Nigeria Making Strides in Infrastructure Development

nigerian infrastructure
Nigeria continue to develop its infrastructure

As economic growth in South Africa slows, a number of fast-growing alternative economies have become viable options, as countries aim to establish themselves as the ‘Gateway to Africa’.

International companies looking to tap into the enormous potential of Africa are increasingly weighing up the possibilities of settling in East or West Africa. Increasing political stability in such regions, and the potential to access large growing markets, is escalating the feasibility of locating further up the continent, writes Environmental and Building Technologies research analyst, James Milne, at global consulting and research firm, Frost & Sullivan.

Nigeria remains the beacon of the West coast – buoyed by abundant fossil fuel resources and the largest population on the African continent (estimated at approximately 167 million). As strong economic growth continues, annual incremental per capita GDP increases are driving a thriving middle-class and building a large consumer driven market for a diverse range of products.

The Nigerian federal government has set itself the target of growing the country’s economy to become the biggest in Africa, as well as one of the top twenty largest (by GDP) in the world by 2020. Although the goal of breaking into the world’s top 20 may appear highly ambitious at this stage, the appetite for economic development is as clear as Nigeria’s intentions of eclipsing South Africa as the leading African powerhouse.

In order for Nigeria to achieve her growth goals, the country will need to undergo an unprecedented level of infrastructure overhaul and development. At present, significant infrastructure delivery gaps exist – most prominently in the energy and power, and transport infrastructure sectors. Such infrastructure gaps exist as a result of a range of highly detrimental factors, which have contributed to the current state of infrastructure decay. Years of civil war, multiple military coups and almost thirty years of military governance have severely hindered infrastructure maintenance plans. Additionally, the plague of almost all African countries – maladministration of project funding and corruption at multiple levels of governance, has led to a multitude of delayed and abandoned projects.

The poor provision of energy and power resources remains possibly the biggest drain on Nigeria’s economy, with only 40% of the population estimated to be connected to the national grid, notes Frost & Sullivan. Those who have managed to obtain access to the grid remain affected by regular power outages and rolling blackouts, caused by overwhelming demand. Large businesses are forced to purchase and run generators, which drive up overheads, while small business owners who are unable to afford access to a generator are often unable to remain profitable. The gap in existing infrastructure is plain to see – current installed energy capacity totalled approximately 6,900MW in 2011, with actual functioning capacity even lower at an estimated 3,321MW. The government’s stated intention is to increase supply to 18,000MW by 2015, and 35,000MW by 2020.

Currently, in the energy and power sector alone, $7.15-billion in key energy generation and transmission projects were identified as ongoing in 2011. All three tiers of government (federal, state and local) combined have also released an estimated $8.44-billion of funding towards the development of Nigeria’s National Integrated Power Projects (NIPPs) between 2005 and 2011. Speculative suggested future power solutions range from the development of nuclear technology to the widespread implementation of renewable energy sources. Perhaps more tangible is the ongoing feasibility study taking place regarding the development of the (estimated) $4-billion 2,600MW Mambilla hydropower dam. Other ongoing considerations include assessment of the potential for coal fired energy generation at Zungeru and Enugu.

In terms of electricity generation capabilities, a 2011 Frost & Sullivan analysis indicated significant inefficiencies in public sector energy generation. Public sector unutilised installed capacity amounted to 51.4%, in contrast with 15.6% in the private sector. In an effort to improve efficiency in the sector, the Nigerian government has indicated the intention of unbundling the state-owned Power Holding Company of Nigeria (PHCN) to private bidders. However, a number of processing delays have taken place, since the announcement and the unbundling process has not yet been successful. Although the initial concept of shifting to privately managed power distribution can be considered positive, the stagnation of actual implementation highlights the risk of investing in a country such as Nigeria.

Revamping the decaying transport infrastructure sector remains the other focal point for government in assisting rapid economic growth. Proof of the state of disrepair, to which transport capabilities have fallen, is the decrease in capacity of the Nigerian Railway Corporation between 1964 and 2005. In 1964, the railway network carried three million tons of freight and three million passengers annually. In 2005, the network transported a mere fifteen thousand tons of freight and five-hundred thousand passengers annually. Such a significant decrease in capacity has shifted the transport burden onto the country’s roads.

Over-utilisation and poor road maintenance planning has led to widespread decay in road infrastructure. As a result, lengthy travel and transportation delays are common, driving up costs of construction and hampering freight distribution. In response, the Nigerian government has indicated a massive infrastructure investment drive aimed at rejuvenating the country’s transport sector.

The federal government has placed priority focus on restoring the rail system to its original high standards. A number of projects are underway, with the goal of providing Nigerians and freight transportation operations with alternative travel options to the notorious road network. Ongoing infrastructure development in the rail sub-sector amounts to over 3,000 kilometres of track currently being restored or under construction. Additionally, innovative modern city rail systems, such as the Lagos Rail Mass Transit System (LRMTS) and the Abuja Light Rail network, have been given the green light for development. Such projects, estimated to cost more than $3-billion, are aimed at easing intense traffic congestion in two of Nigeria’s largest cities.

Improving Nigeria’s 198,000km road network has also been identified as a key priority. The reason for priority status is clear – road transportation is estimated to account for 70% of all freight transport and 90% of all passenger transport in the country. Notably, the government has recognised the importance of implementing consistent maintenance plans aimed at driving the rehabilitation of decaying road surfaces. A total of $2.81-billion has been earmarked for the purpose of rehabilitating failing road infrastructure on federal roads (between 2010 and 2013), while 164 construction and rehabilitation projects were identified as ongoing at Federal government level in 2011.

The development of infrastructure in both the energy and power, and transport sectors is fundamental to driving growth across a number of sectors in the economy, indicate Frost & Sullivan. An excellent example of this ‘knock-on’ effect is the Nigerian telecommunications network. Growth in the telecommunications sector is a well-publicised Nigerian success story (Nigeria contributed almost a third of the MTN Group’s profits in 2011). Enhanced energy and power infrastructure will result in improved access to electricity for local consumers, opening the door for exponential growth in the provision of broadband in the country. Usage statistics in 2011 indicated a significant opportunity for the growth of broadband access – although 28.4 of every 100 Nigerians is a regular internet user, only 0.1 of every 100 is a broadband subscriber.

In a country that is increasingly considered key for international companies looking to establish a position on the African continent, Nigeria’s refocused infrastructure drive is commendable. The fact that the government is increasing attempts to encourage private sector participation, in order to ease the huge infrastructure burden, is also a very positive sign. This is particularly true on a continent where historical practices indicate an over-reliance upon state departments to implement infrastructure development.

Amidst such positive initiatives, it may still be too soon to tell whether the government is able to maintain a consistent focus on such developments in such a historically volatile country. However, what remains clear, concludes Frost & Sullivan, is that vast potential exists for a Nigeria unhindered by poorly functioning infrastructure.