Those in the know have welcomed the coming on stream of the Infrastructure Funds, as it will leapfrog infrastructure development in the country if properly managed. CHIDI UGWU writes
It was in January 2021, that President Muhammadu Buhari, while delivering a speech during the opening session of the 26th Nigerian Economic Summit Group (NESG) conference in Abuja disclosed the government’s plans to float a N15 trillion-infrastructure fund.
Represented by Vice President Yemi Osinbajo, at the occasion which held virtually, President Buhari had stated: “I am pleased to inform you in this regard that we are working actively with the Central Bank of Nigeria (CBN), Nigerian Sovereign Wealth Investment Authority (NSWIA) and the state governments under the auspices of the National Economic Council (NEC) to design and put in place a N15 trillion InfraCo Fund, which will be independently managed.”
Just last month, Governor of the CBN, Godwin Emefiele gave further insights when he explained that the apex bank, African Finance Corporation and the Nigerian Sovereign Investment Authority would debut an InfraCorp Plc, providing a fund of N15 trillion to address the lingering deficits in infrastructure.
Emefiele had said the N15 trillion fund; coming as InfraCorp Plc and expected to be launched this October, would enable the use of “mostly private capital to support infrastructure investment that will have a multiplier effect on growth across critical sectors.
Recall that for the Federal Government’s Economic Recovery and Growth Plan, Nigeria needs $30 trillion in the next 30 years to develop the nation’s infrastructure to the level that is required to serve the country. However, as the launch of the InfraCorp Plc draws near, stakeholders across key sectors of the Nigerian economy have insisted that a N15 trillion-infrastructure fund designed by the CBN could be the most sustainable approach to bridging infrastructure deficit in the country.
With inflation hovering around 17.33 per cent as unemployment stands at over 33.3 per cent while rising debt poses grave dangers, with improvement in infrastructure, the country may improve productivity and thereby improve quality of life. The development could in turn address growing poverty in the country, some economists agreed.
A Senior lecturer at the Ahmadu Bello University, Zaria, Prof. Muhammed Usman, had insisted that investment in infrastructure in the country is below par. The economist had said: “Infrastructural development plays a pivotal role in enhancing economic growth, improving living standards, reducing poverty, and contributing to environmental sustainability.”
Although stakeholders stressed the need for massive investment in infrastructure, noting the efforts but the CBN remained laudable; they insisted that there was need for proper and sustainable plans that would lead to projected goals.
A professor of Economics at Babcock University and former President, Chartered Institute of Bankers of Nigeria (CIBN), Segun Ajibola noted that several hundreds of thousands of road networks, rail lines, energy and power, water and others remained critical but sadly inadequate or dilapidated.
According to him, the deficits constrain the nation’s economy despite the growth in population, urbanisation and technological advancement, adding that the need for the provision of these essential infrastructures remains inevitable yet daunting.
“Hitherto, some reliance had been placed on other sovereigns such as China, international financial institutions, the World Bank, and ADB amongst others. But there is a limit to what Nigeria can attract from these countries and institutions because of the not too friendly conditionalities usually imposed on developing countries like Nigeria.
“Looking inwards in the manner being proposed by the CBN may be helpful. But then, the framework must be right. I will recommend a Private Partnering via collaborative arrangement between local and foreign interests adjudged competent in providing such infrastructures,” Ajibola emphasised.
He noted that PPP would improve on the quality of delivery, performance and accountability, noting that such interventions were expected to berth with relatively generous terms and business-like templates.
Ajibola urged the apex bank to introduce a framework for monitoring performance, which must be efficient and effective, adding that there must be a shift from seeing intervention funds as free public funds, adding that such mentality must be tackled head long if the infrastructural fund would achieve the desired goals.
Former President, Nigerian American Chamber of Commerce and Chairman of Tricontinental Group, Olabintan Famutimi noted that while the infrastructure deficits in the country remained worrisome and require intervention like the CBN funding, the country must tread wisely. He is concerned about channelling the fund into viable projects with economic benefits instead of politicising economic and business decisions.
“We have a huge infrastructure deficit. We need infrastructure but it is more about which infrastructure the government is working on, funding source and the conditions of the fund as well as the overall effect on the economy,” he said.
Famutimi insisted that raising funds to finance infrastructure is not enough but critical examining of the economic outlook of the projects and the multiplier effects on the nation remained sacrosanct.
An expert at PWC, Habeeb Jaiyeola, noted that while infrastructure funds are used across the world for the development of critical infrastructure, which guarantees constant returns on investment for investors, a critical element of the success of the funds remained adequate planning and strategic contracting.
“It is expected that the N15trn fund is channelled into critical infrastructure in the country that will open up sectors and markets as infrastructure challenges have been one of the major factors hindering the growth of some critical sectors in Nigeria,” Jaiyeola said. He noted that with several infrastructure initiatives already being conceptualised within various sectors, especially the gas infrastructure fund embedded within the newly signed PIA, the host community development fund also within the PIA, the N15trn infrastructure fund should be administered to complement and align with the plans and projects.
The proposed establishment will attract private sector participation in the nation’s quest to bridge its infrastructure deficit necessary for growth across all sectors of the economy. Named as the fund managers are Chapel Hill Denham, Triple A (consortium comprising Africa Plus partners, Arc Asset Management, and Afrinvest), Sanlam Infraworks and AIIM, a unit of South Africa’s Old Mutual Group while KPMG was appointed as the transaction advisers for the corporation.
Over the years, Nigeria has sustained a meagre allocation to funding infrastructure in its annual budget despite its pronounced infrastructural gap that has become a clog in the wheel of economic growth and development. Nigeria’s growing infrastructure deficit remains a major concern among economic experts and stakeholders, as poor infrastructure is one of the biggest impediments to smooth business operations and capital inflows into the country.
The paucity of investment in physical and social infrastructure over the years has continued to limit the growth potential of Africa’s largest economy, restricting its ability to exploit its vast amount of natural and human resources towards achieving a broad-based, sustainable and inclusive growth. According to Moody’s, Nigeria would need more than US$3.00trn over the next 30 years to finance its infrastructural deficit.