Nigeria looks to IDB for infrastructure upgrades

After agreeing to help finance a $150m overhaul of the Lekki seaport in Lagos State, the Islamic Development Bank is quickly becoming Nigeria’s top financier for infrastructure developments

The IDB has expanded its interests in Nigeria after agreeing to invest $150m in the Lekki seaport project. The $1.55bn undertaking, which has been scheduled for completion in 2015, will be Nigeria’s first deepwater port. Its free trade status is expected to heavily increase trade with countries like China, and it should bring in an estimated $200bn in annual revenues. It is hoped the 90HA port will also produce around 163,000 new jobs throughout Lagos State.

In a bid to capitalise on the deal’s momentum, Nigeria’s vice president, Mohammed Namadi Sambo, has already started lobbying for even more financing from the Saudi Arabian-based IDB. Sambo, who is currently on a pilgrimage to Mecca, issued a statement yesterday imploring the IDB to commit another $450m in infrastructural improvements. Sambo has said Nigeria desperately needs to expand its electricity capacity by another 20,000 megawatts.

“Nigeria, being an important member of the bank, is looking forward to such an opportunity to facilitate the rebuilding of its infrastructure, revamping the manufacturing sector and creating employment for our teeming youths,” he said.

It’s hardly surprising Sambo would go to the IDB in order to secure financing for such a major project; after all, over the last 12 months the IDB has become one of Nigeria’s top financiers. The bank formally entered the country at the start of 2012, after quietly injecting $470m into various project and trade finance operations throughout Nigeria. By 2015, it’s expected the IDB will have pumped up to $4bn into the Nigerian economy.
According to Charles Robertson, the Global Chief Economist at Renaissance Capital, the IDB’s continued investments in Nigeria’s infrastructure are absolutely vital to the country’s future.

“The IDB is investing because there is acute need in Nigeria,” he says. “Electricity supply is 10 percent of SA amounts for a country that is three times larger by population. Credible technocrat leaders have established a sound legislative backdrop to help develop infrastructure, such as electricity.”

It’s worth noting that Nigeria’s ever-improving infrastructure is becoming heavily reliant on FDI from banks like the IDB. At present, the government’s total external debts are sitting at $6.67bn, which is around three percent GDP. Nigeria’s finance ministers are becoming increasingly wary of taking on more loans from foreigners, lest the country slip back into the heavy debt levels that crippled its economy throughout the late 1990s.

Yet Malam Umar Sani, a senior assistant to Sambo, maintains the IDB’s contributions to Nigeria’s infrastructure thus far have been completely invaluable.

“These include construction of four new science secondary schools in Kaduna State worth $17.9m; construction of 300-bed specialist hospital in Kaduna State for $43.15m; and the Zaria water supply project worth $81m,” he said.

Dr Ahmed Mohammed Ali, the IDB’s boss, said he expected to hammer out the conditions of a stronger relationship between his bank and the Nigerian federal government whilst meeting with Sambo in Mecca. At this point, it’s likely some permutation of Sambo’s $450m request will be approved in the mid-term; after all, the Nigerian government does own a 7.7 percent stake in the IDB.

“Nigeria is a very important member of the IDB Group family both by virtue of its shareholding in the capital of the Bank and the critical role it plays in Africa the home of almost half of IDB member countries,” Ali said. “The IDB Group is committed to provide support to strengthen the private sector, which is at the heart of the Group’s mandate and activities in Nigeria, by collaborating with it to undertake viable projects through Public-Private-Partnership.”

Source: World Finance