Summary:
- Infrastructure doesn’t create value, it stores or transports value that already exists. Which means it can never be worth more than what’s already flowing through it, and whatever flows through it must justify the cost of building and running it.
- Our research on Nigerian MSMEs found that logistics organized itself wherever real market value already existed, and stalled wherever it didn’t, regardless of how much was invested. Market conditions, not infrastructure access, determined whether businesses grew.
- The same logic applies across sectors. Rural mini-grids in Africa built to household headcounts rather than existing paying demand consistently underperform. The anchor customer model, which builds around businesses already paying for power, works precisely because it finds the value before building the infrastructure.
- The right question before any infrastructure investment isn’t whether the need is real. It’s whether the market is deep and valuable enough to justify it. If it isn’t, the market must be created, because the infrastructure won’t.
The Global Prosperity team set out to study Nigerian MSMEs to understand a simple question: Does improving mobility and logistics help small businesses grow? The answer we found was not what we expected.
Our study revealed something counterintuitive: Logistics only becomes a driver of growth once a market already generates enough value to support it. And most Nigerian MSMEs don’t operate in markets that do.
Their trade is too thin, too scattered, or too low in value for formal infrastructure to recover its own costs. So the real bottleneck isn’t how goods move, it’s how much value there is to move in the first place.
This runs against the instinct most infrastructure investment is built on: build the road, the truck fleet, the cold chain, and growth follows. Our research found the opposite sequence. Market conditions, not infrastructure access, are what actually determines whether a business grows.
What infrastructure actually is
Infrastructure is the most efficient mechanism a society has developed to store or distribute value.
Roads and rail are the most efficient way to move people and freight. Schools and hospitals are the most efficient way to educate and heal. None of these create the value they handle. A road doesn’t make a harvest. It carries value that already exists from where it’s worth little to where it’s worth more. A school doesn’t manufacture a child’s potential, it develops it.
This leads to a simple, almost unavoidable consequence: An infrastructure’s value is inseparable from the value it stores or moves. It can never be worth more than what’s already flowing through it, and whatever’s flowing through it has to justify the cost of building and running it in the first place.
The same infrastructure, two outcomes
Take a cold storage facility built in one of Nigeria’s agricultural states. It sits largely unused. Not because farmers can’t reach a buyer (that’s a different problem), but because the harvest moving through that community, even once it reaches a buyer, isn’t valuable or plentiful enough to justify what it costs to store it properly. The economics simply don’t work. The constraint isn’t the cold room, but the market the cold room was built to serve.
The reverse case is just as telling. AFEX, a Nigerian commodities exchange, also stores crops, in warehouses rather than cold rooms, for farmers growing maize, cocoa, and soybeans. The business works at real scale: more than 500,000 farmers feed into its warehouse receipt system. None of this works because AFEX’s warehouses are built any differently than the empty cold room elsewhere. It works because the crops it handles were already moving through established trade at volumes and prices a warehouse could recover its costs from. The infrastructure is doing the identical job, storing value across time. The only difference is the infrastructure arrived into a market already generating enough value to justify it. It is from here that true scale can happen.
This supports our findings that logistics successfully supports growth wherever real market value already exists, but stalls wherever it doesn’t, regardless of how much is invested.
Beyond mobility and logistics
This isn’t only true for mobility and logistics. Across sub-Saharan Africa, rural mini-grid projects have repeatedly faced the same reality. Many were sized off household surveys, counting how many people lacked electricity rather than how much existing paying demand for power was already nearby. The gap between projected and actual consumption has proven costly: research across seven mini-grids in Malawi found that every watt-hour of overestimated demand added $2 to $6 in unnecessary capital cost – capacity built for a load that never showed up.
The industry’s own response is instructive. The model that now works, known as the anchor customer model, prioritizes businesses already running diesel generators to power a mill, a workshop, or a cold store, before extending power to households. It looks for existing, paying economic activity first, and builds around it. Electricity, like logistics, doesn’t create the value it delivers. Its viability has always depended on whether enough of that value already exists to flow through it.
It explains lending too. A loan is value transported across time rather than space, cash handed over today against a harvest or a sale that hasn’t happened yet. A lender can price the risk appropriately, structure the terms carefully, and still fail to recover the funds that were lent, if there isn’t enough real economic activity on the other end to repay. The infrastructure of credit is just as bound by this rule as a road or a cold room.
The pattern holds because it isn’t really about logistics, energy, or finance individually. It’s about what infrastructure is, in every form: a mechanism for storing or distributing value, never a primary source of it. Infrastructure facilitates. It doesn’t create. Wherever an enabling investment is made, mobility, power, capital, its success is always going to be decided by how much real value already exists for it to act on, not by how well it was built.
The question worth asking before any infrastructure investment isn’t simply whether the need is real. It’s whether the market is deep and valuable enough to justify it. If it isn’t, then the market must be created because the infrastructure won’t.
