Fixing Nigeria’s infrastructural deficit
It would be recalled that during the tenure of President Goodluck Jonathan a barrel oil in the international market was over $100 and by the time President Muhammadu Buhari assumed the mantle of leadership, as the President and Commander in Chief of the Federal Republic of Nigeria in 2015, a barrel in the global market had slumped to about $30 or even less and since oil is largest revenue earner for the Nigerian State, how to effectively managed the national economy and provide the necessary infrastructure became a monumental challenge, this as coupled with the fact that the economy was in a recession, occasioned by past years of economic and financial mismanagement as well as well documented evidences of widespread corruption.
It is therefore very alarming and worrisome that when President Buhari became came to power, he noticed a very wide infrastructural chasm; it is not that the previous government did not embark on infrastructural efforts, but the work done did not match the inflow of funds during the period in question. And, infrastructural development has a formidable nexus in actual development of any nation state.
President Muhammadu Buhari recently in Abuja called for more concerted effort, creative and innovative ideas from the Nigerian Society of Engineers (NSE) in reversing the infrastructure deficit in the country, saying “Nigerian problems require uniquely Nigerian solutions’’. President Buhari, who received a delegation of the NSE led by the President, Council of the Nigerian Society of Engineers, Adekunle Mokuolu, said reversing the deficit will require indigenous capacity, noting that the government has deliberately structured policies to favour more local content and capacity development. “The foundations of any developed, competitive and prosperous society are based on good education and quality infrastructure. Many nations we look up to are those with adequate and accessible infrastructure, power and water resources. “They achieved these by embracing engineering and of course, engineers. Over the years, Nigerian engineers have been recognized globally for carrying out amazing and impactful projects. Unfortunately, this is not the case here at home as for decades, the enabling environment was simply not provided for these innovative and creative professionals to flourish and showcase our country as an engineering hub,’’ he said.
The President urged the professionals to look inward in showcasing their knowledge and skill in a way that will directly impact the nation. “In the past four years, we focused on reversing this trend by introducing policies that will create the enabling environment for engineers to succeed and thrive. “We introduced Executive Orders and embarked on several infrastructure development and rehabilitation projects. As a Government, we also prioritized local content in our procurement processes,’’ the President added. President Buhari asked the engineers to continue to support Government at all levels to build a more prosperous society.
It is also imperative to underscore the fact that, the Federal Government has introduced three alternative funding sources to tackle road projects. The Controller of Works in Lagos State, Mr Adedamola Kuti, made the disclosure in Lagos. “The first type of alternative funding source is the Sukkuk, which is a type of Islamic loan with almost 0% interest rate. ” The loan does not only have minimal interest rate, it is also very affordable. It is very attractive to the government. “Though no project in Lagos has benefitted from it, the Federal Government has picked 25 roads nationwide across the six geopolitical zones to benefit from the loan,” Kuti said.
He said that the first tranche of the Sukkuk funding released to the government was N100 billion, adding that this sum was divided equally to projects across the six geopolitical zones. According to the controller, projects in the South West benefitting from the funding are the Ajebandele-Sagamu Road and the Oyo-ibadan Road. According to Kuti, the second source of funding is the National Sovereign Investment Authority (NSIA).
He said that five critical projects in Nigeria were benefitting from the special funding in hard currency. “The projects benefitting from the funding include the Lagos-Ibadan Expressway, Abuja-Kaduna-Kano Road, and the Second Niger Bridge. “A section of the East-West Road from Oron to Eket and the Mambilla Plateau Electricity Project are also under the NSIA funding.” Kuti said that the third alternative funding source introduced was the Tax Credit Scheme. “The Apapa-Oworonshoki Expressway project is under the scheme, where an investor has been identified, i.e Messrs Dangote. “This road is the beginning of the Lagos-Ibadan Expressway,” he noted.
According to the controller, under the scheme, an investor advances the government its tax for a specified number of years. “This advance tax is used to fix roads,” he said. “It is a win-win situation for everybody. The investor protects his investment in the chosen area, business begins to boom. ” A lot of people have been complaining that businesses are failing due to bad roads,” the controller said. The controller said that hitherto a lot of projects had been having difficulties getting appropriate funding for their implementation.
The Federal Government has also said the nation would need a whopping $166 billion to meet its energy and transport infrastructure requirement over the next five years. Transportation Minister, Rotimi Amaechi, who revealed this during a public hearing on Nigerian Railway Authority Bill and National Transport Commission Bill, said the Federal Government and General Electric (GE) have an agreement to commercialize the Lagos-Kano railway project. “Besides privatization, government also realized a monumental infrastructure deficit which as at 2015 stood at over $3.05 trillion in 30 years or $166 billion in five years with energy and transport infrastructure taking more than 50 per cent of that need,” the Minister said. “Transport infrastructure alone needs a whopping $50.9 billion in five years to cover the current gap in the sector, an average of $10.2 billion per year. Currently, the ratio of funding in the sector between the public and private is 9:1. This constituted a major disincentive to private sector participation in the industry. “In addition, it is considered imperative to intimate this Committee that full government ownership and management of these agencies had inherent restrictions for third party funding, undue government interferences; burdensome bureaucratic structures and over-bloated work force among others,” Amaechi added.
Furthermore, the former Minister of Solid Mineral Development, now the Executive Governor of Ekiti State, Dr. Kayode Fayemi, lamented the level of decay of Nigeria’s infrastructure, saying that it will cost the nation $3 trillion to fix. The Minister said this at a business forum organized by the Royal African Society in London, the United Kingdom. Quoting a report by the National Integrated Infrastructure Master Plan, he said, Nigeria’s current core infrastructure stock gap, based on international benchmarks, is estimated at $80 billion.
To finance the infrastructural deficits, therefore, the Federal Government set up a $25 billion infrastructure fund to bridge the funding gap in infrastructure development in the country, the former Minister of Finance, Mrs Kemi Adeosun, insisted. According to Adeosun, setting up the fund became necessary due to the need to upgrade the country’s current infrastructure, which is in a very sorry state. She spoke at the inauguration of the 10-year Capital Market Master Plan, Nigeria Investor Protection Fund, and the launch of the Corporate Governance Scorecard for quoted companies by the Securities and Exchange Commission. The ex-finance minister challenged the capital market community to come up with other innovative ways of mobilizing capital needed to address the nation’s infrastructure problem. She said, “In the current environment of significant revenue squeeze and other budgetary constraints, these investments will clearly not come from government coffers alone. We believe this is where the capital market can really make itself relevant by stepping in to close the funding gap. “Government is already looking to set up a $25 billion fund wholly dedicated to infrastructure investments. A crucial assignment we have for the capital market community is to come up with other innovative ways of mobilizing the capital needed to address Nigeria’s infrastructure challenge.”
For the former minister, an efficient and vibrant capital market is an indispensable feature of any modern economy supplying affordable medium-to-long term capital needed for growth as they facilitate mobilization of savings, accelerate capital formation, provide investment avenues and enhance efficient allocation of capital to the growth of sectors as no country has been able to develop without a thriving capital market.
In a related development, the Federal Ministry of Finance has unfolded plans to reposition the Sovereign Wealth Fund in line with the infrastructure objectives of the federal government. The former Minister of Finance, Mrs Kemi Adeosun said the sovereign wealth fund is currently being managed by the Nigerian Sovereign Investment Authority under the SWF, which had a seed capital of $ 1.55 billion there are three categories of fund from which investments could be anchored. They are Future Generation Fund where up to 20 per cent of the fund could be invested in it, Infrastructure Fund which had an allocation of 40 per cent, and Fiscal Stabilization Fund which also had a 40 per cent allocation. She said since budgetary allocations alone would not be able to address the infrastructure gap as only 30 per cent of the budget had been allocated to capital projects, there was need to reposition the sovereign wealth fund to attract more investments in the area of infrastructure. She said, “The economic blueprint is very clear. We are going to invest in capital projects to ensure that we diversify this economy. “We have been talking about diversification since I was a child and we haven’t achieved that. “What the FG wants to do is reposition and have it (SWF) focused in line with government’s objectives which is investments in infrastructure. “The government realized that even with 30 per cent of the budget earmarked for capital spending, the country’s infrastructure gap is so wide that government alone cannot bridge it. “So what we are hoping is that the sovereign wealth fund now becomes a channel to attract further private capital, particularly from investment funds abroad. “We really want to focus on infrastructure – toll roads, bridges, power plants; things that would help the economy grow.” She said the government is focused on revamping domestic production as part of efforts to diversify the economy. Hence, it is very obvious that this government is making all necessary efforts to really bridge the massive infrastructural gaps in the country.
The federal government confirmed the approval of the transfer of $650 million (about N198.9 billion) to the Nigerian Sovereign Investment Authority (NSIA) as seed funding for the newly established Presidential Infrastructure Development Fund (PIDF). The National Economic Council (NEC) announced the establishment of the Fund and the disbursement of the seed funding at the end of its meeting recently. Details released by NEC showed that the PIDF would be managed by the NSIA. The fund is expected to be invested in critical road and power projects across the country. The initial transfer of $650 million to the NSIA was authorized from the Nigeria Liquefied Natural Gas (NLNG) dividend account at the Central Bank of Nigeria (CBN).
A statement from the NSIA said the initiative was aimed at eliminating the risks of project funding, cost variation and completion that have plagued the development of the nation’s critical infrastructure assets over the last few decades. Ongoing projects mostly impacted by paucity of funding include the 2nd Niger Bridge, Lagos to Ibadan Expressway, East—West Road, Abuja to Kano Road, and Mambilla Hydroelectric Power.“This commitment by the President and NEC, allows all State Governments to own an economic interest in the project companies that will be professionally developed and managed by the NSIA,” the statement said. “The investments will yield returns, which will diversify revenues to States, improve the fiscal sustainability profile of the Federation and ensure Nigerians benefit from modernized Infrastructure for decades to come,” it added. The NEC said the PIDF would help secure counterpart funding required for projects being co-developed with China Export-Import Bank and China Development Bank. The NSIA said any additional funding required from development partners for projects in the country would be mobilized.
Besides, President Muhammadu Buhari, in Abuja, reaffirmed that his administration will sustain the delivery of quality infrastructure across the country for investments and businesses to thrive. Receiving representatives of Trade Associations from the 36 states and the FCT led by the National Coordinator, Prince Paul Ikonne, President Buhari pledged that he will continue to do his best to ensure that the country is safe and secure for everybody.
To further exemplify the commitment of the Federal Government to infrastructural development, it set up the North East Development Commission to development the whole of North East that was ravaged by the menace of the Boko Haram insurgency by providing qualitative infrastructure in the geo-political zone. Similarly, the government put in place a comprehensive plan of action to genuinely and lengthily build up the Niger Delta region, after years of deliberate neglect, in spite of persistent protest from people of the region.
Just to mention a few of the many infrastructural efforts have carried out; these are Gwoza – Damboa – Goniri – Ngamdu Road in Yobe/ and Borno States by Hajaig Construction Nigeria Ltd at the cost of N34.6 billion as well as the rehabilitation of Mayo Belwa – Jada – Ganye – Toungo Road in Adamawa state by Messrs Triacta Nigeria Ltd. at the rate of N22.7 billion.
Other contracts approved are Ado – Ifaki – Otun – Kwara State border in Ekiti State at the rate of N6 billion, the repair of Makurdi bridge in Benue State by Messrs AG Vision Construction Ltd.N4.7 billion, Ihugi – Korinya -Wuse -Ankor in Benue State was given to Datum Construction Ltd at the cost of N15.6 billion.
Also, approved was Gbagi – Apa – Owode in Badagry Lagos State to Messrs Smithcrown Nigeria Ltd at N4.4 billion, and the Construction of Ijebu Igbo – Ita Egba Owonowen in Ogun and Oyo state to Messrs DC Engineering at the cost of N9.8 billion and the Dualisation of Jattu – Fugar – Agenebode road in Edo Phase II by Mothercat at N7.5 billion.
There was also an approval for Makurdi – Gboko – Wannune – Yander Section 1 in Benue State to Messrs Rockbridge Construction Ltd. at the rate of N18.6 billion, Old – Enugu – Port Harcourt Road at Agbogugu – Abia border Spur by Messrs Setraco Ltd. at N13.9 billion, Rehabilitation of Umulungbe – Umoka road at N6.2 billion, Amokwu – Ikedimkpe – Egede – Opeyi Awhum Road in Enugu State to Messrs IDC Construction at N21.7 billion and the rehabilitation of Nkwu Inyi – Akpugoeze in Anambra State awarded to Anbeez Services at N2.6 billion. Sabon Birnin – Tsululu – Kuya – Maradi Junction road in Sokoto by Messrs China Zhonghao Nigeria Ltd at the cost of N4.4 billion.
President Buhari, however, stated that the government would continue to work on the country’s road network as well as other infrastructures and stressed that his administration had raised the country’s budgetary commitment for capital projects from 15 per cent to a minimum of 30 per cent. He stated these in Abuja at a one-day public enlightenment forum on developments in the road sector. The forum was organized by the Federal Ministry of Power, Works and Housing.