Interview: Samaila Zubairu
To what degree is attracting private capital for infrastructure important to the economy?
SAMAILA ZUBAIRU: Once the infrastructure and transport deficit is bridged, there is no doubt that Nigeria will be able to accelerate its GDP growth, as we have seen this happen in other countries such as China and Brazil. The infrastructure issues that must be addressed as a country are related to energy and transport. It is important that expenditure on infrastructure projects is made in local currency, and regulations that support capital mobilisation in naira are needed in order to facilitate this. However, the only way to attract capital is for the country to clearly identify both the risks and the rewards. Capital is always attracted by profit, so once profitability is ensured, capital will follow. The government needs to establish the right framework to attract investors, whether it be for infrastructure projects or for any other economic activity. According to government plans, more than 60% of infrastructure projects should be undertaken by the private sector, demonstrating the importance of creating a proper public-private partnership framework that allows funding to flow from private operators.
How can the financial services sector support infrastructure development in Nigeria?
ZUBAIRU: Profits need to be more bankable in Nigeria for international investors, and the first step to achieving this is to address risk allocation. We must fully understand the viability and length of each project to provide the best information for investors so they can make the right choices and Africa can bridge its infrastructure gap. Investors also need to make an appropriate return in order to consider doing business on the continent.
Another important factor in terms of risk allocation is defining the role of developers and private investors versus the role of the government, and which aspects of the project each stakeholder needs to handle. We have seen examples in Europe in which private actors focus on financing and providing equity and debt. There is sometimes a high level of competition between the government and the private sector in the areas of infrastructure, energy and ICT development, and this causes capital allocations to not be invested. A final thing to note on infrastructure investment is that governments increase their revenue through investment.
Through what means can Nigeria capture more investment in line with environmental, social and governance (ESG) principles?
ZUBAIRU: Nigeria has subscribed to the UN Sustainable Development Goals, which are very clear and are at the core of what we define as ESG standards. Sustainability is essential around the world but, given our demographics, it is even more important in Nigeria. We have a large, young population that needs to enter the labour market in order to escape poverty, thus the necessary investments in education must be made – particularly in technical skills that allow the workforce to create small businesses and move into the middle class.
Another challenge is that Nigeria is a country with more gas than oil, which leads to high gas-related emissions. As a result, Nigeria must invest in renewable energies not only for internal consumption, but also to be exported to other African countries. Moreover, Nigeria must continue addressing climate change and the protection of local forests to fight global carbon emissions. The ESG framework and how it could drive development in Nigeria is not something that the country should adopt simply to improve its image, but is something that leadership can apply to local circumstances so it best benefits society as a whole and allows Nigeria to participate in the global journey towards carbon neutrality.
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