FG turns to PPP scheme to close $2.3trn infrastructure deficit

…as experts seek legal certainty, transparency

As the federal government intensifies efforts to close Nigeria’s vast infrastructure deficit estimated at $2.3 trillion between 2020 and 2043 through the Public-Private Partnership (PPP) scheme, experts have said that such arrangements must be hinged on institutional transparency and legal clarity, noting that private capital will remain elusive without a predictable legal environment.

The federal government in 2005 enacted the Infrastructure Concession Regulatory Commission (ICRC) Act to provide for the participation of the private sector in financing the construction, development, operation, or maintenance of government infrastructural projects.

Speaking on the sidelines of the Global Infrastructure Facility, a G20 initiative, at the IMF/World Bank Spring Meetings in Washington in April this year, Jobson Ewalefoh, director-general of the Infrastructure Concession Regulatory Commission (ICRC), said the country requires about $100 billion annually over the next 23 years to meet its infrastructure needs.

Ewalefoh noted that budgetary allocations remain insufficient to meet this demand, making private sector participation critical to delivering infrastructure projects across the country.

According to him, PPPs provide a practical solution to Nigeria’s funding constraints by reducing reliance on public budgets and enabling sustainable infrastructure financing through long-term investment recovery mechanisms for private investors.

However, experts who spoke to BusinessDay said that PPP arrangements, whether in the form of outsourcing or partnering with the private sector to ensure effective delivery on infrastructural projects, have suffered setbacks in Nigeria due to a lack of trust in governance, disregard for the rule of law, policy inconsistency, and corrupt practices in government.

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Speaking to BusinessDay, Bamidele Ayo, an Abuja-based economist, noted that while PPP frameworks have successfully transformed infrastructure in other emerging economies, the model has not recorded much success in Nigeria due to a fundamental lack of confidence in government policies.

“The problem we have in our Nigerian context is lack of trust in the manner it is being carried out,” Ayo said. “What we have seen in the past is that the government still ends up being the one carrying out most of the supposed PPP projects, while the private sector pulls back because they don’t trust government policies.”

Ayo stressed that the government’s historical disregard for contractual agreements remains a significant deterrent for local and international investors.

“Before we talk about private and public partnership, do you think this government recognizes the private sector? I don’t think so. No one will enter into any of such agreements with a government that has seemed to be above the law,” he added.

Ayo also highlighted the conflicting interests between the state’s socio-economic goals and the private sector’s profit motives. Noting that infrastructure projects are capital-intensive and have long gestation periods, Ayo stressed that making them financially viable is critical to attracting a wider pool of investors.

“Infrastructural projects often take several years before one can enjoy a return, and this is where most investors get discouraged,” Ayo explained to BusinessDay. “Investors are mostly interested in financial gains, while the government’s considerations might be non-financial. Both interests often appear to be in conflict.”

He further pointed out that the lack of consistency in government services renders most projects unbankable, making them look too expensive for the public sector to subsidise and excessively risky for private financiers.

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Also speaking to BusinessDay on the issue, Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), said, “First, there has to be a legal framework that will inspire confidence in the private sector.”

He emphasised that while partnering with the government can be risky, the presence of a legal framework can give private sector partners a high level of confidence. Given that infrastructure concessions typically span longer periods, Yusuf emphasised that the government must absorb non-commercial risks, particularly political risks, to provide comfort to investors.

“There are some risks that the private sector will not take when it comes to public sector projects. For instance, political risk. This government comes, and another one comes and changes the project or changes the terms of the contract. That is not a business risk. So, the risk-sharing framework must give comfort to the private sector,” Yusuf noted.

He also decried the current opaque approach where the government clamours for partnerships without presenting concrete project pipelines. For him, a major missing link in Nigeria’s PPP drive is the lack of accessible, well-packaged data for potential investors.

“We should not just talk of PPP, PPP, but when people ask, ‘Where are the projects?’ nobody is able to put projects on the table.”

“The government should provide a lot more information about all the available projects so that they can invite the private sector. They can even do some feasibility studies ahead and package it together for people to see what they can pick. That is how you market the project,” Yusuf added.

He channels the need for the government to focus strictly on bankable projects that can guarantee cash flow and liquidity to repay investments.

For My-ACE China, chief executive officer of the Mayor of Housing Limited, the government must ensure that deals under public-private partnerships (PPPs) are devoid of political interference in bridging Nigeria’s infrastructure gap.

“What will bridge that gap is a functional PPP, not a non-functional PPP. A functional PPP is a public-private partnership, while the non-functional PPP is a public-political partnership.

“Any PPP devoid of politics delivers, and we are not just saying this, but we have tested this. We have practitioners that are running with this, and as far as we are concerned, political correctness is just another term for lack of political will. When there is political will, you don’t need reforms.”