Published On: Wed, Jul 31st, 2013

AfDB ups expectations of NSWF for infrastructure funding

The Africa Development Bank (AfDB) says it expects the Nigerian Sovereign Wealth Fund (NSWF) to be the chief mobiliser of funding requirement by Nigeria to meet its infrastructure need in coming years.

The AfDB estimates that full implementation of its Infrastructure Action Plan (IAP) for Nigeria would require some $350 billion of development expenditures between 2011 and 2020 and has proposed for the SWF to mobilise from other public and private sources at least $3 for each $1 of SWF contributions to the programme.

The proposed IAP cost projection is larger than any previously published estimates for overcoming the infrastructure gap in Nigeria and calls for a sharp increase in investment levels in infrastructure between 2011 and 2020.

The Federal Government has in fact proposed a modest figure of about N2.9 trillion spending over thirty years in the National Infrastructure Master Plan that is being worked out.

The IAP suggests that out of the $350 billion total infrastructure requirement, about $15 billion out of it will be required for capacity building and technical studies that support the design and implementation of the programme while capital expenditures would include about $285 billion for rehabilitation of existing infrastructure and construction of new facilities to meet existing and future demand.

In addition, about $50 billion will be required for investments in the transport fleet of the country, including aircraft, tankers for transport of liquefied natural gas, locomotives and rolling stock for the railways, enlarged bus fleets required to meet the projected 45 percent increase in the urban population of the country from 2011 to 2020.

The report has been presented to Ngozi Okonjo-Iweala, minister of finance and coordinating minister for the economy, for onward transmission to the Federal Government.

“The AfDB has placed a big emphasis on the SWF and that is something for Nigeria to think about. They did this because they think that each dollar saved in the SWF can leverage three times as much of infrastructure financing”, Okonjo-Iweala commented.

As contained in the report, the IAP also expects the government to mobilise up to 44 percent (about $150 billion) with the main sources to include budget allocations, domestic as well as offshore borrowing.

The private sector would provide a little above $130 billion of equity and debt financing for the programme, with some of the debt being mobilised offshore, according to the report seen by BusinessDay.

The contribution of the donor community is expected to be quite modest while households and local communities would contribute about $8.8 billion, mainly in the form of payments for electricity, water and sewerage connections.

A key challenge for the programme, however, will be the further development of the domestic financial market for both sources of equity and debt financing and would require very early efforts to build a range of capacities within the economy, according to the report.

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