Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, said poor infrastructure financing was a constraint on the growth of the economy.
Emefiele, who spoke at the weekend during the 2021 Finance Correspondents Association of Nigeria (FICAN) Annual Conference and 30th anniversary in Lagos, said an average rate of five to seven per cent is required to boost productivity and sustainable business growth.
To achieve this, he said, more resources needed to be freed to build critical infrastructure to bridge the wide deficit.
“According to the World Development Indicators (2019), 56.2 per cent of Nigerians have access to electricity while electric power consumption stood at 144.52 kWh per capita as of 2018. While the infrastructure deficit in Nigeria is estimated to be about 1.2 per cent of gross domestic product (GDP), it is projected that the Federal Government needs to commit about $100 billion annually to address the nation’s infrastructural deficit,” he said.
The CBN boss said a vibrant infrastructure financing would unlock the potential in micro, small and medium enterprises (MSMEs) to create massive jobs and reduce poverty. Besides infrastructure support, he said, the sector was in earnest need of credit to be relevant to the growth of the economy.
He said: “According to the World Bank, this sector represents an estimated 90 per cent of businesses and employs over 50 per cent of the world’s labour force. Formal MSMEs have been identified to contribute about 40 per cent of GDP in emerging economies, of which Nigeria is one.
“Lack of access to quality infrastructure has been a limiting factor to MSMEs in developing countries, delivering on their potential for growth and creating employment. Beyond infrastructure, access to finance remains one of the biggest threats to MSME development in both developed and developing economies alike, with serious implications for productivity, economic development and job creation. Access to credit has been identified as a critical enabler for the growth and development of MSMEs, as the overall credit gap for MSMEs in developing countries is estimated to be $5.2 trillion, representing 19 per cent of these countries’ cumulative GDP. Of this, the unmet financing demand from MSMEs in sub-Saharan Africa is about $331 billion, representing 18 per cent of the potential demand for credit by MSMEs in the region.”
Emefiele listed the number of initiatives the apex bank has embarked upon to bridge the infrastructure gap.
He, however, insisted that more partners were required to support the economy with functional infrastructure, calling on the fiscal authority to partner the CBN on MSMEs and infrastructure development as well as “developing innovative policy measures to unlock the potential of these enterprises to drive innovation and industrialisation.
“The bank remains committed to fulfilling its developmental mandate by collaborating with stakeholders across infrastructure and MSME segments to boost domestic output,” he assured.
He pointed out that public and private partnership (PPP), as a major vehicle the authorities could explore as an infrastructure finance option as the country and the rest of Africa battle to catch up with other parts of the globe.
“This PPP option is yet to be fully explored in Nigeria, despite its popularity in other emerging economies, particularly Brazil and India. The Brazilian Development Bank (BNDES) has supported industrialisation and infrastructure development in Brazil by providing financing support mechanisms to public and private enterprises and investing in enabling infrastructure projects,” he said.