1. Bridging Nigeria’s Infrastructure Gap By M. K. Ahmad Director General National Pension Commission – Nigeria 1 18 November, 2008

2. Outline of Presentation State of Infrastructure in Nigeria Funding of Infrastructure Government Initiatives & Support Opportunities for Infrastructure Financing in Nigeria Way Forward for Africa & Emerging Markets Mind the Gaps European Opportunities to African Investors 2 18 November, 2008

3. Fairly extensive infrastructure suffering from neglect and over utilisation The foregoing has created infrastructure gap in Nigeria  Estimated annual demand - supply gap of 6,000 MW of electricity o ageing plants – 30 years old o Per capita generation – 50W, weak generation, transmission and distribution infrastructure  Only 48% have access to portable water  Low tele-density in the range of 300 telephone lines to 1,000 persons  15.3% of about 195,200km length of Nigerian roads are adequately paved 3 Infrastructure Gap in Nigeria 18 November, 2008

4.  The railway system currently contributes only 1% to national transportation  Current urbanization levels are estimated at 49% with an annual growth rate of 4.8% as against 2.6% for South Africa Investment of over $100 billion required for infrastructure development over the next six years in four infrastructure areas:  Power ($ 18 – 20 billion)  Rail tracks ($ 8 – 17 billion)  Roads ($ 14 billion)  Oil and Gas ($ 60 billion) 4 Infrastructure Gap in Nigeria..cont’d 18 November, 2008

5. Pension Fund Assets:  Generated large pool of long term investible funds for the first time in Nigeria  About US$8.4 billion generated. Assets increased by 22.37% between January and September, 2008  At an estimated growth rate of 30% less than US$100 billion will be generated PenCom sets standards for investment, but has no power to compel operators to invest in any asset class Investments by operators are purely business decisions provided they don’t violate regulations Non-existence of alternative asset classes as less than 2% of pension assets is invested in corporate bonds; infrastructure bonds yet to be developed 5 Nigerian Pension Fund Investments 18 November, 2008

6. Government’s programmes and strategies to facilitate private participation in infrastructure financing:  Government’s 7 – Point Agenda  Commitment to the rule of law  Independent Judiciary  Independent Regulatory Agencies (Telecommunication, Power, Concession Commission)  Tariffs are being deregulated in some sectors to allow for cost recovery; Multi-year-tariff-order (MYTO), Model Power Purchase Agreement(PPA) & Vesting Contract prepared  Public Private Partnerships to support the Governments 7 – Point Agenda  Public Procurement Act 6 Government Initiatives & Support 18 November, 2008

7.  Fiscal Responsibility Act currently at the National Assembly  Infrastructure Concessioning Regulatory Act: o Concession of 52 infrastructure, 18 Seaports Terminals, etc  Privatization and Commercialization Act: o 83 State Owned Enterprises have been privatized since 1999 Nigerian Independent Power Project (NIPP) which is expected to:  Generate additional 4,777MW  Expand and strengthen transmission and distribution capacities 7 Government Initiatives & Support..cont’d 18 November, 2008

8. There are ample opportunities for the development and financing infrastructure development in Nigeria  Demand – supply and financing gaps  Rapid development of the market for long-term debt  Diversified and deep resources base (agriculture, oil and gas, solid minerals)  Annual GDP growth of non oil sector of about 11%  Favourable credit rating for Nigeria: BB- by Standards & Poor in 2007 for foreign currencies and BB for domestic currencies  Issuing sovereign bonds at the international capital market  Secondary bond market enhanced, Primary Dealer/Market Makers established  Nigeria has a ready-made market with a population of about 150 million  Huge Diaspora population that could be exploited 8 Opportunities for Infrastructure Financing in Nigeria 18 November, 2008

9. There is need for sectoral reforms  Adequate legal framework for concessions  Efficient mechanism for contract enforcement  Establish sound and stable regulatory framework Tariffs must reflect full cost of recovery at a realistic pace, else infrastructure sector subsidy mechanism should be established Policy consistency and commitments to established policies Development of transparent award processes Building and strengthening local institutions Solicitation of support of the World Bank, bilateral and multilateral agencies for project development and financing strategies and capacity building 9 Way Forward for Africa and Emerging Markets 18 November, 2008

10. Europe seen as the yard stick until the recent financial crunch Very low income and modest sized available investible funds Few and in experienced institutional investors Inadequate knowledge of the opportunities Underdeveloped institutions to support offshore investments 10 African Investors and European Opportunities 18 November, 2008

11. Thank You!!! National Pension Commission 174 Adetokunbo Ademola Crescent Wuse II, Abuja - Nigeria +234 9 4138736 – 40 +234 9 8703389 – 9 info@pencom.gov.ng www.pencom.gov.ng 11 18 November, 2008