Bridging infrastructure development gaps in Nigeria
SUCCESSIVE governments in Nigeria have continued to battle with the onerous task of trying to bridge the wide infrastructural chasm that exists in every sector of the nation. This, no doubt, has contributed in no small measure to the inability of the Nigerian nation to harness the gains that come to a country endowed with so many natural resources, both human and material.
Against this background, managers of the nation’s economy initiated a blue print for accelerated infrastructural development, that provides the roadmap for building world class infrastructure that will enhance the quality of life of the citizenry and enable Nigeria to take advantage of the vast opportunities in domestic and global economies for sustained growth and development.
At a one day media workshop with the theme, ‘Towards Strategic and Sustainable Promotion/Marketing of the National Integrated Master Plan (NIIMP)’ in Abuja, organized by the National Planning Commission (NPC) in collaboration with The Infrastructure Bank PLC, the Planning Minister, Suleiman Abubakar, said the approval of the long term development framework by President Goodluck Jonathan was the beginning of “the journey of re-defining our national fortunes and repositioning our self-worth as a nation.”
He said that the approval of the Federal Executive Council (FEC) that followed the 30 year plan “became the blueprint for accelerated infrastructure development in Nigeria, and indeed the springboard that launched the entire continent of Africa to greater height.
He explained that, “in pursuance of the ideal of sustainable development, the present administration adopted and integrated all inclusive approach to infrastructure delivery, as practised in some other industrialized nations, to systematically facilitate and promote economic growth and development.”
Abubakar, who was represented at the event by the Acting Secretary to the Commission, Bassey Akpanyung, said that “the best of infrastructure development plans in Nigeria are the legacies of all the National Plans which terminated about middle of 1980s.”
The prospects of this long-term development plan are enormous, as building on the rebased Gross Domestic Product (GDP) within the first five years would yield positive dividend. It promises to review the current infrastructure investment stock that will be increased annually from $15.9 billion (about N2.86 trillion based on current exchange rate) in 2014 to $51.1 billion (N9.2 trillion) in 2018, representing an average of $33 billion (N5.95) trillion annually.
In this first period of the plan, priority will be given to investments in energy with an expected growth of 50 per cent, Transport 39 per cent, Social infrastructure 32 per cent and housing 23 per cent, “due to their current relative level of under investment.” Investment will also be done in other sectors, but in the first period, it will be at lower growth rate.
In the first five years of the plan, the projected investment required in the different subsectors, according to the NPC, will not be less than $60 billion in Energy, $51 billion in Transport, $22 billion in Information and Communication Technology (ICT), $18 billion in Agriculture, water and mining, $7 billion in Social Infrastructure, $5 billion in Housing and $2.5 billion in vital registration and Security “at constant 2010 prices.”
NIIMP concept provides a framework for investment and allocation for the six geo-political zones in accordance with the socio-economic priorities of each zone in the country.
“Based on assessment, the investment requirement across the regions is North West $481 billion, North East $316 billion, North Central $482 billion, South East $419 billion and South-South $585 billion.”
A total investment target of $3.0 trillion over the 30 years from 2014 to 2043 is projected, with 33 per cent (about $1trillion) going to deals in energy, 25 per cent (about $775billion) set aside for Transport, while 14 per cent ($400billion) will go to Agriculture, Water and Mining.
Others are 11 per cent (about $350billion) for Housing and Regional Development, ICT will take $325billion (about 11per cent also), a total of 5 per cent ($150billion) is set aside for Social Infrastructure and Vital Registration and Security will take the remaining 2 per cent, representing $50 billion of the total amount at constant 2010 prices.
The active participation of the private sector is also required to drive home the desired results. Hakeem Olopade, the Executive Director- Projects of The Infrastructure Bank, said the adoption of the NIIMP policy “implies Nigeria has fully embraced the philosophy of attracting private sector investments to rapidly catalyze sustainable infrastructure development.”
“We stand ready, willing and able to support the development and implementation of any viable infrastructure projects wherever the need arises in Nigeria, but it must be premised on the knowledge that the imperative is for the private sector to identify implementable policies and programmes that will attract and marshal private capital, on a large scale, towards the development of Nigeria,” he said.
He point out the fact that for a project such as this to receive the desired attention of the private sector, minimum standards that border on legal comprehensiveness and the appropriate regulatory framework, the assurance of financial viability and the sustainability of the transaction structure, must be met.
“The foremost consideration for private sector investors to demand for a comprehensive legal, institutional or regulatory framework stems from the recognition of the political risks associated with financing public infrastructure, in the form of change in government policy, termination of administrations among others.”
Olopade posited that, “where even the legal framework exists for a particular sector, the next consideration would be the project’s ability to generate sustainable revenue over the entire project lifecycle typically ranging from 10 – 50 years, considering the long-term nature of infrastructure project, because an enduring infrastructure project must demonstrate that it will generate sufficient cash inflows to cover cost regime for operations and maintenance of the asset, alongside offset loans repayments to lenders, and provide financial returns to equity investors commensurate with their expected returns on investment and risk borne.
“Similarly,” he continued, “the robustness and sustainability of the transaction structure, is hinged on who the grantors, project developers, equity investors, guarantors, lenders and Regulator are, what the relationships and obligations borne by the key parties to the transaction, as defined by the contractual framework and how the key partiers in the transaction are selected, how the various components in the transaction are brought together and of course funding sources that are to be used for the project.”
He reiterated that these are necessary conditions for attracting private capital, to finance the development of infrastructure anywhere in the world and the actualization of NIIMP in particular in Nigeria.
While outlining the funding options that are there in a project, Olopade said development financial institutions, using the credit facility available, could support the project through the World Bank (WB) and others, as well as, funds from the contractual saving sector like the Pension funds Insurance Companies among other, since they are particularly “suited to infrastructure projects financing, because their long term nature directly matched the financial profile of infrastructure projects.
Other sources fingered are the dept capital market instrument with financial instruments like bonds, tradable instruments in a rapidly increasing derivative market “which are sources of private capital to the infrastructure sector.
The long-term tenure of bonds instrument and the stability of repayment profile are key factors that make such capital market instruments ideal for financing infrastructure projects.” The recent rise in bond issuance scheme in Nigeria is indicative of the growing importance of bond as a financing mechanism for the private sector.
“And of course the establishment of special intervention fund which are found to provide the needed impetus to drive reforms in critical sectors of the economy,” Olopade said.
Furthermore, there is no gain saying that the plan is well articulated, but like in most of such framework in Nigeria, implementation is usually the jeopardy. This apprehension is as expressed as the concept document itself. But the assurance is that it is achievable, considering the commitment demonstrated by government and the attendant benefits it holds for the expansion of the Public Private Partnership enterprise.
The Head of the Infrastructure Delivery Coordination Unit (IDCU) at the NPC, David Adeosun, at the workshop, titled said that the existence of infrastructure gaps in Nigeria is not in doubt, so the “NIIMP concept is crafted to bridge the gaps, even though well articulated Development plans and strategy have never been a problem in Nigeria, implementation remains a serious challenge.”
He restated that the establishment of the IDCU “is the right step in the right direction as it is a radical departure from the status quo where such brilliant blueprints do not see the light of day, because NIIMP encompasses a robust implementation framework that recognizes and accords priority to monitoring and evaluation (M&E).”
This recognition, among others, rationalized the creation of the unit in the first place, as the need to put in place the appropriate institutional framework to effect its realization became imperative.
NIIMP does not only require coordinating the multi-sectoral stakeholders, regulation and operation, the project needs to be properly managed by setting up the agenda, targets and milestones, tracking implementation, assessing impact, regular review and of course modification where necessary.
NPC has the statutory mandate of coordination of Policies, plans and programmes across the tiers of government, the fact that integrated infrastructure development requires effective coordination and the need to link infrastructure development with other sectoral strategies and plans, the creation of the IDCU is most desirable.
This unit has the major function of monitoring and evaluating the master plan by generating baseline data and information, identifying areas that require intervention, collecting, collating and processing data on NIIMP.
It ensures programme management and development by not only giving recommendations on how to overcome bottlenecks, but also promotes execution and adjustments to objectives where necessary.
Other functions of the unit are communication, public awareness creation, and capability building through provision of technical assistance in portfolio management; assess needs and building related initiatives.
It also supports high priority projects by facilitating the mobilization of funds to finance projects and attracting private sector market investment through identifying, packaging and marketing projects for private sector investment through Public Private Partnership (PPP).
Whilst agreeing that infrastructure gaps exist in Nigeria, the vital requirements to fill them up cannot be overstressed. But the most visible obstructions that require immediate attention are, among others, the absence of legal frameworks that would allow private sector participation in infrastructure development in Nigeria, alongside bringing on board a far-reaching communication strategy to reach all stakeholders. These would form the bases for effective implementation.
It is imperative to say that the states are expected to develop States Integrated Infrastructure Master Plans (SIIMPs) centred on their individual priorities in line with the NIIMP. Besides that, states would be part of the 52 per cent public sector contribution to the project, the need to create a supporting environment with stable government policies, rule and regulations, is essential to the success of the project, as constructing infrastructure projects across the geo-political zones and linking different sectors hold a lot of potentials to economic growth.