Why Nigeria’s Infrastructural Deficit Lingers
-By Danlami Nasir Isah
Infrastructure has been described as one of the basic indices of measuring development in any nation.
A study conducted by Mckinsey on Nigeria’s infrastructure requirement threw up the need for the investment of well over $31bn annually, over a 10-year period for the country to bridge her huge infrastructure deficit.
Given the huge amount required therefore, it is near impossible to expect government to foot the entire bill, neither will traditional project finance models essentially leveraging medium to long term funds from banks and development finance institutions do much, given the huge funds required for infrastructure projects and the needs that the Foreign Direct Investment FDI contend with on the African continent.
Therefore, projects such as the Second Niger Bridge, the East-West Road, dredging of the River Niger to allow sea-going vessels to dock at in-land ports, a standard gauge rail line connecting the state capitals and economic centres of Nigeria from North to South, power dams, electricity transmission lines, electricity distribution infrastructure and other critical infrastructure are not attended to, affecting the quality of economic growth, the creation of jobs and the enhancement of the economic well-being and standard of living of Nigerians.
Furthermore, given the fact that in government, there are competing needs and limited resources, the projects needed to jump-start Nigeria’s industrial revolution become mere pipe-dreams.
This has led to experts often asking the one million dollar question “Where are the risk-takers who will partner government knowing the risk involved with community resistance to tolling and all other forms of payment for access to public infrastructure once concessioned?
Apart from these, there are also other encumbrances to Public Private Partnerships (PPP), which should otherwise have helped unlock the required funding for economically viable public infrastructure projects, chief among such obstacles confronting private participation in public infrastructure provision is funding.
This is why projects such as the Lagos-Ibadan Expressway will require well over one billion dollars to remodel the road and without a good financial model which leaves the big question of how will financial institutions come together to fund it.
It’s been said that government cannot be left to go it alone with regard to bridging infrastructure deficit, where political risks as well as financial-model risks involved in putting together a PPP deal is possible.
Therefore, due to failure of the PPP projects, like the Lagos-Ibadan Expressway, the Lagos Local Airport and lately the Lekki Link Bridge, it further frustrates the delivery of economic infrastructure with the potential to create jobs as well as leapfrog growth and development.
It is expected that to address this challenge, there will be a need to carefully plan a proper financial model and a strong regulatory platform for delivering Public Private Partnership – one that ensures that project time horizons are shortened; project partners reap benefits derivable from such projects, with minimum resistance from users of such economic infrastructure, citizens, local communities and politicians.
With the Nigerian pension reforms, pension fund assets has grown tremendously with trillions of naira sitting with pension custodians which are deployed to all manner of investments.
For a while, the Central Bank of Nigeria under its Financial System Strategy has been trying to help unlock pension funds for infrastructure financing with very little success thus far.
Stakeholders expect that government needs to throw its weight behind this initiative as it will have multiplier effects in the sense that once we are able to develop critical economic infrastructure such as roads, bridges, rail as well as power and energy infrastructure as it will automatically reduce the cost of doing business, create more jobs, lead to output gains with consequent impact on our Gross Domestic Product.
As such stakeholders at different fora have advised the government to as a matter of urgency, channel pension fund to infrastructure as it will aid diversification.
Also, from the infrastructure project owners and off-takers, the deployment of patient capital will lessen the burden of having an investment-mismatch and limit defaults.
As such, an alternative funding model for infrastructure projects that meets Nigeria’s economic target will aid competitiveness in the area of ease of doing business, deliver quality growth, create jobs and enhance the living standards of Nigerians.
