Unlocking capital for infrastructure: The case for project bonds in Nigeria

Nigeria’s infrastructure challenge is not anchored in a lack of ambition; it is constrained by its financing model. For decades, the public sector balance sheet carried the country’s infrastructure load, but that balance sheet is now stretched thin. Meanwhile, sizable pools of private capital, pension funds, insurers, sovereign wealth funds, are growing and searching for long-term, naira-denominated investment opportunities. The real issue is connecting this capital to well-structured, financially viable projects at scale. This is where project bonds, originated and structured by investment banks, present a compelling pathway.

Nigeria’s Revised National Integrated Infrastructure Master Plan (NIIMP, 2020–2043) estimates that the country needs roughly US$2.3 trillion, or US$100 billion annually, to raise infrastructure stock to 70% of GDP. Across Africa, prospective investors are not in short supply: pension funds, insurers, and sovereign wealth funds collectively hold more than US$1.1 trillion. However, unlocking this capital requires mechanisms that give institutional investors confidence in the structure, governance, and long-term viability of infrastructure projects.

Today, Nigeria finances long-term assets primarily through sovereign bonds, Sukuk, and Eurobonds. While these instruments provide funding, they also place a heavy burden on the federal balance sheet. In some cases, they introduce currency mismatch, naira revenues servicing dollar liabilities, and expose the government to refinancing and FX risks.

In addition, many infrastructure projects remain stuck in the pipeline simply because they are not structured, appraised, or de-risked in ways that attract private investment.

This model is neither sustainable nor sufficient to meet the scale of Nigeria’s infrastructure needs.

Project bonds offer a targeted solution. They are debt securities issued by project-specific Special Purpose Vehicles (SPVs) and repaid from the cash flows of the underlying project, not from a sponsor’s or government’s balance sheet. Because their tenor often aligns with the operational life of the asset, they are particularly suitable for pension and insurance investors that need long-term, stable yields.

Project bonds may be secured by:

Project bonds are not new. They have financed major infrastructure around the world:

In Latin America, the 144A U.S. capital markets window allows transportation and energy projects to access deep institutional capital without a full public offering.

In India, rupee-denominated project bonds have benefited from partial credit guarantees issued by global institutions such as Crédit Agricole Corporate and Investment Bank, helping to de-risk projects and attract a broader class of investors.

These models demonstrate that with the right structures, guarantees, and regulatory frameworks, project bonds can mobilise both domestic and international capital at scale.

Project bonds typically emerge in two forms:

Take-out financing – refinancing construction loans once projects reach operational stability.

Early-stage issuance – suitable for brownfield or late-stage greenfield projects that already demonstrate predictable cash flows. These often benefit from credit enhancements such as guarantees.

Both structures achieve alignment between long-term project cash flows and the long-dated liabilities of institutional investors.

Nigeria already has the regulatory foundations needed to scale a project bond market.

These components form a maturing ecosystem ready to support large-scale project bond issuance.

Merchant banks stand at the centre of this evolving landscape. Their role spans origination, structuring, underwriting, and distribution. They work closely with project sponsors and government agencies to design pipelines of bankable projects, projects that are financially viable, risk-assessed, and investor-ready. Such pipelines give institutional investors confidence, which is crucial for attracting long-term domestic and international capital.

At Coronation Merchant Bank, we embrace the philosophy of “banks-as-catalysts.” We identify, structure, and rigorously test bankable projects. Our integrated platform, covering financial advisory, capital mobilisation, commercial debt, private debt, and alternative finance, positions us to underwrite and distribute infrastructure debt efficiently.

Through partnerships with DFIs, guarantee providers, and other financial institutions, Coronation supports infrastructure debt issuances across both corporate and public-sector projects.

For organisations preparing to issue project bonds or build investment-ready infrastructure pipelines, Coronation provides the guidance, structuring capability, and investor access required to turn concepts into viable financial instruments.

Founded in 1993 as Associated Discount House Limited (ADHL), Coronation became a full-fledged merchant bank in 2015. Renowned for strong governance and rigorous risk management, the bank holds a BBB rating from Agusto & Co and a B- rating (Stable Outlook) from Fitch. Coronation offers corporate and investment banking, private wealth management, and global markets services, and is recognised for its innovation and professionalism in financial solutions.

Taiwo Olatunji; Group Head, Investment Banking, Coronation Merchant Bank

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