A Keynote Lecture delivered at the 65^th Anniversary Celebration of the Nigerian Bar Association (NBA), Ibadan Branch held 10^th Dec., 2019

by Mr. Seye Oyeleye, Director General, DAWN Commission

Introduction

It’s no gainsaying that the state of Nigeria’s infrastructure poses a great challenge to our industrialization and human development. The decay of our infrastructure overtime have negatively impacted on our competitiveness globally, making it difficult for us to fully diversify and grow the economy; speaking of bad roads, inadequate health system, poor education infrastructure, etc. The topic of governance and infrastructural deficit in Nigeria is therefore a crucial one and need to be discussed holistically at all levels till desired change is achieved.

Conceptually, infrastructure generally refers to basic structures, systems and facilities that enable accomplishment social and economic goals, while governance encompasses the state’s institutional and structural arrangements, decision-making processes, and policy formulation and implementation capacity to make this happen. For the sake of this lecture, let us limit infrastructure to public goods including roads, highway safety and standards, mass transit and sea & airport facilities, railway systems, electricity, water supply systems, waste treatment facilities, drainage and sewage disposal systems, postal services, correctional institutions, education facilities, public health delivery systems, health and safety emergency response systems, and security (Hope, 2018), and other goods like telecommunication facilities, housing.

Background

Continentally, the World Bank at the Programme for Infrastructure Development in Africa in 2018 has estimated that in respect to electricity, water, roads, and ICT, infrastructural deficit reduces national economic growth by 2% and reduces productivity by as much as 40%. It was also said at the Organization for Economic Cooperation and Development’s (OECD) Forum on Governance of Infrastructure in 2018 that good infrastructure governance helps deliver the intended economic and social benefits, and create a predictable and equitable business environment for private organizations and investment.

From the foregoing, it is obvious that the World has agreed that Governance is critical to infrastructural development in every democratic and market system such as Nigeria, it is a statutory expectation of the governance structure to manage a state’s social and economic resources for infrastructural development. Noting this, it’s either governance act its role in delivering adequate quality infrastructure or becomes a hole through which infrastructural deficit is inflated in the system. Unfortunately, governance has significantly played both roles in Nigeria.

In Nigeria, weak infrastructure base has hindered the delivery of social and economic benefits to Nigerians, a simple symptom of defective governance according to the Nigeria National Planning Commission (Nigeria National Planning Commission, 2015). This lecture, therefore, is designed with the intention to analyze the relationship between governance in Nigeria and its infrastructural deficit.

Governance and Infrastructure: Nigeria in Perspective

Permit me to crave your indulgence and take us once again through memory lane, some parts of our history and the focus in infrastructure.

In pre-colonial Nigeria, there was little to no modern infrastructure in any of the Kingdoms or empires that now constitute contemporary Nigeria. The Oba, Emir, and the Eze depended on their chiefs/councils (who came from the grassroots and had the ears of the people) to make decisions about what constituted their infrastructural needs and demands. These could be the clearing of bushes or forests to make unpaved roads for the movement of goods and citizens, maintain and preserving the rivers, taking care of their horses and other animals used for means of transportation then, a local security system to secure themselves, or even the construction of huts and houses for every single person in the society.

Back then it was much easier for citizens (or subjects) to approach their rulers and express their dissatisfaction about issues in the society, infrastructure included. The Kings would respond to such issues by consulting their councils or chiefs. In some cases, particularly, the Yoruba ethnic group, the chiefs were even traditionally empowered to remove the King if he was guilty of any wrong doing. A system of checks and balances assisted, which promoted good governance and improved the well-being of the people.

In the 18^th Century, Great Britain displaced the Portuguese and had control on the whole of Nigeria by 1900. To effectively govern the Nigerian territory, the British resorted to the system of indirect rule in some part of the country, where traditional rulers governed Nigerians on their behalf and reported back to British authorities who had the final say (Federal Research Division of the Library of Congress, 1991) .  The indirect rule governance system was inherently extractive and exploitative in nature. The kings lost their powers and the chiefs and councils became of no use any longer. Due to this newly created power relations between the people, the King, and the British, room for good governance started shrinking rapidly. As a result, the people had no say in the development of their societies as well as the infrastructure that was being erected by the British.

As a colony, Nigeria’s political economy was designed to be extractive. Thus, governance was in turn designed to serve that purpose. However, the situation began to go south; bad governance and abuses of human rights were the order of the day. Local farmers were no longer able to decide what crops to grow or what resources to cultivate. Instead, these decisions were made for him/her in a predetermined market. One must however agree that the infrastructural development embarked by the British boosted agricultural output and sustain the economy then (Settles, 1996), but the need for infrastructure grew beyond just extractive purposes.

Fast-forward to the post-colonial era; independent Nigeria, despite all the optimism after the British handed over control back to Nigerians, the story has not lived up to expectation. Just few years after becoming a republic, Nigeria was thrown into turmoil, with military coups d’états and the Nigeria’s civil-war that lasted until 1970.

Cumulatively, the era of military rule can literally be said to have changed the path of Nigeria’s history and indeed its development. There was endless repression, intimidation, violence, corruption, uncontrolled waste and mismanagement of resources as well as the destructive neglect of other economic sectors once the demand for oil internationally increased and consequently, the nation lost the little gains of the colonial and pre-colonial period. The incessant bad governance of the military regime contributed heavily to the infrastructural deficit we experience today. Resources that ought to have been used to improve the livelihoods of Nigerians were not judiciously applied, there was also no discipline for effective planning and where development plans existed, there was no discipline to abide with the provisions in the plan documents. Voices of opposition were crushed and media freedom were limited. Soon after, the very infrastructure the colonialists built to support the then extractive political economy began to deteriorate and decay. Simply put, the military sustained the extractive political economic system that existed but disregarded the infrastructure the British built to support the system nor build new ones.

There was a ray of hope when democracy birthed in 1999 because we thought the democratic system will afford the people to be fully involved in the administration of their country and then deliberate about its socio-economic development because it was meant to be the government of the people, by the people and for the people. Unfortunately, the story is not quite different in present day Nigeria, as defective governance continues to reign in our daily lives and in every sector of the economy, infrastructure not left out. Issues of corruption, revenue diversion, bloated contracts, lack of respect for the rule of Law, disregard for sanctity of contract, ineffective judicial system, non-adherence to procurement processes, etc. ate deep into the system for years and has badly affected infrastructural quantity and quality as we see today.

       

 Infrastructural manifestation of mis-governance in Nigeria.

The manifestation of misgovernance is everywhere in Nigeria and on infrastructure in particular. For instance, power sector privatization did not follow due process and it became obvious with the inability of the buyers of national energy assets to revamp the sector as expected. Their inadequacy has largely contributed to the epilepsy of electricity in Nigeria.  According to the United States Agency for International Development (USAID), Nigeria has the potential to generate 12,522 megawatts (MW) of electric power from existing plants but most days, is only able to generate around 4,000 MW (USAID, 2019 ) because necessary equipment to aid production are not in place.  This challenge of power supply has hindered the industrialization process of Nigeria and can be largely attributed to defective governance. The reason for energy deficit can also be used to explain the pitiable conditions of some other infrastructures that would have positively contributed to our socio-economic development.

In 2011, the World Bank reported that Nigeria would require at least $14.2 billion a year for no less than 10 years to close up the infrastructure gap facing the country. This amount is equivalent to an investment of N5.11 trillion into infrastructure per year with the government expected to carry 74% of this required investment. In 2017, however, the figure had gone up; the Head of Energy Research, Ecobank Plc, Dolapo Oni stated that Nigeria would need at least $30 billion (N9.47 trillion) annual investment to bridge the infrastructure gap in the country (Punch Newspaper, 2017). However, in the last 12 years (2008-2019), the total budget for capital expenditure has been nothing close to this.

 

Obviously, there have been gross underfunding of infrastructure in Nigeria. Just last week, on 2^nd December 2019, FERMA boss, Nurudeen Rafindadi blamed the bad state of Nigeria roads to poor funding, hindering the agency’s capacity in proper road maintenance nationwide (Punch news, 2019). This statement further confirms the big issue of infrastructure funding in Nigeria, for new infrastructure and maintenance of existing ones.

It is bad enough that the amount budgeted for capital projects is inadequate (averagely 27% over the last 12 years), the amount that finally gets into actual project implementation equally faces huge challenges. These includes delay in fund release or outright insufficient release, fund diversion, loopholes in the procurement processes, failure of citizens to involve themselves in project execution process, etc. In the end, the actual spending on capital projects is barely 17-20% of budgeted amount.

Beyond the issue of poor funding, there are other indicators of how defective governance has affected Nigeria’s capability to build relevant infrastructure to enhance socio-economic development. The case of corruption is visible in the prevalence of inflated government contracts for capital projects which end up poorly executed and funds allocated for human capital development diverted as reported by the ICPC boss, Prof. Bolaji Owasanoye at the National Summit on Diminishing Corruption in the Public Service held November 2019. Another indicator is the lack of due process in privatising government enterprises. One good example of this is the privatization process of the energy distribution companies (DISCOs) that has stalled progress in energy distribution as mentioned earlier. Even after privatized, the Discos were still put on tariff subsidies from the government, and about 11 distribution firms out of 19? declared technically insolvent as at August 2019 ahead of the December 31, 2019 performance review timeline, due to their operational incapability (Punch, 2019).

From the World Bank report about the cost needed to meet the infrastructural deficit I quoted from earlier, it becomes obvious that we need to attract private fund to bridge the gap but our governance methods will probably make this difficult for us. Our widely known disregard for sanctity of contracts and business agreements in Nigeria is an albatross to long term investment in public assets as obtains in other jurisdictions. Particularly when it comes to management of political differences among different political actors as it was with the case of Lekki Construction Company International (LCCI) in Lagos State where Mr. Babatunde Fashola, the then G0vernor of Lagos State had to hurriedly pay-off to buy out the concession right from LCCI partly because a Governorship candidate of the main opposition party in Lagos threatened to cancel the contract if elected. Ditto for Bi-Courtney Highway Services Limited’s case with the Federal Government on Lagos-Ibadan Expressway concession during President Goodluck Jonathan’s administration, making the project suffer massive set back and could have further discouraged private sector’s partnership on infrastructural development.

Beside lack of enabling law or disregard for the sanctity of contract to attract foreign/private investment for infrastructural development, another indicator which seats comfortably with this gathering is the ineffective judicial system that takes forever to adjudicate business/contractual disputes notwithstanding the existence of Alternative Dispute Resolution (ADR) mechanism in some States. The long duration it takes for legal dispute resolution is counterproductive and frustrate investors who have their capital tied and interest payment mounting.

In addition to this is the issue of insecurity, which can also be attributed to governance failure and has greatly affected Nigeria’s competitiveness in attracting desired investments to infrastructure; no investor will take on a long-term capital project with no assurance of security for their lives and investment.

All the appearances of Nigeria’s defective governance outlined above have cumulatively contributed to an infrastructural gap of about 87% when compared to the nation’s infrastructure need.

After analyzing the role of Nigeria’s defective governance in its infrastructure gap, let’s briefly look at how good governance has positively impacted on infrastructural quality using the United States as a case study

 

The Interplay of Governance and Infrastructure; The United States Experience

Though, there are numerous examples of how good governance has contributed to infrastructural growth around the World, I will only give an example of the United States for this lecture. While the United States (U.S) may not be said to be the gold standard, its system of government, which is not without its own vagaries, but it is still regarded as one of the best in the world. The U.S is a representative democracy where the government is elected by the citizens for a period of 4 years. As it is evident in recent years, its systems of checks and balances, system transparency, citizen participation and an active civil society has continued to oil their democracy. Due to practices of good governance in American Society, policy makers, and key decision makers in the U.S are constrained to channel the state’s resources to the appropriate infrastructures that would improve the livelihoods of all Americans.

The United States $20 Trillion economy relies heavily on a vast network of infrastructure. These infrastructure were deliberate efforts of visionary leaders (and of course, watchful citizens) who directed public resources to their construction.

It is a consensus amongst the American economists that the robust investment in infrastructure in the 20^th century set the foundation for the nation’s strong growth after the end of the Second World War (McBride, 2018). The American government, which is responsive to both the private sector and the citizens needs and demands, has resolved that continuous investment in infrastructure in the country would boost individual and national productivity. According to a business roundtable report, U.S Federal government spending of $737 billion over 10 years in infrastructure projects such as surface infrastructure, aviation and water resources could generate an additional $5.9 trillion in Gross Domestic Product (GDP) in the next 20 years (Ausick, 2019). McKinsey, the global consulting firm, has also estimated that increasing U.S infrastructure spending by 1% of GDP would add 1.5 million jobs to the American economy.

Essentially, America’s continuous growth and the attendant investment on infrastructure among other reasons can be traced to their robust governance system which holds public officials accountable, empowers citizens to demand for transparency, and reation of conducive environment for the thriving of civil society, and of course the executive is effectively checked by legislature and judiciary.

 

Putting this into perspective, one of the first big business in the United States were railroads. The railway industry which pioneered in the late 1820s and developed after the American Civil War, was the first industry to be regulated as a public utility. Railroad in America came to be regulated as a result of widespread dissatisfaction with the discriminatory practices of large railroad companies. Railroads linked the rich hinterlands of the Midwest and South to the industrialized East, forming a single national market for domestically produced goods. As a result, railroad companies generated large amounts of profits for investors and employed hundreds and thousands of workers.

As railroads are often characterized with enormous costs to maintain and run, debt and bankruptcy began to plague the railroad companies. Pressured to pay off debts and avoid bankruptcy, they decided to use consumer demand and private negotiation to set rates. However, conglomerates such as the John D. Rockefeller’s Standard Oil Company used financial sophistication and bulk shipments to gain preferential rates therefore gaining an unfair advantage. Consequently, the rail companies decided to pass these costs to other classes of consumers who lacked the bargaining power to negotiate lower rates (rural farmers and small business owners). These new rates outraged farmers, who went on to push their legislators to introduce regulations that outlawed prevalent forms of rate discrimination and capped rate increases. In response, different U.S State Governments created new agencies with the exclusive mandate to regulating railroads. Eventually railroad companies were forced to submit their rates to public inspection and publication. Companies who were caught shipping goods under secret rates faced heavy penalties. The railroad regulators, to aid in their decision making, pioneered new forms of data collection and publication, including standardized systems of accounts and routine financial disclosures. Although the reforms were burdensome to the rail companies, they were monumental for passengers and shippers alike as there was greater transparency in how railroads operated. There was also a feeling of justice and fairness as different commodities, localities, and users could make use of the railways. As at 1950, a significant proportion of other classifications of infrastructure in America were subject to the same price and entry controls pioneered for railroads (Jones & Reinecke, 2017).

In Nigeria, you could easily imagine how it would have ended considering our negative history of governance. Thus, it won’t be unfair for one to expect the kind of infrastructure existing in the country at this moment.

 

Looking Forward for Nigeria

With enough pain crying over spilled milk, we need to start looking forward by proffering probable solutions to help our infrastructure deficit. It’s a good thing the federal government is focused on rehabilitating federal roads like the Lagos Ibadan Express and constructing new rail network. The House of Representatives also recently proposed a statutory 40% capital expenditure share of total budget in the next 10 years. Assuming we start from the proposed 2020 budget, 40% of that is only about N4trn, nothing close to the N9.47trn required in the next 10 years (a figure that is also increasing year on year). But the question really is, what is the optimal solution? The answer this question, however simple, is complex in its implementation: it’s simply Good Governance!

For governance to be classified good, it must satisfy 8 major characteristics as outlined by the United Nations (UN Economic and Social Affairs Commission for Asia and the Pacific, n.d.), they are;

1. Participation: Direct and indirect participation of All
2. Rule of law: Impartial enforcement of fair legal frameworks, independence of the judiciary, an incorruptible police force, and the full protection of human rights
3. Transparency: Information is freely available and directly accessible to those who will be affected by the enforcement of those decisions.
4. Responsiveness: institutions and processes serve all stakeholders within an appropriate/reasonable timeframe
5. Consensus oriented: mediate the differing interests to reach a broad consensus in society on what the best interest are and how they can be achieved.
6. Equity and inclusiveness: All groups must have opportunities to improve or maintain their wellbeing and feel they have a stake and not excluded from the delivery
7. Effectiveness and efficiency: Channeling resources to meet infrastructural need in the best way, sustainable use of natural resources and the protection of the environment.
8. Accountability: All actors, including the civil society, the public sector, and the private sector, must be accountable to the public and their institutional stakeholders. Accountability is enhanced by transparency and the rule of law.

Adherence to these 8 principles in our governance process has the potential to efficient infrastructure delivery. Good governance, as this lecture has tried to show, is holistic in nature and will address most, if not all of the problems of the nation. For one, good governance curbs corruption, gives room for all groups to participate in the process, directs and effectively manage the resources needed to solve those challenges. However, breaking down the good governance requirement into simpler pieces, there is need to identify actionable steps that can be taken to bridge the infrastructural deficit in the country. No matter how difficult it seems, we must start somewhere. Below are, therefore, my recommendations for the way forward:

1. Focus on Private Funding: The government must create room for private actors to come in and solve our problems. It is obvious Government resources alone cannot fix our infrastructural needs, though initial/counterpart funding may be sourced from government, it is the private sector that can fund quality infrastructure development; they invariably benefit from it either as investors or as end users. So, the government need to put necessary incentives in place to attract private investments. Attracting private funding will require:

 

1. Effective Regulations: Our regulatory systems must be strengthened in order to attract the needed finance into the sector as stated above. These include;

• An investment friendly Public-Private Partnership (PPP) Law
• Strict implementation of Procurement Law (Due Process) and the Fiscal Responsibility Act
• Strong framework for enforcing contracts; we must develop the habit of honoring contracts

1. Good Investment Outlook: Stable macro-economic conditions have to be created in order to attract the private sector to the development of infrastructure. One major one is building a strong investment outlook by ensuring ease of doing business; build strong security system; fast adjudication process; improve the credit worthiness/integrity of States and the Country at large, etc.

The NBA, within your professional capacity, must act to push for the adherence to the rule of law, due process and honoring of contractual agreements in Nigeria. There might be need to review existing Laws, policies and processes like the privatization process, the judicial processes that prolong business disputes, etc. The advocacy for reform can be championed by the both the local and national branches of NBA.

2. Confront Corruption differently: The country’s fight against corruption and mismanagement of resources cannot be won without sanctions at both the top and bottom level. From the level of embezzlement of infrastructural allocations by government officials, to fraudulent activities and poor job delivery by contractors and so called ‘smartness’ and ‘national cake’ syndrome at the local level. Until culprits are visibly punished and heads roll, the war against corruption will remain a mirage.

 

As NBA, you should support the President’s fight against corruption by advocating for stricter anti-corruption laws with heavier punishment and special courts for corruption trials so it can fast-tract dispensation of justice and deter others from dipping their hands into the cookies’ jar. The judicial process at all levels must be effective and fast enough to discourage corruption. Contract making, contract enforcement and conflict resolution all requires an active judiciary system, this falls in your primary jurisdiction.

 

3. Collaborative Framework: Like in the US example, transparency and civic engagement is key. The Government need to consistently engage all infrastructure stakeholders forum consisting of the private sector, civil society, the public sector, international financial institutions, and international development agencies and all other critical stakeholders, to collaborate for an all-round solution to the problem. To get the best out of this, the government and all its MDAs must be transparent and accountable in the use of public resources so as to attract the interest and contribution of stakeholders for a collaborative approach to filling the infrastructure gap. Achieving this also requires:

 

1. Active Citizenry: Majority of Nigeria citizens are largely disengaged in the governing of the country, they are more passively engaged rather than actively. It is our sole responsibility to call our governments to account, demand transparency, and efficiency in the administration of our beloved country. For good governance to prosper, Nigerians must carry out their responsibilities of engaging and calling-out their leaders purposefully as a governance stakeholder themselves.
2. True Federalism: The challenge of funding at the State level can be largely removed if the States have greater control over their resources and earnings channeled to the needs of their states. However, until the country is restructured, the Federal Government need to consider conditional release of grants for infrastructural development to states who practice good governance (metrics to measure good governance can be developed locally in line with best practices).

The NBA must use its platform to advocate for participatory governance and enlighten the public on their rights and roles in the governance process. You are also in a good position, noting your mastery of the constitution, to advocate for true federalism to enhance state fiscal capability for infrastructure delivery.

4. Finally, there are very few tools in the world capable of producing change, than storytelling. As Prof. Charles Soludo once said, we must change the Nigerian Narrative in the International community, especially when it comes to doing business in the country, it is by so doing that we can attract sustainable investments around our infrastructure need. This is the responsibility of all quarters in Nigeria.

 

In conclusion, the challenge of infrastructure deficit we are facing as a country is a huge time-bomb everywhere we go to across the land. The deficit is stark from lack of pipe borne water to bad roads, absence of medical facilities in several parts, limited access to electricity, fit-for-purpose schools are absent, and indeed, quality shelter in some parts is a mirage. Our government and governance structure must be awaken and be reorganized in order to understand and grapple with the present and future danger which infrastructure deficit is posing to the country. Our population is not just accelerating but indeed exploding, this has exacerbated the insecurity challenges we face across the land and it will only get worse as long as our population keeps moving along this present trajectory. However, it is not a lost cause and governments are in power for times like this. With deliberate and focused interventions we can gradually start chipping away at the humongous deficit that is in front of us.

A good example is the present focus on Agriculture by the government of today, this is definitely welcomed, but current reforms in the sector need to be backed with sustainable infrastructure that will not only reduce poverty and increase growth, but provide the much needed jobs for our youths.  It is without doubt that infrastructure drives growth and growth leads to the development of infrastructure, it is a cycle that every development-conscious government must pay close attention to, all development Stakeholders must also support the process to achieve shared-result.

Thank you for your undivided attention.

 

 

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