Nigeria will need all the ideas it can muster to grow a flailing economy that may be headed for a second recession in four years as crude oil prices race to new lows.
The answer to part of the economic lethargy in Nigeria may lie in some eight projects identified by business leaders as potential game changers that could significantly change the narrative in Nigeria, where the economy is not creating enough opportunities to cater for a burgeoning population.
The list of projects, which is by no means exhaustive, includes the $10 billion Bonga South West Oil field (Bonga II) planned by oil major Shell, which is expected to increase Nigeria’s total oil output by 10 percent with an additional 200,000 barrels of crude oil daily.
But there’s a problem preventing the development of the Bonga South West, which is the uncertainty over future fiscal terms.
The oil majors remain some of the country’s biggest foreign direct investors and increasing their investment in the sector increases the chances of the government to earn more revenue and be closer to its annual budget oil production target.
The second project is the Lagos-Kano railway. The Lagos-Kano railway is a standard gauge railway under construction from the Atlantic Ocean port of Lagos to Kano, near the Niger border. The railway is expected to run parallel to the British-built Cape gauge line, which has a lower design capacity and is in a deteriorated condition.
Like the Lagos-Kano Railway, projects in transportation that will connect major cities and facilitate trade feature heavily on the list with the Lagos-Ibadan Expressway and an eastern rail line that perhaps connects Lagos to Calabar.
“Anything that facilitates the ease of moving people and their goods and services will certainly have a big impact on economic activity,” said Ayo Akinwunmi, relationship manager, corporate banking at FSDH Merchant Bank.
The railway sector has not been liberalised by the government and that caps private-sector involvement in the sector.
Another key project would be to fix at least one of the country’s comatose seaports. According to the Nigerian Ports Authority (NPA), the country has six seaports: Apapa and Tin Can in Lagos, Onne and Port-Harcourt ports in Rivers State, Warri Port, and Calabar Port. But, by many accounts, only the Lagos ports are operating anywhere near full capacity.
The Apapa and Tin Can Ports account for 70 percent of imports on average, according to NPA data.
Meanwhile, 99 percent of Nigeria’s trade goes through its sea borders, meaning the fate of the country’s trade rests on port efficiency, thereby making fixing the ports a potential game changer for the economy.
The Second Niger Bridge is another project touted as a big impact project that Nigeria should prioritise. The Nigeria Sovereign Investment Authority, which is invested in the project, says construction work on the Second Niger Bridge has reached over 40 percent. Another potential big impact project would be in the health sector. Some economic analysts and investment experts say the development of at least three ultra-modern hospitals in Nigeria will go a long way for an economy where average life expectancy is a mere 54 years.
The N41 billion Ibom specialist hospital in Akwa-Ibom failed to live up to expectations while the 300-bed Kaduna ultra-modern hospital, backed by a $48 million fund from the Islamic Development Bank, is still in the works since it was first initiated in 2009.
Projects targeted at Nigeria’s power transmission should also be prioritised to breathe life into the economy, analysts say.
Six years since Nigeria privatised its power sector, the lights are still out, hobbling economic activity while driving up the cost of doing business.
The power sector has been trapped in a dilemma with available generation still standing at around 4000MW for over 200 million people. While the control of electricity generation is currently in the hands of the private sector, the government wholly controls the transmission segment, and owns 40 percent stake in the distribution companies.
Stakeholders in the sector say the power situation will be better off if the government let go of transmission and fully liberalised the sector.
“Building a 3,000MW power plant sounds like a good idea but for private capital to flow into power projects, the government must derisk the sector,” said a senior business leader who didn’t want to be named to speak freely.
“When I look at the breakdown of the $22 billion borrowing plan that the Senate just approved, it’s a clear case of misplaced priorities as most of the projects in there are not even viable,” the person said.
Nigerian lawmakers last Thursday approved President Muhammadu Buhari’s borrowing plan that will see the government spend over half a billion dollars each year in interest payments for an average of 21 years on a bunch of infrastructure projects.
The loan, which would be sourced from multilateral development lenders including the World Bank, Africa Development Bank, China Exim Bank, Japan ICA and AFD, will cost the government some $12.1 billion (N3.7 trillion) over an average duration of 21 years. That works out to $573 million (N175 billion) each year.
The worry for most analysts is whether the loan will be invested in infrastructure, from transport to power, as highlighted in the breakdown and not frittered away with little to show for it.
Their worry is supported by data that show despite a near tripling in the country’s debt stock in the last four years, there’s hardly been significant improvement in infrastructure with incessant power outages and bad roads bedevilling a stuttering economy that has contracted in per capita terms for five straight years.
This time, infrastructure has been prioritised with the proposed borrowing, even though some of the projects are contentious, like the digitisation of national television network, NTA, for a whopping $500 million.
“There are a lot of white elephant projects in there that suggest we may be borrowing our way into another debt trap as most of the projects lack economic viability,” another business leader told BusinessDay.
The breakdown of the proposed $22.7 billion loan showed transportation, power and social investments will get the biggest chunk with $10.25 billion (44.9 percent), $5.6 billion (24 percent) and $1.6 billion (7.02 percent), respectively.
The transport projects to be undertaken include a $5.5 billion splurge on a railway connecting Ibadan in the south-west of Nigeria to Kano, north of the country.
China will provide the loan which will stretch over 20 years and cost 2.75 percent per annum. Then there is a coastal railway that runs through Calabar through Port Harcourt to the Onne Deep Seaport. The government is seeking a $3.75 billion loan also from China with a similar maturity profile and cost as the Ibadan to Kano railway.
The final transport project, also to be funded by China for $1.25 billion, is the Abuja Mass Rail II that will connect the city centre to outer districts.
The power projects to be undertaken number four. The Mambilla Hydropower Project, two transmission upgrade programmes for TCN and Lagos to Abeokuta as well as nine power sector vocational schools will require $5.6 billion in loans to be sourced from the China Exim Bank, the World Bank, AFD France and Japan ICA.
Under works, some seven roads will be reconstructed with a $1.2 billion loan from China and the Africa Development Bank. They include the East-West Road, Gombe-Biu Road (120km), Calabar-Ekang-Ajassor Road (64km), Enugu-Abakiliki-Ogoja Road (246km), Katsina-Jibiya-Niger Rep Road (65km) and Mokwa-Kaduna Road (190km).
Transport, power and works cumulatively account for 75 percent ($17 billion or N5.2 trillion) of the $22.7 billion loan, something analysts say could have a transformative effect on the economy if implemented to the letter.
“If the government spends that much and there’s significant private sector participation, Nigeria can move the needle in terms of infrastructure development and economic growth,” said a former senior staff at the International Finance Corporation.
Indeed, the government will need the private sector to play a starring role in the infrastructure plan because even if 100 percent of the loan went into building roads, rail and upgrading power supply, it is only 22 percent of the $100 billion annual infrastructure investment needed each year for 30 years to bridge the country’s gaping deficit.
LOLADE AKINMURELE
