UNLOCKING RAPID DEVELOPMENT OF TRANSPORT INFRASTRUCTURE IN NIGERIA - PowerPoint PPT Presentation

UNLOCKING RAPID DEVELOPMENT OF TRANSPORT INFRASTRUCTURE IN NIGERIA I n d u s t r y O v e r v i e w a n d P P P O p p o r t u n i t i e s Wale Shonibare N O V E M B E R 2 0 1 5 Managing Director, Investment Banking United Capital Plc

“The World Bank estimates that every 1% of government funds spent on physical infrastructure stock leads to an equivalent 1% increase in GDP”

Outline 1 Background 2 Transport Sectors Financing Needs & Challenges 3 AGENDA Experience from other Countries 4 Key Structuring Issues for Rail in Nigeria 5 Case Studies - Key Success Factors 6 Key Next Steps 7

Background Background on Infrastructure The international benchmark for infrastructure stock  Infrastructure Stock as a % of GDP as a % of GDP is 70%. Nigeria currently stands at 25% 87% 80% 76% In order to bring Nigeria up to the benchmark by 70%  Benchmark 58% 2043, there is need for expenditure of ~ USD 2.9 47% trillion 25% It is expected that 48% of the required funding  requirement will come from the private sector. This amounts to ~USD 1.4 trillion Brazil Nigeria India China Indonesia Poland South Africa The 2015 Africa Competitiveness Report by the  World Economic Forum ranks Nigeria‟s infrastructure at 134 th out of 144 countries Other BRICS (Excluding Russia) emerging markets Expected Infrastructure Spend (2014 – 2043) Funding Source % Amount (USD Bilion) Nigeria needs USD 78 billion over the Private 48 1,392 next four years to finance its Federal 29 841 infrastructure deficit with USD 37 billion State & Local 23 667 expected to come from the private Donor 0.4 11.6 sector TOTAL 2,911.6 Source: National Integrated Infrastructure Master Plan (NIIMP), ITF, GWI, MckinseyGlobal Institute analysis, United Capital Research 4 4

Background Transport Infrastructure Infrastructure spend requirements over the next 30 years Nigeria’s expenditure on transport infrastructure  Funding Requirements as at 2013 stood at USD 2.3 Billion. Transport Sector (USD Billion) Roads 350 This level of expenditure has created a funding  Urban Mass Transit 250 gap of ~USD 800 Billion which can be covered Railway 75 over the next 30 years according to the NIIMP. Maritime 50 In line with this, ~USD 22 Billion is needed over the  Aviation 50 next 4 years translating to an average of ~USD 5 Maintenance Cost 37 Billion per annum. over the period TOTAL 812 Spend on transport infrastructure (USD Bn) 2.3 2.1 2 1.9 2010 2011 2012 2013* Source: 2013 National Integrated Infrastructure Master Plan (NIIMP), United Capital Research 2013* - Current figures as at NIIMP formulation 5 5

Rail Transport  Railway  The 2015 Global Competitiveness Index of the systems World Economic Forum ranked the quality of Nigeria’s rail infrastructure at 100 th out of 144 encourage inter-regional countries. development  To bridge this gap ~USD 75 Billion is required as population over the 30 years of the NIIMP . USD 19 Billion out and urbanization of this would be used to execute new are on the construction of more than 6,000km of standard increase. gauge rail while the rest will be used for rehabilitation of existing lines and development of rail stations and other rail services.  Nigeria has Construction Location Length Region 3,505km of Rail infrastructure stock (Km) railways 1898-1901 Lagos-Ibadan 193 Km rail per 100 square km South- which is 1901-1909 Ibadan-Jebba 295 West 1.9 currently 1.8 1907-1911 Kano-Baro 562 insufficient North and 1909-1915 Jebba-Minna 255 underutilized 1914-1916 Port Harcourt- 243 0.4 0.4 East and Enugu 0.2 Central 1922-1927 Kafanchan-Jos 179 1958-1961 Kafanchan-Bauchi 238 Nigeria India Brazil South China North- Africa 1961-1964 Bauchi-Maiduguri 302 East Source: 2013 National Integrated Infrastructure Master Plan (NIIMP), ~56% of the rail lines (km) in Nigeria were CIA Factbook, NRC Article constructed during the Colonial Era 6 6

Road Transport  Nigeria has the largest road network in West Africa and the second largest, south of the Sahara with an Freight and Passenger estimated 200,000km of road network connecting Movements villages to cities. 10% Roads  The 2015 Global Competitiveness Index of the World Others Economic Forum ranked the quality of Nigeria’s road infrastructure at 125th out of 144 countries. 90%  The road sector accounts for the lion’s share of required transport infrastructure investments. Over the 30 years of the NIIMP, total investment required is ~USD 350 Billion Consequences of Road Sector Decay for upgrading and expansion of existing road structure. N88 Billion loss due to increased Vehicle Operating Costs Road infrastructure stock N12 Billion loss due to delayed Km road per 100 square km turn-around and increased travel time 100 N75 Billion loss due to reduction in asset value 30 21 21 Total annual loss to the economy approx. N175 Billion Nigeria India Brazil S Africa Source: National Integrated Infrastructure Master Plan (NIIMP), 7 7 United Capital Research, Federal Ministry of Works Investors Manual

Aviation  Required investments for the aviation sector amounts to ~USD 50 Billion comprising of rehabilitation and remodeling of the eleven (11) airports in Nigeria.  The 2015 Global Competitiveness Index of the World Economic Forum ranked the quality of Nigeria’s aviation infrastructure at 121 st out of 144 countries.  Government plans to concession the country’s major airports to the private sector under the Build-Operate-Transfer (BOT)model. Project Title PPP PPP Company Structure Domestic Terminal at Concession Bi-Courtney Murtala Mohammed /BOT Limited Airport, Lagos Aviation Lekki-Epe International DBFOM N/A PPPs Airport Nnamdi Azikiwe Concession Abuja International Airport, /BOT Gateway Abuja Consortium (Contract is currently revoked) 8 8

Urban Mass Transit Proposed Lagos State Ferry Service route NIIMP indicates a finance gap of USD 300 million Mile 12 Ikorodu Ijede Oworonsoki Oke Afa Badore West IBB Festac Iddo Ebute Ero Mile 2 Lasu Marina Olodi Apapa Falomo Bridge Satellite Town Lekki Liverpool West Line Central Line Apape Line North Hopper Line North Direct East Line Iddo - Ebute Ero Crossing CABLE CAR The 12.85 km Lagos Cable Car Project is currently  the only cable car initiative ongoing in Nigeria for urban mass transit. It is expected to cost USD 250 Million under a  Concession/BOT PPP structure being executed by Ropeways Transport Limited. This project seeks to have 9,000 vehicles taken off  the roads each day, thereby alleviating congestion and reducing pollution. Source: Trico Capital 9 9

Maritime  The 2015 Global Competitiveness Index of the World Maritime Sector Contribution to Economic Forum ranked the quality of Nigeria‟s port GDP of Developing Economies infrastructure at 110 th out of 144 countries. (2012)  Required investments over the 30 year period of the NIIMP India 28.1 amount to ~USD 30 Billion of which sea port infrastructure would represent ~USD 25 Billion . China 9.7  Nigeria currently has 6 major ports: Lagos Port, Tincan Island Port, Rivers Port, Delta Port, Calabar Port and Onne Port. Russia 5.9  Bureau of Public Enterprises concluded the Seaport Concessioning Programme in 2006 which brought in the Brazil 2.8 current set of private sector operators in Nigeria. S/Africa 1.3 Port Infrastructure Needs in Nigeria : Nigeria 0.15 • Rail Lines • Electricity 0 5 10 15 20 25 30 • Marine services • Development and maintenance of quay walls • Towage and pilotage services Source: 2013 National Integrated Infrastructure Master Plan (NIIMP), United Capital Research, Federal Ministry of Works • Bunkering facilities • Inland waterway fleet • Road network 10 10

Financing Needs & Challenges Financing Needs for Transport Infrastructure With around 48% expected to come from the private  Infrastructure spend funding sector, about USD 1.4 trillion will be required over the 30 year source period. The sources of finance are as follows:  ‒ Local project sponsors ~0.4% ‒ International project sponsors ‒ Local banks Private 29% ‒ International banks 48% State & Local ‒ Local institutional investors Federal Donor ‒ International institutional investors 23% ‒ Multilateral finance organizations However, there are issues to be resolved in order to take full  advantage of the options available We need to foster an environment that encourages sustainable  investment in infrastructure. Source: National Integrated Infrastructure Master Plan (NIIMP) 11 11

Private Sector Financing - Challenges Local Project  Often inexperienced; lack of credible track record Sponsors International Project  Little local knowledge; very risk averse; concerned about transparency Sponsors  Short – term focus due to asset liability mismatch; inadequate access to long-term capital; Local Banks need to build human capacity; high interest rates International  Cyclical – fickle appetite; introduces currency risk Banks Local  Lack access to long-term investment opportunities; underdeveloped corporate bond Institutional market Investors International  Little local knowledge; lack access; require quick exit Institutional Investors Multilateral Finance  Slow cumbersome processes; country limits; many strings attached Institutions 12 12