Private participation in infrastructure is arguably the most reliable approach for alternative infrastructure financing; hence, the upsurge on government collaboration with the private sector to procure public infrastructures through Public Private Partnership (PPP). While attracting private investors to participate in infrastructure procurement has become notably demanding for frontier markets for reasons well-known, different suggestions have been put forward as the right avenue to gain investors’ confidence. One such advice underscored the need for Government to look more closely at their activities and strengthen drivers deterring private investments. Though the private sector can help make markets more efficient, it is the Government that provides the structure in which the markets work and the private sector willing to participate.
As aforementioned, the focus is on how frontier markets, in desperate need of infrastructure and GDP growth, can capitalise on the opportunity investment in infrastructure provides to spur regional economic prosperity. To do this, the article supports developing appropriate structural strategies to strengthen the chances of those infrastructures –– critical to the growth of frontier markets –– but are not attractive to investors due to doubt on bankability issues. Structuring, in this context, connotes various strategies and measures Government can utilise to promote regional infrastructure to be attractive to investors for procurement through PPP. This area of discussion has remained vastly unexplored in research because of limited standard practices or governance design that can fit into frontier market structures, methods and objectives.
Nigeria, with its six geopolitical regions, is not left out of this challenge. Even though the country achieved modest economic growth since 1999 when democratic governance returned after a decade and half of the military rule; its potential to achieve higher growth is limited by lack of adequate economic and social infrastructure; especially in states outside the economic and administrative capital of Lagos and Abuja respectively. Although, the Government is already determined to use PPP model to augment public sector procurements and has shown enough political commitment albeit rhetorically; attracting private capital to develop, upgrade and maintain its ageing large-scale infrastructures, in order to stimulate national economy requires more than rhetorical commitment. It requires establishing appropriate capacities, institutional settings and relevant regulatory frameworks. Of central concern in Nigeria’s regions is the fragmentation of the market with various small projects lined up for PPP adoption in multiple states with different governance structures.
Admittedly, this experience is not limited to Nigeria alone as various developing countries within the frontier market in sub-Saharan Africa, the Middle East and Northern Africa and South-East Asia experience absence of uniformity of approach and governance structure.
For positive results, it is recommended that the Federal Government re-structure the PPP settings and embrace uniformity of governance structure as well as develop a regional level approach that mandate regional or provincial clustering of all small projects within the region targeted towards PPP procurement. This will ensure all small infrastructures in one family unable to attract investors independently are grouped as a single large project to improve its chances of attracting investors and optimising good project investment. The idea is similar to bundling procurement –– not the prevailing bundling project stages. The core promises of this clustering would enable the realisation of economies of scale, the expansion of infrastructure development in neglected regions and stimulate regional economic growth.
This is exemplified in the work undertaken by the author and his team of local PPP advisors, with interest in developing regional infrastructures in Nigeria. They met with few state governors’ representative in South-East region of Nigeria at the 3rd Southeast Economic Summit in December 2018 to discuss the potential benefits of regional clustering. Although, the state governors thought that the projects be executed within their respective states and not across the region due to their diverse PPP governance structures. Being practical, the team explained to the governors that PPP is a costly procurement option for small projects. Subsequently, we recommended that the state governments within the region come together and consider integrated transport infrastructure projects that will cut across all state capitals and market hubs in the area, as investors would find such projects large and attractive due to its potential to meet required traffic demand that can optimise the return of good investment.
Understandably, this approach has its demerits, such as other states economic infrastructure needs being at variant with that of the project originating State, multidimensional governance structures and reluctance to provide equity contribution in extreme scenario. Providing a well-structured clustering solution to regional infrastructures is an innovative strategy likely to produce higher numbers of PPP modelled projects and solve the severe shortage of economic infrastructure in the region to boost regional economic growth through infrastructure investment.
Currently, the team is on the verge of setting up South-East Council for Public-Private Partnerships (SENCPPP) to oversee the structuring of this regional clustering of small projects, harmonise the governance structures and present to South-East Governors by March 2020. Subsequently, we plan to initiate a similar approach in all other geographical zones in Nigeria if the Government at the centre and regions show commitment and political support.
Dr Anago is a UK trained PPP Expert and a Lecturer in Banking and Finance Department, University of Nigeria, Enugu Campus.