Massive underinvestment in infrastructure, bane of Nigeria’s economic development

Infrastructural development is always crucial to any country’s economic prosperity. Infrastructure adds to economic development by increasing productivity and providing amenities which enhance the quality of life.

The agitation for infrastructure development in Nigeria overwhelms the provision. With the present value of the country’s infrastructure at 35% of Gross Domestic Product (GDP), paling considerably in comparison to larger economies standing at 70% of GDP, there is a need for urgent action to bridge the uncomfortable gap.

Massive underinvestment in infrastructural development has been the bane to achieving the nation’s various visions of becoming a top global economy.

Figures from the Infrastructure Concession Regulatory Commission (ICRC) show that between 2009 and 2013, Nigeria invested a mere $664 per capita per annum in infrastructure or three percent of GDP, compared with an average of $3,060 or five percent of GDP in developed countries.

Stable and cost-efficient power availability has been widely acknowledged as pivotal to the successful economic development of any country, yet power remains a monumental infrastructure challenge, with less than 56 percent of Nigerians having access to electricity compared to 80 percent for developed countries. For over 75 percent of businesses operating in Nigeria, power supply is a major constraint. With a power generation capacity of over 10,000 MW, between 2,500 to 3,500 MW is available for a population of over 170 million, compared unfavorably with South Africa that generates 50,000 megawatts for a population of about 50 million, according to the Infrastructure Concession Regulatory Commission (ICRC).

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About 68 percent of all roads in the country are in deplorable condition, with only about 18 percent of Nigerian federal roads paved. In the area of housing, Nigeria requires about 17 million housing units and 60 trillion naira in order to meet its housing needs (National Bureau of Statistics).

Other infrastructure sectors such as transportation rail, seaports and airports equally have similar challenges, while significant gaps also exist in rural and urban ecosystems ranging from availability of basic infrastructures such as housing, healthcare, water, and waste management, to other enabler infrastructures like ICT, hospitality, and industrial/commercial real estate.

A critical look at the nation’s infrastructure development matrix, apart from underinvestment in the sector, will also reveal a high level of dysfunctionality.

Infrastructure development projects in Nigeria suffer from capital flight with the bulk of materials and managerial services procured outside the country. With contracts full of loopholes, overdesign as well as abandoned projects which are rampant, funds leak. The low-level local content of production of goods and services increases production cost; the high cost of governance and recurrent expenditure impinge on funds for capital expenditure while corruption remains a cog in the wheels of infrastructure development in Nigeria, raising the cost of infrastructure, while reducing the quality of, and economic returns from infrastructure investment.

Nigeria will not be able to sustain her current levels of population and economic growth without enhancing her infrastructure,as the development of that sector remains centrally important to her fight in attaining social and economic stability.

The government has a key role in creating and sustaining an enabling environment by deploying instruments that can catalyze the provision of funding needed for infrastructure development. Government and the private sector urgently need to come together to accelerate infrastructure development, while aligning development and implementation of the legal and regulatory frameworks and all other related processes in order to enhance the ease of doing business in Nigeria.

Although Nigerian infrastructure PPPs so far have had a bumpy start, the market outlook remains promising to investors. According to reports, Capital Projects and Infrastructure in East and West Africa hold promising prospects for infrastructure development in Nigeria, with the sector spending estimated to grow from $23 billion in 2013 to $77 billion in 2025. This will provide jobs, deliver vital services and drive economic growth.

Government must build a track record of public-private partnership (PPP) performance to attract large sums of long-term funding. It is also expedient that experts in Infrastructure development embrace infrastructure technology skills and methodologies, as this will go a long way in enhancing the role of ID-experts and system analysts as Infrastructural managers.

Even with the potential to become a major power and player in the global economy by virtue of its human and natural resources endowment, the present infrastructural deficit in Nigeria would continue to adversely impact its economic development goals if infrastructure development is left on the skewed pedestal it has been for so long.