With the recent announcement on the establishment of the Infrastructure Company of Nigeria by President Muhammadu Buhari, there is huge excitement and hope that our infrastructure needs will be better addressed. It will start with a seed capital of N1 trillion contributed by the Central Bank of Nigeria (CBN), Nigeria Sovereign Investment Authority (NSIA), Pension Funds and Africa Finance Corporation (AFC). To ensure effective governance and management, the board will be chaired by the CBN Governor with the Managing Director of NSIA, President of AFC, representatives of the Nigerian Governors Forum, Ministry of Finance and three independent directors from the private sector as board members.
With a focus on financing public asset development, infrastructure rehabilitation and reconstruction, investments in important infrastructure projects like roads, rail, power and other key sectors, it is believed that if well managed and structured, the value of the company can rise to over N15 trillion. According to information from the Presidency, the Infrastructure Company will be empowered to issue bonds among other financing options to deliver on important infrastructure financing needs and will be a leading infrastructure finance firm in Africa with a focus on Nigeria’s infrastructure development.
It might be helpful to understand the differences between the mandate of this new Infrastructure Company and the failed Infrastructure Bank of Nigeria
While there is no doubt on the need and importance of such an infrastructure-focused company in Nigeria, the doubt is always in the effective implementation. As some people have already cautioned, the success of the new infrastructure firm will depend on many factors but critical are the skills and competence of the managers and the governance framework created and used to govern the firm. It is projected as a public-private sector initiative, but it is heavily public sector driven with CBN, NSIA, Nigerian Governors Forum, Ministry of Finance as key board members and stakeholders. As this is the case, there is a problem. It is the Nigerian public sector management problem!
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With so much powers concentrated in Presidency, it means that key appointments into the new infrastructure firm will be from the Presidency and as such the decisions, actions and inactions of the firm will be influenced by the Presidency and the politics of the party in power. As this is always the case with most government-owned or controlled agencies in Nigeria, it means that the effectiveness of new infrastructure firm is already threatened. If we expand the public sector problems, a good question will be what happens if another party wins the presidency in 2023. Will the party in power allow the new firm and those appointed by President Buhari to function or not? If they are allowed to function, will they function according to the vision and plans of the firm or will they function according to the dictates of the new party and men in power? Remember that we are talking of a firm with a potential of rising to a N15 trillion Naira firm. It will be a very powerful firm that will always attract the eyes and proper attention of the President and other powerful forces in government and party. With the heavy leaning of the new firm to public sector control, the question and challenge is how to protect it from government and political pressures.
It is important to remember that this is not the first time such an infrastructure-focused initiative is pursued in Nigeria. We had the Urban Development Bank of Nigeria that later transformed into The Infrastructure Bank of Nigeria. It might be helpful to understand the differences between the mandate of this new Infrastructure Company and the failed Infrastructure Bank of Nigeria. What lessons have been learnt and how did the feedback from failures of previous initiatives influence the setting up of this new firm.
In addition, as the new firm will focus on infrastructures such as roads and railways, it is important that the targets of the new firm are properly stated. For instance, how will roads, railways and other infrastructure projects that the firm will pursue from year to year be determined? Will it be through lobbying to include projects in the firm’s yearly plans or through national budget planning and execution. Given the size of Nigeria, the infrastructural decay and needs, how will fairness and equity be determined or will it be dictated by the wishes and commands of the president and other power circles of the party in power.
Another interesting aspect is how the firm fits with the increasing clamour for power devolution in Nigeria particularly the need to move certain items such as federal roads from the exclusive list controlled by the Federal government to the concurrent list controlled by the State governments. Will it not be better to properly rethink the focus of the infrastructure firm to those items that are strictly for the federal government at the moment and will be for the federal government in a power-devolved Nigeria. Another option will be to think of how the projects and operations of the new firm can be devolved to ensure equity and fairness. As the Nigerian Governors Forum (NGF) is a critical member of the board, an option will be to structure allocation of projects in such a way that there is an equitable distribution across the six geo-political zones of the country. This can be pursued through the embedding of effective corporate governance in all aspects of the firm’s management and operations. A good way to start will be to increase the number of competent private sector independent directors from three to six with each of the key board committees headed by an independent director. Not only will it dilute the dominance of the firm by public sector agencies, but it will also help in sending a positive signal to all the stakeholders that the firm is appropriately governed in the best interest of Nigeria!
Dr Ngwu, is an Economist/Associate Professor of Strategy, Risk Management & Corporate Governance, Lagos Business School and a Member, Expert Network, World Economic Forum. E-mail- [email protected],
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