The Nation Newspaper

Tag: infrastructure

  • AFC: Nigeria needs $3tr to fix infrastructure

    AFC: Nigeria needs $3tr to fix infrastructure

    The Africa Finance Corporation (AFC) has said Nigeria needs $3 trillion to fix huge infrastructure deficit in the country over the next three decades.

    The AFC President/Chief Executive Andrew Alli, who disclosed this at the weekend during a news conference in Lagos, also called on government to allow cost-reflective tariffs so as to boost power supply in the country.

    He regretted that while government must be a primary source of funding, Federal and State Governments’ fiscal inflows are grossly inadequate to match the pace of investments required in infrastructure.

    Represented by a top executive of the corporation, Fowler Fagbule, Alli said the Nigerian government ability to spend is limited based on what it earns.

    Extracts from the Nigeria Economic Recovery & Growth Plan 2017-2020 show that the Federal Government’s medium-term fiscal framework forecasts deficits of N7.6 trillion from 2017 to 2019. This he said, is evidence that the Federal Government resources are limited and additional resources will be needed.

    Specifically, the power sector according to him, recently privatized, is still significantly government driven with challenges of transmission, gas supply, tariffs, payment security, and operational limits which has left the industry in critical state regarding suitability for long-term investment.

    He said the overall effect is that Nigeria still struggles to provide an adequate supply of reliable power to its population of approximately 170 million people, as generation capacity was still about 3,038 megawatts at March, 2017. He believes that the country should generate 5000 megawatts by 2018.

    “If we don’t have a cost reflective tariff, we will not have the kind of investment we want,” he stressed.

    Alli further expressed concern that despite its recent unbundling, “This industry is at a critical juncture in terms of privatization, liberalization and other conditions for long-term investment sustainability, both by public sector and private financiers. Both the public and private sides have fallen short of requirements to create a bankable and sustainable sector. ”

    Similarly, he said the transport sector is largely public financed (FGN) hence limited by annual fiscal constraints. The end result in Nigeria Alli added is that roads and rail typically get the most attention, but funding is “poor and opaque.”

    Arguing  that money is not the problem of infrastructure financing, Alli said other challenges that need to be addressed include: bad Procurement processes, structural problems that make it difficult for investors to get value for money, funding structure, maintenance, tolling, among others. He also, frowns at inadequate attention which Nigeria pays to meeting the needs of specific investors and projects already in progress, or on creating policy incentives that will spur investments.

    “Even though the Country has proven gas reserves greater than oil reserves and world class deposits of tin, substantial iron ore and coal resources, unfavorable policies around pricing and access to acreage have limited infrastructure investment and development for several decades in Nigeria,” said the AFC boss.

    In proffering solution to poor infrastructure financing, the AFC president said there should be major overhaul in approach, for large ticket billion-dollar projects to work.

    Referring to the electricity sector, he said strict enforcement of all agreement by all parties to a contract is important. He however praised the Federal Government for decentralisation of the Nigerian ports via private sector concessions, which he said has allowed for planning and developing of port infrastructure and facilitation of financing for new construction through build-operate-transfer arrangement.

    Alli said despite significant demand for rail transportation, traffic volumes have collapsed to almost zero due to lack of maintenance and capital expansion.

  • N100b Islamic bonds raise hope for better infrastructure

    N100b Islamic bonds raise hope for better infrastructure

    The Federal Government will be raising N100 billion through the Sovereign Sukuk, also called Islamic Bonds offer which opened on Thursday September 14, to close this Wednesday. The fund will be used for the construction and rehabilitation of sections of key economic roads across the six geopolitical zones in the country.  The Federal Ministry of Power, Works and Housing has listed 25 road projects the fund will be used for. For the Central Bank of Nigeria (CBN) and Debt Management Office (DMO), Islamic finance is needed to take financial services to the grassroots, and open new investment frontiers in government-issued securities, writes COLLINS NWEZE.

    With conventional deposits depleted and the need for cash to execute key infrastructure projects rising, many developing and developed economies see Islamic finance as a way out of the quagmire.

    Islamic finance development has in recent years, become very attractive to investors in many African economies. Both market development in line with Islamic principles and regulatory milestones have been recorded in Africa, in the last few years.

    Specifically, Nigeria, Sudan, South Africa and Senegal, Kenya, Morocco and Niger, among other countries, have put in place necessary legal and regulatory frameworks to enable Islamic banking offerings in their respective jurisdictions thrive.

    For Nigeria, the Federal Government’s plans to raise N100 billion through the sovereign Sukuk, also called Islamic Bond has elated investors across the country, especially its non-interest component. The facility was unveiled by the Debt Management Office (DMO) in a nationwide roadshow that took place in Lagos, Port Harcourt and Abuja.

    DMO Director-General, Patience Oniha, alongside officials of the Federal Ministry of Power, Works and Housing, told stakeholders in Lagos, Port Harcourt and Abuja that the debut N100 billion is dedicated to building critical road infrastructure in the country.

    She explained that debut Sovereign Sukuk is an ethical-inclined investment in which rent is based on the investment bi-yearly and the principal sum paid at the end of the seven-year tenor. She said the product was designed as a revenue source to fund the construction and rehabilitation of key economic infrastructure projects across Nigeria, such as roads.

    “It is intended to diversify the sources of government funding, offer ethical investors an opportunity to invest in government-issued securities, achieve higher level of financial inclusion and serve as a reference for pricing Sukuk issued by other bodies, especially private sector issuers,” she said.

    Oniha, at the various stops on the roadshow assured potential investors that the Sukuk is backed by the full faith of the federal government and was one of the avenues it intends to raise funds for capital projects.

    “This is one of several efforts to raise funds for specific projects and this is backed by the full faith of the Federal Government. It is a rental product to cater for segment of our society that requires such services,” she said.

     

    Targeted projects

    The Federal Ministry of Power, Works and Housing, listed 25 road projects spread across the six geo-political zones of the country which the fund will be used for. Some of the projects include the Loko  Oweto Bridge, dualisation of a section of the Abuja-Lokoja road, dualisation of the Suleja-Minna road, the dualisation of the Kano-Katsina road (phase 1), rehabilitation of the Onitsha – Enugu Expressway, and the Enugu-Port Harcourt road (section one to three). Others are the Ibadan-Ilorin Road (Oyo-Ogbomoso), Kolo-Otuoke-Bayelsa-Palm Road (Yenegwa Road Junction), Kaduna Eastern By-Pass and Kano-Maiduguri Road (Potiskum-Damaturu).

    Experts said the offer would boost investments flows based on trends already witnessed in the Federal Government  bond, savings bond among others issued by the debt office.

    Benefits of investing in the Sukuk, according the DMO, include safety of investment, regular income which are tax free and liquidity as they will be listed and traded on The Nigerian Stock Exchange and the FMDQ OTC Securities Exchange Plc.

    The debut Sovereign Sukuk is for N100 billion with a tenor of seven years at N1,000 per unit. The offers has been certified as ethically compliant by the Financial Regulation Advisory Council of Experts of the Central Bank of Nigeria (CBN). The product is also useful as collateral to access loans from banks.

    Also, the minimum subscription is N10,000, that is, 10 units at N1,000 per unit and in multiples of N1,000 (per unit) thereafter. The rental payment is semi-annually while the redemption involves a bullet payment of invested funds at maturity.

    “Sukuk is different from Convention Bonds in the sense that it represents ownership interest in assets while bonds represent a pure debt obligation due from the issuer. The funds raised from Sukuk issuance must be used only for ethical purposes. Bonds can be issued to finance any legal purpose. The sale of Sukuk represents the sale of the holder’s interest in an asset. The sale of a Bond is the sale of a debt,” the DMO said.

    It said all categories of investors, including retail investors, high net worth individuals, institutional investors such as commercial banks, insurance/takaful companies, pension funds, asset managers, private banks and others. Also, ethically inclined investors, cooperative Societies, religious bodies, state investment companies and foreign investors will find it really attractive.

    Assessing the benefits of the financial instrument, the president of Federation of Muslim Women in Nigeria, Rivers State Chapter, Hajia Maimuna Bello, described it as a bold initiative to cater for a critical segment of the country and urged the DMO to deepen its awareness drive.

    In Abuja, a former executive director of the Nigeria National Petroleum Corporation (NNPC), Ibrahim Waziri, expressed the hope that the raised funds would be deployed to the listed projects. He stressed that as an ethical financial instrument, investors are assured of timely rental returns.

    The offer will be listed and traded on The Nigerian Stock Exchange and the FMDQ OTC Securities Exchange Plc, with offer for subscription slated for September 14.

     

    CBN speaks

     The CBN has urged Nigerians to take advantage of the offer, stressing that it is geared towards infrastructural development and a worthwhile investment.

    Speaking at a one-day investors’ forum in Kaduna, CBN’s Deputy Director, Financial Markets Department, Demenongu Yanfa, assured participants  of the apex bank’s commitment to the smooth running of the Sukuk.

    According to Yanfa, the Sukuk will not only allow Nigerians take ownership of the roads with half yearly rental incomes, but will fast track the building of road infrastructure in the country.

    “The world is looking for new areas of investment. As of today, South Africa, Malaysia and some other countries of the world have embraced SUKUK to fund some of the construction and rehabilitation of key sectors of their economies,” Yanfa said.

    He expressed the optimism that Nigerians would embrace this novel funding alternative for government’s projects, promising that the CBN will work with other relevant government agencies to ensure the success of the Sukuk.

    Earlier, Oniha, explained that Sukuk is an investment certificate that represents the ownership interest of the holder in an asset or pool of assets, saying that the certificate entitles the holder to receive income from the use of the assets.

    A participant at the Kaduna investor forum, Acting Managing Director of Kaduna Industrial and Finance Company, Sanusi Maigeri praised the DMO for the initiative, noting that the Sukuk is a veritable tool for financial inclusion. “I call on potential investors to make use of the golden opportunity to available to them to invest in the Sukuk”, Sanusi said.

    The placement agents for the Offer are Access Bank, Citibank, Coronation Merchant Bank, EcoBank, FBN Merchant Bank, First Bank, FCMB Plc, FSDH Merchant Bank, Guaranty Trust Bank Plc, Stanbic IBTC Bank Plc, Standard Chartered Bank Nigeria Ltd, United Bank for Africa Plc and Zenith Bank Plc.

     

    Growth of Islamic finance market

     According to a report by the Malaysia World’s Islamic Finance Marketplace titled: “Islamic finance in Africa: Impetus for growth,” a lot of conventional banks across the continent, have started offering Shariah-compliant banking products through Islamic window set-up. In the Sukuk segment, the report showed that countries, such as Senegal, Nigeria, Mauritius, The Gambia had issued Sukuk.

    A recent milestone in this space was the maiden sukuk issuance by the Africa Finance Corporation (AFC). The global Islamic financial services industry had been estimated to reach $6 trillion in assets by 2020 with a growing number of new market entrants.

    That was why the Managing Director/Chief Executive Officer of the Islamic Banking and Finance Institute of Nigeria (IBFIN), Sani Aminu Dutsinma, stressed the need for Nigerians to take advantage of the opportunities created by this banking instrument.

    According to him, Islamic banking and finance instruments have the potential to check greed, high handedness, selfishness and corruption, not only in the banking and finance industry, but also in the public sector.

    Dutsinma explained that Islamic banking and finance, being asset-based, should, in principle be less prone to financial crime.

    According to him, the Islamic finance industry has expanded rapidly over the past few decades, growing between 10 and 20 per cent yearly, as shariah-compliant financial assets are estimated at about $2 trillion, covering bank and non-bank financial institutions.

    Islamic banking assets have been grown faster than conventional banking assets, he said, adding that there has been an increased interest in Islamic finance from countries, such as the United Kingdom, Luxembourg, South Africa and Hong Kong.

    Within sub-Saharan Africa, he revealed that South Africa leads in terms of Islamic finance, with one of the largest international Islamic banking conglomerates namely, Al-Baraka Banking Group, he disclosed.

    Dutsinma noted that since the introduction of Islamic finance in Nigeria about 18 years ago, concerns and apprehension have been voiwwced that the introduction might be a ploy to Islamise Nigeria.

  • SMEs: Multiple taxation, dearth of infrastructure hurting our businesses

    Small and Medium Enterprises (SMEs), particularly those on the Ikorodu axis of Lagos State, have cried out that excessive taxation and dearth of supportive infrastructure, among other harsh operating environment-related challenges, are taking a huge toll on their businesses.

    Some of the small business owners in Ikorodu, who spoke with The Nation, lamented that constant and multiple demands for taxes by various agents of the government were hurting their profitability and threatening the sustainability of their businesses.

    For instance, Logistics &Facility Manager, Hallel Engineering Company, Mr. Adeolu Akinpelu, said his company was faced with the challenge of double taxation by the government under various names and categories.

    Akinpelu said there was a need for the government at all levels to harmonise the various taxes to be paid by different categories of businesses, to avoid the current situation where businesses, particularly SMEs, are forced to pay the same taxes but with different sub-heads.

    He argued that multiplicity of taxes was having debilitating effects on SMEs by cutting into their profit margin. Besides, those who could not cope with the excessive taxation have been forced to either close shop or relocate to other climes where tax regimes are SME-friendlier.

    To the CEO of Zaiphie Transformation, a firm of make-up artists, Miss Ifeoma  Ikechukwu, the challenges facing SMEs in Ikorodu area of Lagos go beyond tax. She said the perception of Ikorodu as being in the backwaters of civilisation due to lack of infrastructure was a pain in the neck of small business owners.

    The beauty artist said: “The price of makeup and hair products increases daily, and it is affecting my business. But, unfortunately, people see Ikorodu as an undeveloped area and insist that our products must be cheap without recourse to the fact that we all buy from the same market,”

    Miss Ikechukwu lamented that the location of her business in Ikorodu was a major disincentive as customer patronage was low because of the poor infrastructure in the area, such as regular supply of electricity, potable water and good roads, among others.

    She, therefore, called on the state government to improve the infrastructure in the area in order to boost SMEs and ultimately, create jobs.

    Similarly, Managing Director, Marthridge Stitches, Mrs. Martha Aimuemojie, complained that because of poor infrastructure in Ikorodu, many of her customers are unable to locate her business address.

    According to her, the difficulty by prospective customers in locating her business address affects the price of her goods and services. She expressed regrets that location determines the price of goods and services, whether one is good or not in the business.

    Another dealer in beauty products, who gave her name only as Mrs. Orakwe, however, said the hurdles before SMEs in Ikorodu cannot be divorced from the general economic downturn plaguing the nation following the collapse of oil prices at the international market.

    Orakwe said the economic recession that gripped the country since the crisis started has forced many people to re-order their priorities, as many Nigerians now prefer to feed their families first before thinking of buying beauty products and indeed, other products and services.

    Apart from the economic downturn, Orakwe also lamented that the seeming gradual disappearance of the apprenticeship culture from the SME landscape was not helping matters. She said nowadays most apprentices want to make money rather than learn from their masters.

    She added that apprentices learn the trades now are cajoled to do so. She decried the lazy and poor work culture among the youth, and called for a paradigm shift.

  • ‘Apapa infrastructure regeneration ‘ll boost economy’

    ‘Apapa infrastructure regeneration ‘ll boost economy’

    TheFederal Government’s efforts to redevelop infrastructure in Apapa, Lagos State, coupled with private sector involvement to reconstruct a section of the road within the corridor, will boost the economy.

    Minister of Power, Works and Housing Mr Babatunde Fashola, made the submission last week while inspecting some projects in Lagos State.

    “There is need for total regeneration of roads and other infrastructure in Apapa, which houses the nation’s major ports, to boost the nation’s economy. We are battling to restore Liverpool Road and the bridge, this road must not collapse; it would shut down the country,” Fashola said.

    He noted that if Liverpool Road, which leads to the Tin Can Island Port, and the Nigeria Ports Authority, and Funsho Williams Road are lost and not kept in proper shape, it would be tantamount to having shut down the nation.

    His ministry, he said, is working on making all roads in Apapa and its environs motorable because of the importance of the axis to the national economy, adding that the roads have been inadequately maintained for about 40 years.

    Fashola, who was on an inspection of the Apapa-Wharf Road reconstruction, said President Muhammadu Buhari was happy with the financiers of the two-kilometre road project: AG Dangote Construction Company, Flour Mills of Nigeria Limited and the Nigerian Ports Authority. “President Buhari appreciates the gesture,’’ he said.

    An engineer with the Federal Ministry of Power, Works and Housing supervising the road project, Mrs. Korede Keisha, explained that the work would have advanced beyond the present state but for the contractors’ inability to relocate some gas pipes found underneath the road, which were too expensive to move.  Keisha revealed that this development made the contractors to shift the road to about one metre away from the gas pipe.

    A former Lagos State Commissioner for Transportation and consultant to AG Dangote Construction Company Limited on traffic management, Mr. Kayode Opeifa, explained that a collaboration on the traffic management plan was helping the firm to surmount gridlock and free the site for construction. He, however, lamented the activities of unorganised port operators, accusing them of causing congestion on the road with their trucks.

    The inspection tour, which began from the National Stadium, Surulere, spanned through Alaka to the Apongbon Bridge, and outer Marina.

    On the Alaka Bridge, Fashola instructed his team of engineers, led by Director, Federal Highways, Southwest, Mr Emmanuel Adeoye, to expedite action on the replacement of vandalised manhole covers. They are also to reconstruct some drainage and unblock drainage channels connecting a major canal in front of the National Theatre, Iganmu to solve flood problem, which is said to be a major cause of the persistent road degeneration in the area.

    He appealed to Reynolds Construction Company (RCC) Project Manager, Mr Vaknin Harel, whose firm is handling the rehabilitation of Funsho Williams Road up to Ijora Bridge, to hasten work.

    Fashola urged RCC to endeavour to finish the reconstruction work before the next rainy season, considering the fact that the entire stretch of the road sits on swampy land. He also mandated the contractor to replace vandalised bridge railings on the axis with concrete.

    Harel explained that RCC was patching potholes caused by flooding, as well as filling the road with more durable materials to asphalt stage, to make it last longer.

    Inspecting the street lights both under and above the Ijora and Funsho Williams Avenue bridges, the Minister directed his engineers to liaise with the state Rural Electrification, to replace all the lights. “If there are new solar technologies, adopt them. It is a total regeneration of this Apapa area that we want,’’ he said.

  • Bridging the $300b infrastructure gap with Islamic finance

    Bridging the $300b infrastructure gap with Islamic finance

    About $300 billion (N108.75 trillion) is required to close Nigeria’s infrastructure gap, according to experts. Without fixing infrastructure, Nigeria’s road to economic recovery will be long and tortuous, they claimed. The Federal Government has turned to the Islamic Development Bank  (IsDB). But, experts urge caution because of Nigeria’s secularity. Asst. Editor CHIKODI OKEREOCHA reports.

    When Finance Minister Mrs. Kemi Adeosun early this year opened the Abuja office of the Islamic Development Bank (IsDB), many knew that a closer collaboration between Nigeria and IsDB was afoot to enable the country exit recession through aggressive investment in infrastructure.

    IsDB is a Sharia compliant International Development Finance Institution (DFI) that participates in equity capital and grants loans for productive projects and enterprises. It also provides financial assistance to member-countries in other forms for economic and social development. The 43-year-old DFI has upgraded its Nigerian office to a regional hub.

    The bank’s plan was to coordinate operations in its West and Central African member-countries from the Abuja (Nigeria) gateway office, which will serve Nigeria, Gabon, Niger, Mozambique, Burkina Faso, the Republic of Cameroon, Uganda, Senegal, Djibouti and Guinea Bisaau, among others.

    The decentralisation of the bank’s operations through the opening of regional offices was aimed at bringing its services closer to member countries as well as enhance communication, improve efficiency and performance.

    Nigeria became a member of the IsDB, headquartered in Jeddah, Saudi Arabia, in 2005 under the administration of former President Olusegun Obasanjo. And on the strength of its membership, Adeosun had at the opening of the bank’s Abuja office sought its support in the implementation of the Economic Recovery and Growth Plan (ERGP) particularly in the area of infrastructure.

    Again, at IsDB’s recent 42nd annual meeting in Saudi Arabia, the Minister passionately repeated her plea, saying: “We want IsDB to be more visible and deliver signature infrastructure projects in Nigeria.” She specifically called on the bank to increase its financial and technical assistance to Nigeria to fast-track the achievement of the EGRP, which aimed at reviving the ailing economy.

    The EGRP, which covered a period of three years (2017 to 2020), was launched in Abuja by President Muhammadu Buhari. The medium term plan broadly targeted the restoration of growth, human development and a globally competitive economy, in an effort to combat recession and reposition the economy on the path of sustained growth.

    It specifically targeted to grow the economy by 2.19 per cent this year and subsequently, seven per cent in 2020. But with infrastructure critical to realising these ambitious targets, and government unable to raise significant cash to build infrastructure, it has turned to Islamic finance for succour

    However, the move, partly forced by Nigeria’s recent cash flow problems caused by crashing oil prices, may not have gone down well with some experts and financial analysts. Some of them, who spoke with The Nation, argued that Nigeria is not an Islamic country, but a multi-religious state that is constitutionally secular and so, should not turn to Islamic finance under the excuse of building infrastructure.

    They cautioned that Nigeria should be wary of hob-nobbing with IsDB and other Islamic banks as this is capable of undermining the nation’s constitution and its secularity. While insisting on the need to defend Nigeria’s secularity, some of them pointed out that there are other viable options and numerous non-religious lending institutions Nigeria can turn to for help.

    For instance, a Lagos-based lawyer/public affairs analyst, Barr Obiora Akabogu, said although, the only thing that can interest any responsible government in Islamic finance is its zero or low interest offer, there is the need for Nigeria to study the conditionalities very well before appending her signature for any facility from IsDB.

    He said studying the conditionalities before appending signature was necessary to avoid using the loan as an economic weapon to enslave Nigeria. “Nigeria must not come out of European colonialism and enter into Arab colonialism, because it is not a very good alternative, Akabogu warned, adding that there is one kind of attachment or the other that borders on religion.

    While recalling that when the economy of countries such as the United Kingdom (UK), Spain, and Greece were down, they never went to Islamic bank, Akabogu said “Nigeria should know better why those countries didn’t turn to Islamic bank for help.”

     

    Why Islamic finance is gaining traction

    According to the Managing Director/CEO, Islamic Banking and Finance Institute of Nigeria, Alhaji Sani Aminu Dutsinma, the Islamic finance industry is growing at 10 – 20 per cent annually, while “Shariah compliant financial” assets are currently estimated at $2 trillion, covering bank and non-bank financial institutions.

    Dutsinma, who made this known in Abuja, during a sensitisation workshop for journalists on the “Fundamentals of Islamic Economics, Banking and Finance” organised by the Institute in collaboration with the Nigeria Union of Journalists (NUJ), noted that Islamic banking assets have been growing faster than conventional bank assets.

    He said there has been increased interest in Islamic finance from countries like the United Kingdom (UK), Luxembourg, South Africa and Hong Kong. While pointing out that within sub-Saharan Africa, South Africa led the way in Islamic banking, he noted that Islamic finance was not reserved for Muslims only.

    According to Dutsinma, it is not a Muslim finance, with no such tag on Islamic finance products either in Nigeria or in any other part of the world. He, therefore, called on Nigerian policymakers to recognise Islamic finance as capable of significantly contributing to economic development, given its direct link to physical assets and real economy.

    The CEO was, however, quick to note that “Since the introduction of Islamic finance in Nigeria about 18 years ago, concerns and apprehensions have been voiced that the introduction might be a ploy to Islamise Nigeria. But as at today, we are yet to receive any report of religious discrimination as regards access to any Sharia compliant product.”

    As if sensing the concerns and apprehensions that may still greet Nigeria’s latest move to access Islamic finance, Adeosun noted that Nigeria had derived many benefits from its membership of the 43-year old IsDB.

    “We appreciate their intervention in the water supply, health and education sectors in a number of our states, but we want IsDB to do more,” the Minister, who was represented by the Permanent Secretary in the Ministry, Dr. Mahmoud Isa-Dutse, said. Isa-Dutse led the Nigerian delegation to the meeting of the bank.

    She said that given IsDB’s unique role as Islamic Bank with multiplicity of intervention instruments not available to traditional development banks, “We expect IsDB to be bold and work collaboratively with other Money Deposit Banks (MDBs) to ensure overall complementarity in all development interventions in Nigeria.”

    Already, IsDB President Dr. Bandar Mohammed Hajjar has assured that the bank would enhance the development impact of its projects and programmes through comprehensive development solutions that integrate services and products in its member-countries.

    Indeed, Islamic finance has grown progressively in the last 40 years, spreading to over 70 countries and becoming a $2 trillion market at the global level. Africa currently has only about two per cent of global Islamic banking assets and as little as 0.5 per cent of Sukuk outstanding.

    But with Nigeria throwing her hat into the ring, the stage appears set for the rapid growth of Islamic banking and ûnance across the continent, which is said to be home to over a quarter of the global Muslim population.

    According to experts, Nigeria’s economic managers may have been forced by the current economic downturn to realise that Islamic finance is being increasingly deployed as a strategic instrument to tap into the unbanked population in Africa and innovatively address the vital issue of financial inclusion.

    Besides, they have realised that it has become a catalyst for boosting Foreign Direct Investment (FDI) and trade vows between the continent and Organisation of Islamic Countries (OIC) markets. Furthermore, Sukuk is well positioned to play a powerful role in meeting the funding gaps in strategically vital infrastructure projects across the region.

    This must be why Dutsinma called on Nigerian policymakers to recognise Islamic finance as capable of significantly contributing to economic development, given its direct link to physical assets and real economy.

    He said: “The use of profit and loss sharing arrangement encourages the provision of financial support and generates jobs. The emphasis on tangible assets ensures that the industry supports only transactions that serve a real purpose thus discouraging financial speculation.”

    Dutsinma was of the opinion that Islamic finance helps promote financial sector development and broadens financial inclusion by expanding the range and reach of financial products, while helping to improve financial access and foster the inclusion of those deprived of financial services.

     

    $300b infrastructure deficit also a factor

    According to experts, Nigeria requires an investment of $300 billion to close her huge infrastructure gap and unlock the real sector’s potential to reflate the economy severely battered by crashing oil prices.

    The $300 billion infrastructure deficit represents 25 per cent of the nation’s Gross Domestic Product (GDP). This translates to an investment of about $25 billion annually, which Nigeria can hardly afford given the current cash crunch.

    Yet, the achievement of Nigeria’s numerous economic, developmental and inclusive growth goals articulated under the Federal Government’s ERGP was hinged on massive investments in infrastructure.

     

    Experts disagree, list other options

    Akabogu said rather than hub-nub with Islamic finance and make Nigeria an Islamic state under the guise of raising money to build infrastructure, the country should turn to other sources. “What is the use for Excess Crude Account (ECA)?” he asked, noting that external reserves is also there and has not been completely depleted.

    The public affairs analysts added that Nigeria could also fall back on the Sovereign Wealth Fund (SWF) to raise cash to build infrastructure. While noting that the country’s economic buffers are being funded, he said Value Added Tax (VAT) and money accruable from Customs and Excise are also viable sources.

    “Remember that Customs is the only organisation in Nigeria that continues to declare surplus all the time. There is money from the private sector. There is capital inflow into the country from foreign investors. Nigeria continues to be number one investment destination because as others are leaving, others are coming,” Akabogu told The Nation.

    Experts also say that Nigeria’s pension fund, which stood at N6.02 trillion as at last November, is another viable option to build infrastructure. With the National Pension Commission (PenCom) projecting that the nation’s total pension asset may hit N20 trillion by 2020, this huge pool of funds is seen by not a few analysts as a better choice than Islamic finance.

    Yet, others have recommended the Public-Private Partnership (PPP) model for designing, building, financing and operating new and infrastructure.

  • Infrastructure: Govt should wear public sector, private entrepreneur caps, says Ovia

    Infrastructure: Govt should wear public sector, private entrepreneur caps, says Ovia

    The Nigerian Bar Association’s 2017 Annual General Conference, provided Jim Ovia, Chairman, Zenith Bank and Keynote Speaker at the event, an avid opportunity to address what arguably touched on the very kernel of what the nation needs to focus on to develop the economy – Infrastructure. If implemented, it may well be the elixir required to turn the nation’s fortune around, reports, Group Business Editor, SIMEON EBULU.

    Jim Ovia’s keynote address at the just concluded NBA Annual General Conference in Lagos, no doubt serves, not only as an agenda setting, but a schematic order of what should be government’s priority in its quest to improve, or better still, raise Nigerians’ standard of living. Ovia, the Chairman of Zenith Bank, in that presentation, brought to the fore the place of infrastructure, and how its provision can literarily transform the economy of a nation, given its overwhelming impact and multi-plier effect on other segments of the economy.

    For a start, following from Ovia’s presentation, he said “every one per cent of government funds spent on infrastructure leads to an equivalent one per cent increase in  Gross Domestic Product (GDP), underscoring the correlation between funding infrastructure and economic development of nations.’’ If this holds true for Nigeria, as it should, then this nation can as well determine from the onset, by how much it wants to grow her economy, by simply varying its quantum of infrastructural investment.

    And it is common knowledge how much infrastructural deficit Nigeria suffers. If it is roads, we have several thousand kilometres, across the six-geopolitical zones to attend to. If it is health infrastructure, there are countless number of hospitals, primary health centres  and several other health related facilities  calling for attention. Is it in power, or water, rail transportation, just name it, they are everywhere. It’s regretable that the nation is struggling with recession when there’s an exit window in infrastructure development.

     

    Attendant Pain in infrastructure deficit

    In drawing attention to this critical element in nations’ growth and development, Nigeria, not being an exception, Jim Ovia pointed out that poor infrastructure currently costs Nigeria N2.03trillion, or two per cent of GDP yearly, adding that insufficient infrastructure also represents a major cause of loss of quality of life, illness and death.” Ovia didn’t mince words  in his advocacy for the provision of adequate infrastructure, saying the lack of it impedes a nation’s economic growth and international competitiveness. He said infrastructure should be ranked above mere provision of services, “to a moral and economic imperative,” stating that in developing economies, where pointedly Nigeria belongs, “lack of infrastructure is a far more serious barrier to trade than tariffs.

    Given the scope and magnitude of the infrastructure deficit, the nation’s annual budgets will not be adequate to address the issue, Ovia stated. He posited that the Capital allocation in the 2017 Budget, (even when fully utilised), can address only 52 per cent of the annual requirement. He however listed  other sources of funding available to include, Development Finance Institutions (DFIs), Multilateral and Bilateral Organisations, such as the World Bank, Department For International Development (DFID), United States Agency For International Development (USAID), China and the United States. He said the Nigerian integrated infrastructure master plan (NIIMP) provides a roadmap to raise the country’s stock of infrastructure from the current 20-25 per cent of the GDP to an ideal   benchmark of 70 per cent by the year 2043.

     

    Financial Requirement

    Ovia said bridging the infrastructure gap and implementing the Nigeria integrated infrastructure master plan (NIIMP), will require an investment quotient of about $3trillion and will propably take about 26years from now up to 1943, to accomplish. He listed the salient areas to be addressed and the projected financial commitment as follows; Energy: $1trillion, Transport: $775billion, Agriculture, Water and Mining: $400billion, Housing: $350billion, ICT: $325billion, Social Infrastructure: $150billion and Vital Registration and Security: $50billion To achieve this, Ovia pointed out, Nigeria would need to increase investments in infrastructure to seven per cent of GDP annually until 2043

     

    ICT Infrastructure

    On the Information Communication Technology front, Ovia, drawing from the Nigerian Communication Commission data base, said the estimated number of Nigeria’s mobile subscribers was 143,064,490, as at June this year, saying that tele-density remained at 102.19 per cent, based on the 2006  official population census that put the Nigeria’s population figure at 140 million..

    He said: “There is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future. The scale of the technology and infrastructure that must be built is unprecedented, and we believe this is the most important problem we can focus on,” pointing out that the successful companies of the next decade will be the ones that use digital tools to reinvent the way they work.

     

    Challenges

    Ovia identified Limited access to funding, poor project preparation and planning, as well as weak procurement processes as being partly responsible for inadequate provision of infrastructure. In addition, he said, reconciling relatively shorter ‘political life cycles’ with often longer ‘infrastructure life cycles, has been an issue, given that successive political leadership will more often than not, tinker with projects inherited from their predecessors, either by delaying their execution, or in most cases abandoning them out rightly.  He also listed inadequate governance frameworks and lack of capacity, such as competence and experience, as some other hurdles militating against the provision of adequate  infrastructure.

     

    Funding Sources

    Reminiscent of government programmes, the Annual budgets, Ovia stated,  remain the main source of government funding. Although silent about the adequacy of the 31 per cent provision for Capital expenditure to total spending in the N7.44trillion 2017 budget, he nevertheless acknowledged that it was the highest in four years. He said Government’s Debt – such as Treasury Bills and Bonds, as well as other Government Controlled Sources, like the Sovereign Wealth Fund, Pension Funds and Public-Private Partnerships (PPPs), are additional sources of capital to fund infrastructure projects.

     

    Potential Sources of Infrastructure Financing

    The Zenith Bank chair also identified Pension funds, currently standing at over N6.5 trillion, Mutual funds of over N260 billion and International Development Association (IDA) grants of close to US$57billion, as potential sources of infrastructure financing.  Additionally, he said the government can leverage on the Insurance sector, Non- interest banking funds like ‘Sukuk’, the Sovereign wealth funds, Public-Private-Partnership (PPP) schemes and Exchange-Traded Fund (ETF) as other funding sources that can be tapped to drive infrastructure provision and funding.

     

    Financing Mechanisms for Infrastructure

    The Organisation for Economic Cooperation and Development (OECD), Ovia said, has listed other available Infrastructure financial instruments to include Bonds. These incorporate Project Bonds, Corporate bonds, Municipal/Sub-Sovereign and Green Bonds. Also listed are Loans-Direct/Co-Investment Lending to Infrastructure Project and Syndicated Project Loans. Inclusive are Hybrid (mixed), Subordinated Bonds, Convertible Bonds, Preferred Stock and Equity, Listed or Unlisted Infrastructure Equity Fund.

     

    Key Infrastructure Risks

    Ovia drew attention to what he tagged Legal Risks, such as agreements, saying that they must be taken into consideration in infrastructure provision transactions. He listed Contract Negotiations and Renegotiations, Enforceability of Contracts and Project Governance, as necessary ends that must be closed.

     

    Operational Risk

    Given his knack for details, the Zenith Bank chief said these underlying operational risks;  Lack of Technical Expertise, Inadequate Project Planning, Construction Delays and Cost Overruns, Default of Counterparty, Political and Regulatory Risks, Changes in Policies or Regulations, the Rule Of Law, Transparency/ Accountability, Sovereign Risk, as well as other exogenous, or Macroeconomic Risk, like inflation, Real Interest Rates and Exchange Rate Fluctuations and Currency Volatility should be given adequate attention.

     

    De-Risking Infrastructure

    To give comfort to those engaging in infrastructure provision and funding, Ovia offered the underlying reliefs, pointing out that there’s need to mobilise what he termed “the ‘Right’ Vehicle For Infrastructure Projects,” including strengthening the Judicial System to deal with Infrastructure Related Matters.

    He called for enabling streamlined, Transparent Processes For Better Project Selection and Planning.  He also stressed the need for Building Capacity through Stronger Technical Partnerships and Commitment to Knowledge Transfer, Developing and Implementing a Robust Long-Term Plan for Infrastructure Development, institutionalising and providing enabling Legal and Regulatory Frameworks.

    He said there’s need for provision of Legislative Clarity, especially as it relates to Public Procurement, Permits, Expropriation, Taxation, Litigation and Tariff Definition, in addition to establishing a creative Innovative Financing Instruments and Arrangements, including Exit options.

    Ovia said for Nigeria to de-risk various infrastructure projects, Government as initiator, must think as public sector on one hand, and have the mindset of a private sector entrepreneur in execution, so as to align with the profit motive of the private sector entrepreneur. Both parties, the public sector agent and private sector entrepreneur, he stressed, must think NIGERIA FIRST.

  • Strong infrastructure base critical to Africa’s economic transformation, says ECA official

    PrincipalRegional Adviser and Head of Development Planning and Statistics at the Economic Commission for Africa (ECA) Sylvian Boko has argued the need for a strong infrastructure base to critically transform the African continent’s economy.

    He spoke during ECA-sponsored session at the annual Nigerian Bar Association (NBA) conference in Lagos.

    Boko said it was imperative for the continent to create an enabling environment for investment in transboundary infrastructure projects that will change the lives of millions of ordinary people.

    He said the harmonisation of policies, laws, and regulations through the ECA’s Model Law on transboundary infrastructure projects, will go a long way in strengthening existing continental, regional, and national institutional capacity.

    He added there was also an urgent need for the ECA and its pan African partners to help develop the knowledge base of transboundary infrastructure projects and technical advisory capacity on such projects on the continent.

    “There’s also a critical need for capacity development,” he said, adding private perception of risk and uncertainty in the past may have been exacerbated by the disparity and lack of harmonization of the regulatory and legal frameworks governing transboundary infrastructure projects even if such projects are otherwise profitable.

    He said adequate infrastructure can accelerate Africa’s growth, adding the continent can actually fund its development priorities, especially infrastructure projects, with domestic resources.

    Boko said Africa, though still faced with the arduous task of mobilizing adequate resources to fund its own growth and transformation, it had the potential to do so.

    He said infrastructure can trigger development on the continent and eradicate inequalities across borders.

    “It is critical for the continent to have a competitive industrial sector and transboundary infrastructure to advance its integration thus promoting strong and sustained growth by reducing poverty; enhancing economic activity and competitiveness by reducing transportation cost; improving living standard by minimizing transaction costs of business,” he said.

    Boko said this would also raise productivity and promote economic competiveness and in the process assist governments in domestic resource mobilization.

    However, by and large, he said, the continent still lacks adequate infrastructure such as roads, railways, waterways and ICT to support its growing economies.

    Also on the panel were African Capacity Building Foundation (ACBF), Prof. Emmanuel Nnadozie; Akshai Foforia, a partner at Pinsent Mason Law Firm and Makane Mbengue, Professor of Law at the University of Geneva.

    They spoke on opportunities of the pan-African investment code, the African arbitration mechanism and funding of transboundary infrastructure projects, among other thing

  • Nigeria needs $40b for oil infrastructure

    No less than $40 billion would be required to fix infrastructural problems in the oil and gas sector, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has said

    The Minister, who spoke in the latest bulletin of the Organisation of Petroleum Exporting Countries (OPEC), said the money would be spent on fixing the infrastructural gap in the midstream and upstream segments of the oil and gas sector, adding that with this the industry would return to optimal level.

    He said of the amount, the country would spend $10 billion (N3.05 trillion) in the next three years to increase crude oil production from 2.2 million barrels per day (bpd) to three million bpd.

    Kachikwu said: “Nigeria’s normal production level is about 2.2 million bpd and the government would like to raise it to three million barrels per day. Just to get the fields online and cap them will require an average of about $10 billion per year in investments over the next three to four years.”

    He said international oil companies (IOCs) such as Shell and Agip had made some commitments in this regard to improve activities in the sector.

    He stated that there were also some dedicated projects in the Bonga oil field, noting that Italy’s Agip planned to spend about $10 billion, while Royal Dutch Shell hoped to spend $10 to $11 billion on the field.

    “We are fairly close to identifying dedicated investments upstream. Downstream is a challenge. We need to invest in our refineries. We need to do pipelines,” he added.

  • ECA: address infrastructure gap to boost intra-African trade

    The United Nations (UN) Economic Commission for Africa (ECA) has reiterated the need to address limited connectivity within Africa to boost intra-African trade.

    The body said this position at the just-concluded Aid for Trade Global Review at the World Trade Organisation (WTO) headquarters in Geneva, Switzerland, according to ECA’s statement.

    ECA Capacity Development Division Director, Mr.  Stephen Karingi, emphasised the need to boost intra-African trade, which currently stands at a mere 13 percent of the continent’s total trade.

    Karinga  canvassed  the need for African governments to do more to grow intra-African trade stressing  that Africa’s relatively low intra-regional trade is as a result of barriers created by limited connectivity within the continent. He called on leaders in the continent to think of physical connectivity and infrastructure where the gaps remain significant.

    He said: “We should consider softer aspects of connectivity. Non-tariff and tariff costs both influence how African countries can link with each other. Boosting intra-African trade is the most effective channel for trade to deliver development on the African continent adding deeper trade integration is the surest way to speed up Africa’s economic transformation. Policies to enhance intra-regional trade on the continent are crucial; strategies to implement, enforce and monitor their progress and impact are also needed”.

    He maintained  that trade contributes towards industrialisation and structural transformation and regretted that  Intra-African trade currently stands at a mere 13 percent of the continent’s total trade, which is very low.

    Higher volumes of intra-African trade are essential so African countries can do business with each other more frequently and with wider margins, Karingi added.

  • Kwara steps up infrastructure renewal

    Late last year, at the launch of Infrastructure Development Fund (IFK), Kwara State Governor Abdulfatah Ahmed promised to plug the about N255 billion infrastructure gap in the state. With some ongoing projects in Ilorin, the state capital, and some other local government areas, he is keeping to his promise.

    Worthy of mention are the ongoing work at the Geri Alimi Diamond Underpass and the operation light up Kwara. The cost of both has been put at N3.5 billion and N6 billion respectively. Operation light-up Kwara is on public-private partnership basis.

    Other ongoing projects include Chapel-Oke Odo-Bubu link Road, aimed at decongesting Tanke, University road, Pipeline and Awolowo, Offa Garage, and Tipper Garage roads. Others completed five km Offa- Irra rural road, eight km Erin Ile-Elemona-court road in Oyun local government area, Ipe township  and Ogbondoroko township roads.

    The opposition Peoples Democratic Party (PDP) and some other groups in the state have pilloried the underpass bridge and light-up projects, describing them as elitist and of no value to the common man on the street.

    During the launch of IFK, the governor said the state plans to achieve this through partnership with some banks, contractors, consultants and others.

    The state Governor Abdulfatah Ahmed said that the establishment of IF-K was informed by his desire to ensure rapid infrastructure growth and the need for an appropriate savings as well as investment mechanism.

    He added that in the next ten month, over N5.8 billion will be pumped into the state’s economy via IF-K.

    “Our expectation is that this injection will keep our project partners in business and have a positive spiral effect on employment generation. In the medium term, the remaining N5.3b of government spending will boost the state’s Gross Domestic Product (GDP) for about 18 months while sustaining the multiplier impact on job creation,” he said.

    Governor Ahmed added that he is not unaware of the state of “infrastructure in our state in recent times. I am not unaware of the situation. So let me give you this assurance.

    He said, “Following from the PPP, IF-K is the second phase of my government’s long term strategy to diversify our local economy, stimulate economic growth via private sector participation in infrastructure development and create opportunities for collective

    prosperity.

    “The purpose of the IF-K, therefore, is to pool funds for infrastructure projects, optimally leverage private sector resources for infrastructure development and channel State Internal Revenue to directly impact economic diversification and growth strategies. IF-K is also designed to ensure maximum quality assurance for asset and services procured by government and encourage broader and deeper interactions with the Kwara State government from private and non-private partners.

    “The fund will be financed through a N5billion seed fund and a N500 million monthly contribution from the state’s Internally Generated Revenue through an Irrevocable Standing Payment Order (ISPO). This implies that the money will be taken at source from the state’s Internally Generated Revenue and provides an additional layer of assurance to project partners. Additional non-IGR funds, such as those from the Federal Government and global development partners will be added to IF-K as they become available.

    “Under IF-K, funds will be disbursed on a quarterly basis, and are projected to grow by N6 billion by the end of the year. In order to ensure accountability, and insulate the funds from political control, the IF-K will be managed by a reputable investment company, Investment One, appointed as trustee for the scheme.

    “Investment One is also to market the fund to potential investors and mitigate against payment risks by ring-fencing the funds and limiting their utilisation to the approved purposes for which they have been earmarked.

    “In other words, the trustees are independent of the state government, and will only disburse funds upon the presentation of a certified certificate of completion and at agreed project milestones.

    “As an added measure to ensure quality standards, the certificate of completion is also subject to further authentication by an independent project inspector. IF-K is therefore not susceptible to interference from any other party. I must also emphasise that we will continue to fund smaller projects through other platforms as only projects worth N300 million and above will be included on the IF-K payment grid.

    Following the launch of IF-K the payment grid will commence in December, 2016 with all ongoing and new projects targeted for completion by December, 2018. Furthermore, the total value of ongoing project debts to be addressed through IF-K is estimated at about N11.1 billion.

    “As a demonstration of faith and a token of our commitment to pay all outstanding contractor debts, we have disbursed N1.7 billion to significantly reduce current debt to contractors. The balance to be paid from IF-K is estimated at N9.4 billion.

    “This amount will be reduced on a quarterly basis until all debts are finally liquidated before the end of the administration.

    Simultaneously, contractors will drop off the IF-K grid as their obligations are terminated to allow for the introduction of new portfolio of fresh projects.

    “Given the benefits of stable and reliable funding provided by IF-K, I state without any equivocation that the era of abandoned projects is over in Kwara state. As a demonstration of this determination, all ongoing and new projects will be funded to completion under the IFK before the end of my tenure. “In my second inaugural speech, I made a commitment to transform Kwara.

    On inspection tours of some of the project sites, the state Works Commissioner Alhaji Aro Yahaya assured that all ongoing projects would be completed before the expiration of the current administration in 2019. He ruled out insinuations in some quarters that projects would be abandoned, stressing that all projects funded under the Infrastructure Development Fund (IF-K) model would be carried to completion.

    Alhaji Yayah particularly allayed the general public’s fears about the completion of the Geri-Alimi Split Diamond Underpass, stressing that it will not be abandoned.