I had the privilege to transit in Dubai last March and was awed by their humongous Dubai International Airport with its three terminals and seemingly endless boarding areas, duty free shops. After spending a cumulative twenty-five hours at the expansive concourse, I couldn’t help but wonder why it’s such rocket science for Nigeria to achieve a similar feat.
On an earlier visit in 2014, I had seen the super skyscrapers, including the Burj Khalifer reputed to be the tallest building in the world; the Burj Al Arab, which I observed from a few feet away; expansive shopping malls like the breathtaking Dubai Mall; and the city’s driverless trains. Irked by how the city’s splendour made Nigeria look like a village, Nigerian tourists with me had nothing but curses for successive Nigerian leadership for their inability to benchmark what they were seeing in Dubai; a desert transformed into one of the world’s most modern cities within two decades.
It is against this revealing background that when Kemi Adeosun, Nigeria’s finance minister, took to twitter to announce that government spent a mere $4.9 billion on capital expenditure for the WHOLE of Nigeria in 2017, I was exasperated. The Dubai Airport alone cost $32 billion! This year alone, the country has budgeted $15 billion for infrastructure or 21 percent of the 2018 budget. It is “the relentless commitment to infrastructure development (that has) turned Dubai into the Mideast hub for finance, information technology, real estate, shipping and even flowers”, according to Arabian Business. In other words, the ROI from the massive investment is worth it.
The International Monetary Fund (IMF) forecast the UAE’s economic growth to slow to 3.4 per cent this year, before rebounding to 4.6 per cent by 2020, supported by “the implementation of megaprojects and private investment in the run-up to Expo 2020”.
Given the big numbers coming from the Arab country, does it mean that we will never get there, what with the lack of big ticket infrastructure transactions here? Note that in absolute terms, Adeosun’s $4.9 billion is the biggest infrastructure expenditure in Nigeria, ever.
According to Bismarck Rewane’s Financial Derivatives Company (FDC), Nigeria requires $15bn (N4.59tn at N306 to a dollar) worth of investments annually for 15 years in order to adequately develop its infrastructure nationwide. The nearly $5 billion spent by the FG in 2017 is $10 billion short of the estimated sum per annum. The obvious implication for poor infrastructure, FDC says is to drive up the cost of doing business and impairing both local and foreign businesses. It is therefore imperative that Nigeria’s infrastructure is upgraded from the current situation “with a core stock of infrastructure of just 20-25 per cent of the GDP, compared to 70 per cent for more advanced middle-income countries of similar size”. The question now is how can Nigeria get there?
FG agrees with this thesis, “Our commitment to solving the infrastructure challenges in Nigeria is firm, because we think that is what will unlock growth in agriculture and solid minerals, and make us move away from our over reliance on oil,” Adeosun said in February. Her statement was sequel to the revelation of how much the country spent on infrastructure in 2017, which we have noted is like a drop in the ocean.
If we must go by the Dubai model of massive infrastructure spending, the first thing Nigeria needs is to get a leadership of Dreamers. The country needs men that can vision or dream the country out of the present backwater state to one with first class and reference point infrastructure. Dubai is the product of one “Utopian Dreamer” in the person of Sheikh Mohammed bin Rashid Al Maktoum. Born 15 July 1949, he is the Vice President and Prime Minister of the United Arab Emirates (UAE), and Ruler of the Emirate of Dubai. According to Wikipedia, he is responsible for the growth of Dubai into a global city. He is also credited for the launch of a number of major enterprises including Emirates Airline, DP World, and the Jumeirah Group.
These companies are “held by Dubai Holding, a company with multi-diversified businesses and investments. Sheikh Mohammed has overseen the development of numerous projects in Dubai including the creation of a technology park and a free economic zone, Dubai Internet City, Dubai Media City, the Dubai International Finance Centre, the Palm Islands and the Burj Al Arab hotel. He also drove the construction of Burj Khalifa, the tallest building in the world”.
After dreaming audacious projects, like Dubai we must find the funding required for bringing them to reality. Dubai applied a mixed bag of funding to achieve its infrastructure needs apart from petro dollars earned from oil export. The Gulf state applied a combination of financing sources including debt financing from local lenders like Local banks and giant corporations like Emirates NBD, National Bank of Dubai (NBAD) and First Gulf are active lenders.
Dubai also explored sukuk bonds and contractor financing. In this type of financing, a project’s builders fund elements of its construction and are paid over stages after its completion when the project begins to generate income; the Dubai Canal was built with this kind of financing. This is similar to Build Operate and Transfer (BOT) contracts in Nigeria.
Funding from UK Export Finance was deployed to building the Dubai World Trade Centre District, a whopping £3billion. “UK Export Finance has also reportedly offered up to $2bn to help fund the expansion of Al Maktoum International Airport, subject to the involvement of its consultants and contractors. Export credit agencies and export/import banks from other countries – including Japan and Korea – have also helped to fund projects involving contractors from their countries”, according to one source.
True it is a risk to pile on the debts but if they are channelled to infrastructure, the result would be the inevitable stimulation of the economy in the true Keynesian mode, which promises job creation and economic growth along with economic development. With prudent management, a prudent economy should be able to pay up its debts.
The Dubai model shouldn’t be too difficult to copy with a tweak here and there. But before that, we have some serious housecleaning to do mainly on three fronts; Doing Business, Anti corruption and the macroeconomic environment. These will require clarity of thought and plenty of courage.
The post Solving Nigeria’s Dire Need For Infrastructure appeared first on Independent Newspapers Nigeria.
Go to News Source
Author: Kirk Leigh