The Federal Government is to submit the Sovereign Wealth Fund (SWF) Bill to the National Assembly this week.
President Goodluck Jonathan, who disclosed this yesterday in Abuja, said this was part of his administration’s effort to create the enabling environment that would help redress the country’s current huge infrastructure deficit.
In an address through the Minister of Finance, Olusegun Aganga, presented at the Infrastructure Finance Conference, 2010, Mr. Jonathan said a major component of the SWF is in the provision of critical socio-economic infrastructure that could improve the quality of living.
Bridging the infrastructure gap
Noting the huge gap between infrastructure and national development, the president said it was in recognition of the need for urgent solution that a public private partnership (PPP) framework for infrastructural development was initiated under the Vision 20-2020 implementation plan, apart from a four-year national development strategy that was unveiled last June for the attainment of that goal.
He said government established the Infrastructure Concession Regulatory Commission to set guidelines, rules and regulations, present the national framework for PPP, as well as advise government on measures to implement such programmes.
“Federal Government is committed to the construction of roads, rehabilitation of railway lines, sea ports, and airports. The dredging of the River Niger has already started, while steps have been taken to harness the benefits of the gas sector under the national gas master plan to boost gas power supply.
“But, we also recognise that government cannot and will not fund the infrastructural development alone based on its own resources. The private sector has to be fully engaged to ensure that the PPP arrangement works.
“The Sovereign Wealth Fund (SWF) is part of the effort to reduce the infrastructure deficit by investing in local infrastructural projects to act as a catalyst for local and international investors. The Bill establishing the SWF is to be sent to the National Assembly this week,” Mr. Jonathan said.
He said that government’s effort towards infrastructure development in the next two years will be holistic and comprehensive, adding that specific steps will be taken to establish the metro line system in major cities, including Kano and Lagos, water ways, and sustainable access to water supply to meet present and future water resource needs of the people, as well as for agriculture and hydro power projects.
Central Bank governor, Sanusi Lamido Sanusi, acknowledged the relationship between infrastructure and economic development, expressing concern that the convergence of the two has not been achieved in Africa due to a number of factors including huge financial gap, poor performance of state-owned enterprises involved in the infrastructural development, and absence of maintenance culture, which leaves the infrastructure in a permanent state of decay and disrepair.
According to Mr. Sanusi, the major challenges confronting infrastructural financing in Africa, and Nigeria in particular, includes non-availability of long term funds for infrastructure development financing, harsh economic environment, lack of refinancing facilities for existing banks and those interested in infrastructure financing, inadequate capacity building for stakeholders, and policy reversals by government for critical infrastructure projects.
The magnitude of the country’s infrastructural requirement, he pointed out, is far in excess of currently available public financing resources, adding that this calls for urgent mobilisation of financial resources from the private sector.
As part of its effort to redress the challenge, he said the Central Bank of Nigeria established the infrastructure finance office in March to evolve a sustainable financing framework, to stimulate long term financing for infrastructural development in the country.
He said the apex bank has also facilitated the investment of N300 billion in debentures, issued by the Bank of Industry for investment in power and aviation projects, with African Finance Corporation as technical adviser.
The fund, which is channelled through deposit money banks to investors at an interest rate of one percent, is disbursed at a concessionary rate of not more than 7 percent for a 10-15 years tenure.
Also, to ensure that grants for long term funds become available for infrastructure development, the CBN boss said the recent decision to review the universal banking model in favour of special banking was to encourage innovation and specialisation among banks, as well as encourage the establishment of specialised banks, like infrastructure banks.
Assuring that the CBN would avail its balance sheet to support such specialised institutions till they are able to stand on their own, Mr. Sanusi said the review of the guidelines by the Pension Commission (PENCOM) was to allow pension fund administrators to use up to 40 percent of their funds to support infrastructure projects in the country.
Source:234next.com
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