Deciphering the Value of the Infrastructure Loan Oseloka H. Obaze& Izu J. Okoye

Great value was lost in the skewed reportage of the keynote address delivered by Mohammad Sanusi, Emir of Kano in Abuja on 2 December, 2016.  Emir Sanusi, the Federal Government and Nigerians were ill-served by the media’s embellishing of afiscal element of the address. Dialogue attendees know what transpired. The reality remains as Sanusi observed, that Nigeria is heavily enmeshedin debts that “out of every one Naira Nigeria makes, 40 kobo goes to debt and 60 kobo is left for salaries, health, education, power and infrastructure.” Nonetheless, a correlation must exist between government's attempt to borrow $30billion for infrastructural development and plans to offer N20 billion to eachof the 36 states for infrastructural development.
Proclaiming that Nigeria should borrow more in order to dig itself out of the present debt peonage seems counter intuitive. Yet such argument gains validity, if such borrowing is per se, for development. The redeeming caveat is ensuring “beyond financing established infrastructural needs...that aggregate expenditure is of such quantum and composition to enable exit from recession.” The proposed $30 billion loan, which the National Assembly reverted to the Executive Branch,is tailored to social infrastructure.  Since the loan approval document-now to be split into three tranches- did not initially include the sectoral narratives, it’s hard to discern the benefiting geopolitical and economic sectors.But this much is known. Nigeria's infrastructures across board are in bad shape and needs to be remedied.  But the dismal state of our infrastructure is hardly by happenstance; our infrastructure failed gradually, through poor policy articulation, implementation, setting of wrong prioritiesand wrong utilization of past loans. Nigerians remain cognizant that past foreign loans dedicated to Nigeria’s steel industry yieldedvery limited results.
The value and amortization terms of any loan are best assessed, if the loan is meant for hard infrastructure - power, housing tollbridges and roads - that yield returns. Same is not always true of loans for soft and social infrastructures namely, education, health, salaries and benefits.  Thus, it may be wise to borrow for hard infrastructure; yet not so wise to borrow for soft infrastructure. Having only extricated ourselves from debilitating London and Paris Club debts just a decade ago, some questions heady arise. Will our borrowing outcome be any different now?Despite the fate of the recent bail-out of some states, the federal government has agreed to reimburse some states N522 billion being over deductions for external debts service between 1995 and 2002. The reimbursement pegged at 25% of amounts claimed by the states, represents yet another unconditional bailout for the states.  Salutary as such relief measures are, there’s need to avert past bailout mistakes since most states squandered the bail-out funds disbursed to them.  Here is the challenge: Can an external loan - quick-fix, ad-hoc funding - couched in the attractive term of “infrastructure fund” even if it serves as stimulus or bailout, begin to redress the infrastructure deficit, if the utilization modalities are not properly articulated and determined?
Infrastructural deficit in Nigeria remains huge.Sectoralinfrastructures in Nigeria have suffered major setbacks, which manifest in dismal electric generation and distribution; crumbling roads and bridges thatare further exacerbated by a poor maintenance culture.  The deregulatednational air transportation system continues to struggle,due to the existing oligopolistic market structures.Recent census shows that total national commercial aircraft fleet shrank from 60 to 20 planes in the past year alone. Prevailing operational challenges translate to serious air safety concerns. Nigeria is also still underserved by limited ports and waterways infrastructure; as such, that sector is hampered by navigable, but yet to be dredged and therefore underutilized inland waterways totalingsome 3,300km, and dearth of modern vessels.Nigeria’s housing deficit is estimated at 16-20 million and housing infrastructure solaggardly that not even 20% of Nigeria’s housing needs are presently realizable. The mortgage sector remains dysfunctional since Nigeria’s maintains the most inefficacious mortgage policy and regiment.  Whereas real estate construction contributed $990 billion or some 6% of U.S. GDP in 2015, and 4% of GDP in Ghana, in Nigeria, contributionsvia mortgages is a dismal 0.5% of the GDP. 
Whilst Nigeria’s GSM telephone system is much improved and functional, Nigeria’s 97 million GSM users are still grossly underserved with only 21% broadband penetration. Boko Haram has demolished most GSM urban furniture in the Northeastand thenational landline systems has totally collapsed and arenon-existent most parts of the country. Such setbacks are worsened by high tariffs, lack of periodic maintenance, insufficient public sector funding and unavailability of a sound bond market, poor and inefficient banking system and capital markets. Nigeria’s ICT sector yielded N1.4 trillion in FQ 1 of 2016, yet the nexus between the parlous state of our communication infrastructure and our overall inability to fully catalyze the “use of ICTs for different aspects of national development” is now more glaring.Relatedly, Nigeria’s rating on the World Economic Forum’s Global Competitiveness index which assesses “countries’ ability to have good and steady electricity supply, road quality construction, air transportation, and port and rail infrastructures” remainsdismal. The 2014-2015 and 2015-2016surveysplaced Nigeria in the 133rd and 134th positions respectively, out of 144 countries surveyed.
Infrastructure funding and challenges were of lesser concern during the military era. Because democratically elected governments tend to view infrastructure development as components of democratic dividend, the Jonathan administration made infrastructural development a priority viathe National Integrated Infrastructure Master Plan (NIIMP), which linked key sectors of the economy. The plan envisaged to last for 30 years, would guarantee sound and sustainable economic growth and development in Nigeria and bridge existing infrastructuredeficit, if fully implemented.Undeniably, Nigeria has suffered from the inability of successive governments to follow through on approved infrastructure projects.  Regime and power change continue to impact negatively on infrastructure development as new political leaders tend to abandon projects initiated by their predecessors. Politicians jockeying for preferential funding and positioning of infrastructure all in the name of constituency projects remains problematic.
The value of Nigeria’s infrastructure is relative to herhistorical realities regardless of whether the funding is borrowed or budgeted. Historical realities also reflect the federal government’s continuing inability to leverage accruing oil revenue to develop national infrastructure fully. Furthermore, poorly funded and executed policies have contributed to pitiable deliverance of critical and strategic infrastructural projects, with some critical projects abandoned.  Meanwhile, States are increasingly averse to rehabilitating decrepit federal infrastructures, due to extant policies prohibiting repairs of such infrastructures without prior authorization from the federal government, and the sad experience of recouping funds expended by States on such federal projects.
Funding infrastructure via budget or loans is no longer as important as finding the political will and correct strategy for executing and delivering nationalprojects fully, irrespective of the administration in power.  Not delivering on requisite infrastructure equals shortchanging the national population and retarding development. As Ejeviome E. Otobo, rightly averred in the recent edition of Jeune Afrique, “The ability of all tiers of government to increase citizens’ access to pipe-borne water, public healthcare and of the federal government to increase electricity supply will be an important test of their commitment to inclusive growth.”And as Abraham Nwankwo, Nigeria’s debt management czar recently observed; “If the economy does not succeed in converting the external borrowings to domestic productive capacity and self-sustaining economic growth, with substantial diversified export component, the resulting economic and social disruption will be unbearable.” Translated from our historical past to here-and-now, failure means recession, which is already the new normal for Nigeria. Moving Nigeria forward does not require a foreign loan that will most likely be mismanaged, but a clear delineation of institutional structures and responsibilities for driving the deployment of critical national infrastructure. Such delineation will influence funding and burden sharing among the three tiers of governmentwith a view to improving domestic productive capacity and self-sustaining economic growth.
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Obaze MD/CEO, Selonnes Consult Ltd.; Okoye is a Research Associate, at Selonnes Consult Ltd.