It’ll take 300 years to provide minimum needed infrastructure development in Nigeria

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Representative of the African Development Bank Group at Nigeria’s employers’ summit organised by Nigeria Employers Consultative Association has said it will take 300 years to provide a minimum level of infrastructure needed for development in Nigeria because of the poor rate of infrastructural investment.

Mr Lamin Barrow, Director-General, Nigeria Country Department, African Development Bank Group, said this in his keynote address at the summit, which held on Monday in Abuja.

He highlighted macro-economic instability such as low productivity, inadequate access to credit for Small and Medium Enterprises, infrastructure and logistics deficiencies, especially inadequate power supply, as the major bottlenecks limiting full exploitation of the non-oil sectors of Nigeria’s economy.

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Barrow said, “Nigeria faces major infrastructure deficits that inhibit its ability to diversify production in the non-oil sectors. According to the World Bank’s 2022 Public Expenditure Review report, meeting Nigeria’s huge infrastructure needs will require $3 trillion by 2050. At the current rate, it will take Nigeria 300 years to provide a minimum level of infrastructure needed for development.

“To change this narrative, Nigeria should mobilise the private sector for infrastructure development and service delivery, which would also reduce the fiscal burdens on the federal and state governments. Energy sector investments remains one of the most critical and urgent needs in Nigeria.

Barrow went on to say that key policy priorities to change the narrative and accelerate national development include acceleration of domestic resource mobilisation.

He said, “Nigeria’s revenue-to-GDP ratio, at about eight percent, is among the lowest globally and lags behind the West African average of 13 percent. Nigeria currently faces huge fiscal deficits, estimated at six percent of GDP, attributable to high public expenditures amidst dwindling revenues from crude oil exports.

“Other measures that should be prioritised include improving tax collection and tax administration, plugging leakages in tax collection and enhancing the efficiency of public investment programmes.

“The agriculture sector’s contribution to GDP remains important and provides a sure route to sustainable revenue generation and driving transformation of the economy. However, labour productivity in the sector measured by agriculture value added per worker, has remained stagnant at around $5,500.

“Nigeria remains a net importer of food despite generous endowment of arable land and a favourable climate in many parts of the country. Between 2010 and 2020, the annual food import bill averaged $6.4 billion while food exports averaged $1.2 billion over the same period.

“One way to accelerate the development of agro-industrial value chains is by unlocking the opportunities in the sector, including by developing and de-risking of agricultural value chains and attracting private sector food and agribusiness firms into rural areas.

“That is why the African Development Bank, together with our partners – Islamic Development Bank and the International Fund for Agricultural Development – is supporting the implementation of a $518 million Special Agro-Industrial Processing Zones’ (SAPZ) programme in seven states and the Federal Capital Territory. There is strong interest from 20 other states, which will be supported in the second and subsequent phases.

“Through SAPZs, smallholder farmers can evolve into thriving agri-business through a combination of measures including market linkages, technology transfer and improved access to finance and other inputs.”

Hitting on the issue of infrastructure, Barrow said, “With a total installed generation capacity of 13GW, the average power distributed during the first half of 2022 was only about 4GW, less than one third of the installed capacity. Providing reliable and affordable energy services will make Nigerian industries more competitive and accelerate the country’s integration into regional and global supply chains. To remove the barriers to non-oil trade and exports, Nigeria must decisively fix its power sector once and for all.

“While tapping its abundant gas resources as a transition fuel, Nigeria should invest massively in renewable energy generation, especially solar, leveraging the platform of the $25 billion Desert-to-Power initiative aimed at providing electricity for 250 million people across the Sahel, including the northern parts of Nigeria.”

The AfDBG Country Director-General added, “A vibrant and competitive private sector can accelerate diversification of the economy and boost exports. However, the private sector development in Nigeria is hamstrung by policy inconsistencies and implicit taxation.

“Many private sector firms in Nigeria are overburdened by implicit taxes. They provide their own electricity, sink boreholes to get access to water and repair roads in their towns and neighborhoods.

“It is therefore not surprising that foreign direct investment (FDI) inflows have decreased from $8.8 billion in 2011 to only about $469 million in 2022, the lowest in a decade.

“The unification of the exchange rate management system is an important reform by the new administration that will enhance transparency in the allocation and access to foreign exchange, as well as eliminate distortions to boost export competitiveness.

“The removal of fuel subsidies also offers a great opportunity to drive economy-wide efficiencies and enhance productivity growth through increased investments of the savings in infrastructure, education and health sectors.

“Closer collaboration and dialogue between the Federal Government and the private sector are necessary to inform policy making and position Nigeria as an ideal investment destination.

“To this end, Nigeria can also benefit from the experience of countries that have been successful in attracting FDI into their manufacturing sectors. For example, in 2015, the French chocolatier Cémoi, incentivised by a friendly business environment, established its first chocolate processing factory in Côte d’Ivoire with an annual production capacity of 10,000 tonnes.

“Nigeria can become a manufacturing hub in Africa if the Federal Government implements a bold strategy to take advantage of investment and market access opportunities. Rising labour costs and technological upgrading in countries such as China, India, and Brazil offer an excellent opportunity to developing economies, including Nigeria, to attract FDI and diversify their exports.”

Barrow also spoke on promotion of trade and regional integration. He said, “Trade offers a great opportunity to further diversify the Nigerian economy. With the coming into force of the African Continental Free Trade Area, Africa is becoming more integrated, with a larger market for exports from Nigeria.

“Developing regional infrastructure and putting in place the requisite trade policies are a necessary condition for tapping opportunities in the regional and international markets. A good starting point is the effective utilisation of trade agreements to which Nigeria is currently a signatory. However, Nigeria’s trade policies should prioritise the promotion of value-added exports.

“The significance of the non-oil exports in driving inclusive growth, sustainable development job creation, especially for the women and youth, cannot be overemphasised. We look forward to the discussions at this summit to help inform the new narrative for expanding trade and non-traditional exports as well as for strong partnerships to transform Nigeria into a more resilient and export-oriented economy.”