Federal government of Nigeria plans to use the capital market vehicle in mobilizing both domestic and foreign investors to invest in long term capital projects worth $2.9 trillion (N464 trillion) in meeting the infrastructural gap in the country by 2043.
Dr. Yerima Ngama, minister of state of Finance who spoke at the Security and Exchange Commission (SEC) infrastructure round table in Lagos, said that the federal governments along with other stakeholders have worked out national integrated infrastructure master plan which will require N434 trillion in 30 years.
He noted that the initiative to develop a 30 years integrated infrastructure master plan for Nigeria could not have come at a better time because infrastructure is the life blood of any economy.
Arunma Otteh, Director General of SEC, said that the Africa Development Bank (AFDB) estimates Nigeria’s infrastructure needs at $350 billion over the next ten years. “Clearly, traditional funding sources are unable to cover this huge gap. Infrastructure projects require long term funding at reasonably low rates as the Nigerian banking industry currently offers high interest rates and short tenures while foreign loans come with attractive conditions but expose a country to foreign exchange risk.”
She noted that the Nigerian capital market can mobilize an appreciable amount of domestic capital in the hands of private investors to reduce the infrastructure deficit.
Adding that, there are significant amount of capital with pension funds, sovereign wealth funds, insurance companies, high net-worth individuals and other investors.
She stated that the SEC recently approved Nigerian first infrastructure funds, called the Nigerian infrastructure investment fund worth about $100 million, “we expect this product to be a major attraction for our $20 billion pension fund industry.”
She pointed out that securitization is another promising way to finance infrastructure given its wide use and global market size of over $10 trillion having been used to finance iconic infrastructure assets such as M6 Toll in the United Kingdom and housing in other part of the world.
“We believe that securitization broadens the options for infrastructure finance in Nigeria and we are developing regulations and market expected to be approved before the end of 2013 to spur the development of this product in our market”, she said.