Infrastructure as public good for national development (1)

Raising Nigeria’s infrastructure endowment to that of the middle-income countries could boost annual growth by around four percentage points, wrote Foster and Pushak in a 2011 publication titled, “Nigeria’s Infrastructure: A Continental Perspective”. The  African  Development  Bank  (ADB)  has  made  infrastructure  development  a  cornerstone  in  its development  agenda  with  regional  member  countries  (TMSA,  2012: Governance and infrastructure in the continent). The  bank  recognizes  that lack of  adequate  social  and  economic  infrastructure  is  one  of  the  key  constraints  to  short-, and medium-, term poverty  reduction  in  Africa,  and  has  thus  been  a  major  force  in  private  and  public sector infrastructure development through the provision of financial and technical resources. At the same time,  the  bank  recognises  the  increasing  importance  of  good governance  for  infrastructure development and  has  made  good  governance an  imperative  in  its  lending  and  non-lending operations.

There  have  been  considerable  changes  in  the  delivery  of  national  infrastructure  services  across Africa.  While  Nigeria  has  improved  its  telecommunication  infrastructure  situation,  it  has  not improved  in  other  areas  like  health,  education,  airports,  electricity,  housing  and transportation.  However, performance in terms of infrastructure service delivery and quality continues to vary across countries. Infrastructure is the medium of production of goods and services and forms the national asset of any nation.  According to the 2009 Kathmandu Final Workshop Report, infrastructure can help solve four problems: social; health and environment; development; and economics.

A region’s infrastructure network, broadly speaking, is the very socio-economic climate created by the institutions that serve as conduits of trade and investment. Some of these institutions are public, others private. In either case,  their  roles  in  the  context  of  integration  are  transformative,  helping  to  change  resources  into outputs  or  to  enhance  trade  by  removing  barriers. Therefore, an improvement in regional infrastructure is one of the key factors affecting the long-term economic growth of a region. The linkages between infrastructure and economic growth are multiple and complex. Not only does infrastructure affect  production  and  consumption  directly,  it  also  creates  many  direct  and indirect externalities.

It involves large flows of expenditure, thereby creating additional employment. Studies  have  shown  that  infrastructure can have a significant impact  on  output, income,  employment, international  trade,  and  quality  of  life.  Infrastructure development, like road and rail infrastructure, can reduce transit stress and promote good health. It can also reduce the level of crime.  Infrastructure  has  always  played  a  key  role  in  integrating  economies  within  a  region.  Well developed and efficient infrastructure is essential for a region’s economic development and growth. In  a dynamic  concept,  infrastructure  is  seen  as  a  regional  public  good  that  moves  factors  of production within  and  across  countries,  thus  helping  the  region  attain  higher  productivity  and growth.

Nigeria’s widening infrastructure deficit has been a frequent discussion over the years as it is widely believed that the weak stock of infrastructure investments is one of the biggest challenges to the ease of doing business. Nigeria’s infrastructure stock of about 25 percent of gross domestic product (GDP) remains far below the 70 percent international benchmark, according to a 2017 report by the International Monetary Fund (IMF). Nigeria’s Minister of Finance, Budget and National Planning, Mrs. Zainab Shamsuna Ahmed, stated that the federal government will require about N36 trillion (about $60 billion) annually for the next 30 years to effectively tackle Nigeria’s infrastructure challenges. The minister further stated that with the shortfall in oil revenue in recent times, it is difficult to address the infrastructural deficit plaguing the nation.

Capital expenditure in 2018 stood at N820.6 billion (as at 14th December 2018, according to the budget office of the federation), far below the budgeted sum of N2.9 trillion, translating to a performance ratio of just 28.6 percent. Infrastructure financing plays a critical role in promoting economic growth, improving standard of living, poverty reduction, enhancing productivity and in improving competitiveness. It also contributes to environmental sustainability, write Obinna Chima & Nume Ekeghe, in ThisDay of January 6, 2020. And according to a 2019 Statista report, as a percentage of the country’s GDP, China’s annual average infrastructure spending is one of the highest in the world at 8.3 percent. Public infrastructure provision is the best way of bridging the gap between the poor and the rich in any community and of ensuring commerce development.

Studies have shown that the causes of poor economic growth and development in Nigeria are:

Low capital budget provision and execution: Low capital budget execution is also an issue across the infrastructure sector. According to Mr. Babtunde Fashola, minister of works and housing, the federal government owes contractors N392 billion and it proposed N276 billion for its ongoing 711 road projects in the 2021 budget, The Punch, reported in 2020. The government actually needs N7 trillion to complete its current undertakings. In the past five years’ budgets, capital expenditure performance was below 30 percent.

High business-environment risk: The business-environment risks in Nigeria are very high. Foreign investors who could invest highly in the provision of scarce infrastructure are wary of these risks. Apart from the security and safety risks and high rate of road accidents, the October 2020 “END SARS” civil unrest under the auspices of secret promoters and the guise of “peaceful protest” in thirteen out of thirty six states and the Federal Capital Territory (FCT) is unfriendly to infrastructure development by private sector and foreign investors. The incessant strike by Academic Staff Union of Universities in Nigeria (ASUU) is also inimical to direct foreign investment.

Corruption: According to Transparency International (TI) Global Corruption Report 2005, “corruption undermines economic development.” Peter Eigen, the chairman of Transparency International, stated that corruption in large-scale public projects is a daunting obstacle to sustainable development. When the size of a bribe takes precedence over value for money (vfm), the results are shoddy construction and poor infrastructure management. According to Abimbola Ayobami in Premium Times, November 24, 2012, “an estimated 11,886 federal government projects were abandoned in the past 40 years across Nigeria. Despite its enormous array of resources, the Nigerian economy has witnessed a period of stagnant growth. This has been partly blamed on corruption (Dahida D. Philip & Akangbe Oluwabamidele Moses, 2013, in Corruption as a Bane for Under-development in Nigeria).

To be continued next week