economy

PPP: Driving a viable economy in Lagos through structural growth

The state of infrastructure in Nigeria has remained a matter of concern given the importance of infrastructure in the economic wellbeing of the populace and the growth and development process of the economy. Osa Victor Obayagbona writes that the inability of the government to meet up with the increasing responsibility to provide and maintain infrastructure in the country, especially with the huge population at the moment and the need to regulate the contribution of private individuals to infrastructural development, led to the concept of Public-Private Partnerships (PPPs).

 It is commonly believed that the government should provide the basic social amenities and infrastructure for its populace, largely through taxes paid by citizens. But in reality, taxes paid by citizens are not sufficient to ensure that these social amenities and infrastructure are provided for.

The World Bank estimates that every 1 percent of government funds spent on infrastructure leads to an equivalent 1 percent increase in Gross Domestic Product (GDP), which invariably means that there is a correlation between any meaningful inputs in infrastructure development, which reflects on economic growth indices, hence the value of infrastructure cannot be underplayed.

However, it is no news that there is shortage of funding available for essential services and infrastructural development by the government in Nigeria and in almost every country in the world, thereby creating gap non-governmental organisations (NGOs) and companies through their corporate social responsibilities (CSR) has attempted to fill.

Unfortunately, various performance indicators in respect of these infrastructural facilities point to the fact that their performance remained unsatisfactory. It seems to be a well-known fact that infrastructural facilities in this country are grossly inadequate to meet the need of industries; both old and new, and the population.

A report by the African Development Bank on Nigeria’s Infrastructure Plan in 2013 had estimated that Nigeria would need to invest about $350 billion in its infrastructure sector in 10 years to be at par with its peers.

The fact is that the government cannot be the sole provider or promoter of infrastructure projects, as private sector investment in infrastructure sector is also required.

A public-private partnership (PPP) can be described as a cooperation between the public and the private sector, in which the government and the private sector jointly carry out a project on the basis of an agreed division of tasks and risks, each party retaining its own identity and responsibilities.

It is also a way for governments to mobilise funds and deliver what they would not have otherwise been able to provide, that is, the public infrastructure and services that the citizens require.

The underlying principle of PPPs is that, the public sector needs to be responsible for the delivery of a particular service; it does not have to be involved in the actual provision of the service or for undertaking the investment themselves. In this way, all actors of a PPP can concentrate on doing their part of the agreement. It therefore means that PPP agreements are aimed at optimising the input of knowledge and resources from both sectors.

Major public infrastructural developments have always been undertaken by the private sector under contract. The major difference between a normal contract from the government and a private sector and PPPs is the fact that the private sector can be regarded as a full-fledged contributor.

In Nigeria, the Infrastructure Concession Regulatory Commission (ICRC) established under the Infrastructure Concession Regulatory Commission Act 2005 is saddled with the responsibility of addressing Nigeria’s physical infrastructure deficit, which hampers economic development.

The body has been active in the development of PPPs and part of their activities is the establishment of Nigerian Public Private Partnership Network in collaboration with the Lagos State Public Private Partnership Office, which is now headed by Ope George, as the director-general.

OPPP Lagos, playing its part in attracting investment

The legal framework of Lagos State PPP was established in 2011 to, among others, provide vitality for the operations of PPPs and boost investor confidence in the availability, suitability and security of the investment opportunities in the state. Following the creation of the PPP disclosure portal by the ICRC, 70 percent of foreign investors have continued to flood the Nigerian economy as well as in Lagos State where investment in infrastructure is taking a giant leap.

One of the mandates of the Office of Public Private Partnership, Lagos, is to serve as a check against unrealistic government promises or expectations, increase the efficiency of the government’s investment and allow government funds to be redirected to other important socio-economic areas.

It may be early days for the Babajide Sanwo-Olu-led administration but the administration’s constant engagement with the state Public Private Partnership Office is yielding fruits.

Even though the Lekki refinery project started before the tenure of the governor, he has described as “exciting” the decision of the Dangote Group to site its petroleum, fertilizer and petrochemical company in Lagos, and added that it would lead to real growth and development in the Lekki area and the state in particular.

On how the state will play its part, Sanwo-Olu said, “Part of the things we will be doing here is a comprehensive new infrastructure that will be coming to this corridor. We are closing up on two different road connections out of this place. One will go straight to Epe and the other will go towards Ijebu-Ode”.

Furthermore, to curtail the traffic congestion, the Governor recently deployed about 14 commercial boats while assuring its citizens that before the end of the year the ferryboats would be increased to 30 adding that more than 500 buses would be injected into the state bus transport system to ease transportation problems.

The 500 buses to be deployed according to a source is in partnership with an unnamed company who sunk in funds to partner with the government on distribution of these buses.

Furthermore, it was reported that more than N250 billion is said to be lost to traffic annually, thus it is not surprising that the Sanwo-Olu-led administration in partnership with the PPP and major construction companies, has embarked on massive road rehabilitation across the state.

As regards to housing, which is one of the challenges facing Lagos environs, The Lagos State Governor, promised that the current administration will do everything possible to provide decent homes to ensure it plays its part in reducing housing deficit in Nigeria.

So far, over more than 492 homes have been allotted out to individuals and Governor Sanwo-Olu says he will do more.

According to him, “Our vision of a greater Lagos in which everyone prospers, embraces all irrespective of social or economic status.”

Governance is about making an impact in people lives and so we are happy that this has restored some form of hope to the allottees. We will continue to develop mortgage solutions and I am assuring those who missed out in this scheme, not to lose hope as more innovative housing schemes are on the way”, he said.

Sanwo-Olu further said as a matter of policy, the state government is strategizing and intervening at all points to ensure more and more homes are made available through budgetary allocation.

“We are currently engaged in discussions with our partners to see how we can solve the housing challenges so that we can build more housing units and make it at low cost for our people to get access to it”, he said.

It is obvious that the Lagos State government has a true appreciation of the Office of Public Private Partnerships as it has seen that public-private partnership’s return on investment (ROI) might be greater than projects with traditional, all-private or all-government fulfilment. Innovative design and financing approaches become available when the two entities work together. Risks are fully appraised early on to determine project feasibility.

In conclusion, there should be promotion and increment in PPP participation in Nigeria as the benefits are immense in contributing towards building a sustainable economy. It is, however, important that the government or the public sector and the private sectors embrace transparency and accountability while working together to ensure that the basic needs of the populace being the targeted beneficiaries of these partnerships are considerably met.