State infrastructure financing: Seeking a model that works
With its stock estimated at 20 per cent of Gross Domestic Product (GDP), Nigeria’s infrastructure stock is still a far cry from the 70 per cent of GDP internationally recommended.
Hence, the 2014 National Integrated Infrastructure Master Plan (NIMP) estimates a yearly investment of $100 billion or a total spending outlay of $3 trillion over 30 years to bridge the country’s infrastructure gap.
The plan had estimated that Nigeria would spend a yearly average of $33 billion on infrastructure between 2014 and 2018 for a modest start of the make-up investment programme. The plan envisaged that Nigeria would need to increase its infrastructure funding to seven per cent of GDP to stand a chance of bridging the historical gap. But like most national plans, the implementation remains a challenge.
Earlier in the year, the dream of scaling up infrastructure spending outlay received fresh attention with the launch of the N15-trillion Infrastructural Corporation of Nigeria Limited (InfraCo).
Vice President Yemi Osinbajo is hopeful the InfraCo, which is seeking N15 trillion funding in addition to N1 trillion equity contribution of the Central Bank of Nigeria, the African Finance Corporation (AFC), and the Nigeria Sovereign Investment Authority (NSIA) will address the infrastructure needs of the country.
“We believe that with the credibility of the actors that rally the CBN, NSIA, AFC and the quantum of resources that would be deployed, the InfraCo will make a major contribution to meeting the infrastructural needs of the Nigerian economy while promoting public-private partnership,” the VP said at a forum of the Bureau of Public Enterprises (BPE) and the Nigerian Export Promotion Council.
As it takes off, the behemoth is facilitating an initial funding of N170 billion for the Lagos-Ibadan expressway, Abuja-Kano Road and the second Niger bridge, projects the CBN Governor, Godwin Emefiele, told the media, are economically viable and would be tolled when completed.
Indeed, InfraCo has raised the dying hope in giving life to Nigeria’s key infrastructure. But with its operation driven by the Federal Government, its coming may not be the end the search for a workable funding model for dilapidated and limited state physical infrastructure. Over the years, state governments have gambled with different funding options – from equity, commercial loans, foreign debt to bond issuance – to build infrastructure.