FG to leverage private capital for infrastructure financing
Minister of Finance, Budget, and National Planning, Dr. Zainab Ahmed, said the Road Infrastructure Tax Credit Scheme (RITCS) is a sustainable innovative approach to financing road transport infrastructure, by utilising private sector expertise and capital.
Ahmed, who spoke at a two-day national conference on transportation infrastructure development financing, organised by the Nigeria Institute of Transport Technology (NITT), said a hybrid approach to transport infrastructure financing allows government to deepen domestic capital market through the issuance of medium to long-term debt instruments that allow citizens and institutional investors to take a stake in the future growth of the economy.
She said the issuance of Eurobonds targeted at infrastructure spending allows the government to raise foreign exchange at market-determined rates but also registers Nigeria as a viable investment destination for foreign investors.
According to her, multilateral and bilateral partners not only provide financing in grant or concessional form but offer valuable technical assistance and know-how, which enables the government to build world class infrastructure at low cost.
These approaches, she said, demonstrate the unique positive externalities generated from each financing source and represent the means by which the stress of transport infrastructure financing on the fiscus can be alleviated.
Besides, she mentioned that construction has commenced on four road projects undertaken by three corporate investors with more underway for construction in the near term. The COVID-19 pandemic impeded the rollout of the scheme; however, work has gathered pace with the economic recovery.
One of the projects include the Apapa-Oshodi-Oworonshoki-Ojota road in Lagos State, which is 34 km long and being re-constructed by Dangote Industries Limited (DIL). The road, according to her, is 63 per cent complete and is expected to be completed in 2022 among others.
“As the implementation of the scheme matures, we are working with the relevant government agencies such as the Securities and Exchange Commission to allow holders of the RITCS certificate to register and trade it as a financial instrument on relevant securities exchanges as per the Executive Order. This gives the added benefit of deepening the domestic capital market while building our country’s infrastructure stock.
“I strongly believe that infrastructure financing delivered solely by the public sector is a thing of the past and the success of this Scheme will pave the way for further initiatives which create opportunities for PPP arrangements using both domestic and foreign capital in a sector critical to the growth of the Nigerian economy,” she said.
Minister of Works and Housing, Babatunde Fashola, said road transportation accounts for 95 per cent of all freight and passenger movement in Nigeria, making it a strategic economic tool for economic growth and prosperity.
Fashola said the provision of road infrastructure entails the construction and maintenance of roads and bridges. This generates the need for labour, equipment, plant and diverse matters to deliver cost-efficient durable roads and bridges.
However, he said the National Tolling Policy, recently ratified by the Federal Executive Council (FEC), will generate opportunities for investors to encourage more investment and diversification of economic activity to outlying areas that are currently closed off by poor access.
He added that it would improve roadside facilities and services with provision of toll infrastructure (hard and softwares); and employment with an accompanying skill acquisition and training needs.
In his remarks, Director General and Chief Executive NITT, Bayero Salih-Farah, said logistics and transportation contributes below five per cent of the Gross Domestic Product. It is, therefore, not out of place to say that the transport sector in Nigeria is not contributing enough to the economic development and growth.
However, he said given the current economic realities, where the government’s sources of funding are being threatened by unstable oil revenues and myriads of other challenges, there is the need to address the nation’s problem of funding transport infrastructure development head on.
Salih-Farah said with the current concerted efforts of the present administration toward providing and revamping existing transportation infrastructure and the expected private sector participation, things will change for the better in no distant future.
He mentioned that tax credits for work done till date have been issued to the investors by the Federal Inland Revenue Service (FIRS), following validation by the Technical Committee of the RITCS.
No comments yet