Concerns over government’s sincerity in private sector-driven road projects
President Muhammadu Buhari last month signed an Executive Order aimed at improving roads infrastructure across the country.
The Executive Order 7 of 2019, on the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme, is designed to develop and deliver Public Private Partnerships (PPP), with notable investors to bridge the road infrastructure gap in the transportation sector.
Experts, though commended the initiative, they identified some of the challenges militating against PPP, which include lack of legal framework, inconsistent government policies, and failure to honour agreements validly entered into, among others.
And until these problems are resolved, there would always be dearth of the expected direct investments, both locally and internationally, which are needed to bring the country’s economy out of the woods.
Principal Partner with Media Advocate Limited, Manny Philipson, said the present administration lacks the confidence of the private sector and can barely survive irrespective of the efforts it claims to be pulling implace.
Philipson said the private sector has been harassed; hounded and exploited so much that majority of the companies have rather laid off their workers or closed shop. Now, how would such organisations support whatever initiatives the government intends to put in place?
“Little wonder, the only organisation you seem to know partnering with government is Dangote. Others have given up for reasons majority of us know undermine the interest of both the stakeholders in the private sector and the populace. Road infrastructure in Nigeria is the worst hit, with majority of the country’s roads in a state of disrepair. We will live with this dilapidation for a long time as the case is at the moment.”
Performing the signing ceremony at the Presidential Villa in Abuja, the President said under the arrangement, 19 eligible road projects are to be undertaken by six leading manufacturing and construction firms, located in 11 States, and in each of the six geo-political zones.
The move provides another opportunity to demonstrate the commitment of the administration to conceive, design, develop and deliver PPPs with notable investors.
Buhari said his government met a significant backlog of local contractors’ debts. However, he added that the Federal Government was committed to keeping its promises to deliver qualitative roads and transportation infrastructure.
He said the government had consistently adopted innovative solutions to complement the annual budgetary spending on infrastructure.
Specifically, countries worldwide are getting by through PPP arrangements.
This policy has been adopted and put into effective use by many countries, leading to a massive leap in quality infrastructure availability. However, Nigeria has not fully embraced PPP despite its enormous benefits.
PPP is applicable to medium to long-term management contracts with investment requirements, which may include funding, planning, building, operation, maintenance and divestiture.
PPP arrangements are particularly useful for large complex infrastructure projects that require highly-skilled workers and a significant capital outlay to execute.
The PPP model is also useful in countries that require the state to legally hold an interest in any public infrastructure but permits a level of private sector participation.
For instance, the Federal Government, under the administration of former President Olusegun Obasanjo, gave the expansion and reconstruction of the Lagos-Ibadan Expressway on concession but this was eventually cancelled, and it increased the suffering of motorists on this road until the contract was awarded to the two companies carrying out the reconstruction work.
A road safety expert, Patrick Adenusi, said the plan is good, especially given the huge infrastructure deficit.
Adenusi admired the concept, citing that “roads are not supposed to be tolled, but constructed by companies that will get back their money through tax rebate.
“I believe that the companies that are putting their images on the line will have a measure of water-tight contract with the government. As a matter of fact, if anybody needs to be worried, it is the government, bearing in mind that a company can spend N5 billion and say they have spent N50 billion. So, if anyone is to be worried, I think government should be worried.”
Adenusi added that the order is like being communal in Nigeria’s development. “I do not expect a situation where a company constructs a road, gets tax rebate payment in five to 10 years, and the road collapses within the period.
“It means each of those companies will be interested in the quality of the construction because of their corporate image. They will be interested in properly engineered road. I think the concept is good, we need the faithfulness of the companies in ensuring that the roads are properly engineered, and that they are durable,” he said.
Chief Executive Officer, West Atlantic Cold-Chain and Commodities Limited, Henrii Nwanguma, said failure of policy usually has many sources, chief of which include poor stakeholders’ consultation.
Nwanguma said there are always winners and losers. The trick is to have more of the former and mechanisms to compensate the latter.
He explained: “Since it is ultimately tax money that is being utilised, there is implication for appropriation. Some will argue that all taxes accruing to the country gets to be appropriated according to extant formula and the component for the Federal and State Governments further allocated based on budgetary priorities selected by the Executive of both tiers and funds appropriated/allocated by their legislature via budgeting cycles.
“In implementation of this Executive Order 7 of 2019, it means a sequestering of funds to road infrastructure ‘without appropriation by legislature or application of other revenue allocation rules’.
“Are States and LG roads among the roads the PPPs will also cover? If no, then those tiers of government are actually being short-changed in terms of available funds for their own road infrastructure development. They are stakeholders we cannot ignore, as they will challenge the Executive Order.”
Nwanguma said the private sector will readily key-in, if it makes sense to their bottom-line. On the other hand, if a company’s bottom line will be boosted by actually contributing to the reduction in transportation bottlenecks of its inputs and outputs, then in enlightened self interest, it will likely invest more in roads that will improve its core business logistics and the whole T-Bills rates argument becomes academic.
Marketing Manager, Kia Motors Nigeria, Olawale Jimoh, said Nigeria has never for once been short of ideas. “We have ideas on how to move the country forward, we have ideas of how to develop the economy, we have ideas of how to grow our Gross Domestic Product (GDP), but what has always been the problem is implementation and policy instability.
“If there is a policy somersault in a country that has been unstable for quite a while, investors would be reluctant to come in. Although a very good idea but the thing is, how sure are these investors that this policy would stay beyond the current administration that at some point they won’t be naturalised where those investors would now start counting their losses.
“Nigeria has been notorious for policy instability. So, for every Foreign Direct Investment (FDI) that would be coming into the country, they would be sceptical about how long it would be sustainable for them to get back their money.”
Perhaps the challenges earlier enumerated, such as lack of a clear understanding of the issues involved in PPP, the propensity to cancel agreements validly entered into and introduce sentiments instead, selfish interests rather than national interest, refusal to obey court orders, lack of legal framework and inconsistent government policies, among many others, are what the privatesector want addressed.