May 17, 2022
Over the years, the public infrastructure deficit in Nigeria has become an issue of major concern and it is estimated that the country will require between $100 to $150 billion per annum for at least the next ten years to close the gap. The gap includes lack of good roads and a railway network that can drive economic activities, poor and in some instances non-existent power generation, transmission and distribution systems, decaying public educational facilities, dilapidated government owned hospitals (including tertiary healthcare facilities) and even airports amongst others. Generally, infrastructure is the foundation on which economic activities thrive, as poor infrastructure impacts on economic growth. According to the Africa Infrastructure Country Diagnostic Report released in 2011 titled “Nigeria Infrastructure: A Continental Perspective”, about 40 percent of the productivity handicap faced by African firms are caused by infrastructure constraints. There is therefore no doubt that the dearth of key infrastructure in several sectors of the economy has continued to limit Nigeria’s growth potentials and its competitive abilities globally. In a bid to tackle this infrastructure challenge, the Central Bank of Nigeria (CBN) announced the creation of the Infrastructure Corporation (InfraCorp) in October 2021 (after it was approved by the President in February 2021) to boost funding for capital projects in the country.
The InfraCorp was established by the CBN in partnership with African Finance Corporation (AFC) and the Nigerian Sovereign Investment Authority (NSIA) with a seed investment of ₦1 trillion. Funding is expected to grow to N15 trillion over the next few years and will be deployed to tackle critical infrastructural projects.
Given the significant role that the InfraCorp is expected to play within the Nigerian economy, this article provides a general overview of the InfraCorp, its prospects and likely challenges as well as outlook for the future.
The Need for an Infrastructure Corporation in Nigeria
The approach adopted by the government in tackling infrastructure challenges over the years have largely been through a combination of budgetary allocation financed by government revenue and augmented by foreign and domestic debts to fund capital projects. This approach partly accounts for the continued rise in Nigeria’s debt profile resulting in increased cost of debt servicing to the country. In this regard, there are serious concerns that project finance mainly through debt is not sustainable in the long run. This has necessitated the introduction of a number of other strategies to fund infrastructural projects. For example, President Muhammadu Buhari in 2019 signed the Executive Order 007 on Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme to encourage private participation in building critical infrastructure.
Furthermore, the Nigerian Government created the revised National Integrated Infrastructure Master Plan (NIIMP) in 2020 to be implemented across 23 years (i.e. till 2043). The NIIMP projects an estimated infrastructure investment of $2.3 trillion over the 23-year period at $150 billion annually by both the private and public sectors between 2021 and 2025 with the energy and transportation sectors requiring the largest investments of more than fifty percent over the planned period. The private sector is expected to contribute 56% of the investment requirement while the public sector is expected to finance 44%.
The creation of the InfraCorp is therefore crucial to the realization of the NIIMP as a means of bridging the infrastructure investment deficit in the country.
InfraCorp as a Corporate Entity: Prospects, Likely Challenges and Future Outlook
The idea of an infrastructure focused entity backed by a sovereign is not peculiar to Nigeria. In the United Kingdom (UK), for example, the Infrastructure and Projects Authority (IPA) is a government agency with its own charter which was set up to manage the UK government’s delivery of infrastructure and major projects. The delivery of these projects is however outsourced to private companies such as Serco UK which generates about 40% of its revenue from UK government contracts. 3Unlike the UK approach, the InfraCorp was set up as a limited liability company pursuant to the Companies and Allied Matters Act, 2020 (CAMA) rather than as an agency of the Federal Government with statutory flavour.