PPP, private capital, solution to infrastructure development…Experts
Investment and finance experts over the weekend reached a consensus that the solution to inadequate infrastructure financing lies in private capital funding as well as Public private partnership (PPP) initiatives.
According to them, for the fact 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.
Acting Director General of Infrastructure Concession Regulatory Commission (ICRC), Engr. Chidi Kingsley Izuwah, speaking at the 2017 annual conference organized by the Finance Correspondents Association of Nigeria (FICAN), recently in Lagos, said that Private capital enhances transparency, borrowed funds are usually safely deployed.
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 inter-dependencies 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.
The Chief Executive Officer, Viathan Engineering Limited, Mr. Ladi Sanni said that considering the fact that Nigeria needs about $100million annually to begin proper infrastructure financing, which the government alone cannot provide,but fingered concerns around political risks.
He added that among other areas, the government needs to ensure that the judiciary understands that requirements of infrastructure financing.
