Sustainable Funding and Management of the Road Sector

 
By Eze Onyekpere

The inadequacy of road networks in Nigeria has become a major highlight of our poor and underdeveloped infrastructure. Experts, including everyday Nigerians, have noted that roads are poorly maintained; there is poor rural access and interchange facilities; poor road complimentary facilities and some areas totally lack motorable all season roads. Again, road development seems uncoordinated, the designs are poor and do not take cognisance of changing climate patterns and are therefore vulnerable to extreme climate events. Funding is poor and comes in an undulating manner; and due to corruption, the cost of building or maintaining roads in Nigeria is one of the highest in the world.

In the last couple of days, the Federal Government has been literally celebrating the successful issuance of N100bn Sukuk bond and its over-subscription by investors. It is an ethical bond stated by the promoters to be geared, inter alia, towards the diversification of government funding; to fund the construction and rehabilitation of key infrastructure projects; and to achieve a higher level of financial inclusion.  Essentially, it is a loan with a seven-year tenure due in 2024 at a return of 16.47 per cent; the initial investments and the resulting interest must be returned to the investors.

The target infrastructure for this bond is federal highways. Specifically, sections of the Ibadan-Ilorin Road (Oyo-Ogbomoso Section); Enugu-Port Harcourt Expressway (Enugu-Lokpanta); Kaduna Eastern Bypass; Kolo-Otuoke Bayelsa Palm Road (Yenegwe Road Junction); Kano- Maiduguri Road (Potiskum-Damaturu) and bridge works over the Loko-Oweto Bridge over River Benue. The first thing to note is that the road projects were shared across the six geopolitical zones and the funds will be invested, not for the rehabilitation of the full length of the roads in question but just for sections of the roads. This development raises so many posers. Are these the most important roads carrying more traffic in terms of passengers and freight across these geopolitical zones? Where would the funding for the rehabilitation of other sections of these six roads and bridges come from? Where will the funding for the repairs and rehabilitation of other roads and bridges not listed above come from? Is this method of funding a sustainable option for funding road infrastructure – is the interest rate realistic and sustainable? Can this methodology be applied across board?

It is imperative to note that this is not the first time that Nigeria sought to raise funds through bonds and other means of borrowing and it will not be the last. But when government is raising funds to improve a sector, it must do so as a last resort after exploring all other options of raising money through internally generated revenue including user charges, levies and other reasonable taxation. In the road sector, the country is not short of ideas for the sustainable management and funding of the sector. Case studies have been done by the Bureau of Public Enterprises, development scholars and available literature of what is applicable in other developing countries. A combination of public private funding and management is imperative for the sustainability of the road sector. From the National Economic Empowerment and Development Strategy of the Obasanjo administration to the Transformation Agenda of the Goodluck Jonathan government, the idea of a Road Authority and a Road Fund has been embraced in government policy papers. The Economic Reform and Growth Plan of the Buhari administration states of its agenda for the road sector inter alia to “complete the road sector reforms to establish a Road Authority and a Road Fund to enhance best world practice in the administration of road network development and management in the country.”

Enter the Road Fund Bill which was introduced into the legislature in 2011 and another version of it has stalled in the current National Assembly. The bill addresses the issue of funding of road projects. The objective of the bill is to create and sustain a pool of funds dedicated to financing, rehabilitating, repairing and maintenance of federal roads and enhance sustainable development and operation of the federal road network.The sourcing of revenues for the Fund will include fuel levies of about five per cent of the pump price of fuel; grants and loans from the Federal Government for road rehabilitation, repairs and maintenance; fees, charges and interest payable to the Fund; vehicle import tax; fines and amounts collected by government under the Federal Highways Act; toll fees on federal roads; sums of money coming from annual appropriation; and monies coming from the Sovereign Wealth Fund. The fuel levy will be shared between the federal government and the states in a 40 per cent – 60 per cent ratio.

The Fund will be managed by a Board which shall have powers to collect all monies and other dues payable to the Fund; to administer and manage the Road Fund; recommend collection of such fees and charges including toll fees for services and benefits in relation to the use of roads vested in or entrusted to it at such rate, and in such manner as may be prescribed; and formulate integrated annual programme for rehabilitation, repair and maintenance of the roads giving priority to core road networks. Other powers include to provide funds to the road agency for such rehabilitation, repair and maintenance of the roads; develop and monitor key performance indicators for the core road network; approve road programme proposals from road agencies seeking funding from the Road Fund, subject to the agency prioritising its programme on a cost benefit basis; recommend improvement of arrangements for collecting road user charges to minimise avoidance and evasion; and recommend to government, from time to time, appropriate levels of road user charges, fines, penalties, or any other sums to be collected and paid into the Fund; etc.

From the foregoing, it is clear that successive governments have not summoned the political will to do what their policy positions state. There is inherent lethargy and inertia that make governments continue to run away from long term solutions to challenges. Rather, the ad hoc mindset rules programming, creating a disconnect between policy, planning and budgeting. The end result is very poor roads that record high levels of accidents and fatalities, slows down business transactions and creates fiscal challenges in terms of debts that are not sustainable.

The roads selected above may be important but they are not the most important as other federal roads carry tonnes of thousands of passengers and freight on a daily basis. Federal and state roads are not just in a poor state, but in disgraceful conditions of disrepair. The federal and state governments have no idea(s) and have made no proposals of where the funding for the rehabilitation of other sections of these six roads and bridges will come from. They also have drawn blank on where the funding for the repairs and rehabilitation of other roads and bridges not listed above will come from. Paying over 16 per cent interest rate every year on a bond is not sustainable and is an agenda for a government looking forward to insolvency and bankruptcy.

In sum, who exactly is afraid of a Road Fund or Road Authority? Why is it so difficult to do the right things? What is the agenda of the Buhari government in the road sector? Must we continue to “wobble and fumble” even in the roads sector?

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