Nigeria’s infrastructure must improve by 5% annually to boost productivity – CBN

Experts in the financial sector of the nation’s economy have been speaking on the question of Infrastructure financing and inclusive growth for SMEs in the post Covid era, highlighting the need for MSMEs to access finance as it remains one of the biggest threats to economic development in both developed and developing economies alike, with serious implications for productivity and job creation.

The Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele who was represented by the apex bank’s Director, Corporate Communications, Mr Osita Nwasinobi, disclosed that the country’s infrastructure has to improve by at least between 5 to 7 per cent for it to stimulate productivity and sustainable growth for businesses.

While giving the keynote address at the just concluded 30th anniversary conference of the Finance Correspondents Association of Nigeria’s (FICAN) with the theme: “Financing Infrastructure & SMEs for inclusive growth in the post-COVID-19 economy”, Mr. Osita explained that despite being a sector of the economy which has been a major driver of growth, innovation and job creation, the micro, small and medium enterprises (MSMEs) potential to spur growth and create jobs has been hampered by lack of access to quality infrastructure.

The CBN Governor noted that though countries in sub-Saharan Africa have been spending about 6 – 12 per cent of their GDP annually on infrastructure, Nigeria has been projected to need US$100 billion investment to fix its infrastructural gap annually for the next 30 years, which is currently estimated to be about 1.2 per cent of its Gross Domestic Product (GDP).

Mr Emefiele asserted, “The financing gap for MSMEs in Nigeria is estimated to be about N617.3 billion annually pre-Covid-19 pandemic, as less than 5 percent of these businesses have access to adequate finance to support their working capital and business expansion needs (PwC). Other constraints to MSME development in Nigeria, as noted in the survey, included difficulty in finding customers, infrastructure deficit, insufficient cash flows, multiple taxations, regulatory burden, and sub-optimal implementation of the provisions of the MSME policy.”

Meanwhile, he revealed that the apex bank has put in place several policy measures to stimulate economic growth and reduce the impact of the COVID-19 pandemic on Nigerians and its intervention efforts represented about 3.5 per cent of the GDP.

He reiterated that the CBN has remained committed to fulfilling its developmental mandate by collaborating with stakeholders across infrastructure and MSME segments in order to boost domestic output.

“There is an urgent need for fiscal authorities to collaborate with the Central Bank of Nigeria to change the lenses through which they look at MSMEs and infrastructure development, by developing innovative policy measures to unlock the potential of these enterprises to drive innovation and industrialisation. Distinguished ladies and gentlemen, without adequate infrastructure, the Nigerian economy cannot overcome its structural challenges and achieve growth, as well as development,” the CBN Governor opined.

Also, the Managing Director/CEO, Heritage Bank, Mr Ifie Sekibo, who was represented by Olusegun Akanji, Divisional Head, Strategy and Business Solutions, argued that the government cannot solve the country’s infrastructure challenges, noting that it is the private sector that will deliver the solution.

According to him, the government can only provide enabling policies that will support private sector interventions. We need the global private sector intervention to help us achieve a vision of infrastructural development. He stressed further on the need for the Country to develop an identity management system that delivers value to the citizenry.

”Although, the banking industry has financed a lot of SMEs in terms of count, but it is this sector that has the largest number of bad loans and frauds in terms of count. And as a result, SMEs will continue to grapple with financing challenges.

Mr Bola Koko, Managing Director of FMDQ Group, represented by Yomi Osinubi, Head Private Market, urged Nigeria to conceive a way its domestic capital market could fund the international capital market.

“If we want to pluck our infrastructure rewards, first of all we have to conceive of a way our domestic capital market can actually fund capital market.

“But the investors in debt capital market international and debt, money will come into an environment where capital is expected and there is an expectation of good management of those resources and cash flows will come back to it.

“So I think there’s the issue of maybe an underlying structure where we want to put in capital like road infrastructure tax payment.

” If you want SMEs to get the best benefits of infrastructure development in the country, the CBN Governor mentioned the largest areas of course for SMEs which is energy. The second largest is the logistics, movements of cargo around the country,” he said.

Mr Temidayo Obisan, Executive Commissioner representing the Director General of Securities and Exchange Commission (SEC) advised that the nation connected the right duration of money which according to him would be long-term. “The major thing to identify is that infrastructure is a long-term thing, so it Is essential we connect the right duration of money which is long term capital which is what capital market provides and which sec as a regulator should.

“We have about three surviving infrastructure focus funds in Nigeria now that are totalling almost a 100bn, itching about 90 billion at the moment and there are some that are registered programmes of 200billion,” he said.

More so, the Chairman of FICAN, Titus Chima Nwokoji, said if Nigeria’s infrastructural gap, which is estimated to be N36 trillion annually, is addressed, a lot of the country’s economic challenges will be easily tackled.

“And coming out of COVID-19 pandemic, we know that if the infrastructure is fixed and SMEs thrive, the growth that you see will be faster,” he added.