The general state of infrastructure throughout the African continent and especially in sub-Saharan Africa is extremely puzzling. With the exception of South Africa, the continent’s largest economy, the entire region is bogged down by severe infrastructure deficits that have frustrated development programs and clouded prospects for growth. The countries of the Southern African Development Community (SADC) have been relatively better off in this regard with their efforts to drive development across the region through trade agreements, resource pooling, and multinational collaborations. West Africa, on the other hand, has been deprived of similar benefits due to complex demands past and present. As a result, the economic potential of this region has barely been scratched.
In June this year, the World Bank approved a $ 1 billion loan to Nigeria to fund multiple development programs, including the expansion and improvement of the country’s hugely flawed energy sector. An amount of $ 200 million was allocated for network investments and technical upgrades to improve power supply. While this interest-free and concessional financing comes across as an undoubtedly welcome development, it amounts to a small fraction of Nigeria’s overall investment needs in infrastructure. In August 2008, Nigeria’s Debt Management Office (DMO) revealed that the country needed at least $ 100 billion in investment to develop four key infrastructure areas: energy, rail, roads, and oil and gas. The figure was calculated to align with the ambitious national goal of bringing Nigeria to the world’s top 20 economies by 2020. Of the four sectors mentioned, energy alone would require an estimated investment of between $ 18 and $ 20 billion over the next ten years. . With a current installed capacity of 6,000 MW versus the total requirement of 10,000 units, only 40% of Nigerians have access to electricity.
The collapse of basic infrastructure and social services was unleashed in the 1980s, after Abuja’s unhealthy dependence on oil exports decimated its agriculture and light manufacturing sectors. The static oil economy wiped out traditional and emerging livelihoods, creating rampant unemployment, poverty, and degraded living standards. In 2002, per capita income was below the level of 1960, when Nigeria gained independence from British rule. In terms of infrastructure deterioration, energy turns out to be the hardest hit, but the government easily admits serious deficits in many other areas as well. For example, the rail network is in ruins and today represents only 1% of national transport1. Likewise, the port service suffers from serious bottlenecks and inadequate optimization of capacity. The over 100,000 km long road network is in poor condition at best and barely usable at worst.
Due to Nigeria’s strategic location and the abundance of its natural resources, infrastructure development in the country has pan-African relevance. The 148 million human capital that makes Nigeria the most populous African nation is a workforce of unexplored economic potential. The country’s thriving informal sector, estimated at 75% of the total economy, also hides huge possibilities for inclusive growth. The rapid development of SMEs has therefore been the mainstay of successive governments since the reestablishment of civil government in 1999. Nigeria’s ability to launch a business revolution that will fundamentally alter its macroeconomic imbalances remains the challenge par excellence. of its 2020 target.
Infrastructure development will clearly be the first building block in this endeavor, and the realities on the ground are quite harsh as current conditions advance. For Nigeria, the biggest impact of infrastructure deficits is the high cost of doing business, for both large corporations and small businesses. Legislators must develop a comprehensive plan to reverse this trend within a specified time frame. The following are two key aspects in this consideration:
o All of West Africa receives very nominal foreign private investment in infrastructure due to a number of reasons ranging from high currency risks to low credit worthiness. The region’s moderate ability to increase debt and the bias towards infrastructure sectors with limited regulatory intervention are other obstacles. Nigeria should lead the way in improving access to equity debt as a means of attracting projects with viable private participation.
o The capacity of local financial markets to finance infrastructure projects is very low across the continent. Long-term local financing is almost non-existent, except in South Africa, which has been successful in developing an indigenous capital market to obtain constant financing on convenient terms. The absence of similar capacity in the rest of Africa means that most of it is entirely dependent on grants and soft loans from international development agencies.
For African developing economies, increasing foreign investment in infrastructure while developing avenues for credible local financing is a daunting task. The current Nigerian government under the presidency of UM Yar’Adua recognizes the challenge by listing infrastructure development as a critical component of the 7-Point Agenda for the realization of the 2020 goals as well as the Millennium Development Goals. Recent initiatives in this regard include the creation of a federal mortgage bank, a housing authority, and a national highway maintenance agency.
That infrastructure will be the main engine of all socio-economic development in Africa. What remains unclear are the forms and means that individual nations employ, and the field effectiveness of such measures beyond official statistics and proclamations. Nigeria has a unique opportunity not only to reverse decades of economic stagnation, but also to maintain an effective model of accelerated growth in the rest of the continent. The success of your long-term ambition takes on broader importance because it is sure to have a gradual indirect effect on your immediate geography.
