Scaling-up Nigeria’s Road Infrastructure Development

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BUSINESS/Industry

Policy makers drawn from the private and public sectors have concluded that Nigeria will not pull through in her socio-economic development, if she fails to beef up infrastructure financing to fix capital projects, Raheem Akingbolu writes

In what looked like a consensus, experts and policy makers have linked Nigeria’s economic challenge to poor infrastructure development over the years. They have also made case for effective private public partnerships (PPPs), which according to them, is strategic to government’s financing and development plan. They spoke at the Lafarge Africa Plc inaugural Concrete Ideas webinar series with the theme: “Public-Private Partnership Approaches to Rapidly Upscaling Nigeria’s Economic Infrastructure.”

In his welcome address, the CEO, Lafarge Africa, Khaled El-Dokani, said the Concrete Ideas initiative of the company would become a quarterly platform to foster strategic ideas and discussions. He added that the initiative would catalyse the attainment of commercial success within the sector.

El-Dokani highlighted that the concrete ideas webinar series had come at a crucial time since the COVID-19 pandemic has put severe pressure on the Nigerian economy, pointing out that it was designed to chart a new course and move the Nigerian economy forward.

Minister of Works & Housing, Mr. Babatunde Fashola, who was the guest of honour at the event, opened the discussion, admitting that there was indeed a lacuna in the country’s developmental policy, which allocates a meager portion of its GDP on recurrent expenditure, while roads, bridges and transport remain in shamble.

He argued that the country stopped investing in infrastructure in the 1970s and that it must get back to investing something similar today by investing a sizeable part of the GDP on infrastructure development.

Fashola pointed out that developed countries had invested heavily in their infrastructure and that the infrastructure gap in Nigeria is a result of a significant drop in investments and a growth of the population, which is why he brought to the fore the commitment to renew, rebuild and increase the stock of the nation’s current infrastructure.

On the concept of PPP, the minister described the model as investments that entail the availability and mobility of capital, adding that PPPs form part of government financing and development plans. He was, however, quick to emphasise the need to develop smart financial modelling and properly designed and negotiated transaction contracts and funding arrangements.

In line with the global economic realities, he highlighted the options that private capital offers and what to expect.

According to him, it offers the opportunity to manage and complete existing road projects as well as providing opportunities for fresh farm produce into a much more bespoke environment.

He brought to the fore the need to understand the difference between government objective and private objective and also social infrastructure assets and commercial infrastructure assets.

“The profit of government is measured by the general well-being and prosperity of its people with the local economy being largely driven by 80 per cent of MSMEs.

“Across the world, governments are trying to save their private sector and Nigeria is not exempt from that in today’s reality. Due to the pandemic outbreak of COVID19, PPPs in some parts of the world were halted but in Nigeria, the PPPs that have been negotiated and commenced are still viable and ongoing. This has also changed the realities and dynamics of some PPPs in other parts of the world,” Fashola said.

While emphasising the need to understand the role that the private sector plays within the parameters of commercialisation, the minister stated that from research and reports credited to multilateral institutions like the World Bank, it has been established that infrastructure helps to eradicate poverty as it is a legitimate way to distribute wealth.

Earlier, Chairman Lafarge Africa, Mr. Adebode Adefioye, in his remarks said the conversations under the ‘Concrete Ideas’ webinar would focus on how to deepen PPP transactions. He aptly captured the essence of the discussion by declaring that, “For people to progress in society, they must think and co-operate.”

Head, Middle East Africa LafargeHolcium, Mr. Miljan Gutovic, said Nigeria as the biggest economy in Africa needed infrastructure for growth and development.

Gutovic said the company had been involved in PPP across the world, noting that infrastructure creates economic activities for citizens.

He explained that more than US$100billion was spent on PPP in developing countries in 2019 and that approximately 40 per cent of these projects are for roads which are what Nigeria desperately needs.

He told participants on the forum that LafargeHolcim had the experience from working on PPPs in mature markets such as in Canada, UK and Australia, which could be brought to Nigeria.

To this end, Gutovic advised that Nigeria should invest in concrete roads as they have higher life expectancy, require less maintenance and can deal better with the extremes of climate change than asphalt roads, which he said LafargeHolcim also supplies. “The rainy season in Nigeria means that concrete would be the more durable choice,” he added.

Gutovic was of the view that Nigeria needs to develop a solid legal framework to accommodate PPPs, as they can be profitable and sustainable in the long run.

He stressed that infrastructure was not only about road projects, but other segments such as energy and power plants.

The Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, said leakages in the country should be sealed, stating that the country should be spending US$15-20billion annually to keep pace with its growing infrastructure needs.

Rewane, who stressed the need for completion of ongoing projects for the country to move forward, added that idle, stranded assets and uncompleted projects should be sold to the private sector for economic growth and development.

He concluded that the private sector would deploy capital where they can make profit, stressing the need for the right pricing mechanism.

Also speaking, the Chief Executive Officer of Chapel Hill Denham, Mr. Bolaji Balogun, said Nigeria needed to increase infrastructure spending by 20 per cent yearly to tackle infrastructure deficit and that government should not depend solely on PPP for infrastructure financing.

He stressed that only about two per cent of Nigeria’s GDP was effectively spent on infrastructure development and that private capital must be attracted, stating, Nigeria must use capital markets to fund projects as has been seen with China’s use of listings in Hong Kong and Singapore.