Nigeria’s $2.3trn infrastructure deficit

The recent revelation by the Minister of Finance, Budget and National Planning, Hajiya Zainab Ahmed, that Nigeria would require a whopping $2.3 trillion to bridge its infrastructure deficits in the next 21 years is a cause for concern.

Hajiya Ahmed said the revised National Integrated Infrastructure Master Plan was meant to fund key sectors in the economy such as power, rail, roads, housing and agriculture from 2022 to 2043.

“In the national development plan, we have cost the investment that is required; $2.3 trillion with a private sector contribution of 86 per cent anticipated between 2021 and 2025.

“These are downturn investment targets, but they represent the baseline requirements to build a modern Nigeria, an industrialised nation that we deserve for ourselves and also for our future generation,” the minister said while speaking at a conference on the Integrated Infrastructural Research for Development in Abuja Friday.

The minister further observed that extensive consultation with the private sector had created an innovative approach to financing infrastructure projects.

Ahmed said, “the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme launched in 2019 leverages private sector expertise to construct repair and maintain critical federal roads.

“We started the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme launched in 2019 to leverage private sector capital via tax credits, and provide private sector expertise to construct, repair and maintain critical road infrastructure in key economic growth corridors and industrial clusters in Nigeria.

“With this project, the road projects have been approved and are at various stages of construction to the use of tax credit to finance the rehabilitation and reconstruction of road projects across six geopolitical zones of our country.

“So far, we have issued four circles of SUKUK bonds totalling N64.5 billion, and there’s a fifth circle that is under preparation that will be worth about N250 billion. This is what we have issued so far and deployed for specific road projects across the country.”

Vice President Yemi Osinbajo had in August 2022, said the nation, with the private sector, needed $2.3 trillion to fix its infrastructure gap.

It is instructive that infrastructure deficit has been the major factor militating against Nigeria’s development since its independence in 1960. This much was analysed by some experts, who spoke at the 2022 Infrastructure Dialogue, held in Abuja recently by Deutsch Partners Holding (DPH). They said the anomaly must be addressed for the country to attain the needed development.

Managing partner at DPH, Onuoha Nnachi, in his presentation, described Nigeria’s infrastructure deficit as one of the biggest factors holding back its growth and development. In the presentation titled ‘The state of Nigeria infrastructure and its impact on national economic growth and development’, Nnachi said “the country’s financing shortfall for infrastructure will be a staggering $3 trillion over the next 30 years.”

The value of the country’s total infrastructure stock represents only 35 percent of the GDP, which is significantly below the 70 percent average for an emerging economy. He noted that with the World Economic Forum’s 2019 global competitiveness index, Nigeria ranked 116 out of 141 countries, largely due to the poor state of its infrastructure.

Former presidential economic adviser Osita Ogbu in a presentation titled; ‘Global economic indices: The Nigerian position’, lamented the nation’s huge debt profile and corresponding poor infrastructure.

He warned that there will be repercussions if the debts continue to rise while productivity and the infrastructure remain abysmal as, according to the Debt Management Office (DMO), Nigeria’s debt is $92.6 billion.

He said: “We can’t borrow to consume. If the cost of governance consumes five percent of your revenue, you already know that something is wrong. We have an Oronsaye report that says we must collapse parastatals. There are people that go to work on a daily basis- for one year, two years, three years, four years- and they have not produced one thing. There are refineries that produce nothing but incur billions in cost and you are asking me to advise, what are you asking me to advise? Is the advice not obvious?”

Nigeria’s infrastructure gap includes lack of good roads and a railway network that can drive economic activities, poor and in some instances non-existent power generation, transmission and distribution systems, decaying public educational facilities, dilapidated government owned hospitals (including tertiary healthcare facilities) and even airports, among others. Generally, infrastructure is the foundation on which economic activities thrive, as poor infrastructure impacts on economic growth.

We commend the federal government’s efforts at tackling the huge infrastructure deficit in the country particularly the establishment of Infrastructure Corporation (InfraCorp) in October 2021 by the Central Bank of Nigeria (CBN) in partnership with African Finance Corporation (AFC) and the Nigerian Sovereign Investment Authority (NSIA) with a seed investment of ₦1 trillion. Its creation was approved by President Muhammadu Buhari in February 2021, to boost funding for capital projects in the country.

It is also our expectation that the Executive Order 007 on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme signed by Mr President in 2019 will achieve its objective of encouraging private participation in building critical infrastructure.