Increased Public Spending to Support Upgrade of Nigerian Transport Infrastructure

Proshare

Monday, August 13, 2018/04:45PM/News

Some N251.4bn ($697.2m) was allocated to the Ministry of Transportation in the N9.1trn ($25.2bn) 2018 budget, signed into law by President Muhammadu Buhari in late June, a 30.4% increase on the 2017 allocation.

Of this, N162.3bn ($450.2m) will go towards a series of new and ongoing rail projects, including the 1100-km Lagos-Kano standard-gauge rail line, linking the country from north to south; the Lagos-Calabar connection, easing travel from east to west; and the new, 2000-km standard-gauge route linking Port Harcourt in the south-east with Maiduguri in the north-east, expected to improve connectivity to many inland areas.

Furthermore, as part of N2.9trn ($8bn) in capital expenditure featured in the budget, an additional N682.3bn ($1.9bn) – the highest individual allocation – was granted to the Ministry of Power, Works and Housing, with N344bn ($954.2m) of this to go towards the construction and rehabilitation of around 70 new road projects.

This includes N9.6bn ($26.6m) for the fourth phase of the Second Niger Bridge project, a connection linking the cities of Asaba and Onitsha across the Niger River, designed to ease congestion on the existing Niger Bridge, and enhance connectivity between the south-east and western regions.  

Other major road projects include the construction of the Lagos-Shagamu-Ibadan and Enugu-Port-Harcourt dual carriageways.

Addressing infrastructure deficit to stimulate growth opportunities

The efforts to improve transport infrastructure fall under the broader goals of the government’s Economic Recovery Growth Plan (ERGP) 2017-20, which, among its aims, hopes to stimulate economic growth through an improvement in transport services and logistical efficiency.

Infrastructure has been a longstanding issue for the country, with transport cited as the fifth-greatest obstacle to business in the World Bank’s 2014 Enterprise Survey of more than 2500 local companies, while in the World Economic Forum’s “Global Competitiveness Report 2017-18”, Nigeria ranked 132nd out of 137 countries in terms of infrastructure. Meanwhile, the World Bank’s Logistics Performance Index, which rates trade logistics, placed the country 110th out of 160 countries this year.

Improved connectivity, especially between inland centres and Nigeria’s maritime ports, will be vital for the development and recovery of the economy, and will help to spread the benefits of economic growth, according to industry figures.

Hassan Bello, executive secretary and CEO of the Nigerian Shippers Council, believes the challenge is not necessarily to build more infrastructure, but more efficient and integrated connections as part of an overall transport system.

“Most cargo is inland, which requires good connections from the ports,” he told OBG. “Road cargo as the sole mode of transport has led to serious congestions at our sea ports. We need to have rail and inland waterways and pipelines to complement road transportation.”

Funding, timing and efficiency pose challenges to planned projects

While the government wants to fast-track its standard-gauge rail rollout and other transport-focused projects, delivering these major developments on time may prove challenging.

Though Nigeria is West Africa’s leader in transport infrastructure projects – with six of the 10-largest schemes in the region currently under development, and 90% of the region’s rail projects by value – the country often struggles to bring in capital works on time or on budget, according to a study by Deloitte.

In its “Africa Construction Trends Report” for 2017, the international consultancy found transport infrastructure projects undertaken in Nigeria cost on average 14% more than the initial estimates, and take approximately 188% longer to complete, with an average of seven out of 10 projects delayed.

Factors affecting delivery include a decline in state funding as the economy fell into recession in 2016; the devaluation of the currency, leading to higher input costs; and what is, at times, a slow decision-making process, evidenced by the lengthy delay in approving this year’s budget, which was tabled in November 2017 but only ratified in June

 

Proshare Nigeria Pvt. Ltd.

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