The global desire for infrastructural development is insatiable especially in an emerging market like Nigeria where there is a growing concern about the state of infrastructure. The World Bank puts global infrastructural need at an estimated $3.7trillion of which only $2.7 trillion is met on an annual basis.
The infrastructural gap in Nigeria is not only large but widening and efforts must be geared towards addressing this deficit. Currently, the country needs about $100 billion in the next 23 years to close this deficit. But the dwindling revenue from Oil means financing projects from public funds only is very unlikely to meet the ever-growing demand for better infrastructure.
Public-Private Partnership (PPP) seeks to leverage private sector investment through a sound, consistent and sustained public sector policy. Hence, PPP is a funding model for a public infrastructure. The public partners are usually governments- federal, states and even local governments. While the private partners could be financial institutions, consortiums of firms, or institutional investors.
PPP applies to any project ranging from simple, short term management contracts to long term contracts that includes funding, planning ,building, operation, maintenance and divesture. Countries around the world are leveraging on this opportunity provided by PPP to either improve on existing infrastructure or construct new projects. Recently, the Nigerian President on a state visit to Turkey was informed of a PPP financed Turkish Airport in Ankara. On completion, it is expected to be the largest airport in the world with 6 runways and 200 million passengers annually. The project is solely financed by the private sector.
Design-Build : This type of arrangement entails the private sector partner designing, and building the infrastructure to meet the public sector partner’s specification.
Operate & Maintain Contract: The Private sector Partner under contract operates a publicly owned asset for a specific period of time. The ownership of such an asset is retained by the public partner.
Design-Build-Finance-Operate: The Private sector partner designs, finances, constructs and operates /maintains it under a long term lease. The private sector partner transfers the infrastructure component to the public sector partner when the lease is up.
Build-Own-Operate: The private sector will provide the finance, build and operate the infrastructure in perpetuity, while the public sector partner’s constraints are stated in the original agreement through regulatory authority.
Build-Own-Operate-Transfer: The private sector is granted authorization to finance, design, build, and operate an infrastructure (charge user fees) for a specific period of time after which ownership is transferred to the public partner.
The Nigeria Story
The Infrastructure Concession Regulatory Commission (ICRC) was established to regulate Public-Private Partnership endeavours of the Federal government. It is aimed at addressing Nigeria’s physical infrastructure deficit which hampers economic development. The Government, at various levels, entered into partnership with the private sector, all with varying degrees of success.
The Federal Government’s cancellation of its agreement with Bi-Courtney for the upgrade and expansion of the Lagos-Ibadan highway in the past generated mixed reactions. Due to its abrupt cancellation, Nigerians have raised pertinent questions on the government’s motives for its action; the lack of full transparency and the legality of the process.
Also, at the state level, Osun State recently announced its “build and operate” partnership agreement with a Turkish firm in for the proposed MKO Abiola Airport located in the state capital under construction. The contract is to span a period of 30 years. Prior to this agreement, the state government had spent N2 billion on the Airport project.
The state is currently struggling to pay civil servants and Pensioners. The state also has a huge debt hanging on its neck due to ambitious and reckless borrowings by the state government in the last 3 years. The viability of such a project in a state like Osun is doubtful. However time will tell if the state has made a right investment.
In evaluating these failures, the public and private sectors need to review processes followed in awarding concessions and how they determined the outcome.
However, Lagos state has taken the bull by the horn in partnering with private investors to provide public infrastructure.
To ensure that available infrastructure is commensurate with the ever-increasing population, and to achieve its vision of making Lagos state an investment destination of choice in Africa, the government embraced the PPP model in accelerating infrastructure delivery, having arrived at the conclusion that its current resources are insufficient to deliver the smart-city dream without augmenting them with private sector resources
PPP projects in the state include but are not limited to:
The 30 year concession granted Lekki Concession Company Limited (LCC) for the design build-operate-transfer project on the expansion of the Lekki-Epe expressway corridor.
The Light Rail Transit System, the Blue Line which is a 27 kilometre rail line from Okokomaiko to Marina. The Lagos State government is to design and build the rail line, while a concessionaire is to operate and maintain the service, including rolling stock. The project has presently generated about 2,000 jobs .
There are still opportunities to generate more jobs through other pipeline PPP projects in the Eti-Osa-Lekki-Epe corridor. Such projects like, the Lekki Free Trade Zone, Lagos Free Trade Zone, Lekki Deep Sea Port, Lekki International Airport which is expected to attract five million passengers annually, and a Hydrocarbon Park.
It is also noteworthy that the Lagos State Government entered into an MOU with a consortium of firms to build the 4th mainland bridge at the cost of N844billion this was terminated due to the slow pace of work by the by the private partners.
Experts are of the view that PPP offers a timely and cost effective alternative approach to financing, building, operating and maintaining infrastructure and that beyond the benefit of mobilising private capital for the speedy delivery of public infrastructure, PPP has a considerable number of other benefits which perhaps is why it is becoming a popular tool for infrastructure finance.
Both the Federal and State governments in the country have also declared their openness to PPPs andput policies and laws to that effect. In fact government intends to use PPP as a tool for up to 40 percent of its infrastructure development. It is therefore important to demonstrate to potential investors that Nigeria is indeed ready and capable of successfully implementing PPPs.
Fikayo Owoeye is writing from Lagos.