Nigeria has the capacity to empower private sector investors to raise as much as N45 trillion to fund infrastructure development by instituting a well-structured guarantee programme, says Mustafa Chike-Obi, former CEO of Asset Management Corporation of Nigeria (AMCON).
The United States, for example, issues guarantees for multiple projects ranging from Fannie Mae, Federal Housing Administration to small business administration.
Chike-Obi believes by instituting a well-structured guarantee based on a modest 50 percent of GDP, Nigeria, which has GDP of about $375.11 billion or N135 trillion, can generate N45 trillion that can be dedicated to funding priority infrastructure like railways, construction of key roads, bridges, port dredging, and overcome its infrastructure challenges fuelled by shortage of funds and rising debt profile.
Chike-Obi, who is also economic adviser to the Atiku/Obi Campaign Organisation, said if the Federal Government issues the guarantee, it will allow commercial banks to lend at a very low rate instead of the current interest rate of 25-30 percent.
“With this kind of arrangement, a modern railway system that connects all the major cities of the country would be built, thereby boosting transportation of goods and services across the country and increasing productivity,’’ he said.
He is optimistic that a guarantee programme devoted to building modern rail lines that will transport cattle will reduce the herdsmen/farmer clashes over grazing. This, he said, will also minimise the rate at which these cattle lose weight from trekking and increase the value of beef extracted from them.
With such railways and highways built through guarantees, jobs will be created by building slaughter houses by train stations, providing refrigerator trucks that distribute the products, and restaurants, restrooms and modern hospitals in each geo-political zone through which the rail lines pass, he said.
The former manager of a $6-billion asset portfolio at Goldman Sachs debunked insinuations that dropping interest rates following the guarantee programme to fund priority projects would cause excess liquidity and spike inflation, insisting the guarantee scheme would stimulate productivity.
“If you are more productive, that helps to bring down inflation. If you have increased yield in agriculture products, for example, prices will come down. So it is not all expansionary monetary policies that lead to inflation if you deploy the money into more productive sectors,” he said.
GODFREY OBIOMA
