*Recommends NIDF, other funding windows, cautions on investment impediment
* As VP, Amaechi rally investors
By Francis Ugwoke
The Director-General of the Nigerian Stock Exchange (NSC), Mr Oscar Onyema, Thursday said that attracting private sector funds was the only way to bridge the finance gap as far as Truck Transit Parks (TTPs) dry ports projects were concerned.
Onyema also identified a number of financing options that can be adopted by investors for the TTPs and dry ports projects.
Onyema said considering that the transport infrastructure development funding gap was estimated to be greater than US$750bn over the next 30 years, it becomes very clear that a way around the financing was a critical issue.
He said this was moreso with commitment by the federal government on diversifying the economy away from its dependence on oil and given that the national budget is approximately US$24bn and the required annual investment in transportation infrastructure is approximately US$25bn.
Speaking on he investment climate during a BreakFast Meeting on the Financing of Transport Infrastructure organised by the Nigerian Shippers’ Council (NSC) under the auspices of the Transportation Ministry at Eko Hotel, Lagos, he said that the financial participation of the private sector in building infrastructure can take a number of forms, including public private partnership (PPP) and full privatization.
For instance, he said, “a good example is the Lekki-Epe Expressway Toll Road Concession Project, Nigeria’s first ever PPP. For this project, the Lekki Concession Company was able to secure long term financing to the tune of N50bn for the construction phase of the project with participation from several local and international financial institutions on terms which were regarded as groundbreaking in Nigeria”.
He assured that the NSE was committed to exploring and developing innovative ways to finance the nation’s transport infrastructure in order to accelerate the growth of the key sectors of the economy.
According to him, leveraging established PPP funding mechanisms, SPVs can utilize the NSE’s platform to gain access to low-cost, long term capital.
This, he said, can be achieved through public bond issuance by a project company or by incorporating a separate company to issue bonds and lend the proceeds to the project company.
“The SPVs involved in PPP projects can also utilize funding from listed funds focused on PPP infrastructure investments, and a good case of this is our recent partnership with the Lagos State Government and Visionscape Sanitation Solutions where a N50bn Medium Term Note to finance the implementation of the Cleaner Lagos Initiative (CLI) was issued”.
He described the investment prospects for transportation infrastructure as very promising, adding that if the recently exposed draft rules by PENCOM were issued, they will allow for up to 20 percent Accumulated pension assets (N7.16tn) to be invested in infrastructure compared to the current 5 percent.
He pointed out that this does not include potential investments from insurance, savings and fund managers.
He added that with the engagement of NSE with PFAs and other institutional investors, there is an indication of a healthy appetite for alternative investment outlets such as infrastructure funds, such as ETFs, bonds, among others.
He disclosed that over the years, NSE has implemented far-reaching transformation policies aimed at providing products that were aligned with investors’ requirements, increasing market access and ensuring a fair and orderly market.
In this regard, he said that the capital market witnessed the birth of the Nigeria Infrastructure Debt Fund (NIDF) which is billed to raise N200bn.
He explained that the fund which has its core investment focus on traditional infrastructure sectors, primarily transport, was an ideal investment vehicle for the planned truck transit parks and inland dry ports.
“We believe that these achievements improve investor confidence and will go a long way to support the Ministry of Transport and NSC in their quest to unlock the private sector investment required for financing the transport infrastructure gap.
The NSE DG however identified impediments outlined by the National Planning Commission (MPC) that need to be mitigated as far as private investment in the nation’s transport sector was concerned.
The impediments include “inconsistency in enforcing policies and unpredictable regulatory regimes that limit investors’ ability to protect investments; difficulties in accessing finance due to high costs and lack of maturity associated with Nigeria’s credit/venture capital market; lack of economic incentives in some sectors to encourage private sector investment; insufficient public sector capacity incentives in some sectors to encourage private sector investment; insufficient public sector capacity to design and implement PPP projects and security concerns, corruption and other governance issues”.
Hehowever said the NSE was encouraged by the successful launch of the World Bank and Infrastructure Concession Regulatory Commission’s (ICRC) web portal which is dedicated to the disclosure of all PPP contract information in the country.
This initiative, according to him, demonstrates government’s commitment to increase transparency and attract private sector investment and will help boost confidence in PPP in Nigeria.
Onyema described IDPs and TTPs as pre-requisites for any nation serious about boosting intra and cross border trade, adding that there must be concerted efforts to access the capital raising opportunities that exist within and outside the capital market.
The Vice President, Prof Yemi Osinbajo who was represented on the occasion by his Senior Special Adviser on Infrastructure, Kolade Sofolahan, urged investors to invest in the TTP and IDP projects
Osinbajo said there was no infrastructure deficit but a lot of opportunities for Nigerian investors.
He said “We have infrastructural opportunities not a problem in Nigeria. It’s a huge opportunity that everyone should come together to develop a strategy to take advantage of. It is described as crisis but I see it as an opportunity. We have to think about how to grow our roads, TTP and IDP in a way that it is integrated to diversify our economy.”
In his speech, the Transportation Minister , Rotimi Amaechi, said the federal government has okayed the establishment of six Inland Container Depots across the geopolitical zones.
He said the IDPs have designated centres for export of non-oil agricultural commodities and solid minerals products.
“I intend to very soon direct the Nigerian Shippers’ Council to open talks with the Nigerian Export Processing Zone Authority (NEPZA) to obtain export processing zone status for the ICDs. In the ICDS, there are great opportunities for investments (Added Values) including warehousing, commodity processing, packaging among others.
He said, “Government have approved and concession the establishment of six inland container depot across the geo-political zones at Erunmu, Ibadan in South West; Isiala-Ngwa, Aba in the South-East; Futua, Katsina and Zawachiki, Kano in the North-West; Heipang, Jos in North Central and Jauri, Maiduguri in North-East.
“Construction work at the recently concession Kaduna ICNL Inland Dry Port has been completed and awaiting inauguration for full operations. The inland container depots are port of Origin for exports and origin for imports and will see transportation of cargoes to the hinterland and even landlocked neighbouring countries.”
Amaechi described the TTP projects as priority to the government and has provided institutional and legal framework for their establishment.
He added that with the concession of the six Inland Container Depots across the country, TTPs known variously as Rest Stops, Rest Area in other jurisdiction will be inevitable since road transport account for over 90 percent of all freight and passenger movement in the country.”
The Transport Minister said government was focusing on linking the various transport modes so as to strengthen the intermodal transport of goods and passengers as well as increased maintenance and capacity expansion to improve on the state of infrastructure.
Amaechi said government was interested in the TTPs and IDPs because of the long term gains of efficiency and cost effectiveness.
He said government is taking steps to ensure that the financing structure for these projects require concessionaires to invest substantial equity in the project.
Speaking on the occasion, Nobel Laureate, Prof. Wole Soyinka, said the establishment of TTPs has become very important because of increasing road accidents in the country.
Soyinka recalled that a time in Ife, there was so many funeral ceremonies competing with naming ceremonies as a result of road accidents that claimed lives.
He attributed some of the accidents to indifference and callousness on the part of some drivers, adding that establishing a TTP will reduce such carnage on the roads.
He said when established, there must be regulation that will put the drivers on constant check to ensure that when they park for rest, they will not leave without being checked of alcohol inducement.
The event was attended by top industry operators from both maritime and finance sector.
Among those who attended were also members of the National Assembly, including Kebbi State Governor, Alhaji Atiku Bagudu; Representative of Governor of Sokoto state, Prof. Bashir Garba .
*Recommends NIDF, other funding windows, cautions on investment impediment