Market News

The Managing Director of Financial Derivatives Company Limited, Bismarck Rewane, has highlighted that concessioning the nation’s major roads currently in poor condition could significantly lower inflation, boost productivity, and stabilise the nation’s struggling currency, the naira. 

Rewane, who spoke yesterday on Channels Television’s “Business Morning” show, emphasised the importance of the Federal Government’s Highway Development and Management Initiative (HDMI).

The initiative aims to attract sustainable investment for road infrastructure development and management through Public-Private Partnership (PPP) models. 

According to the economist, the programme enables the private sector to invest in road infrastructure, with the government stepping back to allow private investors to take the lead. 

Addressing the security challenges along the nation’s highways, particularly kidnapping, Rewane noted, “Kidnapping is low, productivity increase, the cost of transportation which reflects in the prices of goods. So, you would now see the prices of goods begin to come down.” 

Explaining the connection between road infrastructure and inflation, he stated, “Inflation is defined as the persistent increase in prices because of low productivity and an increase in money supply. So, we can take out the money supply by using the MPR (Monetary Policy Rate) and the central bank but the persistent cause of inflation in the country is a reduction in productivity.” 

He further explained that poor road conditions, high transportation costs, and post-harvest losses contribute to reduced productivity. He added that improving road infrastructure would address these issues, leading to a decline in rural-urban inflation disparities.

He said: “Why is productivity reduced? Because when goods are produced, they cannot get to the market and there are post-harvest losses.

“So, you will now begin to see a difference between rural and urban inflation which is reflecting because of this cost of transportation because the roads are bad, post-harvest losses and because the price of petrol was high.” 

Rewane stressed that a reduction in inflation would positively impact the exchange rate.

“There is a strong correlation between inflation and exchange rate weakness – the higher your inflation rate, the higher the volatility and the weakness of your currency,” he explained. 

Under the proposed model, private sector operators would receive concession agreements spanning 25 years. He highlighted that outsourcing road maintenance to private investors would ultimately reduce maintenance costs for both the federal and state governments. 

“He builds the road, maintained it for 25 years and he gives a percentage of his toll back to the Federal Government of Nigeria, in some cases, the states,” Rewane stated 

“When you concession the road to somebody that spends maybe N100bn or N200bn, and guards it with drone technology and central reservation and high barriers, only three or four outlets to get out of the way, it means that you cannot be kidnapped.”

According to Rewane, quality infrastructure results in improved efficiency and lower transportation costs. He noted that reduced transportation costs would coincide with falling petrol prices, allowing goods to reach their destinations more quickly. 

“When a road is well-built, well-maintained, you will enjoy greater efficiency and lower cost,” he said. 

“The records are there, the evidence is clear that because I can get to my location faster, I would rather pay N1,000 or N500 to get there and come back and turn around.”

Comparing travel times, he noted, “Right now, it takes three to four hours to get to Asaba from Benin but it is now going to come down to 45 minutes.”