Just How Beneficial Have PPPs Been for Nigeria?
In the last nearly three decades, public-private-partnership (PPP), or private-finance-initiative, model has been in use as an option for financing and procuring infrastructure projects around the world. It first began in Britain, Australian, Canada and then much of continental Europe. It soon after gained prominence in the United States of America where it has been useful in supporting many known high-quality infrastructure assets.
In Nigeria, one area with about the highest number of PPP arrangement has been the ports. This began in 2006 when the Federal Government of Nigeria sort to improve the ease and quality of service delivery in Nigeria’s major port terminals. The option of concession was chosen with the Bureau of Public Enterprise (BPE) leading the process which allowed twenty-five concessionaires to manage the national ports which were previously being run by the Nigerian Ports Authority(NPA). Investors, both local and international, have since committed funds to the operations of these range of facilities. Over a decade after, entities with dealings in Nigeria’s ports may be able to point to some level of efficiency that the concession of the port has brought to port operations so far. However, this assessment is not complete unless a counterfactual scenario is proven to accentuate this assertion.
The fact is that PPPs in Nigeria has been fraught with controversies. Though the major argument in favour of the range of PPPs in the ports has been that of better delivery of high-quality services or infrastructure to port users, the higher cost of funding these PPPs (i.e the gap between the cost of private capital and government’s cost of borrowing) is rarely discussed.
The reason for the resentfulness of many Nigerians against PPPs may not be too far from the lack of clarity on this counterfactual. It is not out of place to ask what taxpayers get from services financed at a premium. To what extent does the benefit exceed the extra financing costs?
Similar analysis has been carried out in other climes. In Canada and Australian, for instance, it has been concluded that PPPs provide the government the advantage of private-sector innovation, helps it escape substantial risk, provides it with efficient whole-of-life treatment of the asset, and, ultimately, generates value higher than would have been possible had the government financed such projects itself.
Both the financing and operating model of infrastructure projects in Nigeria via PPPs have been characterized by criticisms of unfair advantage to private sector partners, delays in delivery and administrative inconsistencies. Even in a few cases where some “success” are said to be have been achieved, like the Murtala Mohammed Airport 2 Terminal and the Lekki Highway projects, people have only managed to overlook anomalies in them simply because such projects were eventually delivered, not because they were the best that was possible. The case of the Second Niger Bridge and other similar projects remain sore points in Nigeria’s PPP experience.
Ultimately, there is now clearly a general consensus about the need to quickly enhance infrastructure delivery in Nigeria. When this is done right, experience shows that PPPs can provide delivery and operational certainty, ensure that public resources are protected throughout project delivery period and even into operation. However, something needs to be added. The relevant agencies of the government, including the Infrastructure Concession Regulatory Commission (ICRC), need to commit to evaluating the benefits of existing PPPs and ensure that the Nigerian public is getting the best value from PPP projects.