Africa’s Infrastructure Opportunity Requires New Financial Plumbing

By Victoria Ahiamadu and Joris Cyizere

The African Development Bank estimates that the continent needs between $130 and $170 billion per year in infrastructure investment across energy, transport, water, and digital connectivity. Only about $75 billion is invested per year. The climate finance gap is even wider—the continent has only been able to mobilize $30 billion of the $300 billion required each year. These are not abstract numbers. 600 million people, roughly half the continent’s population, still lack access to electricity according to the International Energy Agency, while UNICEF estimates that 418 million lack access to clean drinking water. And the pressure is only growing: Africa will add one billion people by 2050, more than half of them in cities. Urbanization is rising at 4% per year, making Africa home to five of the world’s ten fastest-growing cities.

Meanwhile, capital is flowing elsewhere. Amazon, Google, Meta, and Microsoft are projected to spend $600 to $700 billion on data centers in 2026 alone—more than four times Africa’s entire annual infrastructure investment requirement. A little more than a year ago, when NVIDIA lost $600 billion in a single day—the largest single-day drop ever recorded—the legend Mihir wrote in the New York Times that he believed “Big Tech was eating itself alive, with its component companies throwing more and more cash at investments in one another that are most likely to generate less and less of a return.” Some of us have thought this, yet we continue to put money into these stocks. He went on to argue that a major reason this continues to happen is that investors assess these companies—the Magnificent 7 in particular—as “premier safe assets… implicitly viewing them almost like governments.” Sure, some of this could be FOMO-driven, but the level of trust we have bestowed upon these companies and their management teams to safeguard our investments is unmatched. Whatever risks there might be, we “please-fix” them in our models, justify them intelligently, or just ignore them all together.

This unfortunately is Africa’s biggest deficit—the perception of risk is too high. And yet, a 2018 Moody’s report found that infrastructure finance in Africa has a lower default rate than even the United States. So perhaps the question is not whether Africa’s infrastructure gap is too risky to finance. Perhaps the question is why Africa is perceived to be too risky to finance and what can be done to alleviate this.

For the longest time, the dominant narrative around infrastructure investment in Africa has been that projects are not “bankable”, a term project finance professionals use to determine whether they can generate a return and are able to get their money back on an investment. At face value, the perception is not entirely unfounded. Investors often point to weak institutions, inconsistent enforcement of the rule of law, currency risk, fragile balance sheets of state-owned enterprises—which in some cases serve as the off-takers of project output on the continent—as key concerns. Yet framing the issue purely as one of risk obscures a more fundamental constraint: a misalignment between the nature of infrastructure assets and the capital available to finance them.

Infrastructure requires patient, long-term financing aligned with the lifespan of the underlying assets. Yet much of the capital available to African markets is short-term, rigid in structure, insufficiently tailored to local political and economic realities on the continent, and often reflects credit underwriting models designed for more developed markets. As a result, traditional foreign capital flow is often not suitable for the risks it seeks to price.

Furthermore, there is growing evidence that the risks associated with African infrastructure may be overstated or at least mispriced. Chinua Azubike, CEO of InfraCredit, Nigeria’s local currency guarantee company, has noted that the firm has not recorded losses across a portfolio of more than 20 projects in 12 sectors over eight years, arguing that “the real risk associated with infrastructure assets in Africa is often overestimated.” With the right structuring, infrastructure assets in Africa can deliver stable, long-term returns.

This misalignment becomes even more clear when viewed through the lens of domestic capital, which Africa is not short of. Domestic institutional investors including pension funds, insurance companies, and sovereign funds collectively manage over $2 trillion in assets. Despite its scale, less than 10% of this capital is deployed into productive sectors like infrastructure, reflecting both regulatory limitations and the perception among local institutions that such projects are inherently risky. Even a partial reallocation of these assets to infrastructure could begin to meaningfully narrow the infrastructure gap.

Looked at together, these dynamics lead to a broader conclusion: the challenge is not simply a bankability challenge or a lack of capital issue, but a lack of alignment in how risk is perceived, how capital is structured, and who is able to participate. Solving it will require not only new pools of capital but better market infrastructure—plumbing, in effect—that can make African infrastructure assets more transparent, more tradable, and more accessible to a wider set of investors.

Tokenization, the process of representing ownership of real-world assets on a blockchain, offers a potential pathway. But its promise is not simply about lowering ticket sizes or bringing in new investors. At its core, tokenization bundles issuance, compliance, reporting, and trading into a single programmable layer. It is, in a very real sense, the kind of market infrastructure that Africa’s infrastructure assets have lacked. Its value rests on three distinct mechanisms: tradability, transparency, and access.

Tradability. One of the most persistent barriers to infrastructure investment in Africa is illiquidity. An institutional investor in an African infrastructure bond today often faces a 15- to 30-year commitment with no meaningful exit. That illiquidity premium gets priced into the cost of capital, making projects more expensive to finance.

Tokenization addresses this directly. By representing infrastructure debt or equity as digital tokens on a blockchain, these instruments can be traded on secondary platforms without requiring the project itself to return capital early. The distinction matters: the investor gets liquidity; the project gets long-term financing. This is the same principle that makes public bond markets work in developed economies—individual holders may come and go, but the capital stays put. African infrastructure assets currently lack that secondary market microstructure. Tokenization could provide it. Notably, the Nairobi Securities Exchange is already exploring this through its integration with the Hedera blockchain for tokenized securities, and the Pan-African Payment and Settlement System (PAPSS) offers a natural cross-border settlement layer that could connect tokenized markets across the continent.

Transparency. A significant portion of the risk premium on African infrastructure is not compensation for actual default risk—Moody’s analysis on default rates and InfraCredit’s track record both tell us that—but compensation for not knowing. Information asymmetry is what gets priced as risk. Foreign investors struggle to diligence projects from afar, cashflow reporting is often delayed and inconsistent, and construction milestones can be difficult to verify independently. In this environment, even well-performing assets carry a perception penalty.

Tokenized instruments can embed real-time, programmatic transparency directly into the asset. Smart contracts—self-executing agreements coded into the blockchain—can automate milestone-based disbursements, linking the release of funds to independently verifiable conditions. For a toll road, that might mean revenue data feeds directly from toll collection systems. For a solar project, satellite imagery can verify installation and output. Payments flow when conditions are met, not when someone files a report six months later. This kind of embedded monitoring compresses the information gap that currently inflates Africa’s borrowing costs beyond what actual performance data would justify.

Access. Once infrastructure assets are tradable and transparent, expanding who can invest becomes not only feasible but powerful. By fragmenting large infrastructure assets into smaller, tradable units, tokenization lowers the barrier to entry. Instead of requiring large ticket sizes, infrastructure investments can be fractionalized, enabling retail investors—including Africa’s global diaspora—to participate in projects that were previously inaccessible.

The scale of this opportunity becomes clear when viewed alongside remittance flows. Remittances to Sub-Saharan Africa reached approximately $54 billion in 2023, with total flows to the continent exceeding $90 billion annually. These flows are among the most stable sources of external finance in Africa. In addition, a 2011 IMF report estimated that the African diaspora saves more than $50 billion annually. Combined, a reallocation of some of this capital into structured retail infrastructure vehicles could be transformative.

On the global scale, momentum is building. The World Economic Forum estimates that up to 10% of global GDP could be tokenized by 2027, and an increasing number of private equity funds in developed markets are exploring retail participation through tokenized structures. BlackRock’s tokenized treasury fund crossed $500 million faster than any traditional ETF. For Africa, where traditional financial intermediation is often limited, the potential is significant.

However, tokenization is not without its challenges. Regulations across most African countries are still evolving and are not yet fully equipped to support tokenized securities at scale. Questions about investor protection, custody, taxation, and cross-border participation remain unresolved. More fundamentally, legal enforceability remains critical: for tokenized assets to gain credibility, smart contracts and digital ownership claims must be recognized and enforceable within domestic legal systems. Without strong rule of law and regulations, the risks could outweigh the benefits.

Progress, however, is real. Kenya’s Capital Markets Authority is piloting blockchain-based platforms through its regulatory sandbox. Nigeria’s new Investments and Securities Act formally recognizes digital assets as securities under the Nigerian Securities and Exchange Commission’s oversight. Ghana’s central bank is developing a regulatory framework for virtual asset service providers in partnership with the Ghanaian Securities and Exchange Commission. These are not theoretical commitments—they are regulatory foundations being built in real time.

A pragmatic immediate step would be to start with brownfield infrastructure assets which are already operational and have established cash flows. Tokenizing these assets would provide liquidity for existing investors, demonstrate the model’s viability, and enable the recycling of capital into new infrastructure development. Institutions like the African Development Bank could accelerate adoption by incorporating blockchain-based monitoring into their project finance frameworks, lending the credibility that bootstraps private participation.

Ultimately, if the challenge remains alignment between capital, risk, and access, then solving it will require new plumbing—the market infrastructure that connects capital to projects in ways the current system does not. Tokenization is not a silver bullet. But it is the most promising mechanism we have for building the issuance platforms, the secondary trading venues, the standardized reporting, and the real-time monitoring that can convert African infrastructure projects from opaque, illiquid commitments into transparent, tradable, investable products.

At HBS, we are constantly reminded that we are expected to be leaders who will make a difference in the world. We could start here. Traditional infrastructure investors focus on developed markets whereas Africa’s infrastructure buildout represents a multi-decade, multi-trillion-dollar opportunity that is currently underserved by both talent and capital. While every fund and strategy is flowing into AI infrastructure—chasing ever-increasing multiples and potentially diminishing returns—Africa’s infrastructure gap represents a guaranteed, structural demand opportunity driven by demographics and urbanization. This is not speculative. People need electricity, roads, water, and connectivity, and the demand curve is only steepening.

The capital is not even missing. What is missing is the plumbing—the financial infrastructure that can channel this capital productively into investable projects. HBS students are well positioned to help build it. And the potential for outsized returns, as much as the impact, is compelling: Moody’s shows that African infrastructure has lower default rates than many other developing nations and even the United States, despite significantly higher borrowing costs. The risk premium is mispriced. Savvy investors who recognize this early stand to see impressive returns while financing something that genuinely matters.

Name (MBA ‘XX) is the TEMPLATE.