The Missing Middle of the Public Counterparty – The Signature Behind the Guarantee
By Chidi Nwafor
In Ghana, a $500 million World Bank guarantee had one job: to stand behind payment for gas supplied to the Sankofa project if the state utility did not pay. By 2025, repeated non-payment had exhausted it entirely. To restore it, the government repaid the World Bank about $597 million, including interest, completing the restoration in December. The guarantee had worked, in the narrow sense that the gas supplier was paid. But the debt had not disappeared. It had come home to the same public balance sheet that failed to pay in the first place.
My last two articles asked who pays and in what currency. Both assume a signature that can be trusted. Almost every infrastructure project in Africa that depends on public revenue rests on a promise from a ministry, a utility, an agency or a state. The Missing Middle of the Public Counterparty is the gap between the promise a public body makes and its authority and capacity to keep it. Capital can be found, risk can be priced and tariffs can be reformed, but a project can be no stronger than the signature beneath it.
Four tests apply. Authority: does the signatory have the legal power to bind the state, with every approval in place? Capacity: can it pay from a budget or balance sheet that exists, rather than one that is hoped for? Priority: is the obligation funded and ranked ahead of competing claims, in a budget line or a ring-fenced account? Enforceability: if it fails, does the lender have a remedy it can use, against an entity with assets? Fail any one, and the contract is a letter of intent.
A strong counterparty leaves evidence. There is a signed agreement rather than a memorandum, a budget line, a funded payment-security account, a termination payment schedule the finance ministry has already approved, and a record of paying earlier obligations on time. Each can be checked before financial close.
Nigeria’s regulator has begun to say so in its own words. In October 2026 the Director-General of the Infrastructure Concession Regulatory Commission, Jobson Ewalefoh, described a reset of the PPP framework. A standard model concession agreement, developed with the Federal Ministry of Justice, is meant to reduce inconsistencies across agencies. Memoranda of understanding can no longer substitute for properly structured concession agreements. He acknowledged that earlier failures stemmed from weak risk allocation, contract drafting and enforcement, and that weak coordination among government agencies remains a continuing challenge. Naming the problem is the first step; enforcing the fix is the test.
The country’s best-known counter-example is the Azura-Edo power plant, which reached financial close on roughly $900 million of debt from a consortium of 15 banks, backed by a World Bank partial risk guarantee and political risk insurance from MIGA. Yet at a 2019 energy finance forum, panelists complained that the Federal Government had been unwilling to grant similar sovereign guarantees since, and one lawyer attributed the stalling of 14 solar power purchase agreements to this. These are 2019 accounts and the position may have moved. The lesson is not that guarantees are good or bad. A project that closes only when a public party puts its balance sheet behind it has revealed where the real counterparty is.
Ghana shows the other side. Emergency procurement between 2013 and 2016 produced power purchase agreements on a take-or-pay basis, obliging the state to pay for capacity whether or not it was consumed, or even transmitted. The contracts were priced in dollars while the utility collected cedis, and its technical and commercial losses stood at about 27 percent in September 2025. One commentator put total sector debt at about $5.6 billion by late last year. Three Missing Middles met in one place: the price was below cost, the currency was mismatched and the counterparty was overcommitted. The government says its later renegotiation of the contracts saved over $250 million and re-profiled $1.1 billion of legacy debt over four years. Bad promises can be repaired, but at a public cost. These are the government’s own figures.
These obligations are easy to sign and hard to see. A guarantee costs the government nothing on the day it is issued, which is exactly why it gets issued, and why the bill arrives later, on someone else’s watch. The IMF has long noted that public-private partnerships transfer only some project risks and often come with government guarantees, whose contingent liabilities must be monitored to avoid harming public finances. In a report on Kenya, the Fund warned that PPP contracts can create “the illusion of additional fiscal space”.
The stakes are rising. The World Bank’s PPI database recorded $7.9 billion of private participation in infrastructure across 47 projects in Sub-Saharan Africa in 2024, up 133 percent from $3.4 billion in 2023, which was spread over 66 projects. Private money is returning to the continent’s infrastructure, which makes the quality of the public signature more urgent, not less.
Why does the gap persist? Because no one owns the counterparty. Line ministries negotiate and sign, finance ministries are consulted late if at all, utilities are expected to pay, and regulators set prices without seeing the balance sheet. Each treats another as the real counterparty. The costs of a weak promise appear years later, under a different government, while advisers, sponsors and officials are rewarded at financial close. A contingent liability that appears nowhere on the budget is, politically, free.
The limits deserve stating. Public counterparties are not uniformly weak, and some honour their obligations for decades. A guarantee from a credible sovereign can be exactly what a project needs. And no government promise turns an uneconomic project into a viable one. The argument applies where a viable project depends on a public promise whose strength has never been tested. A private off-taker can default too, but it can be rated, compared and sued. A public one often cannot be.
Where it applies, the responsibilities are plain. Governments should require finance ministry sign-off on every guarantee and payment obligation, publish contingent liabilities and fund them through an actual budget line, as Ghana’s repayment to restore its guarantee illustrates after the fact. Regulators should enforce the standard agreements and refuse memoranda dressed as contracts. Development finance institutions should test the counterparty before the capital structure, and tie guarantees to reforms that keep them from being called. Investors should do counterparty credit work as rigorously as technical diligence. Governments should also tell lenders in writing which agency is the counterparty and which ministry stands behind it. Sponsors should never present a letter of support as an obligation.
The credit analyst asked where the first naira lands. The treasury officer asked in what currency it would arrive. A third question completes the set: who stands on the other side of the signature, and what do they own? A named payer, a cost-reflective price and a matched currency still depend on a public body able to keep its word. That is the Missing Middle of the Public Counterparty. Even when a project is built, paid and sound, its capital stays locked inside it, unable to fund the next one. That is a question for another day.
Nwafor is founder and lead strategist at De-Lazuli Consult, an advisory practice focused on energy transition, project finance & Investment readiness, DFI engagement and infrastructure investment facilitation. He writes from Abuja.