Experts x-ray constraints on private capital financing
Due to inadequate infrastructure financing in the country, a group of investment and finance experts have reached a consensus that the way to go is by private capital funding.
These professionals believed that governments have finance constraints, long-term funding that is independent of government budget and boards in an ongoing basis is required, if big ticket projects must be embarked upon and completed.
Speaking at the 2017 annual conference organised by the Finance Correspondents Association of Nigeria (FICAN), in Lagos, Acting Director General of Infrastructure Concession Regulatory Commission (ICRC), Engr. Chidi Kingsley Izuwah, said that Private capital sanities corruption because nobody borrows to go and pay a bribe.
According to him, large transportation projects require ongoing investment amounts beyond the capacity of the Federal Government of Nigeria (FGN) and States in any single year, given competing priorities, adding that external funding sources are inevitable for long-term
As case studies have shown in India, Kenya, South Africa, and even Zimbabwe, Izuwah said Nigeria requires stable, multi-year funding mechanisms independent from annual fiscal constraints, “to catalyze long-term funding various sources: banks, contractors, pensions, donors, multilateral agencies and bond markets.
“PPPs cannot by themselves bridge the gap. Government spending needs to be more smartly deployed, to achieve the best value for money in any given project, e.g. through annuity payment contracts.”
He however said there are a number of major policy constraints to private investment inflows into infrastructure in Nigeria, broadly categorized into three areas namely: tariffs and regulations; public procurement approach and investment climate.
The ICRC boss further stated that Natural Gas monetization requires significant investment in prospecting, development, gathering, processing, production, transportation and delivery, as such, given the interdependencies in the value chain, highly specialized investors with strong appetite for onshore Nigeria risk are required. Similarly, mining requires significant prospecting, processing and transportation, all which requires lung-term funding.
According to him, private capital is a force for good, but a number of factors prevent Foreign Direct Investment (FDI) and cause diversion of capital to other countries where the investment climate is more favourable.
Izuwah, highlighted some of the constraints to include: government controlled tariffs which are disincentives to investment, just as incumbents limit scope for private sector participation; uncertainty, bureaucracy and opaqueness in contract bidding; preference for pay-to-build versus pay-for-service contract models; no transparency or due process in concession negotiations and awards; governments’ requirement for speed and haste to award contracts; lmited investment in project preparation by Ministries and Agencies; securing permits, contracts, agreements which are major hurdle for investors.
Motolani Oseni
