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His Excellency,
Dr. Goodluck Ebele Jonathan, GCFR PRESIDENT, Federal Republic of Nigeria
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His Excellency,
Arc. Namadi Sambo, GCON Vice President, Federal Republic of Nigeria
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His Excellency,
Chief Ernest Shonekan, GCFR, CBE Chairman, Infrastructure Concession Regulatory Commission Governing Board
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ICRC Governing Board Members
Mohammed Adoke, SAN
Alhaji Yayale Ahmed
Attorney General of the Federation and Minister of Justice
Secretary to the Government of the Federation
His Excellency,
Chief Ernest Shonekan, GCFR, CBE Chairman
Mallam Sanusi Lamido Sanusi
Mr. Olusegun Olutoyin Aganga
Governor of the Central Bank of Nigeria
Minister of Finance
Bernard B.A. Verr, PhD, MBA, FCA. Chairman, Board Audit and Technical Committee
Mazi Clement Owunna, MFR.
Chief Joe Kyari Gadzama, MFR, SAN Chairman, Board Contract Compliance Committee
Comfort Sira Wiwa
Chairman, Board Finance and General Purpose Committee
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Dr. Aisha Isah Madawaki, MFR. Chairman, Board Human Resource and Establishment Committee
Engr. Mansur Ahmed DG, ICRC & Secretary to the Board
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ICRC Board Committees
Human Resources and Establishment Committee 1. 2. 3. 4. 5. 6. 7.
Dr. Aisha M. Isah, MFR (Chairman) Chief Joe-Kyari Gadzama, SAN Dr. Ben D. Ibe (Rep of SGF) Prof. Peter Akper (Rep of AGF) Engr. Mansur Ahmed Dr. Ghaji Bello Mr. Mohammed Bamalli (Secretary)
Finance and General Purpose Committee 1. 2. 3. 4. 5. 6. 7. 8.
Mazi Clement Owunna, MFR (Chairman) Comfort Sira Wiwa Dr. Bernard Verr, FCA Mr. Aliyu Ismail (Rep of Minister of Finance) Dr. Ben D. Ibe (Rep of SGF) Mr. Garba Ahmed (Rep of CBN Governor) Engr. Mansur Ahmed Dr. Ghaji Bello (Secretary)
Audit and Technical Committee
Contract Compliance Committee
1. 2. 3. 4. 5. 6. 7. 8.
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Dr. Bernard Verr, FCA (Chairman) Dr. Aisha M. Isah, MFR Engr. Ebele Okeke, CFR Dr. Solomon Akpata Mr. Ballama Manu Dr. Joyce Wigwe Engr. Mansur Ahmed Engr. Chidi Izuwah (Secretary)
Chief Joe-Kyari Gadzama, SAN (Chairman) Amb. Aluko Olokun Mazi Clement Owunna, MFR Comfort Sira Wiwa Prof. Peter Akper ( Rep of AGF) Engr. Mrs. Mayen Adetiba Engr. H. Z. Abubakar Dr. Jamil Gwamna Engr. Mansur Ahmed Aminu Diko (Secretary)
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ICRC Executive Management Team
Engr. Mansur Ahmed Director General
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Dr. Ghaji Bello
Engr. Chidi Izuwah
Executive Director, Support Services
Executive Director, PPP Resource Centre
Mr. Aminu Diko Executive Director, Contract Compliance Centre
Mr. Chiedu Ndubisi
Mr. J.A.M. Ohiani
Technical Adviser to the Director General
Head, Legal and Governance & Secretary, Executive Management Team
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ICRC General Management Team Mr. J.A.M. Ohiani
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Head, Legal and Governance
Mr. Mohammed A Bamalli
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Head, Human Resources and Administration
Mr. Chiedu Ndubisi
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Technical Adviser to the Director General
Mr. Togunde Dada Hammed
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Head, Internal Audit
Mr. Emmanuel O. Onwodi
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Head, Finance and Accounts
Mr. Olugbenga Odugbesan
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Head, Communications
Mr. Kabiru Bamidele Yusuf
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Head, Procurement
Mr. Danlami Gomwalk
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Senior Project Manager
Mr. Nyananso Gabriel Ekanem
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Head, Monitoring and Compliance
Mr. Ewalefoh Oseodion Jobson -
Head, Information and Communication Technology
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TABLE OF CONTENTS
ICRC’s Mandate ............................................................................................... Chairman’s Statement ...................................................................................
12 13
1.0 1.1. 1.2. 1.3. 1.4.
BACKGROUND ................................................................................................. Infrastructure need ......................................................................................... ICRC Governing Board Inauguration ............................................................ Presidential Charge .......................................................................................... Government Expectation ..............................................................................
16 16 16 17 18
2.0 2.1. 2.2.
INSTITUTIONAL STRUCTURE & GOVERNANCE .............................. Structure and Functions ............................................................................... HR Recruitment .................................................................................................
19 19 20
3.0 3.1. 3.2. 3.3. 3.4. 3.5. 3.5.1. 3.5.2. 3.5.3. 3.5.4. 3.5.5. 3.5.6.
POLICY AND PROCEDURE GUIDES ....................................................... National Policy on Public Private Partnership ...................................... Operational Guide ......................................................................................... Transitional Arrangements ......................................................................... Enabling Environment .................................................................................. Legacy Projects ............................................................................................... Concession of Lagos – Ibadan Expressway ........................................... Concession of Nnamdi Azikiwe International Airport ...................... Port Concessions ............................................................................................ Rail Concessions .............................................................................................. Katampe ............................................................................................................. Dadin Kowa .......................................................................................................
21 21 22 23 24 25 25 25 26 26 26 26
4.0 4.1. 4.2. 4.3. 4.3.1. 4.3.2. 4.3.3. 4.4.
PIPELINE OF PPP PROJECTS .................................................................... Current Approach ........................................................................................... Market Expectations ...................................................................................... First-Mover and Quick Win Projects ......................................................... The Nigerian Railway Corporation (NRC) .............................................. Transport Sector – Roads etc ...................................................................... Transport Sector - Airports .......................................................................... Power Sector .....................................................................................................
27 27 27 27 28 28 28 29
5.0 5.1. 5.2.
CAPACITY BUILDING .................................................................................. Commencement of Capacity Building for ICRC & MDAs ................. Study-Tours learning from other PPP Regimes ....................................
30 30 31
6.0 6.1. 6.2.
COOPERATION WITH DONOR– AGENCIES ....................................... DFID - NIAF ....................................................................................................... WBG - PPP Projects .........................................................................................
32 32 32
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6.3. 6.4. 6.4.1. 6.4.2.
AFDB .................................................................................................................... Others ..................................................................................................................... AGENCE FRANCAISE DE DEVELOPMENT (AFD) ...................................... Partnership UK .....................................................................................................
33 33 33 34
7.0 7.1. 7.2. 7.3. 7.4. 7.5. 7.6.
STAKEHOLDER ENGAGEMENT ................................................................... Financial Sector .................................................................................................... MDAs & State Governments ........................................................................... Steering Committee ........................................................................................... National Assembly .............................................................................................. Investors, NGOs & Others ................................................................................ Coordination between ICRC and BPE .........................................................
35 35 35 36 36 37 37
8.0 8.1. 8.2. 8.3.
INTERFACE WITH STATES .............................................................................. Building a National Framework ...................................................................... Building a Coherent Market for PPP Projects ........................................... Federal Government support to State projects ........................................
38 38 38 39
9.0 9.1. 9.2. 9.3. 9.4. 9.5. 9.6.
KEY ISSUES ............................................................................................................. Regulatory and Institutional Environment ................................................. Institutional Capacity for PPP Project Development .............................. Cooperation of MDAs ........................................................................................ Legacy Projects .................................................................................................... PPP Pipelines ......................................................................................................... Consultancy and Transaction Advisory Services .......................................
40 40 40 40 41 41 41
10.0 10.1. 10.2. 10.3. 10.4. 10.5.
PPP FINANCING ................................................................................................. Current Financing Environment ..................................................................... Need for Long Term Funding & Structured Financing arrangement Nigeria Viability Gap Fund For PPP ............................................................. Nigeria Public Private Partnerships Project Financial Intermediary Loan (FIL) Support ................................................. Long-term Finance for Infrastructure ..........................................................
42 42 42 43
11.0
FINANCIAL STATEMENTS & ACCOUNTS ............................................... List of the Governing Board Members ....................................................... Management Team and Professional Advisers ........................................ Financial Highlights ............................................................................................ Report of the Auditors ..................................................................................... Accounting Policies ........................................................................................... Balance Sheet ...................................................................................................... Income and Expenditure Account ................................................................ Cash Flow Statement ........................................................................................ Note to the Financial Statements .................................................................
48 49 50 51 52 53 54 55 56 57-59
44 46
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LIST OF FIGURES Figure 1
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Teledensity ....................................................................
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Figure 2
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Power Generation per Capita ................................
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Figure 3
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Rail Network ................................................................
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Figure 4
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Road Network ..............................................................
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Figure 5
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Structure and Functions ...........................................
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GLOSSARY OF TERMS AFC - AFD - AfDB - ATB - BPE - BPP - CBN - DFID - DMO - ED - FCT - FCTA - FDI - FGN - FI - FIL - FMF - FMoT - FY - HR - ICRC - IDA - IERD - ISPO - MDAs - MIGA - MTSS - N4P - NCP - NIAF - NIPC - NIWA - NPA - NPC - NRC - P3RC - PPIAF - PPP - PSP - PUK - ToR - VfM - VGF - WBG -
African Finance Corporation Agence Francaise De Development African Development Bank Air Terminal Building Bureau of Public Enterprises Bureau of Public Procurement Central Bank of Nigeria Department for International Development Debt Management Office Executive Director Federal Capital Territory Federal Capital Territory Authority Foreign Direct Investment Federal Government of Nigeria Financial Intermediaries Financial Intermediary Loan Federal Ministry of Finance Federal Ministry of Transport Financial Year Human Resources Infrastructure Concession Regulatory Commission International Development Assistance International Economic Relations Department Irrevocable Standing Payment Order Ministries, Departments and Agencies Multilateral Investment Guarantee Agency Medium Term Sector Services National Policy on Public Private Partnership National Council on Privatisation Nigerian Infrastructure Advisory Facility Nigerian Investment Promotion Council Nigerian Inland Waterways Agency Nigerian Ports Authority National Planning Commission Nigerian Railway Corporation Public Private Partnership Resource Centre Public Private Infrastructure Advisory Facility Public Private Partnerships Private Sector Participation Partnership United Kingdom Terms of Reference Value for Money Viability Gap Fund World Bank Group INFRASTRUCTURE CONCESSION REGULATORY COMMISSION
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ICRC MANDATE The ICRC Act imbues the Commission with functions and powers to: • • •
Provide general PPP policy guidelines, rules and regulations. Take custody of every concession agreement. Ensure efficient execution of any concession agreement or contract entered into by the Federal Government, and the compliance of the parties.
The Act also provides for MDAs to enter into contracts with or grant concession to any duly pre-qualified private sector proponent for the financing, construction, operation, and maintenance of any infrastructure that is financially viable or any development facility of the Federal Government. Deriving from this mandate, the role of the ICRC consists of four main components: •
Promoting, facilitating, supporting and coordinating the implementation of a sound PPP Process, while ensuring that principles of good governance are applied to all of the functions that form part of it;
•
Providing transaction support and building capacity in all Federal Government Ministries, Agencies and Department (MDAs) for project development, tendering, negotiation and contract execution;
•
Developing guidelines for monitoring contract compliance during construction, operation and contract termination and supporting as appropriate the MDAs assigned to this task;
•
Collaborating with other agencies, including similar state-level PPP units, to implement a cohesive national legal, policy and regulatory environment that is conducive to private sector investment in Nigeria’s infrastructure projects.
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CHAIRMAN’S STATEMENT The Infrastructure Concession Regulatory Commission – ICRC- (Establishment, etc) Act 2005 was enacted to address the huge infrastructure deficit in Nigeria and the decrepit state of our existing infrastructure. The Act, which established the Infrastructure Concession Regulatory Commission (ICRC), also empowers Federal Ministries, Departments and Agencies (MDAs) to utilize Public Private Partnerships (PPP) as a procurement vehicle of choice where suitable, to rapidly turn around our infrastructural insufficiency. The Act envisages the ICRC to serve as the primary driver agency to catalyze and facilitate engagement of the private sector by MDAs of the Federal Government in initiating, developing and implementing PPP projects in a fit-for-purpose, transparent, competitive and sustainable manner that would ensure value for money for the Nigeria economy while putting in place world-class infrastructure for use by Nigerians. The Commission also has the additional task of creating an enabling environment for the private sector to enter into partnerships with Government in the financing, operation and management of infrastructure and allied services. Since the Board’s inauguration on 27th November 2008 by His Excellency, Alhaji Umaru Musa Yar’Adua, GCFR, the late President and Commander-in-Chief of the Federal Republic of Nigeria, the Commission has developed the National Policy Framework document on PPP (N4P). This framework document has been approved by the President-in-Council. In addition, a “how and what to do” operational guideline document for PPP project development has also been finalised and issued to MDAs. The ICRC has, in conjuction with the Private Sector Unit of the World Bank Group and other development partners organized regional stakeholder engagement workshops in Lagos, Calabar and Kano, aimed at consulting with and securing the buy-in of all stakeholders on the National Policy on PPP. The workshops also provided a sound relationship development platform with the States and other key stakeholders, as well as sensitised them on crucial elements of the National PPP policy. At the end of the stakeholders’ deliberation on the N4P, communiqués were issued charting a way forward on infrastructure development in the country. In fulfillment of its mandate, the ICRC has been promoting, facilitating, supporting, coordinating the initiation and development of a sound PPP process, while ensuring that principles of good governance are applied to all of the functions that form part of the PPP maturation process. The Commission is also providing transaction support and capacity building support for MDAs for project development, structuring, negotiation and contract execution. In addition, the ICRC has developed guidelines for monitoring contract compliance during construction, operations/maintenance and contract termination principles including providing hands on support as appropriate to MDAs assigned to this task. The ICRC has also continued to collobrate with other agencies, including similar state-level PPP units, to transfer best practices, provide a coherent and cohesive national legal, policy and regulatory environment that is conducive to private sector investment in Nigeria’s infrastructure projects at the state government and local levels. This collobarative work methodology forms the fulcrum for ICRC’s activities. INFRASTRUCTURE CONCESSION REGULATORY COMMISSION
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Furthermore, the Commission, in recognition of the need to ensure international best practices in developing and implementing the PPP programme of the FGN, as a strategy to attract serious local and international investors, has sought the support and assistance of Development Partners (The World Bank and UK’s Department For International Development (DFID). The DFID is already providing assistance through its Nigerian Infrastructure Advisory Facility (NIAF) Project to help the Commission in the development of policies and institutional guidelines and procedures. The World Bank has agreed to provide financial and technical support through the Nigeria-Public Private Partnership Project Fund to assist with capacity building, transaction advisory services and some project financing interventions. During the 12 months ended 31st December 2009, the Commission received a total of N1,576049558.79, which was 89% of her annual appropriation of N1, 770,000.00. Of this amount, N261,096,353.33 was expended on overheads, N105,414,797.68 on personnel cost and N928,309,690.50 on capital costs. In the coming fiscal year 2010, the Commission plans to spend N600,848,970 on personnel (34%), N900,000,000 on overheads (51%) and N256,000,000 on capital (15%). It is instructive that over 80% of the overhead budget will be expended on PPP advisory services to kick-start and support MDAs for the initiation, development and implementation of PPP projects. Within the resources available, the Commission in FY 2009 was able to set up its Secretariat and its governing framework. With the support of the Office of the Secretary to the Government of the Federation, the Commission was able to acquire suitable office accommodation with a limited number of staff seconded from various MDAs to man the office. The commission put in place a policy of recruiting the best and this has progressed as key top management staff have been recruited via an international standard and very competitive/truly independent recruitment process. This has enabled the Commission to actively participate in inter-ministerial discussions with the Federal Ministry of Transport on the revitalisation of the Nigerian Rail system in the country. The focus of the commission has been to facilitate the development of a quick-win strategy that would ensure the restoration of train services not later than end of 2010, as well as ensure sustainability through appropriate Concessioning/PPP framework for the medium-and long term revitalisation of the Nigerian rail system in a manner that will attract private sector participation. It is envisaged that with the current pace of work, it will be possible to sign a Concession Agreement within the duration of the Short-term Rehabilitation Programme (9 –12 months). The Commission has also commenced exploratory and preliminary engagement with the MDAs to develop a sound basis for collaboration in ensuring sustainability in the execution of PPP programmes in the country, in line with the 7-point agenda of the Federal Government of Nigeria (FGN). In conclusion, the commission has made significant progress in complying with the President’s charge to the Commission during the inauguration of the ICRC governing board on 27 November 2008, Thus: • Develop and issue guidelines on PPP policies, processes and procedures;
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•
Work closely with relevant MDAs to identify potential PPP projects and take a lead role in the development and procurement processes that will enable the participation of the private sector in line with international best practices;
•
Act as the interface with the private sector to promote communication on national PPP policies and programmes;
•
Collaborate with State Governments to promote an orderly and harmonized framework for development of infrastructure, and accelerate market development for PPP projects.
Chief Ernest Shonekan, GCFR, CBE,
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1. 0 BACKGROUND
Figure 1
1.1. Infrastructure need
1.2.
ICRC Governing Board Inauguration
In recognition of the huge Infrastructure deficit in Nigeria, the National Assembly in 2005 passed the Infrastructure Concession Regulatory Commission (ICRC) Act to empower the MDAs to use Public Private Partnerships (PPP) as a vehicle for addressing the huge infrastructure deficit. The ICRC Act also established the Commission to serve as the primary agency to implement the provisions of the Act. Although, the Act was passed in 2005, the Governing Board of the ICRC was inaugurated on November 27, 2008 by His Excellency, Alhaji Umaru Yar’adua, GCFR, President and Commander-in-Chief of the Armed Forces. In fulfillment of its mandate since inauguration, the
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Nigeria India Turkey
TELEDENSITY
Brazil Netherlands 0.00
50.00
100.00
150.00
200.00
(Lines per 100 persons)
Figure 2
POWERGENERATIONPERCAPITA Ethiopia
Country
Nigeria India Turkey
KW/CAP
Brazil Netherlands 0.000 1.000 2.000 3.000 4.000 5.000 6.000 KWH
Figure 3
RAIL NETWORK
Ethiopia Nigeria
COUNTRY
Despite its position as a major oil producer and exporter over the past four decades, and an expenditure of over 14 trillion, naira Nigeria’s stock of basic physical infrastructure remain obsolete, dilapidated and poorly maintained, thereby posing a veritable challenge to economic growth and development. Where the infrastructure exists, it operate as monopolies, is wholly inadequate and has limited coverage. Water supply, sewerage, sanitation, drainage, roads, electricity, waste disposal and most urban infrastructure, suffer from years of serious neglect and under-funding. Periodic and routine maintenance, which ought to be the most cost-effective infrastructure spending, is almost zero. There is limited private sector participation due largely to weak or non-existent legal, institutional and regulatory framework.
Ethiopia
India Turkey
RAIL (KM/100000)
Brazil Netherlands 0.00
5.00
10.00
15.00
20.00
(KM PER 100,000 PERS)
Figure 4
ROAD NETWORK
Ethiopia
COUNTRY
TELEDENSITY
Nigeria India Turkey
ROADS (KM/100000)
Brazil Netherlands 0
200 400
600 800 1000
(KM PER 100,000 pers)
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ICRC Board has been actively engaged in: (i)
Creating an enabling environment for the private sector to partner with Government in the financing, operation and management of infrastructure services.
(ii)
Working closely with Federal MDAs towards the engagement of the private sector in initiating and implementing PPP projects in a transparent, competitive and sustainable basis which ensures value for money for the Nigeria economy.
1.3. Presidential Charge His Excellency, Alhaji Umaru Yar’adua, GCFR, President and Commander-in-Chief of the Armed Forces said:
In accordance with its Act, I expect the Commission to, among others: • Create an effective national framework and a conducive environment for the participation of
the private sector in the finacing, construction, operation and maintenance of infrastructure facilities through PPP with the Federal Government • Develop and issue guidelines on PPP policies, processes and procedures; • Work closely with relevant MDAs to identify potential PPP projects and take a lead role in the
development and procurement processes that will enable participation of the private sector in line with international best practices; • Act as the interface with the private sector to promote communication on national PPP policies
and programmes; • Collaborate with State Governments to promote an orderly and harmonized framework for the
development of infrastructure, and accelerate market development for PPP projects. This Administration assures the investor community of the legality and enforceability of concessions consummated in accordance with the ICRC Act. Distinguished Ladies and Gentlemen, the task that we have charged the members of the ICRC with is an onerous one. I am confident though, that, given the impressive antecedents of the members, along with the stature and richly varied experience of the Chairman, His Excellency Chief Ernest Shonekan, we have chosen the right people to make a success of the work of the ICRC. I congratulate all the members and assure them of the unstinting support of the Federal Government as they commence their vitally important assignment at this point in our nation’s development.
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1.4. Government Expectation The enabling Act imposes on the Commission a dual role - a regulatory and an operation agency. The ICRC is expected to midwife the complex arrangements that the PPP process entails, as well as build capacity within MDAs to handle such arrangements themselves subsequently. The ICRC is expected to monitor the implementation of such arrangements according to best practice, ensuring that the desired service standards are attained and maintained, value for money is assured and that the private sector operators are in a position to recoup their investment in a fair and equitable manner.
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2. 0
INSTITUTIONAL STRUCTURE & GOVERNANCE
2.1. Structure and Functions The Governance and Organizational Structure of the ICRC is designed to facilitate the delivery of the Commission’s mandate. The ICRC Act provides for the establishment of a Governing Board for the Commission, with various board committees assisting the Board in its oversight, policy formulation and other statutory functions. To this end, the following Board Committees were established: •
Compliance Committee (to oversee activities of the Contract Compliance Centre);
•
Technical & Audit Committee (to oversee the activities of the Resource Centre);
•
HR & Establishment Committee (responsible for the HR matters, governance, institutional relations, communications, etc).
•
Finance & General Purpose Committee (Assist the governing board in fulfilling it’s responsibilities in supervising the commission’s finance issues) Figure 5
Mixed Private Public Committee
ICRC Board
Mixed Private Public Committee
Director General
PPP Resource Centre
Support Service Department
Contract Compliance Centre
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Executive Management: Reporting directly to the Director General are three Executive Directors(EDs), for the PPP Resource Centre, Support Services and Contract Compliance Centre. The EDs attend board meetings without necessarily making them statutorily appointed in compliance with Section 14(3) and Section 34(1) of the ICRC Act. There is no mixed representation on the Board committees so as to ensure the intended independence and autonomy of thought/policy direction. The DG and EDs constitute the Executive Management Team of the ICRC. The PPP Resource Centre is charged to disseminate guidance and best practice, communicate plans/ policies to energize private sector participation in PPPs. It also maintains the national PPP project database, coordinates PPP activities across the federation, manages flow of projects to the market and generally acts as centre of technical expertise for MDAs/States and provides leadership in procurement/negotiation, contract/banking law, land/planning and financial intermediation. In addition, the PPP Resource Centre will assist States set-up the legal, and regulatory environment and provide support in Project Origination, Identification, Appraisal, Design, Procurement and Implementation. On its part, the Contract Compliance Centre will take custody of agreements, monitor their implementation and maintain oversight of existing concessions as necessary. Support Services include Human Resouces & Administration, Procurement, Finance & Accounts and ICT Units.
2.2. HR Recruitment In order to achieve the dictates of its multifaceted mandate, the philosophy underlying ICRC’s recruitment vision and process include use of respected independent recruitment consultants, mature hiring, a communicative culture, learning environment, service and relationship focus, professionalism and patriotism, underpinned by world class due process, strong work ethic and lean/fit for purpose staffing numbers. The Commission, working in close collaboration with the Federal Character Commission, has been filling in critical resource gaps with the assistance of a professional human resources firm.
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3. 0
POLICY AND PROCEDURE GUIDES
3.1. National Policy on Public Private Partnerships (N4P)
The need to ensure that PPP projects are designed, carried out and coordinated in an eminently controlled manner with predictable outcomes, which derive from the ICRC mandate, requires the development and issuance of guidelines on PPP policies, processes and procedures to MDAs. This also provides an interface with the private sector to promote active communications on PPP policies and programmes. In pursuance of this objective, the Board developed a draft PPP Policy that aims at providing adequate framework for the development of a conducive environment for private sector involvement in the financing, construction and operation of infrastructure facilities and services in Nigeria.
After an extensive review by a Committee of the Board assisted by the DFID funded Nigerian Infrastructure Advisory Facility (NIAF), a revised Policy draft was subjected to a well-attended one day stakeholder workshop held on Thursday 15th January, 2009 at which over 120 delegates representing Federal MDAs, state governments, National Assembly members, financiers, investors, project promoters, construction companies, professional bodies, consultants, labour and civil society organizations, had the opportunity to debate the draft and make inputs. The outcome of the workshop was the final draft of a national policy which, the Board believes will encourage the development of an attractive market for PPP projects in Nigeria. This policy was approved and issued in April 2009. The national PPP policy examines the severe infrastructure deficit in Nigeria and Government’s commitment to improving the quantum and quality of public services as a precondition for attaining the Governments vision of positioning Nigeria among of the top 20 global economies by the year 2020. The key issues covered by the policy document include the following: •
Policy objectives and enabling environment
•
Scope and application
•
Parties/Stakeholders and their roles
•
Key characteristics, principles and processes of Nigeria’s PPP regime,
•
Project financing and
•
Governance and Legacy projects
It is the conviction of the Commission that the policy, if properly implemented, will provide an adequate and conducive institutional and regulatory framework for effective private sector participation in the development, financing and management of infrastructure services in our country. INFRASTRUCTURE CONCESSION REGULATORY COMMISSION
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It however requires political will at the highest levels of government and in each MDA for operationalizaton and effective implementation. It is therefore our expectation that the Commission will continue to enjoy your unequivocal support and commitment as we proceed to translate this policy into action.
3.2. Operational Guide The ICRC Act provides the basic legal framework for the participation of the private sector in the provision of infrastructure services through a PPP/Concession Contract. In addition to the issued National Policy on PPP (N4P), the ICRC has also issued a number of supplementary guidanc enotes to assist MDAs, PPP practictioners and other stakeholders in developing and implementing PPP/Concession projects in line with international best practices. The following guidance notes have been submitted to Mr. President for the approval of the Federal Executive Council: • Guidance notes on Roles and Responsibilities (R&RG) • Guidance notes on Value for Money (VfMG) • Guidance note on Managing Project Risk ( RiskG) • Guidance note on Procurement Process (Pr Guide) • Unsolicited Proposals Guide (UPG) The following additional guidance notes are currently being developed: • Project Appraisal Guide (PAG) • Environmental and Social Management Framework (ESMF) • Resettlement Policy Framework (RPF) • Identifying, Ranking and Selecting Projects for PPP Implementation using Multi Criteria Assesment • Investment Appraisal Guide for PPPs • Contract Compliance Guide
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These policy guides will be regularly reviewed and updated; and new ones will be issued as experience is gained. There are seven essential pre-requisites for effective PPP/Concessioning and the ICRC operational guides have been structured in a manner that provides operational clarity for these seven pre-requisites listed below; 1. Development of a clear definition of the project scope and its key Outputs and Performance Requirements, 2. A detailed value - for - money assessment, 3. Identification and optimal allocation of Risks, 4. Protection of public and community interest, 5. A clear, transparent and competitive procurement process, 6. Ensuring full stakeholder buy-in and support, 7. Effective pre and post-contract compliance scheme.
3.3. Transitional Arrangements In addition to the Policy Statement for Public Private Partnership (PPP)and associated guidelines already issued and circulated that provide clear guidelines for planning, procuring and approving infrastructure projects within an overall framework of improving Nigeria’s public infrastructure and enhancing the quality and availability of public services, the Commission has issued additional guidelines on Transitional Arrangements for Implementing PPPs. The transitional arrangements set out in the guidelines apply to the following types of projects: (a) Projects whose procurement process commenced before June 2007 (the date of the enactment of the Public Procurement Act); (b) Projects based on “unsolicited” proposals from a private sector party; (c) Projects which do not require funding from the federal budget (financially free standing), but which involve the transfer of the rights to use public asset and/or charge users of an unregulated service through concession.
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3.4.
Enabling Environment
The Government recognizes the imperative of creating an appropriate enabling environment for PPPs and allowing a fair return to private investment for project risks. Government believes that PPP resources could be harnessed to supplement scarce public resources, although it will still provide a greater part of the investment funding for infrastructure across the economy as a whole. Furthermore, PPPs can help create a more competitive and diverse supply market, improve the efficiency of public services and consequently reduce costs in public service delivery. Government is making this possible by putting in place the legal, regulatory, financial and institutional framework that will promote and facilitate the implementation of privately financed infrastructure projects through enhanced transparency, fairness and long-term sustainability of projects. The framework which Government already has in place includes: •
The ICRC Act
•
The National Policy and Guidelines
•
Financing
•
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•
Proposed Viability Gap Funding (VGF)
•
Financing Intermediary Loan Scheme (FILS)
•
International Financing Institutions
•
Private Sector Loans
Project Development •
Project Pipelines
•
Project Development Fund
•
Nigerian PPP Project
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Donor Technical Assistance
•
Integrated Planning Process
•
PPP Steering Committees
•
The PPP Process Cycle
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3.5.
Legacy Projects
Many private sector organizations with specialist know-how and experience in certain sectors may have submitted unsolicited proposals to MDAs, many for which action cannot be escalated due to the absence of clear guidelines, or have been under development before the inauguration of the Board of the ICRC, albeit in a haphazard form. Some of these include: •
Concession of Lagos – Ibadan Expressway
•
Concession of Nnamdi Azikiwe International Airport, Abuja
•
Ports Concession
•
Railway Concession
•
Concession of MMA2
•
Concession of key elements of MMIA
3.5.1.
Concession of Lagos – Ibadan Expressway
3.5.2.
Concession of Nnamdi Azikiwe International Airport
The Lagos – Ibadan Expressway is one of the legacy projects that have been under development before the inauguration of the Board of the ICRC. The ICRC received a request from the Federal Ministry of Works, Housing and Urban Development in respect of the concession of the Lagos – Ibadan Expressway, which the Commission reviewed and suggested that a detailed condition survey needed to be done to ascertain the cost of the project. The Ministry nonetheless went ahead to sign the Concession Agreement despite the absence of any cost and a clear risk allocation structure.The Commission will however work closely with the Ministry to ensure that the project is successfully implemented and managed.
ICRC received a letter of complaints routed through JK Gadzama & Partners by Messrs Abuja Gateway Consortium in respect of the NnamdiAzikiwe International Airport, Abuja. The Consortium alleged that it had paid the initial concession fee of USD10,000,000 over two years ago and that nothing had been done since then. The ICRC has written to the BPE to furnish it with the status of the transaction.The Commission recommends that effort should be made to resolve the matter amicably to avoid litigation which could undermine the credibility of the emerging national PPP Framework.
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3.5.3.
Port Concessions
The ICRC also received another letter from the Office of the Chief Economic Adviser to the President, pertaining to complaints on one of the Ports on concession. ICRC wrote to the MD, Nigerian Port Authority (NPA) and the Bureau of Public Enterprises (BPE) requesting for the concession agreements so that the ICRC could act as appropriate. While the ICRC was yet to receive any response from the NPA, the BPE in its response stated that the concession was done under the NCP Act and therefore, outside the jurisdiction of the ICRC. As a result of this development, the ICRC wrote to the Office of the Attorney General of the Federation to seek the interpretation of the ICRC Act in respect of custody of concession agreements, as well as the monitoring thereof. This controversy has since been resolved through the intervention of Mr. President.
3.5.4.
Rail Concessions
3.5.5.
Katampe
For Railway Concessions, the ICRC is playing a pivotal role in driving the process through consultation with the Ministry of Transportion. The ICRC heads the Technical Sub-committee for the revitalization of the rail system in Nigeria. The ICRC has prepared a work plan for the actualization of the concession process in line with the N4P.
This is a project initiated by the Federal Capital Territory Administration (FCTA) for accelerated development of site and services at Federal Capital Territory (FCT) districts, with Katampe district as a test case. Discussions are currently at an advanced stage with the sole proponent and concessionaire.
3.5.6.
Dadin Kowa
This is an ongoing concession agreement between the FGN and Mabon Limited to build, operate and transfer a hydro power plant made up of turbines (2), generators (2), main transformers (2), outdoor switch yard and sundry control and protection units. On the strength of a presidential directive following a petition by the Gombe State Government to the President, in which the former expressed doubt as to the ability or willingness of Mabon Limited to make progress on the concession, the ICRC set up a review committee of stakeholder. The Committee confirmed the fears earlier expressed by the Gombe State Government and recommended a rescission of the contract and possible hand over to Gombe State for completion, subject to the State Government settling outstanding obligations to Mabon Limited.
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4. 0 PIPELINE OF PPP PROJECTS 4.1. Current Approach Currently, no long-term infrastructure investment planning is undertaken by federal or state MDAs. The National Planning Commission is in the process of developing long and medium term national infrastructure plans as part of the Vision 20:2020 Project. This is an important pre-requisite for a coherent and sustainable programme of infrastructure especially for the meaningful participation of the Private sector. The ICRC will, therefore work closely with the National Planning Commission on this initiative. In the mean time it is urgently necessary to develop a pipeline of priority PPP projects that could be promoted by the Commission and relevant MDAs to open up the Nigerian PPP market.
4.2. Market Expectations The international market for PPP is highly competitive especially in the prevailing international financial environment. PPP projects that will attract investors must respond to the critical expectations of serious investors and long term credit providers. Such projects must demonstrate clear financial viability and be manifestly bankable. Sufficient data and information must be available to prospective investors and financiers to enable them to evaluate the projects’ commercial viability. The raft of unsolicited proposals received by MDAs and continued support Nigeria enjoys from multi lateral agencies like the World Bank does demostrate interest and confidence in Nigeria. However, the market would like a stable pipeline of projects and limited political influence in the PPP programme. A stable and well communicated pipeline will encourage quality investors to bid confident in the fact that a loss on one bid can be compensated by a win on upcoming projects. Furthermore, the market expects the ICRC and the government to make accelerated efforts to update laws and legislation that inhibit and threaten private sector participation in the provision of infrastructure laws eg. The current Railway Act of 1955.
4.3. First-Mover and Quick Win Projects
The Commission is working with the relevant MDAs to identify a few projects, which are being developed fully in line with the N4P. This pipeline, with high probability of success, is intended to have a market demonstration effect and establish a track record for the FGN that would attract future private sector interest. These first mover and quick win projects include roads, rail, airports and seaports.
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4.4.1 4.3.1.
The Nigerian Railway Corporation (NRC)
The Government has moved quickly to support this concession, as the revitalization of the railroads is a current government priority. On July 28th, 2009, the Government inaugurated the NRC PPP Concession team to lead the concession process. This team is chaired by the Managing Director of NRC and includes members from the Federal Ministry of Transportation (FMoT), Office of the Chief Economic Adviser to the President, Federal Ministry of Finance (FMF), Bureau of Public Enterprises (BPE), Debt Management Office (DMO), and the Bureau of Public Procurement (BPP). While ICRC does not have a seat on the committee, it nevertheless provides technical assistance and oversight. The Project team is responsible for the concessioning of the railroad and is the cross-MDA institution to which the transaction advisors will report. Also formed was the Project Steering Committee (oversight) chaired by Permanent Secretary FMoT, with ICRC, DMO and BPP as members. Transaction Due Diligence Advisory services are already concluded. Further Advisory services are required for the concession transaction, and the necessary TORs and RFP documentation for prompt procurement action have been developed. Technical assistance has been provided by the World Bank to the government in the preparation of this assignment. The goal is to have the Transaction Advisors in place as soon as possible in mid-2010. Presently, the FGN has committed $60 million to the rehabilitation of the most critical sections of the rail lines in an effort to make the rail sector viable for concession. This includes an allocation for the procurement of twenty-five new locomotives. The MOT study being conducted by Zetatech to inventorize the exact condition of all the rail assets under NRC is currently underway to provide more exact information on the material resources needed for this undertaking.
4.4.2 4.3.2.
Transport Sector – Roads etc
The potential projects in the transport sector include roads, ports and inland waterways. These projects are being actively developed and worked on by the ICRC. To date, the BPE has received the second phase report from NIWA transaction advisors. The general recommendation from this report advised a “landlord model” for inland waterways concession. A stakeholder workshop, “Business Opportunities in Inland Waterways,” is being scheduled for later in the year and this will provide a first opportunity for MOT, NIWA, BPE, ICRC to scope out potential private sector participation opportunities in Nigeria’s inland waterways.
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4.3.3. 4.4.3
Transport Sector - Airports
The Federal Ministry of Aviation last year engaged an ICAO consultant to conduct a pre-feasibility review for the concession of Nigeria’s airports. Following a best endeavor review of the available data, the consultant has reccomended airport bundling and partial concessioning ie. a limited framework concession format where the governement is responsible for capital expenses for the whole airport (Air Terminal Building – ATB and Airside facilities), while the private sector would be responsible for the operation and maintainance of the ATB excluding runway and aprons. This reccomended approach will require seamless interface management and absence of turf wars to be made workable. The ICRC is currently working with the Federal Ministry of Aviation to make progress in line with the 4NP reccomended road map for concession.
4.5 4.4.
Power Sector
In order to kick-start changes and improvements in the power sector, opportunity exists to concession the operations and maintenance of the new National Integrated Power Projects (NIPP). Successful concessioning of these NIPP plants to world class power plant operators, will not only be a game changer for the power sector, but also unleash the potential of the sector and force a strategic paradigm shift for the power industry in Nigeria.
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5. 0 CAPACITY BUILDING 5.1. Commencement of Capacity Building for ICRC & MDAs The PPP Project anticipates significant capacity building support to key PPP stakeholders in the government. Most critically this involves strengthening the ICRC in terms of organizational and staffing capacities and then, over the longer period, in specific expertise areas. Other key MDAs that have been targeted by the project include key central agencies including the National PlanningCommission (NPC), the International Economic Relations Department (IERD), Budget and Debt Management Offices of the Federal Ministry of Finance, the Bureau of Public Procurement (BPP) and the Bureau of Public Enterprises (BPE). In addition, line (.e.g.transport, works, aviation, power and specialistministries (e.g. Environment, NIPC) have also been identified and prioritized for project capacity support, based on their roles in delivering approved PPP pipeline projects being proposed by the FGN for investment financing. The ICRC has initiated quarterly PPP forums for MDAs to develop understanding and to also coordinate PPP Policy cascade and Project Pipeline development, toenhance understanding of PPP policy frameworks, institutional arrangements, and procedures.The ICRC has agreed to move forward with the preparation of a series of PPP workshops. In collaboration with NIAF, these workshops will focus on key lessons learned from international PPP experiences at both the broader PPP programme structuring level and at a sector transaction level. These workshops will be delivered in two phases: Phase I: These PPP foundation workshops will be led by NIAF and draw on PUK expertise. The topics for the workshops will include an overview of the understanding of PPP as it pertains specifically to the Nigeria experience. This will include critical PPP themes such as value-for-money (VfM) and PPP screening as it relates directly to Nigeria’s institutions and dynamics. Phase II: This will be led by the World Bank team and focus on sector-specific PPP related issues. These sectors will include transportation, particularly Railway and Roads and address specific project structuring, contract supervision and dispute resolution experiences and practices world-wide. The PPIAF and PPIAF funding is being deployed as efficaciously as possible to ensure that priority knowledge and skill transfers take place to address specific immediate gaps and, in the case of the PPIAF, to support ICRC to meet project implementation readiness requirements.
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5.2. Study-Tours: Learning from other PPP Regimes
Due to paucity of funds, operational efficiency, accessibility of public services and cost of service delivery, PPP is the preferred method by the FGN. Being a novel method of procurement, capacity remains a major constraint within federal and state administrations. This has slowed the institutionalization of effective PPP framework at the federal level and is likely to mean that the ICRC will continue to carry a significant burden as a source of knowledge and a centre of technical assistance to other key players, particularly the MDAs. One of the strategies to quickly bridge the knowledge and skills gap both at the policy and operational levels is to learn from the experience of other PPP regimes in the world. Apart from the visit to PPP institutions in the UK, a study tour of India, involving principal officers of the Commission, Board Members, Accounting officers of key MDAs and other collaborating agencies of government, was undertaken in November 2009 to understudy their PPP framework. Very useful lessons were learnt. Similar tours are being organized for 2010 to Brazil, and South Africa. These countries have PPP experience of upwards of 20 years.
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6. 0 COOPERATION WITH DONOR AGENCIES 6.1. DFID- NIAF
The Nigerian Infrastructure Advisory Facility (NIAF) was established by the United Kingdom Department of International Development (DFID) in response to a request made by the Federal Government of Nigeria (FGN) for support in the provision of technical assistance to enable the country to improve the effectiveness with which it planned, financed and implemented infrastructure development. DFID accordingly established a facility of approximately GBP 12million to enable the provision of such assistance. Following an international competitive bidding process, Adam Smith International (ASI) was appointed managers of NIAF. The assistance that has been provided to the Commission to date includes the drafting of the National PPP Policy and supporting guidelines (including - Roles and Responsibilities of Federal MDAs; Risk Management; Value-for-Money and Procurement Guidelines. Other are the development of: • Project Appraisal Manuals on Project Development, Financial Analysis, Procurement (to be undertaken by the World Bank) and Contract Management. • Modalities for handling Unsolicited Proposals • Transitional PPP Operating Arrangements • PPP Process Outline Plan • ICRC Business Plan • Human Resources Plan and assistance with recruitment exercise NIAF has also continued to provide support and assistance to the Public – Private Sector Forum, CapacityBuilding, Technical Assistance and Call Down Assistance to aid project pipeline development. These areon a continuous and ongoing basis.
6.2.
WBG- PPP Projects
In addition to the support from the DFID through NIAF in the development of the framework for PPP, the Federal Government through the Federal Ministry of Finance has approached the World Bank for both technical and financial support for Nigeria’s Public Private Partnership (PPP) Project. The World Bank support will seek to increase infrastructure service levels and quality through a six year institutional development and Public-Private Partnership Investment (PPPI) financing programme. The programme, which seeks to strengthen institutional governance over key factor markets, and improve risk and cost determinants, has the following components:
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• Institution and CapacityBuilding support for the ICRC; • Institution and CapacityBuilding for Federal MDAs and other PPP actors; • Provision of Specialized Transaction Advisors; and, • Infrastructure Financing Support for the FGN PPP projects. To this end, the FGN has requested and the World Bank has provided World Bank Public-Private Infrastructure Advisory Facility (PPIAF) of $400,000, and Project Preparation Facility (PPF) of $3 million. The PPIAF component is a grant, while the PPF will be a part of an IDA credit.
6.3.
AFDB
The ICRC has also approached the African Development Bank with a funding request for Nigeria’s CapacityBuilding project for PPP in Infrastructure. The request, which is intended to facilitate capacity building and institutional strengthening of the ICRC and MDAs, also seeks to build a strategic partnership between the two institutions in the effort to facilitate private sector financing of infrastructure projects through the granting of concession to rehabilitate, upgrade or build, operate and transfer projects. Discussions are currently at an advanced stage for this assistance.
6.4. OTHERS 6.4.1.
AGENCE FRANCAISE DE DEVELOPMENT (AFD)
The Commission has also been in an exploratory contact with the AFD on areas of collaboration which will aid the attainment of the Commission’s goals and objectives. Prospect for collaboration, especially in the area of projects financing are high. The Commission has continued discussions with the AFD Country Representative in Nigeria, with a view to identifying areas in which AFD can extend Technical Assistance to ICRC. The AFD is a development finance Institution, established by the French Government in 1941, to support poverty alleviation and the attainment of sustainable development in French Overseas Territories (FOTs) and other developing nations. AFD has the capacity to provide technical assistance and a wide range of financial instruments including grants, subsidies, guarantees, loans, credit lines, equity and co-financing with local financial institutions in its various interventions. A significant proportion of AFD’s financing activities are routed through Proparco which serves as the private sector arm of the Agency and which focuses on achieving sustainable development through its support to private businesses from small and medium enterprises to large firms and its participation in private equity and long term loans.
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6.4.2.
Partnership UK
ICRC engaged Partnerships UK (PUK), a UKpublic private partnership with a unique public sector mission to support and accelerate the delivery of infrastructure renewal, high quality public services and the efficient use of public assets through better and stronger partnerships between the public and private sectors. This was with a view to learning from PUK’s experience and exploring areas in which PUK could assist the Commission to achieve its mandate. With the establishment of PPP Steering Committees at the various MDAs, the Commission has since forwarded a request to PUK for training and capacity building programme which includes a PPP Foundation Course in Nigeria for the Staff of the Commission and other MDAs and States to be held in Nigeria. This will be followed up by a series of specific core training courses for selected personnel in identified areas of need and aimed at deepening the skills and competencies of key ICRC and relevant MDA staff. PUK also agreed to undertake a review of ICRC’s Policies and guidelines and offer advice.
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7. 0 STAKEHOLDER ENGAGEMENT 7.1. Financial Sector
A workshop and follow-up meetings took place to conclude the PPIAF-funded study on the appetite for PPP infrastructure investment in the wake of the global financial crisis. The main developments in the project finance capital market in Nigeria to date are: • Debt markets have calmed significantly since March, 2009 with the NIBOR rate never having gone above the low ‘20s, despite a widespread expectation in March that it would hit 30% or more. NIBOR is now fluctuating in the middle to upper teens. Actions taken by the CBN include (i) a temporary interest rate cap, (ii) the injection of N650 billion into 10 commercial banks found to be badly under-capitalized combined with the replacement of the banks’ top leadership, and (iii) the investigation of large commercial bank loan defaulters. These measures are credited by financial market participants and outside observers with restoring a measure of confidence in the banking system. • Uncertainty remains about the ability of all but the large foreign-owned banks operating in Nigeria to make significant commitments to PPP or other forms of infrastructure finance in the near-to mid-term. Debt market participants have continued to monitor implications of the CBN’s end-of-September announcements regarding the relative capital strength of the other local banks not deemed to be in crisis. Market participants expect that 5 to 15 additional banks will be required to take significant additional reserving actions, further limiting their alreadyconstrained mid- to long-term loan appetites. • The local bond market’s appetite for infrastructure-related transactions has continued to grow, in spite of the severe problems in the commercial banking sector. LagosState had a very successful January 2009 transaction for N50 Billion (5 yr.) for infrastructure projects. The Nigerian bond market also saw two additional state bond issuances since March with the States of Imo (N18 Billion, 7 yr.) and Kwara (N17 Billion, 5 yr) successfully closing first tranches of shelf registered MTN programs, using the Irrevocable Standing Payment Order (ISPO) ‘state-aid intercept’ mechanism as a direct source of repayment and credit backstop.
7.2.
MDAs & State Governments
The commission engaged the MDAs and State governments both at the Steering Committee level and at the regional workshops. More engagements are planned in FY 2010.
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7.2.1.
Steering Committee
In pursuit of its mandate, the ICRC worked closely with MDAs and other key stakeholders to develop clear guidelines, policies and transparent competitive procurement processes that will ensure value for money while providing adequate returns for investors in all PPP projects, and help bridge the knowledge and skills gap in MDAs to undertake and implement PPP infrastructure projects. In order to ensure that the benefits of international PPP development assistance results in a sustainable improvement in capacity not only in ICRC but across all relevant MDAs, and that the Programme enjoys a strong buy-in among all MDAs, Project Steering Committee was established to amongst other functions: •
Undertake a regular review of the Policy guidelines and operating procedures issued by the ICRC to ensure they are coherent and consistent with evolving development strategies and policy thrust of the Federal Government;
•
Serve as a platform for promoting institutional coordination among all public agencies involved in implementing the FGN’s overall infrastructure development plan;
•
Ensure that the opportunity for capacity building provided by the PPP Nigeria Project is optimally utilized to assist all relevant MDAs implementing PPP projects acquire the requisite skills and competencies to internally initiate, develop, procure, and manage PPP projects effectively in accordance with international best practices;
•
Assist the ICRC and other relevant institutions to engage the Nigerian Financial services sector to develop appetite for long-term infrastructure financing and promote a robust PPP projects market;
•
Anchor the process of sustained dialogue and sharing of ideas and experiences among key PPP personnel in the public sector,
•
Work with the ICRC to develop an effective Communication Strategy to disseminate information on the PPP process and its benefits to the national economy and thus help to build a strong buy-in among all stakeholders;
•
Serve as an effective interface between MDAs involved in PPP and various development partners to ensure effective Donor Coordination.
7.3. National Assembly
On 11th June 2009, the Commission had a interactive session with members of the House of Representatives Committee on Special Duties, one of the bodies responsible for the ICRC’s oversight at the National Assembly,
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during which the enabling Act, N4P and associated guidelines on PPP were presented and explained to members. The powers, duties and functions of the Commission were also explained. The Commission also used the opportunity to present its score card to Members and solicit their buy-in and advocacy of the PPP programme. In addition, members of the National Assembly have been involved in capacity building programmes, including the study tour of India. At present, a joint ICRC/NASS workshop and seminar with the objective of intensifying and expanding the role of the legislature in private sector participation in infrastructure delivery is planned for March 2010.
7.4. Investors, NGOs & Others The ICRC has held engagement sessions with the stakeholders listed above. The ICRC used the engagement sessions held in Lagos, Kano and Calabar to present its score card and solicit their buy-in, advocacy of the PPP programme.
7.5. Coordination between ICRC and BPE Agreements were reached between ICRC and BPE and endorsed by the Presidency regarding the respective roles and responsibilities for PPP initiatives. In summary: •
The ICRC PPP Policy will guide PPP transactions;
•
The appropriate line ministry will take the lead on concessions that fall under its remit, both Greenfield and Brownfield transactions;
•
BPE will maintain the lead for all privatization and commercialization deals;
•
Commercialization transactions will not include PPPs;
•
BPE and ICRC should work together to advance the PPP programme by harmonizing efforts, sharing resources, and capitalizing on existing skill and resources that were strengthened under the PSP project.
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8. 0 INTERFACE WITH STATES
8.1. Building a National Framework
In pursuit of its mandate of collaborating with other agencies of government at Federal and State levels to facilitate the development of a coherent legal, policy and regulatory environment conducive to recruiting private sector investors in the provision of infrastructure services in Nigeria, the Commission developed a National Policy on PPP which forms the bedrock of the PPP Framework, and sought the inputs and views of MDAs and State Governments already involved in infrastructure development through PPP, or considering doing so. This is to ensure that the National Policy would address the needs of all key actors and, therefore, meet our common aspirations. The Commission, therefore, held three Regional Workshops in Lagos, Kano and Calabar as mentioned in 8.4 to 8.6 for this purpose. The first Regional Workshop was held in Lagos on March 10, 2009, while the second Regional Workshop took place in Kano on March 31, 2009. The last in the series took place at Tinapa Resort, Calabar on April 14, 2009.
8.2. Building a Coherent Market for PPP Projects
The Policy Statement for PPP issued by the FGN is intended to provide guidance to MDAs in their planning, procuring and approving infrastructure projects within an overall framework for improving Nigeria’s public infrastructure and enhancing the quality and availability of public service. However, in order to build a coherent and nationwide PPP market as is expected from the Commission’s mandate, the application of the Policy and guidelines need extends beyond the MDAs of the Federal Government to cover the PPP activities at State level, even if it is only in an advisory capacity. At present, no long-term infrastructure investment planning is undertaken by federal or state MDAs. Current project appraisal and monitoring procedures vary both between sectors and within sectors. Projects funded by international agencies are subject to appraisal procedures that comply with international standards and best practice, but many funded by state or federal government are based largely on political judgment rather than robust business case founded on economic cost benefit analysis. At present, there is very little master planning undertaken in any of the key sectors, consequently, projects are appraised on a case by case basis, rather than within the context of a coherent sector development programme. The result is a multiplicity of projects, duplications and overlapping that currently make the list of PPP possibilities. The ICRC/National Planning Commission are interested in implementing a 15-year integrated infrastructure investment plan and a 3-year medium-term rolling plan.
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8.3. Federal Government support to State projects
Due to the federal structure of the Nigerian state, State Governments are specifically exempted from the provisions of the Act and N4P and associated guidelines in their planning, procuring and approving infrastructure projects, except where they require support from the FGN. The support could be direct or contingent. By direct support it is meant that a specific and explicit financial commitment to a PPP project that is predictable as to amount and timing is made. This could be in the form of an implementation grant or operational subsidy. Contingent support, on the other hand is an obligation that may or may not crystallize because it becomes callable if certain events occur. That would be the case if the FGN underwrites events (terrorism, for instance) outside the control of the concessionaire. States are however, encouraged to work with the Federal Government in developing their infrastructure investment programme.
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9. 0 KEY ISSUES 9.1. Regulatory and Institutional Environment Providing an attractive pipeline of potential transactions to the private sector will need to be complemented by a number of other developments that will serve to reduce the risk perception of the private sector. First among these risks is evolving an attractive legal and regulatory environment in Nigeria with a clear and enforceable dispute resolution mechanism. The current uncertain legal context across many of the core infrastructure sectors (notably in transport where there is pending legislation on roads, rail and ports) as well as in respect of the potential overlap of existing legislation relating to ICRC, other sectors (e.g. telecommunications, electric power) and fiduciary (e.g. procurement) poses political risks for which private sector PPP sponsors and financiers will likely seek guarantees. The key challenge here is to reduce the risk perception of the private sector due to the evolving legal and regulatory environment in Nigeria, pending the enactment of the pending legislations, notably in road transport, rail and ports, as well as in respect of the potential overlap of existing legislation relating to ICRC, and other sectors (e.g. telecommunications, electric power). These are potential political risks for which private sector PPP sponsors and financiers will likely seek guarantees. The FGN, through the ICRC could proceed to develop and issue detailed PPP regulations\guidelines approved at the FEC level, particularly with respect to the international competitive requirements of PPP procurement process and due process for coordinating across the relevant MDAs.
9.2. Institutional Capacity for PPP Project Development
The dearth of capacity by public authorities to carry out economic appraisal of projects, undertake development of a long-term investment strategy which will provide a planning tool for the development of infrastructure, whether financed from public funds or through PPP contracts, and evaluation of contingent liabilities and risks that arise from PPP contracts, and associated agreements such as Power Purchase Agreements, and any sub-sovereign or other guarantees, partial risk insurance, subsidies, or exchange rate volatility, significantly reduces speed at which predictable outcomes for PPP will be expected. Institutional capacity for project ideation, development, implementation and management is yet to be developed or fully developed at ICRC, MDAs and states and project finance and managements are still poorly developed in the financial institutions.
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To quickly bridge the institutional/knowledge gap for PPP project development in ICRC, MDAs and potential private sector partners, the ICRC has developed, with the assistance of Human Resources experts and international development partners, a comprehensive human capital development programme, involving training programmes, workshops, seminars, study tours, etc.
9.3. Cooperation of MDAs The success or otherwise of the PPP programme will depend largely on a close cooperation and collaboration between the ICRC and MDAs. It will be the responsibility of the ICRC to provide technical support to the PPP projects but the ownership and responsibility for the project still lies with the MDA. The development of PPP projects requires a lot of upstream work and coordination at the MDA. Thus, a close engagement with the ICRC, particularly at the early stages of the project is critical to the success of the project. In some MDAs, it will be desirable to set up PPP units to coordinate PPP projects internally and work closely and in full cooperation with ICRC to optimize resource use and efficiency of the project.
9.4. Legacy Projects Having reviewed some of these projects, these are some of the issues and challenges: • • • • • •
Lack of proper project preparation (pre-feasibility and feasibility studies); Lack of proper risk assessment and allocation; inadequate financial modelling to enable proper affordability and value for money assessments; Inadequate definition of output requirements; Lack of knowledge and compliance with approved PPP procurement process, undermining the credibility of the process and Government’s intention; Absence of integrated long and medium term planning for infrastructure investment
9.5. PPP Pipelines The Commission will in 2010 intensively engage all MDAs involved with key infrastructure development with a view to developing project pipelines in line with the National Policy and the ICRC Act.
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9.6. Consultancy and Transaction Advisory Services
Capacity in PPP remains a significant constraint within federal and state administrations. This has slowed the institutionalization of an effective PPP framework at the federal level and is likely to mean that the ICRC will continue to carry significant burden both as a source of knowledge and as a centre for technical assistance for other key players, particularly the MDAs. Project preparation at the MDAs, therefore, needs to be properly coordinated, harmonized and properly funded. The implication is that instead of having separate budgets in MDAs for Consultancy and Transaction Advisory services, these could be consolidated within the ICRC for proper coordination and optimization of resources. This becomes imperative In view of the statutory imputation of financial independence by the Commission at the end of three years, this move will guarantee the continued ability of ICRC to cover the cost of consultancy and advisory services in developing projects in all key infrastructure MDAs. While the proposed IDA Credit has a provision of about US$115 for capacity building and transaction support, this will hardly be adequate in the light of the magnitude of contending needs. While ensuring that the ownership of projects remains with the MDAs, the ICRC will continue to provide leadership in the planning, programming and approval of credible project pipelines that dovetail into the 7-point Agenda of Government through the provision of consultancy services for pre-feasibility and transaction advisory services. Although budgetary provision has been made for this support, the sheer volume of capacity support required to create a credible pipeline for a robust PPP market is clearly beyond the budgetary resources. As part of the proposed IDA Credit, a provision has been made for part-funding of this requirement.
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10. 0 10.1.
PPP FINANCING Current Financing Environment
A workshop and follow-up meetings took place to conclude the PPIAF-funded study on the appetite for PPP infrastructure investment in the wake of the global financial crisis. The main developments in the project finance capital market in Nigeria is the need to structure debt support modelling as an instutionalized tool to make PPP projects bankable and attractive to private investors.
10.2.
Need for Long Term Funding & Structured Financing arrangement
A range of competitive constraints aligned with significant political risk continue to diminish Nigeria’s potential for economic growth and development. A recently completed 2008 Infrastructure Consortium for Africa (ICA) study lists the dearth of infrastructure, amongst many other constraints responsible for low levels of performance of Nigeria in all key economic performance variables. According to the Federal Ministry of Finance, Nigeria requires about US$100 billion to put in place the level of infrastructure that is necessary for sustainable economic growth and development. The Federal Government of Nigeria (FGN) has made infrastructure development through PPPs a top priority as a mechanism to assuage the dilapidated core infrastructure throughout the country. The ICRC has been tasked with leading the establishment of a sustainable PPP market for infrastructure as a way of bridging the resource gap between the FGN’s resource and the imperatives for high level availability and quality of infrastructure. A recent market assessment for the sort of long-term finance required for infrastructure PPP in Nigeria indicates serious gaps. First, is the limited tenure of creditmarkets. The current tenures of those few subnational bonds issued to date are generally at most seven years. Others include a lack of project finance skills within financial institutions in the country and lack of track record with PPPs.All of these discourage longer term financing. Secondly, very often the upfront capital costs of infrastructure developments, which arefully justifiable on a public good basis, can exceed the capacity of private investors and discourage private financing, even where there are strong economic and technical reasons for private sector engagement. This potentially threatens financial closure on many deals. To militate against this potential threat, the FGN through the ICRC,has engaged the World Bank and other Development Finance Institutions (DFIs) in
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preliminary discussions towards the development of some long-term supported debt modelled financial products including: •
Nigeria Public Private Partnerships Project Financial Intermediary Loan (FIL) Support;
•
Nigeria Viability Gap Fund for Public Private Partnerships.
10.3. Nigeria Viability Gap Fund For Public Private Partnerships Projects, classified and justifiable as public goods, very often fail the commercial viability test, even where strong economic and technical reasons exist for the private sector engagement. Very often, the upfront capital costs of infrastructure development can exceed the capacity of private investors and discourage private financing. The Viability Gap Funding (VGF) is one of the instruments that the FGN could deploy to address this constraint. The VGF can facilitate the delivery of priority infrastructure services in a socially and financially sustainable manner. As an official instrument of the federal budget, it can provide a level of transparency and predictability to government PPP programming and financing that will increase market confidence in PPP investments. It is an instrument that has been key to the Government of India’s infrastructure programmesuccess since 2005. The Viability Gap Fund (VGF) provides public capital to fill funding gaps required to make infrastructure PPP projects commercially viable and bankable, thus increasing the appetite for private sector investment. A VGF can provide up-front funding to cover a certain amount of a project’s capital cost (capital subsidies or grants). The viability fund can also provide government payments over the life of the project (operational subsidies). This is particularly relevant for PPP projects in sectors where user-fee contributions are likely to be insufficient to cover total project costs. The viability gap funds are useful where initial upfront capital subsidy is needed for the PPP project in order to make the project financially or commercially viable. While this can be a one-time payment, viability gap funding may also function over time or be deferred. For projects to be eligible for VGF, the ICRC is proposing certain pre-conditions.These could include, as with the Indian model:
44
•
The concession is awarded in favour of a private company in which 51 percent or more of the subscribed and paid up equity is controlled or owned by a private sector party or entity;
•
The private sector concessionaire has been selected through open competitive bidding;
•
Proper due diligence as detailed in the National Policy on Public Private Partnerships has been completed prior to submission for VGF funding;
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•
Amount of VGF funding requested cannot exceed 20 percent of total project cost with up to an additional amount of 20 percent fundable by State level budget.
10.4. Nigeria Public Private Partnerships Project Financial Intermediary Loan (FIL) Support In December 2008, the World Bank agreed in principle with the FGN on a prospective $315.5 million PPP project support funding that would include up to $200 million in infrastructure financing. It is anticipated that this financing component would, together with the project’s support to PPP institutional, legal and regulatory capacity building, serve to develop Nigeria’s longer term market for infrastructure financing through direct World Bank contributions to “first mover” PPP investments. The FGN, through the ICRC, is currently in the early stages of developing this US$315.0m PPP Financing Program. As currently proposed, the Program will have the following key elements: Name
Nigeria Public-Private Partnership Financing Programme
Size Lender Borrower(s) Lending Instrument Financing Component Credit Component Implementing Agency Other Key Agencies Proposed Lead FIL Bank Sectors
US$315.0m World Bank/International Development Association (IDA) Federal Government of Nigeria Specific Investment Credit and Guarantees Financial Intermediary Loan (up to US$200.0m) CapacityBuilding and Transaction Support (US$115.0m) Infrastructure Concession Regulatory Commission Ministry of Finance, CBN, DMO, Budget Office. Africa Finance Corporation Power, Transport, Telecoms
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The credit component of the Programme would involve an IDA Line of Credit to the FGN, to be managed by the Ministry of Finance (MoF), with funding channeled to the ICRC through the regular annual budgeting process, and subsequently disbursed under the supervision of the World Bank. Similarly, the loan component could be channeled from the FGN, through the Central Bank of Nigeria as a Line of Credit to the AFC, with subsequent on-lending to specific projects under the supervision of the World Bank. The Programme is broadly structured into two major components: 1.
2.
Institutional Capacity Building: A total of US$115.0m in IDA credits to be disbursed through the ICRC for the following general purposes: a)
Capacity Building: Technical assistance and training for ICRC, key PPP-related Federal and State Ministries, Departments and Agencies (MDAs), as well as PPP project sponsors and technical staff.
b)
Legal and Regulatory Environment: Legislative advice and support for the development of several key outstanding PPP-related laws and regulations
c)
Transaction Support Funding: For professional advisers that would be required as part of the structuring and preparation of PPP projects up to financial close
Infrastructure Financing: This is a total of US$200.0m in public and private financing for infrastructure projects structured as PPPs in Nigeria. This financing is being proposed for deployment in two ways: a)
Public Concessionary Funds: In which a Viability Gap Fund (VGF) would be established (through the Federal budget process) for providing public capital to bridge one-off financing gaps that may exist to take a PPP project towards financial close on a purely commercial basis
b) Private Commercial Loans: Currently proposed to be structured as a World Bank Financial Intermediary Loan (FIL). An on-lending agreement would be negotiated with a private-sector financier (such as AFC), which would then assume the risk of channeling loans to eligible PPP projects, subject to World Bank approvals and independent internal credit analysis The Financial Intermediary Loan (FIL) Under the FIL component of an investment loan, theWB provides funds to eligible participating financial intermediaries (FIs) for on-lending with AFC as the lead, at the FI’s risk to final borrowers. The objectives of such on-lending can vary. In this instance it would be specified for agreed upon infrastructure investments
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as agreed with the Federal Government, in line with Federal Government’s National Policy on PPP and in accordance with the FGN’s Medium Term Sector Strategies and associated priority public investment programmes/projects.
10.5
Long-term Finance for Infrastructure
Limited supply of bankable projects, lack of supported debt finance products and highly constrained project development capacity in both the public and private sectors together with serious gaps in longterm finance required for infrastructure PPP in Nigeria, potentially threaten financial closure on many deals, even where Government’s support has been assured and project development work has been successfully concluded. In the light of this, the Commission will vigorously pursue the development of funding sources and instruments with longergestating developments including: (i) Mobilizing of bond markets for infrastructure; (ii) Strengthening local financial institutional capacities for project finance; (iii) Implementation of FGN plans for a prospective Sovereign Wealth Fund (SWF) that could provide finance, however, more immediate measures to provide longer-term financing are required to build on existing institutional capacity and donor partner commitments. (iv) A number of options are available including World Bank Group Financial Intermediary Loans (FILs) and (v) Guarantee instruments (IDA Partial Risk Guarantees and MIGA Guarantees) that, in addition to deepening financial product choices for investors, would help to develop local institutional capacities and expertise with PPP financing. INFRASTRUCTURE CONCESSION REGULATORY COMMISSION
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11.0
FINANCIAL STATEMENT AND ACCOUNTS
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LIST OF THE GOVERNING BOARD MEMBERS
1
Chief Ernest Shonekan, GCFR, CBE
Chairman
2
Alhaji Yayale Ahmed (SGF)
Member
3
Mr. Mohammed Adoke, SAN (HAGF)
Member
4
Mr. Olusegun Olutoyin Aganga (HMF)
Member
5
Mallam Sanusi Lamido Sanusi (CBN Governor)
Member
6
Dr. Aisha Madawaki Isah, MFR
Member
7
Ms. Comfort SiraWiwa
Member
8
Dr. Bernard Verr, FCA
Member
9
Chief Joe-Kyari Gadzama, MFR, SAN
Member
10
Mazi Clement Owunna, MFR
Member
11
Mr. Hakeem Sanusi (Late)
Member
12
Engr. Mansur Ahmed
Secretary/Member
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MANAGEMENT TEAM AND PROFESSIONAL ADVISERS Management Mansur Ahmed Ghaji Bello Aminu Dikko Chidi Izuwah Chiedu Ndubisi Micheal Ohiani Mohammed A. Bamalli Emmanuel O. Onwodi Nyananso G. Ekanem Kabiru B. Yusuf Olugbenga Odugbesan Dada H. Togunde Jobson Ewalefor Sutura Bello Nelson Hundumofore Danlami Gomwalk
Director General/Chief Executive Officer Executive Director, Support Services Executive Director, Contract Compliance Centre Executive Director, PPP Resource Centre Technical Adviser to the DG Head, Legal & Governance Head, HR / Administration Head, Finance and Accounts Head, Monitoring & Compliance Head Procurement Head, Communications Head, Internal Audit Head, ICT Strategic Partnership Adviser Senior Procurement Adviser Senior Project Manager
Office 13, Suleiman Barau Crescent Aso Villa Abuja. Bankers Central Bank of Nigeria, Abuja Fidelity Bank Plc Zenith Bank Plc Auditors PKF Pannell Kerr Forster, Chartered Accountants NACRDB Plaza (4th Floor), Independence Way, Central Business District, Abuja.
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FINANCIAL HIGHLIGHTS FOR THE SEVEN MONTHS ENDED DECEMBER 31, 2009 2009 N’000 INCOME
EXCESS OF INCOME OVER EXPENDITURE
CAPITAL EXPENDITURE
368,919
61,979
967,289
NET ASSETS
1,311,979
CAPITAL GRANT
1,250,000
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52
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A C C O U N T I N G P O L I C I E S
The following are the significant accounting policies adopted in the preparation of these financial statements. 1. Basis of Accounting The financial statements are prepared under the cash basis of Accounting. 2. Fixed Assets Fixed assets are stated at cost. 3. Income Income comprises of subventions received from the Federal Government of Nigeria during the year net of transfers to consolidated Revenue Fund, and other internally generated revenue. 4. Exchange Rates Transactions in foreign currencies are translated to the Naira at the rate of exchange ruling at the dates of the transactions. Foreign currency balances are converted to Naira at the rate of exchange ruling at the balance sheet date and the difference arising therefrom is taken to income and expenditure account. 5. Stock Stocks are stated at lower of cost and net realisable value.
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BALANCE SHEET AS AT DECEMBER 31, 2009
Notes
2009 N’000
EMPLOYMENT OF CAPITAL Fixed Assets
1
967,289
2 3
12,853 331,837 344,690 1,311,979
4 5
1,250,000 61,979 1,311,979
Current Assets Debtors and Prepayments Cash and Bank Balances Net Assets FINANCED BY: Capital Grant Accumulated Fund
The Financial Statements on pages 53-59 were approved by the Governing Board on 29th July, 2010 and signed on its behalf by:
The accounting policies on page 53 and note on pages 57 - 59 form part of these financial statements. Auditors report on page 52.
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INCOME AND EXPENDITURE ACCOUNT FOR THE SEVEN MONTHS ENDED DECEMBER 31, 2009 2009
Notes
N’000
INCOME Subventions
6
368,304
Other Income
7
615
Total Income
368,919
EXPENDITURE Salaries and Wages Travelling and Accommodation Expenses
109,040
8
Office Materials and Supplies
47,497 1,887
Vehicles Running Cost
96
Maintenance: Office Equipment and Plant
506
Maintenance: Office Building
605
Postages , Telephone and Internet Services
1,680
Printing and Stationery
3,414
Vehicle Insurance
4,976
Electricity and Water Rates Training Expenses
87
9
Bank Charges Miscellaneous Expenses
47,579 79
10
cleaning and Fumigation Expenses
1,550 630
Board Expenses
27,440
Advert and Publicity
22,528
Consultancy Fees Total Expenditure Excess of Income over Expenditure
11
37,346 306,940
61,979
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CASH FLOW STATEMENT FOR THE SEVEN MONTHS ENDED DECEMBER 31, 2009
2009 N’000
Cash Flow from Operating Activities Excess of Income over Expenditure
61,979
Adjustment for items not involving the movement of funds:
Depreciation Operating Excess before Working Capital Changes
-
61,979
Working Capital Changes Debtors
(12,853)
Cash Generated from Operations
49,126
Cash Flow from Investing Activities Purchase of fixed assets
(967,289)
Cash Flow from Financing Activities Capital Grants Net Increase/(Decrease) in Cash Equivalent Cash and cash equivalent at January 1 Cash and cash Equivalent at December 31, 2009
1,250,000
331,837 -
331,837
Represented by: Cash and Bank Balances
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NOTES TO THE FINANCIAL STATEMENTS FOR THE SEVEN MONTHS ENDED DECEMBER 31, 2009 1
FIXED ASSETS
Land &
Motor
Furniture &
Libray
Buildings
Vehicles
Equipment
& Books
N’000
N’000
N’000
N’000
TOTAL
N’000
Cost
Purchases during the Period
847,576
89,148
30,157
408
967,289
At Dec. 31, 2009
847,576
89,148
30,157
408
967,289
2009
2
DEBTORS AND PREPAYMENTS
N’000
Deposit
12,853 12,853
3
CASH AND BANK BALANCES FIdelity Bank Plc
27
Zenith Bank Plc
5,384
Central Bank of Nigeria
325,811
Cash in Hand
615 331,837
4
Capital Grant
5
ACCUMMULATED FUND
1,250,000
Excess of Income over Expenditure 6
SUBVENTIONS
61,979
Received
Transferred
Net
(CRF)
7
N’000
N’000
N’000
Overhead Subventions
320,000
57,111
262,889
Salary Subventions
200,000
94,585
105,415
520,000
151,696
368,304
OTHER INCOME
Sale of Bids
615
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE SEVEN MONTHS ENDED DECEMBER 31, 2009
8
9
TRAVELLING AND ACCOMMODATION EXPENSES
Local Travelling Expenses
33,396
International Traveling Expenses
14,101 47,497
TRAINING EXPENSES
Local Training
8,811
International Training Expenses
38,768 47,579
2009 N’000
10
MISCELLANEOUS EXPENSES
Refreshment & Meals
220
Sporting Activities
230
Death Benefits
100
Welfare Expenses
1,000 1,550
11
CONSULTANCY FEES
Financial Consulting
15,750
Other Professional Services
21,596 37,346
12
CORRESPONDING FIGURES
This is the first set of Accounts, therefore there are no corresponding figures 13
GUARANTEES AND FINANCIAL COMMITMENTS
13.1
CAPITAL EXPENDITURE Capital Expenditure authorized by the Governing Board
Nil
but not provided for in theFinancial Statements
Capital expenditure authorized by the Governing Board but not contracted was
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE SEVEN MONTHS ENDED DECEMBER 31, 2009
13.2
CONTINGENT LIABILITIES There were no contingent liabilities as at December 31st, 2009 known to management in respect of any litigation involving the
Nil
Commission.
13.3
FINANCIAL COMMITMENTS The Governing Board is of the opinion that all known
Nil
liabilities and commitments have been taken into account in the preparation of these Financial Statements
14
APPROVAL OF FINANCIAL STATEMENTS These financial Statements were approved by the Board of the Commission on 29 July 2010
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