Road Concession, Toll Gates Will Reduce Inflation, Strengthen Naira – Rewane
Bismarck Rewane, Managing Director of Financial Derivatives Company Limited, stated that granting concessions on Nigeria’s major highways in poor condition will eventually lower inflation, enhance productivity, and strengthen the country’s shaky currency, the Naira.
Rewane is a member of the Highway Development and Management Initiative (HDMI), a Federal Government initiative that aims to attract long-term investment and funding for road infrastructure
development and asset management along federal highway corridors using a Public-Private Partnership (PPP) model.
He explained that the project was the government’s method of clearing the way for the private sector to invest in it.
Rewane predicted a decline in kidnappings, which have become a disturbing occurrence on the nation’s roads.
He stated, “Kidnapping is low; productivity is increasing; and the cost of transportation is reflected in the prices of goods.” As a result, prices of goods will gradually decrease.
Inflation is described as a steady increase in prices caused by low productivity and an increase in the money supply. So, while we can reduce the money supply via the MPR (Monetary Policy Rate) and the central bank, the underlying cause of inflation in the country is a decrease in productivity.
“Why is productivity down? Because things are created but do not reach the market, and there are post-harvest losses.”
“So, you will now begin to see a difference between rural and urban inflation, which is reflected in this cost of transportation because the roads are bad, because of post-harvest losses, and because the price of petrol was high.
“So we have all three variables contributing to lower inflation, and as inflation falls, your exchange rate tends to increase.
There is a clear link between inflation and exchange rate weakness—”the higher your inflation rate, the higher the volatility and weakness of your currency,” he stated.According to Rewane, the arrangement provides private sector operators with 25-year concession deals.
“He built the road, maintained it for 25 years, and he gives a percentage of his toll back to the Federal Government of Nigeria, and in some cases, the states,” he told journalists.
He stated that road maintenance costs would be reduced, benefiting both the federal government and subnationals.
“When you give the road to someone who spends N100bn or N200bn and guards it with drone technology, central reservation, and high barriers, with only three or four exits, it means you can’t be kidnapped.”
“When a road is well-built and well-maintained, you will enjoy greater efficiency and lower cost,” according to the economist.
“The cost of transportation is falling sharply, and this is coinciding with the drop in the price of petrol,” he added, adding that goods would get at their destinations faster.
“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.”It currently takes three to four hours to get from Benin to Asaba, but that time will be reduced to 45 minutes.