The recent study conducted by Mckinsey on Nigeria's
Infrastructure requirement threw up the need for the investment of well over 31
Billion Dollars investment annually, well over a 10 year period for Nigeria to
bridge her huge infrastructure deficit. Given the huge amount required therefore, it is
near impossible to expect government to foot the entire bill, neither will
traditional project finance models essentially leveraging medium to long term
funds from Banks and Development Finance Institutions
do much, given huge of funds required for
infrastructure projects and the mirades of needs that DFI's contend with on the
African Continent. So projects such as the 2nd Niger-Bridge, the East West
Road, Dredging of the River Niger to allow Sea-going Vessels to Dock at in-land
Ports, a Standard guage rail line connecting the State capitals and economic centres
of Nigeria from North to South, Power Dams, Electricity Transmission Lines,
Electricity Distribution Infrastructure and other critical infrastructure are not attended to, affecting the quality
of Economic growth, the creation of jobs and the enhancement of the
economic well-being and standard of living of Nigerians.
Furthermore given the fact that in government, there are competing needs and limited resources, the projects
needed to jump-start Nigeria's industrial revolution become mere pipe-dreams. So how do we move forward? Where are the
risk-takers who will partner with government knowing the risk involved with
Community resistance to Tolling and all other forms of payment for access to
public infrastructure once concession-ed? Apart from these, there are also other encumbrances to Public Private Partnerships, which should otherwise have helped unlock the required funding for economically viable public infrastructure projects, chief among such obstacles
confronting private participation in public infrastructure provision is
funding! A project such as the Lagos Ibadan Expressway will require well over
one billion dollars to remodel the road and without a good Financial Model, how
will Financial Institutions come together to fund such projects?
DRIVING PPP's THROUGH STRONG REGULATIONS AND BUILDING AN
ALTERNATIVE FINANCIAL MODEL FOR INFRASTRUCTURE PROJECTS
Its been said that government cannot be left to go it alone
with regards to bridging infrastructure deficit, but we all know the political
risks as well as Financial model risks involved in putting together a Public
Private Partnership deal? Hence, you find the failure of PPP projects the like
of the Lagos Ibadan Expressway, the Lagos Local Airport and lately the Lekki
Link Bridge. But we cannot allow that to frustrate the delivery of economic
infrastructure which have potential to create jobs as well as leapfrog growth
and development. So we need to think through a proper financial model and a
strong regulatory platform for delivering PPP's - one that ensures that
projects time horizons are shortened, project partners reap benefits derivable
from such projects, with minimum resistance from users of such economic
infrastructure, citizens, local community and politicians.
BRIDGING THE FUNDING GAP - HOW CAN PENSION FUNDS HELP?
With the Nigerian Pension reforms, we suddenly have a
situation where we have trillions of naira sitting with Pension Custodians
which are deployed to all manner of investment which do not add much value. For
a while, the CBN under its Financial System Strategy - FSS2020 - has been trying to help unlock
Pension Funds for infrastructure Financing with very little success thus far. I
reckon that government needs to throw its weight behind this initiative as it
will have multiplier effects in the sense that once we are able to develop
critical economic infrastructure such as Roads, Bridges, Rail as well as Power
and Energy Infrastructure. it will automatically reduce the cost of doing
business, create more jobs, lead to output gains with consequent impact on our
Gross Domestic Product.
THINKING OF AN ALTERNATIVE INFRASTRUCTURE FUNDING MODEL -
ONE THAT OFFERS A WIN-WIN PROPOSITION FOR GOVERNMENT AND ITS PRIVATE SECTOR
PARTNERS
I reckon also that in terms of gains accrual to Pension
Custodians and Administrators, Infrastructure Financing will have very positive
impact as it will help value addition and risk diversification. Also from the
Infrastructure Project Owners and Off-takers, the deployment of patient capital
will lessen the burden of having an investment-mismatch and limit defaults. My
take therefore is that government should throw its political weight behind
birthing an alternative funding model for infrastructure projects - one that
meets Nigeria's economic target, makes us competitive in terms of the ease of doing business and delivers quality growth which creates jobs and enhances the living standards of Nigerians.
No comments:
Post a Comment