Nigeria’s critical infrastructure deficit and under-investment came once more into sharp focus at the Senate confirmation screening for ministerial nominees where the option of bonds was strongly canvassed by Babatunde Fashola. The returning minister, who ran the “super” Power, Works and Housing ministry in President Muhammadu Buhari’s first term, believes that, in the face of scarce resources, salvation lies in raising bonds to bridge the country’s chronic infrastructure gap. This is one route the government should vigorously pursue, that, combined with an equally robust programme of divestment, liberalisation and magnetising foreign investment, will lift the country from the pit.
Fashola was characteristically forthright as he faced senators: he admitted that the government was not able to deliver much due to poor funding of infrastructure and failure to prioritise projects. He said that the paucity of funding hampered efforts to execute projects. He drew attention to the reality of deficit budgets over the past four years to underscore the precarious position of government revenues. Nigerians are definitely not impressed by the meagre strides this administration claims, such as having “at least, one federal road project in each state of the federation,” intervention in road works in 14 federal universities, and housing projects in 34 of the 36 states. For a country adjudged by the African Development Bank to require $3 trillion investment in infrastructure between now and 2040, this is simply miserable.
Fashola’s proposal for a N10 trillion infrastructure bond is a sound, but long-overdue measure. It has been suggested over the years and some state governments, with Lagos leading the way, have demonstrated its efficacy. We align strongly with this option as one of several initiatives to provide infrastructure, stimulate productive activities, create jobs and expand public revenues. It should, however, be accompanied by an urgent, transparent privatisation of all state-owned commercial assets, liberalisation, and improvement in the ease of doing business, a drastic cut in the cost of governance and vigorous, disciplined implementation of economic stimulation policies. Infrastructure bonds are borrowings to be invested in government-funded infrastructure projects. They are issued by governments or government authorised infrastructure companies or Non-Bank Financial Institutions. The World Bank reports a combined funding gap of $1.3 trillion in some emerging economies and recommends bonds, PPP, concessions and increased private sector investment to close it. The United States Government Accounting Board also identifies infrastructure “as the foundation for economic growth and development,” where the federal, states and local governments share responsibility for the building and maintenance of infrastructure.
Yes, funds are scarce, but the Federal Government gets it all wrong by attempting to fund all infrastructure projects alone: not even the world’s richest countries, including China, with its $3 trillion foreign reserves, Norway, with an over $1 trillion Sovereign Wealth Fund nest or Saudi Arabia, awash in petrodollars, still opt for such a foolhardy choice. The wise course of action is for the government to free itself and resources from expenditure on what private capital can do best, or in partnership with government, and more efficiently, while husbanding its resources for highways, dams, health care, education and research. While the four state-owned refineries have been running losses and operating epileptically at great cost to the country, construction of the $12 billion 650,000 barrels per day Dangote Refinery is moving steadily ahead. The Nigerian government, on the other hand, has wasted three decades flip-flopping over rehabilitating or selling the comatose refineries, even as refined petrol imports rose by 15.2 per cent to 5.61 billion litres in the second quarter of this year. The government makes losers of us all when it goes borrowing at a furious pace from China to single-handedly fund railway projects, ports and airports and by middling budgetary allocations that are too meagre to see projects through, while providing the agreed counterpart funding is a perennial problem. This results in uncompleted, abandoned projects across the country — 11,886 projects requiring over N7 trillion to complete were identified in 2011. These, according to the Chartered Institute of Project Management of Nigeria, have risen to 56,000 projects valued at N12 trillion. Yet, infrastructure development benefits, says the UNDP, include job creation and increased wages, stimulating rural economic growth and helping to reduce poverty.
The World Bank’s Public Infrastructure Database shows that the transport sector attracted 39 per cent of private investment globally in 2017, mostly in rail and highway projects, especially in Asia. To address its infrastructure deficit, India began liberalising its economy in the 1990s, enabling it to double infrastructure investment in the 2007-12 Five-Year Development to $500 billion, with private capital rising from the 22 per cent recorded in 2002-07 to 37 per cent, “a three-fold increase in absolute terms,” according to the World Economic Forum. This greatly boosted provision of power, highways, ports, airports and railways in the Asian country. While continuing to provide most of the funding, India adopted a mix of Public Private Partnership, private investment and credit with a 30:70 ratio of equity and debt. It also set up a special purpose vehicle that supports PPP projects with 40 per cent of the funding to ensure even spread of infrastructure.
Prioritising is crucial: ours is a country where political considerations over-rule the economic, such that the access roads and rail links to the Apapa ports that generate over N1.5 trillion in revenue to the three tiers of government and generate hundreds of jobs do not rate high on the priority list of a government that nevertheless borrows for rail and highway projects located in economically insignificant areas. Launched in 2014, the Egyptian government expanded the Suez Canal funded by a special bond and pursued it to its logical conclusion by the resolute Abdel Fatah el-Sisi government.
Adopting multiple funding options, Buhari should follow this path, privatise state enterprises, reduce and cut down the cost of governance, open up the rail, ports, airports and downstream petroleum sectors, then identify and resolutely reconstruct and build critical infrastructure with economic viability as the major benchmark.