NIGERIA DECIDES

NIGERIA DECIDES
2015 BIG DEBATE: INFRASTRUCTURE

Infrastructure development is the basis of measuring the performance of democratic leaders and it is the foundation of good democratic governance. As Nigeria decides on the next leader, what are the leaders saying about the current state of dilapidated infrastructure?

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Nigeria’s President, Goodluck Jonathan


Gen. Mohamadu Buhari, APC Presidential Candidate

Nigeria’s extensive infrastructure needs are well known. Decades of underinvestment have left the country with dire deficits in such critical areas as railways, roads, ports, airports, telecommunications and electricity generation. In the World Economic Forum’s Global Competitiveness Report for 2014-2015, Nigeria ranked 127th, a drop from 120 it ranked in 2013, out of 162 countries for its infrastructure. The report criticized the country’s weakened public finances as a result of lower oil exports, transport, power and energy infrastructure as “largely insufficient and ill-adapted to the needs of business,” adding: “The Nigerian business community continues to cite infrastructure as the single biggest hindrance to doing business in the country.”
Indeed, the nation’s infrastructure challenges are a major drag on economic growth. During the halcyon years of Nigeria’s boom, it was easier to overlook this threat. Lately, however Nigeria’s Gross Domestic Product (GDP) expanded 8.67 percent in the third quarter of 2014 over the previous quarter. GDP Growth Rate in Nigeria averaged 1.50 Percent from 2013 until 2014, reaching an all time high of 8.99 Percent in the third quarter of 2013 and a record low of -9.88 Percent in the first quarter of 2014. GDP Growth Rate in Nigeria is reported by the Central Bank of Nigeria. The economy has been hobbled by high interest rates, inflation and a lack of purposeful reform. Meanwhile, the government is mired in a slow-moving system of coalition politics, and it’s further constrained by a hefty fiscal deficit and a deepening current account deficit. Given this environment of fading growth, political gridlock and the high cost of capital, it’s not surprising that infrastructure spending has slowed in the past year or so.
Yet Nigeria’s vast infrastructure needs are expanding all the time, and this presents enormous opportunities. The population has already surpassed 170 million, and it continues to grow at a heady rate. Global trade is placing acute pressure on Nigeria’s inefficient ports. Rapid industrialization is intensifying the strain on the nation’s unreliable networks for electricity and water.
The railway system — already infamously overlooked — faces rising demand for freight capacity. And the government has fallen far short of its plans to build additional kilometers of roads each month — an urgent requirement in a nation where 75% of all freight is transported by road, and where traffic is so severe that the maximum highway speed for trucks and buses is only 30-40 km per hour.
The need to upgrade Nigeria’s infrastructure is especially acute in huge cities such as Lagos, Port Harcourt, Abuja, Kano, Kaduna, Niger Delta region.
Nigeria’s urban population of around 85 million is projected to reach 200 million by 2020. Nigeria will see the fastest urban population growth in the next 40 years, with its cities expected to add 200 million people. By 2030, the country is expected to have about 10 cities with over 10 million residents. Nigeria population is expected to hit 367 million in 2050 according to United Nations Report This torrid rate of urbanization means that massive investment will be required in everything from metro systems to clean water supplies, power generation to affordable housing.


Vehicles stucked on a federal highway

Recognizing these almost limitless requirements, the government in 2014 launched the bold and aggressive N655.2trn infrastructure master plan spending in the ten years through 2024.
The priorities include airports, ports, an elevated rail-corridor across the country, and several miles of new roads. Dr. Abubakar Sulaiman, minister/deputy chairman, National Planning Commission (NPC), described the National Integrated Infrastructure Master Plan (NIIMP) as investors’ guide and a robust framework for Infrastructure Development in the country.
Sulaiman, made the remark in Abuja recently at the inauguration of the Inter-Ministerial Committee (IMC) on the Presidential Launch of the National Integrated Infrastructure Master Plan, also said this would also provide job opportunities.
He explained that the NIIMP, which is aimed at bridging the current infrastructure gap in the country, will through targeted investment, cut across the geo political zones in the country, provide infrastructure requirements to various sectors of the economy.
While noting that the National Planning Commission has put the Infrastructure Delivery Coordinating Unit (ICDU) in place, to serve as interface between the Commission and Stakeholders in the implementation of the plan, Sulaiman said they are to work with other structures that may be put in place for seamless implementation of the NIIMP.
Given the scale of this infrastructure gap, it’s small wonder that Nigeria is one of the world’s most attractive markets for companies in the infrastructure business.

A recent report by Natafamdavid Consulting Nigeria Limited predicted that Nigeria’s infrastructure sector will grow by 5.9% in the 2014 fiscal year — down from a previous estimate of 7.4%, but still a formidable rate of growth. The opportunities are so extensive that money has poured in from overseas, including investments in 2012 from leading private equity firms across the world.
But Nigeria’s difficult business environment has sapped the enthusiasm of many foreign investors. Among other things, they complain about unpredictable regulations; bureaucratic delays in approving projects; endless struggles to secure land rights; and the government’s stalled attempts at reform, high level of insecurity.
The country’s reputation for corruption is also a major deterrent: in 2011, Nigeria in 2013 ranked 144th most corrupt country as Afghanistan, North Korea and Somalia are seen as the world’s most corrupt countries while Denmark and New Zealand are nearly squeaky-clean, graft watchdog Transparency International said in a survey.
Worldwide, almost 70 percent of nations are thought to have a “serious problem” with public servants on the take, and none of the 177 countries surveyed this year got a perfect score, said the Berlin-based non-profit group.
Nigeria ranked 144th out of 182 countries in Transparency International’s Corruption Perceptions Index.
Not surprisingly, some investors have retreated. According to Reuters, private equity investments in Nigerian infrastructure sank in the third quarter of 2014, probably due to national elections. There is also a rising tide of domestic disillusionment about the government’s unwillingness to tackle the nation’s economic challenges. “There is a complete absence of decision-making among leaders in the government.”

To shed further light on these issues, we interviewed two of Nigeria’s prominent thinkers whose penetrating insights we share in this special cover report.

Engr. Otis Anyaeji, a legendary engineering professional and business leader, who transformed the power sector as the lead consultant to the Nigerian Integrated Power Project (NIPP). His firm O. T. Otis Engineering Nigeria Limited remains the powerhouse in the engineering industry. He talks of the “huge pressure” on everything from electricity to roads. To meet these challenges, he stresses the need for greater involvement by the private sector, and calls for entrepreneurs to be freed from “the tyranny of petty bureaucracy.”


Engr. Otis Anyaeji

Pat Una, Chief Executive Officer, Una Associates, a leading estate surveyor and valuer and capital market consultant, one of Nigeria’s most renowned estate surveyor, weighs in with a candid discussion of some of the biggest threats Nigeria’s economic progress: political inertia, ominous infrastructure decay, bureaucracy, and corruption — which, he says, “create space for the incompetent to buy their way into the most important sectors of Nigeria’s economy.”


Esv. Pat Una

Otis and Una are both deeply concerned about Nigeria’s future. Yet they are also remarkably optimistic, given the country’s extraordinary dynamism. As Una points out, Nigeria has already made astonishing progress, and he sees no reason why this should not continue either with the current government that may have learned it lessons that power is transient with the pressure from the now formidable opposition or with the emergence of a new government that will have to deal with the highly hyper-active Nigerians who will be looking for quick fix. “There will be problems along the way,” he concedes. “But even if we just equal over the next 16 years what has happened over the last 16 years, what has happened in the last 16 years, you are going to see a country which is at the very edge of the second world, not the first, but definitely the second.”

For Nigeria, it seems, both the challenges and the opportunities are immense.

Nigeria’s economy is growing rapidly, its population is expanding at an extraordinary rate, and there’s massive migration from the countryside to overcrowded cities like Lagos and Port Harcourt and Kano. How concerned are you about the stress all of this places on urban infrastructure such as roads, the water supply, and the electricity system?
It’s a big challenge, there’s no doubt at all. The country is progressing very fast. After the rebasing we are now the biggest economy in Africa and 26th in the World. When the economy grows and attains this status at this rate, it’s only natural that there’s huge pressure on infrastructure. Even though we’ve been building infrastructure, we’re not able to keep pace with demand.
That results in huge productivity losses and delays, mainly in urban areas.

Where do you see the most acute strains on Nigeria’s infrastructure?
Transportation from place to place takes an enormous amount of time. You see it when you’re commuting from home to office and office to home. Our roads have not been developed as quickly as our logistical demands require. Also, the average speed of our freight which is done by road, mainly, and they travel at slow speed because of the bad state of the road at which four hour journey take a whole day. The rail system which is expected to add value is nothing to write home about, “Federal Government is now adding more coaches with the on-going rehabilitation. We’re not expanding roads or improving the quality of our roads. So the movement of goods takes a long time. Similarly, our port infrastructure is not as developed as we’d like. The average time for clearance at our ports is several days, whereas it’s several hours in many other countries. For Nigeria’s economy to make sustained progress we have to build better roads so that the transportation of goods becomes efficient; we have to build ports; we have to enhance our power capacity; and we also have to improve access to coal and other raw materials.
These are all very important requirement
For Nigeria’s economy to make sustained progress, we have to build better roads so that the transportation of goods becomes efficient; we have to build roads; we have to enhance our power capacity; and we have to improve access to coal and other raw materials. These are all very important requirements.

How does the inadequacy of Nigeria’s electricity system affect companies, many of which contend with frequent power outages?
To give you an example, I know several manufacturing companies in states Lagos and Kaduna that don’t get power for several hours a day. Therefore, they’ve installed their own generators. But that power is about twice as expensive —or sometimes 2.5 times as expensive. When you have to pay 2.5 times the normal rate for power, you become less and less competitive in the marketplace; you’re not able to sell your products, so your corporation becomes weaker, which means that it pays lower taxes and can’t employ as many people.

How does the inadequacy of Nigeria’s electricity system affect companies, many of which contend with frequent power outages?
To give you an example, I know several manufacturing companies in states Lagos and Kaduna that don’t get power for several hours a day. Therefore, they’ve installed their own generators. But that power is about twice as expensive —or sometimes 2.5 times as expensive. When you have to pay 2.5 times the normal rate for power, you become less and less competitive in the marketplace; you’re not able to sell your products, so your corporation becomes weaker, which means that it pays lower taxes and can’t employ as many people.

How economically disruptive is the logjam on Nigeria’s roads?
We are adding many vehicles every year and many two-wheelers, but the roads are not expanding. When you leave your home, say in Ikeja, in Lagos at 7 a.m., it takes you only 2 hours to drive to Lagos. These traffic conditions reduce your productivity and waste your time, and you’re not in a very good mood when you get to the office or come home if you’ve just spent two and a half hours in traffic.

One of Nigeria’s most renowned Engineer, Engr. Otis Anyaeji is the Chairman, O.T. Otis Engineering Limited. He is the recipient of several awards, including the Construction and Engineering Digest Forum Award, a fellow of the Nigerian Academy of Engineering, a fellow of the Nigerian Society of Engineers and has been inducted into the Construction Industry Hall of Fame. Here, Anyaeji, whose firm is the lead consultant to the National Integrated Power Project explains the flaws and virtues of Nigeria’s political system, and he discusses the urgent need to confront such issues as power shortages, infrastructure, and a lack of clean water.
Learning along Nigeria’s tumultuous path to democracy and economic progress

Nigeria has made extraordinary advances over the past 16 years, but it still lags behind other developed democracies like India and United States of America and, even South Africa. One reason is that the South Africa government is far more effective at making things happen — whether it’s urban planning, completing infrastructure projects, or confronting threats like urbanisation. Do you worry that Nigeria’s cherished democratic system, for all its virtues, hinders its economic growth?
There is no tradeoff as far as Nigeria is concerned. Nigeria is not going to trade its freedom for any other reward. It’s as simple as that. Nigeria cannot live except as a free country. We cannot survive except as a free country. We are a federal people. We have a federal history. We didn’t remove the British in order to bring domestic tyrants who will then have to be removed by some Nigerian Spring. Whatever the disadvantages of democracy will be, we will have to live with them. Nobody in Nigeria thinks of bread versus freedom as a debate. The key to Nigeria is that its future is being determined by democratic pressures. For example, Nigeria’s poorest find the whole idea of the trickledown theory to be absurd. What is the trickle-down theory?
Does it mean that those few who have swimming pools will get a waterfall and those who are dying of thirst at the bottom will get a trickle? In a democracy, you can’t sustain that sort of thing. The core reality here is that if governments do not deliver in terms of growth, then they become vulnerable.
When you look at what’s holding Nigeria back, obviously one of the biggest issues is inadequate infrastructure. How big an impediment to Nigeria’s economic progress is this infrastructure deficit, which you see everywhere from railways and roads to an insufficient supply of water and electricity?
It’s a huge impediment. How can you be honest and not understand that? But there are models within Nigeria that prove that things can be done, despite the impediments of democracy. Good governance can begin to make a difference, which we’ve seen in places like America and South Africa. What we should not expect from Nigeria is either horizontal or vertical evenness.
There will be curlicues and knots in the graph. There will be problems along the way. There will even be accidents. We see it on the Nigerian highways, which are littered with overturned trucks because Nigerian drivers lose control and don’t respect rules. But even if we just equal over the next 16 years what has happened over the last 16 years, you are going to see a country which is very definitely at the top edge of the second world. Not the first world, but definitely the second.

One long-term challenge is a lack of clean water, given the vast scale of urban development across Nigeria, the depletion of the nation’s underground water supplies, and the growing problem of pollution. How concerned are you about this need to secure adequate water for Nigeria’s rapidly-growing population?
That’s a huge problem. In fact, that’s one of the great failures of Nigerian governance — this inability to have even a rational plan for water resources. It’s extraordinary, but I don’t think .

Is there a sense that environmental issues like this are becoming a more mainstream concern in Nigeria? Do you see, for example, a greater focus on building more resilient urban infrastructure to deal with the growing dangers of climate change?
Nigerians love to argue. So there’s always a big debate going on about the environment. It’s one of the many issues that create turmoil. What I can’t see is any resolution to the debate or any major policy emerging from the debate. At the moment, over the last one or two years, the government is so distracted by trying to save its skin and survive that it just doesn’t pay any attention to the issue — at least, not as much attention as it requires. The issue is there. Everybody recognizes the issue. But then what should be done about it? That becomes a separate issue. But these things that I’m saying are rooted in time: in the future, we might have a government with rational priorities.

For Nigeria to sustain the remarkable economic growth that it’s racked up in recent years, it will need to generate a massive amount of electricity. Yet the inadequacies of the country’s electricity system have created a serious economic bottleneck. Is anything being done to address this need for a more dependable supply of energy?
The only thing the government has done is involve the private sector in electricity generation and distribution — and then left the private sector to try and manage the social realities without the influence of the state. That doesn’t sound very intelligent. Can you see such a situation working effectively? The point is that we are neither white nor black: we neither have free market freedoms nor state sector monopolies. These private sector companies are expected to deliver in terms of their corporate business plans, but they don’t have the cushions available that state-owned monopolies enjoy. One of the great problems that industry faces is a completely opaque government, which then goes on changing the rules after decisions have been made. The government has to know what it wants to do and then stick to that. The government must be a guarantor of law, if nothing else, and provide rules and regulations which have clarity. I think time will clarify these things. Experience will. The people’s worry will. Let’s see.

Foreign visitors are often struck by the disarray they encounter in Nigeria — from the electricity blackouts to the chaos on overcrowded road, non-availability of effective rail system. Why is it that basic infrastructure like this remains so dysfunctional?
In many of these cases, the government doesn’t have the ability to subsidize large corporations of this nature because its own resources are obviously limited. But more than resources being limited, the problem is that the forces that bring modernization will not arrive because things are under government control, and the government lives by bureaucratic rules. Modernization needs entrepreneurship.

How big a problem is inadequate infrastructure for Nigeria’s poor — whether it’s insufficient electricity, say, or a lack of clean water? Are they the ones who suffer most from these problems?
The real problem is that the poor still don’t think they’re getting their share of economic growth. They need much greater compensation from employment to create economic uplift.

One area where Nigeria has made tremendous progress is in telecommunications. How important has the liberalization of the telecom sector been, and how significant an impact have you seen from the growth of Nigeria’s major telecom companies?
Telecom is one of Nigeria’s great success stories. Look at the empowerment of millions of Nigerians. Today, the postcard is dead. The letter is dead. Communication is cheap, and that’s had a huge positive in villages and at the lowest economic levels. The quality of life for the poor has improved so dramatically because they can communicate with their loved ones. Otherwise, if you came from Maiduguri and lived in Lagos, you were cut off. How much could you convey in a letter without a mobile phone? So it’s been a huge benefit.

What needs to be done in terms of reform to encourage more entrepreneurship and to bring greater investment where it’s most urgently required?
We would have to do the same thing in other areas that we did to roads, which is to have clarity in the system of public-private partnerships. And then comes the most difficult part, which is to eliminate or, at least, curb chronic corruption.

How big an obstacle is corruption to Nigeria’s economic development?
Quite substantial. Corruption doesn’t simply create a transaction that has to be factored into the business plan officially or unofficially. What corruption does is it creates space for the incompetent to buy their way into the most important sectors of Nigeria’s economy.

How can you prevent this type of insidious, pervasive corruption?
It’s difficult because democracy is a very hungry and thirsty beast, and the cost of elections is rising. So that’s one of the real problems.

In some ways, Nigeria seems to have moved backwards lately, with less progress in terms of and little decisive government action. Is that a concern?
Yes, the momentum seems to have stalled a bit. That is because of the absence of governance, rather than misgovernance. But give us another election, either a new term for the incumbent or a new government, and let’s see.

When you look at these almost intractable problems like corruption and a lack of political leadership, it must be easy to lose hope. What is it that nonetheless makes you optimistic about Nigeria’s future?
Is it encouraging, for instance, that so many regular Nigerians speak against corruption and to demand change in attitude?
The fact that people are angry and are capable, and may wish to mobilize their anger and unseat governments is cause for enormous hope. Now, everybody knows that if an elected government doesn’t deliver, then it will be in for its own disaster. We don’t really need a sudden volcanic outburst because we have a system in which the guilty can be punished electorally. This is the dividend of democracy.

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