The African Infrastructure Financing Challenge: Unlocking Pension Capital for Digital Growth

Nigeria and the broader African continent face a persistent challenge that underpins every ambition for digital transformation and economic expansion: the **African infrastructure financing** gap. This isn't merely about building roads; it's about powering the digital economy. For Nigerian businesses, developers, and innovators, the availability of reliable power, robust data centres, and efficient logistics networks isn't a luxury – it’s the bedrock of competitiveness. Without it, the promise of a $18.3 billion digital economy in Nigeria by 2026 remains constrained by the everyday realities of high operational costs, unreliable services, and a persistent dependence on foreign capital. The continent’s estimated $400 billion development financing gap is a stark reminder that while the ideas and talent are abundant, the fundamental physical and digital infrastructure needed to scale them is not. Addressing this requires a strategic shift, and a Lagos-based fund manager is leading the charge to channel Africa’s own vast pools of capital into this critical need.

Why African infrastructure financing matters for Nigeria/Africa

The cost of doing business in Nigeria is often inflated by the very basics that are taken for granted elsewhere. Consider the constant struggle for reliable power. Dapo Otunla of IHS Nigeria, managing over 16,000 towers, starkly illustrated this at the recent DOA Business Series in Lagos. In India, connecting a tower to the grid is often the final step. "Over here, you put your tower up, then you need to get a generator there, then you need to figure out a way to get diesel there," Otunla explained, highlighting the compounding costs and complexities. This isn't just about telecoms; it impacts every sector, from manufacturing to e-commerce, driving up prices and stifling innovation. Beyond power, Oluwaseun Oluboyo of ipNX pointed to the problem of digital sovereignty, noting that routing Nigerian internet traffic through servers abroad degrades service quality and latency. The solution, he argued, lies in local infrastructure: data centres and internet exchange points built on the continent. These are not abstract concepts; they are the tangible assets that determine whether a Nigerian startup can compete globally or whether a local e-commerce platform can deliver seamless experiences. The sheer capital required to build this foundational infrastructure is immense, and for too long, Africa has looked outward for solutions.

What happened: ARM-Harith's $200M fund and Nigeria's infrastructure reality

In a significant move to address this fundamental challenge, ARM-Harith Infrastructure Investments, a Lagos-based pan-African private equity fund manager, has announced the first close of its Climate Transition Fund, raising $76 million towards a $200 million target. This fund is designed with a specific, groundbreaking approach: combining US dollar and local currency investments within a single structure. This innovative strategy aims to unlock domestic institutional capital, particularly from **African pension funds**, which collectively manage about $600 billion in long-term savings but have historically been hesitant to invest in infrastructure due to currency mismatch risks. Rachel Moré-Oshodi, ARM-Harith’s chief executive officer, affirmed the firm's track record, stating, “With our first fund, we demonstrated that domestic institutional capital can be mobilised into infrastructure equity. With this successor fund, we are building on that foundation by bringing local and hard-currency capital together within a single platform.” This development comes as Nigeria grapples with severe infrastructural and capital challenges, as highlighted at the 5th edition of the DOA Business Series in Lagos. Panelists underscored that while Nigeria has largely solved the payments layer, as Ugodre Obi-Chukwu of Nairametrics observed, the next frontier is consumer credit and capital formation. The cost of capital remains a formidable barrier. Robert Ijewere of NOLT Finance noted the dramatic difference: "Whereas you are a viable business when your cost of funds is 13%, that changes dramatically when it’s 30%." With the Monetary Policy Rate (MPR) at 26.5%, many digital businesses find the interest burden unsustainable. Furthermore, fragmented right-of-way policies and a lack of coordinated engagement between state governments and infrastructure companies, as detailed by IHS Nigeria's Dapo Otunla, all add to the exorbitant cost of doing business and hinder infrastructure deployment.

African infrastructure financing and the bigger picture for Africa

ARM-Harith’s initiative reflects a broader, crucial shift in **African infrastructure financing**: development finance institutions (DFIs) are increasingly moving from being primary funders to catalytic investors, focused on crowding in domestic and local capital. This strategy acknowledges that while foreign capital from European DFIs like DEG, Proparco, and British International Investment (BII) has been dominant, as research firm Stears noted for Q1 2026, sustainable growth requires leveraging Africa’s own financial strength. The currency mismatch problem, where infrastructure projects generate local currency revenues but funds are raised in US dollars, has long been a deterrent for African pension funds. ARM-Harith's dual-currency structure directly tackles this, making infrastructure equity more appealing to domestic investors while still providing dollar exposure for international backers. This is not a new concept in African development finance; the African Development Bank (AfDB) launched Africa50 in 2015 as an equity and project development platform specifically designed to bring in African institutional investors alongside sovereign and development capital. Projects like Kigali Innovation City and the Benban solar complex in Egypt demonstrate how DFI capital can de-risk early-stage projects and facilitate participation from pension funds and commercial lenders. Africa50, by August 2025, had already crossed $1.4 billion in managed assets, proving the model's viability. The success of such initiatives is paramount to reduce Africa's reliance on external funding and build a more resilient, self-sufficient digital economy.

What's next for African infrastructure financing in Nigeria/Africa

The path forward for **African infrastructure financing** will require sustained effort, innovative financial structures, and cohesive regulatory environments. ARM-Harith’s Climate Transition Fund is a bellwether, signalling a viable pathway for local capital to power critical infrastructure, especially in the sustainable energy sector. We should expect more such blended finance models to emerge, tailored to specific regional and national contexts. For Nigeria, the discussions at the DOA Business Series underscore the urgent need for policy alignment. Addressing issues like fragmented right-of-way policies and actively engaging with infrastructure companies at state and federal levels will significantly reduce the cost of deployment. The Nigerian Exchange Limited (NGX), through initiatives flagged by Jude Chiemeka, is working to encourage the listing of more technology companies, which could create new avenues for capital formation. Furthermore, the suggestion by Robert Ijewere to formally recognise intellectual property as bankable collateral could unlock significant funding for digital businesses, provided the financial and legal sectors collaborate effectively. Ultimately, the successful mobilisation of African pension funds and other domestic capital pools will not only bridge the infrastructure gap but also foster a sense of ownership and long-term commitment to the continent’s digital future. This move toward financial self-reliance is not just about economics; it's about sovereignty and shaping Africa’s destiny on its own terms. **Bottom line for African builders:** The shift to unlock domestic pension capital for infrastructure is critical; it means more reliable power, better connectivity, and a more stable foundation for your ventures, reducing dependence on fickle foreign investment.