Nigeria’s water crisis cannot be solved by government spending alone. The harder question is how to create a market in which private capital can deliver reliable water while protecting affordability.
Nigeria has built water infrastructure for decades, yet much of it does not work. The country’s problem, therefore, may not simply be one of infrastructure.
It may be one of market design.
That was one of the most provocative conclusions from the inaugural Lagos session of Lokoja Dialogues, where policymakers, investors and water-sector practitioners debated who should build, finance, operate and pay for Nigeria’s water infrastructure.
The answers challenged some familiar assumptions. Should government remain the primary developer? Should it be the buyer of water? Should tariffs be kept artificially low? Should private capital be expected to enter without a credible commercial structure? And, perhaps most importantly, who is actually responsible for making the system work?
Who owns the water problem?
The NSIA CEO raised a seemingly basic question with enormous implications for investors. If an investor wants to develop a water project, who should they negotiate with?
The Ministry of Power, Water Resources, a State government, and or another government agency? He argued that the lack of clarity about the appropriate government counterparty can itself discourage investment.
For investors, uncertainty about institutional responsibility is itself a risk. A project may be technically feasible and economically desirable. But if the regulatory and contractual architecture is unclear, capital will wait.
That is why water-sector reform cannot simply mean allocating more money. It must mean creating clarity about roles, responsibilities, contracts, tariffs and accountability.
Government cannot do everything
Several speakers at the dialogue challenged the assumption that government should remain at the centre of water delivery.
One participant argued that government should establish the policy environment while private companies provide water services where commercially viable.
Norbert Shelsuk, a private water developer, was even more direct. His experience suggests that asking government to act simultaneously as developer, offtaker and guarantor can produce projects that eventually fail.
Why?
Because the underlying commercial model remains weak. In his view, a project requires a credible buyer, a viable tariff and sufficient development capital before it can become a sustainable investment.
Government can provide support, but support cannot substitute for a functioning business model.
The tariff problem
Perhaps no issue is more politically sensitive than water pricing. Governments understandably worry that higher tariffs will make water unaffordable for poor households.
But keeping tariffs too low can create another problem: water systems become financially unsustainable. If utilities cannot recover their operating costs, they struggle to maintain infrastructure. If they cannot maintain infrastructure, service deteriorates. If service deteriorates, consumers turn to private alternatives. And households may ultimately pay more.
Shelsuk argued that Nigerians are already paying substantial prices for privately supplied water, challenging the assumption that low formal tariffs necessarily translate into affordability.
His argument points to a difficult but important policy question: Should government subsidise the price of water, or subsidise access to a properly functioning water market?
Lessons from electricity
Damilola Ogunbiyi offered a possible model from the electricity sector. She described a structure in which private companies deliver infrastructure while government support makes connections affordable, with subsidy linked to verified delivery rather than simply being paid upfront.
There is a lesson here for water.
Instead of financing infrastructure irrespective of performance, government could potentially design mechanisms that reward:
- verified connections;
- reliable service;
- quality standards;
- maintenance;
- measurable outcomes.
That would shift the state’s role from being the perpetual provider to being an enabler and market maker. It would also allow public money to leverage private capital rather than attempting to replace it.
The infrastructure graveyard
The case for reform becomes more compelling when viewed against the apparent scale of underutilised infrastructure. Shelsuk cited figures suggesting that Nigeria has around 1,600 water utilities but only about a quarter are operational.
The Lokoja Dialogues team itself cited a figure of 1,412 utilities, with more than 900 described as defunct.
But the broad message is that Nigeria has already invested heavily in water infrastructure that is not delivering its full potential. That should change the nature of the policy conversation.
The case for investment-grade water
Olu Adeosun, chairman of Lokoja Dialogues, used an important phrase during the session: “investment grade.” The objective, he explained, is not merely to do good.
Projects should deliver services, be properly maintained and generate sufficient value to continue operating. That is perhaps the bridge between the humanitarian and commercial arguments.
Water is a human necessity. But that does not mean water infrastructure cannot also be economically productive. The challenge is to design systems in which the commercial logic supports the social objective using blended finance, targeted subsidies, guarantees, and or carbon finance.
The political economy of reform
The hardest part will be political. Water is emotionally different from many infrastructure sectors because it is essential to life.
Nobody wants a system in which poor households are priced out of basic water. But nobody benefits from a system in which utilities cannot operate, infrastructure collapses and households are forced into more expensive informal markets.
The answer is therefore unlikely to be simply “privatise water” or “government must provide free water.” It is more complicated. Government must define the rules and establish standards. The market design must have private sector capable of delivering while financiers must have confidence in revenue structures.
From government provider to market architect
The emerging proposition from Lokoja Dialogues is that Nigeria needs to change the role of government.
Not abandon responsibility, nor withdraw from the sector but move from being the default provider of everything to becoming the architect of a system in which multiple actors can deliver sustainably.
The NSIA is already positioning itself to co-invest in water projects that meet its bankability criteria. Umar-Sadiq said projects need to be well prepared, well managed, well governed, have a clear offtake and be capable of scaling.
That is the standard Nigeria’s water economy may ultimately have to meet. The country’s water challenge is too large for government budgets alone. But the private sector will not solve it simply because the need is enormous.
Capital requires confidence. Confidence requires structure. Structure requires reform. And reform requires government to decide what kind of water market Nigeria actually wants.
The Lokoja Dialogues may have begun as a conversation about a broken water cycle.
The bigger question now is whether Nigeria can build a working water economy.
