Nigeria needs to invest a little over N875 trillion Naira ($2.5 trillion) within the next two and half decades in infrastructural development if she is to be at par with her rapidly growing population and urbanization.
Averagely, the country will need an investment of N35 trillion for each of the years between now and 2043 to grow current infrastructure stock from 30% of the GDP to at least 70%, under the Nigeria National Integrated Infrastructure Master Plan (NIIMP).
It was estimated that the country needed $3 trillion (N1.05 quadrillion) between 2014 and 2043, but with five years within the target period – 2014 and 2019 – already gone, nothing near the required N17.5 trillion for that period was invested in infrastructure by the three tiers of government and non-government sources.
The country’s aspiration and infrastructure target for 30 years (2014-2043) is aimed at increasing the current infrastructure stock from 30% of the GDP to at least 70% by the year 2043, Zainab S. Ahmed, Minister of Finance, Budget and National Planning, says.
Speaking last week at a One-Day Workshop on Maximizing Finance for Development (MFD) of Infrastructure in Nigeria organised by the World Bank Group in Abuja, she disclosed: “It is estimated that $3 trillion infrastructure investment would be needed for the next 30 years, and provides the framework that will guide interventions, investments, as well as budgetary allocations to the sector for the period.”
“Nigeria requires an estimated sum of $3 trillion to bridge its infrastructure gap over a 30-year period. This amounts to roughly $100 billion per year, with a total federal budget of less than $30 billion for 2019 and the dependency of Nigeria’s income on oil revenue with unpredictable global price fluctuation, Nigeria no doubt, lacks the fiscal space to self-finance the required infrastructure investment”, she stated.
Ahmed said that despite all the comparative advantages in natural and human resources, Nigeria’s ability to fully actualise its economic growth potential is repressed by the country’s huge infrastructure gap, recalling that it was in an effort to address the issue that the Nigeria’s National Integrated Infrastructure Master Plan (NIIMP) was approved in 2014 as a policy document which was designed to provide the roadmap for building a world class infrastructure that would guarantee sustainable economic growth and development.
Giving an overview of Nigeria’s infrastructure gap, the Honourable Minister said that the Nigeria core infrastructure stock is currently estimated at 30% of the GDP which falls far short of the international benchmark of 70%.
The effect of weak infrastructure, she noted, is most striking in the energy and transportation sector. The two sectors, according to her, are key to national and economic development due to their multiplier effect across all sectors of the economy.
In her words: “Nigeria has an average electricity consumption per inhabitant of 150kwh (kilowatt/hour) as against over 3000kwh world average (WBG). The current power generation of less than 10GW (Gigawatt) is less than half of the projected 20GW of generation capacity by 2018 which is expected to be increased to 350GW by 2043. To achieve this target, an excess of 10GW of generation capacity is expected to be added every year for the 30 years’ period of NIIMP (2014-2043)”.
Specifically spseaking about the Nigerian transportation sector dominated by the road network as the pillar of economic development in the country, Ahmed also disclosed that, in terms of road network, Nigeria is ahead of the West African average, but behind the international and the Britain, Russia, India, China, and South Africa (BRICS) benchmarks.
“Looking at the individual sectors the largest investment needs are in energy and transport, which represent more than 50% of the required infrastructure investment”, she said further.
Considering the financing plan with the infrastructure gap in mind, the Minister stated that the investment is planned to be financed through both public and private sector participation.
“The private sector is expected to cater for about 48% of the investments which will account for assets that are fully owned and financed by the private sector itself. The remaining 52% of the required investment is expected to be financed from a combination of public and private sector for the first phase of the implementation. The private sector is expected to play a key role in providing critical infrastructure, either directly through privatization or in collaboration with the Government under public private partnership (PPP) arrangements,” she said.
There are in summary four primary financing options: Governments budgets; public debt; other public sources (e.g. Sovereign Wealth Fund, Public Pension Fund); and PPPs, available for financing the investments.
In addition to already committed private sector investments, she said government is strategically considering how much, on project-by-project basis, to leverage from the primary financing options to ensure optimal risk allocation.
According to Ahmed, who commended the effort of the World Bank Group for the timely intervention on infrastructure development, the Federal Government has created an Infrastructure Project Development Facility to finance early project development activities so as to create a pipeline of bankable PPP projects, establish a dedicated cash backed fund (Government Resource Fund) outside the annul budgetary allocation process to finance the government’s contributions on infrastructure involving the private sector.
Apart from noting the Infrastructure Concession Regulatory Commission (ICRC) Act (2005) provision for Ministries, Departments and Agencies (MDAs) to enter into contracts with or grant concession to any duly pre-qualified private sector proponent for the financing, construction, operations and maintenance of any infrastructure that is financially viable or any development facility of government, the Minister also disclosed that the increased private sector participation, through both PPPs and full privatization, is required to decrease the burden of the required infrastructure investments by the public sector.