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Okonjo-Iweala puts Nigeria’s Infrastructure spending at $6bn, wants faster processing of PPPs

By on November 5, 2014

The Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala,  has disclosed that  the country’s spending on infrastructure currently stands at about $6 billion, advocating  a  refined and  improved  use of Public Private Partnerships (PPPs) for the  execution of important projects capable of  improving  the economy and delivering  benefits to the citizenry.

The minister said Nigeria requires about $14 billion annually, out of which $10 billion should come from the federal government, noting that the estimate was not comprehensive.

According to her, the estimate is likely to be higher when the total financial outlay needed to fund the Infrastructure Masterplan is calculated.

Okonjo-Iweala,  who spoke in Abuja on Monday at a training programme on PPP organised by the African Development Bank (AfDB), said: “Currently the country’s spending on infrastructure is about $6 billion,” noting that this presented a big gap that needed to be filled.

She said this was why PPPs are very important to Nigeria at the moment, and applauded the AfDB for organising “this timely and very important forum.

“We need to refine and improve our use of PPPs for execution of important projects which will improve the economy and deliver benefits to our citizens.

“The country is already utilising PPPs in projects such as the Lekki Deep Sea Port, Lagos Ibadan
Expressway, Second Niger Bridge among others., but we need much more because our needs are so great. Also, we need to improve the PPP model to ensure that it suits the country’s needs, delivers clear benefits without leaving us with difficult problems,” she said.

The minister stated that  one of the problematic areas is the amount of time needed to complete a PPP project.

Citing studies, she said on the average, it takes seven years to complete a PPP project in Africa, noting that this is too long.

“For policy makers and political leaders who are operating on a four-year term, seven years to deliver a project, which they have promised the people is not very attractive. The difference in time horizon between policy makers and technical partners needed to be reduced. PPPs need to be processed faster.

“In other words, we need better financial, legal and regulatory capacity to achieve faster results.

“Another issue which we have observed is that there is a tendency to make legal requirements too complicated and push every risk on government to the benefit of investors who walk away with rewards at virtually no risk. Government must of course bear significant risk but not everything. The risks need to be shared to make the project fair and sustainable.

“Also, the rate of return expectation of investors tends to be too high and this is reflected in unsustainably high costs of PPP projects. Sometimes, it is as high as 30 per cent! The consequence of this is that tolls are too high and the public understandably  becomes hostile to the project and this leads to all kind of problems. There is therefore a need to have a right financial and economic framework which will ensure that investment is profitable but also benefits consumers and the economy,” she said

Following the successful launch of PPP Advisory Hub in South African Regional Resource Centre (SARC) of the AfDB, the bank has taken the initiative of establishing a resource centre in its Nigeria’s Country Office, Abuja.

The establishment of such resource centre is normally preceded by a foundational training programme for select participants, particularly governments’ staff in Ministries, Departments and Agencies (MDAs) involved in PPPs at various levels.

PPPs represent a dynamic form of inter-sectoral cooperation that is being rapidly adopted and exploited by many jurisdictions worldwide.

Globally, PPPs have become a sustainable mechanism for financing infrastructural and other development projects.

 

[This Day]