| By Charles Okeke |
CHARLES OKEKE, professor of Economics, writes that providing infrastructure constitutes an integral part of a functioning government and not something a politician has to promise to do, if elected. He posits it is his or her duty to do so and that to promise to do that is, at best, political fraud since a government that provides infrastructure improves the lives of the citizenry of the country
I WILL start the discussion on the topic of infrastructure with an appeal to our lawmakers and everyone whose official duties, to our people, require taking an oath or pledge to carry out his or her duties to the best of the abilities they possess. When your people voted for you in or when you were appointed to your current position, a great deal of hope was placed in you that your action while in office will uplift Nigeria and Nigerians and not degrade them. Have you lived up to that expectation? If not, it is time for you to change. A country is judged on how it is able to provide the basic necessities of life to the citizenry. Before you read any further, I would ask Nigeria’s public officials to look up the meaning of the words “Conscience” and “Integrity.” Some politicians and civil servants have squandered a lot of money meant for infrastructural development and upgrade in the power sector. Billions of dollars or their equivalent in Naira have been spent and the country has nothing to show for expenditure.
There is so much to be done in many aspects of our economic life that unemployment should not be an issue, but it is and getting worse. We only have to think a little bit out of the box. We have to promise ourselves to not accept inferior state of affairs in everything we do. We are better than that and our people deserve better. If we wait for other people to do it for us, we are going to wait for a long time. If Burkina Faso, a very small and poor country could engage their people lay miles of railroad tracks without outside help, why not us?
The celebrated poet from the city of Bccherri at “the edge of one of the cliffs of Wadi Qadisha” asks the question of those who profess to lead: “Are you a politician who says to himself: ‘I will use my country for my own benefit’? If so, you are naught but a parasite living on the flesh of others. Or are you a devoted patriot, who whispers into the ear of his inner self: ‘I love to serve my country as a faithful servant.’ If so, you are an oasis in the desert, ready to quench the thirst of the wayfarer.”
The importance of infrastructure in a nation’s development has been studied, documented, and presented on various fora by scholars, policymakers and economists. Politicians of all hues have also joined the chorus singing about the crucial role of infrastructure in a nation’s transformation. Yet, when something goes into general usage, it becomes so commonplace that it ceases to generate the same level of passion or attention that it did before. However, it is gratifying that the subject of infrastructure continues to be in the forefront of our national discussion, although many Nigerians are beginning to accept that infrastructure, as we shall soon define, will never be provided no matter the amount allocated to it.
Infrastructure has always been defined in various ways, but generally would include, in some fashion, physical (and now digital) systems that are needed to provide transportation, electricity, sewage, water and communications. A word worth noting is “systems.” We could define a system as a set of interconnected parts, which together forms a complex whole. Examples would include roads, sewage, electricity and more.
A moral philosopher, Adam Smith, in a book published in 1776 called An Inquiry into the Nature and Causes of the Wealth of Nations carved out specific roles for government among which is the provision of infrastructure. So, providing funding and making sure that road networks and water systems are provided for the populace would constitute an integral part of a functioning government. It is not something a politician has to promise to do, if elected. It is his or her duty to do so. To promise to do that is, at best, political fraud. A government that provides infrastructure improves the lives of the citizenry of the country. In effect, governments that do not provide infrastructure cheapen the lives of their peoples. We owe it to ourselves, to our people, to Africans both on the continent and the diaspora, and ultimately to the Creator to be the best we can be. One out of every five Africans is a Nigerian. Africa is neglected because Nigeria remains a clay-footed giant.
Why is infrastructure important for any nation?
A modern powerful state requires dependable infrastructure. This is why a good government should have a carefully planned, well-designed and effective infrastructure provision and maintenance policy. WaterAid Nigeria recently reported, “In Nigeria, around 45,000 children under five years old die every year from diarrhea caused by unsafe water and poor sanitation.”Infrastructure is an investment that helps the society function better. Better communications systems help the law enforcement agencies to provide security. Efficient water and sewage systems are necessary to guard public health. On November 21, 2016, issue of The Guardian, the editorial opinion section underscores the point with the following title: “Avoidable deaths from unsafe water.” Dependable power supply ensures that our industries are providing goods for the country’s populace. We now know that these systems are a necessity for well-functioning societies, but they do cost money to provide. How do we generate the funds to do this?
In 1997, Professors Robert Hall and Charles Jones studied the levels of economic activity across countries and reported their findings in one of that year’s editions of the American Economic Review. They reached a very significant and important conclusion: “Differences in the level of economic success across countries are driven primarily (emphasis mine) by the institutions and government policies (or infrastructure) that frame the economic environment in which people produce and transact.”
During President Olusegun Obasanjo’s administration and after, it was widely reported that billions of dollars were spent in an effort to provide electricity for Nigeria. Yet, it was futile as Nigerians are yet to see any improvement in the power sector. Many businesses continue to run on stand-by generators. It is for this reason that I got nervous when I read that the Muhammadu Buhari administration was considering obtaining foreign loans to fund the nation’s infrastructure. Here we go again, I said. Nobody was ever held accountable for the missing or misappropriated funds. Without proper accounting of the nation’s book, there will always remain a cloud of distrust with respect to motive. Transparency must be taken seriously at all levels of the Nigerian government. People with questionable or dubious character should not be seen anywhere near the place public money is being discussed. While loans are legitimate means of financing infrastructure development and upgrade they are not the only way. All the options will be on the table, debated by the legislature with expert opinions entertained to boot.
Infrastructure as Pure Public Good or Is It?
Infrastructure development and transformation have been funded publicly, privately or through public-private partnerships (PPP). The financing could take one or a combination of these methods: Loans, Equity, International Investors or foreign direct investment (FDI), and Public/Private sector and dyad or Public Private Partnership (PPP) and Taxes. One of the overriding reasons we, economists, opt for public funding of infrastructure is that the price we pay for anything should reflect all the benefits and costs associated with producing it. When the price fails to account for all costs and benefits, we say that there is a market failure. How we classify infrastructure in Nigeria will dictate the kind of financing arrangement the country will adopt.
In economics, there are goods which are referred to as pure private goods. An example is your car or your bicycle and other things you purchase for your own consumption or gifts to someone. With such goods, those who are unwilling or unable to pay for them would be excluded from getting them or denied the benefits of using them. When someone gets them, others are effectively denied access to them. On the other hand, there are goods where it is impossible to exclude those who are unwilling or unable to pay from getting the benefits of such goods. Such goods are referred to as pure public goods. Defense is an example. Our use of such goods would not prevent others from using them. In a good society, defense is provided for everybody. There are also other goods with the characteristics of both public and private goods. Such goods are referred to as quasi-public good. Pure public goods are collectively funded through taxes. An example is defense which is public without access. The reason for using taxes is that some people might say that they do care for it and therefore would not want to pay it, but when the good is provided they will use it because they know that they will not be prevented from using the good. So, they would use the good without paying for it. This creates an issue that is called the free-rider problem.
Having cleared some of the classificational fogginess about different types of goods, where does infrastructure fall into? The answer depends on the category of infrastructure you are looking at and the state of available technology. This will be analyzed in more detail in our future discussions.
How Does the Country Pay for the Infrastructure Improvement?
As a starting point in our discussion on how to pay for infrastructure, I point to a report published in 2015 by The Organization for Economic Cooperation and Development (OECD) titled Infrastructure Financing Instruments and Incentives. It came out of the G20 Finance Ministers and Central Bank Governors project to come up with “Market-Based Instruments and Incentive to Stimulate Long-Term Investment Finance.” The report aimed to stimulate re-direct funds to infrastructure investment. The takeaway from the report is that there are many ways of financing infrastructure. It also acknowledged that traditionally, infrastructure investment was accomplished through public funding. However, increasing government deficits around the world have made that option less and less plausible.
Be it as it may, Nigerians get nervous whenever foreign loan is mention, and rightly so given the experience of recent past. If the country had managed its revenues well, it would not be in this predicament. People remember so well the debt- burden which the country carried for so long and the deleterious consequences it had for our economy. Since the burden of long-term debt is often passed on to the next generation, we owe them the obligation of making sure that they would enjoy the benefits of such financial encumbrances. This requires, at the minimum, that the money borrowed is used for what it is intended and not recycled into foreign bank account of some government official(s). The nation is then left holding an empty bag.
If we must borrow money for infrastructure, we have to be concerned with transparency. The same concern I raised in a column in this medium I will raise again. Personally, I am not opposed to Nigeria seeking to obtain foreign loans for infrastructural development and upgrade, but it must be targeted loan that is negotiated in plain view. Since the whole country will have to carry the burden, it behooves us that the decision must not be made by one branch of the government, unless authorized to do so, unless the Constitution allows that. The importance of infrastructure has not been, and should be, communicated well to the public. The country will not develop and transform without dependable power supply.
Infrastructure planning goes beyond the act of building the infrastructure to include maintenance, to guarantee reasonable useful life. If not, the country is stuck with shoddy or substandard work. The companies, usually private, awarded the contract of building the roads should also be required as part of the contract to guarantee a given number of years of problem-free usage. Any damage to the construction within the warranty period should be repaired by the contracting company without any cost to the government, be it Federal, State or Local. Infrastructure planning should also involve educational planning and training to prepare individuals who will take part in the construction, maintenance and monitoring and future upgrades.
Of course, borrowing is not the only way to raise money for infrastructure development. Money could be generated through some revenue raising enhancing opportunities, such as user fees, taxation. However, it is not a wise economic policy to raise taxes when the economy is in recession.
Opportunities for Continuous Learning via Seminars and Conferences
Infrastructure design, set up and operation require general and specific technical and engineering knowledge anchored with practical experience beyond the textbooks and classrooms. This is where international seminars and conferences come in handy. These are not for shopping trips, but opportunities to interact with peers and leaders in the field, with the aim of leveraging and synthesizing their knowledge to better your own environment.
Since these conferences do not come cheap and we all face budget constraints, not everyone who wants to attend should. Ideally, selection should be based on merit and not on friendship or relational propinquity. Skill and ability, knowledge base, and capacity to absorb a large amount of information and convey that to others should be on top of the criteria for selection.
Upon return, those who attended conferences and seminars should, within a reasonable period, organize intra-seminar to inform others who were unable to attend about the information gathered and how they would help in the present and future work assignments and projects. The seminar and conferences, even when theoretical, must have practical import. The selected attendee(s) must show how the information gathered from such attendance will inform and improve the way things are done.
I hope those in charge of the units from which seminar participants and conference attendee(s) are selected are not only knowledgeable and competent, but also ethical enough to make the selection decision based on merit. If the person is unsure and his/her own skill-set, then they should quickly step aside and not make the decision. In the interim, the affected individual should be honorable enough to set up a committee to make selection decision.
My purpose here is to start a discussion on the issue of infrastructure as a sin qua non for national development and transformation. It was not intended to prioritize the infrastructure, but rather to make a case that infrastructure is welfare improving for the society as a whole. Specific infrastructure and specialized educational, technical as well as particular funding requirements will be taken up in future discussions.
Prof. (Dr.) Charles Okeke was born in Nigeria. He attended St. Joseph’s Secondary School, Awka-Etiti and earned Grade I in the West African School Certificate Examination after which he attended St. Patrick’s College, Asaba. He is currently a professor of economics and statistics in the department of social sciences and the dean of the School of Education, Behavioral and Social Sciences in the Nevada System of Higher Education’s largest Campus. His areas of interest and research include Health Economics, Macroeconomics, Development Economics, Monetary Economics and Labor. He served as the chairman of Department of Social Sciences from 1993 – 2003. He obtained the Bachelor of Business Administration in Economics from University of Wisconsin, Whitewater, a Master’s degree in School Business Management from University of Wisconsin, Whitewater, Master’s and Doctor of Philosophy degrees in economics from the University of Wisconsin, Milwaukee. He is an expert in wealth protection and intergenerational transfer of wealth. He holds Life, Health and Fixed Annuities licenses in multiple states in the United States. He has authored and co-authored numerous public interest articles as well as academic papers such as “Enterprise Zones and Community Revitalization: A Wish or Reality?” “The Wealth Gap: The Continuing Dilemma,” “Employment and the New Economy,” “Why Is the Cost of Health Care Rising So Fast?” “Unskilled Labor and the International Trade’” “Health Insurance Coverage, Medical Events, and Bankruptcies,” and most recently, contributed a chapter titled “The Integration of Africa: Commodity Based Industrialization Examined,” was released last Summer in Private Sector Development in West Africa, Diery Seck, Ed. (2015) (Springer Scientific Publishing). He has also served on numerous boards such as, International Journal of Economics, Business & Finance (Editorial Board Member) & Scientific Journal International Review Board, (2008 – Present). He was a board member of Las Vegas-Clark County Urban league and later served as its consultant. He is a member of the Knights of St. Peter Claver and 4th degree member of the Knights of Columbus. He is member of Nigerian Association of Las Vegas where he served as the founding secretary. Dr. Okeke also holds memberships in the International Health Economics Association, American Society of Health Care Economists, Western Economic Association International and the American Economic Association. With over two decades of experience in Higher Education internationally, he is a highly sought after speaker on various policy issues.
— Nov 28, 2016 @ 01:00 GMT