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Moody’s: Nigeria’s rising population weighs on infrastructure
Moody’s says Nigeria significant infrastructure deficit faces additional pressures from its rapidly growing population adding that the West African nation will need increased private and multilateral sector involvement to achieve its infrastructure goals. Kunal Govindia, Vice President, Project and Infrastructure Finance at Moody’s joins CNBC Africa for more.
Mon, 23 Nov 2020 14:45:27 GMT
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AI Generated Summary
- Nigeria faces significant infrastructure deficits exacerbated by rapid population growth, necessitating increased private and multilateral sector involvement.
- Improvements in institutional strength and governance frameworks are crucial for attracting investors and enhancing infrastructure development.
- Innovative financing options, such as off-balance products, contingent liabilities, and public-private partnerships, are essential for bridging funding gaps and driving sustainable infrastructure growth in Nigeria.
Nigeria's significant infrastructure deficit faces additional pressures from its rapidly growing population, with Moody's highlighting the need for increased private and multilateral sector involvement to bridge the gap. Kunal Govindia, Vice President of Project and Infrastructure Finance at Moody's, discussed the challenges and potential solutions in a recent interview. Nigeria has received funding from various multilateral organizations like the African Development Bank (AfDB), Afrexim Bank, World Bank, and IMF. Additionally, the private sector has shown interest through public-private partnerships. Despite these efforts, Nigeria still lags behind other emerging markets in terms of infrastructure development. Moody's emphasizes the need for scaling up existing initiatives due to the significant funding deficits in the country's infrastructure landscape. The country's institutional strength and governance frameworks have also been scrutinized in international surveys, indicating room for improvement compared to its Sub-Saharan African peers like Kenya and Ghana. The Nigerian government aims to attract more capital amidst lower tax revenues and rising debt by exploring innovative financing options. For example, leveraging off-balance products and contingent liabilities, such as providing guarantees for infrastructure projects, could help alleviate financial pressures. Public-private partnerships (PPP) are seen as a crucial avenue for infrastructure development. Projects like the Lagos fourth mainland bridge PPP have attracted interest from European bidders and may diversify funding sources beyond multilateral organizations. Encouraging the Nigerian pension industry to invest in infrastructure assets through third-party guarantees could also drive sector growth over time. However, challenges persist in Nigeria's PPP model, with concerns about risk allocation and investor participation. Strengthening PPP frameworks and successfully executing projects could build investor confidence and attract institutional funding. Moody's report emphasizes the significance of investing in the power sector to address businesses' concerns around reliable energy supply. Improving power infrastructure can catalyze economic growth and pave the way for enhanced social infrastructure development. Finding the right balance between regular and social infrastructure investments is key to addressing Nigeria's infrastructure challenges in the long run.
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