Ranked 130th out of 144 countries on infrastructure in the World Economic Forum’s Global Competitiveness Index Report, Nigerians require no further conviction on the fact that our infrastructural scorecard is poor and urgently needs all the interventions it can get. The situation is a dire one as our critical infrastructures remain in very poor conditions and are basically overstretched. Therefore, if Nigeria is to take its place as the new hub of the African, if not the Southern Hemisphere’s, economy, succeeding governments and stakeholders must see the infrastructure conundrum as one of the country’s biggest challenge.
Our nation is said to need a whopping sum of $35bn per annum for the next ten years, but it is assumed that we currently spend a paltry sum of roughly $3bn, a tenth of what we originally need. This again has heavy implications as it means that Nigeria cannot from its earnings finance such projects alone; it will require a plethora of both fresh and sturdy initiatives to finance these projects and close the gap, assuming we have identified the priority infrastructure projects, which I believe was the essence of the National Integrated Infrastructure Master Plan (NIIMP).
The challenge, therefore, will be funds for such projects and a number of options are available as we go further. Our first option would be to attract Development Finance Institutions’ funding on a large scale, but this could prove tricky and elusive even to a country like ours which is well placed to raise the funds needed for infrastructure, given the strong point of the economy. The challenge herein is in the absence of upfront “at risk” funding which in turn would attract full project funding, an effeminate political will and corruption. It is argued that the finances needed for our critical infrastructure will surely not come when funds that will help carry out the feasibility of such projects are not provided for. Neither will it come when the political will isn’t present or when such funds will not be properly managed. When we see examples of how a number of our intended critical infrastructure have been abandoned despite the huge amounts voted to these projects and given our culture of corruption, it is not expected that such DFI funds would come without the most stringent of conditions.
Nigeria also has the Chinese option. Truth be told, China has surely done well for Africa. It has helped build roads, railways, ports, airports, refineries and more. Of certainty, we can also in addition to the DFIs seek China’s help using the loans got from China with low interest rates to build and deliver quality infrastructure. In an earlier article ‘President Buhari You Must Seek The Dragon’, I called on President Buhari to reach out to China. In the face of this infrastructural conundrum, I will again reiterate that call.
The third approach will be to look inwards and finance some of these projects ourselves. We can borrow from the United States of America’s idea of the Highway Trust Fund in the late 50’s to fix its public roads deficit. Here it put 18.4 cents per gallon of fuel to achieve this and is said to be considering hiking it by 10 percent.
Within this third approach is the option of using the capital market to finance infrastructure development in the country. We all know that the role of the capital market is to help raise long-term funds for governments and big corporations whilst acting as a platform for the trading of securities. Using the stock and bond markets to fill the funding gap, the Nigerian capital market can at least fund a third of our infrastructural needs. The member organizations of the capital market may issue stocks and bonds in order to raise funds with the Federal Government taking the credit risks while the banks would bear the project risks; the bond holders will not take any of the risks. DFIs and commercial banks can also be integrated into this option, where a DFI would issue a bond with the Federal Government through the Central Bank which will serve as guarantor of the loan and lend the funds to project executors. The Federal Government bears the credit risks while DFIs bear the project risk.
Other options would be to use pension funds/insurance funds as is the practice in Canada, Australia and the UK, or to liberalise key sectors such as the railway to allow private and competent firms to invest and develop them.
Infrastructure is a vital component of any strong and modern economy. For Nigeria to achieve its desire of being the number one investment destination in Africa, it must wake up to the challenge of bridging the infrastructural gap. This may take a while to achieve, but let us begin.
Arinze Igboeli
