Tuesday, April 22, 2014

House rents, transport fares & the meaning of despair, By Nasir El-Rufai

Published:

Nasir Ahmad El-Rufai

Just when you think President Goodluck Jonathan should have finished settling his political debts to enable him focus on easing the hardships that most Nigerians face simply to remain alive, the man decides that the welfare of Nigerians and job creation are not his priorities. How else can one explain his plan to spend a staggering N2.4 trillion to run government in 2013? Actually, the question should be: Which government?

Broadly speaking, the major functions of government include protecting the state from external aggression, provision of stable legal and social frameworks, delivery of public goods and services, redistributing incomes where needed and stabilizing the economy. Going by that definition, one can safely conclude that Nigeria has no government, despite planning to spend an outrageous N2.4 trillion – the equivalent of some $15bn on itself next year. This is against the backdrop that this year’s budget has barely achieved 30% implementation. In essence, Nigeria is spending 70% of its income on about one million government officials that can only achieve 30% of annually-set budgetary targets.

The absence of social infrastructure is particularly glaring, since this is an aspect that can help create part of the three million new jobs that Nigeria needs annually just to clear the backlog of the rising unemployment. And nowhere is the absence of government more manifest than in the provision of public goods and services, especially in housing and transportation. Thus, even with the new minimum wage, house rents and transportation costs consume about 80 per cent or more of average household incomes in Nigeria.

Across Nigeria, the massive shortage of housing and transport infrastructure mean that in addition to rising food costs (which our government has denied), many Nigerian families spend most of their income on accommodation and transportation. What would be left for other essentials of life? What about healthcare, education, clothing and other basic essentials? It is no wonder that Nigeria remains in the list of top 15 places with the highest incidence of poverty, with over 112 million out of our 162 million people living below the absolute poverty threshold in 2011. It is sad that one of the top crude oil and gas exporters is now ranked the 25th poorest country in the world.

Incidentally, there is nothing new about these figures. What is painfully obvious is that government does not have the right statistics of housing deficits in Nigeria, nor a workable transport sector development strategy under implementation. For example, the Federal Mortgage Bank of Nigeria, recently said the Federal Government would require more than N56 trillion to provide 16 million housing units to bridge the housing deficit in the country. However, assuming that each household has an average of 6 residents, it means that 96 million Nigerians are homeless. That does not sound intuitively accurate.

Another related agency, the Federal Housing Authority of Nigeria (FHA) which has the statutory responsibility of providing housing for Nigerians has only built about 40, 000 houses nationwide since its inception in 1973. This, according to the FHA, has resulted in a deficit of about 25 million houses in the national housing scheme, suggesting that about 150 million Nigerians out of about 162 million in 2011, are homeless – even more far-fetched!.  Which figures do we work with, 16 or 25 million? The figures do not add up!

In order to facilitate the sales of federal government houses in Abuja, we initiated a pilot mortgage which enabled many public servants and other citizens to buy houses. Unfortunately, the plan to mainstream the system nationally was truncated by our successors-in-office. This is why today, the only hope honest Nigerians have of owning homes is through the traditional and tortuous method – self-purchase and direct labour from life savings which is herculean since only a few people can own houses through legitimate sources.  Now that this year’s flooding has destroyed thousands of homes across Nigeria, more Nigerians have been made homeless.

Apart from the massive housing deficits and the exorbitant rents Nigerians are forced to pay, rising costs of transportation occasioned by abysmal infrastructure in the sector is also consuming significant portion of household and personal incomes in the country.

Transportation is critical for economic growth in every country, but due to our poor transportation infrastructure, logistic costs for our goods and services are now typically more than 20 per cent of sales from the global average of 2 per cent. In Nigeria, transport costs alone can be as high as 15 per cent of the costs of goods or services.

Statistics indicate that for many growing economies, the value added by transportation to the economy accounts for 3 to 8 per cent of GDP while employment in transport sector ranges between 2.5 and 11.5 per cent of total paid employment. But in this year’s budget, government earmarked only 6 per cent to the Works, Transport and Aviation ministries combined, without any clear policy to get the private sector incentivized to invest more in the sector. For a struggling economy like Nigeria, intensified investment in transport will not only increase disposable incomes for millions of Nigerians, but also create millions of jobs and stimulate critical sectors of the economy.

In addition, an effective transportation system can have direct and significant effect on the daily lives of our people. Properly targeted and managed investments in transport facilities will mean efficient travel that could save time, fuel and reduce pollution. Lives will be saved and there will be fewer delays and hassles for the average Nigerian.

Efficient highways, rail systems, airlines, airports, harbours, and waterways will not only provide the backbone to grow our economy by moving people and goods around seamlessly, cheaply and safely, it can also employ millions of workers to generate substantial share of economic output in the country. If well exploited, transportation can actually contribute in excess of 10 per cent of our total domestic product annually.

Most Nigerians travel by road because we do not have a functional railway system and air travel is beyond the reach of most (though the fear of our skies has also driven more people back to our death traps on the ground). This has further compounded an already appalling situation. The state of our roads is distressing because of the level of deterioration, volume of traffic and the countless number of fatalities every day. At the moment, only about 15% of our roads are paved and of this, only about 28% can be easily used by motorists.

The excessive number of federal roads which have overstretched available resources and project management capacity of the government are largely responsible for their long construction periods and poor maintenance of existing roads. Yet every Wednesday, the Federal Executive Council awards more roads contracts that cannot be completed, while the legislature introduces more and more federal roads as ‘constituency projects’.

There is certainly the compelling need to rehabilitate our road networks and invest in road widening schemes to increase capacity through increased total lane length. Compared to the Republic of South Africa which has a population density of about 40 persons per square kilometre, with a total road network of about 754,000 kilometres that are well maintained, Nigeria with a population density of about 150 per square kilometre has only 108,000 kilometres of poorly maintained roads, most of which are unpaved. This year’s flooding has washed away important roads, including major arteries, leaving tens of thousands of travellers stranded and communities disconnected.

Why is it that despite having about 8,600km of waterways, Nigeria has been unable to put them to meaningful use? It is worth stating that effective inland water transportation has the potential to make commerce more competitive and our economy more vibrant.

Well structured, the aviation sector can be a key growth engine for our economy. An efficient and modernized aviation sector, with regulations and incentives for the private sector to thrive can make air travel an essential form of transportation, create jobs and economic growth. Nigeria needs to leverage on transport infrastructure development urgently to eliminate the avoidable logistic costs that are up to 50 per cent higher than what is normal for operations in all spheres of our economy. Such a programme would create millions of jobs and open up the entire country to rapid economic and social development.

Government must live up to its responsibility of developing and implementing policies that would strengthen primary mortgage institutions while simultaneously embarking on social housing projects across the length and breadth of Nigeria. It must also invest heavily in public transportation systems like roads, railways, aviation and inland waterways systems. That way, apart from providing urgently needed social infrastructure, the processes involved would create millions of jobs in Nigeria, promote house ownership for families and facilitate the emergence of a middle class which would in turn form the basis of economic development, security and political stability.

Why is government yet to find creative solutions to develop this vital economic artery? Why can’t we find ways to innovatively leverage the three trillion naira pension funds sitting quietly in banks, the sovereign wealth fund and whatever is left of the depleted excess crude account to address these critical infrastructure deficits?.

For now, it remains a tale of despair for majority of Nigerians who go to bed thinking of landlords, estate agents and house rents, with the voice of rickety bus conductors still ringing in their ears, “no change!” Paradoxically, what most Nigerians want and deserve is just that: Change.

Nasir El-Rufai is a former minister of the Federal Capital Territory 

 

GTBank SME MarketHub campaign