Local gas reserves capable of industrialising Nigeria – Abazie
How far can oil/gas revenue go in addressing Nigeria’s infrastructural deficit?
The sole reliance on oil and gas revenue by the country for meeting all its needs has not served us well over time; in fact, if you balance the nation’s oil and gas wealth against its total population, we cannot be said to be oil and gas rich.
But even at that, with our present circumstance, our gas sector can still be developed further as there are more potential in our gas sector which we are yet to develop effectively.
There are reasonable opportunities to maximise our revenue from there, and from the whole hydro carbon chain, by removing impediments to investment, which we have not done.
This will help the nations revenue stream, and there is no doubt about that.
But even then, the government lacks the capacity to make any meaningfully investment in infrastructural capacity without relying heavily on debt funding.
This is because currently, we are finding it difficult to cover our current expenditure or provide necessary funding for our security challenges.
We cannot say that the oil revenue will continue to provide us with necessary leverage to develop our infrastructure.
It has not that in the past, so the option we need now is to open that sector up for private investment by putting together investment packages and economic architecture that makes it attractive.
We are relying so much on debt funding and that is a difficult approach because we are increasing the debt servicing burden of the government.
It can only whittle down the capacity of government going forward, to even meet its recurrent expenditure.
We need to look at other economic models for doing this without over burdening the nation with debts.
On the other hand, can the country really depend on its solid mineral deposits?
Prior to the oil boom, solid minerals contributed hugely to the economy and provided revenue for infrastructural development.
But since the discovery of oil, the whole dynamics changed, the sector was neglected.
A lot of things have changed now; it will require a lot of investment.
We need to put structures in place to make the sector attractive to investors. We need to give the sectors the required attention.
First, I don’t think that the sector has been positioned to make that kind of impact or provide that kind of revenue that we are looking at to be able to fund infrastructural development. It’s still a long way to go.
What must Nigeria do infrastructure-wise to reap the dividend of its vast population?
It’s widely recognised and well understood by all development economists that availability of quality infrastructure can directly raise the productivity of human and technical capital.
Now, access to roads, improved education, market for farmers’ output, energy, among others, facilitate private investment and improve jobs and income levels.
The investment of government in infrastructure activates the economy, when the economy is starved of infrastructure, human development is retarded, physical capital cannot be attracted into the economy.
Nigeria or any other country in our situation, should put together a financial and business model for massive infrastructural development; there is no alternative to that.
A public-private partnership has been found to be the most effective model for doing this, as the model aligns micro economic goals of the government with the profit motives of the private sector, and with that, we can drive infrastructural development.
Energy for instance, is an input in any of the other infrastructural subsectors, and so have a very high social impact, we cannot intake any meaningful growth or improve income level or job creation in the economy without fixing the energy supply and that is how it works and affects all other sectors of the infrastructural layout.
If Nigeria must develop critical developmental infrastructure, how long will it take the country to make the needed headway?
It is not feasible to put a time frame to doing that because there are so many deciding factors at play to determine the infrastructural investment growth of the nation in the first place.
In our own case the dynamics is a bit complex; we need to gauge the political and institutional capacity and design a medium and long term strategy, and the strategy formulation is something that we must get right or we have always gotten right as a nation, but the execution of the blue print is a problem.
So, it’s all about the political will and institutional capacity; even when the political will is there, do we have the institutional capacity to do?
If these two things are not aligned, we cannot be able to put a time frame as it is a project execution issue that starts with policy formulation which is determined by the political will to do that.
When you get that right, then the execution process, its efficiency and effectiveness is again determined by the institutional capacity to do that.
All these are things that you can’t measure or put a figure to in our nation today, but we just have to get started.
Most of the times we do a lot of blueprints, design strategies, but when we get to execution, we fail.
Again, the country needs to get started, but to put a time frame is not feasible at the moment
How far can Nigeria go leveraging the public-private partnership model in this quest for development?
When we talk about public-private partnership, we are looking at the government partnering with the private sector to create a transparent and sustainable model that is not susceptible to the political fabrics of the nation.
The government can take a fund, for instance, set up a management for it, invest or provide its own contributions into that fund, determine the areas it wants to intervene on infrastructure-wise , and design investment packages that will be attractive to private investors.
From that fund the government can provide some percentage of capital requirements of specific investment listed, create an investment vehicle for that purpose, so that private investors will subscribe to it and partner with government.
The goal of private investors is to make profit, the goal of government is to provide infrastructures that will activate growth in the economy.
So, the alignment of these two goals and objectives creates a business case – if the government provides 30 per cent and private investors provide 70 per cent, for instance, and investment is made, that business takes off, the government can also divest and commit the recovered resources into similar ventures of this nature.
What is expected of a feasible business model is profit potential, as the world is awash of such investments by foreign investors, institutions and local investors.
That is one model that can be used and the risk perception of investors will be reduced as a result of government presence and necessary guarantees arising from them
In your view, is Nigeria’s gas resource underutilised?
Presently we are still flaring gas, and this is because a lot of proposed projects for harnessing this gas are yet to take off for various technical reasons – some arising from legal constraints.
If these constraints can be removed and the projects take off, there are various use of gas apart from the use as a source of energy, which is in high demand globally, gas is also feed-stock for a lot of industrial manufacturing activities including fertilizer production, plastic raw materials production.
The gas resources we have is capable of providing an impetus to a complete industrial sector capable of supporting the entire economic needs of the nation.
Countries like Iraq, United States, Russia, are investing heavily in this area and pushing to leverage on the global interest on gas because it is a clean energy, and most nations of the world that want to clean up their environment, especially in Asia, are looking in that direction.
So, the demand is high, and we have a responsibility to develop and leverage on it while the market is there.
What do you think are the real implications of the late passage of the 2018 budget?
Government expenditure is the major driver of economic activities in the country; so, delay in the investment funds arising from late passage of the budget will reduce industrial activities and have negative impacts on all sectors of the economy like failure to attain economic goals like growth targets.
The delay in passage and implementation of the budget can cause huge economic decline.
So, the non expenditure on the government development agenda or its delay in passage of budget or disbursing the necessary fund into the economy, will affect project execution, infrastructural development projects will suffer, contractors who work in this sector will be out of job, unemployment level will increase, economy will be denied the multiplicity effect of the government expenditure, and this will worsen all economic indicators.
Which sectors of the economy do you think will be worst hit by this delay?
Virtually all sectors will be affected because if you observe over time, we have been experiencing delays in the passage of the budget and it has become a normal thing in the country.
So, we don’t ever get our budget passed in the first quarter, that is our budget implementation does not start in the first quarter of the year.
If you look at the performance of virtually all companies in the stock exchange, you will find out that in the first two quarters of the year, the performance is always poor.
The second two quarters of the year is when economic activities begin to pick up.
That is because the budget implementation begins in the third quarter.
So, the moment the economy is starved of the financial flow that comes from government expenditure, it affects everything in the system because the macroeconomic system determines what happens in the micro.
Once something goes wrong in that sector, every other sector suffers.
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