Domineering the deficit

Rome wasn’t build in a day—in fact, it took roughly three centuries. The same might be said for Nigeria, except that Nigeria hasn’t got three centuries to spare. Pushing 200 million people today and set to have 400 million by 2050 if current demographic trends continue (it sees annual population growth of 3.2% annually), the country has no time to lose in closing its notorious infrastructure deficit if it is to take its place as Africa’s leader.

As an old saying among builders, statesmen, and businessmen in the country has it: “If we do not kill our infrastructure deficit, the deficit will kill us.” Said to have an infrastructure deficit of USD31 billion a year, the country’s roads are bad, its waterways are underexploited, its electricity is scarce and expensive, and its healthcare and access to clean water is lamentable. Its airports could also use work. Not that this should be cause for despair: Every dollar invested in infrastructure, in addition to short-term jobs created, boosts total GDP by another dollar.
How is it to do this? A report by the African Development Bank on Nigeria’s 2015 Infrastructure Plan estimated that Nigeria would need to invest about USD350 billion in its infrastructure sector over the coming decade to remain on par with its peers. As things stand, Nigeria’s total infrastructure stock represents between 20-30% of GDP—a figure that drastically needs to rise to roughly 70% to match that of other booming emerging economies such as Turkey, Malaysia, and Indonesia. As a figure, that translates into roughly USD3.1 trillion that Nigeria needs to spend to close its infrastructure deficit over the coming 30 years.
Though the government is aware of the magnitude of the challenge, private equity will also be key to closing the gap. But PPPs are also playing their role. The establishment of ARM-Harith Infrastructure Investment Limited (ARMHIIL), a joint venture between the Asset & Resource Management Company Ltd (ARM) of Nigeria and Harith General Partners Ltd of South Africa, has already pioneered an indigenously developed and managed USD250-million infrastructure fund focused on transport, energy, and utilities.
Offering investors the opportunity to invest in both brownfield and greenfield assets, ARMHIIL completed the Azura-Edo independent power project in 2018, a 459-MW open cycle power generation plant constructed on the outskirts of Benin City in Edo State that now generates between 6-9% of the entire national grid’s capacity. Other major infrastructure projects are also going forward with the help of private equity.
Not only is the Second Niger Bridge connecting the eastern Nigerian cities of Asaba and Onitsha nearing completion (a monumental 1.6-km bridge and 10.3-km highway and toll station set to be completed in 2022), but crucial extensions to the East-West Road, one of the country’s most important lifelines, are underway to finally connect Lagos with Calabar, the Tinapa Export Free Zone, and the Cross River Delta in the east. To complete the Oron-Calabar section of the road, which traverses the Cross River, the Ministry of Niger Delta Affairs is seeking a USD800-million loan from the China Exim Bank.
Many other projects abound. Of the most important is the Lagos-Kano standard-gauge line, which will connect the country’s two largest and most geographically disparate cities by rail. Though the Lagos-Ibadan leg of the line was completed in 2016, the Ibadan-Kano stretch is now expected to be completed by China Civil Engineering Construction Company by 2023 at a cost of USD5.3 billion.
The country’s other great infrastructural undertakings are the vast dredging of the Niger River from Baro in the center, not far from Abuja, to Warri in the south, and the ongoing construction of the Lekki Deep Water Port off the coast of Lagos, which when finished (estimates are for late 2020) will be West Africa’s most modern.