The challenge of providing infrastructure in Nigeria is of great concern to federal and state governments, given that resources are not only getting slimmer, but competing needs are also spiralling. The Central Bank of Nigeria’s (CBN’s) InfraCo initiative appears to be the way out, writes Group Business Editor, SIMEON EBULU
Infrastructure deficit, or lack of it, has been a major challenge this country has continued to grapple with for years unend. Like most things that make for good living both at the household level and in industry, the availability, or absence of basic infrastructure remains a defining factor in rating a country’s level of industrialisation and its peoples’ standard of living.
In the category of developing countries, Nigeria, unfortunately, happens to be classified as one that lacks basic infrastructure. As a matter of fact, Nigeria, with a population of over 200 million, has been declared as the world’s poverty capital in 2018, in a report by the Brookings Institution.
Infrastructure deficit and poverty, more or less move in the same direction, except in the case of India, though high in infrastructure provision, still has a large proportion of poor people. It’s huge population of over 1.3 billion, can be excused for that.
Infrastructure refers to the basic physical and organisational structures and facilities, like buildings, roads, power and electricity supplies needed for the operation of a society, or enterprise. In other words, this refers to the set of fundamental facilities and systems that support and sustain households and firms, which enable them to function as they were pre-intended, in rendering service to the country, cities and other areas, as well as providing services and facilities necessary for the economy to function.
Infrastructure is so basic a need that it defines the social and economic status of a country. To say Nigeria is lacking in the provision of infrastructure, is not only stating the obvious, it’s even an understatement, more or less, given the sheer amount of investment required to bridge the infrastructure deficit, or gap.
According to a Bloomberg report, Nigeria requires investment of $33 billion – $35 billion yearly over the next five years to close its infrastructure gap. The huge amount so required to fix the infrastructure deficit is a clear indication that Nigeria’s infrastructure level, is at a parlous state and begging for massive intervention.
According to reports credited to the ICRC (Infrastructure Concession Regulatory Commission), Nigeria has 195,000 kilometres of road network, out of which 135,000 kilometers reman untarred. In other words, only 60,000 kilometers of the nation’s road network, across 36 states and the Federal Capital Territory(FCT), covering a land mass of 923,768km2 is tarred and in motorable condition, presumably.
For those residing in Nigeria’s major cities, the notion that we have good motorable roads, is a farce. There are complaints everywhere, though often denied by the authorities, that the status of our roads, or most of them, so to say, is anything but good, especially the intra city ones. Compared to what obtains in the developed nations, and even among ECOWAS countries on the West Coast, Nigeria’s roads still take the back seat.
There are roads which contracts have been awarded for years and which completion periods have been extended several years, and yet without an end in sight to their completion. The East-West Road and the Lagos-Badagry Expressway are cases in point. To continue to hope that the nation’s parlous infrastructure will be fixed without taking action at a point, will amount to waiting for eternity, more so when some of the existing motorable roads are begging for urgent repairs and maintenance.
Besides the inadequate infrastructure, be it roads, bridges, water, health facilities, airports, just name it, the other major challenge on the infrastructure flank, is maintenance. Here in Nigeria, we watch our roads go bad, right from when they are constructed, until they eventually become un-motorable. There’s hardly any serious repairs done in-between.
However, there has been some noticeable change in the past few years. Some federal roads are beginning to receive attention with massive repairs in some major cities. Some few states have equally signed on to the maintenance culture and construction of new ones, as well.
Infrastructure Funding
But the bigger picture remains, and that urgently so. It is how to fund the badly needed infrastructure on all fronts. How will Nigeria be able to build a viable and sustainable infrastructure base in the face of ‘inadequate’ resources and rising cost of construction materials, coupled with an environment where integrity is the bane among decision makers!
It’s common knowledge that projects executed in Nigeria attract higher billing than their counterparts elsewhere. Why?
InfraCo
That said, the CBN has taken a bold step, and rightly so, not only to draw attention to the issue, but also to address it head-on. The birth of the Infrastructure Company of Nigeria (InfraCo) ceteris paribus (all things being equal) as economists would say, may jolly well be the beginning of measures to seriously address the challenge of inadequate infrastructure in the country.
The InfraCo unveiled last year by the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, is a world-class infrastructure development vehicle, to identify, undertake and fund various infrastructure projects in Nigeria. The company with N15 trillion (equivalent of $39 billion) capital at its disposal, is being managed by an independent infrastructure fund manager.
The InfraCo Fund to which the CBN has contributed N1 trillion as seed capital, is to be used, essentially to support the Federal Government in building the transport infrastructure required to move agriculture products to processors, raw materials to factories and finished goods to markets, where consumers can have access. The initiative, Emefiele said at its unveiling, is part of a series of new measures to “drive a self-sufficient Nigerian economy.” as the strategic projects it would fund would speedily foster economic activities inclusive growth.
The CBN Governor, while acquainting banks’ chief executive officers of the initiative at the end of the Bankers Committee meeting in Lagos, outlined some of the reasons why InfraCo came to be.
He said with the decline in revenues accruing to the federal and state governments as a result of reduced receipts from the sale of crude oil, “alternative ways of funding infrastructure is critical, if we are to ensure sustained growth of our economy.” He drew attention to the fact that the cost of logistics and transportation, remain a significant impediment to the growth of businesses in the country.
“In recognition of the role improved infrastructure could play in the development of our economy, along with the need to leverage private sector capital in funding the over N35 trillion deficit, which is the estimated amount required to build an efficient infrastructure ecosystem in Nigeria, the CBN, working in partnership with critical stakeholders such as the Nigerian Sovereign Investment Authority (NSIA) and the African Finance Corporation (AFC), set up Infracorp,” saying the corporation is expected to raise over N15 trillion to support investment in critical infrastructure in Nigeria.
So far, he said, “N1 trillion has been provided as seed fund by the CBN to support the operations of Infracorp,” adding that a Managing Director, four Fund Managers and a Management Team, were already in place to manage the entity, aimed at targeting strategic infrastructure projects that would help catalyse further growth of the economy.
Infracorp, Emefiele, stressed, is expected to set the standard template that will help in enabling greater private sector funding for public infrastructure projects in Nigeria.
Role of Bankers Committee
The Bankers Committee, an umbrella of banks CEOs, has equally signed on to the CBN initiative, promising to support the apex bank and the government so as to reduce the level of infrastructural deficit in the country. The move is based on the realisation that there is increasingly limited fiscal space to fund capital projects on the part of government at the moment.
Projects
The Infrastructure company, Emefiele said, is already working on the Abuja Kano road, the 2nd Niger Bridge, and the Lagos-Ibadan Expressway,” adding that the CBN, prodded by the Federal Government, made available about N170 billion as bridge funding so that those projects could move on unencumbered. One of the pilot projects, the Second Niger Bridge, is nearly above 80 per cent done, with assurance from NSIA Managing Director, Uche Orji, that the project would be ready for inauguration this October. The Lagos-Ibadan and the Abuja-Kano highways are receiving equal attention.
Emefiele estimated the cost of those three projects to be above N1 trillion, saying by the time the asset managers effectively come on board, the details of those projects and the remaining aspects of those funding, will be coming in through debt.
He said at the appropriate time, the asset managers would come up with the entire cost component and “then we would know the detailed cost of those three projects.” He said N1 trillion of the N15 trillion equity was contributed by the CBN, African Finance Corporation, Nigerian Sovereign Investment Authority (NSIA). The balance, he added, would be accessed from the debt market.
Emefiele said he’s upbeat that these projects are substantially going to be naira funded, pointing to the banks and PenCom as additional sources of funding for Infracorp. “The banks have a large pool of funds, the pension administrators have a large pool of funds and we are reasonably optimistic that more than 50 per cent, or two-third of this money is going to be raised locally. Before we begin to think about accessing international finance, we would try as much as possible to limit debt for foreign currencies, particularly knowing that some of these projects and revenues are going to be generated with local currency. Where foreign currencies are needed, we will also take those and then be able to use them.”
The CBN chief admitted that within the financial system, there’s a lot of idle capital that can be channelled to InfraCo, since it was set up to give comfort to investors, especially the local investors to put their funds in these projects. “This is a brilliant alternative financing methodology that has been brought up and we seek to really look into this. It intends to help government and private sector to raise finance, without necessarily encumbering the balance sheet of the Federal Government,” he said.
Return On Investment (RoI)
The brilliance of the InfraCo initiative is its capacity to recover the cost of investment and financial commitment in virtually all the projects under its domain. The process of achieving this, is tolling.The InfraCorp is expected to recoup the over N1 trillion to be expended on rehabilitation/construction of three projects across the country through toll. Emefiele, at a briefing at the end of the Annual Bankers’Committee Retreat in Lagos, last year, said the InfraCo would facilitate an initial funding of N170 billion for the rehabilitation of Lagos- Ibadan expressway and Abuja-Kano highway, as well as the construction of the Second Niger Bridge, with a cost of over N1 trillion.
As he put it: “In 2022, the Bankers’ Committee will be focusing on supporting the CBN and the Federal Government in developing and reducing the level of infrastructure deficit in the country, realising that there is increasing limited fiscal space to fund capital projects. The president has given approval for the establishment of the Infraco.
“At the moment, Infraco is working on three major infrastructure projects– the Abuja-Kano Road; Second Niger Bridge and the Lagos-Ibadan Expressway. What Infraco has done was when the Federal Government approached us to provide some kind of bridge funding. The bridge funding is N170 billion provided so that those projects could move on,” saying that the roads, when completed, would be tolled to recoup the money spent, as well as for maintenance.
“All of the roads will be tolled. And we know that in many other countries in the world, roads are tolled because those projects are commercially viable, they can be re-funded with tolls so that maintenance can be done on a regular basis and people will pay for it and enjoy good roads and enjoy good facilities because that’s the only way we can fund the infrastructure of this country, which is the large amount of money needed.”