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By James O. Obakpolor (Mr.) Social Development Department

HOUSING INFRASTRUCTURE IN THE AGE OF SUSTAINABLE DEVELOPMENT: Strengthening National PPP Capacities and Prospects -- Presentation at the BIG5Construct NIGERIA Launch Event. By James O. Obakpolor (Mr.) Social Development Department Ministry of Budget and National Planning,

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By James O. Obakpolor (Mr.) Social Development Department

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  1. HOUSING INFRASTRUCTURE IN THE AGE OF SUSTAINABLE DEVELOPMENT:Strengthening National PPP Capacities and Prospects -- Presentation at the BIG5Construct NIGERIA Launch Event By James O. Obakpolor (Mr.) Social Development Department Ministry of Budget and National Planning, Abuja (FCT) - Nigeria 9th September 2019

  2. Outline 1.0 Preamble 2.0 Public sector overview and private sector opportunities 3.0 Multilateral Infrastructure Financing options -- Strengthening National PPP Capacities 4.0 Prospects for Sustainable Housing Infrastructure Dev. -- Conclusion -- Appendix

  3. 1.0 PREAMBLE • Housing is regarded as one of the most important human needs of every citizen across the world, just as food and clothing. It is very fundamental to the welfare, survival and health of mankind. • Researchers have noted that housing involves access to land, documentation formalities, and other financially backed infrastructure to make the shelter functional, convenient, decorated, pleasant, safe and hygienic. • The delivery of housing infrastructure in the age of sustainable development is synonymous with the sustainable growth and development of cities around the world. • In harmonizing SDGs 9 and 11, the aim is to build innovative and resilient infrastructure, while also making cities and human settlements inclusive, safe, resilient and sustainable; but then these resilient and sustainable cities advocated by the Goals are already plagued by unending congestion, dilapidating social infrastructure, and housing deficit; qualitatively and quantitatively. • Our coming together to deliberate, partner globally, mobilize resources and find solutions to such myriads of challenges is emphasized under Goal 17.

  4. 1.1 PREAMBLE (...Cont’d) • The outlined social issues are aggravated by the fact that most cities in Nigeria and beyond are now occupied by more than 10 million people on the global average. This is further worsened by projections that 60% of the world’s total population will reside in urban areas by the year 2030. • According to the UN Population statistics, the world’s population continues to rise rapidly, by around 65 to 70 million people per year, and Nigeria alone is projected to record over 210 million people by 2020 and beyond. These millions of people in Nigeria desire a foothold in today’s economy, as they race globally to find food, safe water, healthcare, and shelter that is needed for basic survival. • They pursue socioeconomic improvements, including business, and the current housing deficit stock stands at a figure beyond 17 million units and counting, just as the working population bulges to drive economic growth and reap demographic dividends, among other outlooks. • Housing and Construction industry contribute appreciably to the national GDP, generating huge employment, promoting inclusion, increased productivity, reducing crime incidence, alleviating poverty, raising standard of living, among others: (Q1_2019 GDP data coming next..). • Over the decades and since inception, a significant number of housing units have been built through mortgages provided by the Federal Mortgage Bank of Nigeria, and also through initiative projects and programmes of the Fed.Ministry of Power, Works & Housing (FMPW&H). • States, such as Lagos, Kano, Enugu, Kaduna, Rivers, Oyo, Borno, Benue, Edo, Abia, Gombe, Delta, AkwaIbom, Niger, and others have also been making significant strides in the provision of housing units and other infrastructure investments, while data remains classified.

  5. 1.2 PREAMBLE (..Cont’d) • According to the National Bureau of Statistics (NBS), in nominal terms, the Building and Construction sector grew by 58.51% in Q4- 2018, an increase of 39.26% points when compared to the growth rate of 19.25% that was recorded in Q4 2017, and an increase of 5.84% points when compared to its growth rate in the preceding quarter. • Quarter-on-quarter, nominal growth in this sector was 26.41%, while for 2018, nominal growth rate was 40.85%. Furthermore, the sector contributed 5.03% to nominal GDP in Q4- 2018, which is higher than both the 3.58% contribution a year earlier and the 4.20% contribution recorded in Q3 2018. On an annual basis, nominal contribution to GDP in 2018 also improved (4.72%), compared to 2017 (3.77%). • The sector’s contribution to real GDP in Q4 2018 remained relatively unchanged (3.48%) compared to a year earlier (3.49%), but higher than in the preceding quarter (3.01%). The sector contribution to total real GDP in 2018 also remained relatively stable at 3.73% compared to 2017.

  6. 1.3 PREAMBLE (...Cont’d) • According to the NBS, the Building and Construction sector grew by 66.99% in nominal terms (year on year) in the first quarter of 2019, an increase of 58.02% points compared to the rate recorded in the same quarter of 2018. This was also higher when compared to the rate recorded in the preceding quarter. • On a quarter-on-quarter basis, nominal growth was recorded at 10.62%. Construction contributed 6.17% to nominal GDP in the first quarter of 2019, higher than the 4.13% contribution a year earlier, and the 5.03% contributed in the fourth quarter of 2018. • By contribution, the construction sector accounted for 4.09% of real GDP in the first quarter of 2019, higher than its contribution of 4.04% in the same quarter of 2018, and the 3.48% contribution recorded in the preceding quarter.

  7. According to the NBS, the Building and Construction sector grew by 42.80% in nominal terms (year on year) in the second quarter of 2019, declining by –1.28% points compared to the rate of 44.09% recorded in the same quarter of 2018, and by –24.18% points when compared to the rate recorded in the preceding quarter. Nominal growth, quarter on quarter, was recorded at 22.36%. Construction contributed 6.87% to nominal GDP in the second quarter of 2019, higher than 5.47% it contributed a year earlier and 6.16% contributed in the first quarter of 2019. • The real growth rate of the construction sector in the second quarter of 2019 was recorded at 0.67% (yr. on yr.), lower by –7.00% points from the rate recorded the previous year. Relative to the preceding quarter, there was a decline of –2.51% points. Quarter on quarter, the sector grew by 12.12% in real terms, higher (by 10.76% points) than 1.36% recorded in the first quarter of 2019. • The sector’s contribution to aggregate real GDP was 4.45% in the current quarter, which was slightly lower than its contribution of 4.51% in the same quarter of the previous year, but higher than in the immediate past quarter where it contributed 4.09%. 1.4 PREAMBLE (....Cont’d)

  8. 2.0: Public Sector overview and private sector opportunities • Nigeria's substantial infrastructure deficit and lack of competition in service delivery threatened the nation’s ability to achieve some of its national development plan objectives; hence the Millennium Development Goals, along with other global views had to be rolled over as unfinished businesses unto the age of sustainable development and SDGs. • In turning this situation around, the Federal Government of Nigeria prioritized liberalizing the economy and fostering private sector-led growth. The Government’s reform agenda was based, among others, on a series of sector reforms (aviation, telecommunications, electricity, banking and insurance, others) undertaken in the context of a broad economy-wide privatization program launched in 1999. • Building on lessons learnt from the first generation of reforms, the Government’s sought to deepen its next reform agenda by facilitating additional private sector investment in public infrastructure services through public-private partnerships (PPPs) and successive technical assistance and capacity-building programmes. • In 2005, the Federal Government passed the Infrastructure Concession Regulatory Commission Act to stimulate PPPs and private sector involvement. The ICRC was commissioned in 2008 and charged with the responsibility of harmonizing the ministries, departments, and agencies (MDAs) in support of the PPP Program. • The National Policy on Public-Private Partnerships was crafted in 2009 to ensure adherence to best practices and set forth standards by which the Government engaged in PPP transactions. In 2007, the Government passed the Fiscal Responsibility Act to institutionalize prudent management of public resources and standardize public procurement respectively, while also reinforcing its debt management practices.

  9. Despite the adverse effects of the global recession, the Federal Government developed and implemented its ‘Economic Recovery & Growth Plan (ERGP:2017-20)’, which prioritized the provision and rehabilitation of critical infrastructure. The Plan called for increased PPP in service delivery and infrastructure. • ERGP Overview on Construction and Real Estate, Strategy No.20: Stimulate construction by building affordable housing. After a disappointing growth in 2016, construction is forecast to grow at an average of 5.39 per cent in 2017-2020 in the wake of private and public investments. However, the sector continues to be constrained by the high cost of building houses, land, preparation of sites and services, and borrowing. • Social (mass) housing programmes could mitigate these constraints, stimulate general economic conditions and create a large number of jobs. The proposed Family Homes Fund (FHF) is designed to stimulate the construction sector while improving access to social housing. It will operate as a PPP with an expected fund target of N1 trillion, backed by the World Bank. • Improve access to finance for the construction industry, e.g., by fast-tracking implementation of the FHF, to build 2 million housing units by 2020. Work with State governments to invest in vocational and technical training centres to develop skills for local craftsmen. Reposition the Federal Mortgage Bank of Nigeria by recapitalizing it from N2.5 billion to N500 billion to meet the housing needs across Nigeria; among others. • >>See Stakeholders list on housing dev. • Family Homes Funds is intended to support the development of up to 500,000 Homes targeted at people on low income over the next 5 years. In partnership with the CBN, Ministry of Finance and WBG international financial institutions, FHF has become a pivotal force in delivering affordable housing to Nigerians through multiple schemes including Help-to-own, Rent-to-own, affordable and flexible mortgage plans among others. The Fund is essential as it is not enough to supply houses without taking care of the demand side. Its role is primarily to meet affordable housing demands in Nigeria. 2.1: Public Sector overview and private sector opportunities

  10. 2.2: Public Sector overview and private sector opportunities • However, budget shortfalls caused by drops in commodity prices, and lack of credit following the global financial crisis have limited infrastructure finance in Nigeria. Private sector demand for infrastructure investment was constrained by short tenors for finance and the high cost of issuance and trading in the Nigerian equity market. • The Government took remedial action by focusing on (a) development of a viable project pipeline; (b) institutional, legal, and regulatory reform; and (c) instruments to support long-term financing. Even though private participation was buoyed up because of these efforts, Nigeria’s experience with PPPs remained mostly confined to the telecom and transport sectors, and these transactions realized about US$9.2 billion of private investments. • Implementing a successful reform agenda to provide core infrastructure through PPPs required addressing key weaknesses that impede projects and deliverables. These included, in addition to those outlined earlier, coordination and demonstration effect failures. In recognition of these constraints, the Government requested Multilateral Institutions and development banks to support it in developing and strengthening its PPP Programmes.

  11. 3.0 Multilateral Infrastructure financing options • In collaboration with global players, the Federal Government customized tailor-made PPP models to suit different sectors in the delivery of critical infrastructure. • The World Bank Group has been consistent in providing financing facility and technical support for Nigeria’s infrastructure development. In 2015, the WB committed US$3.4 bn to improving access to water, sanitation and agricultural services. • The World Bank Adaptable Program Loan (APL) program seeks to increase infrastructure service levels and quality through institutional development (Phase 1) and PPP financing (Phase 3). These objectives aligned with the 2010–2013 Country Partnership Strategy, which reinforced non-oil economic growth through infrastructure support and the promotion of private sector involvement being supported by the APL Program. • The Nigeria PPP Program was designed as a US$315 million APL to be sequenced in two main phases. A total of US$115 million in concessional World Bank funds was committed for the first phase, and US$200 million was to be provided for the second phase, subject to the success of the first phase. • The two-phase APL Program aimed to assist the FGN in tackling the binding infrastructure constraints that hampered firm productivity and employment generating growth. Project interventions would result in mobilizing increased private investments in infrastructure, leading to improved infrastructure assets and services. • About the same period, China established the Asian Infrastructure Investment Bank (AIIB), and this development bank provided a more reliable means of financing infrastructure projects in countries along One Belt-One Road (OBOR) Corridor. The AIIB provides sovereign and non-sovereign financing for rural infrastructure, agriculture, water supply and sanitation, among others to support urbanization and housing.

  12. 3.1 Multilateral Infrastructure financing options (2) • Africa too was not left behind; The African Development Bank (AfDB) committed about US$1bn to develop supporting infrastructure development in 2015, and in that same year, September 2015, the new AfDB leadership rolled out a new Agenda of the bank, ‘The High 5s’, and this has been consistent with the 2013-2022 Strategy and the SDGs vis-a-viz Light up and Power Africa, Improve the Quality of Life for the people, among others. The High 5s was Africa’s response to the call for global action which tasked multilateral development banks to considerably increase interventions and financial resources to the unreached mass at the bottom of the pyramid, as was resolved at the UN Conference on Financing for Development, Addis Ababa, in July 2015. • Also, the WB Group established the Global Infrastructure Facility (GIF) in collaboration with regional multilateral development banks with Governments of Australia, Canada, China, Japan, Singapore, et al. • GIFwas established in 2014 to mobilize private investments for infrastructure projects and supporting the designing, preparation and structuring of complex viable infrastructure PPP projects to further aid in the coordination of infrastructure stakeholders in emerging markets and developing economies on project delivery. • The $250m Recapitalization of the Nigeria Sovereign Investment Authority (NSIA) expanded its investment focus areas, and enabled it to actualize the incorporation of the Infrastructure Credit Guarantee Company (InfraCredit) Limited, which provides guarantees to enhance the credit quality of infrastructure bonds in financing viable sector projects in Nigeria.

  13. 3.2: Multilateral Infrastructure financing options (2) • Sovereign wealth funds (SWF) operate out of 60 countries, and globally manage US$7.2 trillion. African SWFs represent a small but growing share (20-plus funds) amounting to around US$1.6 billion. They have not yet featured much in infrastructure, though several of them have mandates that favour infrastructure and industrial development. • Innovative financial products for infrastructure African countries can attract new financing into infrastructure either through PPPs or through local and international capital markets. • In the water and sanitation sector, many bilateral donors provide multi-bi funding to the World Bank and AfDB to carry out support to enhance private sector investments. For example, Canada, Denmark, and the Netherlands’ development bank, FMO fund the AfDB’s Water Partnership Programme on awareness raising for integrated water resources management policies and practices among African countries. • Multilateral Investment Guarantee Agency (MIGA, WBG) has been active in providing risk mitigation instruments and services for various investments, including infrastructure. It does so by providing guarantees against non-commercial risks to investors and lenders. Almost all countries are members of MIGA, including 49 African countries. • MIGA’s risk coverage ranges from 3 to 20 years and includes equity investments, shareholder and non-shareholder loans, and loan guarantees. MIGA also provides technical assistance to support governments to reduce policy impediments, attract new investors and implement management contracts and bond issues. In FY2010, infrastructure comprised 21% of MIGA’s global coverage; while Sub-Saharan Africa made up 26% (excluding North Africa); Europe and Central Asia had the most, at 52%.

  14. 3.3 Multilateral Infrastructure financing options (3) • In Europe, the Association for Financial Markets in Europe (AFME) and the International Capital Market Association (ICMA) launched the Guide to Infrastructure Financing (GIF) in June 2015, and it was to meet the readiness and commitments of the European Commission and the European Investment Bank’s (EIB) €315bn proposal for a European Fund for Strategic Investments (EFSI). The Guided GIF aimed to tap into the financial firepower of the private sector by expanding capital markets financing for all infrastructure project types. • The global infrastructure market has been altered by the increasing participation of China, since joining the World Trade Org.(WTO). Through the Forum for China-Africa Cooperation (FOCAC), it plans to take concrete measures and give priority to encourage Chinese businesses and financial institutions to expand investment through various means, including PPP particularly the Build-Operate-Transfer Model, including the Programme for Infrastructure Development in Africa (PIDA) driven by AfDB and the Presidential Infrastructure Championing Initiative to focus on building railroads, ports, water supply, ICT and would eventually support African countries in establishing 5 Transportation Infrastructure Universities, among other laudable Infrastructure investments on the Beijing table.

  15. 3.3.1: Strengthening National PPP Capacities • In Strengthening National PPP Capacities; it is pertinent to note and to commend the World Bank for taking the lead in fortifying management capacities of PPPs to date, as it launched a web-based database in 2015, which is the Public-Private Partnership (PPP) Knowledge Lab < https://pppknowledgelab.org >. The Lab provides quantitative and qualitative data on PPPs and Private infrastructure across the world. In its bid to bridge capacity gaps in PPP management, the WB also launched a Massive Online Open Course <MOOC:<https://olc.worldbank.org> which provides an online learning platform to a global audience. The platform enables a global diverse audience to learn through knowledge and experience sharing. • The Bank also supported countries to strengthen their legal, regulatory, and institutional frameworks for PPP management, such as in Ghana, Kenya, Jordan, Vietnam, Zambia, and others. • In Nigeria, the ICRC also developed a web portal for disclosing information on PPP projects with support from the World Bank through PPIAF funding. The web portal provides key project information from concept to operational stages. This includes disclosure of documents (such as contract documents and feasibility studies), as well as performance information on projects. The portal is a substantial way forward in transparency by the Federal Government, and it is hoped that this PPP transparency initiative sends a strong signal to savvy investors to invest in Nigeria’s infrastructure space. The link to the web portal is http://ppp.icrc.gov.ng

  16. 3.3.2: Strengthening National PPP Capacities (..Cont’d) >>View the links

  17. 3.3.3: Strengthening National PPP Capacities

  18. 4.0: Prospects for sustainable housing infrastructure development • The legal dynamics of sustainable housing development in Nigeria are well established in the National Housing Policy (Amended 2006, 2014) with core objectives that mirror the targets of the relevant SDGs Agenda. The existence of a legal dimension to sustainable housing infrastructure in Nigeria serves as searchlight as well as a legal yardstick for socioeconomic growth and sustainable housing. The long term benefits of such policies also include increasing investor confidence, infrastructural development and employment generation. • Nigeria is open to public–private partnering in the supporting fields of leasing, franchising, concessions, equity and joint venture participation. • Many States in Nigeria are also focusing on facilitating PPP projects, with Lagos State estimating that 70 per cent of its ongoing and planned projects will be in PPP format, according to recent reports.

  19. 4.1: Prospects for sustainable housing infrastructure development • China on the other hand has continued to feature as an important source of infrastructure funding, particularly for large, capital-intensive projects that require long-term financing in Nigeria. For example, it was announced some time ago that Chinese firms would invest US$300m in a mass housing scheme in Nigeria for low- and middle- income workers, among other supporting infrastructure projects, going forward. • In 2016, the Federal Government also nnounced plans to build 5000 housing units for public servants in each of Nigeria’s 36 states with the ‘FISH(Fed.Integrated Staff Housing) scheme’ under the management of a PPP framework. • In other prospects for sustainable housing development, alternative efforts are on, and by way of research and innovation to engage the prospects and challenges of sustainable housing development in Nigeria using selected innovative approach from institutional building technology projects. • The findings indicated that successful implementation of any innovative policy such as sustainable housing significantly depends on the major stakeholders, laws and policy regulations, and access to adequate finance.

  20. 4.2: Prospects (Cont’d)

  21. 4.3: Prospects (Cont’d)

  22. 4.4: Prospects for sustainable housing infrastructure development • A number of challenges are quite familiar among developing economies, such as paucity of funds or financial guarantees, lack of coherent policy framework, constitutional constraints between Federal and States application of development control instruments, and poor state of Research, Innovation and Development (RID) in the country. • Despite the challenges, the prospects of sustainable housing are high considering the fact that the Nigerian Government is currently diversifying from mono-petroleum based economy to others sectors, as evident by renewed interest in using the construction industry, anchored on Alternative Building Technologies (ABT) to diversify the Nigerian economy for improved living standards to eliminate social ills, health issues, improve overall socioeconomic activity, environmental sustainability and other socio-cultural dynamics in Nigeria. • ABT refers to construction methods that differ from mainstream modern architecture by switching to natural building materials (mud bricks, rammed earth, straw bale, etc). It involves eco- and green developments which are designed to minimize energy requirements, and promote sustainability of the environment. • In concluding, it is pertinent to note that Nigeria’s on-going economic recovery will help to maintain stability in the construction sector, despite the challenges identified; and with the macroeconomic climate, finance and the banking sectors are expected to benefit from a global oil price recovery shifts, while private construction investments are likely to increase into year 2020 and beyond, depending on the ingenuity or prowess of the Government’s Economic Management Team and desk leads.

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  29. Thank You for listening, et. Merci beaucoup… ** QUESTIONS / ANSWERS, CONTRIBUTIONS SESSION

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