After an initial effort by Buhari administration that eventually turned out to be a ‘false start’, a fresh call has been made for the creation of an infrastructure fund, which will lead to significant private sector investments and economic growth.
Figures obtained show that Nigeria is under investing in infrastructure. For instance, during the five years ended 2016, Ghana, Ivory Coast and Kenya invested 5.3 per cent, 6.5per cent and 7.5per cent of national income in infrastructure respective; Nigeria invested only 2.1per cent, despite its huge population, estimated to reach 550 million by 2070.
The Federal Government had two years ago, mooted plans to set up a $25 billion infrastructure fund to bridge the funding gap in infrastructure development and deepen the nation’s capital market. But till date, nothing has been heard of the arrangement.
However, experts in real estate sector and economy who met last week at the International Real Estate Federation (FIABCI) Prix de Excellence/ Dinner in Lagos believe that the government should explore non-traditional model of funding infrastructure that involves partners such as International Development Institutions (IDAs), local and foreign businesses.
The purpose of this move is to identify important improvements and repairs to Nigeria’s infrastructure that will not only enhance the overall quality of life but will also create business opportunities for construction companies and jobs for construction workers.
In his submission at the annual forum, a former Director General/Adviser (Budget Matters) to President Olusegun Obasanjo, Mr. Bode Agusto advised that the Federal Government should create the fund, partner with the private sector for the development of projects with strong economics and huge social impact.
Under the proposed model, he wants the government to pay N0.5 trillion annually (about half of what is currently spends) into this fund, set up a strong governance process for managing this fund.
“The Fund will make, on average, an equity investment of 25per cent on each project, set up a company incorporated under the Companies Act to own the project – e.g. National Grid Plc. Others (local businesses, foreign businesses and IDAs) will own the remaining 75per cent equity and manage the company. This means that potentially, the government can invest N2 trillion annually from the infrastructure fund.
“Each company will pursue its own project, complete it and bill the public for the use of its services. They will prepare annual report and accounts, subject these to external audits, make these accounts public, hold annual meeting of shareholders, pay tax on their profit and pay dividends out of their profit after tax. The companies can also be listed on the NSE to improve their access to capital,” he said.
Speaking on theme: ‘Infrastructure Financing Options in a Challenging Economy’, Agusto said the plan will increase infrastructure spending by 250 per cent, as the World Bank estimates that a sustained 20 per cent growth in infrastructure, spending leads to a 1.8 per cent growth in the economy.
According to him, the NLNG is perhaps the best example of an infrastructure project that has employed this model. Nigeria sold 5per cent of its equity stake in the Shell JV to fund its 49 per cent equity contribution to Nigeria LNG. Three international oil companies own the remaining 51per cent. The business has thrived building six trains of LNG largely from internally generated profits and commercial loans.
“Even though this model has worked successfully in telecom and NLNG it is unlikely that we shall see it practiced on a large scale unless we provide incentives for the executive and legislature to give up some control,” he said.
Earlier, FIABCI Nigeria President, Mr. Joseph Akhigbe noted the development of infrastructure is one of the major drivers of sustainable economic development, and lack of its financing has been a major setback.
He explained that FIABCI serves as a melting pot for all professionals within the built industry; create a platform for them and provides a basis for business opportunities between real estate professionals across borders.
FIABCI Nigeria Vice President, Adele Adeniji posited that the main hindrance of infrastructure investment in Nigeria is the low rate of long-term interest from the users, even if there is adequate supply of long-term finance.
The programme chaired by Goodie Ibru attracted cream of the society.