Inadequate infrastructure is taking a toll on Nigeria whose economy grew a paltry 1 percent over the last three years, even as businesses struggle to expand and firms’ production capacity constrained.
To put the decrepit state of infrastructure in African most populous nation in context, the country ranked 127th out of 137 countries in World Economic Forum’s latest global competitiveness report in terms of quality of roads, and 131st out of 137 on overall quality of infrastructure.
Also, a mere 14 percent of Nigeria’s total road network of 195,000km is paved, with more than 60 percent in deplorable state, according to figures from Nigerian Investment Promotion Commission (NIPC).
Given the inability of government to raise sufficient funds to finance capital projects and the need to bridge the country’s infrastructural deficit of about $3 trillion, President Muhammadu Buhari in January signed the Executive Order 007 to allow private companies fund the construction of major road projects nationwide.
Experts say this is a step in the right direction to resolve Nigeria’s infrastructural problems at the 11th Annual Lecture Series of the Nigerian Institute of Quantity Surveyors (NIQS) Lagos State chapter held Thursday, July 4, themed – The Effect of Executive Order 007 on Road Infrastructure Development over Key Infrastructures.
Ajibola Olomola, partner at KPMG Nigeria, stated in his keynote address that the robust participation in the Executive Order 007 scheme, which predicates on building road infrastructure, would help the country achieve the Sustainable Development Goals (SDGs) 9 and 21 – building resilient infrastructure and promoting innovation and industrialisation.
According to Olomola, it took the government and stakeholders two years to craft out the scheme, and will be extended to other sectors if it work out as planned, adding that the scheme will be a boon for African Continental Free Trade Area (AfCTA) since goods are mostly conveyed via road, now that Nigeria has showed readiness.
“The scheme is a win-win for both government and private companies. For the government, it creates avenue for growth and economic competitiveness. While to private corporates, apart from getting compensated through tax credit and one-time uplift, it helps move their sales faster.”
The participating companies have the leeway to construct any road network that suits their operational location, Olomola explained, adding that corporates will maintain the road for five years before Federal Government takes full responsibility.
The KPMG Partner however warned that participation is not a guarantee for improved profitability, noting, “Government is saying the economic means is that you will be able to move your business faster and not an assurance to make higher profits, that’s why participating firms have to be resilient.”
In his remarks, Olayemi Shonubi, vice president, NIQS, stated that though 30 percent of the fiscal budget was directed to capital expenditure, a thorough look showed that it was actually less than 15 percent as government expended part of the allocation on purchase of vehicles and other items.
Giving his view about the viability of the scheme, Olusegun Ajanlekoko, president, Commonwealth Association of Quantity Surveyors and Land Economy, urged the Federal Government to take a cue from advanced nations on the strategies deployed to develop infrastructure.
“Giving tax credit is really not the best way to lure companies to come participate. Taxes must be restructured and standardised,” he said.
Okaisbor Igbuan, CEO of Lagos-based Construction Kaiser Limited, lauded the initiative as it would boost employment and economic activities, but gave his reservations in certain areas.
“Why are construction companies not directly involved in the project, why only big manufacturers? Moreover, we are even scare to partner government known for policy somersault,” Igbuan said.
Murtala Ajala, chairman, Associated Cost Consultants, said compliance issues, political risk, currency risk and bureaucratic composition of the scheme’s 14-man management committee could thwart positive outcomes.
“I am not too satisfied with the high level of bureaucracy in the management committee. The protocol outlined to take part in the scheme is unnecessary. Even at that, investors’ request is subject to approval of Federal Executive Council. This might frustrate investors,” he said.