As the downturn in global oil prices sends Africa’s largest economy into recession, New Civil Engineer examines the country’s infrastructure investment programme.
Nigeria relies on black gold. Before the recession hit this year, the country took 90% of its export earnings from oil and gas. As the market price dropped, the government’s revenue fell by half and import prices jumped.
Concurrently, pipeline sabotage by rebel groups continued to disrupt the country’s existing oil supply.
This means that Nigeria faces a dilemma when it comes to updating its ageing infrastructure. The country invested heavily during the 1970s, but population increase and degradation over the years mean that there is a need to expand and renew the country’s infrastructure.
“The slowdown has two impacts: it hurts and it helps. It hurts, of course, because most immediately there is less money for everything. The government’s budget has contracted sharply at a time when the improved approach to PPP [public private partnerships] has yet to leverage significant private investment into infrastructure sectors,” Mark Tomlinson, Nigeria Infrastructure Advisory Facility’s managing director, told New Civil Engineer.
“Budget spending is being scrutinised ever more closely to select project priorities against the most binding infrastructure constraints to growth.”
“Many projects which in fairer times doubtless would have found their way into the federal capital budget have been either rescheduled or deferred indefinitely. The pace of infrastructure development and delivery has clearly slowed. On the plus side, it is reasonable to anticipate the budget discipline which these tough times have necessitated, facilitated by the new project screening tools available to the leadership, will achieve a step change in the ‘value for money’ and development impact Nigeria obtains from its capital budget,” he added.
Tomlinson pointed to screening processes for projects that avoid “budget stuffing”, and frustrate pet projects for senior figures as one positive development from constrained budgets.
With money scarce, there’s more pressure to keep a watch on vanity projects and insidious growth in project budgets.
“It is generally realised that the priorities of the Nigeria government in the last 10 years have centred around infrastructure, manpower, and housing developments as well as economic diversification to reduce dependency on crude oil export—all of which directly or indirectly bear on both national and urban productivity/growth,” Victor U. Onyebueke, senior lecturer in the Department of Urban and Regional Planning, University of Nigeria told New Civil Engineer.
“For instance, the Nigerian Power Sector Reforms introduced in 2005 increasing efficiency and output through private sector investment and participation, and measured successes have been recorded here and in other sectors of the economy. The grandiose rail projects concessioned to China Civil Engineering Construction Corporation (CCECC) that is underway is also a case in point. In spite of this, the urban planning challenges inherent in the coordination and orientation of these large-scale projects, whether undertaken by state or federal government, to urban goals and visions are hardly ever taken into consideration,” he added.
Investment in infrastructure has averaged 6%-7% of GDP, which is half the investment rate sustained by other emerging economies.
“Significant constraints to Nigeria’s infrastructure include limited availability of public funding, challenges in procuring, implementing and maintaining public infrastructure and an additional set of challenges around creating conditions needed to attract investment into infrastructure,” explained Tomlinson.
“In recent years strong progress has been made on each of these fronts, including by the administration of President Buhari. But the challenge remains a steep one. For example, access to electric power, at 142kWh per person annually remains one of the lowest in the world and a sharp constraint to growth in the non-oil economy.
“A particularly difficult inheritance has been the legacy of underspend on infrastructure maintenance. The impact is little short of tragic. In the roads sector, for example, about two-thirds of Nigeria’s state and local road network of 13,000km has deteriorated beyond maintenance: a substantial portion of the network requires renovation or rebuilding.
“Across the whole of infrastructure the underspend has reduced asset lifetimes, so that roads, bridges, irrigation systems and rail facilities come up for replacement long before their nominal technical lifetime. This adds further pressure on capital spending, by loading in replacement projects much earlier than normally would be required.”
But Tomlison believes that continued reforms to privatise the infrastructure sector are the solution, with moves to privatise the bankrupt power sector generating interest from investors looking for long-term investment – especially in the solar sector.
That’s one prospect for the future, but it’s only one.
“The grave shortcomings of neoliberalism coupled with the development success recorded by China and other nations employing Keynesian-type planning have shown us that Nigeria need to do more than merely ‘taking the driving seat’,” said Onyebueke
“In as much as the grassroots development aspiration in the urban domain should not be frustrated, state-based urban planning machinery needs to be strengthened to handle the increasing challenges of fast growing cities, urban poverty and inequality, climate change, and other critical issues confronting the 21st century city.”