FG was Cheated by Private Investors – Okonjo-Iweala

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The Federal Government of Nigeria was cheated in previous public-private partnerships that it entered into with various private investors.

 Coordinating Minister for the Economy and Finance Minister Ngozi Okonjo-Iweala who disclosed this at a PPP Stakeholders Workshop organized by the African Development Bank in Abuja Monday, said the FG was loaded with all the risks while the private investors smiled their way to their banks.

“Past PPP arrangements were skewed in favour of private investors, leaving the Nigerian government to bear virtually all the risks, with private investors, sometimes, asking for as much as 30 per cent return on their investment.

“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 advocated.

Dr. Okonjo-Iweala noted that some of the PPP arrangements of the past were bogged down by certain inadequacies in the frameworks of the deals, making them unable to progress as successfully as anticipated.

She, therefore, stressed the need for a review of the PPPs in such a way that the government and the Nigerian public could derive the desired benefits under a legal framework that would be fair to all parties.

“One of the problematic areas is the amount of time needed to complete a PPP project. On the average, according to studies, it takes seven years to complete a PPP project in Africa. 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 tendency to make legal requirements too complicated and load every risk on government to the benefit of investors who walk away with rewards at virtually no risk. Government alone can’t bear all the risk. The risks need to be shared to make the project fair and sustainable.

“Besides, the rate of return expectation of investors tends to be too high and this is reflected in non sustainable high costs of PPP projects. Sometimes it is as high as 30%. The consequence is that tolls are too high and the public understandably becomes hostile to the project and this leads to all kinds of problems.

“There is therefore a need to have a right financial and economic framework which will ensure that investment is profitable but also benefit consumers and the economy.”

The minister said Nigeria was already utilizing PPPs in projects such as the Lekki Deep Sea Port, the Onne Port in Rivers State, Lagos-Ibadan Expressway, and the Second Niger Bridge, adding, “We need much more because our needs are so great”

The Minister also revealed that Nigeria needed about $14 billion annual investment in its infrastructure facilities but that the Federal Government could not afford the entire funding requirement, therefore, making private sector investment in infrastructure inevitable.

According to her, “To fund infrastructure, Nigeria needs about $14 billion every year, out of which $10 billion should come from the federal level. And this estimate is not comprehensive because it is likely to be higher when the total financial outlay needed to fund the Infrastructure Master plan is calculated.

“Currently the country’s spending on infrastructure is about $6 billion, so there is a big gap that needs to be filled. We are talking about something in the region of $8 billion. That is why PPPs are very important to Nigeria at the moment”.

 Also speaking at the occasion the AfDB Director in Nigeria, Dr. Ousumane Dore, explained that his organization decided to establish a PPP Hub in Nigeria to assist the nation and others in the West-African Sub-Region in their efforts at attracting private funds to infrastructure investment.

According to him, the bank has access to a team of experts who could assist in drafting necessary legal frameworks and other agreement details for successful PPPs and would deploy them to the benefit of member countries.

The AfDB already has such a Hub in South Africa.

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.

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