How Infrastructure Deficit Haunts Nigeria’s Economy
-By Danlami Nasir Isah
Infrastructure is regarded as one of the critical sectors that determine the rate of growth of any economy, be it developing or developed.
In Nigeria, the Infrastructure gap has been described as one of the major reasons why the country’s development is still lagging behind.
Although some interventions have been made through the ministry of power, works and housing, stakeholders berate such interventions compared to the population of the country and the huge infrastructure deficit.
Recently, Global credit rating agency, Moody’s Investors Service has stated that the infrastructure in Nigeria is behind other emerging market peers, with about $3tn needed over 30 years to close the gap.
Moody’s stated this in it’s first report on the Nigerian infrastructure market obtained recently.
According to the report, weak institutions and governance frameworks along with a low tax base are hindering infrastructure investment, while financially strained utilities are unable to invest in improvements.
While speaking on the development, the Vice President, Senior Analyst at Moody’s Investors Service, Kunal Govindia, noted that the country had an infrastructure deficit, facing additional pressures from a rapidly growing population.
“Its low government funding capacity and customer affordability has been weakened further by the COVID-19 pandemic and low oil prices,” he said.
The report noted that the focus of infrastructure development had been within power, railways, roads, ports, and pipelines, adding that the trend was expected to continue with particular investment needed to address Nigeria’s electricity shortages.
“To this effect, Nigeria’s power sector could benefit from renewable energy like solar and wind, with financing also possible from green bonds,” it said.
Also highlighting the budget constraints facing the country, the rating agency noted that addressing this shortfall would require financing from the private sector, multilateral development institutions and other non-state investors.
“Financial guarantors, multilateral development banks and local institutional investors will be important in helping finance infrastructure development,” it said.
Meanwhile, Nigeria’s Minister of Finance, Budget and National Planning, Zainab Ahmed had stated that the country requires an estimated sum of $100 billion or N36 trillion annually to address the infrastructural rot in the country.
According to the minister, the Federal Government will require about $100 billion annually for the next 30 years to effectively tackle Nigeria’s infrastructure challenges.
She however said that with the shortfall in oil revenue, which was worsened by the Coronavirus in recent times, it is difficult to address infrastructure deficit.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, reportedly disclosed this recently at a workshop on ‘Maximizing finance for the development of infrastructure in Nigeria’, organised by the World Bank Group in Abuja’.
“Nigeria requires an estimated sum of $3tn to bridge its infrastructure gap over a 30-year period. This amounts to roughly $100bn per year, with a total federal budget of less than $30bn for 2019 and the dependency of Nigeria’s income on oil revenue with unpredictable global price fluctuation, Nigeria no doubt lacks the fiscal space to self-finance the required infrastructure investment,” the minister stated.
Speaking further, she said the time had come for the government to start looking for alternative sources of funding infrastructure as budgetary funding alone could not address the funding gap.
In another development, the World Bank acknowledged that Nigeria faces a $100 billion annual investment gap in infrastructure.
However, Mr Hafez Ghanem, the World Bank Vice President for Africa, believes the bank can, together with the private sector, leverage government resources to bridge infrastructure gaps in Nigeria.
“We have supported and seen success in transport, energy and power sectors using Public-Private Partnerships (PPPs) models. The Azura power project is an example of how we have attracted private sector investment in the power sector,” he added
Experts on different fora have stated that the implications of these infrastructural gaps still points to the fact that Federal government may still settle for further loans from the world bank to brighten any chance of bridging the age-long infrastructural decay.
Already, the debt burden of the country is now over N30 trillion according to figures from the Debt Management Office.
