Infrastructure is one of the indices used to rate the growth and development in any nation whether in poor or flourishing economies. For instance, experts has attributed Nigeria’s recovery from economic recession within one year to the huge investment in the construction and building sectors during the period.
However, with the country’s infrastructure deficit now valued at $3.1trn, the absence of long term funding for the development of the sector might stand as a hindrance in further accelerating the economy. No thanks to the fact that major roads, bridges, water systems, electricity grid and other basic amenities built several years ago are now in a state of disrepair. Annually, Nigeria needed about $100bn which is approximately N38 trillion to close the infrastructure gap.
Given this shortfall, the Nigeria Integrated Infrastructure Masterplan (NIIMP) was initiated by the federal government to provide a starting-point and a roadmap for building a world class infrastructure stock that would not only guarantee sustainable economic growth but would also boost the nation’s economic recovery.
The program was designed to serve as the blueprint for boosting infrastructure stock by 2043. To effectively bridge the infrastructure gap, the NIIMP highlighted that a total of $3.1 trillion would be required to build, maintain and manage the nation’s infrastructure from 2014-2043.
The short-term plan of the NIIMP which covered a 5-year period has an investment of about US$127 billion earmarked for the period to close the infrastructure deficit. However, only about N5.5 trillion roughly US$11.5 billion (N1.1 trillion 2014; N0.6 trillion in 2015; N1.75 trillion in 2016 and N2.24 trillion in 2017 ) was budgeted for capital projects in the last four years, which is rather meagre to boost development.
This is even as the Nigerian Infrastructure Report Card (NIRC) published by the Nigerian Society of Engineers (NSE) in 2015 rated the national infrastructure stock as E2 (2.08 out of 5), an indication that the poor state of infrastructure is a threat to public safety.
Findings by LEADERSHIP Newspaper revealed that exploring Public Private Partnership (PPP), Private Finance Initiatives (PFIs) models and the use of pension funds are the quickest means to fund capital projects. Further investigation highlighted development of secondary infrastructure such as roads that would have been the responsibility of state government could be effectively executed through PPP.
To this end, experts have expressed the view that exploring alternative financing models and massive investment in infrastructure are key to fast-tracking Nigeria’s economic development. The acting director general/ chief executive officer of Infrastructure Concession and Regulatory Commission (ICRC), Engr. Chidi Izuwah noted that federal government needed to spend $15 billion annually to bridge the infrastructure gap.
To achieve this, he said that there is a need for additional capital through the private sector, adding that Nigeria is the first country recognised by World bank to unveil PPP portal. Izuwa hinted that the biggest challenge faced in Nigeria is lack of infrastructure, without which the country cannot advance further in terms of economic, competitiveness and business.
He linked the herdsmen/farmers clashes to infrastructure problem, saying that with the right kind of infrastructure and ranching that the clashes would end. In his contribution, the senior partner, Babalakin & Co, Dr Wale Babalakin noted that it’s better to allow private capital through PPP to construct major projects to enable government channel its limited resources to other areas that are not commercially viable.
He regretted that Nigeria performed poorly in the provision of infrastructure, noting that there is a need to rate Nigeria’s performance with similar countries that have the same potentials during our independence in 1960. Babalakin asserted that private sector development is a monumental challenge, describing it as the major reason why there is huge housing deficit in the country.
The senior advocate of Nigeria wondered why people continued to de-market Nigeria as an investment destination despite its potentials, just as he pleaded with federal government to fully adopt PPP to accelerate the provision of public infrastructure.
Also, the acting managing director/chief executive of the infrastructure bank, Mr Ross Oluyede noted that significant changes in the society have compelled both public and private clients to rethink the traditional method of addressing infrastructure deficit, which hitherto relied primarily on budget funding, in the form of fiscal appropriations.
According to him, “A situation that led to aging infrastructure, occasioned by funding constraints, rising cost of maintenance, skewed and stunted regional development, little or no attention to environmental protections are a consequence of insufficient planning and under-investment in infrastructure”. Oluyede stated that PPP, PFIs and other private funding models would provide opportunity of transferring some design, construction and completion-related risks to the private sector noting that it would result to timely and cost effective project delivery that would enable the investor gain appreciable returns on investments.
When properly executed, Oluyede believed that PPP projects would promote efficient use of resources and minimise waste, with minimal project failure due to the misallocation of risks among the parties involved in the project. He maintained that its the responsibility of government to prioritise selected projects, abide by the agreement especially on project financing and retaining regulatory oversight of the sector.
Oluyede emphasised that the value proposition for investments in infrastructure is due to the fact that private sector involvement would result in improved infrastructure service delivery to public users, as well as the availability of additional funding to ease the financial burden on the government.
He disclosed that federal government has taken steps to attract private capital through the issuance of a $1 billion Eurobond, adding that the proceeds are allocated to the capitalisation of the bulk electricity trading company.
Other steps taken by federal government include the upgrade of the transmission network and other infrastructure projects; securing facilities from the World Bank, Department for International Development (DFID) and other Development Finance Institutions (DFIs), structuring of PPP projects in Nigeria, enactment of sector-specific legislation, policies and regulations as well as other initiatives aimed at supporting the emergence of a viable infrastructure ecosystem.
Oluyede revealed that investors would reap the benefits of PPPs in the future given the economic conditions and success of PPPs across similar developing countries like Nigeria, and worldwide. He pointed out that several local private firms and organisations would be excited to collaborate with foreign partners to develop sustainable and effective alliances that would lead to the successful implementation and completion of projects through PPP in Nigeria.
According to him, the private sector would mobilise the required financial resources to fund the nation’s infrastructure development, subject to the availability of an efficient financial ecosystem. Elaborating on efficient financial ecosystem, he hinted that the requisite level of participation from all key players such as banks, DFIs, fund managers and administrators, equity investors and finance organs of the government like ministry of finance and the Central Bank of Nigeria (CBN), sector regulators and insurance companies would make infrastructure financing a reality. Oluyede stated that the importance of creating an efficient financial ecosystem is predicated on the need to ensure that the financial market is capable of attracting long-term funds required to develop infrastructure.
He disclosed that long-term funds such as pension funds is best-suited for financing infrastructure projects since it has long-term repayment period . He noted that investments in capital infrastructure have been recognised as a reliable tool for accelerating the nation’s economic recovery that would set the nation on a path of sustainable growth. Lending his voice, a world bank PPP consultant, Engr. Chukwuma Katchy revealed that since there are lots of funds in the private sector, that many governments have started adopting PPP as its complementary structure.
According to him, “If PPP is fully adopted in Nigeria, it may not cover the greater part of infrastructure but it will go a long way to bridge the infrastructure gap while government’s resources can be channeled in other areas”.
He said that governments adopted PPP due to funding challenges, project efficiency, reduction of corruption as a result of contract inflation and timely completion of project. Katchy asserted that in adopting PPP that there must be alignment of interest between the government and private sector, asserting that there must be contractual management plans to manage the projects.
He noted that public sector must create a PPP unit aside other existing units in the institution, stating that PPP must be done in a pragmatic and strategic way since investors are interested in the market. On its part, the federal government has described the construction sector as one of the most important sectors in any economy adding that apart from generating employment that it has multiplier effects on other sectors.
The minister of power, works and housing, Babatunde Fashola hinted that the National Housing Programme ( NHP) of the current administration has created not less than 14, 000 direct jobs and 40, 000 indirect jobs for builders, petty traders, food vendors and among others. He maintained that Nigeria recovered from economic recession as a result of heavy investment in the construction and building sectors. QS Dickson Onoja who spoke on behalf of the minister revealed that President Muhammadu Buhari has been working to meet government contractual obligations including payment of contractors and contractual debts inherited by the previous administration.