Gabon, eight others beat Nigeria to private infrastructure investment

Nigeria, Africa’s biggest economy, lagged behind Gabon and eight other countries in sub-Saharan Africa in private participation in infrastructure (PPI) investment last year, an analysis of newly released World Bank data has shown.

The other countries that attracted more private investment in infrastructure in 2021 were the Democratic Republic of Congo, South Africa, Cote d’Ivoire, Mozambique, Zambia, Uganda, Gabon, Angola and Burkina Faso.

The data revealed that sub-Saharan Africa attracted $5.2 billion in investments across 26 projects in 2021, representing 0.3 percent of
its regional GDP. This marked a 17.1 percent decrease in investment levels from 2020 and a 3 percent decrease from the five-year average.

The leading PPI investment destination in the region for 2021 was the Democratic Republic of Congo, which received $1.1 billion in investments across three projects.

According to the World Bank, the vast majority of the country’s investment was for the Port of Banana concession, which received $1.0 billion.

Mozambique received $652 million in PPI investments for one power project, the Temane Gas-Fired Plant.

“This project alone placed Mozambique as the largest PPI recipient in 2021 in terms of national GDP at 4.7 percent. DEFIs played an important role in this project as the debt financing was provided by International Finance Corporation, along with the FMO, Emerging Africa Infrastructure Fund, US International Development Finance Corporation and the OPEC Fund for International Development,” the World Bank said.

Other countries in SSA with PPI transactions in 2021 included Angola ($190 million), Burkina Faso ($112 million), Chad ($71 million), Côte d’Ivoire ($701 million), Gabon ($209 million), Ghana, Kenya ($98 million), Madagascar, Malawi, Mali ($56 million), Nigeria ($108 million), Uganda ($230 million), South Africa ($826 million) and Zambia ($336 million).

Johnson Chukwu, CEO of Cowry Assets Management, said the Nigerian economy had gone through troughs and twists over the past five years, with an unstable growth rate.

He said interest rates have become quite high, as well as Treasury bills, whose rate grew as high as 18 percent at some point.

He said: “Nigeria’s policy environment is another challenge; there is still no proven successful case of public-private partnership in infrastructure. The three attempted cases were inconclusive which include the building of Murtala Muhammed International Airport; Lekki-Epe express road, which later on got intervention from the Lagos State government; the Second Niger Bridge, which was also taken back into the federal government budget.
“There are still issues around the concession, as there is no proof of concept yet.”

Chukwu, however, hopes that the road infrastructure scheme that the Nigerian government is trying to push would give a proof of concept.

According to him, the federal government must intensify efforts on identifying sectors, develop appropriate regulatory frameworks and advertise for private sectors to invest in infrastructures.

He said these would help to drive private investment in the country.

“Other factors responsible for low investment from the private sector are weak infrastructure, unpredictable macroeconomic environment, policy implementation, and security challenges. Private sectors or individuals who are profit-oriented will invest where their physical assets are secured to enable them to generate the kind of return they are looking at,” said Ayo Akinwunmi, senior relationship manager, corporate banking at FSDH Merchant Bank.

He said the government should put incentives, including tax holidays, government intervention, in place to enable investment in infrastructure growth in the economy.

“While there are some infrastructures mainly for the federal government to provide like roads to ease the cost of business operations, which is part of government incentives, the moment private businesses begin to construct roads, it might take them a longer period to pay back on these assets. This will further discourage more people to invest in infrastructures like this,” he said.

For other amenities and infrastructures that permit government and private partnerships where there are not enough resources, Akinwunmi said more of such will accelerate the growth of the Nigerian economy as more jobs will be created.

Tony Elumelu, chairman of Heirs Holdings, in his address at the 25th Milken Institute Global Conference last week, highlighted the need for private sector investment to transform Africa.

Read also: The many disincentives to investments in Nigeria

He said: “I am a private sector guy. It is the private sector that is going to change Africa – but a private sector that demonstrates good governance and responsibility.

“Finance in Africa understands that role but when I speak of Africapitalism, a philosophy that calls on the private sector to be involved in catalysing development on the continent by investing in critical sectors and helping to mobilise capital, it has global resonance.”

Last year, President Muhammadu Buhari said Nigeria needed $1.5 trillion over a 10-year period to achieve an appreciable level of the National Infrastructure Stock.

Speaking in Glasgow at a COP 26 high-level side event, he said the country was ready for your investments in infrastructural development in the country.

“My administration has established a clear legal and regulatory framework for private financing of infrastructure to establish a standard process, especially on the monitoring and evaluation process.

Akinwunmi Adesina, president of the African Development Bank, said in October 2021 that to be sustainable and more efficient, public-private partnerships should be accelerated to finance major infrastructure across Nigeria.

“Governments can also implement ‘Infrastructure Asset Recycling models,’ where existing infrastructure assets on government books can be turned over to the private sector, freeing up financing for governments to invest in new infrastructure needs,” he said.

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