African Infrastructure Tracker--Nigeria

Feb 11, 2016, 18:04 ET from ReportBuyer

LONDON, Feb. 11, 2016 /PRNewswire/ --

Infrastructure Development in Nigeria

Nigeria has the largest economy in Africa but is affected by its limited infrastructure—particularly, its transport and energy infrastructure which imposes serious limitations on the country's economic growth potential. Significant challenges such as power shortages are evident in the electricity sector and this has negatively impacted industrial growth. There is a massive drive toward infrastructure development to support economic growth, with significant development in rail, energy, and electricity infrastructure.

Introduction
Nigeria has overtaken South Africa and has emerged as the largest economy in the African continent after re-establishing their Gross Domestic Product (GDP) calculation. In 2014, the Nigerian economy
was largely driven by the non-oil sector, as declining oil prices and production volumes posed major challenges to the economy. Significant efforts are being initiated by the federal government of Nigeria
to facilitate better access to high-quality living standards through enhanced developments in education, healthcare, and other infrastructure services. Exhibit 1 depicts the development of infrastructure for different industrial sectors in Nigeria for 2015. The Nigerian economy has been significantly affected due to oil-price volatility, sluggish economic growth, and inadequate investments in the infrastructure sector. Although the country recorded annual growth of approximately % in 2015, this was only possible due to enhancements in the non-oil sector of Nigeria.

As estimated in the 2015-2017 Medium Term Expenditure Framework (MTEF), oil prices in Nigeria have been benchmarked to $ from an earlier rate of $65, thus affecting the fiscal revenues of the country. Moreover, highly regulated gas pricing policies implemented by the government have induced minimal investments in gas exploration and supply activities resulting in reduced natural gas production in Nigeria. To address these challenges, the federal government has been heavily recovering revenue from the non-oil sector to compensate for declining oil revenue. In addition, the government also plans to impose monetary penalties on
non-complying entities to prevent large scale natural gas flaring in the country. The Trans-Saharan gas-pipeline project between Nigeria and Algeria is a major development undertaken by the Nigerian National Petroleum Corporation (NNPC) to establish connectivity with Algeria and Niger, as well as the European continent.

The electricity supply industry in Nigeria is highly affected due to gas pipeline vandalism, inadequate transmission infrastructure, and insufficient funding which hampers timely completion of the projects.
Social unrest, which is prevalent in the country, has resulted in power shutdowns on a large scale, resulting in negative implications in other key sectors of the economy including retail, trade, transport,
and telecom. However, various strategies are being implemented by the government to overcome the inflation caused by the deteriorating energy crisis in line with increased private sector participation to
inject huge investments towards development of the projects. Insurgency is a major threat affecting implementation of various infrastructure projects in the country. Most of the contractors have abandoned their projects owing to loss of life due to frequent militant attacks. The construction of key roads in Nigeria has been hindered on a large scale because of the inadequate support from the government in terms of funding, security, and technical expertise.

Inefficient modes of transportation have also induced heavy pressure on the road sector preventing further rehabilitation and expansion of existing road projects. Over the last few decades, railway sector development has remained stagnant owing to negligence from the federal government as well as management issues concerning the Nigerian Railway Corporation (NRC). However, a 25-year Railway Strategic Plan has been introduced by the government to modernize obsolete railway infrastructure and to ensure completion of all existing and ongoing railway projects in the country. To enhance the economy of the country, the Nigerian government has also initiated the development of new deep-sea ports that are expected to further transform Nigeria into a major hub for trade and business in West Africa. The federal government is also engaged in the development of new terminals at existing airports in the country to facilitate the efficient handling of incremental passenger and freight traffic by incorporating huge investments through private sector participation.
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