Fixing Nigeria’s Decades-long Infrastructure Decay
The federal government’s resolve to address Nigeria’s long-running infrastructure problem to reshape her economy is a step in a right direction, but achieving this goal will depend not on “how much” but “how well”, writes Chika Amanze-Nwachuku
Acting President Prof. Yemi Osinbajo penultimate week, signed the belated 2017 appropriation bill into law.
The budget, which was passed into law by the Senate last month, was raised to N7.44 trillion from the N7.28 trillion earlier proposed by President Muhammadu Buhari in December last year. Osinbajo stated at the signing that the budget would be implemented in line with the recently launched Economic Recovery and Growth Plan (ERGP), aimed at bolstering Nigeria’s ailing economy. He emphatically stated that the 2017 budget “will trigger activities in the domestic economy, which will lead to job creation and more opportunities for employment, especially for our youth.”
Details of the budget as provided last week by the Minister of Budget and National Planning, Senator Udoma Udo Udoma, showed statutory transfers of N434.41 billion; debt service of N1.66 trillion; sinking fund of N177.46 billion to retire certain maturing bonds; non-debt recurrent expenditure of N2.99 trillion; and capital expenditure N2.36 trillion (inclusive of statutory transfers).
He identified some of the major capital allocation sectors as the Power, Works and Housing Ministry, which got N553.7 billion; Transportation – N150 billion, Defence – N104.24 billion, and Interior – N151.91billion. Udoma also disclosed that N40 billion was allocated to defray the electricity debts of the ministries, department and agencies (MDAs). The 2017 Appropriation bill was predicted on a benchmark crude oil price of US$44.5 per barrel and oil production estimate of 2.2mbpd.
The overall projected fiscal deficit was put at N2.36 trillion, about 2.18 per cent of gross domestic product (GDP).
The huge amount allocated for debt service in the 2017 budget proposal has continued to elicit condemnations from economic analysts, who noted that the allocation of 24.73 per cent of the overall budget proposal to debt service was a sign that another debt crisis is brewing in Nigeria. Analysts also picked holes on the dilated overheads, emphasis on spending and huge recurrent expenditure over allocation for capital projects. However, other analysts have argued that it is not a sin for a country to borrow money, but the concerns should be about how the money is utilised.
They pointed out that in the past, monies borrowed for capital projects were not utilised for that purpose, but instead, were diverted to private pockets. They reasoned that the government should hit the ground running by making funds available for capital projects.
Need for Robust Infrastructure Nigeria’s infrastructure across board is in bad shape. Most major roads and bridges are in dilapidated condition and require major repairs; the power sector is still bedevilled by sundry issues, the health and education sectors are equally in poor condition. Fixing these problems could create millions of jobs; curb the rising unemployment, reduce crime rate, and return the recessed economy to a sustainable growth path.
The United States drew itself out of the 1930s Great Depression through massive infrastructure investments. In fact, established countries like United Kingdom and Germany invest nonstop huge sums of money to ensure the continuous operation of their creaking old infrastructure networks, while many developing nations are starting from a rather clean slate and are even investing big in latest technologies.
At an advocacy roundtable organised last year, by the Nigeria-British Chamber of Commerce in Lagos, experts posited that the desired national economic development will remain a mere wish that cannot be achieved unless necessary actions are taken to bridge the infrastructure gap.
Managing Director, African Finance Corporation (AFC), said Andrew Alli, who spoke on ‘Achieving Sustainable Development through Infrastructure -The Role of the AFC.’, argued that for a sustainable infrastructure development to happen, policy instability, poor legal and political framework, lack of a holistic view of national planning, lack of coordination between government agencies as well as limited capacity of civil servants must be addressed.
He stressed that stakeholders must tackle infrastructure challenges creatively, target private sector funding and integrate training and job creation components into projects from conception, adding government must also ensure a favourable environment that would ease cost of doing business.
He attributed project failure in Nigeria to overestimate revenue and growth potential, insufficient attention to mitigating and controlling risk at the design phase, lack of confidence between the project stakeholders, ability to monitor project development and predict emerging risks and poor planning of asset operation.
Importance of Infrastructure Robust infrastructure could put millions of Nigerians to work in decent paying jobs. Electricity is crucial to fuel the economic growth of a country; a road improves productivity; Schools increase education levels and productivity. And so on. These all have important medium- and long-run implications for an economy.
A key benefit of infrastructure, especially transport infrastructure, is the reduction of transport costs, which helps to create new markets, fuels further agglomeration, which in turn fosters competition, spurs innovation, lowers prices and raises productivity, leading to an increase in living standards.
Group Executive Vice Chairman, SIFAX Group, Dr. Taiwo Afolabi, cautioned recently that the lack of critical infrastructure could hinder the success of the federal government’s drive to improving the ease of doing business in the country and urged that the problem of infrastructure deficit should be urgently addressed in order to compliment the executive orders signed recently by the acting President.
To spur economic growth and development, the federal government has taken the bull by the horn and has taken steps to bridge the infrastructure deficit.
At the third Nigerian Stock Exchange (NSE) & Bloomberg Chief Executive Officer Roundtable in Lagos recently, the Minister of Finance, Mrs. Kemi Adeosun had said the federal government was commitment to infrastructure development and economic diversifying. She said about N200billion was invested on roads in 2016.
Adeosun said the N200 billion, which was an increased on the N90 billion spent in 2015, is out of the N1.2 trillion earmarked for capital projects to ensure ease of doing business.
According to the minister, the government will continue to prioritise infrastructure development to unlock growth potential, pointing out that the diversification of the economy would not be achieved without a good transportation system and power supply to improve ease of doing business.
The minister said the country was very vast and to actualise her potential, infrastructure development was very crucial for sustainable growth and development.
A ‘Big Plan’ for Infrastructure To this end, Adeosun said last week that her ministry was set to release N350billion, being the first tranche for the capital votes included in the 2017 Appropriation Act.
The finance minister, who spoke at the public presentation of the 2017 Appropriation Act, emphatically stated that the government had enough cash available to commence the execution of key projects and initiatives scheduled for the 2017 fiscal year. “We are ready, we are having a cash-plan meeting very soon and after that, N350 billion will be released as first tranche of capital releases for the 2017 budget,’’ the minister said.
Speaking in the same vein, Udoma, listed some major capital expenditure allocations as N553.71billion for Power, Works and Housing; N241.71billion for Transportation; N150 billion for Special Intervention Programmes; N139.29 billion for Defence; N104.24 billion for Water Resources; N81.73 billion for Industry, Trade and Investment; N63.76 billion for Interior; N151.91 billion for Education (including Universal Basic Education Commission); N55.61 billion for Health; and, N103.79 billion for Agriculture.
Some major initiatives in the 2017 Budget include: N100 billion provisioned for a new Social Housing Programme; N46 billion for Special Economic Zone Projects to be set up in each of the geo-political zones to drive manufacturing / exports; N16 billion voted for the revival of the Export Expansion Grant (EEG) in the form of tax credits; N15 billion to recapitalise Bank of Industry (BoI) and Bank of Agriculture (BOA) to strength their capacities to support micro, small and medium scale enterprises (MSMEs).
Roads and Bridges About 65 road projects are included in the budget. According to Udoma, the over 65 roads and bridges undergoing construction and rehabilitation are located across the six geopolitical zones of the country. The breakdown as captured in the budget are as follows: N10billion for the rehabilitation/reconstruction and expansion of Lagos-Shagamu-Ibadan dual carriageway Sections I & II in Lagos and Oyo States; N13.19bn for the dualisation of Kano-Maiduguri Road, Sections I-V;
N10.63bn for rehabilitation of Enugu-Port Harcourt dual carriageway, Sections I-IV; N7bn for the construction of Second Niger Bridge including access roads phases 2A & 2B; N7.12bn for the dualisation of Abuja-Abaji-Lokoja road; N9.25bn for the dualisation of Obajana junction to Benin road Phase 2 Sections I-IV; N7.5bn for the rehabilitation of Onitsha-Enugu dual carriageway; N7bn for the construction of Bodo-Bonny road with a bridge across the Opobo channel; N3.3bn for the rehabilitation of Ilorin-Jebba-Mokwa-Bokani road;
N3.5bn for the dualisation of Odukpani-Itu(SPUR IDIDEP – ITAM) – Ikot Ekpene federal highway Lot 1: Odukpani-Itu bridgehead; N1.5bn for the dualisation of Kano-Katsina road Phase 1; N2.24bn for the dualisation of Suleja-Minna Road, Sections I & II; N2.3bn for Gombe-NumanYola Phase II (Gombe – Kaltungo); N2.7bn for the construction of Kano Western bypass; and N2.03bn for the construction of the terminal building at Enugu airport. Given the huge amount of money that would be required for actualisation of these laudable projects, there have been growing concerns about the possibility of raising funds for the projects.
But Udoma allayed those fears when he stated that there would be prudent management of overhead costs in order to provide adequate funds to execute capital projects.
He said strenuous efforts were being made to find the resources required. “We are challenging our revenue generating agencies, particularly the FIRS and Customs, to improve efficiency and broaden their reach so as to achieve the targets set for them in the 2017 budget”, he said.
The implementation of the 2016 budget was hampered by a combination of massive drop in oil prices and disruptions in crude oil production, which resulted in significant shortfalls in the projected revenue.
There are also concerns that the dwindling oil price from the 2017 high of $55 per barrel in February this year, may hinder the attainment of the 2017 target. This development, analysts said, should compel the government to not only strive to boost internally generated revenue, but to strengthen alternative revenue sources to shore up the country’s foreign earnings.