All infrastructure projects in Nigeria will henceforth be screened for Public Private Partnership (PPP) suitability and compliance with the National Integrated Infrastructure Master Plan by the Ministry of Finance, Budget and National Planning and the Bureau for Public Enterprises (BPE) before inclusion in national budgets and subsequent procurement.
Zainab Ahmed, Minister of Finance, Budget and National Planning, announced this on Thursday while speaking at a webinar on ‘Financing Public Private Partnership (PPP) to Boost Infrastructure Delivery in Nigeria’ organised by the Bureau for Public Enterprises (BPE).
The new policy, which takes effect from the 2021/2022 budget cycle, is part of efforts to ensure that PPP takes a centre stage in the procurement of infrastructure in Nigeria amid low revenues.
Nigeria’s huge infrastructure deficit is estimated to require an additional US$408 billion (almost N150 trillion) of investment, over and above current trends, cumulatively by 2040.
Also, the Nigerian Integrated Infrastructure Masterplan and the Economic Recovery & Growth Plan report estimate that up to $3 trillion funding is needed over the next 30 years to close the deficit.
As fiscal constraints worsen, the government is now pushing beyond budgetary allocations and has adopted the PPP strategy to access significant resources from both local and international investors for investment in infrastructure.
But despite the effort, the government has not been able to fully unlock the potentially huge benefits afforded by PPPs, due to the absence of a comprehensive PPP framework setting out institutional responsibilities, which would provide investors with the necessary comfort to commit capital towards infrastructure development.
“The government is ready and willing to dialogue and incorporate valuable suggestions from stakeholders with a view to further strengthening Nigeria’s PPP framework,” said Ahmed, who is also the vice-chairman of the National Council on Privatisation (NCP).
She solicited the support and cooperation of the public and private sector partners, local and foreign partners, financial institutions and other key stakeholders towards the successful implementation of the government’s new PPP policy directive.
In his presentation, Kingsley Obiora, Deputy Governor, Economic Policy, Central Bank of Nigeria (CBN), confirmed that plans were being finalized for the take-off of the N1 trillion world-class infrastructure development vehicle called ‘The Infrastructure Corporation of Nigeria (InfraCorp)’.
InfraCorp fund is a N15 trillion vehicle denominated in naira to totally avoid or substantially mitigate foreign exchange risk.
Already, the CBN, Nigeria Sovereign Investment Authority (NSIA), and the African Finance Corporation (AFC) have jointly contributed the N1 trillion start-up capital after President Buhari gave the nod in February.
The proposed equity will be leveraged and managed by Independent Infrastructure Fund Managers and will be utilized to support the Federal Government in building the transport infrastructure required to move agriculture products to processors, raw materials to factories, and finished goods to markets.
Obiora said considering government fiscal constraints, local and international institutional investors must also be crowded-in at scale, leveraging the significant appetite for infrastructure investment, both globally and locally.
According to him, estimates suggest that up to US$550 billion (almost N200 trillion) of international investor funds could be available today for Africa’s infrastructure, with the right interventions.
In Nigeria, banking sector assets have grown to over N23 trillion, while pension funds hold over N10 trillion of assets.
Explaining the rationale behind InfraCorp, Obiora noted that mobilizing and catalysing private capital requires an institution with independence, specific expertise and a long-term focus.
“InfraCorp will operate as an independent internationally-rated fund that will develop the critical infrastructure required to deliver goods and services to markets across states and borders,” he said.
In his remarks, the Director General of the Bureau of Public Enterprises (BPE), Alex Okoh, said in line with its new role in the government’s Administration of Concession Programme, the Bureau in collaboration with the finance ministry developed a Public Private Partnership (PPP) Project Information tool which has been forwarded to all the Ministries, Departments and Agencies (MDAs) to capture all current and proposed infrastructure projects in the country.
He said this will help document a pipeline of PPP projects across various sectors of the economy and that a number of the MDAs have already submitted their PPP Project Information Data. The final date for submission is May 31, 2021.
He also announced that the Bureau would partner with the United Kingdom Nigeria Infrastructure Advisory Facility (UKNIAF) to screen projects to ensure that only projects that are financially as well as economically viable are included in the ‘National Pipeline of PPP Projects. The BPE also intends to establish a revolving Project Development Fund (PDF) for PPP transactions, Okoh added.
While stating that funds realised from the pool would be used to facilitate the proper structuring of PPP transactions, he expressed the hope that financial institutions would support the initiative to increase the number of viable projects that could be successfully brought to commercial and financial close in the infrastructure space through PPPs.
The Director General stated that considering the huge gap in infrastructure stock in the country and the quantum of funding required to bridge this gap, the role of private sector financing through PPPs has assumed a very significant importance.
He said to unlock the requisite financing from the private sector – who would typically raise investment capital through equity, as well as long-term debt from financial institutions – it is important that Nigeria’s PPP policy framework is unambiguous and in tandem with international best practises and adhere to the rules that guide issues around bankability.