Private and public sectors experts have advised governments at all levels to use the capital market to bridge funding gap and develop much-needed infrastructure.
At the 2019 annual conference of the Capital Market Correspondents Association of Nigeria (CAMCAN) in Lagos, experts were unanimous that the capital market represents a veritable platform for raising funding for infrastructure development.
Citing recent landmark transactions, they noted that considering the huge financial outlay of many trillions of Naira needed for infrastructure development, Nigeria should embrace the capital market model for infrastructural funding.
An investment banker and Head, Debt Capital Markets, FBNQuest Merchant Bank Limited, Mr Oluseun Olatidoye noted that the market has funded more than 26 roads across the six geopolitical zones in the country with the sum of N200 billion raised through the two sovereign Sukuks issued by the Federal Government.
“We have raised N11.4billion for the development of primary, middle and secondary schools facilities in Osun State, we have funded the development of affordable housing on the Mixta Real Estate Plc bond issues and we have developed a number of roads, bridges, health facilities using the opportunity presented by the capital markets,” Olatidoye said.
He however noted that to successfully tap into the capital market for infrastructural financing, the existence of sound macroeconomic and policy frameworks are pre-conditions, hence, freedom must be given market forces to take its course.
According to him, as much as the government has its roles, political interference must be limited. This insures investors against any form of political risk, and most importantly corruption which has the potential of crippling the entire endeavour.
Acting Director General, Securities and Exchange Commission (SEC), Ms Mary Uduk, said Nigeria has a huge gap in infrastructure base measured through levels of physical capital of roads, public education, electricity production, health infrastructure, and access to treated water.
She said that the Nigerian government like other developing countries continues to face significant challenges in implementing programmes to build basic infrastructure, as the traditional source of infrastructure funding was through public expenditure and development finance aids.
According to her, these sources of infrastructure financing have been found to be inadequate as evidenced by the country’s infrastructure gap.
She added that the establishment of an active infrastructure funds through the market being pursued by capital stakeholders would be immensely beneficial in closing the infrastructure gaps in the country.
According to her, there are various sources of funds available in the market which can be harnessed for infrastructure development such as the pension funds, real estate investment trust and collective investment scheme.
Uduk, who was represented by Mr Sufyan Abdul karim, SEC’s Head of External Relations, said government cannot be the sole provider of infrastructure, noting that active private sector participation is also needed.
She urged government to leverage on the alternative sources of infrastructure financing in the capital market in a bid to diversify the economy and develop infrastructure in Nigeria.
“The international capital markets are the largest and deepest pool of financing in the world, and in conjunction with local capital markets, which represent an essentially untapped source of funds for infrastructure projects, they can make a huge contribution to economic development, if effective transaction structures are developed,” Uduk said.
She pointed out that infrastructure development is important for a country’s sustained economic growth and competitiveness.
Chief Executive Officer, FMDQ Securities Exchange (FMDQ) Plc, Mr Bola Onadele, said the Exchange was committed to tackling the housing infrastructural deficit facing Nigeria through mobilisation of funds from the capital market.
He pointed out that infrastructure is central to the development of the economy, noting that FMDQ is poised to provide workable means of housing provision in the country, amongst other programmes to address infrastructural gap in Nigeria.
Onadele who was represented by Associate Executive Director, Corporate Development, FMDQ, Ms Kaodi Ugoji, noted that the Exchange had set up a housing development project team to work directly with the office of the Vice President.
He added that the Exchange has been working with stakeholders and government to develop products that will drive the capital market and the Nigerian economy in the last four years.