Nigerian Infrastructure Development and the Enterprise Revolution – An African Perspective
The general state of infrastructure across the African continent and especially sub-Saharan Africa is acutely discomfiting. With the exception of South Africa, the continent’s largest economy, the entire region is bogged down by severe infrastructure deficits that have frustrated development programmes and marred growth prospects. The Southern African Development Community (SADC) countries have been relatively better off in this regard with their efforts to drive area-wide development through trade agreements, resource pooling and multi-nation collaborations. Western Africa, on the other hand, has been bereft of similar benefits due to complex past and present exigencies. As a result, the economic potential of this region has hardly been scratched.
In June this year, the World Bank approved a $1 billion loan for Nigeria to fund multiple development programmes including expansion and enhancement of the country’s massively deficient power sector. An amount of $200 million was earmarked for investment in networking and technical upgrades to improve electric supply. While this concessionary, interest-free funding comes as an undoubtedly welcome development, it amounts but to a tiny fraction of Nigeria’s overall investment requirement in infrastructure. In August 2008, the Nigerian Debt Management Office (DMO) revealed that the country needed at least $100 billion in investment to develop four key infrastructure areas – power, rail, roads and oil & gas. The figure was calculated to align with the ambitious national goal of taking Nigeria to the top-20 world economies by 2020. Of the four sectors mentioned, power alone would require an estimated investment of between $18 and $20 billion over the next ten years. With a current installed capacity of 6,000 MW against the total requirement of 10,000 units, only 40% of Nigerians currently have access to electricity.
The collapse of basic infrastructure and social services was set off in the 1980s, after Abuja’s unhealthy dependence on oil exports decimated its agriculture and light manufacturing sectors. The static oil economy wiped out traditional and emerging livelihoods, creating rampant unemployment, poverty and degraded living standards. By 2002, per capita income was below the level for 1960, when Nigeria gained independence from British rule. In terms of infrastructure decline, power happens to be the most hardly hit, but the government readily admits severe shortfalls in a many other areas as well. For instance, the rail network is in shambles and today accounts for only 1% of national transportation1. The port service likewise suffers severe bottlenecks and inadequate capacity optimisation. The over 100,000 km long road network is in disrepair at best and barely usable at worst.
Because of Nigeria’s strategic location and the abundance of its natural resources, infrastructure development in the country has pan-African relevance. The human capital of 148 million that makes Nigeria the most populous African nation is a workforce of uncharted economic potential. The country’s thriving informal sector, estimated to be as high as 75% of the total economy, also conceals tremendous possibilities for inclusive growth. Rapid SME development has hence been the mainstay of successive governments since the reinstatement of civilian rule in 1999. Nigeria’s ability to kick-start an enterprise revolution that will fundamentally alter its macroeconomic imbalances remains the quintessential challenge of its 2020 goal.
Infrastructure development is clearly going to be the first building block in this endeavour, and ground realities are pretty harsh as present conditions go. For Nigeria, the larger impact of infrastructure deficits is the high cost of doing business, for large corporations and small enterprises alike. Lawmakers need to draw up a comprehensive blueprint to reverse this trend in a time-bound manner. The following are two key aspects in this consideration:
o The whole of Western African receives very nominal foreign private investment in infrastructure due to a slew of reasons ranging from high foreign exchange risks to low creditworthiness. The region’s subdued ability to raise debt and inclination towards infrastructure sectors with limited regulatory intervention are further obstacles. Nigeria needs to lead the way in enhancing access to equity debt as a means of attracting projects with viable private participation.
o The ability of local finance markets to fund infrastructure projects is very low across the continent. Local long-term local financing is almost non-existent except in South Africa, which has been successful in developing an indigenous capital market for consistent funding on convenient terms. The absence of similar capacity in the rest of Africa means most of it is dependent entirely on grants-in-aid and soft loans from international development agencies.
For developing African economies, increasing foreign investment on infrastructure while simultaneously developing avenues for credible local finance is a daunting task. The current Nigerian government under President UM Yar’Adua acknowledges the challenge by listing infrastructure development as a cornerstone component of the 7 Point Agenda for realisation of the 2020 goals as well as the Millennium Development targets. Some recent initiatives in this connection include the setting up of a federal mortgage bank, a housing authority and a national road maintenance agency.
That infrastructure will be the prime driver of all socio-economic development in Africa is given. What remain unclear are the ways and means that individual nations employ, and the ground effectiveness of such measures beyond official statistics and proclamations. Nigeria has the unique opportunity not only to reverse decades of economic stagnation but also to hold up an effective model for accelerated growth to the rest of the continent. The success of its long-term ambition gathers wider significance because it is bound to have a gradual spill-over effect on its immediate geography.
