BusinessDay

PPP as driver to infrastructure development

The building and construction sector is one of the most crucial, mainly for its contribution to the basic human need of shelter, and the fastest growing industries in the Nigerian economy.

In the last three years, the industry has experienced rapid double-digit growth rates, outgrowing all other sectors in the economy.

In spite of this recent boom, the sector’s overall contribution to Gross Domestic Product (GDP) is still significantly low. Among other factors responsible for this slow impact is the shortage of funds for project execution. Infrastructure in Nigeria in particular has suffered some of the major consequences of deferred maintenance and underinvestment in the construction industry. This has constantly led to fatal building collapses, bad roads, and loss of lives and property.

More importantly, the need to act responsibly by other stakeholders of the road/street network cannot be over-emphasised

Working to solve these problems by creating lasting solutions, the Nigerian government has been leveraging public-private partnership (PPP) as its core strategy in the financing of infrastructure projects. According to the World Bank 2012, a PPP is a long-term contract between a private party and a government agency for providing a public asset or service, in which the private party bears significant risk and management responsibility.

Public-private partnership is a generic term that rightly describes the multitudes of structures put in place to pave the way for private sector involvement in the provision of public services.

It helps to ensure optimal use of resources as well as efficiency in service delivery. These added benefits translate to an increased value for money as a result of utilisation of private sector expertise and technology, leading to superior products and services at a lower cost.

Looking at infrastructure in Nigeria, this particular strategy is borne out of a desire to solve Nigeria’s huge infrastructural needs coupled with inadequate funding for such needs.

It has the capacity to both meet these needs and generate the requisite funds for the provision and management of these infrastructures. So far, quite a number of projects have been successfully executed over the years. Some very popular examples include the Lekki-Epe Expressway, the Lagos State Blue Line, and the domestic Wing of the Muritala Muhammed Airport General Aviation Terminal II, among others.

Recently, also in partnership with private sector players, the government established Infra-Co. a trillion naira ($2.4bn) company. This company is backed by the Central Bank of Nigeria, the Nigerian Sovereign Investment Authority, and the Africa Finance Corporation.

Infra-Co is expected to grow its capital and assets to N15 trillion over time and will fund public infrastructure projects like housing, road, rail, and power. It is also projected to help Nigeria achieve a GDP growth of 10 percent over the next 10 years.

Read also: Government must prioritise spending on infrastructure development – President, ECOWAS Bank

Interestingly, the PPP strategy has not only helped governments to procure long-term infrastructure services from private providers but has also brought about added benefits for other stakeholders. Private companies for instance have the opportunity to develop knowledge, experience, and skills, which can be constructively reapplied in the private sector.

They can also be provided with access to reduced risk, secure, long-term investment opportunities that are underwritten by government contracts. It has also drastically reduced construction costs and tax burdens on citizens, allowing funds to be redirected to other infrastructural projects.

Currently, the total construction project pipeline in Nigeria, as tracked by the Construction Intelligence Centre (CIC), including all mega projects with a value above $25 million, stands at N167.4 trillion ($511.7bn), with private sector involvement in a vast majority of the projects. This shows a promising outlook for Nigeria’s construction space.

It is projected that efforts to enhance transport and residential infrastructure will support the growth of the industry over the next few years. Considering the immense benefits provided by private sector participation, one can confidently say that the growth of the construction sector is on a steady, upward trajectory, triggering development at every level.

Although Lagos State is known for many things, it does not like to be known for its traffic jams, road congestion, and large numerous potholes along some major roads and streets. Indeed, the state has consistently been repairing several roads and in some cases, the construction of new roads and expansion of old ones have been the order of the day.

This is in addition to the rehabilitation of some federal roads such as the Apapa-Oworonshoki expressway pioneered by the Dangote Group of Companies with about 12-inch thick concrete-based road construction in recent times. Typical examples at the state level include the VGC fly-over and expansion of some portions of the Lekki-Epe road as well as the international airport road.

It is understood that the local government has a role to play in fixing the potholes within their areas of jurisdiction and so it is of every citizen to do what needs to be done to survive this rainy season.

To mitigate the cost, we have noticed some innovative and interesting interventions by the government through the models of ‘adopting’ roads and also some form of outsourcing to capable companies and institutions. This approach is commendable more so now that the purse of the state is increasingly shrinking.

More importantly, the need to act responsibly by other stakeholders of the road/street network cannot be over-emphasised.

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