• Tuesday, February 27, 2024
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BusinessDay

Fiscal discipline key to achieving Nigeria’s $3trn infrastructural development master plan

The approval of $3.05 trillion as part of the funds required for the realisation of the National Infrastructural Implementation Master Plan (NIIMP) by the Federal Executive Council (FEC) has seen the blueprint passed to the National Assembly for adoption as an executive bill.

Over the 30-year period set as the timeline for the completion of the project, it is expected that about 25 million jobs will be created in key sectors such as agriculture, transportation and health.

Given the pivotal role a sizeable industrial base plays in determining the economic potential of a nation, the announcement by Abubakar Olanrewaju Suleiman, minister of the National Planning Commission, came on the heels of a report by the World Economic Forum on global competitiveness that saw the country tumble down the rank seven spots from its previously held position last year at 127 out of 144 countries.

The minister told journalists recently in Abuja that the federal and state governments would provide $85 billion which is 52 percent of the cost for investment over the first five-year period after which public-private sector partnerships would be entered with the non-governmental institutions to deliver the remaining $80 billion over the same period.

Playing a vital role in the achievement of the vision for the National Planning Committee, is the Nigerian Sovereign Investment Authority (NSIA), a sovereign wealth fund created to effectively utilise the country’s excess crude reserves.

The organisation, in partnership with Guarantco – a development fund whose principal mandate is to encourage private sector participation in the financing of infrastructural ventures – and African Infrastructure Summit Group (AISG) are to employ 40 percent of the fiscal returns accrued by its management from the nation’s excess reserve for the engineering of primary domestic projects.

While the NSIA’s policies are intended to design protocol, check risk tolerance and formulate strategic methods of limiting constraints as targeted base developmental projects commence, the key areas of focus are pegged at increasing indigenous power generation, transmission and distribution as well as healthcare , transportation, real estate and agriculture framework.

With strategic opportunities for sustainable economic growth and higher returns on investments being projected through the direct investment in core trade and industrial segments aiding inclusive value-added market linkages, government forces theorise the achievement of the 30-year infrastructural expansion plan as realistic.

However, while the progression by NSIA towards delivering on the agreed deadline is underway, there are growing concerns on the availability of internally generated funding in light of accelerating inflation rate, the extrapolated state of the excess crude account per annum and its subsequent judicious utilisation.

According to the Sovereign Wealth Fund Institute, a global corporation analysing public assets and long-standing government investors, Nigeria ranks 57th globally with a total asset base of $1.4 billion generated largely from the commodities sector as at August of this year.

Barring any changes and at steady rate, the cumulative forecast reserve over three decades is estimated to sit at $42 billion at a quarterly Gross Domestic Product of 0.31 percent, a far cry from the $3.05 trillion stated by the minister of Planning as the total minimum requirement for the actualisation of the project average at $ 27.5 billion per annum.

The recourse may be to expect the private sector to plug the huge foreseeable deficit in expenditure within this time frame.

In the same vein, although the country has been tagged the most fiscally transparent African nation based on the Q2 report released by the Linaburg-Maduell transparency index, inconclusive probes into the erratic pilfering of public funds has served as the bane of industrial and grassroots development.

Only recently, the disappearance of $10 billion in unaccounted oil receipts after allegations of the non-remittance of $49.5 billion in oil sale proceeds were laid against the Nigerian National Petroleum Corporation (NNPC) by the former Central Bank of Nigeria, Lamido Sanusi. Analysts believe that the bulk of this money would have aided in boosting the nation’s reserve funds.

According to Sanusi: “No one has the right to retain money that should have gone to the federation account […] this money was supposed to come in and if it came in, it would be part of our reserves and part of our excess crude savings.”

With respect to inflation, reports from the National Bureau of Statistics highlight warning signals with the nation’s continuous climb up the inflationary ladder. A trend that analysts state may be exist up on till after the 2015 general elections.

Since the start of the year, the fiscal market has recorded seven months of consecutive spiking in the Consumer Pricing index (CPI); from 7.7 percent at the end of March to 8.5 percent in August and an estimated further 0.1 percent increase in September.

If this rise persists, it could be indicative of the inability of the present capacity of the SWF to cushion the country’s inflation rate, as revealed by Price WaterHouse Coopers International in their analysis of the impact of sovereign wealth on economic success, thereby depreciating the value of the local currency and increasing the cost for importation of raw materials, production and manpower for most of the construction projects to be undertaken in the near future.

The way forward

As expansion in value of the SWF is spurred by high current account surpluses and product pricing accrued from its principal sources, experts advocate alternate avenues for revenue generation particularly with the introduction of governance efficiencies in marketing and drawing investments towards the non-commodity sector to boost the federation account.

Based on research conducted by the Organisation for Economic Cooperation and Development, countries such as China, Singapore, North Korea whose economies are sustained by manufacturing and premium service delivery in the financial and technological industries record higher Gross National Savings (GNS) each year.

These countries are also found to have higher economic diversification and efficiency gains as well as strong saving cultures.

Against the backdrop of corruption activities across board within the oil and gas sector, the inability by the Federal Government to properly prosecute and recover misappropriated funds may serve as an impeding factor in the protection of monies programmed for development.

Stakeholders insist that increasing accountability and fiscal discipline between political and government agencies are essential in preserving the limited funds available.