Risks Associated with Road Infrastructure Project Financing in Developing Countries: Study of Selected PPP Road Projects in Lagos, Nigeria

Abstract

Several World Bank reports on the infrastructure situation in the emerging economies such as Nigeria have indicated that adequate infrastructure provision is not only critical but inevitable for any meaningful economic development. This paper examines the risk factor which is a major impediment to infrastructure project financing. In Lagos, several PPP road infrastructure projects have suffered setbacks at various stages. The Public – Private Partnership (PPP) scheme is now becoming one of the prevailing ways for infrastructure development in Lagos and although infrastructure investment have gained increasing investors attention over the past decades, the empirical evidence on their risk implications is still limited. The research is limited to Lagos since PPP arrangement in project financing/investment is still very low in Nigeria.  Random sampling technique was applied. Data collection was by structured questionnaires, personal observations, interviews and phone surveys. Data analysis was based on simple descriptive analysis which employed statistical tools. The result of the research identifies and categorizes the various risks into three main categories – financial, political and project performance risks. The result of this research further show the most common causes of project failures in Lagos PPP road infrastructure projects and also identifies the most critical investment risks in the sector. The paper further recommends the most responsive risk management framework and mitigation measures for Lagos PPP road infrastructure projects. Conclusively, and given the relatively high risk perception associated with road infrastructure investment in Lagos, it is of primary importance to carry out exhaustive risk identification, risk hedging/management reviews, and evaluation of risk mitigating instruments/measures before embarking on any road infrastructure project investment/finance.