Nigeria Needs $100bn for Infrastructure

From Kunle Aderinokun in Abuja

The Federal Government has said massive investments in critical infrastructure such as power, transportation as well as the development of the Niger Delta region and agricultural sector has been estimated to contribute about 25 per cent to the gross domestic product (GDP).
But such investments, the government said, will in the next six years gulp over $100 billion - or N12 trillion, nearly twice the size of the nation’s external reserves and almost five times the size of the 2008 budget.
In a presentation entitled “A framework for Pricing Public Goods: Objectives and Characteristics”, at the Nigeria Economic Summit in Abuja, yesterday, Finance Minister, Dr. Shamsuddeen Usman, said over the next six years, Nigeria would need to invest over N12 trillion in four key sectors, namely power, railways, roads and oil and gas.
Usman explained that for power, the nation would need between $18 and $20 billion for necessary investments in six years with about $10 billion for railways. He added that, roads and oil and gas would gulp $14 billion and $60 billion in investments respectively within the same period.
He however said the government could not meet the financing requirements alone, thus, asking for increased collaboration between the public and private sectors.
To him, the private sector was a “more preferred” method of financing infrastructure provision.
Usman noted that, increased private sector provision in Nigeria required effective and efficient pricing mechanisms, especially as it relates to cost recovery and reasonable rate of return.
The finance minister stressed that closing the infrastructure gap and improving the quality of public services remained the major components of President Umaru Musa Yar’Adua’s Seven-Point Agenda.
Speaking at the dinner organised for the summit on Wednesday night, the Chief Economic Adviser to the President, Mallam Tanimu Yakubu, said concerted efforts were being geared towards the maintenance, upgrade and expansion concurrently of critical infrastructure.
An appropriate framework has been developed to attract private sector participation and investment in infrastructure development, he said.
He said the administration had identified as priority areas for domestic and potential inward investment “power generation, distribution and supply; transportation including roads, railways and inland waterways; telecommunications especially laying of fibre-optic throughout state capitals and other commercial cities in the country and; investment in national gas grid for supply and distribution for power generation, petrochemicals and fertilisers”.
Yakubu estimated that the success of the administration’s ability to fulfil the objective of investment in the power sector, would fetch the economy an additional 5 per cent growth.
He explained that as part of its strategies, the administration had planned to increase the utilisation of existing energy capacities and also widen the nation’s energy mix.
“In this respect, the administration has set itself short, medium and long-term targets for power generation under its critical infrastructure agenda. In the short-term, power generation is expected to be in the region of 4000 MW (2009), 6000MW (2010) and 10,000MW (2011),” he said.
Noting that the administration’s medium-term objective was about 18,000MW, he stated that to fund the project, a $5.37 billion from excess crude proceeds account was agreed with the state governments.
Yakubu, who said the administration recognised the benefits of adequately utilising the nation’s large gas reserves, said: “We now have a National Gas Master Plan incorporating domestic gas supply obligation, appropriate pricing framework, national gas grid and gas fiscal reform.
“We also have in our sight the building of three Central Progress Facilities to be established in the Niger Delta to process gas and transmit this across the nation. We are also striving to establish regional processing hubs across the nation and facilitating the establishing of gas-based industries, power plants and export project alongside. The construction of the national gas grid will resuscitate our ailing industries al over the country.”
This, he said, would add not less than 3 per cent to the GDP in the short run.
Similarly, the presidential adviser said bold proposal on road concessioning and aggressive road sector development as well as maintenance programme which is expected to cover an estimated 5700 kilometres, has been estimated to contributed an additional 4 per cent to the growth of the GDP.
He lamented that currently, the GDP suffers a loss of 4 per cent due to unmotorable conditions of the country’s road.
Also, Yakubu posited that the Federal Government’s railway strategy would add at least 3 per cent growth to the GDP in the short-run.
“The Western, Eastern and Central Railway networks are to be rehabilitated and concessioned too. The infrastructure Concession Regulatory Commission (ICRC) is expected to commence work in due course,” he explained.
Yakubu added that the government’s proposal to strengthen the telecommunications sector would deepen teledensity and facilitate the use of internet in health, education and business to spur further growth in information technology.
In the agricultural sector, the adviser said the administration was resolutely pursuing a policy of sustained support for small-scale farmers, developing medium and large-scale and piloting the implementation of the warehouse receipt system in the food security agenda, which is capable of adding 5 per cent to the GDP.
Achieving the administration’s security targets by enforcing the laws of the country and guaranteeing the security to life and property in the Niger Delta, Yakubu said, would add 3-4 per cent to the GDP.
According to him, “a regional transformation in accordance with the Niger Delta Development Master Plan is expected to be achieved through timely and adequate funding and collaboration between the Federal and the state governments mainstreaming small business development initiatives, enforcing local content policy in the oil and gas sector as a way of widening local production.
“The development of a regional grid alongside an effective international transport system that connects the Niger Delta with other parts of the country is also in the pipeline.”

Chinese Firm to Set Up Power Plant in Nigeria

From Paul Ibe in Shanghai, China

The Federal Government’s determination to increase the nation’s energy capacity received a major boost in far away Shanghai, China where Shenzhen Energy Group pledged to invest a $300 million power plant in the country.
The commitment of the Chinese energy firm came on a day Engr. Mustafa Bello, Executive Secretary of the Nigeria Investment Promotion Commission (NIPC) urged investors to take advantage of Nigeria’s favourable business climate.
Ms. Cissy Jiang, representative of the Shenzhen Energy Group, disclosed the plans of the Chinese firm at the 7th Nigeria-China Business and Investment Forum (NCBIF), which got underway yesterday at the Purple Mountain Hotel, Shanghai, China.
Jiang said the energy group decided to capitalise on the government’s investment-friendly incentives to expand its operations into Nigeria and by so doing, hopes to add to a sizeable number of Chinese companies in Nigeria.
She explained that a number of Chinese investors such as Chief Jacob Woods, Deputy President of China Africa Business Council (CABC), had given testimonials on the benefits of investing in Nigeria, and that when weighed against the risks, Nigeria presents a much more favourable investment climate than its competitors.

Jiang said contrary to the information being peddled in the international media, the reports from Chinese investors in Nigeria is that the nation’s security and security of investment was much improved, and as such, the company will be willing to partner with the Federal Government in its emergency intervention in the power sector.
In his presentation, Bello acknowledged the trail blazing efforts of the Xiguang Guandong Group in setting up a Free Trade Zone in Ogun State at a cost of $500 million and the Chinese investment in the Lekki Free Trade Zone in Lagos.
He also advised Chinese investors to continue to partner with Nigeria in its development efforts, as the country remains the most attractive destination for foreign direct investment in sub-Saharan Africa, with a cumulative potential of over 300 million consumers.

He assured them that the NIPC would continue to deliver on its mandate of providing the necessary support to foreign investors, especially with the introduction of the one-stop investment centre (OSIC), which integrates over 36 government and private-sector organisations at the commission’s headquarters in Abuja.

Also present were Mr. Sina Agboluaje, Managing Director of Nigeria Export Processing Zones Authority (NEPZA), Mallam Lamis Dikko, Executive Director, Unity Bank, and the Financial Secretary of the Peoples Democratic Party (PDP), Alhaji Tukur Mani, who led the Nigerian delegation.

Others who made presentations yesterday were Mr. Lanre Fagbohun, Managing Director (Internal) of BankPHB, Mr. Femi Bakre of First Bank, Bola Ajibode of Stanbic IBTC and Alhaji Ibrahim Aliyu, Chairman of Urban Shelter Limited.
The 7th Nigeria-China Business and Investment Forum continues today, with visits to some Chinese industrial companies located in Shanghai.