AfDB Joins Nakuru-Nairobi Road Financing With KSh. 17.5bn Loan

The African Development Bank is set to lend $150 million for the construction of the Nairobi-Nakuru Road. This project will improve connectivity and reduce transport costs in Kenya.

The African Development Bank (AfDB) has announced that it will be lending Ksh. 17.5 billion (approximately $150 million) to finance the construction of the Nakuru-Nairobi Road. This loan makes the AfDB the tenth financier lined up to provide financing for the project, which is estimated to cost a total of Ksh. 180 billion Kenyan shillings (approximately $1.54 billion). The AfDB funding is equivalent to 10% of the project’s upgrade budget.

The Nakuru-Nairobi Road is a key transport corridor in Kenya, connecting the country’s capital city with the important agricultural and tourism region of the Rift Valley.

The road is used by an estimated 16,000 vehicles every day, and is currently in poor condition, with large potholes and frequent traffic snarl-ups. The proposed upgrade would widen the road to four lanes and improve its overall condition, making it safer and more efficient.

Financing Nairobi-Mau Summit Upgrade

A consortium led by Vinci, a French-based infrastructure firm, will receive the loan. In 2019, the Vinci won a 30-year concession contract to construct and operate the Nairobi-Nakuru Road.

The Kenya National Highways Authority (KNHA) selected the Rift Valley Connect (RVC) consortium, which includes Vinci Highways SAS, Meridian Infrastructure Africa Fund, and Vinci Concessions SAS, as the preferred bidder for the work.

The remaining 10 development finance sources and organizations will cover the project’s remaining cost through a public-private partnership (PPP) arrangement.

Nnenna Nwabufo, director-general of the African Development Bank for East Africa, said that the Ksh. 17.5 billion loan for the toll highway project will be discussed for approval at the lender’s board meeting in July.

AfDB is working on its funding strategies with the board. It is looking for a total amount of approximately $150 million. Nwabufo went on to explain that because the project entails considerable risk, AfDB’s partial investment was determined by those risks. She stated that other financial investors also concur with this assessment.

The formal agreements and subsequent funding will enable work on the 233-kilometre road project to begin, which will add a four-lane dual highway and hope for reduced traffic snarl-ups on the Northern Corridor.

When finished, the Nakuru-Mau Summit highway will provide a much-needed boost to Kenya’s economy, improving connectivity and reducing transport costs.

The International Finance Corporation (IFC), the World Bank Group’s private arm that invests in and provides policy advice to private enterprises in developing countries as part of its mission to eradicate global poverty, also joined the race to finance the $1.54 billion Nairobi-Mau Summit Highway. This decision was a significant boost to the French contractor.

According to James Macharia, Kenya’s Cabinet Secretary for Transport and Infrastructure, the Nairobi-Mau Summit toll road was supposed to open in September 2021. According to Solomon Quaynor’s earlier remarks, the delay could have been caused by AfDB’s concern for the Environmental and Social Impact Assessment quality; or concession between the private sector and the government.

Quaynor, Vice President for the Private Sector, Infrastructure and Industrialization at AfDB, had earlier reasoned that the burden of financing an entire project 100% should not be given to a single financier. Hence, the inclusion of the AfDB and the other ten backers in the French-backed project indicates that the road builder has broadened its search for financing and the project may soon be underway.

Recouping Construction Costs

The French group will design, build, finance, operate and maintain the highway. During the first 30 years, the firm will use revenues and income from the electronic toll collection system to recoup its costs.

The Nairobi-Mau Summit toll road being built also includes the extension and rehabilitation of the current Rironi-Mai Mahiu–Naivasha road. The new road will be a 7 metres wide highway with 2-metre shoulders on either side. In addition, a 4-km elevated expressway will be constructed through Nakuru town. This will improve the interchanges along the route.