Editorial Opinion: Public-Private Partnership: Panacea to Nigeria’s infrastructure decay

Public-Private Partnerships (PPPs) have worked in many countries of the world, including Senegal, the United Kingdom, and the United Arab Emirates. These countries have built huge infrastructure and edifices through PPP deals. However, this is yet to work in Nigeria as many PPPs are either poorly structured or locked in legal logjams, confirming that policy makers must act fast to re-instil confidence in private investors willing to participate in such deals, writes ODINAKA ANUDU.

 

Across the world countries are making headway in infrastructure development through the public-private partnership, popularly called PPP.

A public–private partnership, also called 3P or P3, is an arrangement between one or more public and private sectors for the purpose of executive key projects.

Senegal, a small country of 14 million people, completed the 32 km Dakar-Diamniadio toll road in 2013, the first highway funded under a PPP deal. The country also successfully completed the concession of the container terminal at the site of the Port of Dakar, which is currently run under the PPP arrangement.

With a war chest of €575million, the French-speaking West African country is building the Aéroport International De Blaise Diagne, Dakar, through this deal.

Due to the success of the PPP in Senegal so far, the country has slated over 18 priority projects which are to be realised through PPP and has secured funding for them.

These include: Construction of dry port of Kaolack ($60 million); Tramway ($734 million); Iron Ore Project Falémé ($202 million); Second University of Dakar ($200 million), and City of Knowledge ($90 million).

Others are Vocational Training Institutes for ($160 million); University Residences ($ 280 million); reconstruction of the Aristide Le Dantec hospital ($160 million); Grain Corridors ($620 million); Business City ($540 million), and Irrigation, Agriculture for ($178 million), among others.

There are different models in the PPP, which include concession, franchise, build –operate-transfer, build-rent-transfer, and build-transfer-operate, among others.

In concessions private vendors operate on an already existing facility and  are  allowed  to charge  users a fee or toll for  use  of  the facility  within the period  of  the contract.

Under the Build –Operate- Transfer arrangement, private investors access funds to build a public facility/utility, sell the output to the public and transfer at the end of the contract arrangement.

For the Built-Rent-Transfer, private investors build facilities, rent them out to recoup investment, and, thereafter transfer the facility to the authority [government] at the end of contract duration, according to Iyiola Omisore, former deputy governor of Osun State, who holds doctorate degree in Infrastructure Finance with specialisation in PPP from the School of Management, Paris.

Senegal is not the only country in the world that is making progress on the PPP.  Saudi Arabia is reconstructing and expanding its Medina airport at a cost of $1.2 billion under a Build-Transfer-Operate PPP model.  A French company has signed $1.5 billion for the 25-year Power & Water Purchase Agreement for its 6th Independent Water and Power project in Abu Dhabi, capital of the United Arab Emirates.

The United Kingdom has completed a series of projects worth £57.68 billion via the PPP model. These include the cabinet office, ministry of defence, department of health, and the Mersey Gateway, among others.

In Nigeria many projects are also done under the PPP platform. Such include some sections of the Murtala Mohammed Airport, MMA International Airport Road, Lagos International Trade Fair Complex, Tafawa Balewa Square, Lagos – Ibadan  Expressway, Narrow Gauge Railway Concessions (Brown Field), four inland ports located at Baro, Lokoja, Oguta and Onitsha.

Others include Kirikiri Lighter Terminal 1 & 2, the National Theatre, 33 silos, the Second Niger Bridge, small and medium hydro power, and 20- storey Twin Tower Buildings for the Debt Management Office, among others.

However, the twist is that many of these PPP schemes are either locked in legal logjams or in out-of-court disputes.

For instance, findings show that in the case of the Lagos International Trade Fair Complex, some sections were excluded from the concession.  According to Aminu Dikko, director-general of the Infrastructural Concession Regulatory Commission (ICRC), some details of the deal were not known by the concessionaire.

In terms of the Tafawa Balewa Square, the Federal Government during the Goodluck Jonathan administration agreed for a concession, but that needed to be approved by the then Lagos State government. This didn’t happen owing to unclear reasons.

The Federal Government and Bi-Courtney are still fighting locked in legal battles over the Murtala Mohammed Airport.

It also suffices to say that the Lagos-Ibadan Expressway, one of the most important roads in Nigeria today, did not work in the past owing to familiar issues. The FG agreed a concession with Bi-Courtney in 2009 but suspended it mid-way on non-performance. The Federal Government later terminated the contract. Bi-Courtney was to finance the project and recoup its money through tolls, but this didn’t happen, according to checks.

Moreover, the 33 silos are yet to be fully handed over to their concessionaires.

Currently, a concession was contrived to develop 65 hectares of the 134 hectares fallow land around the National Theatre, which are supposed to include a five-star hotel, office buildings, leisure park, shopping mall and multi- level car park, according to Dikko.

A company known as Topwide/APEAS emerged the preferred bidder. Negotiations have been completed and FBC Certificate issued by ICRC in March 2016. However, a court case by an interested company is stalling presentation of the project to the Federal Executive Council for approval.

All these paint a gory picture of several PPPs in Nigeria and underscore why investors do not have confidence in the country.

“At a point Nigeria is short of funds, only a partnership with the private sector through the PPP can save it now,” said Onyika Ibe, an infrastructure analyst based in Abuja.

Nigeria is badly hit by huge infrastructure decay and deficit estimated at $300 billion. With dollar crunch, economic recession and empty treasury, Nigeria has no option than to take PPPs more seriously, say experts.

Iyiola Omisore, who is also one-time senator of the Federal Republic of Nigeria, said outside of Lagos State, a cursory survey of the infrastructure procurement by state governments shows the old model of contract awards to private firms to execute projects designed and financed by governments. Thus, on the average, Nigeria has fared, rather poorly, especially in view of the country’s need for requisite infrastructure for nation’s potential developmental capacity, Omisore said.

Speaking as a guest speaker at the 2016 African Engineering Conference, organised by the Nigerian Society of Engineers (NSE) in Uyo, Akwa Ibom State, Omisore said a segment   of  the  public  service operators sees  the  private  sector   concessionaires   as the  enemies that  would deprive   them  of  their  jobs, and must   be overcome at  all costs.

“And this  is  often  achieved  when  some  extant  rules in  the civil service are  exhumed  to  advise  the government   on  why all  of  a PPP undertaking,  or some  aspects of  PPP  project  agreement  should  not be  honoured, thereby  leading  to government unilaterally rebidding on contracts voluntarily  entered. Moreso,  with a  weak  legal  framework, under which concessionaires can be protected, the tendency is for the  private  sector operators, both from within and from outside of the country, to be wary  of doing business with government.

Thus, timely procurement of public utilities suffers and the socio-economic development and the country is the worst for it,” Omisore said, in his presentation, titled, ‘Nigeria’s Infrastructure Deficit:  Beyond The Limitation of Finance In Public Private Partnership and Project Procurement Options’.

According to him, the critical point is that Nigeria’s crisis seems compounded by the integrity profile of its legal framework for an ideal PPP model, despite the  seeming shortage of investable funds in the international market.

He suggested that the apex bank should make concerted efforts to offer assistance to commercial and industrial banks to enable them offer financial skills required in PPP management.

Explaining some of the critical factors affecting successful implementation of PPP model, Omisore emphasised that “it is important that we do not gloss over the political and cultural issues that often constitute major disincentives to public procurement, via PPP arrangement.”

“One of the issues is absence of political will on the part of an administration to see through the policies of a previous administration,” he said.

“And  because   concessionaires  are  aware  of  a negative   tendency  by  a new  administration   not  to honour, to  the latter, all the tenets of an arrangement  by a departed  administration,   they  are often inclined to speed up the commissioning of projects before the date of departure  of a  sitting  administration,  with avoidable increase  in the cost  of project,” he stated.

“Yet, except  there  is a  determination  that a PPP succeed,  there are offer  sufficient  vested  interests   in a  country,  especially in a multi-faith  and multi-ethnic country  like  Nigeria  to  ensure  that  the  governments initiative  to  promote PPP  as  a  policy  fail,” he further said.

“Thus, timely procurement of public utilities suffers and the socio-economic development and the country is the worst for it,” he lamented.

http://www.businessdayonline.com/public-private-partnership-panacea-to-nigerias-infrastructure-decay/

 

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