Africa’s efforts to close its infrastructure deficit are being affected not only by limited access to funding but also by the high cost of raising capital for major projects.
Nigeria’s Finance Minister and Coordinating Minister of the Economy, Taiwo Oyedele, raised the concern during a United Nations dialogue on climate finance in New York on Wednesday, September 23, 2026.
Oyedele said African countries face what he described as a “prejudice premium”, “narrative cost” and “stereotype tax” when seeking financing for critical infrastructure.
His comments highlight the financial challenges facing governments across the continent as they work to expand energy supply and accelerate economic development.
Infrastructure projects often require substantial investment before they begin generating returns. As a result, higher borrowing costs can make projects that would otherwise be financially viable more difficult to fund.
Currency movements can further increase the pressure. Several infrastructure projects generate revenue in local currencies while relying partly on financing in dollars or euros. A significant depreciation of the local currency can therefore increase the cost of servicing foreign debt, even when a project is performing as expected.
For governments, this can result in delayed projects, increased subsidies or guarantees, or additional borrowing to keep projects financially viable.
The challenge is particularly significant in the energy sector, where African countries need to increase electricity access while also financing the transition towards cleaner energy.
Oyedele argued that gas and other transition energy sources should form part of the response, reflecting Nigeria’s position that African economies need to expand energy supply while gradually moving towards cleaner sources.
However, the financing challenge extends beyond energy.
High capital costs can increase the expense of developing roads, ports, water systems, telecommunications networks and industrial infrastructure. This raises the amount of money governments and private investors must commit before projects begin generating returns.
This makes the structure and terms of financing as important as the amount available. Long-term and concessional funding can help support projects whose financial returns are weakened by high commercial borrowing costs.
African countries also face genuine investment risks, including currency volatility, regulatory uncertainty, limited fiscal space and relatively shallow domestic capital markets.
However, broad risk premiums can make it difficult to distinguish between the risks associated with a particular investment and perceptions about an entire market.
For Nigeria, the issue is especially relevant as the country seeks to attract private investment while managing inflation, exchange-rate pressures and elevated domestic borrowing costs.
Increasing foreign borrowing alone may not solve the problem. Infrastructure financed in foreign currency but supported by local-currency revenues can shift exchange-rate risks to governments, businesses or consumers.
Developing deeper domestic capital markets could help reduce some of these risks by enabling infrastructure projects that generate revenue in naira to access longer-term local funding.
Better project preparation, predictable regulations and stronger revenue structures could also reduce risks linked to individual projects rather than Africa as a whole.
The infrastructure financing challenge therefore requires action on both sides. African countries need to make projects more investable and reduce project-specific risks, while the international financial system needs to ensure that African projects are not subjected to unnecessarily high financing costs.
For Nigeria and other African economies, attracting more capital will not automatically close the infrastructure gap if the cost of that funding consumes too much of the expected economic return.
The key issue is therefore not simply how much money is committed to infrastructure, but whether financing is sufficiently affordable, long-term and appropriately structured to turn projects into viable investments.
