Technology infrastructure is the backbone of digital transformation and economic advancement. In Nigeria, there is a rapidly growing demand for robust infrastructure—such as broadband networks, data centers, cloud platforms, and smart grids. Financing these projects could however present distinct challenges and opportunities to developers and project sponsors.
In this newsletter, we highlight some financing options, as well as the key legal and regulatory considerations for successfully executing technology infrastructure projects in Nigeria.
1. What is Technology Infrastructure?
Technology infrastructure refers to the core physical and digital systems that support modern connectivity and digital services. This includes assets like fiberoptic cables, telecom towers, base stations, and data centers, cloud platforms, enterprise software, and electronic payment systems.
These systems are essential to a wide range of sectors, including telecommunications (such as broadband rollout and ICT backbone development), power (like smart grids), public services (including e-Government and digital identity platforms), and emerging areas such as the Internet of Things (IoT), Artificial Intelligence (AI), and blockchain technology.
2. Financing Models for Technology Infrastructure Projects
a. Grants
Grants are financial contributions provided by government or private institutions to support specific projects, typically without the expectation of repayment. They are a valuable funding option for technology infrastructure projects, especially in emerging markets. Examples of such grants include the Bank of Industry (BoI) Grant and the Lagos State Science Research and Innovation Council (LASRIC) Grant. To access these funds, project sponsors and developers must meet the eligibility criteria established by each institution.
b. Public-Private Partnerships (PPPs)
Given the capital-intensive nature of infrastructure projects, Public-Private Partnerships (PPPs) offer a valuable opportunity for collaboration between the government and private sector. Federal-level PPPs are regulated by the Infrastructure Concession Regulatory Commission (ICRC) Act, while state-level projects are governed by respective state laws. As certain technology services, like broadband provision, are increasingly viewed as essential public utilities, governments are more open to partnering with the private sector to deliver these projects.
There are several PPP models, including Build-Operate-Transfer (BOT), Design-Build-Finance-Operate (DBFO), concessions, and joint ventures, which outline how projects will be delivered, who assumes the risks, and how returns are shared. These models are tailored to suit the specific needs and structure of each project, ensuring a flexible and effective approach to technology infrastructure development.
c. Project Finance
To manage project risks and facilitate external funding, developers often adopt the use of Special Purpose Vehicles (SPVs). These structures allow sponsors to access debt financing—typically from development finance institutions (DFIs), commercial banks, or international lenders—on a limited-recourse basis. This means that liabilities are largely kept off the sponsor's balance sheet and vest in the SPV.
This financing approach uses long-term loans that align with the lifespan of the project, with repayments made directly from the income the project generates. For example, in data center projects, the developer can enter into long-term agreements with users, where the service fees are structured to cover loan repayments. This allows sponsors to deliver large-scale technology infrastructure without the need to fund the entire project upfront—apart from their equity contribution.
d. Crowdfunding
Crowdfunding is a popular financing method where funds can be raised from a large pool of contributors, typically through online platforms. It offers two main models: reward-based crowdfunding, where backers receive non-financial rewards or early access to products, and equity crowdfunding, where investors receive ownership shares in the entity. Crowdfunding can be effective in technology infrastructure projects. Project sponsors and developers should however seek crowdfunding through duly registered and licensed intermediaries and platforms in accordance with the Securities and Exchange Commission (SEC) Rules on Crowdfunding.
e. Blended Finance and Development Funding
Blended finance combines public funds with private investment to reduce risks and make projects more appealing to investors. By using tools like grants, low-interest loans, and guarantees, it helps attract private capital for projects that might otherwise struggle to secure funding.
This approach is especially useful for large-scale technology infrastructure projects in Nigeria, such as broadband networks and establishment of data centers. To access blended finance, project developers need to present a solid business case, show clear social or economic benefits, and engage with development finance institutions (DFIs) like the African Development Bank, International Finance Corporation, and BoI early in the process. Developers must also demonstrate how the project will be financially sustainable and meet both commercial and developmental goals.
3. Regulatory Landscape and Compliance Considerations
a. Licensing Regimes
Depending on the nature and scope of the technology infrastructure project, developers may require specific licenses or authorizations from regulatory bodies before development of infrastructure projects. For instance, telecommunications and broadband service providers must obtain operating licenses under the Nigerian Communications Commission (NCC) licensing framework, which includes categories such as the Unified Access Service Licence, Internet Service Provider (ISP) Licence, and Infrastructure Company (InfraCo) Licence.
b. Sustainable Development and Regulatory Alignment
As investors increasingly prioritize environmental, social, and governance (ESG) standards when evaluating projects, developers and sponsors must ensure that their technology infrastructure projects meet these requirements. This is essential not only for attracting investment but also for demonstrating a commitment to sustainable and responsible development.
In line with these ESG expectations, technology projects involving physical infrastructure —such as towers, cables, and data centers—must comply with environmental and land use regulations. Developers are required to conduct an Environmental Impact Assessment (EIA) to evaluate potential environmental effects and outline necessary mitigation measures. Additionally, they must adhere to the provisions of the Land Use Act and local urban planning laws to ensure that the infrastructure is properly sited and aligned with responsible development practices.
c. Local Content and Technology Transfer
Developers must demonstrate compliance with local content laws that prioritize the use of local labour, materials, and expertise. Technology transfer, which encourages the sharing of knowledge and skills with local businesses, is also a key factor in ensuring project sustainability and fostering innovation. Both aspects are crucial for increasing a project's appeal to financiers, especially public sector investors.
Conclusion
As Nigeria's demand for digital infrastructure grows, it is essential for sponsors and developers to understand the financing options and legal considerations that support successful project delivery. Models such as PPPs, project finance, crowdfunding, and blended finance offer viable pathways, particularly when aligned with regulatory requirements and ESG standards. While this newsletter provides key insights, it is not exhaustive. We advise seeking tailored legal and financial guidance to effectively navigate the complexities of financing and developing technology infrastructure in Nigeria.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
