Continuing the shift away from state dominance in infrastructure development that began with the power privatisation initiative, a drive to boost the private sector role in several of Nigeria’s big-ticket transport projects looks set to open doors for investors.
The government is keen to champion the public-private partnership (PPP) model to strengthen transport infrastructure, which forms a key component of its vision for long-term economic growth. However, as with any significant PPP push, regulatory reforms are needed to ensure a transparent operating environment, and bringing financing on board for long-term ventures may prove challenging.
Laying the foundations
The government is looking to channel up to N485trn ($3trn) into a raft of ambitious projects across the transport, energy, ICT, housing, water, agriculture and mining industries under its long-term blueprint for infrastructure development.
The National Integrated Infrastructure Master Plan (NIIMP), which was adopted by the federal government in September, will support the drive to boost economic growth to 2043, with investment expected to reach N26.9trn ($166bn) in the first five years alone. The government will be looking to the private sector to contribute half the funding for the five-year period through a combination of direct developments and PPP ventures.
To that end, Nigeria broke ground on its first large-scale transport infrastructure PPP – a N117.86bn ($715.8m) second bridge linking it with Niger – in March. The government expects to contribute 25% of the project’s cost, which includes the 1.6-km bridge and related roadworks. The structure, which will cross the River Niger, is slated to be operational by 2018. Under the PPP build-operate-and-transfer agreement, the bridge will revert to state control 25 years after completion.
The road ahead
In late September, Minister of Information Labaran Maku announced that the government planned to hand the bulk of road construction and maintenance to the private sector by 2019. The decision, Maku said, was in line with trends evident in global economies.
“Everywhere in the world now, or major countries that are strong economic powers like Nigeria, people are not looking for federal money or government money for road construction,” he said. “People are returning to the private sector.”
Uche Orji, managing director and CEO of the Nigerian Sovereign Investment Authority (NSIA), believes the PPP model makes sense for the country, given the high costs and extensive nature of Nigeria’s transport infrastructure gaps. “It is very clear the government does not have the necessary resources for all the infrastructure needed in this country, so PPPs are absolutely the way forward,” he told OBG.
He acknowledged, however, that some projects would have greater investor appeal than others. “I believe the second Niger Bridge is bankable, but every project is not,” he said. “For the ones that are – those that can lure investors and provide substantial returns – the government has shown willingness to involve the private sector.”
Implementing more incentives
With investors expected to cherry pick projects, the government may well have to find the cash for less attractive ventures, or offer investors added incentives to take them on.
The government has said it plans to overhaul transport legislation, with extensive changes earmarked for the operational guidelines of the Nigerian Railway Corporation, Nigerian Ports Authority and Nigerian Inland Waterways Authority aimed at opening the door to private investment.
In mid-October, the minister of transport, Idris Umar, said reforms would increase private sector participation on projects, while also boosting the role played by states and local governments.
“The federal government of Nigeria aims to establish a safe, efficient, affordable and seamless intermodal transport system in line with global best practices while creating an enabling environment for PPPs in the sector,” Umar said.
Bringing these reforms to fruition and clarifying issues around PPP participation may well determine the pace at which Nigeria’s transport infrastructure is strengthened.