Efforts ongoing to boost private sector investment and leverage bilateral partnerships in Abuja, Nigeria

 

Following prolonged population growth, infrastructure networks in the Federal Capital Territory (FCT) are facing unprecedented demand. A series of new and ongoing works are set to expand the network, and the proposed 2018 budget of the FCT Administration (FCTA) focuses much of its expenditure on infrastructure and transport projects. Nevertheless, public spending is set to fall short of rapidly increasing demand, highlighting the need to further explore alternative funding models.

There are, however, signs that the FCT’s infrastructure is set for a near-term resurgence. A rising emphasis on public-private partnerships (PPPs) appears set to bolster private sector participation in new builds, while financing from bilateral partners has also helped accelerate development. Land acquisition rights remain an obstacle to increased private investment. However, in an effort to overcome this issue, the FCTA has proposed reinstating its land swap initiative.

Overcapacity

Issues associated with rapid urbanisation have become particularly visible in satellite settlements, though many of these have arisen informally, outside of the city master plan. “Within the city, roads are wide, developed and in good condition, up to a certain point. Most of the traffic congestion we have is from commuters living in neighbouring settlements outside the city,” Moses Apa, an urban planner with the FCTA, told OBG. “The people commuting in and out of the city are living in towns in neighbouring states, which have not been developed as much as Abuja. That is where the most significant infrastructure deficits exist.”

Indeed, in a 2016 study published in the Journal of Resources Development and Management, researchers from the University of Abuja reported that more than 50% of respondents to a survey conducted in FCT townships reported that road networks were tarred but eroded, due to improper drainage systems. Furthermore, 40.2% of respondents reported that roads were not tarred at all. Additionally, 85% of respondents reported that there was no available supply of drinkable water in their areas, while more than 30% reported that electricity supply was available but unreliable. Moreover, an April 2017 study published by the Women Environmental Programme – a domestic NGO – found that 71% of FCT communities surveyed had ungraded roads, 37% were not connected to the national grid and 73% were not served by the public water supply. In addition, 75% had no waste management systems.

Spending Priorities

As part of an attempt to address these issues, the FCTA’s proposed budget for 2018 has allocated N21.1bn ($68.2m) for the development of infrastructure in satellite settlements, as well as N74.7bn ($241.5m) for Abuja. In addition, the authority has earmarked N12.3bn ($39.8m) for the completion of the Abuja light railway project and N8bn ($25.9m) of capital expenditure for the expansion and extension of major road links. These include the expansion and extension of the Outer Southern Expressway and Inner Southern Expressway, along with the construction of the Southern Parkway and a new carriageway.

The proposed budget also allocates a total of N4.13bn ($13.4m) for the advancement of water treatment and sanitation facilities in the FCT. However, despite a range of major infrastructure improvements under way or nearing completion, the territory still faces a shortfall between supply and demand, given the pace of ongoing rapid urbanisation in Abuja and its surrounding settlements.

Private Sector 

Faced with these issues, the government has moved to increase private sector participation in new projects under a PPP framework. In 2005 the national government established the Infrastructure Concession Regulatory Commission (ICRC), a body tasked with the development and implementation of PPPs. Furthermore, in 2009 the National PPP Policy was passed to establish a renewed legal framework for PPPs.

Between 1990 and 2016, 42 PPP projects with a total value of $10.52bn were completed in Nigeria, according to the World Bank, although PPP development in the FCT has been comparatively limited.

Indeed, in a 2015 study published in the Journal of Management and Sustainability, researchers at Glasgow Caledonian University identified a number of factors as having impeded the development of PPP projects in FCT and surrounding regions. These included a lack of long-term funds, insufficient expertise in PPP agreements, an absence of sufficient risk-sharing structures and an ongoing lack of clarity regarding PPP framework implementation. Nevertheless, the government is pursuing a range of policies aimed at improving this situation, including the reform of the ICRC to expedite implementation and a review of the overall PPP framework.

Alternative Financing 

Authorities have also increasingly turned to bilateral partners to meet budgetary shortfalls and deliver big-ticket projects. A notable example of this is the Abuja light railway project, the first phase of which opened in July 2018. The new transport system aims to connect the city’s administrative and industrial zones, ease access to Nnamdi Azikiwe International Airport and integrate the FCT into the national railway network. The Export-Import Bank of China is financing 60% of the $876m project, and building work is being undertaken by the China Civil Engineering and Construction Corporation.

Positive Signs 

Land acquisition presents a challenge to infrastructure development in the FCT, although here too there are signs of improvement. This is partially attributable to the 2015 suspension of a state-level land swap initiative that had been popular with private investors. In March 2018 FCT Minister Muhammad Musa Bello told media that, while the FCTA had made good progress on its infrastructure development agenda, the suspension of the scheme had impacted on project implementation, particularly roads projects.

“A lot of investors were subscribing to the programme in areas south of Abuja. It was attractive because developers were given parcels of land for free in exchange for developing supportive infrastructure such as roads and utilities,” Apa told OBG. “But there was a change in government, and although the programme is not completely obsolete, investors have not been able to fully benefit for several years.”

This situation appears to be changing, however. The FCTA announced the renewal of the initiative in July 2018, with four new districts of Abuja being granted to real estate developers. These districts are Mamusa North, Mamusa East, Parfun North and Parfun South, all located in the south of Abuja. Taken together, these efforts to update and improve PPP legislation and reduce land acquisition challenges should help support increased private sector investment in infrastructure and real estate. Along with ongoing public sector investment in transport links and utilities, and bilateral partnerships to support major projects, these policies provide a solid groundwork for the ongoing upgrade of Abuja and its surrounding settlements in the FCT.

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The Report: Nigeria 2019

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