Raising capital to fund infrastructure projects via the capital market

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Globally, the availability of infrastructure is very critical to the economic, industrial, technological and social development of any nation.

This is because it is important to improve living standards of citizens, promoting private sector development, country’s business perceptions and competitiveness are all important in attaining a well-functioning economy.


It is of a fact that in these trying times, reliance on government revenue like taxes and grants are never sufficient to fund these infrastructural developments. Some economic analysts are of the opinion that increased tax would be enough to run an economy while others believe that an increase in taxes is a disincentive, which places more burden on the citizens and can cripple an economy.

It is estimated that the current population would have ballooned to about 330 million people in the next 21 years, making Nigeria the fourth most populous country by 2040, behind India, China, and the US. Hence, it is expected that there would only be more pressure on the existing facilities, and the government’s financing capacity will even be more challenged.

Therefore, rather than relying strictly on internally generated revenue, governments can float bonds at intervals for specific developmental projects. All tiers of government, their agencies and corporate organisations have the opportunity to finance their projects through the issuance of bonds.


Different shades of bonds can be structured to suit the project peculiarities, investor’s expectations, concerns and issuers requirements. Thus, there are Federal Government (sovereign) Bonds, Government Agency Bonds, State/Local Government (sub national) Bonds and Corporate Bonds. This is why the capital market is said to be a critical pillar to long term fund mobilisation needed for capital formation to fast track economic growth and development. In addition, the capital market provides a variety of financing instruments and investor categories, which could lead to a larger pool of funds than other financing options.

Little wonder with the devastating impact of COVID-19 on the nation’s economy, the Federal Government tapped into the capital market by raising over N2.36 trillion via its 92 per cent of total bond issuances in 2020.

Going by some landmark transactions in which the government has funded over portions of 26 roads across the six geopolitical zones in the country with the sum of N200 billion on the FGN Sukuk I and II, It is believed that the nation’s economic recovery is hinged on the creation of a new economic model in the view of the declining global oil economy and creation of a sound investment environment.

According to market experts, Nigeria needs to make more significant structural progress in reducing its vulnerabilities to oil cycles, future declines in the oil price and place its focus on Nigeria’s capital market as it will play a key role in the much talked about recovery.

Delivering a presentation titled; Emerging Market- Outlook and opportunities in the Nigerian capital markets during the annual Nigerian Stock Exchange (NSE)’s 2020 Market Recap/2021 Outlook, Chief Economist, Africa and the Middle East, Standard Chartered Global Research, Razia Khan, noted that the nation’s capital market will play a huge role in its economic recovery due to the fact that portfolio investors seeking higher yields will still be looking to African markets especially Nigerian markets to drive the desired investment returns while adding that there is need for the Federal government to contain its debt service bill.

Khan said that there is an expectation that 2021 will bring at least technical recovery in growth which won’t be enough for the Nigerian economy.

Her words, “There was an idea back then of increased savings associated with any oil windfall, more like creating a buffer for oil earnings. But it has become difficult for Nigeria to do so in that regard in the context of the post 2014 oil earnings environment. There is a strong case of the accumulation of the longer term savings and so Nigeria needs to look at what it can do in the meantime as much as it faces pressures relating to weaker growth trend and human cost from the COVID-19 crisis.

 There is a need to look at a consistent need to formalize the informal economy and the nation needs to give great attention to growing its revenue base as it has been too narrow and a medium to long term plan where there will be more progress year after year in terms of mobilizing non-oil revenue.

Having seen this unprecedented amount of global stimulus and liquidity creation, how much of investments is going to be attracted back to economies like Nigeria? Will it be possible to create the conditions that create confidence that Nigeria is at the very cusp of a longer term structural diversification drive that will move things differently in the future?

We have already seen it in recent months in terms of the performance of the NSE that the building blocks of recovery from the capital market is very much in place for a more sustained rally and it seem like a very good note to state that it is about whether we can see long term lasting structural change which will be the best way of underscoring recent performance of the NSE”.

For his part, Head, Debt Capital Markets, FBNQuest Merchant Bank Limited, Oluseun Olatidoye, stressed the need for sound macroeconomic and policy frameworks to enable the capital market attract investors to long-term domestic projects.

Olatidoye said that the capital market represents a very good platform for raising funds for infrastructure development and urged the state governments to prioritise funding for specific projects.

“One of the challenges facing Nigeria is that we have so many programmes but we are not concentrating well enough on them. There is a need to focus funding on specific projects and provide some form of guarantee, that way, investments can flow into the economy”, he said.



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