The Governor of the Central Bank of Nigeria, Mr. Lamido Sanusi, on Wednesday proposed a new banking model that would enable the country to address its infrastructure deficit.

Specifically, Sanusi, in a keynote address delivered at the third Public Private Partnership stakeholders forum in Abuja called for the creation of a new government-owned bank that could raise tax-free bonds to fund projects.

Alternatively, the governor said that the mandate of an existing government- owned bank, such as the Bank of Industry, could be expanded to enable it partake in infrastructure financing.

The bank to be created from the model, he noted, could be financed from funds recovered from the petroleum subsidy removal and equipped with professional and qualified management recruited globally.

He said, “I would like to outline some thoughts on what Nigeria should consider as sustainable way of supporting Development Finance Institutions that could support the financing of infrastructure.

“Nigeria could pursue such a model, whereby a new government-owned bank is created that can raise tax-free bonds to fund projects.

“Alternatively, the mandate of an existing government owned bank such as the BOI could be expanded to enable it to partake in infrastructure financing.

“The bank could be financed from funds recovered from petroleum subsidy removal and equipped with professional and qualified management recruited globally. Funding could be by way of non-callable tier-2 capital, returning a decent rate of return to the ministry of finance.”

In terms of lending, the apex bank boss explained that the bank could lend to projects based on a selection criteria with a moratorium of up to seven years at single digit interest rates repayable over 20 to 30 years.

He added, “However, we could have a requirement where a minimum of 70 per cent of the bank’s portfolio must be invested in hard infrastructure (seaports, airports, railways, power plants), while 30 per cent would be reserved for financing procurement.”

He said since Nigeria required an average of $10bn over the next ten years to reduce infrastructure deficit, there was need for the government to look beyond traditional approaches.

He said, “The current level of infrastructure deficit in the country is perhaps the major constraints towards achieving the national vision of becoming one of the 20 largest economies by 2020.”

Source: Punch/Ifeanyi Onuba