Transcript Financing Nigeria's Indigenous Oil Industry

Bridging Nigeria’s Infrastructure Gap
By
M. K. Ahmad
Director General
National Pension Commission – Nigeria
18 November, 2008
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Outline of Presentation
State of Infrastructure in Nigeria
Funding of Infrastructure
Government Initiatives & Support
Opportunities for Infrastructure Financing in Nigeria
Way Forward for Africa & Emerging Markets
Mind the Gaps
European Opportunities to African Investors
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Infrastructure Gap in Nigeria
Fairly extensive infrastructure suffering from
neglect and over utilisation
The foregoing has created infrastructure gap in
Nigeria
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Estimated annual demand - supply gap of 6,000 MW
electricity
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of
ageing plants – 30 years old
Per capita generation – 50W, weak generation, transmission and distribution
infrastructure
Only 48% have access to portable water
Low tele-density in the range of 300 telephone lines to 1,000
persons
15.3% of about 195,200km length of Nigerian roads are
adequately paved
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Infrastructure Gap in Nigeria ..cont’d
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The railway system currently contributes only 1% to national
transportation
Current urbanization levels are estimated at 49% with an annual
growth rate of 4.8% as against 2.6% for South Africa
Investment of over $100 billion required for
infrastructure development over the next six years
in four infrastructure areas:
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Power ($ 18 – 20 billion)
Rail tracks ($ 8 – 17 billion)
Roads ($ 14 billion)
Oil and Gas ($ 60 billion)
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Nigerian Pension Fund Investments
Pension Fund Assets:
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Generated large pool of long term investible funds for the first
time in Nigeria
About US$8.4 billion generated. Assets increased by 22.37%
between January and September, 2008
At an estimated growth rate of 30% less than US$100 billion will
be generated
PenCom sets standards for investment, but has no
power to compel operators to invest in any asset class
Investments by operators are purely business decisions
provided they don’t violate regulations
Non-existence of alternative asset classes as less than
2% of pension assets is invested in corporate bonds;
infrastructure bonds yet to be developed
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Government Initiatives & Support
Government’s programmes and strategies to facilitate
private participation in infrastructure financing:
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Government’s 7 – Point Agenda
Commitment to the rule of law
Independent Judiciary
Independent Regulatory Agencies (Telecommunication, Power,
Concession Commission)
Tariffs are being deregulated in some sectors to allow for cost
recovery; Multi-year-tariff-order (MYTO), Model Power
Purchase Agreement(PPA) & Vesting Contract prepared
Public Private Partnerships to support the Governments 7 –
Point Agenda
Public Procurement Act
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Government Initiatives & Support ..cont’d
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Fiscal Responsibility Act currently at the National
Assembly
Infrastructure Concessioning Regulatory Act:
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Concession of 52 infrastructure, 18 Seaports Terminals, etc
Privatization and Commercialization Act:
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83 State Owned Enterprises have been privatized since 1999
Nigerian Independent Power Project (NIPP) which is
expected to:
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Generate additional 4,777MW
Expand and strengthen transmission and distribution
capacities
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Opportunities for Infrastructure Financing in Nigeria
There are ample opportunities for the development
and financing infrastructure development in Nigeria
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Demand – supply and financing gaps
Rapid development of the market for long-term debt
Diversified and deep resources base (agriculture, oil and gas,
solid minerals)
Annual GDP growth of non oil sector of about 11%
Favourable credit rating for Nigeria: BB- by Standards & Poor in
2007 for foreign currencies and BB for domestic currencies
Issuing sovereign bonds at the international capital market
Secondary bond market enhanced, Primary Dealer/Market
Makers established
Nigeria has a ready-made market with a population of about
150 million
Huge Diaspora population that could be exploited
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Way Forward for Africa and Emerging Markets
There is need for sectoral reforms
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Adequate legal framework for concessions
Efficient mechanism for contract enforcement
Establish sound and stable regulatory framework
Tariffs must reflect full cost of recovery at a realistic
pace, else infrastructure sector subsidy mechanism
should be established
Policy consistency and commitments to established
policies
Development of transparent award processes
Building and strengthening local institutions
Solicitation of support of the World Bank, bilateral and
multilateral agencies for project development and
financing strategies and capacity building
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African Investors and European Opportunities
Europe seen as the yard stick until the recent financial
crunch
Very low income and modest sized available investible
funds
Few and in experienced institutional investors
Inadequate knowledge of the opportunities
Underdeveloped institutions to support
offshore
investments
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Thank You!!!
National Pension Commission
174 Adetokunbo Ademola Crescent
Wuse II, Abuja - Nigeria
+234 9 4138736 – 40
+234 9 8703389 – 9
[email protected]
www.pencom.gov.ng
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