Need for lasting solution to infrastructure deficit in Nigeria
The Editorial Board Oct 16, 2020
The recent federal government’s approval of the concession of some non-performing public infrastructure in the country could not have come at a better time than now as they have remained drain pipes to the national purse. With COVID-19 challenges, poor infrastructure all over the country, staggering local and foreign debts standing at $31.477 billion as at June 2020, according to the Debt Management Office (DMO), dwindling crude and crude non-oil revenue and fears of another recession, Nigeria cannot afford to waste public funds on facilities that contribute little or nothing to economy.
It is heart-warming that the government has realised the need for public-private sector participation in rebuilding dilapidated infrastructure as a means of restoring their usefulness and proving needed services to the populace. This is the global practice and our country cannot be an exception.
On Wednesday 7th October, 2020, Federal Executive Council approved three Full Business Cases in respect of the Bonny Deep Water Port Project, the Nigerian Correctional Service (NCS) Shoe and Garment Factories Projects in Aba and the Janguza Tannery Factory Project in Kano, the Portharcourt Industrial Park Project and the Port Harcourt – Maiduguri Narrow Gauge with O&M phase as Concession. The combined investment value of these Joint Venture (JV) projects is $3.9 billion.
FEC also gave approval for the rehabilitation and reconstruction of Port Harcourt – Maiduguri Eastern Narrow-Gauge Railway at a cost of about $3billion dollars. These projects when completed would substantially support efforts of the government for economic recovery from damage caused by insurgency and COVID- 19 pandemic. The concession is facilitated by the Infrastructure Concession and Regulatory Commission (ICRC) in alliance with relevant MDAs.
Suffice it to say that the government has no business been in business. The era when this was the swan song had passed. Countries around the world now embrace PPP as a means of building and sustaining public infrastructure while the government concentrates on giving the citizens good governance, providing security for lives and property and ensuring rule of law and justice for all.
The financial crisis of 2008 brought about renewed interest in PPP in both developed and developing countries. Facing constraints on public resources and fiscal space, while recognising the importance of investment in infrastructure to help their economies grow, governments are increasingly turning to the private sector as an alternative additional source of funding to meet the funding gap.
Indeed, ownership of public assets is a sensitive issue for all governments. However, budgetary shortfalls (as witnessed in Nigeria) as well as the repeated failure of governments all over the world to maintain these assets have forced them to change their attitude towards private ownership of such assets. Thus, concession contracts, through which ownership rights continue to reside with public authorities, have been gaining popularity around the world. Under concession contract, a private partner gets exclusive rights from the government to operate, maintain and sometimes even carry out investment in a public utility for a given period of time. In return, the private party pays either a fixed sum, a percentage of revenue from the utility or a combination of the two to the government for exclusive rights over a facility.
Many European countries such as Austria, Spain, France, Denmark, Greece, Italy, Norway, Germany and Portugal, which embraced concession years ago are today reaping the huge benefits. For instance, Denmark has used toll concessions for two crossings: the “Great Belt”, which comprises two bridges with a total length of 18 km, opened on 14 June 1998, and the Oresund crossing, combining a bridge and tunnel with a total length of 16 km. There are also 26 toll companies in Norway.
In line with global practice, the federal government in 2008 established the Infrastructure Concession Regulatory Commission (ICRC) with the responsibility for the development and implementation of Public Private Partnership (PPP) framework for the provision of infrastructure services aimed at addressing Nigeria’s physical infrastructure deficit which hampers economic development. Between 2017 to date the agency has handled over 155 projects with combined investment revenue of about $18billion.
These infrastructures when functional would provide huge job opportunities for teeming unemployed Nigerians, and create wealth for the nation by boosting the country’s Gross Domestic Production (GDP). There is no doubt that using PPPs as a way of gradually exposing state owned enterprises and government to increasing levels of private sector participation and structuring PPPs in a way as to ensure transfer of skills leading to national champions that can run their own operations professionally and eventually export their competencies by bidding for projects/ joint ventures is the way to go.
To solve the current infrastructure deficit in Nigeria, concession should be seen as a necessity and embraced by not just the federal government but equally state and local government authorities. They should use PPP to resuscitate hundreds of abandoned and non-perfuming projects that litter the environment.