|Lagos Island Photo courtesy|
The transformation agenda is targeted at creating jobs to reduce unemployment; laying a foundation for economic growth; and improving the wellbeing of Nigerians on a sustainable basis. To achieve these goals, the federal government plans to focus its attention in the next five years on priority sectors such as Agriculture, Mining, Manufacturing, Oil and Gas, Trade and Investment, Health, Education, and Tourism. However, inadequate infrastructure continues to militate against the realization of the lofty objectives of the transformation agenda of the federal government of Nigeria and the nation’s vision 20:2020.
Infrastructure and National Development
Infrastructure development and economic growth are mutually reinforcing, as infrastructure development plays a vital role in wealth creation. Clearly, the importance of infrastructure to national development in cannot be overemphasized. It is at the core of good governance and public welfare. Good infrastructure is critical to the overall development of the Nigerian economy, which in turn impacts the standard of living of all Nigerians.
The connection between good infrastructure and economic wellbeing of a nation was made some decades ago by no less a personality than former President John Kennedy of the United States, who once said, “America is having good roads not because America is rich; but America is rich because it has good roads.” Good and sustainable infrastructure is needed in Nigeria not only to serve as a catalyst for economic growth, but also for the creative engagement of citizens and to generate national development. Not only that, good infrastructure also provides a platform for the socio-political transformation of the nation.
In Nigeria, stakeholders have realized that good and sustainable infrastructure holds the key to the realization of the federal government’s transformation agenda and Nigeria’s vision 20:2020. This realization has led to the government’s focus on infrastructure development in the last few years. However, government alone cannot meet the infrastructure needs of our nation’s economy. Local and Foreign investments are needed in the infrastructure sector to drive economic growth in Nigeria. The federal government of Nigeria is willing to forge a healthy collaboration between the private sector and the public sector to create a mutually beneficial “win-win” relationship in the development of key national infrastructures that will aid economic growth in our country.
Our Nation and its Promise
Nigeria is a country of about 167 million people, with one of the largest economies in sub-Saharan Africa, and is home to the highest population of blacks in the world. Nigeria is rich in natural resources such as oil and gas, solid minerals and arable land for agriculture, with two distinct seasons: Rain season (April-September) and Dry season (October-March). Nigeria is one of the leading exporters of crude oil in the world and has huge deposits of solid minerals.
With an economic growth rate of about eight percent per annum, a robust GDP growth rate of about 12 percent is anticipated in the next five years, which will translate to a nominal GDP of about USD500 billion. Nigeria’s vision 20:2020’s aspiration to achieve a GDP of USD900 billion by the year 2020, is predicated on improved sectoral performance, propelled by a better business environment and government policies that are supportive of a stable macroeconomic environment and increased investments.
The Infrastructure Challenge
Nigeria is in the process of developing a National Integrated Infrastructure Master Plan (2014-2043). Infrastructure stock in Nigeria today is far from being adequate. This becomes even more evident when compared to countries such as Brazil, Turkey, India and South Africa. A look at some of the statistics would indicate the inadequacy of infrastructure in Nigeria.
In the road sector for example, Nigeria has a total of about 200,000 km of roads, out of which only 40,000 km are paved. Comparing this figure to those of the United States of America (6,506,204 km); India (4,109,593 km); China (3,806,800 km); Brazil (1,751868 km); Turkey (352,046 km); and South Africa (362,099 km), enables a better appreciation of the enormity of the challenge our nation faces in the road sector.
For Nigeria to be among the first 20 economies in the world, our road infrastructure needs to grow from 200,000 km to about 300,000 km. Most of the new alignments will serve as feeder roads to mine fields, agricultural centres, industries and other major theatres of economic activities around the country. With Nigeria’s huge population, recouping any investment in the road sector through user related charges has been found to be positive from recent feasibility/traffic studies.
In the rail sector, while countries such as India and Brazil have 63,974 km and 28,538 km of rail lines respectively, Nigeria has only 3,505 km of rail lines, which had been unserviceable in the past few decades.
The federal government of Nigeria is currently rehabilitating the existing rail lines; while the North-West rail line is billed to be re-opened by December 2012, rehabilitation works on the North-East rail line is expected to be completed in the coming year. Brand new rail alignments are also being proposed to link economic centres to the market place, and help move people and goods from one part of the country to another.
The aviation industry on its part parades vast investment opportunities from commercial flight operations to maintenance services, among others. Imagine the huge opportunities in the transportation sector alone, not to talk of the vast opportunities in the mining, real estate, manufacturing, tourism and ICT sectors. In mining alone, Nigeria has huge deposits of iron ore, coal, gold, lead zinc, tar sands, barites and industrial minerals – all waiting to be tapped.
The Federal Government recognizes the need to bridge the infrastructure gap in the country. As such, although the priorities of the Nigerian government in the next five years are to focus on Good Governance (Security of lives and property, law and order, and providing enabling environment); Human Development (Education, healthcare, skill acquisition, and capacity building); Real Sector (Agriculture, manufacturing, mining, oil and gas); and Infrastructure (Power, roads, rails, information and communication technology, water for irrigation and industries), more premium is being placed on funding of infrastructure projects to impact positively in the realization of the other priorities. Infrastructure is a common denominator for the other three priorities and vital to the success of the transformation agenda of the government.
There is a yawning gap in infrastructure in Nigeria. This yawning gap pervades through the various sectors of the nation’s economy; from power to roads, from rail/water to air transportation, from mining to water resources, and from ICT to housing.
This huge infrastructure gap provides an equally huge opportunity for investment in key sectors of the Nigerian economy. Nigeria remains a major investment destination in Africa and an investor’s delight, with its huge population, its central location in the African continent with access to the Atlantic Ocean, as well as road and rail links to other African countries.
The transformation agenda of the federal government of Nigeria envisions the mobilization and harnessing of private sector funds for infrastructure development through Public Private Partnerships (PPPs), as to supplement the increasingly limited resources of government.
Across the various sectors, bankable projects with confirmed ability to establish revenue streams, deliver positive net present value (NPV), allocate risks and have sufficient scale for absorbing transaction costs, as well as a high probability of success and acceptability to institutional leaders and financiers have been prepared and will be showcased to investors by sector leaders in the next two days. Many more are in the pipeline. Public Private Partnership funding mechanism requires the creation of a deregulated and competitive economic environment to attract foreign and local investments.
The federal government of Nigeria has since created such an environment for investors, and this accounts for the success stories of some investors such as MTN of South Africa, and Dangote group of Nigeria, among others who dared all odds to invest massively in Nigeria about 10 years ago. For example, in the first year of operation of MTN (South African owned), the company not only broke even, but went ahead to declare a profit of about USD 60 Million. Last year, MTN declared a profit of USD 5 Billion.
The Dangote Group (Nigerian owned) doubled its cement sales in the second quarter of 2012 to 5.2 Million tons. It is worth noting that 5.1 Million tons out of the 5.2 Million tons was produced locally. During this period also, the revenue profit for Dangote Group also rose to about USD 1 Billion.
Specifically, the Federal Government of Nigeria has taken a number of steps not only to ensure that direct foreign investments (DFIs) and Public Private Partnerships (PPPs) thrive in the development of infrastructure and the real sector in Nigeria, but also to guarantee transparency and accountability in the process.
By Arc. Mike O. Onolememen,
The Honourable Minister Of Works