DCS business series elicits talks on infrastructure financing
The business series organised by Detail Commercial Solicitors in Lagos last month seems to be creating positive impact as talks on infrastructure development have intensified in the country after the series.
Only last Friday, at the inauguration of the Capital Market Master Plan Implementation Council (CAMMIC), National Investor Protection Fund (NIPF), and launch of the Corporate Governance Scorecard for quoted companies by the Securities and Exchange Commission (SEC), Kemi Adeosun, minister of finance, announced that the Federal Government was considering launching a $25 billion infrastructure fund to bridge the gap between government revenue and financing requirements for much-needed infrastructure.
Adeosun, who was represented by the permanent secretary in the ministry, Mahmoud Isa-Dutse, said the government was doing this owing to the current significant revenue squeeze and other budgetary constraints that have made government’s funding inadequate for the infrastructure investments.
“We believe this is where the capital market can really make itself relevant by stepping in to close the funding gap. Government is already looking to set up a $25 billion fund wholly dedicated to infrastructure investments. A crucial assignment we have for the capital market community is to come up with other innovative ways of mobilizing the capital needed to address Nigeria’s infrastructure challenge,” the finance minister said.
The minister’s statements are indeed in tandem with some of the suggestions proffered at the DCS business series in Lagos.
At the DCS business series, Wale Shonibare, deputy group CEO/managing director, United Capital Plc, had advocated, amongst other things, the mobilization of long-term savings and the need to take advantage of the depth of the capital market.
“We can 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 for this purpose and more,” Shonibare had said.
He had also harped on the need to look inward into the capital market for Nigeria’s infrastructure needs, noting that the size of the capital market in any given country was usually twice the size of the economy itself.
Further reiterating Shonibare’s position, she said, “efficient and vibrant capital markets are an indispensable feature of any modern economy supplying affordable medium-to-long term capital needed for growth as they facilitate mobilization of savings, accelerate capital formation, provide investment avenues and enhance efficient allocation of capital to growth sectors as no country has been able to develop without a thriving capital market.”
Expressing worries that the number of Nigerians who invest in the capital market are less than 3% whilst only 0.2% of Nigerians invest in mutual funds. Adeosun assured Nigerians that as the supervising minister of the capital market, she would support SEC to ensure that the project towards infrastructure development is successful
Also echoing the voices of other panel members, Opuiyo Oforikuma of ARM-Harith Infrastructure Investment and Funke Jones of Eco Bank, the finance minister advised that Nigerians should aspire to a level where retail investors look at collective investment schemes managed by fund managers, who along with pension funds, insurance companies and banks are better at monitoring the governance landscape as he said this will lead to better fund safety and will enhance investor protection in the long run.
It would be recalled that the Lead Partner of Detail Solicitors, Ayuli Jemide explained that the discourse on infrastructure was relevant at this time when Nigeria was experiencing a paucity of funds, and there was need to look for alternative sources of finance to fund infrastructure projects.
“We see this as an opportunity rather than a problem,” he said.
“If Government can understand that it cannot do it all alone and thus put the right framework in place, then this would be the right time for project finance to be on the top burner.”
Jemide referred to the question that came up for discussion at the business series, “If Government doesn’t have the money and infrastructure must be developed, then where do we look? This was the underlying element behind the discourse today.”
Alternative and veritable sources of finance identified at this event include funds from the capital market, Pension funds, increase in tax capture as Nigeria’s tax revenue at the moment is only at 12%, enhancing and improving the role of Development Finance Institutions (DFIs) and ultimately helping Nigerians develop grow long-term savings, which in the long-run can be used for project funding
The lead partner continued, “Nigeria does need a development bank as our own in-house DFI. A lot of the other DFIs are either multilateral or foreign. Having our own development bank would constantly create the right framework and the right space for infrastructure to grow through proper financing.
“For example one of the things a development bank would do would be to put seed capital to develop projects up to a point where they are bankable before investors are called in. I also engaged Opuiyo on infrastructure funds set up in the market; the role they would play in all of this and the sort of bankable projects they would be looking at, I do believe that there will continuity with these discussions and one way or the other, we would have these development banks.”
The DCS Business Series is a platform created by Detail Commercial Solicitors where stakeholders from selected industries gather periodically to discuss issues and challenges plaguing certain sectors of the economy. The objective is to synthesize thoughts and feedback to government and/or other relevant bodies.
Jemide assured attendees that the Business Series was “not just another Talk-Shop” as it brought together key actors in the relevant industries to engage and address issues vital to the development of the economy.
Theodora Kio-Lawson