How to tackle Nigeria’s huge infrastructure deficit

Experts have renewed the call for government to take advantage of a variety of financing instrument options in the capital market to finance critical infrastructure, which is identified as the most challenging factor in doing business in Nigeria.

The experts, who spoke at an a seminar on infrastructure, in Lagos, at the weekend, argued that government needed to access a pool of less-volatile funds readily available in the market, to execute capital infrastructure.

According to them, Nigeria’s infrastructure needs are too massive to be dependent on the meagre yearly budgetary allocations, noting that a well-developed infrastructure has the potential to increase productivity, which would ultimately alleviate poverty, enhance job creation, facilitate trade, and promote innovation in the economy.

They added that the country is faced with a huge infrastructure gap like roads, public education, electricity production, healthcare, and access to treated water.

Specifically, the Director-General, Securities and Exchange Commission (SEC), Ms Mary Uduk, speaking on the theme: “Bridging Nigeria’s infrastructure Gap, the Capital Market Option,” said for government to reverse current growth trend, diversify the economy and develop infrastructure, now is the time to leverage the capital market for sourcing of infrastructure development financing.

Uduk, who was represented by the Head of Department, External Relations, SEC, Sufian Abdulkarim, noted that the market provides an enabling environment for private investments in infrastructure projects.

She said: “We believe that the establishment of an active infrastructure fund via the capital market, as being pursued by stakeholders would be immensely beneficial in closing the infrastructure gaps in the country.

“A report by the African Development Bank on Nigeria’s Infrastructure Plan in 2013, estimated that Nigeria would need to invest about $350billion in its infrastructure sector in 10 years to be at par with its peers.

“There are other estimates that have put this figure at slightly higher. The government, in recognition of this is doing its best to close the infrastructure gap as outlined in the Economic Recovery and Growth Plan (ERGP) for 2017-2020.”

Uduk further argued that international capital markets are the largest and deepest pool of financing in the world, and in conjunction with local markets, which represent an essentially untapped source of funds for infrastructure projects; they can make a huge contribution to economic development, if effective transaction structures are developed.

According to her, there are various sources of funds available in the market, which can be harnessed for infrastructure development such as the pension funds, real estate investment trust, and collective investment scheme.

She maintained that government cannot be the sole provider of infrastructure, noting that active private sector participation is also needed to bridge the gap.

The Chief Executive Officer, FMDQ, Bola Onadele, said infrastructure is central to economic development, adding that the Securities Exchange is committed to tackling the housing infrastructural deficit in Nigeria, through mobilisation of funds from the capital market.

Onadele, who was represented by Associate Executive Director, Corporate Development, FMDQ, Ms Kaodi Ugoji, noted that the Exchange has set up a housing development project team to work directly with the office of the Vice president.

He added that the Exchange has been working with stakeholders and government to develop products that will drive the capital market and the Nigerian economy in the last four years.

“Sukuk bond has been a success no doubt, but there is a need to expand Sukuk bond, which the Federal Government introduced. Infrastructure is one thing we need to shore up to achieve our goal as a country,” he said.

An investment banker and Head, Debt Capital Markets, FBNQuest Merchant Bank Limited, Oluseun Olatidoye, said the capital market represents a very good platform for raising funds for infrastructure development going by some landmark transactions in recent years.

According to him, the market has funded over 26 roads across the six geopolitical zones in Nigeria with about N200billion on the FGN Sukuk I and II.

“We have raised N11.4billion for the development of primary, middle, and secondary schools facilities in Osun State, we have funded the development of affordable housing on the Mixta Real Estate Plc Bond Issues, and we have developed a number of roads, bridges, health facilities using the opportunity presented by the capital markets,” he said.

Olatidoye further stressed the need for sound macroeconomic and policy frameworks to enable the capital market attract investors to long-term domestic projects.