Nigeria needs an investment of $2.3 trillion over the next 30 years to close its public infrastructure deficit, according to the Reviewed National Integrated Infrastructure Master Plan.
The master plan says Africa’s most populous nation must spend $150bn annually to achieve this target.
Agusto & Co, a pan-African credit ratings agency, on the other hand, projected a higher figure for Nigeria to bridge its infrastructural gap.
“Nigeria has a huge infrastructural deficit and requires up to $3 trillion over the next 30 years to bridge this gap,” the credit ratings agency disclosed in one of its monthly newsletters entitled, “Rethinking Nigeria’s Models for Infrastructure Development.”
Whichever figure one decides to go with, two things are certain. First, there are high infrastructural gaps in Nigeria. Secondly, huge investment is needed to bridge the gap. Sadly, government revenue is on the decline, and continued borrowing has become a major concern.
On May 29, President Muhammadu Buhari will hand over the baton of leadership of Nigeria to Bola Tinubu of the All Progressives Congress (APC), who was declared winner of the February 25 contentious election. Among the many challenges the next administration will face is fixing the country’s huge infrastructure deficit amidst dwindling revenue.
Like many sub-Saharan African countries, several reports have shown that Nigeria has a huge infrastructure gap. For instance, Nigeria’s total infrastructure stock is estimated at only 35 percent of the country’s Gross Domestic Product (GDP) as opposed to the 70 percent average for emerging economies.
The infrastructure gaps in Nigeria manifest in lack of good roads and railway network; poor power generation, transmission and distribution systems; poor water, health, housing, and education facilities, among others. Their poor supply or non-availability has limited the country’s development.
Stunted growth
According to research by Chukwuka Onyekwena et al., Nigeria’s infrastructure deficit has stunted its efforts towards achieving inclusive growth and sustainable development.
Several other experts have shared a similar view. A partner at Andersen, a tax and business advisory firm, Mr Michael Ango, noted that the dearth of key infrastructure in several sectors of the Nigerian economy had limited Nigeria’s growth potential and its competitive abilities globally.
This is true especially if Nigeria’s ranking in the 2019 World Economic Forum’ (WEF) Global Competitiveness Index is put into perspective. In 2019, the WEF assessed the competitiveness of various countries. Out of 141 countries assessed, Nigeria ranked 116 places in the WEF’s competitiveness index. A report attributed Nigeria’s low ranking to the poor state of the country’s infrastructure, which experts have affirmed.
Last year, the President and Chairman of Governing Council, Institute of Directors (IoD) Nigeria, Dr. Ije Jidenma, stated that Nigeria’s poor infrastructure had badly affected the social environment of the country, as well as the standard of living of the citizens, thus highlighting the significance of infrastructure to the socio-economic development of Nigeria and the need to tackle its gaps.
Over the years, successive governments in Nigeria have embarked on several infrastructural projects. This is seen as a critical factor in driving economic growth. However, much still remains to be done.
For instance, in 2022, the Minister of Mines and Steel Development, Olamilekan Adegbite, disclosed that Nigeria had 200,000 Km of road networks and only 60,000 Km were paved. Many other sectors also suffered from this as well.
While a number of issues such as corruption, vandalisation of existing ones, bureaucratic bottlenecks, delay, poor maintenance, and repairs of damaged facilities have all been cited as reasons for the poor infrastructure in Nigeria, revenue has remained a major challenge. This is especially so as the Nigerian government’s approach to fixing infrastructure over the years has traditionally been through budgetary allocation financed by government revenue generated from taxes, fees, and other sources. This is also augmented with borrowing.
To understand how much investment the government has poured into infrastructures, especially from a budgetary allocation perspective, Dataphyte reviewed the country’s budget, specifically the capital expenditure, which is considered a proxy for infrastructure investment.
A review of the Federal Government’s budget showed that between 2015 and 2023, infrastructure investment by the government was N27.82 trillion. That is the amount that has been allocated for capital expenditure by the Federal Government. The highest location was N5.97 trillion in 2023. This represents 14 percent of the country’s gross domestic product (GDP).
infrastructural deficit
Borrowing to which end?
With the country’s infrastructural needs, experts believe that budgetary allocation alone cannot solve the country’s infrastructural problem, especially with dwindling revenue. Thus, the government augments its revenue with borrowings from external sources such as multilateral development banks like the World Bank and the African Development Bank. The Nigerian government also borrows from bilateral development banks like the Exim Bank of China to finance infrastructure projects in the country.
For instance, from China alone, the Nigerian government borrowed $7.3 billion between 2000 and 2020, mainly to fund its infrastructures in different sectors.
The position of the Minister of Finance, Budget, and National Planning, Mrs Zainab Ahmed, is that the Federal Government will borrow more to fund critical infrastructure. But experts have faulted this model.
Deja vu?
Dataphyte’s review of Tinubu’s policy document/manifesto showed that the president-elect recognised infrastructure investment as a crucial driver of economic growth. He also highlighted ongoing investments and infrastructural projects in the country and committed to enlarging or completing these projects.
However, BudgIT, in its review, critiqued the policy document of the incoming president, noting that the infrastructure component of the document lacked a quantitative non-committal outlook.
BudgIT further noted that delivery mechanisms and processes were not properly articulated, leaving the assumption that the incoming administration would likely use the current government’s unssustainable project delivery systems,
Private sector partnership
Following these worries, coupled with the government’s weakening revenue generation capacity, Augusto and Co has suggested that the Nigerian government should consider a different approach to tackle the country’s infrastructural deficit. And for Tinubu’s administration, this is crucial.
The Credit Augusto and Co particularly suggested that the involvement of the private sector was a good way for Nigeria to tackle its infrastructural deficit.
According to an economist, Mr Michael Ango, this approach (borrowing to fund capital projects) partly accounted for the continued rise in Nigeria’s debt profile, resulting in increased cost of debt servicing to the country. He argued that project finance, mainly through debt, was not sustainable in the long run, especially as the country’s debt had risen from N7.56 trillion in December 2012 to N46.25 trillion at the end of December 2022.
If the N23.77 trillion ways and means is added, the total debt will amount to N70.02 trillion by May 2023 when the President-elect, Bola Tinubu, will be sworn in.
The Managing Director, MBC Securities Limited, Mr Olutoyin Ayoade, shared the same view in a report. According to him, the government, both at the federal level and state levels, could explore different models of public-private partnerships (PPP) — Build-Operate-Transfer (BOT), Build-Own-Operate (BOO) and Build-Own-Operate-Transfer (BOOT) – to create the required funding to bridge the infrastructure gaps.
According to Professor of Economics, Uche Nwogwugwu, Nigeria must begin to examine new models of infrastructure financing, stressing that “the private sector can play an important role in this area.”
The Chief Executive Officer, Centre for Promotion of Private Enterprise, Dr Muda Yusuf, said the Nigerian economy was “in a stumbling and fragile state and indire need of a new direction. The political transition offers a great opportunity to chart a new course.”
infrastructural deficit