Accounting for the majority of passenger and freight movements, Nigeria’s road network plays a critical role in domestic transport and international trade, although the bulk of its network remains in poor condition and unpaved, a challenge exacerbated by rising traffic volumes. Chronic congestion has had major economic ramifications for the country.
The government is taking bold steps to address the challenge, significantly boosting capital spending at the Federal Ministry of Power, Works and Housing (FMPWH) in the 2018 budget, channelling public funds towards much-needed road maintenance and rehabilitation, and adopting measures aimed at attracting private sector-investment, which will be critical to implementing its mid-term transport development agenda. Initiatives include a tax incentive scheme for private road developers and plans to re-introduce private sector managed toll booths, which should see road development accelerate in 2018, supporting steady long-term transport growth and mitigating future budgetary constraints.
Roads
Nigeria has an expansive road network estimated at between 193,200 km and 195,000 km in 2017, including 32,000 km of federal roads and 31,000 km of state roads. Federal roads account for more than 80% of total vehicle and freight traffic in the country.
However, the Infrastructure Concession Regulatory Commission reports that just 60,000 km of Nigeria’s road network is paved, leading to high rates of accidents and deaths, and weighing on economic growth.
The National Planning Commission (NPC) reports that roads account for over 90% of freight and passenger movement, although 40% of the federal road network was in poor condition as of 2012, and just 27% in good condition, while 78% of state roads and 87% of local government roads were in poor condition.
The NPC attributed this to institutional shortcomings for road management bodies, insufficient maintenance leading to significant deterioration, exacerbated by limited budgetary outlays for preventive maintenance, and a historical trend of prioritising new road construction over maintenance of existing networks.
The country’s recent oil boom has also impacted its road network, with the NPC reporting that as transport strategies shifted to roads over rail and waterways, high volumes of petroleum products transported via highway, rather than pipeline, shorten roads’ lifespans and push maintenance costs higher.
Overloading, blocked drainage structures, and the practice of parking heavy axis vehicles on carriageways strains already-dilapidated road infrastructure, adding to chronic traffic congestion.
Urban Congestion
The NPC reports that city roads are generally narrow, single-lane, poorly-maintained, and prone to flooding as a result of poor drainage systems, reducing their capacity to handle rising traffic volumes and exacerbating chronic urban congestion. Current urbanisation trends – the population of Lagos is growing by 6% annually, with the Population Reference Bureau forecasting it will double between 2015 and 2050 to hit nearly 36m – have made urban transport network upgrades a critical priority given the negative impact congestion has on the economy.
According to a 2013 report published by the State Partnership for Accountability, Responsiveness and Capability, up to 8m Nigerians travel to work on 9100 roads and expressways in Lagos every day, with 1m registered vehicles as of 2011. A study published by ROM Transportation Engineering in 2009 found that congestion costs Nigeria $1bn annually, with Lagos residents losing 3bn hours to congestion each year.
Road congestion and inadequate Customs facilities have also weighed on trade growth, and Nigeria ranked 183rd out of 190 economies surveyed on the World Bank’s “Doing Business 2018” survey, against South Africa in 147th and Kenya placing 106th, with the bank reporting that border compliance export procedures take an average of 135 hours to complete, compared to the sub-Saharan African average of 100.1 hours. Import border compliance procedures take an average of 284 hours to complete, against the sub-Saharan Africa average of 136.4 hours.
The Rural Connection
Prioritising road projects could prove a difficult task for stakeholders weighing the competing interests of boosting rural connectivity against the reduction of urban congestion.
In May 2018 the World Bank examined highway planning strategies, recommending Nigerian policymakers consider trade-offs between two competing priorities – spatial equity and aggregate economic efficiency. The bank noted three distinct, but important impacts of transport connectivity across three areas: remote rural areas focusing on subsistence agriculture and eventually on trading its surplus with a connected rural area, connected rural areas active in agribusiness and trade output with a nearby city, and urban areas producing tradeable and manufactured goods with a connected rural area, and which trade with rural areas.
The World Bank reported that a 10% reduction in transport costs between remote and connected rural areas has a bigger welfare impact than a similar reduction in transport cost between cities and connected rural areas, at 13% and 8%, respectively. According to the bank this means that local welfare gains are clearly higher for investments supporting rural connectivity.
Aggregate economic efficiency benefits most from development of interregional corridors linking major urban centres, however, with the World Bank reporting that upgrading roads between the north and south would boost overall efficiency, for example along the Lagos-Kano-Jibiya corridor, where upgrades could result in annual benefits of $1.34bn. According to the bank, a recent study showed that southern zones record larger GDP gains from transport infrastructure improvements.
Highway Upgrades
The government appears to be pursuing a well-balanced mix of highway and rural roads projects, with an increased emphasis on rehabilitation and maintenance, although public spending constraints remain a concern.
In September 2017 Stears Business, a local business news firm, reported that the federal government plans to spend at least N295bn ($953.7m) on road construction under the 2018 budget, and has recently moved to raise funds for new roads through sukuk (Islamic bond) issuance, although it notes that stakeholders remain sceptical about budget disbursement and its programme implementation.
Recent government budgets have made major commitments to roads projects. The FMPWH, which is tasked with developing and implementing national highway projects, saw its budgetary capital outlays rise by 29% from 2017 to 2018, with N682.96bn ($220.8m) of expenditure planned during the 2018 fiscal year, while the Ministry of Agriculture and Rural Development was allocated N6.37bn ($20.6m) for roads provision and construction under the 2018 budget, including N4.59bn ($14.8m) for rehabilitation and repairs.
Rehabilitation has become an important priority, and in November 2017 the government announced plans to award reconstruction and rehabilitation contracts for 69 highways with each economic zone to receive N16.67bn ($53.9m) to rehabilitate major arterial roads.
However, Stears reports that increased private sector investment will be critical to meet targets set under the Economic Recovery and Growth Plan (ERGP), running from 2017 to 2020, which has called for 50% of future transport investment to be channelled into the roads sector, and $3trn of infrastructure investment over the next 30 years to meet rising demand.
Private Sector Participation
With the government’s ability to finance new infrastructure remaining constrained (see Construction chapter), allocating new private sector investment in roads will be a priority.
The World Economic Forum recommends policy strategies including toll gate fees and public transport subsidies to fund road maintenance and repair. These strategies are supported by ERGP, emphasising infrastructure investment in supporting non-oil growth and private sector investment in transport.
The plan includes a mandate to create a tolling policy for national roads, entailing an offering of maintenance and tolling concessions to the private sector, among other measures aimed at boosting private investment.
Incentivisation
The government is already moving to implement measures, with the Federal Executive Council announcing in October 2017 that it had approved a tax relief scheme to attract private investment into a federal roads authority, after signing a memorandum of understanding to establish a Road Trust Fund, as mandated by ERGP.
Described as a form of a public-private partnership agreement, the incentive scheme will allow private sector operators to collectively fund roads projects in exchange for tax credits, with companies permitted to claim relief based on the amount of capital collected. Up to 100% of costs incurred can be claimed against total tax payable, including up to 10% for the cost of funds, with the scheme expected to enable cost recovery within one year, against the previous average of three.
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