Enhancing Private Participation in Infrastructure(PPI): Policy Challenge for Nigeria

Photo Credit: Guardian Nigeria

According to the National Integrated Infrastructure Master Plan (NIIMP) of 2015, the investment needed to meet current infrastructure deficit in Nigeria is put at about USD 3.0 trillion per annum over the next 30 years. The NIIMP estimates that annual investments in infrastructure would have to rise from the current USD 9-10 billion (about two percent of GDP) per year to an average of USD 33.2 billion for the medium term. The size of additional investment needed to make-up for the shortfall is expected to come from the private sector and PPPs.

The country is currently looking at promoting and expanding private participation in infrastructure. Two of the major policy measures that have driven the government’s efforts at improving private investment levels in infrastructure financing include privatization and Public-Private Partnerships (PPPs). The institutional and policy frameworks needed to drive the needed investment in the various sectors have been put in place and are currently running. The Infrastructure Concession Regulatory Commission (ICRC) was established in 2005 to regulate Public Private Partnership (PPP) endeavors of the Federal government aimed at addressing physical infrastructure deficit which hampers economic development. The Commission currently has more than 50 projects (at various levels of completion) under its regulation and implementation across a wide range of sectors and completion periods. On the other hand, the Bureau for Public Enterprise (BPE), is saddled with the overall responsibility of implementing the Nigerian policy on privatization and commercialization. The BPP is the secretariat of the National Council on Privatisation (NCP) which is the highest decision-making body on the formulation and approval of policies on privatization and commercialization. Apart from the activities of these agencies, a number of reforms initiatives are currently being implemented to improve the policy environment for private investment in infrastructure.

As important as the PPPs are to PPI and the government’s resolve to close the infrastructure gap in Nigeria, a number of daunting challenges, especially regarding the policy and regulatory clarity and efficiency still persist. First on the list of challenges is the jurisprudential overlap between the ICRC, BPE and the Bureau for Public Procurement(BPP). The BPP is saddled with the responsibility for Engineering Procurement Construction (EPC) contracts which are entirely financed and regulated by the government, usually through budget allocations. The BPE is, on the other hand, is the regulatory and implementing agency for privatization process through which government cedes its interest or assets partly or fully to private companies. Related to this role is that of the ICRC which regulates procurement process between private sector Project Proponents wishing to partner with government in developing infrastructure, where investment is recouped over time. The broadly similar roles which these agencies play in the procurement processes involving infrastructure has been a major source of conflict and has hampered the smooth delivery of PPP projects in Nigeria. An interim measure was undertaken in 2015 by the Hon. Attorney General of the Federation (AGF) and Minister of Justice via a review of the applicable laws and a subsequent ‘guideline’. The Hon. Minster had prescribed that “…. all concessions made or granted by the Ministries Departments & Agencies (MDAs) or facilitated by the BPE whether or not under the Public Enterprise Act, must be made in accordance with the provisions of the ICRC Act and subject to the regulatory authority of the ICRC”. As soothing as the prescription may sound, it is only a temporary remedy to the perennial conflict that surrounds PPI in Nigeria. Only a legislative intervention, through amendments to existing laws, will suffice as a permanent remedy in this case.   

The second challenge is the weakness of project preparation mechanism PPP projects. Currently, the ICRC has not been able to make critical project preparation guidelines available for potential private sector organizations and MDAs willing to go into PPP projects for infrastructure. Some of the guidelines pending review and formalization include the Outline Business Case Guide; the PPP Procurement Guide & PPP Primer; the PPP Project Appraisal & Selection Guide; the Unsolicited Proposals Manuals & Guidelines on the Selection, and the PPP Contract Management Guide. The Infrastructure Consortium for Africa (ICA) 2014 Report points that the lack of a strong stream of well-prepared, bankable projects is one of the major constraints to the development of infrastructure projects involving external financing in African. In the case of the ICRC, the lack of technical capacity within the agency is compounded by the lack of funding which has hindered expert review and updating of PPP guidelines and primers.

Another challenge confronting the PPPs in Nigeria is the lack of legal enforcement powers for PPP contracts and dispute resolution mechanism in the law establishing the ICRC. To address this challenge, a bill to amend the ICRC Act of 2005 has been sent to the National Assembly of Nigeria and is still pending. A speedy amendment to the Act will no doubt expand existing risk mitigation options available to investors and could help spur PPI in the country. As we draw closer to another election season, it is important to expedite action on this proposed amendment.

Generally speaking, while the main attention of the government on promoting PPI has been directed primarily at the project/transaction level and raising or unleashing financing, the quality and sustainability of infrastructure and related services depend largely on the political will and capacity of the Nigeria government for regulatory reforms where it matters. The Nigerian Government needs to focus more on the risk related issue of contract management and implementation through the life of a PPP. Failure of PPP projects implementation occasioned by weak regulatory capacity, construction uncertainties, land disputes or corruption have a significant impact on the quality of outcomes. Another area requiring the attention of the Nigerian government is that of better maintenance aging infrastructure in use, institutional reform of public utilities and service providers, administrative and regulatory reform, and improvements in the type and administration of subsidies. These set of reforms must be undertaken by the Nigerian government if the infrastructure deficit currently bedeviling the country will be addressed.

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