Kenya’s Sh340 billion Infrastructure Fund starts investing: How it will finance roads, energy and more

The money has started moving, but not yet into a new highway or power plant.

The National Infrastructure Fund (NIF) is initially putting part of its Sh340 billion seed capital into domestic government bonds, a move designed to preserve the fund’s principal while generating income and injecting liquidity into the banking system.

NIF CEO James Mworia told Reuters that the fund expects the bond strategy to generate about Sh42 billion a year.

That first step is central to how the fund is supposed to work.

From state assets to infrastructure capital

The NIF was created under the National Infrastructure Fund Act, 2026, signed into law by President William Ruto in March.

Parliament described it as a new investment vehicle intended to mobilise capital from sources including pension funds, collective investment schemes, sovereign wealth funds and other private investors.

Its initial capital came from the Government’s partial monetisation of state assets, particularly the Kenya Pipeline Company and Safaricom.

The idea is to keep the capital working rather than repeatedly returning to taxpayers or borrowing to finance every major project.

Why is it buying government bonds?

This may sound strange for a fund created to build infrastructure: Why put infrastructure money into government securities?

The answer is income and capital preservation.

Mworia has said the fund expects long-term government papers to yield around 12% to 14% annually, using about 12.5% in its projections.

On that basis, the Sh340 billion pool could generate roughly Sh42 billion a year while the underlying capital remains intact.

The fund's strategy is then to use its income and equity to support viable infrastructure projects and attract much larger amounts of private financing alongside it.

Roads, power, water and digital infrastructure

Under the Act, “national infrastructure” covers national highways, railways, airports, seaports, electricity generation, transmission and distribution, ICT infrastructure, water reservoirs, irrigation and agribusiness infrastructure.

The investment policy framework also identifies transport, energy, ICT, water and irrigation, and agriculture and livestock among the priority areas.

Projects are expected to demonstrate commercial viability rather than simply receive funding because they are politically popular or socially important.

One project cannot swallow the fund

The framework includes limits intended to spread risk.

No single project is supposed to account for more than 20% of the fund, while exposure to any one priority sector is capped at 40%.

With a Sh340 billion fund, the 20% ceiling would translate to a theoretical maximum exposure of about Sh68 billion to one project.

Each investment can also be placed in a separate special-purpose vehicle, helping isolate project-level liabilities from the wider fund.

The proposed structure also expects projects to attract significant non-recourse debt, meaning lenders would primarily rely on the project and its cash flows rather than the fund's entire balance sheet.

How Sh340 billion could become trillions

The fund is therefore not designed simply to spend Sh340 billion on infrastructure.

The Government's wider roadmap has talked about mobilizing as much as Sh5 trillion over a decade, while the latest NIF plan cited by Reuters targets about Sh3.6 trillion in additional capital over the next 10 years.

The difference reflects broader government mobilisation targets versus the fund's current co-investment ambitions.

NIF provides capital to an investable project, then pension funds, banks, private investors and other financiers are brought in around it.

What changes for Kenya?

The larger objective is to move infrastructure financing away from a model heavily dependent on taxes and public borrowing towards investment-backed projects capable of generating returns and attracting outside capital.

Parliament and Treasury have both described the fund as part of a broader shift towards private and institutional financing.

The first bond purchases therefore mark the beginning of the machinery, not the completion of the infrastructure programme.

The real test will come when the fund starts committing capital to projects, attracting co-investors and proving that commercial infrastructure can be financed without repeatedly expanding Kenya's public debt burden.