Vice-President Yemi Osinbajo’s oft-reiteration that the only way to effectively address the massive infrastructure deficit that the country faces is by Public-Private Partnership (PPP) arrangement in one form or the other could be the panacea for Nigeria’s socio-economic development.
Citing statistics from Nigerian Integrated Infrastructure Masterplan (NIIMP) and the Economic Recovery and Growth Plan (ERGP) 2017-2020 to buttress his point, Professor Osinbajo said “Nigeria will require at least $3 trillion over the next 30 years to bridge this gap.
The vice-president made the statement last week at the opening of a 2-day retreat of the National Council on Privatization (NCP). The retreat, among other things, deliberated on the proposed amendment of the Public Enterprises (Privatization & Commercialization) Act 1999.
“The review of budgetary allocation for capital expenditure even over the past decade will show that government’s resources are completely insufficient for this purpose.”
In a statement signed by his media aide, Laolu Akande, Osinbajo said that while government can take either commercial or concessionary loans for infrastructure development, this is an additional burden on a usually considerably leveraged balance sheet.
“There is a large pool of investable funds from both local and international investors for the development and maintenance of infrastructure. But these are only accessible where there is a business case to be made for developing public infrastructure”.
The vice-president had in December said a realistic solution to Nigeria’s infrastructure deficit would be a strong synergy between the public sector and the private sector of the country. He said deepening infrastructure would require adopting new models of investment, among others, as reliance on public expenditure alone is no longer sufficient to meet the need.
Speaking at webinar forum organised by the BPE to discuss measures to deepen Nigerian infrastructure stock through PPP, Osinbajo said that in spite of government’s interventions over the years, Nigeria still faces a huge infrastructure deficit which is constraining rapid economic growth.
“It is clear that this deficit can only be made up by private investment. Private sector is 92 per cent of GDP while the public sector is mere eight per cent; so, the synergy between the public and private sector through Public-Private Partnerships (PPP) is really the realistic solution”.
Osinbajo said that the federal government would have to spend the entire revised 2020 appropriation of N10.81 trillion continuously for the next 108 years or more on capital expenditure (CAPEX) to meet that target.
“The fact that only N2.49 trillion was appropriated for capital expenditure in 2020 reflects the importance of deliberate and pragmatic action to boost infrastructural spending. It seems to me to be quite clear that the financial outlay and management capability required for infrastructural development and service delivery outstrip the financial and technical resources available to government.
” In other words, the traditional method of building infrastructure through budgetary allocations is inadequate and set to become harder because of increasingly limited fiscal space”.
On the benefits of effectively implementing PPP arrangement for Nigeria, he said if properly designed and executed, PPP models would unlock innovative infrastructure financing and management in a transparent and more efficient manner.
According to him, Nigeria using PPP frameworks will benefit immensely from huge local and foreign private sector resources. He said that the federal government was leveraging on the partnership with the private sector to bridge the huge infrastructure gap.
“The federal government has recently issued a circular on the administration of PPP projects in the country to provide the much-needed clarity. The circular re-emphasises that the BPE shall be responsible for the concession of public enterprises and infrastructure already listed in the First and Second Schedules of the Public Enterprises Act.
“The circular equally stipulates that the BPE shall act on behalf of the Federal Government as the counterparty on all infrastructure projects being developed on a PPP basis,” he said.
He said the Infrastructure Concession Regulatory Commission (ICRC) would continue to act as the regulatory agency for PPP transactions with powers to inspect, supervise and monitor projects and processes in order to ensure compliance with relevant laws, policies and regulations.
“It is expected that this new policy direction would provide clarity to stakeholders and foster the improvement of PPP programmes in the country. Ministries, departments and agencies, as well as the multilateral agencies and our development partners, are urged to support the PPP policy objectives and institutional arrangements already put up by government,” he said.
Osinbajo said that the federal government through the Central Bank of Nigeria (CBN), Nigerian Sovereign Investment Authority and African Finance Corporation and other financial institutions would be creating a N15 trillion Infrastructure Fund. According to him, the fund will help to, not only unlock investment from local sources but also attract foreign private investment in infrastructure development.
Without a doubt, the huge infrastructure gap, especially in key sectors of the economy such as power, roads, health, water, among others, is stifling the nation’s industrial and technology development with the attendant backlash of an incessant relapse of the economy into recession.
It is on the backdrop of this sordid reality that we align with the PPP postulation by the vice-president. The PPP model is not peculiar to Nigeria as it is being adopted even by the advanced economies for accelerated and sustainable social, political and economic development.