The coming into operation of the Infrastructure Corporation of Nigeria Limited (Infra-Co) has been described as the long awaited institution to boost infrastructure development and transform Nigeria’s economy, writes Dike Onwuamaeze
The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele has a clear perception of what the role of the Infrastructure Corporation of Nigeria Limited (InfraCo) would be in tackling the infrastructure deficit that has hampered Nigeria’s capacity to appropriate its abundant natural resources to enhance the quality of life of its people.
Speaking last November, Emefiele had said the InfraCo would kick off its operations by targeting strategic infrastructure projects that would help catalyse further growth of our economy.
According to him, “Infra-Co is expected to set the standard template that will help in enabling greater private sector funding for public infrastructure projects in Nigeria.”
He stated that with the, “decline in revenues due to federal and state governments as a result of reduced receipts from the sale of crude oil, alternative ways of funding infrastructure are critical if we are to ensure sustained growth of our economy. As we are all aware, the cost of logistics is often seen as a significant impediment to the growth of businesses in the country.”
The central bank’s governor added that in recognition of the role that improved infrastructure could play in the development of our economy, along with the need to leverage private sector capital in funding the over N35 trillion deficit, which is the estimated amount required to build an efficient infrastructure ecosystem in Nigeria, the CBN, working in partnership with critical stakeholders such as the Nigerian Sovereign Investment Authority (NSIA) and the African Finance Corporation (AFC) has set up the InfraCo.
He said the corporation is expected to raise over N15 trillion to support investment in critical infrastructure in Nigeria.
“So far, N1 trillion has been provided as seed funds by the promoters to support the operations of InfraCo. We recently appointed four fund managers, and a management team has been selected to run and manage InfraCo.”
The InfraCo eventually took off in December 2021. It is positioned as the CBN’s tool for infrastructure development in Nigeria.
The corporation was conceived as a dedicated privately-managed infrastructure and industrial vehicle that would harness opportunities for Nigeria’s infrastructure development by originating, structuring, executing and managing end-to-end bankable projects in that space.
It is expected that the private sector would provide 50 per cent of the proposed N15 trillion needed to close the gap in infrastructure financing in Nigeria.
Emefiele had disclosed that the InfraCo was already working on three major projects, namely: the Abuja Kano Road, the Second Niger Bridge, and the Lagos-Ibadan Expressway.
The governor of the central bank also said the initiative would commence massive road infrastructure projects around the Lagos Free Zone (LFZ) area to decongest traffic along the Apapa and the Tin Can Island ports.
“We look at the benefits of these infrastructure interventions for the economy, the host communities and impact on life and well-being in terms of cost-saving, loss time recovery, ease of movement of goods and persons and further economic diversification,” he said.
The establishment of the InfraCo was approved by President Muhammadu Buhari in February 2021. Its current assets is said to be about $2.6 billon. It would facilitate the use of private capital to support infrastructure investment that would have impactful multiplier effect on economic growth across several critical sectors of Nigerian economy.
It is also expected to act as a catalyst for growth in the medium and the long run while the support of the banking community would be important in achieving its objectives.
In order to ensure its smooth operation, the federal government has selected four asset managers to run the N15 trillion ($37 billion) fund for the InfraCo, which is set up to drive investment in roads, railways and power projects in Nigeria.
The establishment of the InfraCo has been described by financial experts as a long awaited welcome development because of the critical role infrastructure financing would play in promoting economic growth, improving standard of living, poverty reduction, enhancing productivity and in improving competitiveness of the Nigerian economy.
It has been generally believed that the huge infrastructure deficit has continued to put a wedge on the country’s economic growth and development; and has become obvious that all hands should be on deck to find a lasting solution to these challenges.
An Economist and Founder of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, described the coming of the InfraCo- as a laudable initiative.
Yusuf told THISDAY that, “infrastructure deficit is perhaps the biggest problem we have as a nation. No efforts or resources will be too much to commit to it. We should welcome it if the CBN has more room to boost investments in infrastructure.
“In fact, infrastructure challenges are among the reasons the intervention funds have not been able to make the desired impact on the economy. If we fix Infrastructure, a lot of things will fall into place.
“Infrastructure master plan indicated that we need to commit $100 billion annually for three decades before the deficit in infrastructure can be fixed. This shows the magnitude of the problem.”
He added that, “the beauty of the InfraCo initiative is the involvement of the private sector. We are likely to see greater level of efficiency and cost effectiveness both in the execution and management of the infrastructure.”
On his part, the Managing Director and Chief Executive Officer of the BIC Consultancy Services Limited, Lagos, Dr. Boniface Chizea, told THISDAY that the establishment of the InfraCo could not have come at a better time as inadequate infrastructure has made the Nigerian economic environment unattractive to investors and has remained the bane of its economy.
Chizea said that gaps in the country’s infrastructure space have remained the perennial problem to its economic development.
He said: “As I respond to this your enquiry I do so using power from petrol generator. Mark you that I emphasised petrol advisedly as diesel for most compatriots is out of reach and now only used sparingly.
“And as has been variously emphasised by many you cannot grow and develop your economy without adequate power supply. We are reminded that infrastructure is all encompassing and it includes basic physical and organisational structures and facilities needed for the organisation of a society including personnel.”
Chizea observed that the seed capital of N15 trillion, which is humongous by all account, if logically, prudently and judiciously disbursed, will have far reaching impact from the perspective of the provision of critical and reliable infrastructure to propel the economy for rapid growth and development.
He said: “It is a good vehicle, which has been properly conceived and delivered to jump start the economy following its grounding to a halt which was precipitated by COVID-19.
“It is therefore projected to make resounding and impactful difference to the fortunes of the economy.”
He also added that the establishment of the InfraCo would reduce leakages in the execution of infrastructure projects.
“Ordinarily, it should reduce leakages and waste to the barest minimum and enable Nigerians to have good value for money considering its packaging and configuration.
“It will be private sector driven and 50 per cent of the money is projected to come from the private sector. Therefore, we should expect private sector template and discipline to drive operations. We should also expect that most of the money will be equity investments raised from the stock market which does not allow too much slack for lackluster performance.
“From the discussion so far this is the one and only expected goal and objective, which we can safely assume will be delivered. We have experiences in this connection and one that readily comes to mind is the Liquefied Natural Gas (LNG) project.
“Because it has 51 per cent private sector capital and, therefore, private sector managed, it has been able to sustain profitable performance over the years. We don’t, therefore, expect InfraCo to be any different,” he said.
Chizea pointed out that the coming into operation of the InfraCo would be good news to manufacturers and industrialists in the country.
He said: “As we observed before, if there is one problem that has hamstrung Nigeria’s development aspirations, it is lack of commensurate availability of critical infrastructure. So, the expectations are that if InfraCo lives up to its billing, that it should be the silver bullet we have been looking for to make problems arising from lack of availability of infrastructure a thing of the past to therefore unleash the potentials of the Nigerian economy. Therefore, all things considered, this development should strongly have lasting impact on the Nigerian economy.”
Financial experts agreed that there is a relationship between infrastructure and economic growth. They argued that infrastructure is basically the base on which economic growth is built upon. These infrastructure included roads, water systems, mass transportation, airports and utilities. It also covered those supporting services that help the growth of directly productive activities like agriculture and industry.
They also argued that there was a symbiotic relationship between infrastructure and economic growth. On one hand, infrastructure promotes economic growth, and on the other hand, economic growth brings about changes in infrastructure.
A research carried out by a group of academicians in the Department of Economics, Lagos State University, titled “Infrastructure Finance and Development in Nigeria,” said that development in whatever dimension could not result into good healthy living if infrastructure, such as telecommunications, transport, energy, water, health, housing and education, are not invested on.
They believed that financing of infrastructure project is expected to yield positive externality on economic growth and welfare of the people. The academicians that carried out the research were Ogunlana Olarewaju Fatai, Yaqub Jemeelah Omolara and Alhassan Bello Taiwo.
Their research work, which was published in the “Arabian Journal of Business and Management Review (Nigerian Chapter) Vol. 3, No. 12, 2016,” stated that Nigeria is experiencing a stunted economic growth due to sluggish infrastructure development.
They observed that resources hitherto channeled to the provision of infrastructure services were largely inadequate and sub optimal. But that was not all. They also claimed that funds directed to the provision of infrastructures were either embezzled or out rightly diverted to less productive needs which are susceptible to corruption.
“This, however, created a lacuna in infrastructure development process,” which has taken a great toll on the average growth rate in Nigeria that has at best been growing marginally in recent times.
They also pointed out that the high revenue inflow from the oil sector did not support sustained infrastructure growth in the country.
“However, the rise in the growth rate did not reflect on Nigeria’s infrastructure development needs. The growth rate further declined substantially from 24.2 per cent to 8.48 per cent during the period 2000 and 2014 respectively.
“The downward trend in the growth rate could be attributed to the poor state infrastructure development. Recently, it was discovered that one of the major feature of Nigeria’s dwindling growth performance has been massive decline in physical infrastructure development.”
They harped on the need to invest on infrastructures in order to maintain a stable growth momentum in productivity and at the same time improve the quality of living standard of the people.
“Nigeria has the potential to house a large number of the world’s investments, but due to poor state of infrastructure development, this potential could not be showcased to a greater height.
“The deplorable state of infrastructures and poor state of repairs and maintenance are evident on electricity, roads, railways and water facilities,” they said, and warned that these could, “result into low productivity growth, low income growth, low savings, low level of industrial development and ultimately end up as vicious cycle of poverty. Infrastructure deficit have decimated Nigeria’s growth potentials and made doing business very difficult and restrictive.”
These are the reasons why the coming of the InfraCo should be a moment of relief and one that could firmly entrench the concept of Public, Private Partnership (PPP) in infrastructure development as a sustainable practice.