Home Finance BMI: Nigeria transport sector needs $100 bn investment, predicts total transport value at $12.8 bn by 2013

BMI: Nigeria transport sector needs $100 bn investment, predicts total transport value at $12.8 bn by 2013

by Business News Report

Omoh Gabriel
Business Monitor International, a London based research institution has predicted that Nigeria transport sector will grow by 6.4 per cent with a total value of $12.8 billion between 2009 and 2013. The body which released its study of the Nigerian transport sector after several discussion with the government and stakeholders over the weekend said “Our conclusion is that total freight volume across the different modes, measured in million tonnes-km, will rise by an annual average of 6.4 per cent in the 2009-2013 forecast period, a little ahead of GDP.
“The total value of transport and communications GDP will rise to $12.8 billion in nominal terms by 2013, representing 3.5 per cent of Nigeria’s GDP, a low proportion compared with the Africa region”.
According to the report Nigeria needs at least $100 billion in the first five years for investments in the various sectors of the economy to generate the a total transport value of $12.8 billion. The report said that in the power “sector $18-20 billion” worth of investment will be required, “the railways, $8-17 billion, roads $14 billion, and the oil and gas sector $60 billion”.
The BMI report stated, ‚Äúwe warn against fundamental risks in the country’s business environment that, unless addressed, will keep many investors at bay. The government said that the $510 billion required for investments in the various infrastructure sectors over the next ten years are necessary if Nigeria is to be considered a leading economic player in the region. Various factors, both positive and negative, support this prediction. Among the positives is the introduction of private operators into the ports sector, as well as BMI‚Äôs view that domestic growth will continue despite lower oil prices.

“Predicted average annual GDP growth across the next five years will be 5.6 per cent. In our view, however, the economy still remains prisoner to short-term oil-price related volatility and domestic risk factors. Among the negatives are the weakness of the Nigerian-flagged merchant fleet, continuing port congestion, corruption, and poor security. We continue to expect road haulage to be constrained as a result of the disastrous state of the road network, although there will be some recovery as privately run toll roads are introduced.
‚ÄúRail freight will also lag behind because of the investment slump in this sector. The central question, of course, is that of financing. The Nigerian daily Business Day reported in July 2008 that Nigeria was planning to attract $600 billion in foreign direct investments by 2020 to bridge the financing gap in infrastructure. Public-private partnerships will be pivotal, but reforms are necessary to attract the private sector for the long term. The country faces several major challenges: endemic corruption, high risks to physical security, and weak enforcement of property rights are highly visible constraints to the country’s business environment. As part of a comprehensive development strategy called Vision 2020, the government has shown commitment to reforming the business environment and turning around the negative investment climate.
“Nigeria has the ingredients necessary to become not only a regional, but also a global powerhouse thanks to abundant natural resources, a young population, a strategic geographic position on the Gulf of Guinea, and a long history of being one of the major power brokers in Africa. That said, for the freight transport industry change will take time. Bearing in mind the more difficult international economic environment in 2009-10, which includes the ending of the oil boom, in our latest Nigeria Freight Transport report, Business International Monitor, BMI concludes that freight traffic across all modes will grow by an average annual rate of 6.4 per cent in the 2009-2013 period.
‚ÄúIn October 2008, Nigeria’s federal government said it estimated that the country would need at least $510 billion-worth of investments in infrastructure over the next decade. BMI is optimistic about the strides the government has been taking to increase the level of private participation in the provision of infrastructure and we anticipate increased activity.
– the government’s announcement of a recovery programme will not boost traffic until after 2011.
Following the catastrophic accidents of late 2005, there are signs of a turn-around following Virgin Nigeria Airways’ relatively successful launch, although there is some uncertainty over the company’s immediate future. We have also held back our projections for pipeline throughput, given the range of attacks on pipeline infrastructure that led to significant cuts in Nigerian crude oil exports”.

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