Nigeria: A Cusory look at the Infrastructure Deficit and the Ease of Doing Business
Nigeria is African’s largest economy with about 190 million inhabitants. After years of positive growth, the economy slipped into recession in the first quarter of 2016 due largely to plummeting crude oil prices. Though the economy has recently come out of recession, massive unemployment, ailing public infrastructure, and corrupt public service, insecurity, widespread poverty, remain major challenges facing the country’s All Progressive Congress (APC) administration. With a disappointing revenue base due to a fall in crude oil proceeds, the administration has remained under intense pressure to make good its campaign promises. Currently, poor budget implementation (across the tiers of government) prevail and public debt is rising. As a result, the government is, increasingly looking to external sources to fund the huge infrastructure deficit as a way of promoting growth.
According to the National Integrated Infrastructure Master Plan (NIIMP) of 2015, the investment needed to meet current infrastructure deficit in Nigeria is put at about USD 3.0 trillion per annum over the next 30 years. The NIIMP estimates that this annual investment would have to rise from the current USD 9-10 billion (about two percent of GDP) to an average of USD 33.2 billion in the medium term (see Table 1 below for a description). The size of additional investment needed to make-up for the shortfall is expected to come from the private sector and Public-Private Partnerships (PPPs) (see Table 2 for a breakdown), therefore, the current administration is placing emphasis on improving the business environment in Nigeria.
Table 1 Infrastructure Concept and Estimated Cost
Source: NIIMP Development Team
Table 2 Private-Public Sector Split on Infrastructure Spending
Source: NIIMP Development Team
Recent efforts at improving the quality of the business environment in Nigeria have been largely concentrated on a select category of regulatory factors which provide opportunities for some quick wins. The major driver of the current administration’s efforts at better ease of doing business has been the Presidential Enabling Business Environment Council(PEBEC), led by Vice President since July 2016. Firstly, reforms to ensure reliable regulations and institutions has led to shorter businesses registration periods through online filing procedures for legally required documents, e-payment of taxes and the integration of initially separate business processes. Secondly, investor protection and dispute resolution mechanisms have made property transfer easier and more transparent through the removal of sworn affidavit for certified copies of the land ownership records. Specific and independent complaint mechanism have also been introduced by making statistics on land transfers publicly available. Thirdly, on reforms to improve project preparation and standardization of contracts now involve online publication of all relevant regulations, fee schedules and pre-application requirements regarding projects. These reforms and the provisions in the National Policy on PPPs (overseen by the National Council for Public-Private Partnerships) are to provide protection and guarantee for private investment in commercially viable projects. Due to these recent efforts, Nigeria is currently among the top 10 most reforming countries on the World Bank Ease of 2018 Doing Business ranking after moving 24 points up the ranking within a year.
In conclusion, the above described quick wins notwithstanding, the massive infrastructure deficit alongside the perennial monetary policy flaws, inconsistent exchange rate management, a less resilient banking sector and absent of supporting structural reforms, still plague the private sector of Nigeria.