Infrastructure suffers, as Nigeria seems to have its hands full with other governance issues; hence the country approaches the private sector for assistance. EHIME ALEX writes on the journey so far
Following the devastating impact of the Coronavirus Disease on Nigeria’s economy, the country lists 36 projects across diverse sectors of its economy for privatisation. According to the country’s Bureau of Public Enterprises, the sale and concessioning of the projects are expected to provide investment opportunities that will be of interest to local and foreign investors.
Over 200 assets gone
The country had, in the past 32 years commercialised and concessioned 234 public assets, which added N1tn revenue to government’s coffers. A breakdown of the assets, dating back to the time of the defunct Technical Committee on Privatisation in 1989 to the creation of the BPE in 1999, showed that the agriculture sector accounted for 32, banking and finance (31), cement (15), energy construction and services (14), hotels and tourism (13), industry and manufacturing (9), oil and gas (13), ports (31), power (24), mines, and steel (38), automobile (8), paper and packaging (4), sugar (4) and telecom.
The new projects, expected to generate N493.40bn revenue from various transactions, as approved by the National Council on Privatisation, include nine categorised as energy, eight in industries and communication, six in development institutions and natural resources, while 22 others are carried from the 2020 projects to the ‘BPE 2021 Work Plan’.
Faced with many challenges in sustaining economic growth and improving its broad development indicators, Nigeria has been battling to expand and maintain investments in infrastructure. Arising from several years of poor economic management, the country has experienced a prolonged period of economic stagnation, rising poverty levels and declining public institutions.
World Bank supports privatisation
In the light of the precarious fiscal position, the World Bank believes there has been a growing consensus among professionals, policy-makers and economic development planners that privatisation of public enterprises can yield substantial benefits relating to greater efficiency, renewed investment, budgetary savings and preservation of scarce resources for the improvement of the country’s economic condition.
Meanwhile, report shows that Nigeria’s fiscal deficit is likely to print at five per cent of Gross Domestic Product in 2021, slightly lower than the 2020 deficit, but significantly higher than the five-year average of 3.4 per cent, and that the high debt servicing cost at 2.2 per cent of the GDP 2021 will continue to limit fiscal space.
Opportunities
Recently, however, the BPE, in collaboration with the Nigerian Exchange Limited and the Nigerian Investment Promotion Commission, showcased the investment opportunities available from its privatisation activities, a virtual meeting attended by key stakeholders from different sectors of the economy.
According to the Director-General of BPE, Mr Alex Okoh, the government is dedicated to improving its public-private investment engagement framework to generate the confident needed to attract private sector capital in the nation’s infrastructure space.
“The recent policy by the Federal Government on Public Private Partnership simplifies the roles of engagement and clarifies the roles of various agencies of government in the PPP process,” the BPE boss said at a webinar.
The Vice President, Yemi Osinbajo, who is the Chairman of NCP, in a keynote address at the webinar, noted that past sectoral reforms had brought about extensive economic and social gains, but that the reforms had yet to yield the anticipated results. According to him, the Federal Government is working with key stakeholders in various sectors to address some of the challenges hindering the growth projections.
His words, “Undoubtedly, a major challenge of the Nigerian economy is the limited infrastructure. It is estimated to be about 35 per cent of GDP deficit stock.
“Government alone cannot provide the finance needed to meet the huge infrastructure deficit. So, it is imperative to use the PPP to promote infrastructure development.”
Prioritising privatisation
In reiterating the importance of investment in Nigeria, the Minister of Finance, Zainab Ahmed, said given the current global economic outlook impacted by the pandemic vis-à-vis Nigeria’s dwindling revenue, the privatisation move became a priority for the government to ensure a robust partnership with the private sector.
“Indeed, Nigeria is an investor’s delight, despite its numerous challenges,” the minister said, adding that the country remains a key destination for foreign investors. “Given our population, Nigeria remains one of the economic hubs in the African continent that is quite attractive.”
Opportunities in water
The country’s huge investment opportunities also lie in hydropower, irrigation and water, the Minister of Water Resources, Suleiman Adamu, noted in a goodwill message.
On showcasing the investment opportunities in the Nigerian government’s privatisation and economic reform programme, the Governor, Central Bank of Nigeria, Godwin Emefiele, says over N350tn is needed to support infrastructure investment in the country over the next decade.
If the investments are made, the country is likely to attain GDP growth rate of over 10 per cent yearly, Emefiele said.
“It will be difficult to support these investments using government’s resources alone. Harnessing available funds from the private sector is, therefore, vital,” he added.
Enter InfraCo
The projects, he further said, will require viable public partnership arrangement that provides investors with bankable projects that are socially and economically beneficial.
His words, “It is as a result of this position that the CBN, working with key stakeholders such as the African Finance Organisation and the Nigerian Sovereign Investment Authority with the approval of President Muhammadu Buhari in setting up the infrastructure corporation of Nigeria, which is an entity that seek to raise private sector capital to support investment in key infrastructure in Nigeria.”
He assured that the Infrastructure Corporation of Nigeria would begin full operation by the third quarter.
“We believe that through partnership with the private sector, InfraCo will be able to leverage close to N15tn over the coming year which will help to close the gap of our infrastructure funding needs and will help to catalyse growth in other key sectors of our economy,” Emefiele said.
The webinar provided opportunity for public and private sector stakeholders to explore ways that could further help to achieve Nigeria’s objective of enabling more private sector investment in key government assets, given the beneficial impact it could have on our economy, he noted.
