The Federal Government on Monday said Nigeria would require a minimum of N2.24 trillion annually to finance the development of basic infrastructural facilities in the country.
The Minister said the estimate was not comprehensive, as it was likely to be higher when the total financial outlay needed to fund the country’ Infrastructure Masterplan was calculated.
The Minister of Finance, Ngozi Okonjo-Iweala, who stated this at a training programme on Private Public Partnership, PPP, organised by African Development Bank, ADB, in Abuja said over 70 percent of the amount (N160 billion) would come from the Federal Government purse.
At the moment, Ms. Okonjo-Iweala said the country’s spending on infrastructure development was about N960billion, showing a huge gap that needs to be filled.
The gap, the Minister explained, justifies the essence of the PPPs currently being implemented by the Federal Government in various sectors of the economy.
The country, she said, was already utilizing PPPs in the execution of projects such as the Lekki Deep Sea Port, Lagos-Ibadan Expressway, Second Niger Bridge, etc, adding that the country would need much more in view of her great needs for growth.
She emphasized the need for the country to improve the PPP model to suit the country’s peculiar needs, pointing out that the initiative must deliver clear benefits without leaving the people with difficult problems.
While commending ADB for organizing the training programme, she said the country needed to refine and improve its use of PPPs for execution of important projects which would improve the economy and deliver benefits to its citizens.
The minister identified one area that usually poses problems as the amount of time needed to complete a PPP project, noting that studies have shown that on the average, it takes a minimum of seven years to complete a PPP project in Africa.
“This is too long!”, Ms. Okonjo-Iweala said. “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.”
She said the difference in time horizon between policy makers and technical partners needs to be reduced to ensure that PPPs were processed faster to deliver democracy dividend to the people.
“In other words, we need better financial, legal and regulatory capacity to achieve faster results,” she added.
Ms. Okonjo-Iweala said there is a tendency to make legal requirements too complicated by loading every risk on government to the benefit of investors who walk away with rewards at virtually no risk.
She said while government must bear significant risk, the risks needed to be shared to make the project fair and sustainable.
Also, the rate of return expectation of investors, she stated, tends to be too high (often as high as 30 per cent) reflecting in unsustainably high costs of PPP projects.
The consequence of this problems, Ms. Okonjo-Iweala said, would be that tolls are too high, resulting in the public becoming hostile to the project and creating all kinds of problems.
She underlined the need to have a right financial and economic framework that would ensure that investments are not only profitable, but also beneficial to consumers and the economy.
According to Ms. Okojo-Iweala, this became necessary following the successful launching of PPP Advisory Hub in South African Regional Resource Centre, SARC, by the ADB and the establishment of a resource centre in its Nigeria Country Office in Abuja.
The training would afford selected participants, particularly governments’ staff in Ministries, Departments and Agencies, MDAs, involved in PPPs at various levels to interact and share ideas and knowledge on the effective implementation of the programme.
PPPs represent a dynamic form of inter-sectoral cooperation adopted globally as a sustainable mechanism for financing infrastructural and other development projects.
Nigeria has committed to the PPP by establishing the Infrastructure Concession Regulatory Commission (ICRC) as part of its response to bridging infrastructure deficit through regulation of Federal MDAs in the delivery of infrastructure service.
The strategic objective for the ICRC is to accelerate investment in national infrastructure through private sector funding by assisting the Federal Government and MDAs to implement and establish effective Government PPP procurement through appropriate regulations.