As the federal government battles to address the huge housing deficit in the country, the Group Chief Financial Officer of Norrenberger Financial Group, Nkiru Chime, in this interview says the country’s capital project allocation is too small to tackle infrastructure deficit as it will require N615 trillion in the next 10 years to address the challenges. She also discusses the entry of the company into the infrastructure market with the acquisition of the infrastructure bank.
Infrastructure deficit is quite huge in Nigeria, what do you think can be done to improve the situation?
The 2023 budget projected N5.47 trillion for capital projects. However, with the huge deficit, the country will need a cumulative investment of $1.5 trillion (N615 trillion) in the next 10 years to begin to address the infrastructural deficit in the country. At this rate, the government budget is addressing less than 10% of the country’s infrastructural deficit.
This means that the only way to achieve meaningful infrastructural development is through private sector participation in financing infrastructural development. This is why we came into the market to contribute by ensuring a pipeline of investible infrastructure projects that will attract private sector funds as well as through the deployment of best practices that will ensure effective and sustainable infrastructure development through the provision of advisory services, project supervision, infrastructure fund administration as well as innovative financing arrangements.
We want to also ensure that infrastructure projects are planned, designed, and executed to meet the intended objectives and deliver long-term value to stakeholders.
In your assessment, what are the key challenges inherent in the infrastructure sector?
The infrastructure sector is laden with myriad challenges including: insufficient budgetary allocation due to limited resources and dwindling federal government revenue; poor planning and limited feasibility studies which leads to delays, cost overruns and poor implementation with consequential impact on project viability; security challenges that threaten the safety of infrastructure assets like pipelines, power plants etc.
These challenges, compounded by the volatile fiscal, political and regulatory environment in the country, make investing in infrastructure a risky venture and stifle private sector involvement in funding infrastructure projects.
Do you think Nigeria can compete favourably in the infrastructure market among its global peers?
We have a lot of catching up to do. With an estimated gap of N615 trillion and government funding at less than 10% of the gap, we can only compete when we create the right environment to spur private sector investment in infrastructure.
The government needs to have the right fiscal and regulatory environments as well as work on developing a track record of successful Public Private Partnership (PPP) performances to incite the confidence for private sector investment. With these in place, we will see the banks, pension funds and insurance companies and other private sector participants begin to invest in infrastructure.
Infrastructure finance remains a viable investment option that guarantees inflation-hedged streams of income to ensure optimal return on investment. When we can attract the right level of private sector participation, then we can begin to bridge the gap and match what obtains around the world.
Norrenberger recently acquired a 60% stake in the Infrastructure Bank, what does this mean?
Our acquisition of the Infrastructure Bank heralds a new dawn in the development finance space in Nigeria. With a private sector participant in a sector dominated by the public sector, we hope to bring improved efficiency to the sector through the deployment of innovative solutions that will accelerate infrastructure development to foster economic growth.
Infrastructure development is the bedrock for true wealth creation as a developed economy works for everyone and creates prosperity for all.
Has the takeover been completed?
Yes, the acquisition process, which began in 2019 got SEC’s approval in November 2021 and has been completed following approval from The Central Bank of Nigeria (CBN) and the FCCPC, with the transaction adhering to established protocols and regulatory procedures.
The completion board meeting was held on March 16, 2023, putting a final seal to the deal.
Will you be partnering with development financial institutions for infrastructure development?
Yes, we will be collaborating with development financial institutions and other infrastructure financing institutions including International Financial Institutions and Multilateral Development Banks, that can bring value to infrastructure funding and development in Nigeria.
We are currently engaging with various potential partners who are excited to have us on board. You can expect to see partnerships that will be rewarding to all stakeholders.
What are the major states you are targeting to drive your infrastructure growth plan?
We intend to cover at least one state in each of the six geographical zones in the country; all parts of the country suffer infrastructure deficit. We will start with a couple of states and scale to others.
What agenda will you be setting for the new administration?
The future of infrastructure finance is private sector participation as we cannot continue to rely on the government to fund infrastructure development. We would like the new administration to introduce policies that will tackle the low participation of the private sector in infrastructure finance which is predominantly due to perceived risks around political instability, volatility of government policies, currency fluctuations among other risks.
This is critical because infrastructure development is the gateway to economic development and urbanisation. We will also encourage the government to sponsor more initiatives to promote global trends in infrastructure around green infrastructure development, and the need for resilience and sustainability, targeted at addressing the impacts of climate change due to urbanisation.
The world is focusing on sustainable infrastructure development to tackle the issue of climate change due to urbanisation. With urban population projected to be at about 70% by 2050 with rapidly developing economies largely China, India and Nigeria contributing the largest to the growth (about 35%), it is important that in tackling our infrastructure issues we keep the issue of sustainability forefront.
Although we have seen increased introduction of policies to promote sustainable development finance including NGX’s sustainability disclosure requirement for public entities, SEC’s rules on green bonds and social bonds etc, Nigeria is yet to achieve much in this area even as climate issues and environmental challenges persist.
What are your strategies to succeed in this new venture?
Norrenberger has sound risk management practices as well as technical expertise which have been fundamental to its successful growth track record. We will be deploying our expertise in investment management to ensure viability of projects we participate in.
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