“A few months down the line, the project continued to run into hitches, and understandably so.”
The Lagos-Ibadan Concession has unfortunately joined the bandwagon of the many failed marriages in Nigeria. The federal government recently terminated the agreement it entered into with Bi-Courtney Consortium. The works minister has alleged that this was due to the concessionaire’s failure to adhere to the terms of the agreement. More specifically, its inability to reach financial close as stipulated.
Experts see a Public Private Partnership (PPP), as a marriage in many ways. I agree! It is a union between two parties who believe that they’re right for each other and are in it for the long run. In an attempt to grasp exactly what went wrong with this seemingly happy couple and what led to an abrupt end for their short-lived marriage, I went back to the beginning; when their eyes met, when they fell in love, their short courtship and their glamorous wedding. And then, just then, I understood.
There are some pretty basic critical success factors when it comes to a lasting union, and preparation definitely tops the list. The couple as well as their families undertakes major ground work to see if they are right for each other, if he’ll be able to care of her, put food on the table. They need to find out if they’ll be able to make beautiful babies together and if any of them has a disease they can pass to the other party or their “offspring”. So then, a concession must include two sets of “PPP”, the first and most important being “Preparation, Preparation, Preparation”, then the actual “Public-Private Partnership”.
In April, 2009, the Federal Government approved the concession of the Lagos-Ibadan Expressway to Messrs Bi-Courtney Consortium at the cost of N89, 533,688,879.84 with a concession period of 25 years under Design, Build, Operate and Transfer (DBOT) Scheme with 100 per cent funding by the concessionaire.
Part of the agreement was that the latter would recover cost and return on investment, via tolls, subject to regulatory guidance from the Federal Government and other charges on Road Support Services. The Federal Government was also expected to reap from the partnership with concession fees of N100 million payable per annum and 5 per cent of all revenues accruing from the project.
However, in its Annual Report for the year ending 2010, the Infrastructure Concession Regulatory Commission (ICRC), a body charged with the responsibility of regulating all concessions of the Federal Government of Nigeria stated, that it formally sent a request to the Federal Ministry of Works and Bi-Courtney Ltd on the status of the transaction and contract implementation for the Lagos – Ibadan Express Way contract.
In the report, ICRC observed that while a lot of work had been undertaken to address some of the concerns raised by the Bureau of Public Procurement (BPP) on the draft Concession Agreement, the following issues needed to be resolved if the project was to meet the basic benchmark of best practices. Amongst these alarming discoveries were that, “An economic case for this investment, as well as the base traffic forecast/modelling had not been made”, “…the financial model appeared to be rudimentary and overly optimistic in the light of the financial climate existing at the time…”, “The actual cost of the project needed to be determined and agreed between the Ministry and the Concessionaire through a detailed condition survey and outline design”, and “…required a Social and Environment Impact Assessment [EIA] study of the project”.
The report also reveals that “Despite communicating this absence of costs and a clear risk allocation structure, the Ministry on behalf of the Federal Government nonetheless went ahead to sign the Concession Agreement.”
This was the catastrophic error on the part of the Federal Government that would eventually lead to the failure of this project. One would think that before you give out your daughter’s hand in marriage, you would have addressed all potential pitfalls rather than wait for the marriage to be contracted before pitfalls are addressed.
At the “Wedding reception”, i.e. the flag-off ceremony of the project, various newspapers reported optimistic comments by both sides. The then Minister of Works, Housing and Urban Development, Dr. Hassan Lawal, said “It is my belief that government at all levels would respond to the infrastructural development with strategies that rely more on private sector capital and expertise. With this hand-over today, the Nigeria public will become more aware of this innovation and come to accept that PPP can be beneficial in providing fast delivery of infrastructural projects and also ensure steady and proper maintenance over time, all giving good value for money to Nigerian taxpayers. It is for this reason that Federal Government is pursuing the PPP initiative very vigorously.”
The Chairman of Bi-Courtney (the Concessionaire), Dr. Wale Babalakin, said: ” we entered the bid for the rehabilitation of the Lagos- Ibadan Expressway out of a strong belief that Nigeria’s development into glory will be championed only by Nigerians, as no one will love our country as much as we do. The desire to help restore Nigeria’s ailing infrastructures to world-class standards is demonstrably natural to Bi-Courtney”.
Lack of adequate preparation brought about delays in kick starting the project, and according to news reports, issues that ought to have been finalised, like project drawings were still being considered. A few months down the line, the project continued to run into hitches, and understandably so. Series of threats and negotiations went on almost perpetually and amid all of that, loss of human lives and properties ensued due to the terrible state of the project site and its continued deterioration.
Truth is, just like a nasty divorce proceeding with a complicated prenup, terminating a concession agreement can have huge financial implications in terms of compensation, legal fees and other ancillary costs. The process can be endless and marred by countless injunctions and directives and in the end, the damage may be irreparable.
What hope for PPPs in Nigeria? What has this done for the much needed investor confidence within our Country? How do we prove to the global community that we are serious about our development and bring in foreign direct investment?
More questions remain than answers and the only way this country can move forward is by changing its attitude towards PPP. Rather than viewing it as a venture to make money at all costs or a political decision that will add to campaign points, it should be seen as a real marriage akin to that between a man and a woman who plan to grow old together and inspire other young couples to do the same.