Nigeria needs PPP to fund infrastructure – Experts

Next Story

Chidinma Ekile Deletes All IG Posts Leaving Only Her Pics With Flavour (Snapshot)

As the drama of the $30 billion external borrowing continues to unfold, analysts have stressed the need for the federal government to design a framework that would allow public private partnership in developing the country’s infrastructure.

adeosun-udoma-ahmed-690x450

Although the federal government said it has so far released N753.6 billion for capital expenditure out of the N1.8 trillion budgeted for 2016, analysts said the country still has a long way to go in meeting its N6 trillion infrastructure deficit.

The minister of Budget and National Planning, Mr Udoma Udo Udoma, had recently informed the Senate Committee on Appropriation that the federal government has so far spent N3.577 trillion out of the full year budget of N6.06 trillion.

Analysts while commending the rate of implementation of the 2016 budget noted that the impact of the amount spent so far may not be evident as more is needed to be spent for the economy to feel the impact.

According to the analysts, the huge infrastructure deficit of the country alongside the downturn in economic growth which the country is presently facing require more money to be spent before the impact of the budget spending is felt by the populace.

With oil prices lingering around $45 per barrel and oil output dropping due to activities of militants in the Niger Delta region, revenue of the federal government has been below expectation, prompting the federal government’s decision to seek legislative approval for a $30 billion external borrowing.

Analysts noted that with the low level of revenue, the federal government needs massive borrowing and Public Private Partnership to be able to jumpstart the economy which has since slipped into recession and address the massive infrastructure deficit.

READ Archive:   Super Eagles striker Ighalo loses dad

An analyst at Ecobank, Olakunle Ezun who pointed out that the budget was signed around May said “if in the last four months the federal government has spent that much on capital project, to me it is a step in the right direction, considering the financial challenges facing the economy in terms of revenue.

“However the impact may not be seen considering the fact that the economy is in recession. So it may take a more and higher spending to actually show the impact of the injection in the system. Whatever they are spending now may not be that significant to jumpstart the economy.”

Managing Director and Chief Executive of Cowry Assets Management Limited, Johnson Chukwu, while noting that what has been expended on capital expenditure is not enough to make an impact due to the fact that its value had been eroded by devaluation of the currency, said “I don’t think the revenue will recover enough to compensate for the shortfall in expenditure.

“So the federal government has to go into massive borrowing or it has to devise alternative ways to finance infrastructure because as it stands today, Nigeria’s level of income cannot build the modern world class infrastructure that would support economic productive activity that will improve our economy and business competitiveness.”

Chukwu noted that “we need to recognize the fact that government revenue is actually behind the budget target. If you look at the government had projected a total revenue of N3.8 trillion and N2.2 trillion borrowing. I don’t think the government is doing well in terms of revenue, because looking at government revenue for the first half of the year, it was only N1.2 trillion. So that has partly constrained the capacity of the government budgetary expenditure adding to the fact that the budget was only passed around may thereabout, so we have lost about five months of the fiscal year.

READ Archive:   (Video) Under-20 World Cup, Nigeria bounce back, thrash Korea DPR 4-0 + Full match highlights

“In effect what has happened is that the expenditure and capital has become discretionary in the sense that it can only be available only when the government has met the recurrent expenditure which is why we are only seeing about N700 billion so far spent on capital expenditure. But you also have to put that N700 billion in context because N700 billion is equivalent to about N350 billion of the previous year because of the devaluation, so in terms of impact of the capital expenditure it is not very obvious in the first nine months of the year because the monetary value in terms of purchasing power has been eroded by devaluation.

Likewise, Head, Research and Investment at Sterling Capital, Sewa Wusu commended the level of budget implementation saying revenue constraints had been a factor in government not doing more. Stating that in years past, budget implementation had not always been up to 50 per cent, he said a 70 per cent budget implementation is laudable.

The N3.577 trillion disbursement of the N6.06 trillion budgeted for 2016 is a 79 per cent performance of the prorated budget for three quarters up to September, 2016. He however noted that due to the huge infrastructure gap, government’s spendings which has been affected by reduced revenue would not make visible impacts, saying PPP is one funding mechanism that the government should explore in infrastructure development so that it can “channel funds to other areas that affects the common man more.”

READ Archive:   Bello blames past leaders for Kogi’s woes

In 2015, there had been low consumer spending, as government at Federal, State and local governments did not spend enough on capital items and issues relating to outstanding salaries affected purchasing power of Nigerians.

Government spending had been heavily impacted by sharp drop in global oil prices which is a major revenue base for the country. There had been a 34.94 per cent shortfall in capital expenditure in 2015. Oil revenue expectations fell by 30.9 per cent last year as government had estimated a N5.43 trillion revenue from the black gold only to realize N3.75 trillion.

The 2015 budget of N5.06 trillion was anchored on projected oil price benchmark of $53 per barrel but averaged $43.69 By the fourth quarter of last year.. The significant reduction owes to the instability of international market prices for crude oil barrels. Volume of production was pegged at 2.28 million barrels per day at an average of 400,000 barrels for local use. Nigeria witnessed series of pipeline vandalisms and oil well attacks cutting Nigeria’s actual production to 2.19 million barrels per day in Q4 2015. Oil and Non-Oil revenue items fell short of their respective quarterly projections.

4 thoughts on “Nigeria needs PPP to fund infrastructure – Experts

Leave a Reply

Your email address will not be published. Required fields are marked *