2010 Annual Report

2010 Annual Report

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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Engr. Mansur Ahmed Director General & Secretary to the Board

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ICRC Governing Board Members

Alhaji Yayale Ahmed, CFR Secretary to the Goverment

Mohammed Bello Adoke, SAN Attorney General of the Federation & Minister of Justice

of the Federation

Chief Ernest Shonekan GCFR, CBE Chairman

Dr. Olusegun Olutoyin Aganga

Mall. Sanusi Lamido Sanusi

Minister of Finance

Governor of the Central Bank of Nigeria

Dr. Bernard BA Verr Phd, MBA, FCA Chief Joe-Kyari Gadzama, MFR, SAN Chairman, Board Audit & Chairman, Board Contract Compliance Technical Commiittee Commiittee

Comfort Sira Wiwa 2010 Annual Report

Dr. Aisha Madawaki Isah, MFR Chairman, Board Human Resource & Establishment Committee

Engr. Mansur Ahmed DG & Secretary to the Board

Mazi Clement Owunna, MFR Chairman, Board Finance & General Purpose Committee

Mr.Hakeem Sanusi (Deceased 22.02.2010)

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ICRC Board Committees HUMAN RESOURCE AND ESTABLISHMENT COMMITTEE Dr. Aisha Madawaki Isah MFR (Chairman) Chief Joe-Kyari Gadzama, SAN Alhaji Yayale Ahmed, CFR Mr. Mohammed Bello Adoke, SAN Engr. Mansur Ahmed Dr. Ghaji Bello Mr. Mohammed Bamalli (Secretary)

FINANCE AND GENERAL PURPOSE COMMITTEE Mazi Clement Owunna, MFR (Chairman) Comfort Sira Wiwa Dr. Bernard Verr, FCA Dr. Olusegun Olutoyin Aganga Mallam Sanusi Lamido Sanusi Engr. Mansur Ahmed Dr. Ghaji Bello (Secretary)

AUDIT AND TECHNICAL COMMITTEE Dr. Bernard Verr, FCA (Chairman) Dr. Aisha Madawaki Isah, MFR Engr. Ebele Okeke, CFR Engr. Mansur Ahmed Dr. Solomon Akpata Mr. Ballama Manu Dr. Joyce Wigwe Dr. Olusegun Olutoyin Aganga Mallam Sanusi Lamido Sanusi Engr. Chidi Izuwah (Secretary) CONTRACT COMPLIANCE COMMITTEE Chief Joe-kyari Gadzama SAN (Chairman) Amb. Aluko Olokun Dr. Jamil Gwamna Engr. Mansur Ahmed Engr. H.Z. Abubakar Mazi Clement Owunna, MFR Engr. Mrs. Mayen Adetiba Mr. Mohammed Bello Adoke SAN Comfort Sira Wiwa Mr. Aminu Diko (Secretary)

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ICRC Executive Management Team

Engr. Mansur Ahmed Director General

2010 Annual Report

Dr. Ghaji Bello

Engr. Chidi Izuwahi

Aminu Diko

ED Support Services

ED PPP Resource Centre

ED Contract Compliance Centre

Chiedu Ndubisi

J. A. M. Ohiani

Technical Adviser to the DG

Head Legal and Governance & Sec, Exec. Management Team Infrastructure Concession Regulatory Commission

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ICRC General Management Team Mr. J. A. M. Ohiani

Head, Legal and Governance

Mr. Mohammed A. Bamalli

Head, Human Resources and Administration

Mr. Chiedu Ndubisi

Technical Adviser to the Director General

Mr. Togunde Dada Hammed

Head, Internal Audit

Mr. Emmanuel O. Onwodi

Head, Finance and Accounts

Mr. Olugbenga Odugbesan

Head, Communications

Mr. Kabiru Bamidele Yusuf

Head, Procurement

Mr. Danlami Gomwalk

Senior Project Manager

Mr. Nyananso Gabriel Ekanem

Head, Monitoring and Compliance

Mr. Ewalefo Oseodion Jobson

Head, Information & Communication Technology

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Table of Contents Page Chairman’s Statement 14 EXECUTIVE SUMMARY 20 1. BACKGROUND 23 2. ROLE & MANDATE 24 3. INSTITUTIONAL STRUCTURE & MANDATE 25 4. OBJECTIVES FOR 2010 26 5. KEY ACTIVITIES/ TARGETS FOR 2010 27 6. PROGRESS REPORT/TARGETS ACHIEVED 6.1. General & Governance Issues 28 6.2. PPP Resource Centre 34 6.3. Contract Compliance Centre 40 6.4. Support Services 45 7. KEY ISSUES 7.1. General 46 7.2. Regulatory and Institutional Environment 46 7.3. Institutional Capacity for PPPs 47 7.4. Cooperation of MDAs 47 7.5. Concession fees & Finacially Autonomy 47 7.6. Integrating PPPs Projects into National Planning Framework 47 7.7. Legacy Projects 48 7.8. Long-term Infrastructure Finance 48 8. RECOMMENDATIONS on key issues 49 9. FINANCIAL SUMMARY 51 10. CONCLUSIONS 52 11. FINANCIAL STATEMENT FOR YEAR ENDED DECEMBER 31, 2010 53

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GLOSSARY OF TERMS ADB AFD AfDB ATI BASL BCC BOF BPE Capex C3 or CCC CBN COFACE DFID DFIs DMBs DMO EBA EC EIA EoI EPC FBC FCTA FEC FEC FGN F M0A FM0F FM0J FM0W FM0P FERMA FM0T FM0H FM0LHUD FM0W GDP HRE ICRC ICRC Act IDB

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Asian Development Bank Agence Francaise de Developpement African Development Bank African Trade Insurance Bi-Courtney Aviation Services Limited Bi-Courtney Consortium Limited Budget Office of the Federation Bureau of Public Enterprises Capital Expenditure Contract Compliance Centre Central Bank of Nigeria COFACE of France United Kingdom Department for International Development Development Finance Institutions Domestic Major Banks Debt Management Office Enhanced Budgetary Allocation European Commission Environmental Impact Assessment Expression of Interest Engineering, Procurement and Construction Full Business Case Federal Capital Territory Administration Federal Executive Council Federal Executive Council Federal Government of Nigeria Federal Ministry of Aviation Federal Ministry of Finance Federal Ministry of Justice Federal Ministry of Works Federal Ministry of Power Federal Road Maintenance Agency Federal Ministry of Transport Federal Ministry of Health Federal Ministry of Lands, Housing & Urban Development Federal Ministry of Works Gross Domestic Product Human Resources & Establishment Infrastructure Concession Regulatory Commission Infrastructure Concession Regulatory Commission (Establishment, etc) Act 2005 Islamic Development Bank

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IPFA IPP ITWG JBIC JICA JPEG KBE LCC MDAs MNDA NIAF NIWA NDDC NEMT NNIP NNPC NPC NRC NOTAP NSWF OBC OCR O&M OPIC OPS OPTS PAD PDF PEF PENCOM PTFP RBDA RFP RMAFC SHPP SIF TBS UNIDO USAID VGF WB

2010 Annual Report

International Project Finance Association Independent Power Producer Infrastructure Technical Working Group Japan Bank for International Cooperation Japan International Cooperation Agency Joint Photographic Expert Group Knowledge-Based Economy Lekki Concession Company Ministries, Departments and Agencies Ministry of the Niger Delta Affairs Nigerian Infrastructure Advisory Facility National Inland Waterway Authority Niger Delta Development Commission National Economic Management Team Nigerian National Infrastructure Plan Nigerian National Petroleum Corporation National Planning Commission Nigerian Railway Corporation National Office for Technology Acquisition and Promotion Nigerian Sovereign Wealth Fund Outline Business Case Optical Character Recognition Operations and Maintenance Overseas Private Investment Corporations Organised Private Sector Oil Producers’ Trade Section Project Appraisal Document Portable Document Format Project Execution Framework National Pension Commission Presidential Task Force on Power River Basin Development Authority Request for Proposal Revenue Mobilisation, Allocation and Fiscal Commission Small Hydropower Projects Special Intervention Fund Tafawa Balewa Square United Nations Industrial Development Organisation United States Agency for International Development Viability Gap Fund World Bank

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CHAIRMAN’S STATEMENT

1.0

Introduction and Review of 2009 The Infrastructure Concession Regulatory Commission was inaugurated on 28th November 2008 to, among other things, help address Nigeria’s infrastructure challenges through Public Private Partnerships (PPP). The year ended 31st December 2009 saw the Commission putting in -place the building blocks and structures for an effective takeoff. During the period, the Commission established the basic structures of organisation, recruited key staff, developed organisational processes and more importantly, interfaced with the Ministries, Departments and Agencies of the Federal Government (MDAs) and other key stakeholders in preparation for the arduous task ahead. Perhaps the most significant step taken towards the attainment of the Commission’s mandate during this period which could aptly be described as the Year of Establishment was the development and approval by the Federal Executive Council, of the National Policy on PPP (N4P) and its associated operational guidelines.

2.0

Overview of 2010 Activities The 2010 Annual Report is therefore the report of our stewardship for the first effective year of operations. The year 2010 saw the ICRC move from the realms of conceptualisation to the actual process of catalysing the delivery of PPP projects into the market. The Commission, building on the gains of the first year, embarked on a number of activities and programmes, designed not only to mitigate the challenges of the first year, but also to create and take advantage of opportunities to upscale infrastructure delivery in the country through PPPs.







2.2

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The Commission commenced operations under an ever-evolving legal and regulatory environment for PPPs in Nigeria. As a first step towards reducing the risk perception of the private sector and investing public, the Commission developed a detailed set of PPP Regulations and Guidelines with the assistance of the World Bank. This new and comprehensive Regulations\Guidelines, incorporating international competitiveness requirements of PPP procurement process and due process for coordinating PPPs across the relevant MDAs, will be forwarded for appropriate FEC approval after the ongoing stakeholder consultations. To address some shortcomings identified in the ICRC Act, which severely constrained the operational effectiveness of the Commission, the Governing Board approved a holistic review of the Act to correct the identified limitations, and bring the operations of the Commission in line with international best practices. The revised Bill has received the input of the draftsmen at the Ministry of Justice and will be forwarded to the Honourable Minister of Justice soon for further pre-enactment action. In addition to these measures, the enabling environment to harness local and international private sector resources will receive a big boost if these initiatives are followed by an accelerated enactment of sector-specific reform bills. These include the Federal Competition and Consumer Protection Bill, Nigerian Postal Bill, Inland Waterways Bill, National Transport Commission Bill, Ports and Harbours Reform Bill, The Rail and Road Sector Reform Bill. Cognizant of the fact that the success or otherwise of the PPP programme will depend largely on a close cooperation and collaboration between the ICRC and MDAs, the Commission, through a well-thought-out strategy, closely engaged the MDAs in the process of building and regulating a world-class and internationally competitive Public Private Partnership (PPP) market in Nigeria. This has not been without some challenges, particularly in the area of ensuring compliance with the New PPP Policy Guidelines by MDAs and the Private sector partners. Also in collaboration with the office of the Head of the Civil Service of the Federation, the Commission is currently championing the establishment of PPP Units in key infrastructure MDAs. Conceptually, these PPP Units will become and remain the reservoir of institutional knowledge for PPPs in the MDAs. Institutional Capacity Building The third area of focus for the Commission during the year was in bridging the institutional/knowledge gap for PPP project development in ICRC, MDAs and potential private sector partners. This involved comprehensive local and international training programmes, workshops and seminars, study tours, etc. for the staff of the Commission, Board Members and Infrastructure Concession Regulatory Commission

2010 Annual Report

MDAs. By the end of the year, a total of 110 participants drawn from ICRC and 27 MDAs, as well as some private sector institutions, participated in several training/capacity building programmes organised by the Commission. 2.3

Securing Support from the World Bank. Following the establishment of the ICRC, the Federal Ministry of Finance on behalf of the Federal Government, sought the assistance of the World Bank for Technical and Financial Support to ensure the development of a sound institutional framework for PPP in line with international best practices. An IDA funded “Nigeria PPP Programme” under an Adaptable Programme Loan (APL) facility was proposed. The programme is structured in two stages. APL1, valued at US $115million to provide support for Capacity building in Project Development and Transaction Advisory services to ICRC and MDAs involved in developing PPP projects over the next six years. APL11 valued at US $200million, to provide seed funds to facilitate the development of long-term financing instruments in the Nigerian Financial Market. The APL11 will also help the FGN to establish a Structured Viability Gap funding scheme to support FGN infrastructure PPP projects. The request for Federal Executive Council approval for the agreement with the World Bank to be executed is already with the Cabinet Secretariat.

2.4

Establishing a Contract Compliance Framework Under the ICRC Act, the Commission is mandated to “take custody of every concession agreement made under the Act and monitor compliance with the terms and conditions of such agreement”. Consequently, during the year under review, the Commission, through its Contract Compliance Centre, commenced the process of developing a robust database of concessions already entered into by the FGN through the MDAs. In this respect, ICRC sought for and took custody of some major concessions entered into by the Federal Government before the inauguration of the ICRC. A comprehensive review of these contracts was undertaken, and the review revealed fundamental issues and challenges such as the lack of proper project preparation, inadequate definition of output requirements, lack of knowledge and non-compliance with approved PPP procurement process.



The Commission, therefore, established a framework for taking custody of agreements and addressing the complex issues arising therefrom. In the course of this exercise, the Commission found it necessary to intervene in a number of disputes between the MDAs responsible for these projects and their private sector partners with a view to getting the parties to negotiate a mutually acceptable resolution of their disputes within the provisions of the agreement rather than through extended litigation or arbitrary revocation of the contract by government.



Our intervention is anchored on government’s unequivocal commitment to up-holding the rule of law and the sanctity of contracts. It is also the Commission’s view that resolving such disputes through negotiation is more likely to ensure the sustainability of services to the public and a fair sharing of risks and rewards between the parties. Such an approach will also send strong positive signals to the market and to prospective investors and thus enhance the credibility of Nigeria’s PPP programme.

2.5

Promoting Long-term Finance The availability of long term finance remains a major challenge to sustainable infrastructure delivery in Nigeria. This need informed ICRC’s vigorous collaboration with relevant public and private stakeholders to promote the development of funding sources and instruments with long tenor for financing infrastructure projects in the country. This becomes urgent as the financial market, in Nigeria currently, lacks the capacity to support infrastructure PPP projects. In particular, the Commission, as part of the Presidential Committee on Alternative Funding Arrangements for Major Capital Projects under the distinguished Chairmanship of the Vice President, worked closely with other relevant MDAs not only to identify infrastructure projects whose delivery is key to the attainment of the objectives of the National Vision 20:2020, but also to propose optimal funding sources and project delivery framework likely to ensure an expedited and accelerated completion of the projects. The Commission has also engaged key players in the banking and finance sector through workshops, seminars and other forums in a continuing effort to deepen and broaden the availability of long-term finance in the domestic market in the conviction that a strong domestic financial services sector is vital if we are to attract the required inflows from the global financial market.

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2.6

Creating a PPP Resource Centre and developing a credible PPP Projects Pipeline The primary mandate of the Commission is the creation of a sound framework which provides best practice guidelines and procedures for the effective development and competitive procurement of PPP Projects and working closely with MDAs to identify credible and competent partners for the efficient provision of high quality infrastructure services. While the FEC approval of the World Bank PPP Project will mark the commencement of an aggressive and robust PPP regime in Nigeria, the Commission has already launched a modest PPP projects pipeline with the full establishment of the PPP Resource Centre which has been working with key Infrastructure MDAs in preparing sound Outline Business Case (prefeasibility studies) on carefully selected projects in various sectors. During the year under review about 20 potential PPP projects were identified and are currently under development. These projects are under the jurisdiction of the Ministry of Transport, the Ministry of Works and the Federal Capital Territory and they include roads, railways, port terminals and urban infrastructure. The PPP Resource Centre is also engaging other MDAs including the Ministries of Aviation, Water Resources, Power and Health etc to identify and develop other potentially viable PPP projects.



In the course of working with MDAs to develop these and other viable PPP projects that would attract credible investors and financiers, we have also taken steps to learn from the experiences of other emerging countries like India, South Africa and Malaysia that have adopted a sound PPP framework to significantly scale up their national infrastructure and we have learned some important lessons: (a) First, PPP projects that have been most successful the world over, have been characterised by thorough planning, detailed studies and analyses of lifecycle costs and revenues, good communication, strong commitment from all parties and are guided by open and transparent procedures. These procedures commence with proper project preparation, clarity in the specification of output requirements and the conduct of a thorough needs analysis of the service to be delivered. A careful consideration of all available options for delivering the service should be the first necessary step. This must be determined by a thorough feasibility study that must also test the affordability and value-for-money of the project. It is necessary to identify all potential risks that may threaten the success of the project and determine which party in the partnership will bear which risks. This will ensure that the rewards conferred on partners are commensurate with the risks they bear. It is also important to consider all relevant stakeholders, including communities, labour and the environment, whose interests may be affected by the project and ensure that all key stakeholder interests are adequately addressed. Finally, in selecting private sector partners it is imperative that an open and competitive procurement procedure is followed. The important lesson in this is that successful PPP projects require a significant investment in time and resources to prepare and an open and competitive procurement process will more likely ensure selection of the right partners. (b) PPP projects that are selected from a coherent infrastructure investment programme which is an integral part of a national development plan tend to add greater value to and enhance overall national development more than projects that are conceived by private proponents outside the national plan and proposed to the public sector as unsolicited projects. Thus, it is preferable that unsolicited projects be the exception rather than the rule and where such unsolicited projects are found acceptable they must be subjected to a thorough review and analysis to ensure that they are consistent with the national plan. Further, they must also be subjected to same tests as internallygenerated projects with regards to affordability, value-for-money, risk/reward balance and competitiveness. (c) Thirdly, PPP contract agreements involve long-term commitments. They are also complex, often involving many parties and significant risks. They must, therefore, be approached with great care, due diligence and a deep sense of responsibility and accountability especially on the part of public sector officials who must recognise that they are acting under public trust. This is especially pertinent since officials involved in negotiating a particular contract are often no longer in service when the agreements begin to fall into dispute. It is also most important that senior public functionaries should endeavour to refrain from undue interference in contractual negotiations between public officials and their private sector partners. Such interference often makes it difficult to hold public officers accountable for any failed contracts.

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(d) Finally PPP arrangements involve long term relationships (10 to 30 years) must be approached by both partners with absolute seriousness. This is more so because despite every effort to plan and prepare these projects professionally and to analyse potential risks it will not always be possible to anticipate all risks or mitigate them effectively. It is therefore imperative that both parties approach the contract in a spirit of genuine partnership, a commitment to work for a win-win situation and to always seek an outcome that ensures that the interests of all parties are recognised and pursued in an equitable manner. This requires a level of openness and transparency in negotiations in which there is full disclosure and sharing of information and concerns. It also requires the deployment of a high level of professional competence and skills in all aspects of the transaction – technical, legal, financial etc. For the public sector agency, this indicates the need to engage highly competent and experienced Transaction Advisers.

While the foregoing lessons have all been fully incorporated in our National PPP Policy and guidelines, our experience in the past year clearly indicates an urgent need for our colleagues in the MDAs to recognise and imbibe these lessons if we are to succeed in using PPP to attract significant private sector investment in scaling up our infrastructure services. First, it is absolutely vital that all PPP projects be developed and procured in line with the National Policy on PPP (N4P) and MDAs are encouraged to consult ICRC at the earliest stages for necessary guidance and support. It is also important that MDAs make adequate provisions in their annual budgets for the cost of project development which should be in the range of 3 - 5% of the estimated project cost. Further, MDAs are advised to consult the Commission with regards to all unsolicited projects which they consider of interest before they engage the proponents in further discussions or make any commitments. And finally, it is our sincere prayer that all public agencies be prevailed upon to show greater diligence in negotiating PPP contracts on behalf of the government. They must be encouraged to engage experienced and competent professional advisers when necessary, to ensure that the public sector is not exposed to unnecessary liabilities or forced to resort to arbitrary revocation of duly executed contract agreements against its avowed policy of commitment to the rule of law.

2.7

Integrating PPP Programme with National Plan As mentioned earlier, the experience of many of our peer emerging economies is that sustainable infrastructure development must be anchored on a coherent and consistent economic planning framework. In 2010, under the guidance of the Economic Management Team and in consultation with other relevant agencies, the ICRC developed a comprehensive list of high priority infrastructure projects which, if successfully implemented, will facilitate the effective attainment of the goals of Vision 20:2020. Further in close collaboration with the National Planning Commission, these priority projects have been fully incorporated in the National Implementation Plan of Vision 20:2020. With this alignment, it is our prayer that MDAs should be prevailed upon to use the National Implementation Plan as the primary source of their PPP projects and to work with ICRC in identifying and developing those critical projects that are potentially viable and can attract the requisite private investment which has been anticipated by the National Implementation Plan for Vision 20:2020.

2.8

Interfacing with State Governments Although the ICRC Act limits the Commission’s jurisdiction to federal infrastructure projects, our Board is aware that many state governments are also desirous of attracting private investments in their infrastructure development programmes and some have, indeed, established their own PPP framework to facilitate this. The Commission recognises that aligning the states’ PPP framework with the federal framework will be an important pre-condition for the development of a coherent and robust national PPP market in Nigeria which will not only help to deepen the capacity of PPP practitioners in the country but will indeed enhance the attractiveness of Nigerian projects in an increasingly competitive global PPP market. In this regard, the Commission has engaged states that have established or are in the process of establishing their own PPP institutions in a mutually beneficial collaboration aimed at aligning our regulatory frameworks and sharing experiences and capacity building opportunities. Thus the ICRC has established collaborative relationship with PPP agencies in Lagos, Cross River, Niger, Benue, Rivers, Kaduna and Bayelsa states and will continue to encourage such linkages with other states and assist them when required to establish or strengthen their PPP institutions.

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2.9

Developing the Market for Nigerian PPP Projects Public Private Partnership has in recent years become the preferred model especially for infrastructure financing in both the developed and emerging economies. PPP-modelled Infrastructure projects attracted about 25% of global project finance every year for the past five years. In 2010 alone, 610 transactions reached financial closure estimated at over US$60billion. The market is becoming more and more competitive as more countries especially in Africa and Asia resort to PPP to fund their infrastructure development programmes. If we are to achieve the goal of our National Implementation Plan of Vision 20:2020 which anticipates private sector investment of about US $87billion (N13 trillion) over the next four years we must, clearly establish a very robust internationally competitive market and also engage in a very vigorous promotion of Nigeria’s infrastructure programme and projects. In recognition of this fact, the ICRC organised its first international Road Show for investors and stakeholders on the 24th of June 2010 in London, the United Kingdom. The event, titled Nigeria’s Public Private Partnership Road Show, was aimed at attracting the best in the world to partner with the ICRC and MDAs towards up-scaling our critical national infrastructure. The Commission used the opportunity of the road show to showcase the Nigerian PPP framework and environment, the challenges and strategies adopted to mitigate them, together with details of the first mover projects on the national PPP projects pipeline. The road show was well attended by approximately 150 delegates from various economic and professional groups, including the financial, legal, and engineering sectors. A total of 75 organisations, not including the Nigerian delegation, were represented at the event.

3.0

Funding of ICRC Activities. At the end of the year 2010, a total sum of N1,556,097,097.39 only was received through the monthly allocation as against the appropriation sum of N1,757,061,774.00 for the year. The total expenditure for the year was N911,926,863.97 only, while a sum of N421,372,476.62 was returned to the coffers of the Government. The balance in capital vote of N222,797,756.80 was however carried over to the year 2011 due to the extension of capital budget till March 2011 as summarised in the following table:



4.0

Conclusion The year 2010 marked the first year in which ICRC, as a public institution, moved from concept to physical reality and began to actualise its mandate of creating a conducive environment for and facilitating the delivery of well structured Infrastructure PPP projects to the market. Following the approval of the National PPP Policy document by the Federal Executive Council in 2009, the Commission focused on creating awareness, especially among MDAs and other key stakeholders, of the PPP project development process and the detailed preparation that is absolutely vital for engaging the private sector to implement successful and sustainable PPP transactions.



While we had encountered the usual start-up challenges especially given the relative novelty of PPP as a means of delivering public services, we wish to humbly submit that we have recorded some significant progress with more than 10 MDAs buying into the PPP programme and working with the Commission to begin the project development process on their various projects. We are confident that before the end of 2011, many of these projects will be ready for delivery to the global market.



On the second plank of its mandate of taking custody of all Concession Agreements entered into by Federal MDAs, and ensuring their effective implementation, the Commission has also made some appreciable progress. Our Contract Compliance Centre has taken custody of nearly 30 legacy PPP agreements and is in the process of reviewing all of them with a view to providing guidance to the various parties in the agreements on how to ensure continued efficient service

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delivery while maintaining effective partnership. The Contract Compliance Centre has also developed a suitable framework for continuous effective monitoring of these PPP arrangements. In a few important PPP contracts where the parties have fallen into dispute, the Commission has intervened with a view to helping the partners resolve their differences amicably and sustain the desired service delivery in a mutually satisfactory manner.

But while we lay claim to some modest progress we do acknowledge that this is just the beginning and we are in no doubt that the road ahead will be nothing but challenging. We are, however, confident that with your continued support and the cooperation of all MDAs, the Nigerian PPP programme will make a significant contribution to the successful implementation of your government’s transformation agenda. The growth potential of the Nigerian economy has been widely acknowledged with the country being recognised as one of the leading Global Growth Generators (3G) of the world economy over the next three decades. It is also clear that one of the critical success factors for the actualisation of that potential is continuous scaling up of our infrastructure. We believe that a world-class PPP framework is vital to attracting the huge investments in infrastructure that will make the actualisation of that potential possible and we at ICRC are committed to creating that framework.

THANK YOU.

CHIEF ERNEST SHONEKAN, GCFR, CBE. CHAIRMAN OF THE GOVERNING BOARD

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EXECUTIVE SUMMARY The Infrastructure Concession Regulatory Commission (ICRC) made significant strides in the attainment of its mandate during its first year of operation ended 31st December 2009. During the period, the national framework for PPP in Nigeria and relevant operational guidelines were developed and put in place, following the approval of same by the President in Council. The Commission also commenced, through a well-thought-out strategy, the process of building a world-class and internationally competitive Public Private Partnership (PPP) market in Nigeria by providing leadership to the Ministries, Departments and Agencies (MDAs) of the Federal Government in the planning, programming and approval of credible project pipeline. The thrust of the Commission’s activities in 2010 is the mitigation of the challenges experienced during the first year. There is the primary challenge of establishing a fully operational Secretariat for the Commission. Second, is the need to quickly reduce the risk perception of the private sector and investing public arising from the evolving nature of the legal and regulatory environment for PPPs in Nigeria. Third, is the challenge of bridging the institutional/knowledge gap for PPP project development at ICRC, collaborating MDAs and potential private sector partners. The need to vigorously pursue the development of funding sources and instruments with long-gestation for funding infrastructure projects in the country becomes urgent as the financial markets in Nigeria currently show gaps in long-term financing capacity to support infrastructure PPPs in the country. In addition, there is the imperative of anchoring infrastructure development through PPPs on a coherent and consistent integrated national planning framework. Finally, the novelty of the PPP as a policy instrument, underscores the need to develop and implement effective strategy for communication and promotion of the Nigerian PPP projects in order to generate interest and attract credible and committed private investors to the Nigerian PPP market. The year 2010 commenced with a visit of the Governing Board and Management of the ICRC to the office of the President on 14 January 2010 for the purpose of presenting the 2009 Annual Report on the activities of the Commission. The team was received by the President, Dr. Goodluck E. Jonathan, GCFR. Three key issues that emerged from the briefing were the need to develop a position on the future funding of the Commission through internally generated revenues; the need for the Commission to put in place consistent procedure and format for granting its “No Objection” for the Federal Executive Council (FEC) approval of PPP projects; and the need for the Commission to organise a Presidential retreat so that policymakers would understand the complexity of their role in the PPP process. The visit elicited the pledge of support and co-operation of the Presidency towards the achievement of the Commission’s mandate. The first major activity designed to bridge the identified gaps in the attainment of the Commission’s mandate is to bring the Secretariat into full operations. While the remodelling of the Commission’s head office is on fast-track, a number of strategic departments namely PPP Resource Centre and Contract Compliance Centre became operational with the assumption of duties by their respective Executive Directors. The Heads of Communications, Monitoring and Compliance, Procurement, Finance and Accounts and Audit Units also assumed duties, in addition to 26 other staff of various categories. During the period, the Commission in its continuing effort at building a cohesive, efficient and functional organisation held a visioning session for its Management, members of the Governing Board, as well as members of the Technical and Audit Committees of the Board to promote a shared understanding and buy-in of the Commission’s mandate, goals and objectives, and strategic plans for achieving them. The visioning session elaborated on the Infrastructure Concession Regulatory Commission Act (2005) and sought clarity on a number of issues including ICRC’s core roles and objectives, internal roles, manning levels, reporting relationships and communications strategy. The session, apart from providing a forum for bonding and the emergence of ICRC corporate culture, laid some groundwork for the development of strategic framework for ICRC and a high-level action plan to guide the activities of the Commission during the year. A Presidential Retreat aimed at enabling policymakers to achieve a clearer understanding of the dynamics and complexity of PPPs, and their role in achieving Nigeria’s PPP objectives, took place on 14th June 2010. The well-attended retreat which sought the commitment of the Presidency/Ministers/Senior Public servants in achieving Nigeria’s PPP objectives was opened by the President and Commander-in-Chief of the Armed Forces of the Federal Republic of Nigeria. The retreat was organised in

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collaboration with the National Planning Commission, with a view to mainstreaming PPPs into the integrated national planning framework anchored on the Vision 20:2020 Economic Transformation Blueprint and the First 4-year National Implementation Plan. The Commission facilitated a World Bank (WB) Pre-Appraisal Mission in January 2010, during which areas for further detailed discussions prior to the preparation of the first draft of the Project Appraisal Document (PAD) of the WB/IDA-funded Public Private Partnership Programme were identified. This was followed by a high-level technical consultation which took place in Washington, D.C. from February 24-26th. The Nigeria delegation, led by the Permanent Secretary in the Federal Ministry of Finance, included senior officials from across the key MDAs participating in the PPP Programme. The outcome was an agreement on an Adaptable Programme Lending (APL) facility to support PPPs in Nigeria with capacity building and technical assistance, project preparation, infrastructure financing, and project implementation, monitoring and evaluation as its components. In the course of the year ended 31st December 2010, the Commission provided technical support for the development of Outline Business Case (OBC) and Environmental Impact Assessment (EIA) to key infrastructure MDAs. Notable projects in the pipeline are the FCT Light Rail Project LOT 2, Kuje Water Works upgrade and reticulation, Lekki Deep Seaport, Onitsha Inland Port concession, Kirikiri Lighter Terminals 1 and 2. Others are Shagamu-Benin and Benin-Asaba highway rehabilitation and upgrade, Abuja-Kaduna and Kaduna-Kano highway rehabilitation and upgrade, and the existing narrow gauge railways between Lagos to Kaduna to Kaura-Namoda and Nguru, and Port Harcourt to Kafanchan and the Northern line to Maiduguri. In the course of the year, the Commission provided technical assistance to the National Inland Waterway Authority (NIWA) in prioritising its projects for possible PPP procurement, and engaged the Federal Ministry of Aviation in considering options for the concession of such airports as MMIA Lagos, Mallam Aminu Kano International Airport, Port Harcourt International Airport and Margaret Ekpo International Airport in Calabar. The Commission is currently partnering with the National Office for Technology Acquisition and Promotion (NOTAP), the FMoT, SMEDAN/Ministry of Commerce and Industry, and FMoH on a number of PPP initiatives. These respectively include the coastal rail line with Lagos-Benin-Yenagua-Port Harcourt-Uyo-Calabar alignment, Industrial Pack projects and the Abuja Military Hospital. ICRC reviewed the report prepared by Yoroso-Enplan-Pentagon Consortium with a view to jumpstarting the beleaguered LagosIbadan Expressway. During the year, ICRC reenergised the process of building a world-class and internationally competitive PPP by providing assistance to some State Governments in the development of their PPP laws and institutions. In this regard, the Commission engaged the Governments of Niger and Kaduna States on the development of an institutional and legal framework for PPP by providing comments on draft Bills and examples of good practice. It has also reviewed potential PPP projects for Cross River State and provided advice on a proposed partial divestment of Port Harcourt Electricity Distribution Company to four States. Further to its mandate of taking custody of and ensuring compliance of PPPs entered into by MDAs, the Commission, through the Contract Compliance Centre, commenced the process of developing a robust database of concessions already entered into by the FGN through the MDAs. In addition, ICRC has undertaken a review of all contracts received with a view to developing a framework for ensuring compliance with PPP Contracts. It is also developing appropriate intervention strategy for legacy projects. The Commission has been active in a number of dispute resolutions, particularly between Bi-Courtney and FAAN on the MMA2 contract. Others include disputes arising from concessions on Lagos-Ibadan Expressway, Seaport Terminals, Lekki Toll Road, and the Lagos International Trade Fair Complex. At the end of the year 2010, a total sum of N1,556,097,097.39 was received as against the appropriation sum of N1,757,061,774.00. The total expenditure for the year was N911,926,863.97, while a sum of N421,372,476.62 was returned to the coffers of the Government. In summary, the 1st half of the year 2010 saw the ICRC move from the realms of conceptualisation to the actual process of catalysing the delivery of PPP projects into the market. The very long “wish list” of PPP projects by the MDAs is 2010 Annual Report

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gradually being reduced into credible PPP pipeline of projects that demonstrate clear financial viability and bankability. Sufficient data and information is being put together through ICRC-supported OBC and Social Impact Studies to enable prospective investors and financiers to evaluate projects’ commercial viability. Pending the enactment of the outstanding sector legislations, notably in road transport, rail and ports, together with the streamlining of potential overlap of existing procurement legislation relating to PPP, the Commission has proceeded to reduce the risk perception of the private sector through the development of detailed PPP regulations\guidelines particularly as they relate to the international competitiveness requirements of PPP procurement process and due process for coordination across the relevant MDAs. The development of funding sources and instruments with longer-gestating periods is at advanced stages of discussion with the relevant stakeholders in Nigeria and international development partners. Serious discussions are already under way to harness Pension Fund resources for infrastructure development. PPP awareness efforts and stakeholder capacity-building activities have been ongoing with the ICRC making over 21 presentations during the year, and participating in over six PPP and Infrastructure development discussion events, both locally and internationally. In addition, the Commission has developed, with the assistance of Human Resources experts and international development partners, a comprehensive human capital development programme, involving training programmes, workshops and seminars, study tours, and the like. These will be unfolding within the first and second quarters of 2011.

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Section 1: BACKGROUND

General 1.1.

Shortly after its inauguration in November 2008, the Commission developed the National Policy on PPPs (N4P). This framework document, which was approved by the FEC, provides MDAs with operational guidelines for PPP project development. The ICRC has also robustly engaged, promoted, facilitated, supported and coordinated stakeholders at all tiers of government in initiating and developing a sound PPP process, while ensuring that principles of good governance are applied to all of the functions that form part of the PPP process. In addition, the Commission continued to provide transaction support and capacity building to MDAs for project development, structuring, negotiation and contract execution.

1.2.

These efforts have not been without challenges. First, is the absence of a fully operational Secretariat, manned by the requisite staff and adequate resources. Efforts are on fast-track to address this constraint. The risk perception of the potential private sector partners arising from the ever evolving legal and regulatory environment in Nigeria has diminished over time. While the development of a robust PPP market is largely beyond the direct control of the Commission with pending sector bills, notably in road transport, rail and ports, etc. awaiting enactment, and relevant sector reforms appearing stalled, the issue of enabling environment for PPPs will remain a serious challenge to the effectiveness of ICRC’s efforts. Third, is the issue of the institutional/knowledge gap for PPP project development both at the ICRC, the Ministries, Departments and Agencies of the Federal Government (MDAs) and potential private sector partners. There also appears to be a dearth of credible project pipeline that dovetails into the National Implementation Plan of Vision 20:2020 Economic Transformation Blueprint of the FGN. Fifth, is the serious gap in long-term finance required for infrastructure PPP in Nigeria, which limits the likelihood of financial closure on many PPP deals. Last, is the nonexistence of an effective strategy for communication and promotion of the Nigerian PPP projects that would generate interest and attract respectable and committed private investors (both domestic and foreign) to the Nigerian PPP market.

1.3.

Underlying the Commission’s objectives, goals, targets and activities for 2010 are efforts aimed at mitigating these challenges.

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Section 2: ROLE & MANDATE 2.1.   

The ICRC ACT imbues the Commission with functions and powers to: Provide general 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.

2.2. 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. 2.3.

Deriving from this mandate, the role of the ICRC consists of four main components: * Promoting, facilitating, supporting, coordinating and implementing 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 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 for private sector investment in Nigeria’s infrastructure projects.

2.4. 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 the capacity of 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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Section 3: INSTITUTIONAL STRUCTURE & GOVERNANCE 3.1.

Structure and Functions The Governance and Organisational 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: * * * *

• Contract Compliance Committee (oversees the activities of the Contract Compliance Centre); • Technical & Audit Committee (oversees the activities of the PPP Resource Centre); • HR & Establishment Committee (responsible for HR matters, governance, institutional relations, communications, etc). • Finance & General Purpose Committee

3.2. Executive Management: Reporting directly to the Director General are three Executive Directors (EDs), each for the PPP Resource Centre, Support Services and Contract Compliance Centre. The EDs attend board meetings, not as statutory members of the governing board but as observers. 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 the EDs constitute the Executive Management Team of the ICRC. 3.3. The PPP Resource Centre is charged to disseminate guidance and best practice, communicate plans/policies to energise 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 is to assist States setup 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.

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Section 4: OBJECTIVES FOR 2010

4.1.

In order to position the ICRC to deliver its mandate of expanding infrastructure provision through PPPs, the broad objectives established by the Commission for 2010 include:

4.1.1 Administrative To make the Secretariat fully operational in terms of requisite staff, systems and equipment. 4.1.2

Regulatory and Institutional Environment (a) To strengthen the legal and regulatory environment; (b) To develop coherent regulations and guidelines to reduce the risk perception of the private sector due to the evolving legal and regulatory environment in Nigeria. This is a prelude to the enactment of the pending sector- specific legislations;

4.1.3

Institutional Capacity for PPP Project Development (a) To bridge the institutional/knowledge gap for PPP project development in ICRC, MDAs and potential private sector partners.

4.1.4 Integrating the PPP Programme with the National Infrastructure Plan (a) As a prerequisite for a coherent and sustainable programme of infrastructure delivery through PPP, integrate the N4P framework into a coherent and consistent national planning framework. (b) Continue to build the interface with the NPC and other agencies. 4.1.5 PPP Pipelines, Consultancy and Transaction Advisory services To provide leadership to MDAs in their planning, programming, and preparation of credible project pipeline that dovetails into the Nigerian Vision 20: 2020. 4.1.6 Promoting the availability of Long-term Finance for Infrastructure To pursue the development of funding sources and financial instruments with longer-gestation for infrastructure PPP through collaboration with relevant institutions in: (a) mobilising of bond markets for infrastructure; (b) strengthening local financial institutional capacities for project finance; (c) Implementation of FGN plans for a prospective Sovereign Wealth Fund (SWF) that could provide finance for infrastructure PPP (d) Ensuring that a number of funding initiatives currently being developed including the World Bank Group Financial Intermediary Loans (FILs) and Viability Gap Fund (VGF) are concluded and perfected (e) Strengthening collaborative actions with other public agencies such as Pencom, CBN, etc. 4.1.7

To develop and implement effective Communications Strategy To develop an effective strategy for communication and promotion of the Nigerian PPP projects in order to enhance the visibility of ICRC and the PPP programme, generate public interest and attract credible and committed private investors (both domestic and foreign) to the Nigeria PPP market.

4.1.8

To develop effective Legacy PPP Project Governance (a) To monitor and ensure efficient management and execution of all existing PPP agreements. (b) To develop and implement an effective dispute resolution mechanism for PPP contracts.

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Section 5: KEY ACTIVITIES/TARGETS FOR 2010 5.1.

The specific goals and targets designed to ensure the achievement each of the objectives set out in Section 4 above are as follow:

5.1.1 Administrative Action Required: To quickly remodel and equip the ICRC permanent Head Office and bring on board requisite staff necessary to achieve the ICRC statutory mandate. 5.1.2 Regulatory and Institutional Environment Action Required: (a) ICRC to develop and issue detailed PPP Regulations and Guidelines in relation to international competitive requirements of PPP procurement process and due process for coordinating across the relevant MDAs. (b) Liaise with relevant MDAs and the National Assembly (NASS) for the enactment of sector-specific reform bills designed to provide conducive investment and operating environment for private sector participation in infrastructure PPPs. (c) Undertake comprehensive review of the ICRC Act of 2005 with a view to addressing its shortcomings in providing a robust and dynamic all-inclusive legal framework for PPPs in Nigeria. 5.1.3 Institutional Capacity for PPP Project Development Action Required: To implement a comprehensive human capital development programme, involving training programmes, workshops and seminars, study tours, etc, developed with the assistance of Human Resources experts and international development partners. 5.1.4

Integrated Planning Action Required: The ICRC to work closely with the National Planning Commission on the initiative of integrating the N4P framework into the Vision 20:2020 Economic Transformation Blueprint and its Implementation plans.

5.1.5 PPP Pipelines, Consultancy and Transaction Advisory services Action Required: To provide consultancy services for pre-feasibility and transaction advisory services to develop credible pipeline of PPP projects, with the assistance of international development partners. 5.1.6 Long-term Finance for Infrastructure Action Required: (i) To actively engage the capital market towards mobilising long term funds through the bond markets; (ii) To actively pursue advocacy geared towards strengthening local financial institutional capacities for project finance; (iii) To support the implementation of FGN plans for a prospective Sovereign Wealth Fund (SWF) that could provide finance for infrastructure projects; (iv) To ensure that the World Bank Group Financial Intermediary Loans (FILs), the Viability Gap Fund (VGF) schemes are finalised and brought into operation; (v) To strengthen collaborative actions with other public agencies such as Pencom, CBN, etc.

5.1.7 To develop effective Legacy PPP Project Governance (i) To consult closely with various stakeholders on PPP legacy projects; (ii) To regularly visit PPP projects for monitoring and information/data gathering; (iii) To develop and manage a contract monitoring/database system; (iv) To develop an in-house capacity for PPP dispute resolution. 2010 Annual Report

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Section 6: PROGRESS REPORT/TARGETS ACHIEVED 6.1. General & Governance Issues 6.1.1. 2009 Annual Report and Presidential Visit

The year 2010 commenced with a visit of the Governing Board and Management of the ICRC to the office of the President on 14 January 2010. The team was received by the President, Dr. Goodluck E. Jonathan. The ICRC team presented the 2009 Annual Report on the activities of the Commission. Three key issues emerged from the briefing. These were: * The need to develop a position on the future funding of the Commission through internally generated revenues; * The need for the Commission to put in place consistent procedure and format for granting its “No Objection” for the FEC approval of PPP project; and, * The need for the Commission to organise a Presidential retreat so that policymakers would understand the complexity of PPP process and their role in the process. At the end of the briefing, the Acting President (as Dr. Goodluck Jonathan then was), commended the Commission for the significant progress it made within one year of its existence, and pledged the necessary Presidential support for the achievement of the Commission’smandate.

6.1.2. TWG Report on Critical Infrastructure In August 2010, His Excellency, Mr. President approved the constitution of a “Committee on Alternative Funding Arrangements for Major Capital Projects” under the distinguished Chairmanship of the Vice President. The thrust of the Committee’s assignment is the determination of the optimal funding mechanism for major projects with limited recourse to annual budgetary appropriation to avoid project abandonment, and defining the manner and conditions of private sector engagement for funding support.

Following the inauguration of this Committee, the Vice President charged the ICRC with the responsibility of identifying infrastructure projects whose delivery is key to the attainment of the objectives of the National Vision 20:2020, establish their delivery status, determine their funding requirement, and propose optimal funding methods and project delivery framework likely to ensure an expedited and accelerated completion of the projects. This charge by the Vice President is in line with an earlier decision of the reconstituted New Economic Management Team (NEMT) to set up a Technical Working Group (TWG) of the NEMT with ICRC as its chair, to develop a Medium Term (3-4 years) Action Plan for critical infrastructure. The report titled “TWG Report on Critical Infrastructure”, which was submitted in December 2010, remains a key reference for infrastructure delivery in Nigeria.

6.1.3. Staffing of the Secretariat During the year, the following departments and units became fully operational: 1. PPP Resource Centre 2. Contract Compliance Centre 3. Communications Unit 4. Monitoring and Compliance Unit 5. Procurement Unit 6. Finance and Accounts Unit 7. Audit Unit; In all, 30 new staff of various categories were added in 2010. These include eight management level staff, five middle management staff, while the others are Junior and Officer cadres.

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6.1.4.

Governing Board Meetings The Governing Board of ICRC met seven times during the year ended 31st December 2010 to provide leadership and direction to the Commission. During this period, the Board deliberated on, and approved a number of measures designed to establish a fully functional and operational Secretariat for the Commission, and facilitate the process of building a world-class and internationally competitive PPP market in Nigeria. In this regards, the Governing Board granted approval for: * Remodelling of the New Office Complex purchased in the previous year by the Commission, with a budget baseline of N250 million. The Board mandated Management to take all necessary steps to ensure an expedited completion of the office remodelling project; * Recruitment of the staff earlier interviewed. In this respect, interviews for selection and placement of the Commission’s staff from grade levels 12-17 be handled be the HR & Establishment Committee, subject to Board approval, while officers from grade levels 10 and below, be concluded by ICRC Management before presentation to the HR & Establishment Committee for approval and subsequent notification to the Board for information; * The Commission’s Communication Strategy; * The Board considered and approved the 10 candidates for recruitment as presented to it by the HR & Establishment Committee; * its allowances subject to approval by RMAFC, staff fringe benefits and allowances, and the Audited Statement of Account for the year ended December 31st 2009; * The Commission’s computerisation programme and the recruitment of competent ICT staff. * The format for the issuance of Certificate of “No Objection” for OBC and FBC.



Other significant events the Governing Board was involved in during the year include: (i) Presentation of the ICRC Annual Report and Statement of Accounts for the year ended 31st December to the President. (ii) On 22nd February 201, the Governing Board of ICRC lost one of its members in the person of Mallam Hakeem Sanusi, who passed away in hospital in Virginia in the United States. The Chairman of the Governing Board, Chief Ernest Shonekan, led a delegation of ICRC Board and Management to the funeral in Akure, Ondo State. (iii) At its 3rd sitting on 6th May 2010, the Governing Board took out time to condole with the President and Commanderin-Chief of the Nigerian Armed Forces, His Excellency, Dr. Goodluck E. Jonathan on the death of the late President, Alhaji Umaru Musa Yar’adua who passed on on May 5, 2010. It was the late President Umaru Musa Yar’adua who inaugurated the Board of the Commission on 27th November 2008 with a charge to address the infrastructure challenges of the country through PPP.

6.1.5.



Executive Management Team Meetings During the period under review, the Executive Management Team of ICRC met eight times, during which wide ranging issues were discussed, and key decisions taken including: * Need to carry out a Strategic Management Development Retreat to articulate a clear position on the Commission’s mandate and how to deliver it * The recruitment of the junior /support staff for the Commission * Purchase of Office Equipment * Capacity Building * Outsourcing of Drivers * Need to carry out a Presidential Retreat to bring key policymakers up to speed on the imperative of PPP in Nigeria * Accelerated development of the Commission’s Head Office * Lease of an Office Annex for a short period, pending the completion of the remodelling of the Headquarter complex. * Staff Welfare The Executive Management Team approved the conditions for the Car Loan to the pioneer staff of the Commission.

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6.1.6. ICRC Visioning Process During the period, the Commission in its continuing effort at building a cohesive, efficient and functional organisation, held a visioning session for its Management and members of the Governing Board to promote a shared understanding and buy-in of the Commission’s mandate, goals and objectives, as well as the strategic plans for achieving these objectives. The visioning session elaborated on the Infrastructure Concession Regulatory Commission Act (2005), and sought clarity on a number of issues including ICRC’s core roles and objectives, internal roles, procedures and processes, current and future communication strategy and laid some groundwork for the development of strategic framework for ICRC. The session, apart from providing a forum for bonding and the emergence of ICRC corporate culture, developed a high level action plan to guide the activities of ICRC over the next 6 to 12 months. 6.1.7. Presidential Retreat A Presidential Retreat to enable key policymakers to achieve a clearer understanding of the dynamics and complexity of the PPP and their role in achieving Nigeria’s PPP objectives, took place on 14th June 2010. The retreat was also used to unveil the First Implementation Plan for Nigeria’s Vision 20:2020. The event attracted the presence of H. E. President Goodluck Jonathan, GCFR, with all members of the Federal Executive Council, representatives of the Senate President and Speaker of the House of Representatives, some State Governors, captains of industry, the organised private sector, Development Partners and Ministers from Lesotho. At the end of the retreat, the President assured Nigerians that the administration was committed to implementing the National Vision 20:2020 and the First National Indicative Programme, as well as the National Framework on PPP to support the enhanced delivery of infrastructure services. The retreat was organised in collaboration with the National Planning Commission. The idea was to mainstream PPPs into the integrated national planning framework anchored on the Vision 20: 2020 Economic Transformation Blueprint and the First 4-year Implementation Plan. 6.1.8. ICRC London Road Show The ICRC held a Road Show for investors and stakeholders on the 24th June 2010 in London, the United Kingdom. The event, titled Nigeria’s Public Private Partnership Road Show, was aimed at attracting the best in the world to partner with the ICRC and MDAs towards up-scaling the nation’s critical national infrastructure. The road show was well attended by approximately 150 delegates from various economic and professional groups, including the financial, legal, and engineering sectors. A total of 75 organisations were represented at the event, not including the Nigerian delegation. The ICRC delegation, led by the Chairman of its Governing Board, H.E. Chief Ernest Shonekan GCFR, used the opportunity to showcase the Nigerian PPP framework and environment, the challenges and strategies adopted to mitigate them, together with details of the first-mover projects on the national PPP projects pipeline. In all, the audience found the event very informative and were generally impressed by the forthrightness and enthusiasm exhibited by ICRC. The Commission has since received invitation to replicate the process in Italy and the Far East.

6.1.9. Review of the ICRC Act 2005 The law setting up the Commission was passed in 2005. Although some of the operational shortcomings were detectedvery early in the life of the Commission, it nevertheless commenced operation on 28th November, 2008 when its Board was inaugurated, on the understanding that these limitations will be addressed with time. Following the approval of theNational Policy on PPP by the Federal Executive Council in April 2009, the Board constituted a review Committee to undertake a holistic review of the Act. Upon conclusion of its assignment, the Board approved the broad areas for amendments and directed that the draft be sent to the draftsmen in the Federal Ministry of Justice (FMoJ) for their inputs. The draft is currently with the FMoJ. 6.1.10. Legislative Retreat As a follow-up to the review of ICRC’s Act, the Commission on 16th October, 2010 held a Legislative Retreat for the House of Representatives Committee on Special Duties that has oversight function over the Commission. The retreat was designed to, among other things, strengthen the relationship between the Commission and the House Committee, discuss the progress and challenges of regulating PPP in Nigeria, share lessons in implementing PPPs from other

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jurisdictions, present the short- to medium-term plans of the Commission, and discuss and agree on the areas for legislative support.

A total of 35 participants registered and took part in the event. In all, 14 House Committee members attended the event, and their involvement and engagement with the Commission and the resource persons was quite intensive. At the end of the retreat, a communiqué was jointly signed and issued by the Director General of the Commission and the Chairman, House Committee on Special Duties. The thrust of the communiqué was on the need for an expeditious review the ICRC Act to address identified deficiencies. The House Committee on Special Duties promised to drive the amendment process in collaboration with the Commission and other stakeholders and experts on PPP.

6.1.11. Collaborations with State Governments on PPP Legislations In the quest of the Commission to have a robust enabling environment for sustainable PPP projects, the Commission had supported the development of the legal framework for PPP in Niger, Kaduna, Rivers and Cross River States. 6.1.12. World Bank and ICRC Engagement Since inauguration of the ICRC Board, the FGN (represented by the FMoF) and the Commission have been holding discussions with the WB for purposes of providing assistance to Nigeria’s PPP project under the World Bank’s PPP Programme. Following the completion of the Nigeria PreAppraisal Mission on the 29th of January, 2010, the World Bank and ICRC identified some key areas of the project design that needed further detailed discussions prior to the preparation of the first draft of the Project Appraisal Document (PAD). As a follow-up, a high-level technical consultation was arranged which took place in Washington, D.C. from February 24-26th. The Nigeria delegation, led by the Permanent Secretary of the Federal Ministry of Finance, involved senior officials from across the key MDAs participating in the PPP Programme.

The delegation discussed the type of lending instrument to be employed by the World Bank for this project. The FGN re-stated its preference to proceed with an Adaptable Program Loan (APL). The APL will be sequenced in two phases with Phase I providing resources for capacity building and technical assistance to the ICRC as well as participating MDAs, and Phase II providing the infrastructure finance resources for bankable PPP transactions. The delegation reached consensus that initial capacity must be built quickly in Phase I in order to initiate Phase II. Nevertheless, Phase I work will overlap Phase II and provide ongoing assistance throughout the life of the project.



Agreement was reached on the design of the four components of the project comprising. (i) capacity building and technical assistance;

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(ii) project preparation; (iii) infrastructure financing; and (iv) project implementation, monitoring and evaluation. Extensive discussion covered the development of the project pipeline. Following an agreement with the WB team on the need to select viable “first-mover” transactions prior to Board delivery, the following possible toll roads were identified as first movers: * Abuja-Kaduna Expressway * Kaduna-Kano Expressway * Benin-Sagamu Expressway * Benin-Asaba Expressway These roads are currently the responsibility of the PPP Unit of the FMoW. The Commission is working closely with the World Bank to provide resources for institution capacity building for key MDAs central to the PPP Programme. On the recommendation of the ICRC, fourteen MDAs will be the recipients of targeted capacity building. In addition, these MDAs are also qualified to acquire the following:

a) PPP Preparation and Transaction Advisory Support: This will provide resources for proper due diligence to be undertaken for particular pipeline transactions. Its sub components include: (i.) Outline Business Case preparatory work; (ii.) Transaction advisory services; (iii.) Safeguards due diligence work; (iv.) Market outreach resources; (v.) Embedded specialist services. b) Project Implementation, Monitoring and Evaluation: This will be established as a separate project component to oversee the activities covered under all phases of the PPP Program. It also provides for resources that will go to establishing a small complementary PIU in the CBN to oversee the FIL and VGF. Infrastructure Financing: This is designed to mitigate the problems of limited tenure of existing credit markets by developing some long-term supported debt modelled financial products including the Financial Intermediary Loan (FIL) Support, and Nigeria Viability Gap Fund for PPPs. 6.1.13.

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Engagements with the Commonwealth The Commission accepted an invitation from the Commonwealth Office to participate in a 10-day work attachment at the Victorian Auditor General’s Office in Melbourne, Australia. The ED 3C attended the attachment which took place from 27th April to 10th May 2010. Malaysia, Zambia and Ghana also participated. The attachment provided opportunity for sharing experiences and exchange of ideas on the practice of PPP in the different climes. The ED3C visited some key projects that were executed through PPP including a modern Railway Station, a Convention Centre, a Court of Appeal Complex, a Prison, Children’s Hospital and a Film Studio. The Commission also participated in the first Commonwealth PPP Network Conference (CP3N) held in Kuala Lumpur, Malaysia. The ICRC, represented by the Director General, was subsequently approved as host of the Second CP3N in 2011.

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6.1.14. ICRC Regulation In the Commission’s effort to ensure a robust enabling environment for sustainable PPP projects, the Commission has finalised the draft ICRC Regulation and Guidelines developed with the assistance of the World Bank. The regulation would be subjected to stakeholders input before its submission to the Federal Executive Council for approval. 6.1.15.

Communications Strategy The Commission has designed and developed a number of supplementary and supporting policies, procedures and guidelines as part of the development of an effective strategy for communication and promotion of the Nigerian PPP projects including: (i) (ii) (iii) (iv) (v)

Communications Procedures & Manual that would serve as a procedural guideline for communications unit staff and provide a clear definition of job responsibilities as well as interrelationships. Stakeholders Relations Procedures detailing the procedures of all corporate relations processes inclusive of stakeholder management, sponsorships management, events management and corporate gifts management. Statutory Communications Requirements manual that will serve as a guide to newspaper advertisement placements relating to the requirements of the ICRC Act. Media Relations and Leveraging proactively developing and disseminating relevant messages on the operations of the ICRC and its interactions with MDAs, as well as private sector groups and international agencies through the print and broadcast media. Website Content Management: Management of ICRC website and provision of content.

6.1.16. Finance and Accounts At the end of the year 2010, a total sum of N1,556,097,097.39 was received through the monthly allocation as against the appropriation sum of N1,757,061,774.00. The total expenditure for the year was N911,926,863.97, while the sum of N421,372,476.62 was returned to the coffers of the Government. The sum of N321,690,309.50 was brought forward from 2009 financial year due to the extension for closure of Capital Expenditure to 31st March 2010. Of this amount, N113,889,414.92 was spent while the balance of N207,800,894.92 was returned to the Consolidated Revenue Fund. The capital fund was expended on Air Conditioners and Refrigerators N1,799,980.00, Website design - N2,467,500.00, ICT equipment - N9,996,656.25, Furniture - N49,652,278.33 and Motor Vehicle - N49,973,000.00. This information has not been included in the financial report essentially because they do not form part of the year 2010 account. 6.1.17.

ICRC Internal Audit ICRC Internal Audit was fully established in the year 2010, following the recruitment and resumption of the Head, Internal Audit in December 2009. In line with the International best practices, the Federal Government Financial Regulations and Audit Guidelines, the Unit is completely independent of the operational activities of the Commission. This ensures that there is a high level of independence.



Internal Audit Plan Internal Audit prepared and submitted a comprehensive Internal Audit Plan for the year 2010. This plan, along with the Internal Audit Charter, was approved by the Director-General before implementation. This plan was strictly followed by the Unit in the discharge of its responsibilities during the year.



Pre-Payment Audit In line with the Financial Regulation 1705, the Internal Audit Unit carried out a 100 percent pre-payment audit off all Checked and Passed Vouchers. All payments made out of the Commission’s Personnel, Overhead and Capital accounts were properly checked for correctness and compliance.



Internal Audit Manual Review The Internal Audit Unit carried out a comprehensive review of the approved Internal Audit Manual of the Commission and commenced usage of the Manual during the year.

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Internal Audit Programme The Unit also initiated the preparation of Internal Audit Programme. At present, the document has undergone two reviews. The final draft was for Management approval in the first quarter of year 2011. Internal Audit Programme is an instructional and training document that provides a guide to specific Internal Audit Engagements.



Internal Audit Operation Review Internal Audit Unit carried out scheduled and detailed Internal Audit review of the operations of the Commission during the year. The Scope of the Engagements were planned to facilitate total coverage of the entire activities of the Commission during the year. These engagements included comprehensive review of financial operations, contract compliance activities and Public Private Partnership activities. The Unit also carried out a comprehensive risk analysis of the Commission and designed appropriate responses to potential risks. Additionally, the Unit prepared and submitted a comprehensive report on all the activities reviewed and recommendations made. These are currently being implemented by Management.



Preparation of Job Description and Structure In response to the directive of Management, the Internal Audit Unit prepared a comprehensive Job description for the each category of staff required to enable the Unit to operate effectively. The structure of Internal Audit Unit was also designed during the year.

Miscellaneous Internal Audit collaborated effectively with the Finance Unit to design the stores documents for effective stores control. In addition, policies, processes and procedures for stores issues and receipts were put in place. Scheduled stock counts and Cash counts were also carried out as at when due. 6.2. 6.2.1.

Institutional Capacity for PPP Project Development The Commission continued its implementation of comprehensive human capital development programme. This involved comprehensive international and local training programmes, workshops and seminars, study tours, etc. for the staff of the Commission and Board Members.

6.2.2.

By the end of the year 2010, a total of 14 Board members and 42 ICRC staff attended capacity development programmes both locally and internationally. This is in addition to numerous local training programmes including seminars, conferences and workshops that staff and board/committee members have been exposed to since the beginning of the year.

6.2.3.

ICRC continued to strengthen capacity in MDAs through study tours, training and site visits. In October 2010, the Commission organised one-week PPP training for 66 participants drawn from MDAs, banks and the organised private sector (OPS). This was jointly sponsored by South Africa Development Bank, Urban Development Bank and the ICRC.

6.2.4.

In addition, the Commission developed a Training Plan for the World Bank-Funded Project Preparation Facility, which focuses on providing technical training on PPP and related areas for Board members and staff. The World Bank- assisted capacity building programme and technical assistance received a boost with the review of the first year draft World Bank Capacity Building Work Plan (October 2010 to September 2011). Preparation for 1st year Capacity Building Programme has commenced in earnest.

6.3. 6.3.1. 6.3.1.1.

PPP RESOURCE CENTRE Stakeholder Engagement The Commission continued its engagement with MDAs and other stakeholders for purposes of creating PPP awareness for infrastructure/service delivery, developing a credible pipeline of projects and deepening the existing PPP market in Nigeria. In this regard, ICRC held a series of meetings with the FMoT on the PPP development of railways, and the Ministry of Mines and Steel Development on potential areas where PPP can be applied to unleash

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opportunities and growth in the mining sector. The Commission also engaged with FERMA and Catamaran (OBC Consultants) for the review of draft financial models on projects that FERMA contracted to Catamaran. In addition, ICRC engaged the FMoW PPP Unit in the review of roads OBCs proposed under the World Bank PPP project. The first- mover road PPP projects are Sagamu-Benin-Asaba and Abuja-Kaduna-Kano Expressways, respectively developed by Roughton International and SNC Lavalin.

6.3.1.2. ICRC also reviewed the proposal submitted by Messrs Eurochem Corporation to develop, manage and operate a deep seaport (Lekki Port) close to the Lekki Export Processing Zone, Lagos State. Messrs Eurochem, through the Nigerian Ports Authority (NPA), was seeking a waiver from competitive bidding for this project on the argument that approval for the project predated the ICRC Act of 2005. 6.3.1.3. The Commission escalated its collaboration with such development partners as NIAF, and the World Bank. NIAF has been assisting the FMoT on the development of OBC for the proposed concession of Western and Eastern existing narrow gauge rail line. On 9th August 2010, ICRC held a meeting with the World Bank to discuss issues related to approval processes and areas of cooperation to enhance ICRC Act review and amendment efforts. 6.3.1.4.

The setting up of PPP Units at key infrastructure MDAs received the attention of the Commission during the year. At the meeting between the ICRC and the HOS, the idea of establishing PPP Units in infrastructure critical MDAs was officially communicated to the HOS. On his part, the HOS mandated a Director in his office to collaborate with the ICRC towards the realisation of the PPP units proposal. A Concept Paper, identifying the specific infrastructure ministries where PPP Units should be established, including the criteria for staffing the units, issues of security of tenure for the PPP focal point at the MDA was developed and forwarded to the Office of the Head of the Civil Service of the Federation. Conceptually, the proposed PPP Units will become and remain the reservoir of institutional knowledge for PPPs in the MDAs.



For better coordination of projects, it was proposed in the concept paper that PPP Units be anchored at the supervising ministry/departments of Government, with sub units of the PPP Unit, manned by desk officers created in parastatals or governmental departments.

6.3.2. PPP Pipelines, Consultancy and Transaction Advisory services 6.3.2.1. Other focused activities of the Commission towards developing a credible pipeline of PPP projects and developing a world class PPP market include: * Meeting with and Presentation to the Ministry of Mines and Steel Development during which potential areas of PPP application to unleash opportunities and growth in the mining sector were discussed at the highest levels. * The Rail Department of the Ministry of Transport sought the support of ICRC in preparing EOI and TOR for the feasibility study of a number of proposed PPP rail projects, including the coastal rail line for Lagos-Benin-YenogoaPort Harcourt-Uyo-Calabar and some other locations. * A proposal for the establishment of Industrial Parks was presented by BGL/Vortex Advisory Services to Ministry of Commerce and Industry and SMEDAN for shared infrastructure services. An ICRC interactive session with Ministry of Commerce and Industry and SMEDAN indicated that the best option for the development of these Industrial Park Projects would be through PPP. As such SMEDAN was advised to engage an OBC adviser to commence the procurement process. * Draft EOI and TOR for Onitsha River Port sent to NIWA representative, Research Planning and Environment Department and Chair PPP Committee for review and comments. * Reviewed the report prepared by Yoroso-Enplan-Pentagon Consortium in association with Vela VEK, South Africa done on behalf of Bi-Courtney Limited with respect to the 25-year concession of Lagos-Ibadan Expressway. 6.3.3. MINISTRY OF WORKS 6.3.3.1. Project: Abuja-Kaduna-Kano Dual Carriageway rehabilitation and upgrade Project Background: The ICRC, in collaboration with the Federal Ministry of Works (FMoW), are in the process of acquiring concessionaires to undertake the rehabilitation and upgrade of the Abuja - Kaduna - Kano Dual Carriageway, which extends for 210Km through the Federal Capital Territory, Kaduna and Kano States, Nigeria. The preferred 2010 Annual Report

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PPP option is Build Operate Transfer (BOT) model utilizing appropriate tolling systems to generate revenue and return on investment. Project Status: The project, which is in the development phase, requires the development of an Outline Business Case (OBC) that will demonstrate the viability and returns on investments to prospective investors. The ICRC, working in concert with the PPP Unit of the FMoW, engaged a Consultant to develop the OBC, and carryout Environmental Impact Assessment (EIA). The OBC and EIA have been developed and reviewed. It is anticipated that the prequalification and request for proposals will be concluded in last quarter of 2011. 6.3.3.2. Project: Shagamu-Benin-Asaba highway rehabilitation and upgrade Project Background: The ICRC, working jointly with the Federal Ministry of Works (FMoW), has commenced the process of undertaking the rehabilitation and upgrade of the 368 Km Shagamu- Benin-Benin-Asaba expressways, through PPP. The preferred PPP option for developing the highway which extends from Ogun through to Edo and Delta States, is the Build Operate Transfer (BOT) model, utilizing appropriate tolling systems to generate revenue and returns on this investment.



Project Status: At present, the OBC and EIA studies have been completed and FBC will commence in shortly. In the meantime, an excellent unsolicited proposal to Build, Operate and Transfer this road on PPP basis has been received from ENL Consortium and Chinese partners. In the proposal, the US Exim and China Exim Banks will be providing the funding for the project. A presentation and review meeting was held in Dec 2010 with ENL Consortium to review their proposal. The in-depth review and possible engagement with ENL Consortium and the FMoW PPP unit on this proposal will continue in 2011. It is anticipated that this project will be taken to the market in 2011 and concessionaire selected.

6.3.3.3. Project: Lagos-Iseyin-Kishi-Kaiama road modernization project Project Background: The FMoW is in the process of modernization of the Lagos-Iseyin-Kishi-kaiama road with a new alignment, through concession. Preliminary studies indicate that the preferred PPP option will be the DesignBuild-Operate-Transfer (DBOT) model that utilizes appropriate tolling systems to generate revenue and returns on this investment. Project Status: The project is still at the planning stage. The FMoW working in collaboration with the ICRC is in the process of procuring advisory services for the development of an Outline Business Case. Request for Expression of Interest (EOI) has been advertised and the evaluation of the submissions received is scheduled for 21st January, 2011. ICRC is currently providing leadership in the development of the RFP. It is expected that this PPP project will be taken to market in 2012. 6.3.3.4. Project: Kaiama-Bahana-Bobe-Kaoje-Gwabe-Fokku Sokoto modernisation project Project Background: The modernisation of the Kaiama-Bahana-Bobe-Kaoje-Gwabe-Fokku Sokoto Road is currently undergoing development at the FMoW with the assistance of ICRC. Project Status: At present, request for EOI has been advertised. The harvest is scheduled for evaluation on 21st January,

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2011. Other projects that are running concurrently with this project and are share the same status are: a) The River Katsina Ala Bridge at Buruku b) The River Niger bridge at Nupeko; Both are road modernisation projects expected to be developed under the Design-Build-Operate--Transfer (DBOT) model. These projects are expected to be taken to the market in 2012. 6.3.3.5. Project: Jos-Bauchi-Gombe Highway Maintain Operate and Transfer Project Background: The Operations and Maintenance (O&M) concession of the Jos-Bauchi-Gombe Road, running through Plateau, Bauchi and Gombe States, is currently at the preparation stage. Early indications are that OperateMaintain-Transfer (OMT) Public Private Partnership model, with appropriate tolling framework will be utilised in the development of the road network. Project Status: OBC studies have been completed for this project and review. Based on the review recommendations by ICRC, the OBC have been updated and the ICRC is in the process of engaging a Financial Analyst to validate the financial models. It is projected that this project will be ready for concession by the third quarter of 2011. The preparation of 9th Mile-Otukpa (Otukpo Road) is running concurrently with this project and shares the same status. This is a project under the O&M model being implemented in partnership with the FMoW and FERMA. 6.3.4.

PPP Pipelines, Consultancy and Transaction Advisory Services Other focused activities of the Commission towards developing a credible pipeline of PPP projects and developing a world-class PPP market include: * Presentation was made to the Ministry of Mines and Steel Development on the potential areas of PPP application to unleash opportunities and growth in the mining sector. Discussions were held at the highest levels. * The Rail Department of the Ministry of Transport sought the support of ICRC in preparing EOI and TOR for the feasibility study of a number of proposed PPP rail projects, including the coastal rail line for Lagos-Benin-Yenogoa-Port Harcourt-Uyo-Calabar and some other locations. * A proposal for the establishment of Industrial Parks was presented by BGL/Vortex Advisory Services to Ministry of Commerce and Industry and SMEDAN for shared infrastructure services. An ICRC interactive session with Ministry of Commerce and Industry and SMEDAN indicated that the best option for the development of these Industrial Park Projects would be through PPP. As such SMEDAN was advised to engage an OBC adviser to commence the procurement process. * ICRC reviewed the report prepared by Yoroso-Enplan-Pentagon Consortium with a view to jumpstarting the beleaguered Lagos-Ibadan Expressway.

6.3.5. FCT PROJECTS 6.3.5.1. FCT Light Rail Project LOT 2 The proposed light rail service will run from Nyanya to Eagle Square and then to Central Train Station. The FCT is in the process of carrying out intensive research on deliverables that will be crucial towards preparing a well-defined OBC. 6.3.5.2. Kuje Water Works upgrade and reticulation The FCT Water Board is pursuing PPP as a means of meeting its water service delivery objectives for the Kuje development area. P3RC is working with the engineers of the FCT Water Board to develop the TOR through which the Water Board can procure a suitable consultant to prepare a well-defined OBC which will demonstrate the financial and economic viability of the project and the preferred procurement option. 6.3.5.3. Katampe 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 on the project were concluded with the sole proponent and concessionaire Deanshanger. The project was approved by the FEC. 2010 Annual Report

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The Katampe Concession Contract was reviewed by the C3 department in August 2010, in conjunction with the Legal and Governance Unit. Appropriate comments were made and the contract was signed on the 19th of October 2010, after all comments and agreed changes were incorporated. This was the first PPP contract to be prepared under the ICRC Act. 6.3.5.4. Legacy Agricultural Development PPP The Commission reviewed the FCTA legacy PPP agricultural project, developed with Primesoil Consortium. This is an unsolicited project for the development of site and services for agricultural land in the FCT. Site inspection was undertaken by a joint team of ICRC, FCTA, AIIC and Primesoil Limited. 6.3.6. Federal Ministry of Transport 6.3.6.1. The Federal Government of Nigeria (FGN) has embarked on Rail Reform and Modernisation Strategy to improve railway services, increase efficiency and reduce cost to users. As part of this strategy, the FGN has decided to transfer the management and operations of the Eastern (PHC to Maiduguri) and Western (Lagos Kano)Lines from the Nigeria Railway Corporation (NRC) to the private sector through a series of concessions. The FGN, through a reformed NRC, will continue to own the track and other assets and would retain responsibility for major capital improvements to the network. The current rehabilitation of railway tracks is designed to improve railway capacity to required minimum that will allow the recommencement of railway operations. It is envisaged that after the rehabilitation is complete, the potential capacity of the network should be approximately 9 million tonnes per annum. Therefore, the potential to support significant freight and passenger services exists, provided the investment and management expertise can be introduced. 6.3.6.2. In preparation for the concession, the Western rail line is being rehabilitated and the contract for the rehabilitation of the Eastern rail line has recently been awarded. NRC has been allocated funds by the Federal Ministry of Transport to upgrade its signaling systems. Twenty-five new locomotives were recently purchased to increase the capacity of the corporation to move freight. A new railway bill that allows private participation in the management and operations of Nigerian railways has been drafted and awaiting enactment by the National Assembly. 6.3.6.3. The realisation of any traffic target by NRC is dependent upon the rehabilitation of the Western and Eastern rail lines, integration of Apapa, Tin Can Island and Port Harcourt ports into the rail network, and construction of the rail links to the Inland Container Depots (ICDs) located in the six geo-political zones, namely Ibadan, Kano, Isiala-Ngwa in Abia, Jos, Maiduguri and Funtua in Katsina State, to the existing and narrow gauge lines 6.3.6.4. The integration of these projects into existing lines is the nexus of all possible development for the Western and Eastern Lines freight business. 6.3.6.5. The Commission, with technical and financial assistance from Nigeria Infrastructure Advisory Facility (NIAF), is currently preparing an Outline Business Case to determine the commercial viability of NRC concession. Early indication is that two (2) stage concession programmers are more likely to meet the objectives of Government on rail development. 6.3.6.6. At the first stage, the concessionaires would take over operations without financial commitment to Government for the first 3-4 years of the concession period and use the period to stabilise operations in terms of acquiring rolling stock, marketing, building human capacity, etc. This is meant basically to serve as an incentive to resuscitate rail services and to demonstrate beyond reasonable doubt Government’s determination in this direction. 6.3.6.7. The second stage which commences after the stabilisation period would be the introduction of concession fee, deployment of appropriate ICT hard and software, performance target, etc. It is only at this stage that the concessionaire can be expected to start paying concession fees to government.

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6.3.7. Federal Ministry of Aviation 6.3.7.1. The Commission has attended and contributed to meetings of a committee set up by the Ministry to consider options for concession of the under-listed airports, during which it recommended that a detailed OBC be prepared to demonstrate the viability of these projects and that a proposed international study tour by the committee would be premature until these studies are in place: * * * * * 6.3.8.

MMIA Lagos Mallam Aminu International Airport Port Harcourt International Airport Akanu Ibiam International Airport Margaret Ekpo International Airport

Federal Ministry of Health/Defence

6.3.8.1. The Ministry, through its PPP Unit and with the assistance of P3RC, is currently working on developing a TOR to engage a transaction advisor to develop an Outline Business Case (OBC) for a new 200 bed specialist military hospital. 6.3.8.2. The TOR is also expected to define work needed to assist FMoH examine unsolicited bids in the areas of vaccine/ pharmaceutical production in Nigeria. 6.3.9.

National Office for Technology Acquisition and Promotion (NOTAP) NOTAP has interest in using a PPP arrangement to Design, Finance, Build and Operate a Head Office building in Abuja which may incorporate multi-purpose functions in order to provide opportunities for leasing to private sector or other suitable parties. P3RC is in the preliminary stages of working with NOTAP to provide guidance on how to consider the needs of NOTAP as well as viable options to achieve this goal.

6.3.10. State PPP Framework and Draft Legislation Support The P3RC has contributed to the development of an institutional and legal framework for PPP for Niger and Kaduna State Governments by providing comments on draft Bills and examples of good practice. It has also reviewed potential PPP projects for Cross River State and advised on a proposed partial divestment of Port Harcourt Electricity Distribution Company to four States. 6.3.11. PPP Resource Centre Challenges 6.3.11.1. The major challenge faced by the P3RC is that of inadequate staffing. At the moment the P3RC is coping within existing resources but with rapidly increasing demand for P3RC support, this staffing shortage will need to be monitored and immediately addressed to maintain the level of excellent support provided by the centre. 6.3.11.2. The Commission has experienced a number of problems in its mandate of assisting MDAs deliver a credible pipeline of projects into the PPP market. First, there is a lack of clear understanding of the process for dealing with unsolicited bids. Second, MDAs appear to lack clear understanding of what constitutes a PPP. Consequently they approach PPP transaction in a similar way to traditional procurement. Third, there is evidently a need for investment of significant resources in project selection and preparation at MDAs. This is obviously not the case at this time, with the result that a lot of resources are currently being deployed in clarifying ICRC roles and MDAs’ responsibilities. 6.3.11.3. Perhaps, the most potent challenge to PPP infrastructure delivery is the fact that PPP transaction life cycle often conflicts with MDA budgetary cycles. This creates pressures which deny adequate time for robust PPP procurement processes that will ultimately yield better long-term results. In addition, long-term financing is still a major challenge in Nigeria. 2010 Annual Report

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6.4. 6.4.1.

CONTRACT COMPLIANCE CENTRE Port Visits

6.4.1.1. In furtherance of the mandate of the ICRC and in collaboration with the Bureau of Public Enterprises (BPE), and the Ministry of Transport (“the monitoring team” or “the team”), the Board Committee on Contract Compliance (BCCC) visited some PPP projects in Lagos between 20 and 22 January 2010. The team visited seven seaport terminals in Apapa and five terminals in Tin-can Island; the Lagos International Trade Fair Complex (LITRC); and the Murtala Mohammed Airport Terminal 1(MMT1) popularly called MMA2.The visit afforded the members of the BCCC the opportunity to assess the level of compliance with the concession agreements, and also to appreciate the challenges in the implementation of the contracts. Significant among the challenges experienced by the ports concessionaires is the delay in dredging the channel as agreed to by the Nigeria Ports Authority (NPA) in the contract. Most of the Ports Concessionaires have invested in facilities and the upgrading in line with the agreed five-year rolling plan. Vessels’ turnaround time has also significantly improved. 6.4.1.2. Some of the challenges being faced by the Port Concessionaires in the course of their operations include: * Average achieved draft is presently 11 meters as against the 13.5 meters which the NPA covenanted to provide; * Several identified wrecks around the stone Jetty remain a threat to navigation and development of Berth 21; * The inability of NPA to patrol the waterfront constitutes security risk from Ogogoro Village; * Litigation of lease property by claimants who maintain that they have subsisting lease predating the execution of the concessions; * 99% dependence on generator for power supply, which translates into huge expenditure on diesel; * Access roads to the terminals are in a deplorable state; * Blockage of the drainage by activities of residents of adjoining communities; and, * Non-release of agreed land space of the terminal to the concessionaires. 6.4.1.3. The Contract Compliance Centre is planning regular joint monitoring visits with the BPE, to ensure that parties to the agreements in the Port Terminals comply with the terms of their agreements. However, financing for the visits may be a challenge, considering the cost for a team to visit all the terminals, at least twice in a year. 6.4.2.

Federal Airports Authority of Nigeria (FAAN)

6.4.2.1. The Commission also undertook a fact-finding tour of the facilities of the Federal Airports Authority of Nigeria (FAAN) and held fruitful meetings with the management of FAAN. The visit afforded the Commission the opportunity to inspect the MMA2 which is under the management of Bi-Courtney Aviation Services Limited (BASL), through a concession contract between Bi-Courtney limited (BCL) and FAAN. 6.4.2.2. In their briefing at the terminal, BASL informed the Commission that their role was to design the new terminal, source for the required funding, construct and equip the terminal, and operate it exclusively for 36 years, under a BOT arrangement. The expected facilities include a passenger drop-off canopy, an apron equipped with facilities capable of handling wide body aircraft, six boarding bridges, four bus departure gates serving 8 remote aircraft parking positions, and departure and arrival halls with holding capacity for up to 4,000 passengers. 6.4.2.3. There were a number of subsisting issues that would require further engagement meetings with FAAN and BCL to unravel. The Board Committee on Contract Compliance is keen on mediating between the two parties, towards resolving the issues identified, and has decided to focus on resolving the conflict in the contract. However, funding for the mediation processes, which will require the use of consultants and experts at some point, may pose a challenge to effective implementation. 6.4.3.

Concession Agreements

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6.4.3.1. Media report in early June 2010 has it that FAAN had granted as many as 88 concessions over its facilities spread around all the airports in the country. At present, the ICRC has taken custody of only 49 FAAN concession agreements. Most of the agreements are mainly service contracts, management contracts, and leases that were wrongly termed “concessions.” The transactions, which now form part of the Commission’s database, are currently under review to ascertain the actual nature of the agreement and their deficiencies. 6.4.3.2. Other concession agreements brought under the custody of the Commission include: 1. 2.

The Tafawa Balewa Square (TBS) Concession Contract, between the Tafawa Balewa Square Management Board (TBSMB) and BHS International Limited. Six Inland Container Depots (ICDs) concession contracts, between the Nigerian Shippers Council (NSC) and Eastgate Inland Container Depot Ltd, Migfo Nigeria Ltd, Catamaran Logistics Ltd, Duncan Maritime Ventures Nigeria LTD, Equatorial Marine Oil and Gas Company Ltd, and Dala Inland Dry port Nigeria LTD,

6.4.3.3. These agreements will all be reviewed by the Contract Compliance Centre, to ascertain their status and effectiveness. Parties to the contracts will be made aware of the issues identified, if any. However, the subsequent review of agreements in line with international standards will solely depend on the willingness of parties to the agreements. 6.4.4. Transport Commission Bill 6.4.4.1. The ICRC is a member of the Ministerial Committee set up by the Honourable Minister of Transport to review certain aspects of the National Transport Commission (NTC) Bill developed by the BPE in March 2008. The Committee, after wide consultation with stakeholders, reached the conclusion that, as a matter of urgency, all efforts be channeled towards enacting the NTC Bill without delay, and subject to the following changes; (1) The proposed NTC should have no power of licensing or to operate the inland container depots, (2) For good governance, the proposed NTC should have more non-executive Commissioners than executive Commissioners. (3) All references in the draft Bill to licensing, health and safety standards, technical matters and oversight functions regarding other agencies should be expunged. 6.4.4.2. Following the Committee’s submission to the Honourable Minister of Transport, the National Council on Transport Extra Ordinary General meeting was held in Kano on the 16th of September 2010, to review and ratify the Committee’s report. Representatives of 15 state governments attended the meeting. State representatives and other stakeholders were asked to ratify the National Transport Policy (NTP) document for onward presentation to the Federal Executive Council for approval. The National Transport Master Plan was also presented to all attendees. At the end of the meeting, Ministry of Transport informed participants that the updated draft NTP would be posted on its website as soon as it was ready. 6.4.5. MMA2 Contract Dispute Resolution 6.4.5.1. The Board Committee on Contract Compliance (BCCC) meeting held on the 17th of September 2010, decided to focus on resolving the disputes in Legacy PPP contracts, taking one contract at a time. The Committee agreed to take on the MMA2 contract between Bi-Courtney Limited (BCL) and FAAN as the first contract to focus on. The Contract Compliance Centre, based on the submissions made by Bi-Courtney in June 2010, and FAAN in July 2010, developed a dispute matrix that clearly captured the issues in the contract. The BCCC, with the consent of the Honourable Minister of Aviation, proceeded with a dispute resolution process between FAAN and BCL. The parties were contacted, and a facilitative/mediation strategy was communicated to them accordingly. Their responses were positive. ICRC expects to commence dispute resolution activities in the first quarter of 2011. 6.4.5.2. The Main issues in the contract were identified as; 1. tenure of the contract 2. the use of the General Aviation Terminal-GAT 3. the exclusivity clause in the contract. 2010 Annual Report

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6.4.5.3. The BCCC Centre intends to continue with the facilitative/mediation process to a logical conclusion. However, the huge cost associated with the mediation process may hinder the Commission’s progress. 6.4.6. The Guto-Bagana Bridge Contract 6.4.6.1. The Federal Ministry of Works (FMW) invited the ICRC to a Stakeholders’ meeting on the 6th of July 2010, on the Guto Bagana Bridge concession contract. The meeting was presided over by the Honourable Minister of State for Works with representatives from the Concessionaire (Digital Toll Ltd (DTL)), the Project Contractor (Nairda Ltd), the Project Consultant (Siraj Nig. Ltd), Kogi state Government (KSG), and Nasarawa State Government (NSG). Discussions centered on the very poor state of the project, and the possible remedial measures. After several accusations and counter-accusations between the PPP unit of the FMW and the concessionaire, the Hon. Minister of Works informed the meeting that a Committee to assess the job done on the Project so far be would be set up, and if it was found that the work done was not commensurate with the money paid to the concessionaire, an appropriate refund would have to be made by the concessionaire. He added that the Ministry assessed the total value of the work done at =N=1.0 billion (one billion Naira), whereas =N=6.4 (six billion, four hundred million Naira) had been paid by the Public Partners (FMW, KSG, and NSG). 6.4.6.2. The Minister also observed that DTL had contributed only =N=0.3 billion (three hundred million Naira) to the project and it had been spending the funds contributed by the Public Partners. In his view, this showed that DTL was unserious with the project. He confirmed that the aim of the Ministry was to build the bridge as soon as possible so that Nigerians could reap the inherent benefits. He went ahead to inform the meeting that the Ministry would revalue the Contract and if necessary, advise the Federal Government to terminate the Contract and replace DTCL with a new concessionaire. 6.4.6.3.

The project concessionaire, DTL, visited ICRC’s Head Office on the 27th August 2010, to present and confirm to the ICRC the notice of termination sent by the FMW, and asked for ICRC’s intervention and advice. The Contract Compliance Centre (C3) informed DTL that the contract, which had provision on termination process, should be complied with. The C3 opened discussions with the Ministry to see how the breaches could be remedied before the next meeting of stakeholders. However, as at the time of this report, the FMW was yet to formally send a copy of the Guto-Bagana contract agreement to ICRC as requested in June 2010, and several follow up visits. Therefore, the ICRC was unable to proffer constructive advice without a detailed review of the agreement.

6.4.7. 6.4.7.1.

Lagos-Ibadan Expressway Concession In line with the ICRC’s contract monitoring approach, the Commission formally sent a request to the Federal Ministry of Works and Bi-Courtney Ltd, on the status of the transaction and contract implementation for the Lagos-Ibadan Expressway contract. This became even more critical considering the poor state of the road and complaints from users as reported regularly in the national dailies. However, until the end of the year under review ICRC received no response from either party. At the 16th Nigeria Economic Summit held in Abuja, in October 2010, the concessionaire informed participants that the project design development was still ongoing, and the delay in starting construction activity on ground was due to changes in the road design.

6.4.7.2. The Contract Compliance Centre did not have information on the status of the Lagos-Ibadan Expressway concession, and could not take any action due to the limitations of the ICRC Act 2005. All the information available to the Commission,with respect to the status of the contract, was through the media. 6.4.8. The LITFC Concession Contract 6.4.8.1. In January 2010, the Commission, through the BCCC undertook a fact-finding visit to the Lagos international Trade Fair Complex (LITFC) which is under a concession contract between the LITFC Management Board and Aulic Nigeria Limited. Issues bordering on non-compliance with the terms of the Concession Agreement were raised by the parties to the contract, with the most problematic being the inability of Aulic Nigeria Ltd, the concessionaire, to take effective possession of LITFC. Other information gathered during the visit includes;

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6.4.8.2.

1. Thirteen litigations over the lease property by claimants with subsisting lease before the concession was executed; 2. Allegations that the former Management Board of LITFC was still collecting rents due to Aulic Nigeria Ltd; and 3. Unplanned development being undertaken by the Balogun Traders Association. The Commission undertook a review of the LITFC concession agreement in order to assist the BCCC gain a better insight on the dispute between the concessionaire and holders of subsisting leases within the complex, so as to develop a strategy for intervention. However, while the BCCC was waiting for the final report of the consultant engaged for the review, which included physical land survey of the complex land area under dispute, the Commission received information through the newspapers that the Bureau of Public Enterprises (BPE) had handed over the entire complex (including areas being held by other lease holders) to the concessionaire. The Commission was not informed about the hand-over, even though it was part of the committee looking into the resolution of the issues in the contract. The LITFC Management Board had, at its 7th December 2010 board meeting held in Lagos, expressed its dissatisfaction with the way the concessionaire was implementing the contract, and requested ICRC’s intervention.

6.4.9. 6.4.9.1.

Port Terminals Concessions The Board Committee on Contract Compliance (BCCC) met with the Executive Management of the Nigeria Ports Authority (NPA) in Lagos on the 19th of July 2010, to discuss issues surrounding the port concessions and the dispute between the NPA and the concessionaires. At the meeting, the Managing Director of NPA reiterated the commitment of the NPA to PPPs in the management of the port terminals in Nigeria. However, he pointed out some pertinent clauses in the contract that should be reviewed for a mutually beneficial relationship. The Commission advised NPA to write the affected concessionaires and communicate to them the proposed amendments. This procedure was already provided in the various agreements. The Commission and NPA agreed to set up a Joint Monitoring Team (JMT) to monitor compliance with the contracts.

6.4.9.2.

On the 26th of August, 2010, the Honourable Minister of Transport inaugurated a 12-man Ports Reform Evaluation Committee (PREC), with the ICRC as a member. The aim of the PREC was to ascertain the full Ports Reform Objectives of the Federal Government, determine the extent of implementation of the objectives, evaluate the Reform Performance, and ascertain the status of Ports Concession Programme and the extent of implementation. The Committee was also to ascertain/evaluate the performance of each concessionaire within the terms of their contracts, ascertain/evaluate the performance of the Nigerian Ports Authority (NPA) within the terms of each contract, ascertain evaluate the Regulatory role of Nigerian Ports Authority, ascertain the level of effectiveness of the current administrative structure of Nigerian Ports Authority in relation to its regulatory role, ascertain and evaluate any other issues relating to the Ports Reform and Concession in general; and suggest areas of improvement in port operations for greater efficiency.

6.4.9.3.

The C3 represented the Commission in the Committee, and attended all scheduled meetings of the Committee. The Committee, in the months of October, November, and December, visited all the Port terminals in the country, as part of the activities towards meeting the objectives of the committee. Based on the Terms of Reference (ToR) and expected report of the committee, C3 decided that the report of the PREC will form the baseline information for an effective monitoring programme of the Port Concessions, and since the Commission was represented on the PREC, C3 would use the PREC report to continue with its monitoring activities for the Port Terminals.

6.4.10. 6.4.10.1.

Lekki Toll Road Based on the Commission’s information gathering strategy on all PPPs in the country, in August 2010, the C3 discovered that a sovereign guarantee of the Federal Government of Nigeria had been issued for the Lekki Toll Road project in Lagos. The guarantee was used to facilitate the financial closure for the project. The Commission promptly sent a letter to the Debt Management Office (with a copy to the Federal Ministry of Finance and the Budget Office) requesting a copy of the guarantee. Only the DMO responded to the request, informing the Commission that the office was not aware of the existence of such guarantee. However, publications by the concessionaire, Lekki Concession Company (LCC), showed that there was a sovereign guarantee for the project. The ICRC did not receive a formal response from the Federal Ministry of Finance. The Commission would pursue this further to obtain a confirmation of the guarantee. The guarantee would help the Commission to ascertain the level of the Federal Government’s liability

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in the contract.

6.4.11. Meeting with Aviation Labour Unions 6.4.11.1 On 20th December 2010, the BCCC convened a meeting with the Aviation sector labour unions the National Union of Air Transport Employees (NUATE) and the Air Transport Services Senior Staff Association of Nigeria (ATSSSAN). The meeting was informed by the threat by the unions to go on a nationwide strike due to the poor implementation of key concession contracts in the sector. The main PPP contracts the unions complained about were Airport Operations Management Contract between FAAN and MAEVIS Limited; and the Murtala Muhammed Airport Domestic Terminal Contract between FAAN and Bi-Courtney Limited. 6.4.11.2 At the meeting held in Abuja the Commission prevailed on the unions to stay action on the proposed industrial action, having regards to the efforts the Commission was making to resolve some of the issues in the concession contracts in the Aviation sector. The Commission assured the unions of their involvement in the resolution efforts of the Commission. At the end of the meeting, the unions reaffirmed their support for PPPs in Nigeria in general, and in the aviation sector in particular. They also requested to be involved in the mediation process of the Commission, as a major stakeholder in the sector. A communiqu was issued on the outcome of the meeting and given publicity in the media. 6.4.12. Systems Development 6.3.12.1. The Commission is presently developing systems and tools to support the operations of the Contract Compliance Centre. These include: * a compliance monitoring framework; * a contracts database, and key performance indicators for key sectors; and * a data management plan, human resources plan, and an operational tools plan, all to be included in a C3 strategy. 6.4.13. General Challenges 6.4.13.1. Failure of some MDAs to Release Custody of Concession Contracts Some MDAs are yet to submit PPP contracts that have been entered into with Private sector, against the Federal Government’s directive that all PPP Agreements should be submitted to the ICRC. This has affected the Contract Compliance Centre’s comprehensive review of existing PPP contracts of the Federal Government, thereby hampering effective monitoring. 6.4.13.2.

Untimely Response to Requests on Status of Compliance The status of PPP projects implementation is very important to compliance monitoring, and some MDAs are not responsive in terms of information on the status of projects. Hence the Contract Compliance Centre is not able to ascertain the level of compliance of some existing concession contracts.

6.4.13.3.

Lack of Adherence to the PPP process The N4P clearly outlines the process for PPP implementation and the MDAs are expected to follow the process in the development of PPP projects. However, some MDAs are still initiating PPPs without following the outlined process, which adversely affects contract implementation.

6.4.13.4.

Inadequate Enforcement Powers In cases where there is clear violation of the terms and conditions of an agreement, the Contract Compliance Centre is limited to the response of the parties to the contract, and a report to the Presidency. However, the violation or non compliance with the terms may hinder services to the public or is detrimental to the Government, and the ICRC lacks the Powers to enforce compliance.

6.5.

Support Services

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6.5.1. HR & Establishment Committee 6.5.1.1. The HRE Committee held nine meetings during the course of the year. Recruitment was the central activity. Below are some of the key activities undertaken: * • Allowances for Board Members: The Commission had written to the RMAFC on Board Members Allowances and Benefits. * • Salaries and Wages: The Salaries, Incomes and Wages Commission was approached and a salary structure had since been approved for the Commission * • Staff Handbook and Conditions of Service: This was developed and approved by the Board. The Office of the Head of the Civil Service of the Federation was approached to review the draft document before the Board’s approval. * • Capacity Development: A comprehensive training plan was implemented in 2010 for all the staff of the Commission in PPP-related areas, project management and general management. Over 30 staff and Board members were trained both locally and internationally. * • Staffing Plan: Under the guidance of the HR & Establishment Committee, Management reviewed the Commission’s Staffing Plan. 6.5.2. Recruitment 6.5.2.1. A total of 30 staff were recruited in 2010 bringing the entire workforce to 37. 6.5.3. Procurement

6.5.3.1. Vehicles: The Commission, in the period under review, purchased nine operational vehicles at a total cost of NGN49,969,666.00 6.5.3.2. Furniture: The Commission also engaged AFP/Julius Berger for the supply of office furniture at a cost of ` NGN49,652,278.00 6.5.3.3. ICT Equipment: Softquest Limited was awarded the contract for the supply of ICT Equipment at a cost of NGN9,996,656.25. The items included desktops, laptops, printers, etc. 6.5.3.4. Office Remodelling: The Commission engaged Messrs Ericon, Bello & Associates and Prime & Bell Partnerships to deliver services of Architectural, Structural, M&E and QS for the remodelling of its head office located at Area11, Garki. The tender exercise, award of contract, and relocation to the remodelled building are expected to be concluded in 2011. 6.5.3.5. Annex Office Acquisition and Furnishing In view of the space constraint at the Commission’s temporary office accommodation at 13, Suleiman Barau Crescent which has hindered the recruitment of much needed personnel and by implication the ability of the Commission to operate at its optimal level, an additional office building was acquired on a one year lease within the Aso Villa area at No 1, Ali Ailu Crescent for a sum of NGN5,000,000.00.

This additional office building provides office space for additional 40 staff. This arrangement will sustain the Commission’s operations until the final relocation to the permanent head office. 6.5.3.6 Information & Communications Technology The activities include development of an ICT strategy for the Commission, the installation of a 60 nodes Local Area Network (LAN), Procurement and Installation of Digital Scanner, Network Printers, and the installation of MTN Fiber Optics Internet facility. Other activities that are ongoing include the designing of the ICT plan for the New Office building, the redesigning and overhauling of the existing website and the installation of ICT facility for the office annex.

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Section 7: KEY ISSUES 7.1. General 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. The institutional, legal and regulatory environment must be conducive to private sector participation, sufficient data and information must be available to prospective investors and financiers to enable them to evaluate projects commercial viability. Despite best efforts, there are a number of issues which tend to diminish the effective development of a robust PPP market in Nigeria by the Commission. Some of the issues relate to the following: * * * * * * * *

7.2.

Regulatory and Institutional Environment Institutional Capacity for PPPs Cooperation of MDAs ICRC Internally Generated Revenue Consultancy and Transaction Advisory Project Delivery Framework Integrating PPPs Projects into National Planning Framework Legacy Projects

Regulatory and Institutional Environment The legal and regulatory environment for PPPs in Nigeria requires quantum improvements to reduce the risk perception of the private sector. The primary concern here is the limited scope of the Infrastructure Concession Regulatory Commission (Establishment, etc.) Act 2005. First, the Act emphasises more of concession contracts to the exclusion of other PPP options. Second, the Commission lacks adequate enforcement powers on PPP contracts. Third, the Act makes no provision for concession contracts entered into before the enactment of the Act. Last, the Act lacks a clear and enforceable dispute resolution mechanism. These and other serious limitations place severe constraint on the operating environment and operational efficiency of the Commission. The next major constraint to an effective legal and regulatory framework is the current uncertain legal context across many of the core infrastructure sectors (notably in transport where there are pending legislations on roads, rail and ports. Some of these pending sector-specific legislations are: *  *  *  *  *  *  * 

Federal Competition and Consumer Protection Bill 2008 Nigerian Postal Bill 2008 Inland Waterways Bill 2008 National Transport Commission Bill 2008 Ports and Harbour Reform Bill 2008 The Rail Bill 2008 Road Sector Reform Bill 2008

There is also the risk associated with the potential overlap of existing legislation relating to ICRC, other sectors (e.g. telecommunications, electric power) and fiduciary legislation, particularly with respect to procurement. This overlap poses political risks for which private sector PPP sponsors and financiers will likely seek guarantees. Perhaps, the most potent challenge to PPP infrastructure delivery is the fact that PPP transaction life cycle often conflicts with MDA budgetary cycles. Depending on the complexity of the asset to be procured under PPP, the PPP transaction life cycle often lasts from 12 months to 36 months. As the MDA budgetary cycle is 12 months, the pressure to deliver often means that proper projects preparation will be sacrificed.

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7.3.

Institutional Capacity for PPPs The absence of capacity by public authorities to carry out economic appraisal of projects and undertake development of a long-term investment strategy continues to hamper the development of a steady pipeline of infrastructure projects into the market. First, there is the lack of clear understanding of the process for dealing with unsolicited bids. Second, MDAs appear to lack clear understanding of what constitutes a PPP. Consequently, MDAs approach PPP transaction in a similar way to traditional procurement, with the result that adequate preparation is not made for project selection and preparation. Considerable resources of the Commission are currently being deployed in clarifying ICRC’s roles and MDAs’ responsibilities. I addition, frequent inter-ministerial and inter-agency redeployments and mobility of labour dilute PPP skills developed through a planned capacity development programme at relevant MDAs. This leads to leads to wastages, as the skills developed are never appropriately deployed.

7.4.

Cooperation of MDAs Cognizant of the fact that the success or otherwise of the PPP programme will depend largely on a close cooperation and collaboration between the ICRC and MDAs, the Commission, through a well-thought-out strategy, closely engaged the MDAs in the process of building and regulating a world-class and internationally competitive Public Private Partnership (PPP) market in Nigeria. This has not been without some challenges, particularly in the area of ensuring compliance with legacy PPP projects. First, there is the failure of some MDAs to release to the Commission their Concession Contracts, thus hampering the monitoring and compliance roles of ICRC. Next is the untimely response to requests on Status of Compliance. The status of PPP projects implementation is very important to compliance monitoring, and some MDAs are not responsive. Last, there has been markedly lack of adherence to the PPP process as enshrined in the N4P. Some MDAs are still implementing PPPs without following the outlined process, which adversely affects contract implementation. Thus, not only has it been difficult to ascertain the number of PPP contracts the FGN has entered into with third parties, the Commission has been unable to ascertain the level of compliance of some existing concession contracts which are already in the custody of ICRC. 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 lie with the MDA. The development of PPP projects requires a lot of upstream work and coordination at the MDAs. 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 optimise resource use and efficiency of the project.

7.5.

Concession Fees & Financial Autonomy Along the lines of the provisions of the ICRC Act, concession fees charged for all concession arrangements should be domiciled at ICRC for its operation. This may pave the way for financial independence of the Commission in the future.

7.6.

Integrating PPP Projects into National Planning Framework Given the imperatives of a national integrated planning framework to the success of infrastructure delivery through PPP in the country, effective infrastructure development must be anchored on a coherent and consistent integrated national planning framework. This is an important pre-requisite for a coherent and sustainable programme of infrastructure especially for the meaningful participation of the private sector. The NPC has since finalised the First Medium Term Implementation Plan (NIP) for Vision 20:2020. It is a legitimate expectation that the PPP projects being proposed or executed by MDAs will derive for this NIP. However, despite having provided the input to the NIP, the infrastructure investment plans of most MDAs largely fall outside the NIP. This

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has made a coherent and sustainable programme of infrastructure for the country practically impossible. 7.7.

Legacy Projects A review of some PPP contracts executed before the inauguration of the ICRC revealed such fundamental issues and challenges as the lack of proper project preparation (pre-feasibility and feasibility studies), risk assessment and allocation. These were complicated by 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; and the absence of integrated long- and medium-term planning for infrastructure investment. Some MDAs have the penchant for rushing into PPP contracts with little regard to the NIP and the N4P. This will invariably lead to a repeat of all the mistakes enumerated above with the attendant cost to the people of Nigeria.

7.8.

Long-term Finance for Infrastructure. Long term finances remain a major challenge to sustainable infrastructure delivery in Nigeria.

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Section 8: RECOMMENDATIONS

8.1.

Regulatory and Institutional Environment As a first step towards reducing the risk perception of the investing public of the current PPP framework, the Commission has: * Developed a detailed PPP regulations\guidelines, which incorporate international competitive requirements of PPP procurement process and due process for coordinating PPPs across the relevant MDAs. This will be forwarded for appropriate FEC approval after the ongoing stakeholder consultations. * Following the identified shortcomings in the ICRC Act, the Board constituted a review Committee to undertake a holistic review of the Act. Upon approval of the broad areas for amendments, the Board directed that the draft be sent to the draftsmen in Federal Ministry of Justice (FMoJ) for their inputs. The draft is will be finalised soon. * The provision of an enabling environment to harness private sector resources both locally and internationally will receive a big boost if these initiates are followed by an accelerated enactment of sector specific reform bills. * In addition, the economic reforms embarked upon by government in the key infrastructure sector need to be driven to conclusion. In particular: * The power and transport sectors need a clear statement of commitment and greater clarity on how this will be implemented; * Legislation to establish the National Transport Commission and some amendments to other legislations will need to be done to ensure a more conducive environment for PPPs in the sector; * Opposition to from employees, labour unions, and other vested interests to reform and greater private sector involvement in service delivery will be strong in some sectors, and will require political leadership, and often monetary compensation, to be overcome; * State Governments can play a greater role in some sectors such as electricity distribution and regional airport concessions, following templates developed by the Federal Government; * Mechanisms to increase the availability, and reduce the cost, of private finance are being developed and these will reduce the need for Federal Government guarantees, but the Nigerian capital and debt markets will need to be monitored and deepened.

8.2.

Institutional Capacity for PPP The Commission has commenced, with the assistance of such development partners as the World Bank, SDBA, etc, a comprehensive human capital development programme, involving training programmes, workshops, seminars, study tours, etc. This is to quickly bridge the institutional/knowledge gap for PPP project development in ICRC, MDAs and potential private sector partners. The Commission, in collaboration with the office of the Head of the Civil Service of the Federation, is currently championing the establishment of PPP Units in key infrastructure MDAs. Conceptually, these PPP Units will become and remain the reservoir of institutional knowledge for PPPs in the MDAs. This will only be possible if staff turnover at these units will be low.

8.3.

Cooperation of MDAs Some MDAs are still in the habit of disregarding the rules and guidelines on PPP as contained in the N4P. While provision for sanctions in the revised ICRC Act is being considered, appropriate sanctions by the FEC for erring MDAs will bring this practice to a minimum.

8.4.

Consultancy and Transaction Advisory 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 transformation agenda of Federal Government through the provision of consultancy services for pre-feasibility and transaction advisory services.

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Adequate and timely budgetary provision should be made by MDAs for project preparation. Although the IDA Credit option has been proposed for this support, the sheer volume of capacity support required to create a credible pipeline for a robust PPP market is clearly beyond budgetary resources. 8.5.

Project Delivery Framework In order to adequately address the twin challenges of faulty project execution framework together with project execution capacity and competencies identified as primarily responsible for the low project execution in Nigeria, a project delivery approach at sectoral levels (power, transport, others, etc.) will be imperative. This will come under the coordination of a Critical Projects Coordinator with Project Delivery Teams, and will be responsible for day-to-day delivery of the projects or group of projects.

8.6.

Integrating PPP Projects into National Planning Framework With the First Medium-Term National Implementation Plan (NIP) for Vision 20:2020 (as revised to date) already in place, it is expected that the PPP projects being proposed or executed by MDAs will draw from the NIP. This will need to be enforced through the Federal Executive Council. That way, a well-coordinated and coherent infrastructure delivery programme for the country will be sustained.

8.7.

Long-term Infrastructure Finance 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 long-term 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 has continued to pursue the development of funding sources and instruments with longer gestating periods. The measures include: (i) (ii) (iii)

mobilising the bond markets for infrastructure; strengthening local financial institutions’ capacities for project finance; supporting Government’s plans for a prospective Sovereign Wealth Fund (SWF) that could provide infrastructure finance.

However, in the immediate term, a number of options have been developed. These include the World Bank Group Financial Intermediary Loans (FILs) and the Viability Gap Funding (VGF) of infrastructure projects. Indeed, the VGF was accommodated, for the first time, in the 2011 budget.

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Section 9: FINANCIAL SUMMARY

Finance and Accounts

At the end of the year 2010, a total sum of N1,556,097,097.39 was received through the monthly allocation as against the appropriation sum of N1,757,061,774.00. During the year, the total expenditure was N911,926,863.97. The sum of N421,372,476.62, received largely on account of Personnel Costs, could not be utilised as the Commission was still in the process of establishing its structures of organisation, manning levels and optimal staffing. This was returned to the coffers of the Government. The balance in capital vote of N222,797,756.80 reserved for the remodelling of the Commission’s Head Office was carried over to the year 2011 to allow enough time to conclude the tender exercise, award of contract and actual remodelling of the Head Office. The sum of N321,690,309.50 was brought forward from 2009 financial year due to the extension of closure of Capital Expenditure to 31st March 2010. Of this amount, N113,889,414.92 was spent while the balance of N207,800,894.92 was returned to the Consolidated Revenue Fund.

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Section 10: CONCLUSION

The year 2010 has seen the Commission move from the realms of conceptualisation to actual delivery of PPP projects into the market. The very long “wish list” of PPP projects by the MDAs is gradually being pruned into credible PPP pipeline projects that demonstrate clear financial viability and bankability. Sufficient data and information are being put together through ICRC supported-OBC and allied studies to enable prospective investors and financiers to evaluate projects’ commercial viability. Pending the enactment of the outstanding sector-specific legislations, notably in road transport, rail and ports, as well as the harmonisation of existing overlapping and contradictory legislations relating to the ICRC and other sectors (e.g. telecommunications, electric power), the Commission has proceeded to reduce the risk perception of the private sector arising from shaky legal and regulatory environment for PPP in Nigeria. This was achieved by developing detailed PPP regulations\guidelines particularly as they relate to the international competitive requirements of PPP procurement process and due process for coordination across the relevant MDAs. The comprehensive review of the ICRC enabling Act to address shortcomings which limit the Commission’s operational effectiveness is also a step in stabilizing the PPP environment. The development of funding sources and instruments with longer gestation is at advanced stages as discussions with the relevant stakeholders in Nigeria and international development partners are already under way to direct some of the significant accumulation of pension funds to investments in infrastructure development. In pursuit of PPP awareness and stakeholder capacity-building initiatives, ICRC made over 10 presentations during the year and participated in over six PPP and Infrastructure development events, both locally and internationally. In addition, the Commission developed, with the assistance of Human Resources experts and international development partners, a comprehensive capacity development programme, involving training programmes, workshops and seminars, study tours, etc.

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Section 11: FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2010

INFRASTRUCTURE CONCESSION REGULATORY COMMISSION ABUJA FINANCIAL STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2010

PKF PROFESSIONAL SERVICES [CHARTERED ACCOUNTANTS] ABUJA, NIGERIA

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INFRASTRUCTURE CONCESSION REGULATORY COMMISSION, ABUJA C O N T E N T S

Page(s) Governing Board Members 56 Management 57 Financial Highlights 58 ICRC Mandate 59 Report of the Auditors 60 Accounting Policies 61 Balance Sheet 62 Income and Expenditure Account 63 Cash Flow Statement 64 Notes to the Financial Statements 65

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INFRASTRUCTURE CONCESSION REGULATORY COMMISSION, ABUJA GOVERNING BOARD MEMBERS Chief Ernest Shonekan, GCFR, CBE Chairman Alhaji Yayale Ahmed, CFR Secretary to the Government of the Federation Mohammed Bello Adoke, SAN Attorney-General of the Federation & Minister of Justice Dr. Olusegun Olutoyin Aganga Minister of Finance Mallam Sanusi Lamido Sanusi Governor of the Central Bank of Nigeria Dr. Bernard BA Verr, MBA, FCA Chairman, Board Audit & Technical Commiittee Chief Joe-Kyari Gadzama, MFR, SAN Chairman, Board Contract Compliance Commiittee Dr. Aisha Madawaki Isah, MFR Chairman, Board Human Resource & Establishment Committee Mazi Clement Owunna, MFR Chairman, Board Finance & General Purpose Committee Ms. Comfort Sira Wiwa Mr. Hakeem Sanusi (Deceased 22.02.2010) Engr. Mansur Ahmed Director General & Secretary to the Board

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INFRASTRUCTURE CONCESSION REGULATORY COMMISSION ABUJA MANAGEMENT Management Mansur Ahmed Director General/Chief Executive Officer Ghaji Bello Executive Director, Support Services Aminu Dikko Executive Director, Contract Compliance Centre Izuwah Chidi Executive Director, PPP Resource Centre Chiedu Ndubisi Technical Adviser to Director General Micheal Ohiani Head, Legal & Governance Mohammed Bamalli Head, Human Resources & Administration Emmanuel O. Onwodi Head, Finance & Accounts Gabriel E. Nyananso Head, Monitoring & Compliance Kabiru B. Yusuf Head, Procurement Olugbenga Odugbesan Head, Communications Dada H. Togunde Head, Internal Audit Jobson Ewalefor Head, Information & Communication Technology Office 13, Suleman Barau Crescent Aso Villa Abuja. Bankers Central Bank of Nigeria, Abuja Fidelity Bank Plc Zenith Bank Plc Auditors PKF Professional Services, Chartered Accountants NACRDB Plaza (4th Floor), Independence Way, Central Business District, Abuja. 56

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INFRASTRUCTURE CONCESSION REGULATORY COMMISSION, ABUJA FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED DECEMBER 31, 2010

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INFRASTRUCTURE CONCESSION REGULATORY COMMISSION, ABUJA

ICRC’s MANDATE The Infrastructure Concession Regulatory Commission - ICRC Establishment 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 utilise 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 catalyse and facilitate engagement of the private sector by MDAs of 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 ICRC Act imbues the Commission with functions and powers to: 1. Provide general PPP policy guidelines, rules and regulations 2. Take custody of every concession agreement 3. Ensure efficient execution of any concession agreement or contract entered into 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 ICRC consists of four main components: 1. Promoting, Facilitating, Supporting and Coordinating the implementation of sound PPP process, while ensuring that principles of good governance are applied to all of the functions that form part of it; 2. Providing transaction support and building capacity in all Federal Government Ministries, Agencies and Department (MDAs) for project development, tendering, negotiation and contract execution; 3. Developing guidelines for monitoring contract compliance during construction, operation and contract termination and supporting as appropriate the MDAs assigned to this task; 4. 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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INFRASTRUCTURE CONCESSION REGULATORY COMMISSION, ABUJA ACCOUNTING POLICIES 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 realizable value.

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INFRASTRUCTURE CONCESSION REGULATORY COMMISSION, ABUJA BALANCE SHEET

The Financial Statements on pages 61 to 65 were approved by the Governing Board 27th May 2011 and signed on its behalf by: on......................., ...............................................Director General ...............................................Executive Director Support Services ...............................................Head of Accounts The Accounting Policies on page 60 and notes on pages 64 to 65 form part of these Financial Statements. Auditors’ report on page 59.

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INFRASTRUCTURE CONCESSION REGULATORY COMMISSION, ABUJA CASH FLOW STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2010

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INFRASTRUCTURE CONCESSION REGULATORY COMMISSION, ABUJA INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2010

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INFRASTRUCTURE CONCESSION REGULATORY COMMISSION, ABUJA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010

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INFRASTRUCTURE CONCESSION REGULATORY COMMISSION, ABUJA NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2010

13 APPROVAL OF FINANCIAL STATEMENTS These financial Statements were approved by the 27th May 2011 Board of the Commission on.......................................................

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NOTE

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13, Suleiman Barau Crescent, Aso Villa, Abuja Tel: +234-9-4604900, F: +234-9-4604900 E-mail: [email protected] Website: www.icrc.gov.ng

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