Lamentation by the Transportation Minister, Rotimi Amaechi, on the paucity of funds for critical infrastructure projects exposes our poor public finance management skills and our penchant for misplacing priorities. His revelation that only 16.55 per cent of the N192.2 billion earmarked for rail and other key projects in the 2017 budget for the transport sector had been released by the second week of December means that all his grand plans for rail lines will not materialise anytime soon. The Federal Government should adopt the more practical option of liberalising the sector to pave the way for private capital infusion.
Questioned by the Senate Committee on Land Transport on the ministry’s 2018 spending plans, Amaechi disclosed that even from the paltry sum released from the capital vote, only N20.82 billion had been spent by November. For a ministry that had committed itself to multi-billion naira rail, ports and aviation projects, this is alarming. There are the $1.5 billion Lagos-Ibadan rail line; Itakpe-Ajaokuta-Warri line; Kano-Kaduna line; Port Harcourt-Calabar line; a second runway at the Nnamdi Azikiwe International Airport; dredging and construction of the Calabar Port, and projects at the Nigerian Institute of Transport Technology and the Nigeria Inland Waterways Authority, among others.
Indeed, the minister says that Nigeria needs at least $36 billion for its rail projects alone. To accomplish its grand designs embedded in the dusted-up 25-year railway master plan, the government has stepped up the borrowing binge that leaves the country at the mercy of the Chinese who are providing the bulk of the loans, as well as executing most of the rail projects as contractors. The failure of the government to provide counterpart funding over the years has led to project delays and abandoned infrastructure. President Muhammadu Buhari has ordered the ministry to connect all the 36 states and the Federal Capital Territory by rail without identifying where the funds will come from.
The problem is not in dreaming big; rather, the failure of successive Nigerian governments in delivering functional infrastructure lies in misplacing spending priorities, wrong strategies, direct involvement in commercial activities and inhibition of private capital and investment. Nigeria cannot fully realise its economic potential or provide for its rising population until it unleashes private capital. It is a lesson repeatedly drummed into the ears of our policymakers by development agencies, but which is tenaciously resisted. The reality is that the government alone simply cannot muster the funds to execute infrastructure projects. Even the oil-rich Gulf Arab states have latched on to this, opening up key infrastructure sub-sectors to foreign capital. UNDP estimates that Nigeria needs $20 billion annually for 10 unbroken years to bridge the yawning infrastructure deficit. The Council of Registered Engineers of Nigeria said that up to N3 trillion would be required to address the country’s road infrastructure deficit. Nigeria will struggle to raise its 80 per cent component of the $5.79 billion 3,050-megawatt Mambilla Power Project agreement it recently signed with the Chinese. Of the $5.5 billion the government is about to borrow, $3 billion is to fund debt. A panel report in 2011 discovered 11,866 abandoned infrastructure littered nationwide and would require over N7 trillion to complete.
We should change our errant ways: with annual budget of $26 billion, and only 30 per cent earmarked for capital, government cannot fund infrastructure alone. Yet, we need to catch up and surpass Egypt’s 6,700 kilometres of rail tracks and strive for South Africa’s 31,000 km; Nigeria has a paltry 3,505 route km. Massive local and foreign direct investments are therefore urgently needed to finance projects and free funds for the most critical. The argument for liberalising is compelling: it frees public funds for education, health, roads, sanitation, research, water supply and security. Instead of the massive spending and borrowing for rail projects, government should restrict itself to building institutional regulatory framework, support and policy direction. In Germany, the Deutsch Bahn, though state-owned, is an arms-length (free of government interference) private limited liability company that dominates the 33,331 km of tracks in the country. The United Kingdom’s liberalised railway system is driven by Network Rail, also an arms-length public body, manages rail infrastructure and concessions sections and activities to Train Operating Companies.
The N311 billion the government expects from the sale of assets to partly fund the 2018 budget would be trillions of naira if only it embarks on a massive, transparent and targeted privatisation drive. Our collective folly is evident in the determination of the Nigerian National Petroleum Corporation to waste $1.8 billion on another fraudulent Turnaround Maintenance of its four loss-making refineries. Buhari, like his predecessors, does not see the wisdom in selling them off and liberalising the space for more private operators to move into the downstream oil sector. His administration is also still bent on concessioning the massive Ajaokuta Steel Company instead of outright sale despite three similar serial disastrous transactions.
To avoid adding to the national load of abandoned and uncompleted projects, we should return to precise, rational budgeting, while allowing private capital free rein. Apart from outright transparent asset sales, the Public Private Partnership option, identified by the International Monetary Fund as offering a unique infrastructure funding window for emerging economies, should be vigorously pursued. PwC, the global consultancy, forecasts PPP growing in emerging markets and playing a leading role in infrastructure provision.
Our budgeting must be tied also to realistic income projections, while priority should be given to capital vote funding. There should be drastic reduction in the cost of governance, through reduction in the bureaucracy and drastic cuts in the perfidious luxury that officials have become accustomed to at public expense.
