The Africa Finance Corporation (AFC) has said Nigeria needs $3 trillion to fix huge infrastructure deficit in the country over the next three decades.
The AFC President/Chief Executive Andrew Alli, who disclosed this at the weekend during a news conference in Lagos, also called on government to allow cost-reflective tariffs so as to boost power supply in the country.
He regretted that while government must be a primary source of funding, Federal and State Governments’ fiscal inflows are grossly inadequate to match the pace of investments required in infrastructure.
Represented by a top executive of the corporation, Fowler Fagbule, Alli said the Nigerian government ability to spend is limited based on what it earns.
Extracts from the Nigeria Economic Recovery & Growth Plan 2017-2020 show that the Federal Government’s medium-term fiscal framework forecasts deficits of N7.6 trillion from 2017 to 2019. This he said, is evidence that the Federal Government resources are limited and additional resources will be needed.
Specifically, the power sector according to him, recently privatized, is still significantly government driven with challenges of transmission, gas supply, tariffs, payment security, and operational limits which has left the industry in critical state regarding suitability for long-term investment.
He said the overall effect is that Nigeria still struggles to provide an adequate supply of reliable power to its population of approximately 170 million people, as generation capacity was still about 3,038 megawatts at March, 2017. He believes that the country should generate 5000 megawatts by 2018.
“If we don’t have a cost reflective tariff, we will not have the kind of investment we want,” he stressed.
Alli further expressed concern that despite its recent unbundling, “This industry is at a critical juncture in terms of privatization, liberalization and other conditions for long-term investment sustainability, both by public sector and private financiers. Both the public and private sides have fallen short of requirements to create a bankable and sustainable sector. ”
Similarly, he said the transport sector is largely public financed (FGN) hence limited by annual fiscal constraints. The end result in Nigeria Alli added is that roads and rail typically get the most attention, but funding is “poor and opaque.”
Arguing that money is not the problem of infrastructure financing, Alli said other challenges that need to be addressed include: bad Procurement processes, structural problems that make it difficult for investors to get value for money, funding structure, maintenance, tolling, among others. He also, frowns at inadequate attention which Nigeria pays to meeting the needs of specific investors and projects already in progress, or on creating policy incentives that will spur investments.
“Even though the Country has proven gas reserves greater than oil reserves and world class deposits of tin, substantial iron ore and coal resources, unfavorable policies around pricing and access to acreage have limited infrastructure investment and development for several decades in Nigeria,” said the AFC boss.
In proffering solution to poor infrastructure financing, the AFC president said there should be major overhaul in approach, for large ticket billion-dollar projects to work.
Referring to the electricity sector, he said strict enforcement of all agreement by all parties to a contract is important. He however praised the Federal Government for decentralisation of the Nigerian ports via private sector concessions, which he said has allowed for planning and developing of port infrastructure and facilitation of financing for new construction through build-operate-transfer arrangement.
Alli said despite significant demand for rail transportation, traffic volumes have collapsed to almost zero due to lack of maintenance and capital expansion.