Private sector and infrastructure financing

Nigeria, no doubt, has a huge infrastructure deficit. According to the National Integrated Infrastructure Master Plan (NIIMP), Nigeria’s core infrastructure stock is estimated at between 35 and 40 percent of the Gross Domestic Product (GDP). In fact, funding the country’s infrastructure gap in the next 30 years (starting from 2012) would require a cumulative spending of $2.9 trillion, according to the NIIMP.

In 2013, the African Development Bank estimated that Nigeria must spend $350 billion between 2011 and 2020, with $300 billion of this investment focused on core infrastructure assets for transport, power, water and ICT sectors.

Comparatively, Nigeria’s infrastructure stock (against GDP) is lower than South Africa’s 87 percent, China’s 76 percent and India’s 58 percent. It is even much lower when compared with the global infrastructure benchmark of 70 percent.

In fact, advanced economies are characterised with high infrastructure stock which ranges between 65 and 80 percent of GDP.

Nigeria’slow infrastructure profile is attributed to historically low public and private spending.

Roads, rails, aviation, maritime, energy, ICT, manufacturing, agriculture, water, mining, housing, education, health and security, among others, require huge infrastructure spending that will muzzle the limited and dwindling revenues of the Federal Government amid falling oil prices, incredible stories of oil theft and decline in oil and non-oil exports.

Nigeria’s revenue has fallen by over 50 percent in the last 12 months. Over N2 trillion is spent annually only on personnel costs, leaving barely N2.5 trillion budget for infrastructure and other recurrent expenditures. This has even been worsened by a four-year attack on the country’s infrastructure by hoodlums and Boko Haram insurgents in the north-eastern part of the country.

More pressure has, indubitably, been piled on the country’s lean revenue, thereby requiring ‘intervention’ by the private sector.

Paul Collier, keynote speaker and professor of economics and public policy in the Blavatnik School of Government at the University of Oxford, at this year’s CEO Forum organised by BusinessDay, said government should involve the private sector in infrastructure financing, where it has become impossible for it to provide same.

According to Collier, for this to happen, there must be an interaction among the three investment processes, including the government, the household and the firm.

When government provides good infrastructure that will enable firms and people to cluster, people and skills are brought close to jobs while the government will have the opportunity to levy taxes and raising sufficient revenue, he said.

Indeed, we agree with Collier that government at all levels must play their part, while the private sector and households must also participate in funding infrastructure. For instance, is it not possible for a state government to allow the private sector to build a major road in an industrial estate with a promise of tax holiday within a specified period? But the urge for revenue drive at various levels of government may not allow this to happen.

We are aware that most of the problems faced by the private sector in the country border on weak infrastructure base, and any sincere attempt to involve players in the building process will not be rebuffed.

We therefore believe that an honest government should persuade the private sector to join in financing light infrastructure but also ensure they are adequately compensated or put in place measures for refund where necessary.