Public Private Partnership, PPP, Infrastructure, Economic Growth, Infrastructure, Joint Venture Agreement, JVA, Finance.
For every developing economy like Nigeria, infrastructural development is usually at the forefront of government policies and this is because infrastructure is an important factor in the economic growth of a nation.
Infrastructure development is important for developing countries because it can help to improve the economy, reduce poverty, and improve the quality of life for citizens.
Infrastructure can help to improve economic growth by reducing transportation costs, increasing access to markets, and facilitating trade. For example, a well-developed transportation system can make it easier for businesses to transport goods and services to market, which can lead to increased sales and profits.
Infrastructure can help to reduce poverty by providing access to essential services such as clean water, sanitation, and electricity. For example, a well-developed water and sanitation system can help to prevent the spread of disease, which can improve the health of people living in poverty.
Infrastructure can help to improve the quality of life for citizens by providing access to education, healthcare, and other essential services. For example, a well-developed education system can help to improve the skills of workers, which can lead to higher wages and better job opportunities.
The importance of infrastructure development is especially pronounced in developing countries, where the lack of infrastructure can be a major obstacle to economic growth and development. By investing in infrastructure, developing countries can create a more conducive environment for businesses to operate and grow, which can lead to increased economic activity and job creation.
Developed economies like USA, China, Japan, Canada etc prioritise the building of infrastructure. By investing in infrastructure, these countries have created a foundation for economic growth and prosperity.
Although Nigeria is currently not financially buoyant and the economy is not at its best, infrastructure still needs to be funded. Therefore, Public-private partnerships (PPPs) are the best financial means to adopt instead of the traditional procurement system.
Public Private Partnerships
Public and Private Partnerships (PPPs) have emerged as one of the most important drivers of economic growth in Nigeria over the past few decades. PPPs are a type of collaboration between the public sector, such as the government, and the private sector, such as private businesses and organizations.
This collaboration between the two sectors can take many forms, from joint ventures to infrastructure projects to public-private investments. The public sector provides the public, goods or services, while the private sector provides the capital and expertise to develop and implement them. This type of public-private collaboration has been especially beneficial for Nigeria as it has allowed the country to develop the infrastructure and services necessary for economic growth. For instance, Nigeria was one of the first countries in Africa to adopt a public-private partnership model for the construction of roads and bridges, which has paved the way for further investment in the transportation sector.
There is no generally accepted definition of Public Private Partnership; it has been defined by the World Bank as A long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility and remuneration is linked to performance.[1]
It is a relationship between the public and private sectors that works to leverage each sector’s strengths and capabilities in order to create a business environment that is conducive to economic growth in Nigeria.
1. Types Of PPP
Concession Agreement: A concession agreement is a contract between a public sector entity (the grantor) and a private sector entity (the concessionaire). The grantor grants the concessionaire the right to provide certain services or products in exchange for a fee or other form of payment.
Service Contract: A service contract is an agreement between a public sector entity and a private sector entity for the provision of a specific service. The public sector entity pays the private sector entity for the service, which is typically provided over a specific period of time.
Lease Agreement: A lease agreement is an agreement between a public sector entity and a private sector entity for the leasing of public property. The public sector entity grants the private sector entity the right to use the property in exchange for a fee or other form of payment.
Build-Operate-Transfer: Build-operate-transfer (BOT) is a type of public-private partnership where a private sector entity finances, builds, and operates a project for a specific period of time. At the end of the contract period, the project is then transferred back to the public sector entity.[2]
Design-Build-Finance-Operate-Maintain: Design-build-finance-operate-maintain (DBFOM) is a type of public-private partnership where a private sector entity designs, builds, finances, operates, and maintains a project for a specific period of time. At the end of the contract period, the project is then transferred back to the public sector entity. An example of this is the Fourth Mainland Bridge proposed by the Lagos State Government.[3]
2. Legal and Regulatory Framework of PPP
In order to facilitate economic growth through PPPs, the Nigerian government has implemented policies and regulations that encourage and promote public and private partnerships. These policies are designed to protect the interests of both parties and to ensure that the PPP is mutually beneficial.
The Nigerian constitution provides the legal basis for PPPs, by allowing the government to enter into partnerships with private entities to provide public services and infrastructure. The Federal Government of Nigeria has established a legal framework for PPPs through the Bureau of Public Procurement Act of 2007 and the PPP Regulatory Framework of 2011. This framework outlines the procedures for entering into PPP contracts, the roles and responsibilities of the parties involved, and the dispute resolution mechanism.
In addition, the Nigerian Investment Promotion Commission (NIPC) is responsible for the promotion, coordination and regulation of investments in the country. NIPC provides a wide range of services to investors, such as providing information on the legal and regulatory framework for investments, and assisting investors in obtaining necessary permits and licenses. The NIPC also provides guidance on the implementation of PPP projects.
The Nigerian government has also established the Infrastructure Concession Regulatory Commission (ICRC) to facilitate the implementation of PPP projects. The ICRC is responsible for regulating the PPP process, promoting transparency and accountability, and ensuring that the public interest is protected.[4] The ICRC also provides technical assistance to the private sector in the preparation and management of PPP projects. The ICRC has the power to make regulations which are applicable only to PPP Projects undertaken by a public infrastructure entity of the Federal government.
The National Policy on PPPs was approved by the Federal Executive Council in 2009 with the objectives of attracting private investment into infrastructure projects, reducing the cost of infrastructure projects and improving the quality of infrastructure projects.
The Public Procurement Act (PPA) 2007 is the primary law governing public procurement in Nigeria. The PPA establishes a framework for the procurement of goods, works, and services by public bodies.
The legal and regulatory framework for PPPs in Nigeria is designed to promote the successful implementation of PPP projects. The framework provides a clear legal basis for the formation of PPPs, outlines the procedures for entering into PPP contracts, and provides guidance on the implementation of PPP projects.
3. Importance of PPP In Nigeria.
Public and private partnerships (PPP) have become increasingly important to the development of Nigeria in recent years. This form of collaboration has enabled the country to gain access to a range of resources and expertise, which can be used to improve the infrastructure and living standards of the population. It has been proven to be an effective way of delivering projects and services in an efficient and effective manner. By leveraging resources from both the public and private sector, Nigeria can benefit from the strengths and expertise of each. This can result in improved public services, better infrastructure, and higher economic growth.
Examples of PPP projects being carried out in Nigeria include the Mambilla Hydro Electric Power Project, which is a joint venture between the Federal Government of Nigeria and Chinese investors. The project aims to provide Nigeria with a reliable source of power and reduce its reliance on imported energy sources.
4. Benefits of PPP to the Nigerian Economy
The major benefits of PPPs to an economy are[5]:
Cost Savings: PPPs often reduce costs for governments by having the private sector partner bear a portion of the costs associated with a project. This can be beneficial for governments as they often have limited resources and can benefit from the private sector’s expertise in financing and managing projects.
Increased Efficiency and Quality: By having the private sector partner take on some of the risk and responsibility of a project, governments can benefit from increased efficiency and quality. The private sector partner is often more motivated to complete the project quickly and to a higher standard.
Job Creation: PPPs can lead to job creation in both the public and private sector. This is beneficial for economic growth and can help to reduce unemployment in the country.
Long Term Benefits: PPPs can also bring long term benefits to an economy by providing a reliable source of revenue for governments. This can help to fund public services such as healthcare, education and transportation. For example, the Lagos State Metro Rail Project will help to decrease the traffic congestion in the state, create new jobs for citizens and enhance productivity and increase quality of life as number of hours spent in traffic will drastically reduce. The Ajaokuta Steel Project, though riddled with many implementation problems is currently a subject of a PPP. The project is expected to boost to the country’s infrastructure development, by providing steel for the construction of roads, bridges, and other key infrastructure projects, making a significant contribution to the country’s Gross Domestic Product (GDP) and employment opportunities.,[6] and causing an increase in foreign exchange earnings,[7]
Other benefits of the project are that it will enable a decrease in the country’s reliance on imported steel, as the project will provide a large supply of locally produced steel. And ensure a reduction in the amount of money spent on importing steel products, thereby freeing up resources for other economic activities.
5. Challenges of PPP
PPP has proven to be successful in Nigeria, as evidenced by the completion of several important infrastructure projects such as the Abuja-Kaduna-Kano highway and the Murtala Muhammed International Airport, however, it is faced with some challenges. One of the most significant of these is the lack of political will to implement and sustain them. This is due to the fact that politicians are often unwilling to invest the necessary resources and effort into PPPs, as they do not always provide immediate and tangible benefits.[8]
Furthermore, PPPs are often plagued by delays and cost overruns, which can be attributed to the lack of clear and transparent regulations and procedures.
Another challenge is lack of public awareness and understanding.[9] The general public in Nigeria is not well informed about the benefits and risks associated with PPP projects. This has led to a lack of public support and participation in the implementation of PPP projects. In addition, the lack of public awareness has also resulted in the inadequate monitoring of PPP projects, which can lead to mismanagement and corruption.
6. Conclusion
In order to maximize the potential of PPPs as a tool of economic growth in Nigeria, it is necessary to ensure that the necessary policies, regulations, and procedures are in place. This can be done by creating an enabling environment, which includes clear and transparent contracting and regulatory processes, as well as a clear and consistent framework for monitoring and evaluating PPPs. Furthermore, it is important to ensure that the necessary resources are available to support PPPs, such as financing and technical expertise.
Finally, it is important to ensure that the public sector and private sector collaborate effectively, as this is essential to the success of PPPs. In conclusion, PPPs have the potential to be a powerful driver of economic growth in Nigeria. However, in order to maximize the benefits of PPPs, it is necessary to ensure that the necessary policies and regulations are in place, and that the public and private sectors work together effectively. By doing so, PPPs can help to improve the quality of services and infrastructure in Nigeria, leading to increased economic growth.
Endnotes
[2] Ibid.
[3] PPP-Lagos (lagosstate.gov.ng) last accessed on 30 January 2023.
[4] The Nigerian PPP Network https://www.icrc.gov.ng last accessed 31st January 2023.
[5] Ibid.
[6] The project has the potential to create up to 100,000 direct and indirect jobs.
[7] The project is expected to generate export earnings for Nigeria.
[8] Risks and Challenges in Public-Private Partnership Projects in Nigeria. https://www.nomos-elibrary/ last accessed 31st January 31, 2023.
[9] Ibid.
Originally published by Oluwamayowa Olaoba, ACIArb on Linkedin
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