HAND IN HAND

Nigeria 2015 | ECONOMY | FOCUS: PUBLIC-PRIVATE PARTNERSHIPS

The federal government increasingly uses public-private partnerships to tackle the nation's infrastructure deficit.

As Nigeria is faced with a huge infrastructure deficit, the federal government is prospecting ways to reduce it and boost the economy. Since infrastructure serves as the bedrock of a nation's economic growth, it is imperative that the government finds a way to accelerate funding and improve the delivery of important infrastructure projects that will stimulate Nigeria's infrastructure development. The government has identified public-private partnerships (PPPs) as the most viable solution to achieve this end. As a result, these partnerships, in which private-sector companies assume part of the financial, technical and operational risk of public-sector projects, have been increasingly utilized by the government in recent years.

Projects such as the Lekki Deep Sea Port, the Lagos-Ibadan Expressway, and the Second Niger Bridge are all being financed and constructed through a PPP, following in the wake of Nigeria's most successful PPP project to date: the construction of Murtala Muhammed Airport II, which was designed, built and is being operated by a private company on a build-operate-transfer (BOT) arrangement. Eko Atlantic, the visionary new urban area in Lagos on reclaimed land from the sea that is to become the financial hub of West Africa, is perhaps the most ambitious PPP in Nigeria today. In the country's capital, the $650 million Abuja Medical City, which will strengthen Nigeria's position as a destination for medical tourism in Africa, will be implemented through a PPP. In addition to this, several projects under the wing of the Federal Ministry of Power are run on a PPP basis. In Nigeria's agriculture sector, a victim of long-term underfunding, the federal government has recently invited the private sector to express interest for the concession of 33 silo complexes. What these PPP projects have in common is that each is a testament to the cross-sector applicability of the model, and, therefore, the potential beneficiary effects that PPPs have for the entire economy.

Demonstrating a clear willingness to engage in PPPs, the government has acknowledged the need to grow the current number to make a serious attempt at bridging the funding gap that currently exists in infrastructure. According to the Coordinating Minister of Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, Nigeria currently spends $6 billion on infrastructure projects, where $14 billion is needed, moving her to argue that, “We need to refine and improve our use of PPPs for the execution of important projects that will improve the economy and deliver benefits to our citizens." She is keen to point out that Nigeria “needs to improve the PPP model to ensure that it suits the country's needs, and delivers clear benefits without leaving the country with difficult problems."

Areas of improvement include the timeframe of most PPP projects, with most projects currently taking an average of seven years to be completed. Additionally, the government has indicated that it intends to establish a more balanced risk-sharing framework between itself and private sector parties, as the current balance disproportionately favors the latter. Risks need to be shared to make projects fair and sustainable. Related to this, the government has stressed the need to curb the costs of PPPs, which frequently reach epic proportions due to investors looking for high returns on their investment. Thus, a balance needs to be struck between profitable investments on the one hand, and economic benefits for the everyday Nigerian on the other.

Having successfully used the PPP model in the past for infrastructure projects, it has become clear that the Nigerian government needs to improve on the current model. Only then will the government be able to bridge the $8 billion gap in funding that exists in infrastructure in Nigeria today, and eliminate the barriers that exist on the road to economic development.