EPC+F: An Alternative Model for Financing and Delivering Infrastructure in Nigeria

The Engineering, Procurement, Construction and Financing (EPC+F) model is an increasingly relevant structure for delivering large-scale infrastructure projects, particularly where government funding is constrained but the need for investment remains substantial.

In February 2025, the Federal Government signed an EPC+F agreement with Hitech Construction Company Ltd. for the Lagos–Calabar Coastal Highway. Under the announced funding arrangement, the Federal Government would provide 30% counterpart funding, while Hitech would be responsible for mobilising the remaining 70% through external financing. In July 2025, the Federal Ministry of Finance announced a $747 million syndicated loan for Phase 1, Section 1 of the highway, demonstrating the mobilisation of international financing for that section.

Under this model, four principal responsibilities are combined within a single contractual structure:

(a)  Engineering: Developing the project design, technical specifications and engineering solutions.

(b)  Procurement: Sourcing the materials, equipment and other resources required for construction.

(c)   Construction: Executing the physical works in accordance with the agreed specifications, cost and timetable.

(d)  Financing: Arranging the funds required to execute the project, subject to the agreed financing structure.

The Strategic Advantages of EPC+F

The EPC+F model offers several potential advantages for infrastructure delivery in Nigeria. We reflect on our experience advising on EPC+F transactions and highlight a few commercial considerations below:

1. Reduces Immediate Pressure on Public Finances

By requiring the contractor to arrange a substantial portion of the project financing, the model can reduce the government's immediate funding requirements. Rather than financing the entire project upfront, the government contributes an agreed counterpart amount, while the balance is mobilised through external financing. However, this does not eliminate the government's financial obligations. The ultimate allocation of repayment risk depends on the contract, financing arrangements and any sovereign guarantees or other commitments provided.

2. Improves Coordination and Project Delivery

Combining engineering, procurement, construction and financing under a single contractual structure can reduce the coordination problems associated with separately procured services. The contractor has greater responsibility for aligning the availability of funds, materials, equipment and technical resources with the construction programme. With the EPC+F model delivery timelines can be significantly improved, particularly where conventional public procurement is affected by fragmented responsibilities or delays in budgetary releases.

3. Creates Greater Cost Certainty

Where the contract provides for a fixed price, clearly defined specifications and limited grounds for variations, the EPC+F model can improve cost predictability and place more of the construction cost risk on the contractor. As a contractual matter, the extent of that protection depends on the contractual terms. Changes in scope, unforeseen site conditions, inflation, exchange-rate movements and other specified events may still result in additional costs for the government.

4. Strengthens Performance Accountability

A single contractor responsible for financing arrangements and project execution has a direct incentive to coordinate delivery against agreed milestones. Contracts may also provide for performance bonds, warranties, liquidated damages and other remedies for delay or defective work. These contracual mechanisms, typically, baked into EPC+F models can strengthen accountability, provided the contractual obligations are clearly defined and effectively enforced.

5. Mobilises Foreign Capital and Technical Expertise

EPC+F arrangements can attract international contractors, lenders and investors with access to foreign capital, specialist expertise and established financing relationships. This can be particularly useful for projects requiring substantial investment or technical capabilities that are not readily available domestically. Nevertheless, foreign financing introduces its own considerations, including exchange-rate exposure, financing costs, lender conditions and the enforceability of contractual obligations.

6. Supports Long-Term Infrastructure Planning

The model can encourage contractors to consider durability, construction quality and lifecycle costs from the outset, particularly where maintenance obligations or long-term performance requirements form part of the contract. This can be critical for road infrastructure, where the economic value of a project depends not only on completing construction but also on maintaining the road in a condition that supports safe and efficient use over time.

7. Enables Large-Scale Infrastructure Projects

For major infrastructure projects, EPC+F can provide a route to mobilisation where the government cannot immediately commit the full capital expenditure. Depending on the financing structure, repayment may be supported by budgetary allocations, agreed government payment obligations, toll revenues or other permitted funding arrangements.The model can therefore expand the range of projects that can be undertaken, although the financing must ultimately be supported by credible repayment arrangements and a realistic assessment of the project's economic value.

The Critical Consideration: Financing Is Not Free

The principal attraction of EPC+F is also the source of one of its greatest risks. The contractor's ability to mobilise financing does not mean that the project is financed at no cost to the government.

The cost of capital, repayment obligations, foreign-exchange exposure, guarantees and contingent liabilities must all be assessed before the contract is executed. The government must also ensure that the proposed financing is genuinely available, competitively priced and supported by transparent contractual terms.

Equally important is the allocation of risk. An EPC+F contract does not automatically transfer every technical, financial or construction risk to the contractor. The contract must identify the risks assumed by each party, the circumstances in which additional payments may become due and the remedies available if the contractor fails to perform.

Conclusion

EPC+F can provide Nigeria with an additional mechanism for financing and delivering critical infrastructure. Its effectiveness, however, depends on more than the ability to secure funding. Proper project appraisal, transparent procurement, credible financing, disciplined contract management and enforceable performance obligations remain essential.

For Nigeria, the objective should not simply be to build more infrastructure without immediate reliance on public funds. It should be to secure infrastructure that delivers measurable economic value at a sustainable cost to the public.

Sources

1. BusinessDay: FG signs pact to attract foreign investment for Lagos-Calabar Coastal Highway Project.

2. Federal Ministry of Finance: Landmark $747 Million Syndicated Loan for Phase 1, Section 1 of the Lagos-Calabar Coastal Highway.

Balogun Harold advises businesses, investors and public-sector stakeholders on infrastructure transactions, project financing, procurement and construction contracts, and the allocation of commercial and regulatory risk.