Economic growth in Nigeria hampered by critical infrastructure gaps – report

Economic growth in Nigeria is being hampered by critical infrastructure gaps, according to a new report by Nanyang Technology University’s Centre for African Studies.

The report titled ‘Back to Growth: Priority Agenda for the Economic Revival of Nigeria’ was presented by the author and Director of the Centre, Amit Jain on Monday in Lagos.

It noted that the economy is being slowed down as the country does not have enough ports, power, roads, running water, or health services.

It added that Nigeria’s infrastructure budget yearly is less than 5% of the $100 billion it needs.

The report read: “Gaps in critical infrastructure are constraining economic growth. In 2020, Moody’s estimated that Nigeria will need to invest US$3 trillion over the next 30 years to plug the national infrastructure gap.
Inadequate provision of ports, power, and roads is proving to be a drag on the economy. Large parts of the country do not have access to motorable roads, running water, electricity, and health services. The annual infrastructure budget of Nigeria is less than 5% of what is required (US$100 billion).

“Inadequate infrastructure results in 40% of the agricultural produce being lost because it fails to reach the market in time. Productivity at the workplace is hit because workers are caught in traffic jams on gridlocked roads. Ships remain idle for days because ports are ill-equipped to handle cargo. Small businesses must rely on expensive diesel generators for electricity because power cuts are frequent and often last for hours. Firms connected to the grid typically receive only five hours of electricity per day. It can take days for traders to move goods from one part of the country to another because potholed roads slow down the movement of trucks. In short, poor infrastructure acts as a serious drag on the economy.

“Without addressing the infrastructure deficiencies, it will be impossible to build a competitive economy and bring back growth. The government has been promoting Public-Private Partnerships (PPPs) to cover the gap, but financing remains a challenge. Besides, flaws in the procurement and project awarding process also facilitate graft and impede the improvement of infrastructure.”

Poor electricity access: ‘Nigeria lags behind other African countries’
According to the report, the economy loses at least 5% of its GDP annually (about $ 28 billion) due to unreliable power supply.

It added that when it comes to getting electrification, Nigeria is behind other African countries.

There is electricity in only 55% of the country, and most businesses that are linked to the national grid only get power for five hours a day.

It added that 30% of small and medium-sized businesses (SMEs) and 26% of households use petrol generators when they can’t get power from a stable source.

Together, these generators can power eight times more than the national grid. But these generators are expensive, and every year they kill 1,500 people through smoke inhalation.

As well, most people can’t afford the $350 price tag that comes with a diesel engine.

Everything in Nigeria costs at least 40% more because of the high cost of power and the lack of energy. This makes the economy much less competitive.

Also, the constant power outages make investors less likely to invest in new projects that would increase output and job creation, the report noted.

The report read: “Unreliable power supply shaves at least 5% of the GDP, costing the economy US$28 billion a year. Nigeria lags behind other African countries when it comes to electrification. Only 55% of the country has access to electricity, and most firms connected to the national grid receive less than five hours of power per day. Problems across the power value chain need to be fixed.”

Inadequate transport infrastructure: ‘Nigeria is among the least connected countries in the world’

According to the Africa Infrastructure Development Index (AIDI), Nigeria’s roads and train systems are not up to par for the size of its economy.

The report by the Centre for African Studies noted that the Years of not investing enough have led to a lack of transport facilities.

It added that Nigeria’s transport infrastructure projects are often sparked by politics and are often shelved in the middle because they cannot afford to finish or because the people in charge are not good at their jobs.

It noted that Nigeria has only 60,000 km of built roads, making it one of the least connected places in the world.

The report read: “The deficit in transport infrastructure has been driven by years of inadequate investment. However, the problem goes beyond just funding. Transport infrastructure projects in Nigeria are often politically driven and frequently abandoned mid-way due to lack of financing, administrative ineptitude, or outright corruption. With just 60,000km of paved roads across the country, Nigeria is among the least connected countries in the world.

“The poor road and rail networks cause frequent breakdowns of vehicles and hinder efficient transportation of goods from production factories to points of consumption. This increases the cost of doing business. One study found that about 40 percent of export costs are linked to inefficiencies and informal payments along a single road corridor – the Lagos-Kano-Jibiya Road.

“Nigerian ports are also burdened with abandoned cargoes due to administrative bureaucracy and high operational costs. For example, the cost of exporting 100 tons of cargo in Nigeria is US$35,000. In Ghana it is only US$4000.”

ICT infrastructure gaps: ‘service providers grapple with multiple problems’
About a quarter of Africa’s internet users are in Nigeria. More than 10% of Nigeria’s GDP has come from the information and communication technology (ICT) sector in the last decade, and it is as one of the country’s fastest-growing industries.

However, there exist certain gaps associated with this sector. With an internet penetration rate of around 40%, Nigeria is now behind the world average of 60%.

It added that service providers face a multitude of challenges, such as theft of telecom equipment, unstable power supply, various tax regimes, vandalism, and rapid legislative changes.

Additional issues include safety concerns that have delayed network expansion in some areas of the nation, difficulties in accessing currencies, and damage to underwater cables caused by marine transportation systems.