Nigeria’s first 10 Highways for Concession to attract N163.32bn capital
The total direct investment expected in the ten (10) selected first phase routes under Nigeria’s Highway Development and Management Initiative (HDMI) is estimated to be N163.323billion, BusinessDay has learnt.
Total length of the Federal Road Network is 35,000km. Total length of the proposed 10 Value-Added Concession first phase routes is approximately 2,275.385km.
The Lot-1 routes are Asaba – Agbor, Abuja – Sheda, Kaduna – Zaria, Onitsha – Owerri, Shagamu –Ajebandele, Abuja – Keffi, Kano – Shuari, Lokoja – Okene, Enugu – Umuahia, and Ilorin – Jebba.
Before this newest development, most of these roads contracts are fund through Sukuk, Nigeria Sovereign Investment Authority, FMWH, China EXIM/FGN, etc.
The 10 routes being concessioned are commercially attractive as evidenced by predictable and high traffic volume, significant enough to generate sufficient revenues to cover debt service requirements.
A Tolling Policy is in place to guide tolling activities, giving a high measure of security to potential investors. Concessionaires will be able to earn a predictable and stable income through revenue generating assets.
“I see major opportunities”, Gbite Oduneye, Founder and CEO of A&O Acquisitions, a boutique investment firm with an African focus with offices in London and Lagos.
The Federal Ministry of Works and Housing (FMWH) under its statutory responsibility over the Federal road network conceptualized a land value capture initiative titled the Highway Development and Management Initiative.
Also, the Value-Added Concession (VAC) initiative has the potential to generate N326.647billion in direct capital investment with additional 10 routes.
The objectives of the Initiative include: to attract sustainable investment/funding in the development of road infrastructure; and to maximize the use of assets along the Right of Way and also develop other highway furniture.
The initiative is anchored on private sector engagement to carry out the development and management of road networks. The rationale behind private sector engagement is that it provides an avenue to mitigate paucity of funds which has hindered road development in the past.
The structure under the Value Added Concession will involve a Special Purpose Vehicle (SPV). The SPV under a VAC with road pavement maintenance would involve more parties as there is the added element of rehabilitation and maintenance of the road pavement; while under the Value Added Approvals (VAA), assets are unbundled and approvals given on a build, operate and maintain basis. Meaning that road reserve users would apply directly to the FMWH for the requisite approvals/licenses.
The SPV/Concessionaire will develop the highway right of way, inclusive of but not limited to construction/rehabilitation of the road pavement, streetlights, directional signage, advertisement assets and telecommunications facilities, in accordance with the concession agreement. Financing will be arranged through the SPV and all legal and financial agreements with various parties/stakeholders of a project are accorded with the SPV.