Concessioning, PPP and sustainable socio-economic growth
FOR some years now, Nigerians have been expressing grave concern on the inability of the Federal Ministry of Finance to release the full provisions in the annual budget for the implementation of critical capital infrastructures especially the “Trunk A roads” for their reconstruction and rehabilitation.
The adoption of the practice in advanced countries of the world to engage the services of reputable construction companies otherwise known as “Public-Private-Participation” [PPP] was to accord primacy to the critical infrastructures since they are crucial to leapfrogging of socio-economic growth and development.
Casual observation has shown that the good side of PPP has not been fully exploited hence the prevalence of dilapidated Trunk A roads across the federation and lamentations of the state governors where these roads adversely affect the economic activities of the people. Consequently, some state governors like Anambra State have been seeking the approval of the Federal Ministry of Works to undertake the reconstruction and rehabilitation of the express and major ways since it is their people that bear the brunt of the consequences of the dilapidation and impassable condition of the roads. Road work in whatever measure is capital intensive and to that extent, a substantial chunk of state governments’ resources are removed so as to reconstruct and rehabilitate the roads. Yes, it is true that the state governments apply for reimbursement of the funds expended in the roads but the disturbing reality is that the refund has not been quick to come thus depriving the affected states of the resources to tackle the developmental challenges in the states.
It is sad that the lofty expectations of the affected people in the states that the ever deteriorating and dilapidated Trunk A roads should be given prompt attention by the federal government to leap-frog their socio-economic growth and development with the attendant increase of the Gross Development Product [GDP]. But as the years rolled by, the lofty expectations of the people who are always conscious of the fact that they pay their taxes have dimmed with forlorn hope.
Going by the wish of the president to give every state a sense of belonging in the annual budgets for the provision of critical capital infrastructures to uplift the standard of living, the releases hardly exceed 50 percent of the financial provision in the annual budget. This disheartening trend has led some humane-oriented governors like in Anambra State to engage the services of engineers in the Ministry of Works to embark on palliative measures in the tick of rainy seasons and festive seasons like Christmas and Easter.
Media reports have it that Anambra State has the best road net-works in the federation. Governor Willie Obiano has over-stretched the state’s meager finances to rehabilitate federal roads because of the stupendous benefits accruable from good roads in terms of socio-economic activities as they are regularly being used on a daily basis by the people of the state.
Thus in view of the fact that good road networks are critical components to ensure sustainable socio-economic growth and development, it has become a thing of necessity to reinvigorate PPP or what is sometimes referred to as “Concession” which is also a global practice ostensibly to get the major or arterial roads motor-able all-year round in the country for vibrant economic activities to create wealth and generate employment for the teeming youths roaming aimlessly with forlorn hopes to meet up the exigencies of life.
A cursory perusing of annual federal budgets has revealed that the failure of the Federal Ministry of Finance to be releasing full amount of funds in the budgetary provisions for road rehabilitation and reconstruction is due to the fact that the federal government has been neck-deep in both foreign and domestic loans to fund its annual budgets. The Olusegun Obasanjo administration had expressed deep worry for the future generation of Nigerians over the ever rising debt profile. Through the international connection of Dr. Mrs. Ngozi Okonji-Iweala, former World Bank chief executive invited to be the Finance Minister, took controversial steps to negotiate debt reprieve to the gladness of Nigerians who expressed the wish to have the country trapped in excruciating foreign debt profile.
Sadly, Nigeria has crawled back to ever rising foreign debt to the tune of N24.39 trillion as at April. This policy is by no means economically unviable and unsustainable even as international communities have decried the unsustainable trends. Expressing utter disgust at the rising foreign debt and unlikely hood of repayment, the Financial Controller and Director, Monetary and Capital Markets Department, of International Monetary Fund [IMF], Tobias Adrian said while presenting the Global Financial Stability Report at the on-going joint annual spring meetings with the World Bank in Washington D C said: “Nigeria has been borrowing in international markets but we worry. So, on the one hand, that is very good because it allows Nigeria to invest more, but on the other hand, we do worry about rollover risks going forward.
However, in a swift reaction, the Budget and National Planning Minister, Udo Udoma, described the nation’s debt burden as sustainable and posed no harm to the economy. He said: “Borrowing to spend on infrastructure and productive purposes is being done by all countries as long as there is back-up revenue base. We regard to our debts, our debts are sustainable”.
The re-jigging of PPP has become relevant since it will not affect the payments to the reputable private construction conglomerates, going by the confidence given by the Budget and National Planning Minister. In the same trajectory, the Director General of Bureau of Public Enterprises [BPE], Alex Okoh said that Nigeria needed to invest $100 billion per annum for the next six years in order to achieve optimum result in closing infrastructure gap across the country. “The next phase of the Reform and Privatization Programme of the federal government would focus on PPP with the view of closing infrastructure gaps in the country. The new phase targets reforms mostly in the utility and infrastructure sectors including: water resources, railways, airports and high ways. The BPE noted that the country’s infrastructure gap was huge as it was estimated that Nigeria needed to invest more than $3tn in the next 30 years to bridge the gap. For the next six years, Nigeria needs to invest an average of $100bn per annum”.
The BPE stated the need for refocusing on PPP was borne out of increasing budgetary constraints to fund the development of new infrastructure and effectively maintain existing ones, deteriorating infrastructures [dilapidated roads, schools, hospitals, etc] higher public expectations in terms of efficiency and effectiveness of infrastructure service delivery”.
One of the key factors that hamstring socio-economic growth and development and industrialization remains the issue of decrepit road infrastructure traversing all the states of the federation. President Buhari will hearken to the criticism of making one person the minister of three ministries namely: works, housing, and power. In spite of his strenuous efforts to prove his capability, he can never be efficient and effective in these gigantic sectors of governance. The issue of saving cost is unrealistic as efficiency has been known to be the casualty in the present dispensation.
It is a glaring fact that roads need to be reconstructed, apart from the need for new ones critically needed for opening the vast swath of the Nigerian terrain for massive agricultural projects, exploration of mineral resources, industrialization, and even total diversification synonymous with true federalism.
The option of concession and PPP should be refocused in the new dispensation. It will be recalled that as a way to tackle the perennial road infrastructure deficit, the federal government had came up with the idea of “Road Infrastructure Development and Refurbishment Tax Credit Scheme”. Sequel to the initiative, the Federal Executive Council [FEC] in March 2017 approved “Industrial Policy and Competitive Advisory Council” [Industrial Council] as a vehicle for partnering with the private sector on the industrialization agenda to address key hindrances to the growth of manufacturing in the country. The instrument for the concession of some roads is the “Executive Order 007 ” to allow private companies construct and refurbish roads across the country. The initiative is expected to develop critical road infrastructure in the country by leveraging private sector funding for the construction or refurbishing of strategic roads that will enhance economic growth in the country. Speaking during the signing of the contract, the Minister of Finance, Zainab Ahmed, had said that “the scheme is the outcome of efforts to think outside the box and deploy new techniques to develop critical road infrastructure in the country.
In the long run, if reality is anything to go by, it has become imperative to return Nigeria to realistic practice of federal system of government for substantial devolution of powers to the federating units using the six geopolitical zones. Diversification of all sectors of the national life will make the economy expand as the newly envisaged federating units will explore and exploit the natural resources within their respective domain as done in countries that practice federal system of government. The envisaged new federating units like the present six geo-political zones will leverage on their respective natural resources within their jurisdiction to construct new roads to open up the vast hinterlands for accelerated socio-economic growth and development to create wealth and massive employment for the teeming youths from institutions of higher learning.