Ex-Governor Babatunde Fashola’s appointment as minister in charge of an omnibus Power, Works and Housing Ministry effectively puts him in charge of most of Nigeria’s critical infrastructure requirements, with rail, water and aviation-based infrastructure being the main segments outside his purview.
With the substantial completion of power sector privatisation, it is Fashola’s remit to manage the complicated post-privatisation challenges of tariffs, gas supply, new investments and transmission that still limit the sector. He will also have to stimulate investments in alternative energy, especially solar energy. Nigeria’s housing deficit has been estimated as 17 million housing units, and growing. There is a mismatch between housing requirements – mostly social housing for the very poor and poor; functional housing for lower income families; and comfortable homes for the middle classes, where the bulk of the deficit lies, and upper class and/or luxury housing where the economic incentives favour development activity resulting in simultaneous under-supply and glut in the two ends of the market. The underlying problem is the absence of an effective mortgage market and a secondary window for mortgage securities. High interest rates are a major constraint. There are also challenges of title, legal and judicial systems, weak construction industry capacity (at industrial housing scale), housing accessories and artisanal skills, etc.
And Nigeria’s road network is in need of major rework and enhancement. It is a shame that after 16 years of democracy, the Lagos-Ibadan Expressway remains in the state it is in; our Lagos international airport access road is a national embarrassment, and symptomatic of governance failures, ex-President Obasanjo did not in eight years attend to the expressway leading to Sango-Otta where his farms and estate are situated! The second Niger Bridge has been an idea for too many decades!
So “BRF” has his work cut out. It is an irony that Fashola faces these challenges at a time resources are a constraint, so resourcefulness and creative thinking, attributes which the former governor is not lacking in, will be an asset at Nigeria’s de facto Ministry of Infrastructure! It is instructive that BRF is so far the only federal minister that has attempted to lay out a comprehensive roadmap to outline policy direction over the medium term! On December 8, 2015, he addressed a press conference, describing his vision and approach to the huge challenges I earlier described. Fashola complained that the 2015 budget provided N557bn (16 percent) for total capital spending, and claimed that the last time Nigeria budgeted over N200bn for roads in an annual budget was 2002! The Works Ministry in 2015, according to the minister, received N13bn for all road and highway construction in 2015, even though it has subsisting contracts for 206 roads covering 6,000km and worth over N2 trillion! (By the way, for some curious reasons, contrary to the thrust of Fashola’s speech highlighting resource starvation to the roads sector, some reports have falsely claimed that he said the previous government built the largest road network. I have twice searched the text of his address in vain for any such reference!) Naturally most road contracts are thus stalled, with workers laid off. BRF’s sensible short-term strategy is to start with roads with substantial progress that may be quickly completed, before moving to the biggest highways and bridges.
It was refreshing to note that Fashola generally throughout this press conference, but particularly in relation to the power sector, carefully explained the new electricity sector structure, challenges, opportunities and prospects if only Nigerians are enlightened as to the real issues, and support sensible reforms, policies (and tariffs!). The import of that careful public education and enlightenment was of course a precursor to the imperative of adjusting electricity tariffs so that privately-owned power entities can recover their costs and thus enable a sustainable power industry. I’ve heard the minister argue correctly that the issue of tariffs vis-à-vis adequate power supply presents a “chicken and egg” conundrum – which comes first? I support the reality that except tariffs enable cost-recovery and a sustainable industry, it is unrealistic to expect transformation in electricity output and supply. NERC has since announced new tariff structure effective February 1, 2016.
In the housing space, Fashola outlined a strategy wherein government leads in public housing and stimulates private sector participation to reduce the deficit. He argued for a higher housing budget to facilitate consistency of public housing supply across the federation, over the long term but with full cost recovery and thus sustainability. Fortunately, the government is supporting Fashola’s bold aspirations for Nigeria’s infrastructural development with the largest capital allocation of N433.4bn (approximately 24 percent) to the ministry in the 2016 capital budget estimates presented by the president. I am optimistic that with clear and logical thinking at the Power, Works and Housing Ministry, complemented by adequate capital budgetary allocations, Nigeria’s infrastructure sector will get a much-needed boost. In addition, infrastructure spending at a time of economic slowdown represents counter-cyclical fiscal stimulus that will preserve and create employment at a time when the propensity is otherwise for unemployment to rise.
Opeyemi Agbaje
