Strengthening the Mechanism for Private Sector Participation in Public Service Delivery in Nigeria PRESENTED TO HIS EXCELLENCY, PRESIDENT MUHAMMADU BUHARI, GCFR August 26, 2015

Aminu Adamu Diko DIRECTOR GENERAL INFRASTRUCTURE CONCESSION REGULATORY COMMISSION

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Outline 1. ICRC Governance Structure 2. Functions of the Infrastructure Concession Regulatory Commission (ICRC) 3. Legacy (Inherited) PPP Projects 4. New Projects under ICRC law & National Policy on PPP 5. Examples of successful PPPs from other Emerging Economies 6. Challenges 7. Conclusions 8. Prayers

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Governance Structure

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Governance Structure

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Governance Structure The Commission reports to the President through the Secretary to the Government of the Federation Governing Board composed of:  a Part–time Chairman  the Secretary to the Government of the Federation  Attorney General of the Federation  Minister of Finance  Governor of the Central Bank  One member from each of the 6 geo-political zones of the country  Director General ICRC-Member/Secretary 5

Governance Documents The Infrastructure Concession Regulatory Commission Act (Establishment Etc,) Act 2005 is the principal legislation for the regulation of PPP agreements over Federal Government Infrastructure. (The Commission has no mandate over infrastructure in States except where they require FGN guarantee) In 2009, the Federal Executive Council (FEC) approved a National Policy on PPP which aims to provide a conducive environment for private sector involvement in the delivery of infrastructure services in Nigeria. Annual Report to the President is presented every year in June. Key Standards: Transparency and Competition 6

The Functions of ICRC 1. Regulate Public Private Partnership (PPP) procurement by:  Guiding MDAs in structuring PPP transactions: PreContract regulation  Taking custody of all executed agreements and ensuring compliance with the terms and conditions of such contracts: Post Contract Regulation 2. Issuing regulations and guidelines. 3. Capacity building and PPP support for MDAs 4. Collaborating with State Governments for a sustainable National PPP Framework. 7

The Functions of ICRC – Cont’d

The ICRC, as a regulatory agency, does NOT: • Initiate PPP projects – MDA responsibility • Develop the Projects – MDA responsibility • Approve PPP projects – FEC approves • Enforce court judgments over PPP transactions – Courts’ Mandate

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The PPP Alternative … What is Public Private Partnership

“A Public-Private Partnership is a contractual agreement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources; each party shares in the risks and rewards potential in the delivery of the service and/or facility”. - NCPPP/USA. Wide Infrastructure Gap

Declining Government Resources

Need to urgently fill Resource Gap

Private Sector & Infrastructure Services

The PPP Alternative

Private

Public Procurement continuum

Legacy (Inherited) Concessions

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Ports Concessions • At inception, the ICRC inherited a number of PPP projects including the following concessions: • Apapa Port Terminals (7) • Tincan Island Port Terminals (5) • Port Harcourt Port Terminals (5) • Calabar Port Terminals(4) • Warri port terminals (3) 12

Lagos International Trade Fair Complex Concession  Project Description: A concession was granted over this historic national

asset to a company called Aulic Nigeria Limited in 2007 for 30 years. The concession was faulty from day one.  The Government could not hand over the entire complex as agreed and  As a result, the concessionaire has not been paying the agreed yearly fees and is also not running the contract as required.

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Tafawa Balewa Square Complex  Project Description: Concession was granted over this historic national asset to BHS International Limited in 2007 for a period of 30 years. The concession was faulty from day one.  Project Status: Lagos State Government challenges the proprietary of the FGN converting the complex for commercial use rather than handing the complex back to the State. Lagos State had since taken the dispute to court.

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Lagos -Ibadan Expressway  Project Description: A Concession was granted over this strategic road to Bi-Courtney Highways Limited in 2009 even when the ICRC had declined to certify the transaction. Owing to allegations of nonperformance, Government terminated the Concession. Bi-Courtney has obtained a court injunction in May 2015 preventing Ministry of Works/ICRC from processing another concession over the road.

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Lagos -Ibadan Expressway  Federal Government granted Julius Berger and RCC a contract at N167 billion. The sum of N50 billion was to be paid by FGN and private investors/financiers to raise N117 billion balance needed to complete the project.  After constructing 25km, the contractors are reported to have abandoned the road for non-payment.

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Murtala Mohammed Domestic Airport , Lagos • Description: The first domestic terminal, PPP financed infrastructure in the Aviation industry in Nigeria. • Project Status: Airport Terminal Commissioned in 2008 is operating but the concessionaire and the Federal Government have been in court for the last 7 years.

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MM2 _Departure Hall

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PPP projects initiated under the ICRC Act and National Policy

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Gas Pipelines Projects  Project Name: Trans Nigeria Gas Pipeline (TNGP) Project (subset of Trans Saharan Gas Pipeline) in 3 Phases  Project Owner: Nigerian National Petroleum Corporation  Description: The Trans Nigeria Gas Pipeline (TNGP) Project is a subset of the Trans Saharan Gas Pipeline Project valued at $5 Billion.  Project Status: The TNGP Project is under development by NNPC.

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Roads and Rails Projects • Road and rail lines projects ready for market but were taken off to SURE-P:  Shagamu-Ore-Benin-Asaba road  Coastal rail/new alignments  East-West rail Concession • Road projects that are in development phase and bankable:  Lagos-Iseyin-Kishi-Kaiama road  Kaiama-Bahama-Kaoje-Gwambu-Fokko-Sokoto road  Ilorin-Kaduna road

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Security Projects-Ministry of Defence … Without

security no significant investment is possible • Projects Description:  Supply, Operate and Maintenance of Equipment to be leased to the United Nations Nigerian Contingent under the Contingent Owned Equipment (COE) system.  Maintain, Repair, Overhaul and Upgrade services within the existing hardware and facilities  Manufacturing equipment through partnership with DICON and AFIT • Project Status: The three (3) Business Cases are currently being reviewed by a team comprising ICRC, Ministry of Finance, Ministry of Defence, Ministry of Trade and Investment and DICON 22

Public Private Partnership in National Defence

Australia’s Coastwatch: A PPP Model for Coast Guards and CBP - Australia has semi-privatized the coastal patrol function, placing contractors under the Customs service. Once intruders are detected, these contractors can then call on pre-arranged support Air or Naval support - since 1995. 23

Public Private Partnership in National Defence

Project: Building of the UK Joint Services Command and Staff College

• • • •

PFI contract between UK MOD and Laing Ltd Commissioned in August 2000. PFI contract between UK MOD Serco To provide building maintenance, academic and administrative support, catering, estates, library, security, cleaning and laundry under the terms of the 30 year concession agreement. PFI: Private Finance initiative

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Public Private Partnership in National Defence

The RAF is using the PFI approach for the procurement of its future Strategic Tanker Aircraft for refueling

• Under the agreement the RAF will pay for aerial refuelling and air transport missions as required. • The RAF will retain responsibility for all military missions • Contractor will own, manage and maintain the aircraft and also provide training facilities and some personnel. • Contractor can earn extra revenue by using aircraft for commercial operations when not required by the RAF • The RAF have the "first call" on entire fleet in times of crisis

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Public Private Partnership in National Defence

Satellite Surveillance System

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Public Private Partnership in Coastal Patrol

Source: FMOT

NIMASA Coastal patrol vessels on surveillance 27

Security Projects – Example from Brazil

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Security Projects – Example from Brazil

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Bridges – the 2nd Niger Bridge • Description: Bridge is a 6-lane dual carriageway of approximately 1.760km long including 14km long approach road with three (3) river bridges and three (3) interchanges on the approach road. The Bridge was estimated to cost N117 billion @ N165= US$709 million • Project Status: The Commission has declined to certify the process owing to concerns about the cost of the bridge and non-compliance with the law and PPP Policy.

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World’s Tallest Bridge built in France through PPP • Description: It is 2.46km long, 23m wide, with the highest bridge deck in the world at the cost of $448 million. It was opened to traffic on 16 December 2004

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World’s Longest Ocean Bridge, China • Description: The Jiaozhou Bay bridge is 42.5km long and 33.5m wide at the cost of $1.511 billion and is the longest of its kind.

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Green field (New) Deep Sea Ports Project

Lekki Deep Sea Port

Estimated Project Cost

US$1.4billion

Ibom Deep Sea Port US$2.64billion

Badagry Deep Sea Port US$2billion

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Re-development of National Arts Theatre, Lagos • Project Description: Develop 65 hectares of the 134 hectares fallow land around the theatre by building 5-star hotel, office buildings, leisure Park, shopping mall and Multi Level car park. • Project Status: A preferred bidder Topwide/APEAS has emerged through a competitive bidding process certified by the Commission. The contract negotiations have commenced.

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National Theatre – Artist impression of Proposed redevelopment

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Hydro Electric Power • Project Description: Concession granted over 3 Large Hydro Power Plants at Kainji, Jebba and Shiroro.  Project Status: The Commission has commenced regulating compliance (with NERC) with the terms and conditions of the Concession.  Project Description: 10 Small and Medium Hydro Power Projects to generate up to 45.25MW from the dams. (2 Kano, 2 Katsina, Kogi, Nassarawa, Zamfara, Ogun, Oyo and Ondo)  Project Status: The Business Case is being reviewed by the Commission. 36

Power Transmission As recognized by Mr. President, power transmission inadequacies is a major problem in Nigeria’s Power sector.  Project Description: TCN has submitted six (6) projects for Refurbishing and Replacement of transmission assets measuring approximately 12,000 km of 330kv/132kv & 132kv/33kv primary/secondary substations. These projects are located nationwide.  Project Status: Due to lack of funding, project development has stopped.

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4 Inland Ports - NIWA  Project Description: Operations and Management of 4 Inland Ports located at Baro, Lokoja, Oguta and Onitsha which shall be the first, as a test case.  World Bank is financing the development of these concessions.  Project Status: The Onitsha port has been completed and ready for operation, while the other three ports are in different levels of completion.

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Kiri-Kiri Lighter Terminal 1 & II  Project Description: NPA is undertaking the process to concession the terminals to private operators for a variety of possible uses including fishing and container operations. The World Bank is supporting the process by paying for advisory services  Project Status: ICRC has asked Ministries of Transport and Finance to suspend the process for breach of the ICRC law and PPP Policy. 39

33 Agricultural Silos Complexes • Project Description: The Federal Ministry of Agriculture and Rural Development intends to grant concession over 33 Silo Complexes located in different parts of the country to allow for greater participation of farmers . • Project Status: Procurement of Transaction Adviser through the World Bank.

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Building and Operating Prisons through PPP

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Kaduna Prison located in the heart of the City Typical African Prison

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Modern Prisons located out of Cities – Mangaung in South Africa

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Acacia PPP Prison in Western Australia

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Old prisons converted for better use HI-Ottawa Jail Hostel -- Ottawa, Canada

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Malmaison Hotel -- Oxford, United Kingdom

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The Liberty Hotel -- Boston, MA

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Murtala Mohammed International Airport Road • Project Name: Rehabilitation and Upgrade of the 2.8km dual carriage Murtala Muhammed Airport (MMA) Road • Description: The proposal is to expand the road from 4 to 8 lanes • Project Status: Development – the Commission has reviewed the Business Case and found it unsatisfactory and has asked the Ministry of Works to make corrections.

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PPP for Office Accommodation in Nigeria • Project Name: Development of 20 Storey Twin Tower Buildings for the Debt Management Office • Project Cost: Reduced from N51 billion to N42 billion • Project Status: Procurement phase- FEC approval received. Contract signing and financial close to follow soon.

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Challenges

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Challenges … Funding Constraints

Decline in budgetary allocation constrains the operations of the Commission as indicated in the table below: Budget Allocation: 2011 to 2014 No

Heading

2011

2012

2013

2014

1

Legacy Projects/ Contracts

68

70

70

75

2

Pipeline Projects

15

19

21

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3

Overhead (N)

466,749,540.00

240,574,018.00

247,624,780.00

280,731,563.00

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Capital (N)

76,386,247.00

69,160,000.00

60,000,000.00

47,878,526.00

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Total (N)

543,135,787

309,734,018

307,624,780

328,610,089 51

Challenges … Funding Insufficiency

ICRC Budget (Overhead and Capital)

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Challenges Cont’d • Unstable Government Policies – Tolling/Billing • ICRC Act needs to be strengthened • Dearth of institutional capacity – World Bank PPP support loan to be effectively utilised • Conflict in laws – under mentioned bills have been approved by FEC. (Most would also require establishment of new Agencies) 1. 2. 3. 4. 5. 6. 7.

Inland Waterways Bill National Transport Commission Bill Ports and Harbor reform Bill Rail Authority Bill and reforms Road Sector Reform Bill Federal Competition and Consumer Protection Bill Nigerian Postal Bill

Examples of successful PPPs from other jurisdictions

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Lesotho Referral Hospital - PPP • Partners: Consortium of 5 institutions competitively procured - Development Bank of South Africa, the International Finance Corporation and World Bank • Project was commissioned: Late in 2011 following contract executed in 2009 This is the first big PPP project in • Project cost: US$120 Lesotho to provide 425 hospital beds million (390 bed public, 35 private) • Concession period: 18 years 55

SMART Tunnel, Kuala Lumpur, Malaysia  Project: SMART is an acronym for Stormwater Management and Road Tunnel, designed to alleviate the flooding problem in the city centre of Kuala Lumpur.  Description: The ingenuity of the project proponents integrated the tunnel into the system to relieve traffic congestion in the city, reducing travel time significantly. SMART opened to traffic on 14 May 2007, after four years of construction. The tunnel handles 30,000 cars per day and has been used 44 times to divert floodwater.  Project Cost: Around U.S $514m recoverable over 40 years.

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SMART Tunnel, Kuala Lumpur, Malaysia

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Smart Tunnel (Enlarged)

https://youtu.be/5eMpNN_vF4s

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Central Java IPP Power Plant Indonesia – Coal to Power  Project Name: 2,000MW Ultra super critical (USC) coal-fired plant & transmission facilities  Description: Winning bid was for a 25-years – to build, own, operate and transfer the green field facility, to improve access to electricity to 7.5 million people and mobilize over $3 billion in investment.  Project Cost: U.S $4 billion  Project Status: Construction ongoing with the expected completion date of 2016. 59

Mumbai Metro, India  Project Name: 63 kilometers (39 mi). Urban infrastructure- Mass Rapid Transport.  Description: The system is designed to reduce traffic congestion in the city. To be built in 3 phases over a 15-year period, with overall completion expected in 2021.  Project cost : U.S $5.8billion  Concession Period - 35 years  Project Status: Phase 1 commenced commercial operations in 2014.

Railcars of the Mumbai Metro

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CONCLUSION … We

are in a race for funding with others

.....So we must compete for available Private Sector funds – A French company has signed $1.5 billion for the 25 year Power & Water Purchase Agreement for its 6th Independent Water and Power project in Abu Dhabi – India plans to spend $1 trillion in its 12th development plan making its PPP regime more competitive. – The Indonesian Central Government has decided to use PPP financing in the region of $31.47 billion in its infrastructure development – The Saudi Arabian government is to build a new international airport under a PPP model Source: ACCA Global Report 126 & Partnership Bulleting

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CONCLUSION cont… …

We are in a race for funding with others

• Canada has announced that it has launched Round 6 of the P3 Canada fund with additional $1.2bn over five years, beginning 1st April 2014 • Zimbabwe is seeking $5bn for road PPPs • The Chinese government is courting potential PPP deals for a series of new Infrastructure projects. • New York’s Tappan Zee PPP Bridge could be the first of President Obama’s many new multi-billion dollar projects in the U.S. to boost the country’s infrastructure

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Prayers 1. Having regard to the Commission’s increasing regulatory portfolio, direct the Budget Office to give the Commission a life line of N100 million to sustain operations up to December 2015 and also to improve the Commission’s Budget allocation from 2016 budget. 2. Approve and support the amendment of the ICRC Act to make it comprehensive for PPPs. 3. Approve that Ministry of Finance provides funds for the Presidential Team to visit Brazil to see how the city of Rio emergency disaster command center operates. 4. Approve that the four (4) problematic legacy concessions in this presentation, (LITFC, TBS, Lagos-Ibadan Rd & MMA2) be also referred to the Committee set up by Your Excellency to review Port Concessions.

5. Persuade the National Assembly to be more circumspect in their pronouncements on Executive policy issues like tolling of roads.

Prayers – Cont’d Seek Judiciary’s commitment to speedy conclusion of cases and exercise restraint in granting injunctions to stall executive actions. 7. Direct MDAs to specially provide funds in the budget for PPP transactions and training 8. Approve final review of Reform Bills already approved by FEC - for conflict in laws – before sending them to National Assembly 9. Review the supervision of the World Bank PPP funds as provided in the initial Loan Agreement signed by the Federal Government. 10. Direct MDAs to recognise that the ICRC is the Government ’s foremost authority on PPP transactions as reinforced by the Attorney General of the Federation in a letter reference Number th :HAGF/ICRC/2015/Vol:11 dated 19 May 2015. 6.

Infrastructure Concession Regulatory Commission Plot 1270 Ayangba Street, Close to FCDA Headquarters, Area 11, Garki, Abuja – Federal Capital Territory. Phone: +234 94604900 E-mail: [email protected] Website: www.icrc.gov.ng

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