies Nigeria as a middle-income economy, estimated the nation's total infrastructure stock to be approximately 30 to 35 percent of its Gross Domestic Product (GDP). This ratio falls well short of the World Bank's 70 percent benchmark for middle-income economies. Thus, it is projected that Nigeria will need an accumulated investment of up to $3 trillion over 30 years to bridge the infrastructure gap. The African Development Bank (AfDB) estimated the value of the country's infrastructure shortfall at $2.3 trillion, $700 billion lower than the World Bank's estimate. According to its former President, Dr. Akinwunmi Adesina, Nigeria needs $15 billion in annual investment over 20 years to bridge its infrastructure gap. The International Finance Corporation (IFC) estimated a lower figure of $2 trillion over 20 years. Meanwhile, KPMG, the global audit firm, estimated a much lower annual infrastructure spending of $14.2 billion over 10 years, totaling $142 billion to close the country's huge infrastructure gap.
To determine which estimate is achievable in Nigeria's perennially constrained revenue generation circumstances, we subjected the different infrastructure deficit estimates to a test of probable outcomes, which determine the likelihood of specific results from a random event or experiment, often calculated as the ratio of favorable outcomes to total possible outcomes. Among all the estimates, KPMG's $142 billion figure aligned more closely with the Nigerian situation, with a probable outcome indicating that spending $14.2 billion annually over 10 years (a total of $142 billion) is a key target to bridge Nigeria's infrastructure gap. Accordingly, sustained investment at this level, particularly in transportation, power, and digital infrastructure, will catalyze substantial economic growth and significantly reduce the deficit. While this estimate will not fully provide the complete range of required infrastructure, the investment will shift Nigeria from an infrastructure-deficient state to one with a rapidly modernized, connected, and sustainable system. Such investment could generate roughly three to four times as many jobs in the economy, significantly reducing unemployment and addressing the poor condition of road networks, enhancing air transport safety, and facilitating faster growth to support a modern digital economy, among other benefits.
Historical Budget Allocation and the Possible Realization of the $142 Billion Infrastructure Target
Over the last 25 years, since 2000, no federal administration has budgeted more than $14 billion for capital spending in a single year, despite three oil booms between 2000 and 2014. In 2000, total federal government projected capital expenditure was $3.62 billion, but only the first quarter was fully disbursed, with lower disbursements recorded in subsequent quarters. Though the 2001 fiscal year was marked by high oil revenues and windfall gains (excess proceeds), the capital budget was $3.87 billion, but only the first-quarter allocation was fully disbursed. In 2002, total capital expenditure appropriated was $2.7 billion, but only about 38 percent of the capital budget was implemented, with appropriated capital expenditure declining to $2.25 billion in 2003 and recording a marginal increase to $2.6 billion in 2004. Though capital spending increased to $4.6 billion in 2005, it was still far from KPMG's suggested $14.2 billion benchmark per annum, especially given that it marked the year of the oil windfall, when projected crude oil sales reached $37.7 billion. However, only 55 percent of the budget was implemented by December 2005. The trend of low capital appropriation continued in 2006, with total federal infrastructure spending cited at $4.5 billion. In 2007, the capital budget ballooned to over $5 billion, propelled by an oil sale boom, but actual spending was about $3.9 billion. The same relatively high capital budget appropriation was recorded in 2008, another oil price surge year, when about $6.7 billion was appropriated, with yet again a low implementation threshold. In 2009, approximately $7 billion was budgeted for capital expenditure, but only about 54.26 percent was released. In tandem with the oil boom of 2010, 2011, 2012, and 2013, appropriated capital expenditure increased to about $12.3 billion, $10.42 billion, $8.2 billion, and $9.9 billion, respectively. However, all the appropriated expenditures were reported to have performed below 70 percent. We note that, beginning in 2014, after the global oil price upswing, capital expenditure returned to the $6 billion range. By 2015, earnings from crude oil had crashed, and that reflected in a reduced capital budget allocation of about $3.2 billion. Nevertheless, as of September 2015, only about $1 billion had been spent on capital projects. In 2016, there was a relative increase in both allocation and implementation, with about $3.95 billion released for capital projects. Paradoxically, the year of the oil crash recorded the highest capital release for infrastructure in the country's history up to that point. The budget was successfully implemented through loans and related debts. About $2 billion was specifically injected to revive abandoned projects in the year. In 2017, proposed capital expenditure was roughly $7.3 billion; however, about $4.5 billion was released. In 2018, capital expenditure was quite ambitious at about $9.42 billion, again with about $4.4 billion released. This was replicated in 2019 when total capital expenditure released was roughly $3.9 billion out of the approved capital budget of $6.6 billion. In 2020, budgeted capital expenditure was about $5.0 billion. In 2021, planned capital expenditure totaled roughly $10.4 billion, but actual spending was about $5 billion. Beginning with the 2022 capital budget allocation, we observed an exponential increase in the capital budget to $13.34 billion; however, only about $4.29 billion was released. The value of capital expenditure declined to $9.3 billion in 2023, while actual performance was reported at $3.45 billion. Beginning in 2024, we observed a policy of rolling over outstanding appropriated expenditures into the following year to ensure their complete implementation. The 2024 capital expenditure was printed at about $13 billion, with a further increase to about $15 billion in the 2025 budget for restoration.
We note at this juncture the near-perennial low budget implementation threshold since 2000, with the obvious inconsequentiality of appropriated expenditure on infrastructural development. However, at this time, we acknowledge the record-breaking fiscal milestone set by the President Tinubu-led federal administration, which matched and exceeded KPMG's $14.2 billion annual infrastructure spending estimate for the first time in Nigeria's fiscal history. Based on the approved 2026 Appropriation Act, the Nigerian government significantly expanded its fiscal framework, with the total budget breaking records. Remarkably, the budget allocated $23 billion (roughly half the total budget) to infrastructure and other capital expenditures. Without doubt, the 2026 budget is indicative of a new vista in the nation's fiscal firmament with emphasis on securing debts for infrastructure development. The approved $23 billion infrastructure budget is about the same size as the budget deficit to be financed almost entirely through debt. This debt-for-infrastructure spending policy has roused a cacophony of concerns and, at times, condemnation in political opposition quarters and corporate advocacy groups. Some had orchestrated the fact that debts should not have been planned to finance the 2026 deficit since the removal of the fiscally ruinous fuel subsidy. The opposing argument is that the removal had saved the country about $10 billion, which should naturally revert to the federation account. Our retort, however, is that the $10 billion annual fuel subsidy was mostly funded by debt and did not account for the bulk of the financing required for capital spending at that time or now. The country definitely needed more than the $10 billion saved from subsidies to provide functional infrastructural facilities.
Some other adversarial imputations have also argued that, rather than resorting to debt financing for infrastructure, the Public-Private Partnership (PPP) model should be vigorously adopted. We note, conversely, that several empirical studies have shown that PPPs in infrastructure financing face significant challenges, including high transaction costs, lengthy negotiation timelines, complex risk allocation, and political instability, which often result in projects being treated as off-balance-sheet liabilities. Other key obstacles include limited institutional capacity to manage contracts, weak legal frameworks, insufficient financial resources, and abandonment. In addition, private investors are drawn more to jurisdictions that have demonstrated strong commitments to infrastructure investment because such commitments act as key indicators of economic stability, reduced operational risks, and enhanced profitability, unlike what obtains in Nigeria. A substantive indicator of the private sector's reluctance to enthusiastically embrace infrastructure PPP in Nigeria is that institutional assets, including pension and insurance funds, have exceeded $100 billion, yet less than 5 percent is invested in infrastructure, compared to 15 percent in South Africa. Private equity and venture capital flow to Nigeria reached $1.2 billion in 2023, but little of this was directed to infrastructure. The reality is that manifest government funding of infrastructure assets usually motivates and builds investors' confidence in the jurisdiction of interest.
Nonetheless, from both global and domestic indicators, there are growing signs of investors' increased confidence in Nigeria's debt instruments, evidenced by Nigeria's sovereign Eurobonds yields, which fell last week to 6.89 percent from 8 percent for the first time on record. This signals improved sentiment among foreign portfolio investors towards the country and underscores the strength of demand for Nigeria's external debt, even as global borrowing costs remain elevated. This positive development is despite rising US Treasury yields, which usually attract investors away from emerging-market debt. Instead, investors are increasingly pricing in Nigeria's improved macroeconomic stability, reform momentum, and more recently, the rally in oil prices following the U.S.-Iran war. Thus, it can be safely asserted that the global capital market will provide Nigeria with a cheaper cost of debt in the future. We also note that some Nigerian corporates express concerns about the crowding out of domestic companies from the debt market by the federal government's borrowing there. Our submission in this regard is that, at this point in the nation's developmental trajectory, all considerations should be subject to the requirements of development infrastructure investment, with borrowed funds directed to high-priority projects in transportation, power, digital, healthcare, and education that enhance long-term productivity and economic growth. We must add that the government's issuance of domestic debt through bonds and treasury bills deepens local financial markets, helping to create a benchmark yield curve. This serves as a reference point for pricing private-sector debt and facilitates the growth of corporate bond markets.
Conclusion
Already, we are seeing clear signs of a rejuvenated Nigerian infrastructure, with the recent approval by the Tinubu-led Federal Executive Council of a record-breaking suite of infrastructure projects. These include $2.99 billion for rail projects in Lagos, Kano, and Kaduna; more than 7 trillion naira for road and bridge works nationwide; billions of dollars for the total reconstruction of major seaports in Apapa, Tin Can, Calabar, Warri, and Port Harcourt to address decades of neglect; and 1.096 trillion naira for capital projects in the power sector, among others.
