According to a projection made by the African Development Bank (AfDB), Nigeria’s infrastructure financing needs “will grow to $3 trillion in the next 26 years.” This projection was made in Abuja on Tuesday, July 10th, 2018 during the Africa Investment Forum (AIF) roadshow organized by the Bank. Thus, AfDB plans to help Nigeria bridge its infrastructure gap.
The Special Advisor to the Nigerian President and Coordinator of the country’s Economic Recovery and Growth Plan (ERGP) Unit, Folarin Ayalande stated that Nigeria is ready for investments but lack of affordable and long-term finance remains a major constraint. He further described the lending de-risking component of AIF as a game changer and assured the support of the Nigerian government. “New approaches are required to deliver on the country’s development targets, with a focus on private sector-led growth,” he added.
Also speaking during the roadshow, Director for Nigeria Country Office of the AfDB, Ebrima Faal reiterated the critical need to change the current funding mix and create partnerships to finance infrastructure and other projects in Africa as Nigeria’s infrastructure cumulative financing needs are estimated to reach US$ 3 trillion by 2044 or about US$100 billion annually.
Over the last 50 years, particularly following the 2008 financial crisis, consecutive Nigerian governments have been unable to meet the growing demand for infrastructure and services alone. As a result, large fiscal deficits arising from imprudent fiscal management policies have led to decreasing public expenditure on infrastructure. This has widened the infrastructure financing gap, thereby preventing the construction of much needed transformative infrastructure.
Nigeria’s Economic Recovery and Growth Plan requires billions of dollars of investment to deliver on its growth and job-creation targets. The government has shown a willingness to collaborate with the private sector and the AIF by targeting opportunity-driven entrepreneurs, upgrading skills, developing business clusters and economic corridors. These are critical factors to developing a buoyant and productive industrial sector in Nigeria.
While interacting with key private players and viewing presentations from Nigeria’s senior government on the country’s development priorities and project pipeline that could benefit from the AIF partnership, AIF Senior Director, Stella Kilonzo, said the AIF is a marketplace that will bring together the Bank and other multilateral institutions to de-risk investments at scale. It will work closely with investors and project sponsors to enable them to increase trade and investment in local and global markets, ensuring that projects are able to secure adequate and appropriate finance.
Among the projects that have been selected in Nigeria by the AfDB for funding through the new mechanism are Santa Clara Medical Facility, a state-of-the-art medical facility comprising an ultra-modern referral 150 bed private hospital and two separate 10 bed primary healthcare clinics situated in two different locations within Lagos, the Eko Atlantic City project also in Lagos, the Abuja Integrated Infrastructure Project, otherwise referred to as the Satellite towns and the Bus Rapid Transit.
AfDB and Nigeria have a long-standing relationship that dates back to 1976 when the Nigeria Trust Fund(NTF), a self-sustaining revolving fund, was created by an agreement between the Bank Group and the Nigerian Government. In 2016, the President of the Bank, Dr Akinwunmi Adeshina said the bank was working on giving the country loan facilities of $4.1 billion for critical sectors of the economy over a period of 2 years. The loan included $1 billion at a concessionary rate of 1.2 percent which was used to address the 2016 budget deficit and helped the country’s economic recovery as it grappled with its first recession in more than 20 years.
AIF is a platform created by the AfDB to mobilize private equity funds, sovereign wealth funds and the private sector to facilitate infrastructure projects in Africa. It is set to hold its inaugural edition from November 7-9, 2018 in Johannesburg, South Africa.