PROPERTY NEWS

CALLS for governments at all levels to put a lid on financing infrastructure and related projects in the real sector of the nation’s economy have been described as an unrealistic approach that cannot deliver the desired turn-around the whole world is expecting to see in Nigeria in the next few years.

Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, said last week that financing infrastructure was no mean task that would require governments’ involvement to bring the expected change and development.

He was responding to a submission by a participant at the 2nd Yearly Distinguished Lecture Series on "Banking sector reforms, aftermaths, and effects on infrastructure financing in Nigeria" hosted by Nigerian Institute of Quantity Surveyors (NIQS), Lagos chapter, held at the Nigeria Institute of International Affairs (NIIA), Victoria Island, Lagos.

A school of thought, which believes that the nation’s financial sector does not have the capacity to give infrastructural projects the needed impetus, has suggested that both the federal and state governments should explore alternative sources of revenue, such as the capital market, bonds and the like to fund infrastructure projects, in order to overcome the present lull in the sector.

The African Development Bank (ADB) describes infrastructure finance as the means of financing the establishment, maintenance, operation and improvement of a country’s physical infrastructure systems - transport, water, communications networks and power. Such projects need long-term funds that can be provided by the issue of bonds and through public-private partnerships.

In a recent report, ADB stated that the use of bonds for financing infrastructure has been limited in Africa and that the global economic crisis has constrained financing from international capital markets, resulting in substantial delays or even cancellation of important infrastructure projects across the continent.

It further stated that some countries, such as South Africa and Kenya, have issued infrastructure bonds, while others, like Nigeria and Uganda, have either signaled their intention to do so or started discussions with investors.

The Ogun State Government, for instance, recently indicated its intention to access the capital market through the floatation of a two-tranched sub-national debt instrument as an infrastructure bond.

Public-Private Partnerships (PPPs) are considered an alternative means of infrastructure financing. Important pre-requisites for a successful PPP include a clear policy framework, a legal system that ensures contracts are effective and enforceable, a long-term investment plan and an operating framework within government to properly manage the process. African governments, according to reports, have shown growing interest in the opportunities provided by PPPs to help fill the current infrastructure financing gap.

Director-General, Infrastructure Concession Regulatory Commission (ICRC), Mansur Ahmed, had disclosed at a regional workshop on Public-Private Partnership Policy and Infrastructure Financing organised by ICRC in Calabar in April last year, that Nigeria needs about $15 billion yearly over the next five to six years to finance its infrastructural deficits and meet up with its Vision 20:2020 development plans.

Chairman, NIQS Lagos chapter, Mr. Jide Oke, noted that it was widely accepted that no nation could develop without adequate improvement in its infrastructure facilities, such as power, potable water, healthcare, good roads, rail lines, effective and affordable telecommunication.

He, however, lamented the state of the nation at 50 years, saying, "It is therefore apalling that after 50 years of independence, our nation still lags behind other African nations in these vital facilities."

Though the nation’s banking sector had witnessed series of reforms in the last six years, beginning with the re-capitalisation and consolidation exercise, what was left to be seen is the salutary effect of the reform on the nation’s development, as credit to fund major infrastructure facilities projects is still hard to come by from the banks, majority of whom had reviewed their credit management policies.

He urged the present dispensation not to treat the issue of infrastructure provision and maintenance with kid gloves. "The new government of Dr. Goodluck Jonathan has to treat the issue of provision of infrastructure facilities in the country with all passion and seriousness, as with continuous lack of these, the whole essence of hope for attainment of rapid industrial development and making the country attractive to foreign investors would at best be a mirage."

Chairman of the occasion, Mohammed Faworaja, a former President of the Nigerian Institute of Architects (NIA), said if professionals within the built environment sector accept the Vision 20:2020 as a target, the issue of infrastructure financing and development must be on the front burner, as there cannot be any real progress if this is neglected. In his lecture, Sanusi, who was represented by the apex bank’s Deputy Director, Banking Supervision, Mr. Oke Ebedu, said part of the on-going reform was to ensure that the financial sector contributes to the real economy by serving as the driving force for infrastructure financing.

While noting that infrastructure development remained grossly inadequate relative to the nation’s requirements due to lack of funds, he said, however, that Nigeria could learn from the experience of other economies like Japan, Korea, China and Vietnam, where many programmes were funded by state budget or through government-controlled savings system (such as postal savings in Japan).

"The state invariably provided seed funding as equity in specialised development financial institutions like in Brazil and China. Some funding also came from development agencies such as IFAD, WB and ADB," he said.

To ensure the financial sector contributes to the real economy, including infrastructure financing, the following areas, he said, need further consideration:

• Leveraging the CBN Governor’s role as advisor to the President on economic matters to ensure that the financial sector contributes to the real economy;
• taking the lead in measuring more accurately the relationship between the real economy and financial sector and the transmission mechanism;
• evaluating continuously the effectiveness of existing development finance initiatives such as agriculture credits and import-export guarantees;
• taking the public lead in encouraging examination of critical issues for economic development such as impact of infrastructure like power, port and railways;
• leading further studies on the potential of venture capital and private-public partnership initiatives for Nigeria; and,
• cooperating with a state government to run a pilot programme in directing the financial sector’s contribution to the state’s social economic development.