Options for infrastructure deficit funding 

Nigeria’s infrastructure deficit is overwhelming. That is the result of decades of neglect by successive governments. A World Bank report states that Nigeria would need a colossal sum of $3 trillion to correct its infrastructure deficit. That figure is mind-boggling.

At the current exchange rate of N1,520 to the dollar, the figure needed to address Nigeria’s infrastructure deficit is something in the range of N5,000,000, 000,000,000. That may be a figure known as nonillion.

To break down the figure, the World Bank contends that Nigeria would have to invest $150 billion annually for 30 years to address its calamitous infrastructure deficit. 

Nigeria’s 2024 budget is less than $30 billion. One therefore wonders how government could raise $150 billion annually to address infrastructure deficit.

Nigeria is a distant 130 of 141 economies surveyed for quality infrastructure facilities.

The deficit is so pronounced in the power sector that the minister of power recently lamented that Nigerian consumers generate 40,000megawatts of electricity daily while public power facilities generate a scant 4,000megawatts.

That explains why some communities have power supply for less than 10 hours in a day. The rest of the power that runs the economy is generated by 164 million private power generators.

Nigeria’s rail system has been in comatose for 30 years before the current rehabilitation moves. Even at that, millions of people in Cross River state have lived and died without ever seeing a modern transport system like train. The rail system stops at Aba, Abia state, some 200 kilometers from Calabar. 

Nigeria imports all its refined petroleum products because of the catastrophic neglect of refineries.

Nigeria’s road network is equally debilitating. It has total roads and highway network measuring 195,000 kilometers in length where smaller countries record in millions. 

The federal government is so worried about Nigeria’s catastrophic infrastructure deficit that it is now thinking of radical measures to address the situation. 

Recently, Wale Edun, Nigeria’s minister of finance, announced plans to tap from the nation’s pension fund to finance infrastructure development.  

In a country where pensioners are treated as destitute, many are worried that government plans to tap from pension funds to address infrastructure deficit.

Lagos state government, the richest in the federation, has not listed those who retired in 2021 in its pension pay roll. 

The worst part of the inhuman treatment of pensioners is that Lagos state has abolished gratuity for its retiring civil servants. 

Other states, including Sokoto, which is rated poorest in the federation, still pays gratuity even though some retirees have to wait for seven years to collect it. 

The gratifying thing is that those who are blessed with long life still collect their gratuity while heirs of the unfortunate ones draw from the gratuities of their dead loved ones.

The federal government’s plan to draw from pension fund to finance its infrastructure deficit is a double-edged sword. It could solve one problem and create myriads more.

The federal government is the only one in the federation that cannot default in its domestic debts repayment. Nigeria has not even defaulted in its foreign debt commitments.

In terms of domestic debts repayment, the federal government can print money and pay its debts if everything goes wrong. Consequently, federal government’s domestic debt has practically no risk.

The only danger to the worst case scenario of paying debts, which is what ways and means funding through the Central Bank of Nigeria (CBN) amounts to, is its inflationary trend. That is what Nigeria is suffering today.

The surging inflation which has crossed the 33 per cent mark this month is partially caused by the N23 trillion ways and means funding of fiscal deficit raised by the administration of President Muhammadu Buhari.

If for any reason the federal government defaults in paying back the funds it would draw from pension fund and decides to resort to ways and means funding of the debt repayment, it would end up worsening a bad inflationary situation in the country.

Recent developments suggest that government could be pushed into that worst case scenario. Architects of the 2024 federal budget estimated that government would rake in a princely sum of N2.6 trillion as revenue in the first quarter of 2024.

The projections just did not tally. At the end of March 2024, government only managed to muster a paltry N367 billion.

No one expects the revenue drought to extend to the second quarter of the year. But just in case it happens again, it would place government in a very difficult position to pay back most of its debts without resorting to ways and means funding of fiscal deficits. 

That is why the federal government must give serious consideration to private sector participation in infrastructure development since it can no longer fund it through debts. 

The controversy surrounding the development of the second domestic terminal of the Murtala Muhammed International Airport in Lagos (MM2) has given government a very bad impression of private sector participation in infrastructure development.

About 15 years after MM2 came on stream, the ownership of the old domestic terminal of the airport is still an issue under litigation.

That is because the government of former President Olusegun Obasanjo allowed the concessionaire to draw up the agreement for the concession without supervision from the technocrats in the Federal Ministry of Aviation. 

The concessionaire couched the agreement in deliberate ambiguity thus subjecting it to the debilitating controversy dogging it.

Besides the controversy surrounding it, the concession has provided a huge relief to government. Government should enact a law guiding private sector participation in infrastructure development.

The law to be passed by the National Assembly would set the guidelines for private sector funding of infrastructure development that would relief government of the burden of funding it through crushing debt burden.

Such a law would clear the doubts in the minds of private investors and make them see infrastructure development as viable investments.