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Bringing private sector into mainstream of governance

Murtala Muhammed Airport 2, a PPP model.

Murtala Muhammed Airport 2, a PPP model.

IT is increasingly becoming clear that the business of governance can no longer be limited to government if desired result of making life better for the citizens is to be met.
 
It is in this light that the strategic alliance with the private sector in the area of public utility services is more germane now than ever before. The Nigerian government moved away from the usual mouthing of the alliance, by it following it up with the enactment of the Infrastructure Concession Regulatory Commission (ICRC) Act to drive the Public- Private Partnership (PPP) initiative.
 
The key strategic objective of the ICRC is to accelerate investment in national infrastructure through private sector funding by assisting the Federal Government and its Ministries, Departments and Agencies (MDAs), to implement and establish effective public private partnership’s procurements.

The scope is undoubtedly for PPP to create new infrastructure, expansion and refurbishment of existing assets at the federal level in the areas of power generation, transmission and distribution networks, roads and bridges, ports, railways, solid waste management, housing health care, urban transport system among others.
 
The impact of the PPP initiative put in place by government some few years’ back has become very visible and critical for the survival of the nation, given the prevailing global economic challenges. In no record time, some federal roads have been constructed, schools and airports have been refurbished, power projects are being built across the country even as new railway tracks are under construction. These developments clearly indicate government alone can no longer meet its obligation to provide social infrastructure through normal budgetary provisions.
 
For this reason, many countries (developing and developed) have in recent years, increased their reliance on PPP model to finance capital asset acquisitions and operations. Global records available reveal that the PPP presently consist 10 percent of the capital budget provisions in the United Kingdom, 20 Percent of the capital budget in France and 15 Percent of the capital budget in South Korea.
 
Similarly in Portugal, PPP represents, as much as 28 percent of the capital budget while the position in Africa is lower but growing. In Nigeria for instance, the 2015 Appropriation Bill submitted to the National Assembly shows a 43.4 Percent drop in capital budget provisions, compared to the 2014 budget.
 
The need to boost private sector involvement in infrastructure funding influenced the Bureau of Public Service Reforms (BPSR) to organize a one-day monthly lunchtime reform seminar series with the theme, ‘Implementation of Public – Private Partnership’.

The seminar, which was held in Abuja recently, brought together several stakeholders such as the Budget Office, Bureau of Public Procurement and the Concession Regulatory Commission (ICRC) among others. Stakeholders reckoned that for PPP to fully takeoff in Nigeria, it would be absolutely necessary for all concerned parties to work together.
 
While attempting to deconstruct what PPP models mean, many business and economic scholars have tried to give various definitions to capture its meaning. But for the Director-General, Infrastructure Concession Regulatory Commission (ICRC), Aminu Dikko, PPP is a contractual agreement between a public agency and a private sector entity. He added that through such agreement, the general public shares skills and assets of each sector in delivering a service or facility for use. Dikko further stated that each party shares in the risks and rewards potential in the delivery of the service or facility.
 
His explanation: “PPPs are about mobilizing private sector’s money, expertise and capacities for infrastructure development, long-term relationship between government and private sector (Usually-10 years), sharing of risks and rewards, private sector performs to agreed KPIs and that of Life cycle focus [operations and maintenance].”
 
According to him, the goal is to combine the best capabilities of the public and private sectors for mutual benefits. He listed the seven essential conditions that define Public Private Partnership to include: arrangement, provision, investment, time period, risk sharing, standards and payment. He listed the various types of PPPs to includes, Build, Operate and Transfer [BOT], Build Own Operate {BOO], Build Own Operate Transfer [BOOT], Design Build Finance [DBFO], Design Build Finance Operate [DBFO], and Design Build Operate [DBO] respectively.
 
He identified some key benefits of PPPs to include: rigorous project preparations, delivery of whole life solution, shifting of focus to service delivery, pragmatic approach to infrastructure development and service delivery which could lead to better overall management of public services. Other advantages, he said, are that PPP maximizes the use of each sector’s strength, reduces public capital investment, mobilizes excess or underutilized assets, shares, resources and allocates risks.
 
The ICRC Director- General explained that suitable candidates for the PPPs remain the transport sector – roads, rail, ports, airports, water resources (Irrigation, sewage treatment, pipelines), health (hospitals and specialized health services), and that of Education Facilities (schools, museums, libraries). He also said that the key principles that drive the Commission in PPP arrangements are value for money, public interest, output requirements, transparency, risk allocation, competition and capacity to deliver.
 
The Guardian gathered that Nigeria’s Public-Private Partnership experienced very negative results prior to ICRC interventions because it witnessed inadequate experience in public and private sectors, political involvement at the implementation level, asymmetry of knowledge between concessionaire and government. 

Recalling some of the major challenges in procuring infrastructure services via the PPP in Nigeria, the ICRC boss explained: “We have weak public sector sponsors, Fiscal and Service delivery Affordability, Low institutional and Management capacity, Poor Legal and Regulatory systems, Government/Political Interference while the biggest is a misunderstanding of the difference between project development and preparation as well as Lack of funding for project development.”
 
Earlier in his opening address, the Director-General, Bureau of Public Service Reforms (BPSR), Dr. Joe Abah, said that despite the challenges, traditional capital infrastructure financing entirely by government is now increasingly untenable.
 
He said: “PPPs can be a useful approach to augment government’s own efforts, it is for this reason that we are fortunate to have the Director-General of the ICRC with us today, if PPP in Nigeria is to fully take off, it would be absolutely necessary for the DG, ICRC to work very closely with our previous speakers at the Lunchtime seminar series—the Director-General of the Budget Office of the Federation, myself, I believe that closer synergy between the functions of ICRC, BOF, BPP and the Bureau of Public Enterprise BPE  working with the Federal Ministry of Justice can only be for the benefit of the country.”
 
While rating the successes so far recorded by sound implementation of PPP model in Nigeria, Joe Abah said: “I would say, it’s been a mixed story, there has been some important successes such as the one recorded at the second Murtala Muhammed local airport in Lagos [MM2], project constructed under the PPP arrangement, there has also been the Akwa-Ibom Deep-Sea Port that is being run by PPP arrangement and many more.
 
“With the PPP arrangement, it affords government the ability to retain close control over the delivery of the specified level and standard of services. Where core social services are involved such as teaching, medical care, these will be retained by the public sector professionals.
 
‘‘The government is expecting a higher quality of service delivery from PPPs, for this and other several reasons and because this arrangement will further open up new channels of finance, government is now very sure of having more latitude in bringing forward its investment programmes. This, he noted, will in turn open up opportunities for the domestic contracting and financing sectors, including smaller contractors who are expected to benefit considerably from the programme.”
 
According to him, the last period have witnessed the intensification of contacts with line Ministries and support other government bodies and with the private sector to activate the initiatives.
 
He however said: “PPP is a complex process but proper and experienced management can deliver projects to the benefits of all. There have also been issues with regards to contractors disputes, for instance, on the Lagos-Ibadan Expressway contract with Bi-Courtney. There was also an issue with Arik and Virgin Nigeria on old domestic Terminal, so I would say it has been a mixed story.”
 
Speaking on how to get the PPP also implemented at the state and local government levels, the BPSR DG said he is in total support of such move noting, “I think so because if we borrow examples from other parts of the world, say like the united Kingdom, I can tell you that they depends on the PPP of 10 Percent of their capital budget, while France has about 20 Percent, Portugal, about 28 Percent and many more countries are embracing PPP model all over, so am of the school that will advocate that our Local governments can do better if they are introduced to the arrangement more so that every tier of government presently has funding challenges’’. The PPP, he said is the surest way to go for the improvement of their infrastructural development.”
 
He stressed that the Bureau is promoting the PPP initiative because, “one of the main role of the BPSR is to find new ways of doing government business better and to try to solve problems and challenges facing government. So, now that we have dwindling resources, it is therefore one of our key responsibilities to try to find a way to try and manage or augment those resources.”
 
He stated that the Bureau is not only focusing on the implementation of the PPP model, but that it has also been focusing on other very important areas of governance such as housing budgets and several other key challenges.

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