• Nigeria secures $1.126bn from FAB and Afreximbank for the Lagos-Calabar Highway, using ICIEC guarantees to attract global capital.

• The deal pivots to "productive debt," relying on tolls and trade efficiency to service loans rather than recurrent state budgets.

• Despite financial success, environmental risks and potential displacement remain critical threats to execution and revenue stability.

Nigeria has taken a significant step forward in the execution of its most ambitious commercial infrastructure corridor. On December 26, the government announced the financial close of $1.126 billion for Phase 1, Section 2 of the Lagos–Calabar Coastal Highway. Fully underwritten by First Abu Dhabi Bank (FAB) and Afreximbank, the transaction underscores the continued attractiveness of Nigerian infrastructure assets to international capital, despite a challenging macroeconomic environment marked by currency pressure, inflation, and fiscal consolidation.

The 55.7-kilometre stretch linking Lekki, Nigeria’s primary economic hub, to Ode-Omi forms part of a vast 700-kilometre coastal corridor. While the engineering execution—entrusted to Hitech Construction—is notable, the most consequential aspect of the deal lies in its adoption of the EPC+F (Engineering, Procurement, Construction plus Finance) model. This transaction represents a deliberate shift in how Nigeria seeks to fund large-scale infrastructure, necessitating that contractors actively facilitate capital raising to complement government counterpart funding, moving away from purely sovereign-backed spending toward commercially structured, revenue-oriented debt.

The financing package comprises two principal tranches: $626 million from First Abu Dhabi Bank and $500 million from Afreximbank. Crucially, the operation is supported by a record-risk mitigation facility from the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC). Specifically, the deployment of a Non-Honouring of Sovereign Financial Obligations (NHSFO) policy played a decisive role in de-risking the project for Gulf-based investors. This mechanism effectively bridged the gap between Nigeria’s sovereign credit rating and the risk-return expectations of commercial lenders.

For Nigeria’s Minister of Finance, Wale Edun, the deal marks a “turning point” in President Bola Tinubu’s Renewed Hope agenda, demonstrating that Nigeria can still attract large-scale commercial financing for strategic assets. More broadly, the transaction signals an attempt to reframe the debt debate: not all borrowing weighs equally on public finances.

At first glance, the scale of the funding naturally raises concerns about Nigeria’s already elevated public debt levels. However, assessing the sustainability of this operation solely through traditional metrics, such as the debt-to-GDP ratio, risks overlooking the central issue. The Lagos–Calabar Coastal Highway is designed not as a social asset reliant on recurrent budgetary support, but as a commercial infrastructure capable of generating its own cash flows. In this sense, it fits squarely within the concept of “productive debt”—borrowing whose servicing is expected to be covered primarily by the revenues generated by the financed asset itself.

The project’s financial logic rests first on direct user-based revenues underpinned by a concession-backed framework. As a priority logistics corridor, the highway incorporates a mandatory tolling model, particularly targeting heavy and commercial traffic. The projected traffic density between the Lekki Free Trade Zone—home to the Dangote Refinery and the deep-sea port—and markets in eastern Nigeria provides a robust revenue base. This "user-pay" model is designed to serve as a self-liquidating mechanism, covering a significant portion of debt service obligations over the facility's tenure.

Beyond toll revenues, the project’s viability also depends on its logistical efficiency gains. Nigeria’s current transport bottlenecks impose billions of dollars in annual productivity losses. By reducing transit times and congestion, the coastal highway is expected to increase trade volumes, lower logistics costs, and indirectly boost fiscal revenues through higher customs receipts, corporate taxes, and export earnings. These secondary effects strengthen the project’s macroeconomic justification and improve its overall debt-servicing capacity.

The strongest validation of the model lies in its bankability. The willingness of a commercial institution such as First Abu Dhabi Bank to commit over $600 million reflects an upbeat assessment of the project’s long-term return profile. These institutions operate under strict profitability and risk criteria. Their participation suggests that financial audits and value-for-money assessments—coordinated notably by GIBB and aligned with the IFC Performance Standards—have confirmed the project’s capacity to move toward operational self-financing upon completion.

Taken together, the transaction represents a calculated bet on productive debt: leverage deployed to create an asset strategically positioned along West Africa’s most dynamic commercial axis, and one that carries within it the mechanisms for its own repayment. It reflects a more mature approach to infrastructure finance, where debt is evaluated not merely as a fiscal burden but as an instrument of economic transformation.

That said, financial logic alone cannot guarantee success. The project faces significant environmental and social risks detailed in the Environmental and Social Impact Assessment (ESIA). Sections of the route intersect critical biodiversity hotspots, including mangrove ecosystems and migratory bird habitats, necessitating a rigorous and costly Resettlement Action Plan (RAP). If compensation mechanisms and environmental mitigation frameworks are inadequately funded or poorly executed, legal disputes and social resistance could delay construction, directly undermining the revenue generation timeline.

Equally critical is the currency mismatch risk. While the debt is denominated in US Dollars, toll revenues will primarily be collected in Naira. Unless the concession framework includes dynamic toll indexation to absorb exchange rate volatility, further devaluation could erode the real value of revenues needed to service the foreign debt. Furthermore, the model's sustainability depends on strict adherence to maintenance obligations to prevent asset deterioration. Cost overruns, lack of maintenance discipline, or prolonged delays would weaken the project’s cash-flow profile and shift financial pressure back onto the sovereign.

Cynthia Ebot Takang, Edited by Idriss Linge