Continuing the “Inflation in the Face of Bounty” multi-sector series, this article explores the pivotal role of infrastructure, including electricity, transportation, and water supply, in curbing inflation in Nigeria. Despite their crucial contribution to the production of goods and services and overall human well-being, the existing infrastructure falls short of meeting the demands of the rapidly expanding Nigerian population.
Electricity
Nigeria remains the country with the largest number of people without access to electricity. According to the World Bank, roughly 43% of the population experiences an inadequate supply of electricity. Poor quality of electricity supplies, voltage fluctuation, and power outages are only some of the challenges faced by businesses and households, at great cost, in the country. For example, businesses and households spend roughly $22 billion annually to fuel diesel or petrol backup generators, leading to an increase in the cost of production of goods and cost of living. It also costs the country an estimated $26.2 billion annual economic loss and private sector stunted growth due to halted production, damaged equipment, and reduced profitability. Furthermore, data shows that smoke and carbon monoxide from fossil fuel-powered generators affects the ecosystem negatively and leads to roughly 1,500 deaths in Nigeria annually, in addition to health challenges such as lung cancer. A World Bank report has shown that on-grid electricity demand in Nigeria is about 4 – 12 times more than the total electricity distributed on the grid. This significant gap in demand and supply owes to the country’s fast-growing population, and over-dependence on one source of power generation.
Despite being richly endowed with multiple potential sources of electricity, 70.5% of Nigeria’s power generation currently comes from gas (see chart below). There is a growing need to explore other potential electricity-generating sources in the country, particularly renewable sources such as solar, wind and hydro. As electricity demand is predicted to grow by a factor of 16.8 by 2035, fossil fuel-powered generators which generate nearly half of the electricity consumed in the country are neither financially sustainable nor environmentally friendly. Research shows that Nigeria has the potential to generate about 427 gigawatts (GW) of solar power, but its current generation capacity is estimated at 5GW. It also has a total exploitable large-scale hydropower potential of over 14,120 MW, capable of annually producing 50,832 GW of electricity; and about 12,522MW wind energy installed capacity. Exploring these sources will fortify the country’s capacity to provide electricity for its fast-growing population and also contribute to the 2050 global net-zero transition goal.
Transportation
Nigeria is the 7th most populated country in the world, with a projected population that might surpass the United States’ current population by 2050. Despite this fast-growing population, the country has one of the least diversified transportation systems in comparison with countries that have similar population sizes. Data shows that road transportation alone accounts for 90% of the movement of people and goods in the country; while rail, air, water and others share just 10%. However, the United States, China, India, Russia and other countries with equally large population sizes have the largest railroad network in the world. South Africa, the 25th largest country in the world, ranks as the 7th country with the largest railway network globally. Furthermore, the United States, China, India and Russia account for the largest number of airline passengers globally – South Africa also ranks 33rd. This shows that most of the countries with large population sizes like Nigeria have a commensurate diversified transportation system that eases the mobility of people and goods within the country.
Further analysis indicates that having a diversified transportation system can enhance a country’s GDP performance. Countries with diversified transportation systems and large populations like the United States, India and South Africa, record about 8%, 5.5% and 6.5% GDP contributions from the transportation sector respectively. However, the sector only contributes to Nigeria’s GDP by 1.89%. Nigeria’s fast-growing population potentially provides a huge market to generate more revenue through the transportation sector. In addition, building a diversified transportation system in Nigeria will enhance the free flow of raw materials and finished products from producers to final consumers across the country, reducing urban congestion, improving logistic bottlenecks and reducing waste.
Water
Water infrastructure is a broad term that captures the system of water supply, treatment, storage, management, flood prevention and hydropower. Annually, Nigeria generates about 267 billion cubic meters of surface water, roughly 92 billion cubic meters of groundwater, and approximately 1,295 mm rainfall index; but two-thirds of the population, especially the rural population, lack access to safe drinking water. About 77.3% of the population source drinking water from contaminated sources (See the chart below) and nearly 86% of households do not treat the water before drinking. Hence, unsafe water sources account for about 7.34% of deaths in the country, in addition to an estimated 151,700 annual child deaths – making it one of the leading causes of child morbidity and mortality in Nigeria.
The mismanagement of water infrastructure has also resulted in recurring flooding incidents, which have had a detrimental impact on the agricultural sector. Recent data indicates that these floods caused agricultural losses amounting to approximately nearly 700 billion naira, including over 120 billion naira worth of agricultural structures and the destruction of around 863,648 hectares of farmland in 2022. Consequently, the country has been grappling with severe food insecurity and escalating food inflation since the first quarter of 2023.
Nigeria has enough resources to meet the growing demands for electricity, water and transportation in the country. These improvements have the potential to bolster the economy, leading to a decline in inflation and an improved standard of living for the citizens. By ensuring reliable and consistent electricity supply, the production of goods and services can flourish, reducing production costs and enhancing affordability for citizens. In addition, effective management of water infrastructure can mitigate agricultural waste caused by flooding, consequently reducing the number of deaths and illnesses associated with consuming unsafe water. Finally, a diversified transportation system can contribute to GDP growth and enhance the ease of mobility of goods and people.
About the Author(s)
Olayide Oyeleke is an associate at The AR Initiative.
