Capacity building, long-term savings essential to infrastructure growth in Nigeria – Experts
Investment and project finance experts in Nigeria have identified capacity building, long-term savings, depth of the capital market, additional Development Banking Institutions (DFIs), among other things as factors critical to the development of infrastructure in Nigeria.
At the 5th Detail Business Series organised by Detail Commercial Solicitors (DCS), which took place in Lagos on Monday, participants made strong calls for capacity building in both the public and private sectors of the economy.
The event put together to discuss Nigeria’s infrastructure development and investment opportunities across sectors, had the CEO/Managing Director, ARM-Harith Infrastructure Investment Opuiyo Oforikuma, EcoBank’s Head of Power & Energy, Olufunke Jones; Hakeem Olopade of Infrastructure Bank; Deputy Group CEO/Managing Director, United Capital Plc., Wale Shonibare; Tonna Ejiofor of FBN Capital and the host Ayuli Jemide, Lead Partner, Detail Commercial Solicitors as part of the panel of discussants.
Speaking at the event, the Deputy Group CEO/Managing Director, United Capital Plc., Wale Shonibare who was on the panel noted that the discourse on infrastructure couldn’t have come at a better time.
Shonibare, whose contributions centred on project realism, contract sanctity, depth of the capital market, among other things, stated:
“The money is right here in Nigeria. With Tax at 12%, Nigeria is among countries with the lowest tax rates in the world. We can pay more to achieve more in terms of infrastructure development. Insurance is another pot of savings we can look into to finance infrastructure.
“We need to mobilise long term savings. We can also raise funds through the active management of our exchange rates. All we need do is prime the market. We are looking in all the wrong places. We need to create institutions that can fund our infrastructure needs. We need to, by design drive our capital markets.”
Funke Jones however pointed out that there was need to build capacity for the financial institutions, to ensure they grasp the concept of projects and become project promoters before we can move to the next level.
She said: “Everyone involved in PPP projects, be it in the public or private sector must grasp the concept of projects and its development, particularly as it relates to infrastructure, to be able to promote it.
“Capacity building is our greatest challenge. We need to get our financial institutions, particularly the banks to build capacity and develop strategies for financing projects. They must understand infrastructure and work towards becoming project promoters themselves. Without this, we will continue to have boundless challenges with financing projects.”
The Eco Bank Head of Power and Energy noted further, that too much emphasis and concentration is being laid on growing capacity for the public sector, whereas a huge number of project promoters in the private sector lack basic capacity and understanding of projects. This I think is the next step before we begin to deepen our capital markets. I believe the infrastructure bank is already doing a good job in this regard,” she said.
Agreeing with this position, another panelist, Tonna Ejiofor of FBN Capital, attributed Nigeria’s challenge in infrastructure financing to this lack of capacity. He said: “One of the most significant challenges we have in this area is having very viable deals dying before they even get to decision making points. This is not good at all.”
On his part, the chief executive officer and managing director of ARM-Harith Infrastructure Investment Limited, Opuiyo Oforikuma, noted the relevance of structure in every finance project.
According to him, the importance of considering current policies and regulations while drafting a project finance contract cannot be overstated, saying, “it must be embedded into the contract.”
He further suggested infrastructure bonds as one way to invest in infrastructure, while agreeing with the other panelists that long-term savings a very essential to infrastructure financing.
The panelists and participants were in agreement that long-term savings was ideal for financing infrastructure. They however made a case for the sanctity of contracts.
Identifying information dissemination as a critical factor in the growth process for infrastructure, Jones urged stakeholders to constantly engage the media, while prevailing on the media to disseminate information accurately and efficiently.
Government agencies and parastals were also urged to collaborate more, as such synergies will drive more development across sectors.
It was hoped that regulators and policy makers would however tailor regulations to the needs of the local market and the current realities as it relates to infrastructure.
DCS’s lead partner, Ayuli Jemide who spoke earlier, noted that for Nigeria to have viable and successful PPP projects, there was need to ensure contract sanctity.
“We have had a lot of bad stories with project contracts, but I think the Lekki concessioneering project was one good contract that ended well.”
Jemide further suggested the use of investment enhancements and ‘sweeteners’ to attract private sector investors into the economy for infrastructure finance, while pointing to Pension funds as ‘the lowest hanging fruit’ to look to for infrastructure financing.
Having worked on several projects across sectors, the DCS Business Series is a platform created for the synthesizing thoughts among industry stakeholders, which will ultimately be fed back to the government.
Speaking on the event, the lead partner said, “We do well to ensure that the business series is not just another ‘Talk-Shop’ by getting the right people in the room to engage and tackle very vital issues to the development of the economy.”