The people of Nigeria’s oil-rich Niger delta have yet to see many benefits of the natural resources under their feet. But Rotimi Amaechi, governor of Rivers State, the most populous delta state, is trumpeting the measures he is taking to improve his state’s infrastructural deficiencies. He tells Euromoney that in Nigeria’s federal system, the 36 states get 30% of government revenue, while the nine delta states get additional cash thanks to their importance in the country’s petrochemicals industry.
Port Harcourt
Charismatic 43-year-old Amaechi has scraped together billions of dollars of this cash as well as foreign and private investment over the past few months. The results, he hopes, will be a ring road, a monorail and a 60-storey Hilton hotel, all in Port Harcourt, the fast-growing capital of Nigeria’s oil industry.
The ring road will cost $1.1 billion, 60% of which will be financed by US-based private-sector investors through a mixture of debt and equity. The Rivers State government itself and the Africa Finance Corporation (AFC) will finance the remaining 40%. The AFC, a Lagos-based organization chaired by Nigeria’s central bank governor and similar to the International Finance Corporation (the World Bank’s commercial arm), is leading a consortium of Nigerian banks in providing counterparty funds. Amaechi says work on the road was meant to start at the end of October but the Chinese contractor became worried about rising violence, and more security guarantees have had to be arranged.
The monorail will cost $450 million, 20% of which will be financed by the state government. Also using a consortium of Nigerian banks, domestic private-sector developer TSI will provide the remainder. Work on the 20-kilometre track will begin in January. The Hilton, meanwhile – which will cost $500 million – will be developed in collaboration with Transcorp Hilton, a private sector Lagos-based conglomerate in affiliation with Hilton.
“Rivers State is a priority in Nigeria because that is where the oil is produced,” says Amaechi. Nevertheless, he adds: “The amount of funds the state receives for next year will be reduced because of the falling oil price.”
The Rivers State investments are indicative of the approach that the Nigerian federal government hopes to take to infrastructure financing. Between now and 2050, Goldman Sachs estimates that Nigeria will try to get $360 billion invested in its roads, electricity, telephone system and internet infrastructure.
Goldman Sachs dedicates a large part of a recent report to the different ways in which to play the development of Africa’s infrastructure. One avenue it lists is private equity funds dedicated to investing in African infrastructure.
Fashion models
Foreign direct investment in African infrastructure has surged in recent years, especially from China. One fashionable model is for China to provide interest-free loans if Chinese building contractors are used.
Most investment still comes from the home government and international aid agencies – with the notable exception of mobile telephone infrastructure. However, across sub-Saharan Africa, public-private partnerships are a more common way to finance ports, roads and other infrastructure.
