By Arize Nwobu
SAT, AUG 29 20202-theG&BJournal-The importance of infrastructure in expanding national production capacity and increasing a country’s wealth cannot be overemphasized. Research reports have noted that lack of infrastructure in many developing countries is one of the most significant limitations to economic growth and achievement of Millenium Development Goals.
Economic infrastructures include roads, rail, airports, bridges, tunnels, cycle highway and water. Others include education, technology, telecommunication, standards and values, environment, safety and resilience.
Soft infrastructures include all the institutions that maintain economic, health, social and cultural standards of a country such as law enforcement agencies, educational programmes, official statistics, emergency services and others.
Singapore is noted as the global leader in overall infrastructure with a value of 95.4 on a scale of 0-100. The country is noted to have the best road quality in terms of extensiveness and conditions of the roads, followed by Switzerland and Netherland.
According to CNN, the top ten African countries in infrastructure development are Ivory Coast, South Africa, Sao Tome and Principe, Botswana and Tunisia. Others are Cameroon, Algeria, Egypt, and Mauritius. The latter is said to have 100 per cent paved or tarred roads.
Nigeria’s infrastructure deficit has been estimated at 25 per cent of GDP which is below the 70 per cent international benchmark. According to the National Integrated Infrastructure Master plan (NIIMP), Nigeria needs N31 trillion ($100 billion annually) in the next 30 years to close the infrastructure gap.
Central Bank of Nigeria (CBN) is making concerted efforts with other national institutions and the Federal Government to enhance the stock of infrastructure and boost national productivity. In collaboration with the Africa Finance Corporation (AFC) and Nigeria Sovereign Investment Authority (NSIA), CBN floated an infrastructure development company known as Infraco Plc which is said to be world class.
According to CBN Governor, Godwin Emefiele, the purpose of the company was to support the Federal Government in building transport required to move agriculture and other products to processors, raw materials to factories and finished goods to the markets.
Emefiele noted that Infraco Plc would be managed by an Independent Infrastructure Fund Manager (IIFM) that would mobilize local and foreign capital, and that the company would take off with a combined debt and equity capital of N15 trillion projected over five years. Reportedly, the Monetary Policy Committee had noted with satisfaction on CBN’s immediate work on the updates and time lines for the establishment of the ‘’much needed entity’’.
Infraco Plc would focus on roads which account for about 80 per cent of all freight and passenger movements in the country. The National Planning Commission had noted that any improvement in road would positively impact the nation’s GDP. It has also been noted that poor quality of roads constitute a stumbling block to development as it makes transporting goods to become more expensive which fuels inflation.
Statistics show that Nigeria has a national road network of about 200,000 km, with local government roads making up 67 per cent (about 150,000 km) with most of them untarred. Federal roads make up 18 per cent (about 35,000 km) and account for about 70 per cent of the national vehicular and freight traffic,
State roads constitute 15 per cent (about 17,000km), and 78 per cent of the roads is noted to be in poor condition, while 87 per cent of Local government roads is in poor condition.
Prior to the conception of Infraco Plc, President Muhammadu Buhari had signed the Executive Order 7 (EO 7) in 2019 which provides for ‘’Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme’’.
The scheme is open to Nigerian companies(other than sole corporations), Institutional Investors, Collective Investment Schemes (CIS), Insurance companies, Investment Banks and pool of companies operating trough a special vehicle set up such as an Infrastructure Fund..
The objectives of the EO7 are, to enable the Government to leverage private sector funding for the construction or repair of eligible road infrastructure in Nigeria, increase the focus on the development of eligible road infrastructure projects in a manner that will generate value for money through PPP intervention and guarantee participants timely and full recovery f funds provided for the construction or repair of eligible road infrastructure projects in a manner prescribed in the Executive Order.
CBN Governor had called on investors to take advantage of the EO7 and invest in infrastructure. Experts have noted that returns to investment in infrastructure are very significant with an average of 30-40 per cent returns for telecom (ICT) investments, over 40 per cent for electricity and 80 per cent for roads.
It is expected that the combined efforts of Infraco Plc, Federal Government and others would enhance infrastructure and boost national productivity and wealth in the medium to long term.
Nwobu, a Charterd Stockbroker and Business Journalist wrote via firstname.lastname@example.org. Tel: 08033021230.