Addressing Nigeria’s Weak Infrastructure

NIGERIA’s weak infrastructural base was in focus recently as stakeholders lamented our current economic adversity. A report by Boston Consulting Group dovetailed with Vice-President Yemi Osinbajo’s roll-out of the government’s policy objectives and a call for new investments in infrastructure by a former president. The situation demands decisive action and fresh thinking.

BCG, the reputed American consultancy, reiterated the country’s patchy infrastructure among other issues and called for immediate action to redress it. It deplored the $664 per capita (adjusted for purchasing-power parity) Nigeria spent annually on infrastructure from 2009 to 2013, which it said represented just three per cent of Gross Domestic Product, compared with the $3,060 or five per cent of GDP spent by several peer countries. “Without decisive action,” it warned, “the gap is likely to widen.”

That is saying the obvious, as attested to by Olusegun Obasanjo, president between 1999 and 2007, who also warned the government to invest to raise power supply from its current 5,000 megawatts or forget about rescuing the economy. Osinbajo admitted the infrastructure quagmire in his address at a national forum on the economy, rolling out an action plan for some critical infrastructure projects.

Nigeria’s case is pathetic: unlike poorer, smaller sub-Saharan countries, it has a large population (170 million), abundant resources and, for almost five decades, has earned hundreds of billions from crude oil. The World Bank reported that power, water, road and rail facilities were in a bad shape, despite an average of $5.9 billion voted annually for infrastructure by the Federal Government in recent years. The value of our infrastructure stock is put at 20-25 per cent of GDP by the IMF, (lower than BCG’s estimate of 35 per cent) compared to the 70 per cent average for developed economies. The World Bank 2011 estimate of $14.2 billion required each year for 10 years to close the gap is regarded as conservative.

This government must dump its statist instincts and realise that the public sector simply cannot muster the resources to bridge the dire infrastructure gap alone. Its plan to borrow for refineries, railways, airports, irrigation and road projects is not enough and such borrowing by its predecessor is already ensnaring the country in a new debt trap that stood at $65.42 billion by December 2015.

The federal and state governments need to urgently map out programmes of massive infrastructure development. The centre should concentrate on what economists identify as “hard” infrastructure, and the states and local governments, on rural facilities.  President Muhammadu Buhari should move with the times by enthusiastically opting for a close partnership with the private sector.  A 2013 report by McKinsey identified China as the world’s leader in infrastructure investment that enabled 100 million Chinese to benefit from upgraded power and telecommunication services between 1990 and 2005, while investment in rural roads grew by 51 per cent annually between 2001 and 2004. Singapore’s top ranking in global competitiveness ratings was attributed in a 2012 survey to its having the world’s best infrastructure, the result of far-sighted planning. By according priority to infrastructure, Malaysia, with a land area of 127,720 square kilometres, has 94,500 kilometres of roads (70,970 km are paved), and 1,833 km of modern rail tracks, compared to Nigeria whose much larger 923,768 sq km area  boasts just 193,200 km of roads with only 28,980 km paved, and 3,505 km of ageing single gauge tracks.

South Korea, regarded as having advanced infrastructure, has privatised power assets, delivering 62,000MW to its 50.29 million people, and has a 20-year new spending plan (2001-2020) involving public and private investment on roads, railways, airports and mega resorts.

We reiterate the urgent need for a robust policy of privatisation and liberalisation that will see the repeal of the 1955 Railways Act that decreed state monopoly on railways; state withdrawal from steel, downstream oil and gas, airports and transport, as well as mining. Public resources should be concentrated on “soft” infrastructure – institutions that are required to maintain the economy and these include health, education, law enforcement, sanitation and water supply, the financial system and culture.

Only private sector entrepreneurship and massive foreign and domestic investment can bridge the infrastructure gap that another study by McKinsey, the global consultancy, posits will require $31 billion each year for the next decade.

The Buhari government should, therefore, quickly dust off the National Integrated Infrastructure Master Plan, a 30-year plan inaugurated in 2014. The government should deepen its collaboration with the Nigerian Infrastructure Advisory Facility, funded by the United Kingdom’s Department for International Development to assist Nigeria with expertise in infrastructure plans that is now in its second phase.

There is a need for greater thinking to raise and diversify revenues.  Liberalisation policies and transparent privatisations that target major world players, Foreign Direct Investment through the sale of steel, power (NIPP), mining and refineries, pipelines and depots as well as concessions for airports, rail tracks, river basin development authorities, stadia and tourism facilities will help.  In the United States, some state and city governments raise infrastructure bonds to fund public capital. The government should quickly review the law on concession as previous and subsisting concessions have failed to deliver value to the people or anticipated revenues for the government, favouring only the concessionaires.

After many years of corruption and under-investment, this government should not dash expectations, but should apply itself urgently and vigorously to deploying new ideas to provide infrastructure for Africa’s biggest economy.

#Punch

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