Aviation sector to benefit as CBN mulls N15tn fund

There are indications that the aviation sector will be part of top beneficiaries of a N15 trillion infrastructure fund expected to kick off by next month by the Central Bank of Nigeria (CBN).

Earlier this month, Godwin Emefiele, Governor of CBN had disclosed that the apex bank, African Finance Corporation and the Nigerian Sovereign Investment Authority would debut an InfraCorp Plc, providing a find of N15 billion to address the lingering deficits in infrastructure, a development, which would in turn impact the aviation, especially if industry players take advantage of the window.

The fund is expected to make available private capital that would support infrastructure investment and by extension have a multiplier effect on growth across critical sectors.

Emefiele had said the N15 trillion fund, coming as InfraCorp Plc and expected to be launched in October would enable the use of “mostly private capital to support infrastructure investment that will have a multiplier effect on growth across critical sectors.

With inflation hovering around 17.33 per cent as unemployment stands at over 33.3 per cent while rising debt poses grave dangers ahead for future generations, Muhammed Usman, a Senior lecturer at Ahmadu Bello University, Zaria, had noted that investment in infrastructure in the country is below par.

While stressing that between 2009 and 2013, Nigeria invested a paltry $664 yearly in infrastructure, which represents three per cent of its GDP, compared with an average investment of $3.060 or five per cent of the GDP in developed countries, Usman had said: “Infrastructural development plays a pivotal role in enhancing economic growth, improving living standards, reducing poverty, and contributing to environmental sustainability.”

Although stakeholders stressed the need for massive investment in infrastructure, noting that the efforts but the CBN remained laudable, they insisted that there was need for proper and sustainable plans that would lead to projected goals.

A professor of Economics at Babcock University and former President, Chartered Institute of Bankers of Nigeria (CIBN), Segun Ajibola noted that several hundreds of thousands of road network, rail lines, energy and power, water and others remained critical but sadly inadequate or dilapidated.

According to him, the deficits constrains the nation’s economy despite the growth in population, urbanisation and technological advancement, adding that the need for the provision of these essential infrastructures remains inevitable yet daunting.

“Hitherto, some reliance had been placed on other sovereigns such as China, international financial institutions such as the World Bank, ADB, etc. But there is limit to which what Nigeria can attract from these countries and institutions because of the not too friendly conditionalities usually imposed on developing countries like Nigeria.

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“Looking inwards in the manner being proposed by the CBN may be helpful. But then, the framework must be right. I will recommend a Private Partnering via collaborative arrangement between local and foreign interests adjudged competent in providing such infrastructures,” Ajibola noted.

He noted that PPP would improve on the quality of delivery, performance and accountability, noting that such interventions were expected to berth with relatively generous terms and business-like template.

Ajibola urged the apex bank to introduce framework for monitoring performance, which must be efficient and effective, adding that there must be shift from seeing intervention funds as free public funds, adding that such mentality must be tackled head long if the infrastructural fund would achieve the desired goals.

Olabintan Famutimi, former president, Nigerian American Chamber of Commerce and chairman of Tricontinental Group, noted that while the infrastructure deficits in the country remained worrisome and require intervention like the CBN funding, the country must tread wisely.

Famutimi was concerns about channeling fund into viable projects with economic benefits instead of politicizing economic and business decisions.

“We have huge infrastructure deficit. We need infrastructure but it is more about which infrastructure government is working on, funding source and the conditions of the fund as well as the overall effect on the economy,” he said.

Famutimi insisted that raising fund to finance infrastructure is not enough but critical examining of the economic outlook of the projects and the multiplier effects of on the nation remained sacrosanct.

An expert at PWC, Habeeb Jaiyeola noted that while Infrastructure funds are used across the world for the development of critical infrastructure, which guarantees constant returns on investment for investors, a critical element of the success of the funds remained adequate planning and strategic contracting.

“It is expected that the N15trn fund is channelled into critical infrastructure in the country that will open up sectors and markets as infrastructure challenges have been one of the major factors hindering the growth of some critical sectors in Nigeria,” Jaiyeola said.

A survey by African Development Bank (AfDB), had noted that for Nigeria to fix airport related infrastructural alone, over N1.5 trillion or $5 billion would be needed.

The bank’s projection was in line with the Federal Government’s aviation development roadmap to transform 24 airports to world standard through the public and private sector investment model.

In the Federal Government’s Economic Recovery and Growth Plan, Nigeria needs $30 trillion in the next 30 years to develop the infrastructure to the level that is required to serve the country.

Recall that in 2001 Nigeria’s apex aviation regulator was created; Nigeria Civil Aviation Authority (NCAA) by the Act of parliament and till date.

Many investors troop to the sector registering to run airline companies. Sadly, since 2001, no fewer than 50 registered airlines already collapsed. A lot of the companies did not celebrate their fifth anniversary. The basic reasons for the collapse were linked to finance and debt of infrastructure.

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