As Nigeria’s projected infrastructure deficit is set to hit $878 billion by 2040, it is time to explore available options to close the yawning gap. This is ostensible because the country’s economic development and the welfare of the people, rests on adequate infrastructure.
Indeed, Nigeria’s infrastructure deficit 20-25 per cent of the GDP, compared to 70 per cent for more advanced middle-income countries of similar size. This will require $15bn (N4.59tn at N306 to a dollar) worth of investments annually for 15 years, according to analysts firm, Financial Derivatives Company (FDC), led by Bismarck Rewane. Indeed the average $5 billion spent by the FG on infrastructure since 2017 is $10 billion short of the estimated sum required per annum.
The obvious implication of poor infrastructure, FDC says is to drive up the cost of doing business and impairing both local and foreign businesses, perpetually hindering economic progress. It is therefore imperative that Nigeria’s infrastructure is upgraded from the current jaundiced level.
The next step after realising the urgent need for infrastructure development is to find the funding. The first option is to take another look at the annual budget allocation to capital project and to significantly improve it from the current 42 percent. In addition to that, government can prune the current waste from bogus allowances and impracticable projects and channels these to workable infrastructure.
If we must take lessons from Dubai (UAE), arguably an emerging city with the most advanced physical infrastructure. The Gulf state applied a combination of financing sources including debt financing from local lenders like Local banks and giant corporations like Emirates NBD, National Bank of Dubai (NBAD) and First GulfBank, the third largest bank in Dubai. This apart from tapping into its oil and gas earnings.
Dubai also explored sukuk bonds and contractor financing. In this type of financing, a project’s builders fund elements of its construction and are paid over stages after its completion when the project begins to generate income; the Dubai Canal was built with this kind of financing. This is similar to Build Operate and Transfer (BOT) contracts in Nigeria.
In addition to the above, and as recommended by the Nigerian Securities and Exchange Commission (SEC), is the floating of Green Bonds for infrastructure purposes. A green bond is a bond specifically earmarked to be used for climate and environmental projects. These bonds are typically asset-linked and backed by the issuer’s balance sheet, and are also referred to as climate bonds. This, along with the prescriptions from Dubai presupposes that infrastructural development is not entirely a government thing but also requires private sector participation. In order to encourage the private sector, government must visit the conduciveness of the fiscal environment like the ease of doing business and further improve on investment laws and property rights among other laws that encourage investments including repatriation of funds by international investors.
That said, we urge government to look into the activities of the Bank of Infrastructure with a view to empowering it to be more effective in carrying out its mandate of facilitating infrastructural development in the country. It is our belief that once these prescriptions are followed with a strong political will; the country will be able to boast of solid infrastructure in the not too distant future.