Closing Infrastructure Gap: PPP Way to Go
Despite federal government’s efforts at closing the infrastructure gaps with the development of the National Integrated Infrastructure Master Plan [NIIMP], and the establishment of an Infrastructure Delivery Coordinating Unit (IDCU) by the National Planning Commission, to serve as a central, specialised unit to coordinate delivery of infrastructure priorities and initiatives, Nigeria remains a poor infrastructurally developed nation.
With the congested state of the Nigerian roads, clogged ports, antiquated air traffics system, poor electric power supply among social amenities failure, and low budgeting, Nigeria is unarguably going through serious infrastructure deficit.
The aforementioned coupled with low investment in the education and health sectors have continuously put Nigeria behind in the scores of emerging economies in the world. These are just a few of the manifestations of an infrastructure deficit that is undermining our economic efficiency and lowering our quality of life.
Recently, a World Bank report stated that for Nigeria to fill its infrastructure gaps, an annual expenditure of $14.2 billion would be required for the next 10 years. The former Nigeria’s coordinating Minister of the economy Dr. Okonjo Iweala under the Goodluck Jonathan Presidency, alluded to this at a Public Private Partnership Stakeholders workshop organised by the Africa Development Bank (ADB), in Abuja. Dr. Iweala stated that $14.2 billion would be needed yearly to fund infrastructure and the federal government is expected to provide $10.5billion. But according to her, the present Nigerian government is expending $6 b illion leaving a huge deficit.
The infrastructure deficit is the result of a steady decline in government infrastructure spending, combined with a steady increase in the cost of building additional infrastructure. This national deficit is likely to grow as state and local governments, which account for a growing share of infrastructure spending, face budget cuts.
According to researchgate.net, “modern and efficient infrastructure is no doubt the bedrock of developed economies all over the world. Such countries did not arrive at their robust economic development by chance but as a result of continuous investment and overhauling of the existing ones over time. Nigeria has failed over the years to invest in its infrastructure. Consequently, the economy has remained on its knees precipitating poverty, unemployment, insecurity, low foreign direct investment, diseases, high cost of living, low life expectancy, etc”.
Since the advent of globalisation, much promoted by internet technology, the world, outside of its southern hemisphere, the era of government, at every level of nation’s political economy, being solely responsible for the total conception, financing and management of public projects, has since ceased to be the norm.
Today, there has been much and involving contractual relationships between the public and the private sectors of the polity in the procurement of public utilities under an arrangement known as public private partnership [PPP].
Experts have expressed optimism of fixing the Nigeria’s infrastructure deficit through Public Private Partnership, provided the government is sincere and purposeful without political influence. PPP has proved successful in majority of countries where it has been applied.
Although, PPP is seen as new and novel initiative that has come on stream in the last 25 years, the idea, historically, has not been absent, since governments, as authorities of states, have as a matter of social contract, had to procure utilities for the people, hundreds of years back.
The reality is that the private sector has always been involved whenever it has become necessary for governments, or their agencies, to provide public services for their people. The arrangement prevalent in most societies is the design and finance [by government], build and deliver [by private contractors] and manage [by government].
Hitherto, before PPP became the norm, this was the arrangement by which roads, railway, electricity and water services were provided, the world over.
Whereas, countries outside sub-regional Africa has had a major paradigm shift in public procurement, countries within the sub-regional African continent, Nigeria inclusive, are yet to avail themselves of the opportunities and advantages in the provisions of public services and utilities, as offered by the PPP model, for their peoples, thereby expanding the scope of their socio–economic developments.
While it is recognised that the PPP model has been deployed to execute a few public projects in Nigeria, its utility value has been mostly felt in Lagos state where the authorities have partnered with private sectors for design, finance and management of public utilities. Even then, the projects involved are hardly ones that can recommend themselves to a sustainable management status under an ideal PPP model.
Outside of Lagos State, cursory survey of the infrastructure procurement by state governments is still largely tied to the old model of contract awards to private firms to execute a project 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
The critical point to be made here is that, though, there seems to be shortage of investable funds in the International Market, but Nigeria crisis seems compounded by the integrity profile of our legal framework for an ideal PPP model.
According to Engr. Iyiola Omisore Phd. “the Infrastructure Concession Regulatory Commission [ICRC] Act of 2005, the Public Procurement Act 2007 regulations issued by ICRC governing the PPP process and various state laws as described in each State’s PPP policies falls short of necessary regulatory framework for proper implementation of PPP projects, most importantly with respect to dispute resolution during the tenor of the contract.
“Yet, 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”.
PPP has become a generic term to describe plethora of contractual business relationships and management indices between governments [national, state and local, including their respective agencies] and private sector- that may be promoters and financing Institution, i.e. banks.
In some PPP model, project financiers [banks] may be part of contractual arrangement as investors, thereby part of the risk-sharing, with a view of participating in the accruing profit and also losses from such business undertakings.
“It suffices, however, that this arrangement is not popular in ideal PPP model for public procurement, as some financial regulations preclude banks committed to the procurement of public infrastructure, from getting involved in business ventures beyond their statutory function of managing public funds,”. Senator Omisore clarified.
The regulatory agencies of government should as a matter of urgency re-examine this regulatory limitation that preclude banks from engaging in business venture.
Government must also create a conducive environment for PPP
to thrive. Agreement must be a binding bond with legal and policy framework
that will enhance its success and suitability in Nigeria.