Analysis of the Effect of Project Risk Allocation on Cost Outcomes in Infrastructure PPPs in South West Nigeria

Risk allocation is a foundational element of public-private partnership structuring, with significant implications for project cost outcomes and long-term value for money. This study analyses the effect of risk allocation arrangements on cost outcomes in infrastructure PPP projects in the South West geopolitical zone of Nigeria. A mixed-method design was adopted, combining quantitative analysis of risk allocation terms and cost performance data from 18 completed PPP projects with qualitative insights from 35 expert interviews. Risk allocation adequacy was scored using a structured assessment framework, and its relationship with cost deviation was modelled using regression analysis. Findings show that projects where construction risk was inadequately transferred to the private sector, due to performance guarantee weaknesses or government step-in rights being excessively triggered, experienced significantly higher public expenditure than projected. Conversely, projects where demand risk was inappropriately transferred to private operators resulted in financial distress and renegotiation. The study identifies a systematic tendency to under-price risk in South West PPP projects due to optimism bias and political pressure to demonstrate low contract costs. Filling a gap in the Nigerian PPP literature, this study links contract risk allocation terms directly to measured cost outcomes using an original scoring methodology. Recommendations target PPP unit capacity, risk register standardisation, and independent quantity surveyor engagement in risk pricing during transaction development. Keywords: risk allocation, PPP, infrastructure, cost outcomes, South West Nigeria