The Federal Government is incapable of funding the 2021 budget due to dwindling oil income amidst maniacal public spend. Therefore, infrastructure financing which should revive the wilting economy is lagging. We urge the government to start tolling roads and create a fund to manage projects sustainably.
Babatunde Fashola, the minister of Works and Housing, last year said the government would restore tolls on highways after former president Olusegun Obasanjo scrapped them in 2004. Obasanjo’s grouse with the process was that it was rife with corruption and generated poor returns. This was a poor decision. The penchant of government officials to take a wrecking ball to every complication only evidence poverty of ideas.
We urge the minister to go ahead in reforming, reinstating the National Road Tolling Policy. Tolling is becoming a predominate way for poor African countries to repay millions of Chinese loans used to build roads.
In Kenya, each driver on the proposed Nairobi Expressway will pay around $3 to help repay the $608 million loan the government took to build the new double-decker highway, which aims to reduce congestion in the Kenyan capital. In Mozambique, drivers on National Road Number 6, which connects the Mozambican central port city of Beira to Machipanda, on the Zimbabwean border, are required to pay between $11.10 and $83.60 in tolls on the 287km road as part of an effort to repay a $410 million loan to China’s Exim Bank. In Uganda, drivers on the new Kampala-Entebbe Expressway will pay for the privilege to drive on this 49.5 km road that was built with a $467 million Chinese loan.
We are in a similar precarious financial situation with our African peers – binging on Chinese loans, unable and unwilling to diversify export revenues, industrial-scale corruption, feckless leadership and broken infrastructure. We have fossil fuels as do Mozambique, even if with a long history of irresponsible management.
The inability to repay Chinese loans is rattling the Asian lender. It has started insisting that only financially feasible projects with a clear path to recoup loans will be financed. The Brass Fertilizer and Petrochemicals project in Nigeria seeking a 70 percent equity financing from China only secured a final investment decision in 2021 though talks began in 2014.
The Nigerian government’s strategy to unlock private capital for road finance is through tax incentives and various Public-Private Partnerships (PPPs) schemes. In 2013, it created the National Integrated Infrastructure Master Plan (NIIMP) that sought to raise $3 trillion to implement it. In February 2017, the Ministry of Budget Planning and National Development launched the Economic Recovery & Growth Plan 2017-2020 (ERGP) with infrastructural development as one of its key Pillars.
The Federal Executive Council in October 2017 approved the Road Trust Fund (RTF), also another PPP arrangement led by the Federal Ministry of Finance and the Federal Ministry of Power, Works and Housing. The RTF allows private sector involvement in road construction in exchange for a three-year tax credit.
To consolidate on the plan, in January 2019, President Muhammadu Buhari signed an executive order on ‘The Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme Order 2019 (EO 007) to encourage private capital in building roads.
Yet a recent International Monetary Fund (IMF) Technical Assistance Report on Nigeria, said the country requires an aggregate investment of $100 billion from 2020 to 2030 to construct an additional 180,000 kilometres to the existing network of 195, 000 kilometres of federal, states and local government roads.
Private capital will increasingly become harder to access due to COVID-19. This reality is why we are calling on this government to create a road fund now. Economic growth cannot be realised with our broken infrastructure. We should make it easier for investors to put money into road construction by tolling the roads.
There are several options to explore in building the road fund. These include setting up commercial tolls, diverting elements of petrol pricing template such as the National Transportation Allowance N3.89 per litre and Petroleum Equalisation Fund N7.51 per litre into the fund or other administrative charges into it. Taxes on vehicles and related charges like licenses and fees should be applied to the road fund.
The fund should be managed by private sector professionals and involve professional career civil servants in the board but should not be placed under the control of politicians. It must never be funded by the National Assembly and must have the freedom to undertake procurements without recourse to the Ministry of Works and Housing. Decisions on what roads to build should be based on economic consequence.
Other African nations including Ethiopia, Zambia, Kenya, Ghana, Malawi, Tanzania and even Benin all have functional road funds, many established since the 1990s. They are financed by fuel levies and managed by boards representing the interests of road users.
Now is the time for bold ideas, after all, what’s there to lose except broken roads amidst reckless allocations for infrastructure.
