Acting managing director/chief executive of the Infrastructure Bank, Mr. Ross Oluyede has stated that 48 per cent of funding needed to bridge the infrastructure deficit has to be sourced from private capital.
This is even as he noted that private investors and financiers are willing to fund viable economic and social infrastructure provided the financing or transaction structure comprehensively addressed the credit and risks faced by project promoters in a bid to guarantee return on investment.
The Nigeria Integrated Infrastructure Masterplan (NIIMP) highlighted that a total of $3.1 trillion would be required to build, maintain and manage the nation’s infrastructure from 2014-2043.
In his keynote address at the Nigerian Society of Engineers conferment and lecture in Abuja, Oluyede pointed out that harsher macroeconomic conditions plaguing developing and commodity-based economies such as Nigeria, have resulted in smaller budgetary allocations for infrastructure projects.
This he said, required the use of alternative financing mechanisms that would optimise the delivery process by integrating the funding with the operation and long-term maintenance of the completed infrastructure asset.
Oluyede disclosed that Public Private Partnership (PPP), Private Finance Initiatives (PFIs) and other private funding models would provide opportunity of transferring some design, construction and completion-related risks to the private sector adding that it would result to timely and cost effective project delivery that would enable the investor gain appreciable returns on investments.
When properly executed, Oluyede believed that PPP projects would promote efficient use of resources and minimise waste, with minimal project failure due to the misallocation of risks among the parties involved in the project
He however, asserted that it is the responsibility of government to prioritise selected projects, abide by the agreement especially on project financing and retaining regulatory oversight of the sector.
The managing director said that the value proposition for investments in infrastructure is due to the fact that private sector involvement would result in improved infrastructure service delivery to public users, as well as the availability of additional funding to ease the financial burden on the government.
He maintained that federal government has taken steps to attract private capital through the issuance of a $1 billion Eurobond, saying that the proceeds are allocated to the capitalisation of the bulk electricity trading company.
Others are the upgrade of the transmission network and other infrastructure projects; securing facilities from the World Bank, Department for International Development (DFID) and other Development Finance Institutions (DFIs), structuring of PPP projects in Nigeria, enactment of sector-specific legislation, policies and regulations as well as other initiatives aimed at supporting the emergence of a viable infrastructure ecosystem.
Oluyede asserted that investors would reap the benefits of PPPs in the future given the economic conditions and success of PPPs across similar developing countries like Nigeria, and worldwide.
He stated that several local private firms and organisations would be excited to collaborate with foreign partners to develop sustainable and effective alliances that would lead to the successful implementation and completion of projects through PPP in Nigeria.
The MD informed that private sector would mobilise the required financial resources to fund the nation’s infrastructure development, subject to the availability of an efficient financial ecosystem.
Elaborating on efficient financial ecosystem, he said that the requisite level of participation from all key players such as banks, DFIs, fund managers and administrators, equity investors and finance organs of the government like ministry of finance and the Central Bank of Nigeria (CBN), sector regulators and insurance companies would make infrastructure financing a reality.
Oluyede affirmed that the importance of creating an efficient financial ecosystem is predicated on the need to ensure that the financial market is capable of attracting long-term funds required to develop infrastructure.
He hinted that long-term funds such as pension funds is best-suited for financing infrastructure projects since it has long-term repayment period.
By CHIKA OKEKE (Leadership)