Coronavirus leaves Nigeria with no alternative to critical infrastructure spending
If Nigeria needed a reason to stop paying lip service to the its infrastructure needs and return the country to full economic strength, the fallout of the new coronavirus outbreak makes a compelling case.
The virus-related economic disruption and oil market downturn are expected to hammer a 3.4 percent contraction on the economy going by IMF’S predictions and have caused the FG to roll out palliatives to households and businesses.
While paying people’s wages, supporting the most vulnerable and keeping businesses afloat are important priorities in the immediate term during an unprecedented crisis, these measures alone will not bring longlasting results, said Ernst & Young Global in a report on “Repairing the damage from COVID-19.”
“By contrast, investment in new infrastructure, such as hospitals, schools, renewable energy and digital networks, will create jobs and deliver tangible assets that will fuel long-term economic growth,” said E&Y.
The idea that government can help stimulate the economy through its spending is one that can be traced back to the economist John Maynard Keynes during the 1930s. The relevance today is unquestionable.
According to a 2014 study by the IMF, an unanticipated increase in capital spending of 1.0 percent of GDP leads to a 0.4 percent uplift in output that same year and a 1.5 percent rise four years later.
“This economic dividend occurs because building new infrastructure lays the groundwork for future economic growth, whether that’s an improved transport network to move goods, a digital backbone to power a new economy or education facilities to train a skilled workforce for the future,” said E&Y. “Moreover, countries that spend on new capital stock tend to attract more private investment.”
For Nigeria which will need a quick rebound from COVID-19 blows as opposed to the low growth cycle suffered post-2016-recession, this means investing in new infrastructures is the only way out.
Old message
The call for the government to focus on critical infrastructure investment in the country of 200 million people isn’t new.
The African Development Bank (AFDB), The World Bank, IMF, trade unions and associations, economists and even public office holders have clamoured for more investment in the country.
Last year, Zainab Ahmed, minister of finance, budget and national planning, said Nigeria’s infrastructure gap would require an estimated sum of $3trn to bridge over a 30-year period.
Compared to emerging market economies, Nigeria’s infrastructure gap is 35 percent of GDP, with major challenges in the electricity sector, low and inefficient capital spending, and road and port infrastructure constraining transport and trade, according to the IMF in 2019.