President Goodluck Jonathan
The Central Bank of Nigeria (CBN) has called for the establishment of Nigeria Infrastructure Fund where funds could be mobilised and developed to address Nigeria’s huge infrastructural deficit.
It also stated that in terms of estimated funding gaps in infrastructure, Nigeria needs to invest $100billion (about N15 trillion) over the next 10 years.
CBN Governor, Sanusi Lamido Sanuso, who presented a paper at the second public lecture of Kresta Laurel Limited in Lagos Tuesday said the Nigeria Infrastructure Fund may supplement other initiatives such as creation of Guarantee mechanism by the government to ensure that particular projects obtain the necessary funding where otherwise they would not be feasible.
Sanusi in his lecture on the theme: ‘Infrastructure, Industrialisation and the Nigerian economy’ delivered on his behalf by the Deputy Governor, Corporate Services, CBN, Alhaji Suleiman Barau, commended the three tiers of government for agreeing to set up the Sovereign Wealth Fund (SWF) to cater for the country’s infrastructure needs.
“Guarantees are a vital mechanism for enhancing infrastructure project finance particularly in developing countries that are going through a credit rationing process. Guarantee mechanisms from source countries or international financial institutions can catalyze private finance when other instruments do not suffice.
“This (Guarantee) may be supplemented by operation of Nigerian Infrastructure Fund where funds could also be mobilised and developed to address Nigeria’s huge infrastructural deficits,” said Sanusi.
The CBN Governor noted that the state of infrastructure in Nigeria at present does not meet the requirement for economic development, stressing for instance that the sum of N300billion would be required to bring Nigerian roads to a satisfactory condition.
Citing sources, the Governor explained that out of the N15 trillion needed for building infrastructure, about N3trillion is required for power with rail tracks expected to gulp about N2 trillion; roads N2trillion and oil and gas N9trillion.
Buttressing the need for adequate attention to the country’s infrastructure challenges, he stated that a recent World Bank investment climate survey ranked infrastructure as nearly two and a half times worse than the next bigger problem of industrial development, which is access to finance.
On the challenges facing Nigeria’s infrastructure development, the Governor cited lack of adequate legal framework as well as lack of sufficient domestic term finance.
“Finance is critical to develop infrastructure not only for the usual reason of allocating efficiency but also because of the distinctive economic characteristics of infrastructure – a high capital intensity, long tenor projects, elements of natural monopoly and location specific investments, all of which affect private sector incentives to commit long term capital, “ he said.”
Notwithstanding the stumbling blocks, the apex bank chief raised hope that the battle could be won.
For instance, he said, with the successful completion of banks’ recapitalization in 2005, the banking sector witnessed rapid growth as its aggregate asset base grew from N2.7 trillion in 2003 to N14. 9 trillion in March 2009, a development, he noted also led to growth in infrastructure credit from N363 billion in 2006 to N1.6 trillion in 2009.
Sanusi assured that the present banking reforms and some positive steps taken by the government, would help cushion the country’s infrastructure needs.
“The financial System Strategy (FSS) which aims at developing Nigeria’s financial system to catalyze the economy to be among the 20 economies by the year 2020 would greatly assist in providing the financial framework locally for the provision of infrastructure funding. Pension reforms would also help capital market reforms to elicit the long term financing requited through debt and equity issues,” said Sanusi.
The CBN Governor further pointed out that to elicit the necessary environment for infrastructural funding and industrial development, there have to be appropriate macroeconomic environment; strong and deepened financial system; sustenance of ongoing infrastructure concession and regulatory commission; enhanced access to international capital market; the implementation of FSS 2020 as well as the establishment of the SWF.
Earlier in his remark, the Managing Director of Kresta Laurel Limited, Engineer Dideolu Falobi, said the company organised the lecture to find solution to the many infrastructural challenges hampering the growth of the industrial sector.
The Chairman of the occasion, the Founder of First City Monument Bank, Otumba Michael Balogun, said there is the need for concerted efforts to fix infrastructure in the country, stressing that, “if we can solve the problem of inefficient, inadequate or collapsing infrastructure, the economy will be on the part of growth and development.”