It has been generally asserted that infrastructural development is key to national development, and that Nigeria faces a significant infrastructure gap which is a major bottleneck to the productivity of the private sector and business generally. CHIKA IZUORA writes on fresh government policy to bridge this gap and the challenges faced by the real sector. At a recent forum of Nigeria’s Organised Private Sector, the Manufacturers Association of Nigeria (MAN) did a post-mortem analysis of the country’s infrastructure deficit where it said that inadequate infrastructure in Nigeria is evident in a number of areas, which include, power, port services, road network, transportation with social infrastructure also lacking in the health and education sectors. MAN also pointed out that for this yawning gap to be closed, Nigeria requires substantial expenditure of almost $14.2 billion per annum over the next decade or about 12 per cent of the country’s Gross Domestic Product (GDP).Also, at the Annual General Meeting of the association, its president, Chief Kola Jamodu estimated that Nigeria needs about $ 10.5 billion to fix federal infrastructure alone, especially power against the current expenditure of about $5.9 billion per year on federal infrastructure which is equivalent to about five per cent of the GDP. Jamodu brought to the attention of stakeholders in the industry how China topped global manufacturing index with the expenditure of 15 per cent of its GDP on infrastructure investment in the mid 2000. He said that indirect costs borne by firms to fill infrastructure gap in Nigeria is about 15 per cent and which is just five per cent in China, 10 per cent in India and only two per cent in Turkey. Integrated Infrastructure Master Plan President Goodluck Jonathan in his message to the association during its 41st AGM in Lagos identified the private sector as the key facilitator of the nation’s economic development which has prompted his administration’s intervention efforts in corporate re-engineering and accelerated infrastructural enhancement and widened investments and reforms particularly in the power sector. The president told the association that the roadmap for power sector reforms highlighted by the National Integrated Power Projects (NIPP) framework will not be altered and that a greater priority is focused on rejuvenating the generation and transmission networks with the view to modernising them for optimal reliability and service and to bridge the infrastructural gap arising from many decades of neglect, sub-standard solutions and endemic corruption. The administration, he further said, has strategically injected more funds for the restoration of the old narrow gauge rail network and simultaneous development of a new modern wide gauge network for faster passenger connections. On road networks, he stated that government is rehabilitating, constructing and reconstructing major federal roads nationwide, naming important gateways like Lagos-Ore-Benin, Enugu-Port Harcourt, Kano-Katina, Lagos-Ibadan Expressway and Lokoja-Abuja are on the priority list. The re-establishment of inland water ways as a viable transportation alternative through a network of river ports and accessible by well dredged channels is ongoing. Still on transport infrastructure development, the president said that the simultaneous reconstruction and re-equipping of all the nation’s major airports to strategically adapt them to their best use as determined by the economic and social demands of each location marks an unprecedented infrastructural intervention in history to satisfy the nation’s desire for accelerated development. Reacting, Jamodu though commended government for instituting the Integrated Infrastructure master plan; he however, said the growth, prosperity and national security of any country are critically dependent to a large extent on the adequacy and efficiency of its infrastructure. Presenting obvious challenges of the private sector in trying to break-even, he disclosed that despite all claims, manufacturers have encountered serious challenges in terms of infrastructure (availability, cost and efficiency) which has had adverse impact on the contribution of the sector to the economy. In particular, he stressed that power has constituted a major factor that has affected manufacturing in the list of infrastructural facilities that require urgent attention. In his words, “The cost of providing alternative power has increased substantially the cost of production. Added to this, is the condition of our major roads which has also created a constraint in moving raw materials and finished goods across the federation”, thus making Nigerian made goods non- competitive due to additional costs. High Cost Of Production Mr Rasheed Adegbenro, acting director general of MAN who presented the score card of the manufacturing sector vis-a-vis the intractable power problems and infrastructure deficit declared that the full potential of the sector is still hamstrung which accounted for its historical low performance in terms of contribution to the GDP, export earnings, employment generation and wealth creation since 1980s. Adegbenro observed sadly that the harsh operating environment due mainly to huge infrastructure slit, making particular reference to poor public power supply and road infrastructure. He disclosed that irregular supply of industrial fuels arising from the epileptic operation of local refineries resulted in high cost of alternative power supply to industries making cost of locally produced goods uncompetitive. The director general revealed that a survey by the association showed drastic reduction in the level of electricity supply to industries with average daily supply level of five hours. He listed other factors responsible for low capacity utilisation of the sector to include among others, dearth of skilled middle level manpower occasioned by decay in the education sector, multiplicity of taxes and levies in addition to the unorthodox system of assessment adopted by most local governments through the use of revenue consultants and growing level of insecurity. Similarly, the Lagos Chamber of Commerce and Industry (LCCI) described the power situation in the first half of the year unsatisfactory. President of the chamber, Mr Goodie Ibru in the second quarter review of the state of the economy corroborated MAN claim that firms expenditure on diesel and petrol during the period of review was unbearable. He said, “This development impacted negatively on investment over the last six months with increased expenditure on diesel and petrol by enterprises. This also comes with the consequences of declining productivity and competitiveness”. He stressed that the incessant system collapse in the power sector has remained a great cause of concern. Ibru further lamented that in the midst of all these shortcomings, electricity tariff was reviewed upwards, and complained that the programmed periodic increase in fixed charge was unfair to electricity consumers and advised that there should be a good balance between the protection of the interest of investors and that of all the consumers. Sustainable Policies And Good Governance Stressing the way forward, both MAN and LCCI proffered that the real sector of the economy would spring back if government remain committed to good governance and sustain the current reforms in order to engender stability in the political and economic terrains to win investors confidence. Local supply of industrial fuels like the Low Pour Fuel Oil (LPFO), Automated Gas Oil (AGO) at affordable prices should be ensured to reduce cost of production in the manufacturing sector. They shared the belief that if government embarks on sustainable policy that will encourage utilisation of renewable energy resources for power generation such as coal, solar and wind, it will reduce much dependence on the conventional sources of energy that is currently in short supply. New Industrial Plants Underway The Minister of Petroleum Resources, Mrs Diezani Alison-Madueke believed that a new approach to develop the petrochemical sub-sector of the economy will help propel the economy as it will facilitate infrastructure development in the sector. The minister has also assured that the Gas Revolution Agenda of government which aims at using the nation’s abundant gas resources to galvanize all-round economic growth is making steady progress towards achieving its objective. Mrs Alison-Madueke who spoke at a plenary session of the 19th Nigerian Economic Summit titled, “Building a World Class Petrochemical and Fertilizer Industry in Nigeria”, disclosed that the need to get the gas sector to drive growth in all sectors of the economy especially the agricultural sector, necessitated the excision of some key areas of the Gas Master Plan from the PIB for accelerated implementation under the Gas Revolution Agenda. The programme has begun to yield dividends with plans for the establishment of a number of new fertilizer plants at advanced stage. Some fertilizer plants expected to drive the revolution include the proposed Dangote Petrochemical and Fertilizer Plants to be built at Olokola, Indorama Fertilizer Plant at Eleme, Brass Fertilizer Company at Brass, Nagarjuna Fertilizer Plant at Ogidigben, and another plant by the International Fertilizer Association. With most of the fertilizer plants billed to come on stream by 2017, Nigeria is being positioned to control 10 per cent of global fertilizer market by 2017, said the minister. Alison- Madueke further explained that the thrust of the two-pronged policy of gas-to-power and gas-to-industries is to drive linkages between the power and industrial sectors with the agricultural sector serving as a linchpin in the industrial sector on account of its enormous job creation potential and multiplier effect in the economy. The gas supply challenges are being tackled through the introduction of fair pricing that is comparable with what obtains in major gas producing countries like Egypt and Trinidad & Tobago as well as massive construction of gas infrastructure such as gas pipelines and gas processing plants. The minister said gas flare has been reduced considerably over the past two years to 20 per cent and that the series of gas projects including the oncoming petrochemical and fertilizer plants would take up a bulk of the gas currently flared thereby reducing gas flare and the harm it does to the environment. Confirming the development of new fertilizer plants, the Managing Director of Gas Aggregator Company of Nigeria, Mr Kunle Allen, stated that apart from Notore which is already into fertilizer production, six new companies have approached the Gas Aggregator Company to firm up gas supply arrangements for their fertilizer plants and that talks are at an advanced stage with the companies. Mr Allen further disclosed that the gas supply challenge is being further tackled through the dedication of 10 per cent of domestic gas obligation for gas-to-industry to petrochemical and fertilizer plants. Need For Incentive-Based Approach Government’s lofty ideas notwithstanding, the Oil Producers Trade Section (OPTS), has a contrary position on gas development in Nigeria in view of poor price regime. The OPTS is a private sector group under the umbrella of the Lagos Chamber of Commerce and Industry. The 18 indigenous and international OPTS members operate 96 per cent of the total oil and gas production in Nigeria today. Mr Mark Ward, Chairman of the group who examined the sector performance at an energy forum in Lagos recently explained that the treatment of gas in the Petroleum Industry Bill (PIB) is an even more difficult story. While he acknowledged the importance of gas to Nigeria because of its huge reserve and being the world’s 9th largest gas reserve and he believes that these vast reserves can underpin economic growth and diversification to Nigeria through more power generation, more gas based industrial activities such as fertilizer plants to boost agriculture, petrochemical industries and also high value exports. Mark however, pointed out that despite its importance, domestic gas has not really taken off yet as the average domestic gas prices have recently risen to US$1 per mmbtu, which is grossly inadequate when compared with development costs which include not only the development of the resource, but also the infrastructure needed to move the gas to market. To put the US$1 in perspective, this is equivalent to US$6 per barrel of oil, Mark said adding that the infrastructure is still very much in its infancy and therefore costs are mostly higher than oil developments depending on many factors. “You can imagine if oil were priced at US$6 per barrel there would be no new oil developments” he observed. According to him, the PIB makes matters worse by increasing the tax rate from 30 per cent to 80 per cent and by significantly reducing incentives for investments. “Furthermore, PIB focuses on a punitive approach to enforce domestic obligations. Given the capped price and the undeveloped infrastructure leading to high overall development costs, we believe that an incentive based approach to domestic obligations is the best way to achieve the development which Nigeria so clearly needs.”
Posted on: Sun, 22 Sep 2013 05:23:52 +0000
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