Subsidy Savings Can’t Fix Nigeria’s Infrastructure Deficit – Group

A group, Independent Media and Policy Initiative (IMPI), has said that the annual savings from removing the fuel subsidy are insufficient to address Nigeria’s huge infrastructure deficit.

It stressed that Nigeria requires broader, more sustainable funding strategies to bridge the gap.

In a policy brief signed by its chairman, Dr Omoniyi Akinsiju, IMPI argued that Nigeria’s annual capital needs far outweighs what was spent on fuel subsidy while justifying the debt for infrastructure policy of the President Bola Tinubu administration.

He said, “This debt-for-infrastructure spending policy had roused a cacophony of concerns and, at times, condemnation in political opposition quarters and corporate advocacy groups.

“Some had orchestrated the fact that debts should not have been planned to finance the 2026 deficit since the removal of the fiscally ruinous fuel subsidy.

“The opposing argument is that the removal had saved the country about $10 billion, which should naturally revert to the federation account.

“Our retort, however, is that the $10 billion annual fuel subsidy expenditure was mostly funded by debt and did not account for the bulk of the financing required for capital spending at that time or now.

“The country definitely needed more than the $10 billion saved from subsidies to provide functional infrastructural facilities.”

The policy group also pointed out why it would be difficult to expect full private-sector involvement in bridging Nigeria’s annual $100 billion infrastructure gap.

“Some other adversarial imputations have also argued that, rather than resorting to debt financing for infrastructure, the Public-Private Partnership (PPP) model should be vigorously adopted.

“We note, conversely, that several empirical studies have shown that PPPs in infrastructure financing face significant challenges, including high transaction costs, lengthy negotiation timelines, complex risk allocation, and political instability, which often result in projects being treated as off-balance-sheet liabilities.

“Other key obstacles include limited institutional capacity to manage contracts, weak legal frameworks, insufficient financial resources and abandonment.”

IMPI pointed at the federal cabinet’s recent approval of massive road and rail projects as evidence of government’s readiness to stimulate economic growth with debts tied to infrastructural projects.

“Already, we are seeing clear signs of a rejuvenated Nigerian infrastructural landscape, with the recent approval by the Tinubu-led Federal Executive Council of a record-breaking suite of infrastructure projects.

“These include $2.99 billion for rail projects in Lagos, Kano, and Kaduna, more than N7 trillion for road and bridge works nationwide, $1billion worth of total reconstruction of major seaports in Apapa, Tin Can, Calabar, Warri, and Port Harcourt to address decades of neglect, and N1.096 trillion for capital projects in the power sector, among others,” it added.