Osinbajo Blames Low Delivery of PPP Projects on Approval Processes, Unwieldy Project Appraisal

0

Ndubuisi Francis in Abuja

The Vice President, Prof. Yemi Osinbajo, has regretted the low level of completed Public-Private-Partnership (PPP) projects in the country, blaming the trend on encumbrances arising from approval processes and unwieldy project appraisal.

He called for innovative ways to help reduce the time frame for delivering projects while still ensuring that only those of very high quality are delivered.
“The number of PPP projects that have been concluded in this country so far is quite low. This is partly because of unwieldy project appraisal and approval processes.

“One obvious solution is improved coordination between the different parties and institutions involved in project delivery,” he said in an address he presented in Abuja yesterday at a knowledge sharing forum organised by the African Development Bank (AfDB) in collaboration with the Federal Ministry of Finance.

The vice-president also pointed out that there is very limited capacity within Ministries, Departments and Agencies (MDAs) to deliver PPP projects.

“Yet at the minimum, MDAs should have in-house staff with requisite skills in financial, legal, technical, procurement and project management areas to be able to deliver on such projects.
“Capacity building efforts, including training and availability of resource materials would be inevitable.  In the short run however, one tried and tested way is learning by doing which can be achieved by contracting consultants to assist but in a manner that ensures eventual transfer of knowledge to the public sector.

“In particular, public servants have to be involved in actual transactions and negotiations,” he said.
Commending the organisers for the theme of the forum.

“PPPs as a Stable Financing Vehicle for Infrastructure Development in Nigeria,” Osinbajo noted that a forum such as that would undoubtedly contribute to finding solutions on how to raise the required finance for investment in much needed infrastructure.

“Empirical evidence abounds that there is a positive correlation between investment in infrastructure and economic growth. Infrastructure not only improves the quality of life of citizens but also has a multiplier effect on employment and productivity.

“However, the quantity and quality of our infrastructure is exceedingly low, mainly due to low levels of investment over the years and a poor maintenance culture. This has significantly hindered the country’s economic growth.

“The National Infrastructure Master Plan states that Nigeria’s current infrastructure stock is at about 20 per cent to 25 per cent of GDP, which is way below the international benchmark of about 70 per cent.
“There are also various estimates about the impact of infrastructure on growth but the broad consensus is that the relationship is a positive one if the example of countries like China is anything to go by,” the VP said.

Accordingly, he noted that given its significant infrastructure deficit, Nigeria is most likely to experience growth if significant investment is made in the building of roads, bridges, railways, ports, airports, housing, dams, telecommunications facilities and electric power.

“It is for such reasons that the administration of President Buhari has made investment in infrastructure a major priority and policy focus. In the 2016 budget, government has proposed to spend N1.84 trillion on capital projects, amounting to about 30 per cent of the entire budget.

“Even though this is unprecedented in recent times, there is a realisation that this figure is still way below what the country should ideally be investing in infrastructure.
“For instance, it is estimated that Nigeria requires about $25 billion annually for the next 10 years to grow its infrastructure to sustainable levels.

“It is obvious that this cannot be funded entirely by the public sector which brings the Public-Private Partnerships (PPPs) model to the forefront of our considerations,” Osinbajo stated.
He noted that while paucity of funds is one of the major reasons for looking at PPP opportunities, there are other advantages to be derived.

“Some of these include a more efficient procurement regime, rigorous analysis and market testing of costs, as well as more efficient operation and maintenance of infrastructure.

“Of course, PPP as a concept is not new to Nigeria as attested to by the establishment of the Infrastructure Concession Regulatory Commission in 2005. However, very few PPP projects have been delivered over the years. There are several reasons for this state of affairs which will no doubt be extensively debated at this forum.  “However, let me speak to some of them including the issues of capacity, an enabling environment, speed of delivery, bankability and good project management.

“As things stand there is very limited capacity within ministries, departments and agencies to deliver PPP projects. Yet, at the minimum MDAs should have in-house staff with requisite skills in financial, legal, technical, procurement and project management areas to be able to deliver on such projects. Capacity building efforts including training and availability of resource materials would be inevitable,” he said.

He added that it was self-evident that a key factor for attracting private sector finance is a predictable and enabling policy as well as legal and institutional environment.
“This forum presents another opportunity for a thorough analysis of our policy, legal and institutional framework for PPPs, including assessing whether the current framework provides enough incentive for local and foreign investors alike.

“Nigeria clearly requires a PPP regime that matches its ambitions.  A closely related issue is whether we have the appropriate framework to enable the use of our very large and growing public pension assets estimated at about N5.3 trillion for the provision of infrastructure without putting these assets at risk.

“The number of PPP projects that have been concluded in this country so far is quite low. This is partly because of unwieldy project appraisal and approval processes.

“One major hindrance to financing of PPP projects has been that majority of them have not been able to secure financing. This has been attributed primarily to the projects not being “bankable” and often relying on government guarantees in order to progress to implementation.

“We must use this forum to discuss ways of ensuring that more projects become bankable and that we do not allow a project guarantee dependent culture take root,” the vice-president stated
According to him, following due process and leading international best practices when developing projects are essential to raising finance for projects.

“There have been cases where projects have been denied funding due to the fact that project proponents have neglected to follow due process such as complying with procurement laws to acceptable environmental and resettlement processes.

“Also, PPPs must put people first and it is essential to ensure public participation in the decision making process so that projects reflect the priorities of the populace,” Osinbajo noted.