A recent report released by one of the leading global rating agencies, Moody Investors Services, has revealed that Nigeria needs to spend about $3 trillion in over 30 years to bridge the infrastructural gap experienced in the country.
The report titled: ‘’Moody’s – Significant financing from private sector and multilaterals needed to address Nigeria’s infrastructure deficit.’’ revealed that Infrastructure in Nigeria (Government of Nigeria, B2 negative) is significantly behind its other emerging market peers. Hence, the sum of N3 trillion is needed over the next three decades to address the anomaly.
Why it matters: No country develops without solid infrastructures, which will be needed to transit to the frontiers phase. In lieu of this, the importance of well-developed infrastructural facilities to national development cannot be overemphasized. Little wonder this fact was pronounced in the 2020-2024 Nigeria Strategy Paper, where the AFDB highlights infrastructure development as one of its key priority areas for support.
As regards the reason the country had experienced a perennial infrastructural gap, the report stated that Nigeria faces many budgetary and financing challenges. Weak institutions and governance frameworks, along with a low tax base are hindering infrastructure investment, while financially strained utilities are unable to invest in improvements.
What they are saying
Commenting on the causes and nature of the infrastructural gap in the country, the Vice-President, Senior Analyst at Moody’s Investor Service, Kunal Govinda said,
“Nigeria currently has a significant infrastructure deficit and faces additional pressures from a rapidly growing population. Its low government funding capacity and customer affordability have been weakened further by the coronavirus pandemic and low oil prices.”
What you should know
- The recent moody report is first of its kind on the Nigerian infrastructure market.
- Nairametrics had earlier reported the approval by the Federal Government of Nigeria to establish infrastructure companies to address this gap. This indicates that the present government is not oblivious of this fact and making efforts to address the challenges.
- The report noted that the focus of infrastructure development has been within power, railways, roads, ports, and pipelines, and this trend is expected to continue with particular investment needed to address Nigeria’s electricity shortages. To this effect, Nigeria’s power sector could benefit from renewable energy like solar and wind, with financing also possible from green bonds.
Given the huge financial outlay required to address the lacuna in infrastructural development in the country, it is pertinent to note that government alone cannot fix this gap. There is a need for public-private partnership.
In a nutshell, private sector and multilateral financing is needed to address shortfalls as financial guarantors, multilateral development banks, and local institutional investors will be important in helping finance infrastructure development.