InfraCo as silver bullet for infrastructure

In 2021, President Muhammadu Buhari had given approval for the establishment of the N15 trillion Infrastructure Company (Infraco Plc), a world-class infrastructure development vehicle wholly focused on Nigeria.

The N15tr Infrastructure Company Limited (InfraCo), is designed to bridge the nation’s huge infrastructure gap.

Investors in the N15tr InfraCo include the CBN, Nigeria Sovereign Investment Authority (NSIA) and Africa Finance Corporation (AFC).

The Bankers Committee has also thrown its weight behind the Company, noting that it will in 2022 be focusing on supporting the CBN and the government to reduce the level of infrastructure deficits in the country.

The move is based on the realisation that there is increasingly limited fiscal space to fund capital projects.

Emefiele, who addressed journalists at the end of the two-day annual bankers’ committee retreat in Lagos, said the board of the Infraco has been constituted with the managing director and four assets managers appointed.

“As we speak, the Infraco is already working on three major infrastructure projects in the country – the Abuja Kano road, the 2nd Niger Bridge, and the Lagos-Ibadan Expressway,” Emefiele said.

He added that “the Federal Government approached us to provide some kind of bridge funding. The bridge funding is almost about N170 billion and we provided it so that those projects can move on with funding.

“The entire scope of those three projects I’m told is slightly above N1 trillion but the numbers are being worked on. And I believe by the time the asset managers effectively come on board, the details of those projects and the remaining aspects of those funding would be coming in through debt and that is where the asset managers would come in with the entire scope and then we would know the detailed cost of those three projects,” Emefiele explained.

The CBN governor said N1 trillion of the N15 trillion equity is being contributed by the CBN, African Finance Corporation, Nigerian Sovereign Investment Authority (NSIA). The remaining N14 trillion, he added would be accessed from debt market.

“And I must say that we are happy here that these are substantially going to be naira funding. The banks have a large pool of funds, the pension administrators have a large pool of funds and we are reasonably optimistic that more than 50 percent or two-third of this money is going to be raised locally. Before we begin to think about accessing international finance, we would try as much as possible to limit debt for foreign currencies particularly knowing that some of these projects and revenues are going to be generated with local currency. Where foreign currencies are needed, we will also take those and then be able to use them,” he said.

Emefiele admitted that within the Nigerian financial system, there’s a lot of idle capital that can be channeled to INFRACO as it was set up to give comfort to investors especially the local investors to put their funds in these projects.

“This is a brilliant alternative financing methodology that has been brought up and we seek to really look into this. It intends to help government and private sector to raise finance, without necessarily encumbering the balance sheet of the Federal Government,” he said.

Only recently, The CBN Governor hinted that he would engage Lagos and Federal governments on the possibility of allowing the Infrastructural Corporation of Nigeria Plc (INFRACO) to take over Lagos Free Zone (LFZ) access roads.

Emefiele said this during a tour of the zone, being promoted Tolaram Group, stressing that the existing road infrastructure would be overwhelmed when the economic activities of the zone begin to take off.

This comes as a seaport, a key infrastructure in the area, is scheduled to take off by September, according to the company.

The Chief Executive Officer for Africa, Tolaram Group, Haresh Aswani, disclosed that $2.1b has been committed into the project covering 850 hectares. He added that 300 hectares (or 35 per cent) would be developed before the end of 2024.

About 70 per cent of the project is earmarked for industries while 20 per cent and 10 per cent are devoted to logistics and real estate respectively. The company said an estimated $6b is to be spent in the project development in the next 10 years, during which many companies are expected to take off.

The CBN boss, who promised the bank would give every support required to make the project a success, said he would engage the government through the Ministry of Works and Housing on the possibility of ceding roads connecting the zone to $15 billion INFRACO, which was inaugurated last year by President Muhammadu Buhari and chaired by the apex bank, for construction under agreed terms.

Emefiele stressed that he is not an advocate of the road tax credit as it denies the government of future revenue. He was, however, certain that the road developed under other commercial-viable terms to ease access to and from the axis, which houses LFZ and Lekki Free Trade Zone (LFTZ).

An Economist and Founder of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, described the coming of the InfraCo- as a laudable initiative.

Yusuf said: “infrastructure deficit is perhaps the biggest problem we have as a nation. No efforts or resources will be too much to commit to it. We should welcome it if the CBN has more room to boost investments in infrastructure.

“In fact, infrastructure challenges are among the reasons the intervention funds have not been able to make the desired impact on the economy. If we fix Infrastructure, a lot of things will fall into place.

“Infrastructure master plan indicated that we need to commit $100 billion annually for three decades before the deficit in infrastructure can be fixed. This shows the magnitude of the problem.”

He added that “the beauty of the InfraCo initiative is the involvement of the private sector. We are likely to see a greater level of efficiency and cost effectiveness both in the execution and management of the infrastructure.”

On his part, the Managing Director and Chief Executive Officer of the BIC Consultancy Services Limited, Lagos, Dr. Boniface Chizea, said the establishment of the InfraCo could not have come at a better time as inadequate infrastructure has made the Nigerian economic environment unattractive to investors and has remained the bane of its economy.

Chizea said that gaps in the country’s infrastructure space have remained the perennial problem to its economic development.

He said: “ As has been variously emphasised by many you cannot grow and develop your economy without adequate power supply. We are reminded that infrastructure is all encompassing and it includes basic physical and organisational structures and facilities needed for the organisation of society including personnel.”

Chizea observed that the seed capital of N15 trillion, which is humongous by all accounts, if logically, prudently and judiciously disbursed, will have far reaching impact from the perspective of the provision of critical and reliable infrastructure to propel the economy for rapid growth and development.

He said: “It is a good vehicle, which has been properly conceived and delivered to jump start the economy following its grounding to a halt which was precipitated by COVID-19.

“It is therefore projected to make a resounding and impactful difference to the fortunes of the economy.”

He also added that the establishment of the InfraCo would reduce leakages in the execution of infrastructure projects.

“Ordinarily, it should reduce leakages and waste to the barest minimum and enable Nigerians to have good value for money considering its packaging and configuration.

“It will be private sector driven and 50 per cent of the money is projected to come from the private sector. Therefore, we should expect private sector templates and discipline to drive operations. We should also expect that most of the money will be equity investments raised from the stock market which does not allow too much slack for lackluster performance.