Scaling-up Nigeria’s Infrastructure

THE ROLE OF PPP PRESENTATION AT THE NIGERIA BRITISH CHAMBER OF COMMERCE BREAKFAST MEETING ON INFRASTRUCTURE ON 24TH NOVEMBER 2016 IN LAGOS, NIGERIA

Aminu Diko DIRECTOR GENERAL INFRASTRUCTURE CONCESSION REGULATORY COMMISSION November 2016

Outline • Nigerian Investment Needs & Opportunities • The Nigerian PPP Framework – Framework – PPP Process in Nigeria

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Nigerian PPP Experience Experience from other jurisdictions Challenges and Lessons Learnt Conclusion 2

Investment Needs & Opportunities

• Nigerian Investment Needs & Opportunities • The Nigerian PPP Framework – Framework – PPP Process in Nigeria

• • • •

Nigerian PPP Experience Experience from other jurisdictions Challenges and Lessons Learnt Conclusion 4

Definition of PPP 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 (Nat. Council on PPP USA)

Wide Infrastructure Gap

Growing demand for private sector participation in infrastructure

Small and depleting Government resources

Urgent need for alternative funding of Infrastructure

The goal is to combine the best capabilities of the public and private sectors for mutual benefit

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Government Procurement Options

Public Sector

Risk Spectrum

Private Sector 6

The Nigerian PPP Framework The Infrastructure Concession Regulatory Commission Act (Establishment Etc,) Act 2005. In 2009, the Federal Executive Council (FEC) approved a National Policy on PPP which provides guidance on PPP project structuring. Presidential Circular of September 2013 directing All MDAs to engage with the FMoF and ICRC PRIOR to commencing PPP projects. MDAs to establish PPP units Annual Report to the President presented every year in June. Transparency and Competition 7

The ICRC Governing Board 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 8

The ICRC Functions • Regulate Public Private Partnership (PPP) procurement by: a. Guiding MDAs in structuring PPP transactions for both green field and brown field infrastructure – Pre Contract regulation b. Taking custody of all executed agreements and ensuring compliance-Post Contract Regulation

• Issue PPP regulations and guidelines • Collaborate with state governments to develop a sustainable national framework 9

What the ICRC Does Not Do 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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PPP Process Framework • Knowledge, experience and skills required to go through PPP phases:1. 2. 3. 4. 5.

Project Initiation, Project Preparation, Project Procurement, Project Implementation Asset return 11

The Nigerian PPP Framework … The PPP Process -1

1. Project identification by MDAs 2. MDA’s engages ICRC prior to commencing PPP to ensure viability and bankability of proposed projects. 3. MDA’s consult and engage with the FMoF to structure financing prior to commencing PPP projects 4. MDA engage Transaction Adviser (TA) as required under the Public Procurement Act of 2007. Prepares for Outline Business Case (OBC) ICRC reviews OBC/issues OBC Certificate of Compliance 5. MDA submits OBC to Federal Executive Council (FEC) for approval.

Project Identified

Project Prepared OBC

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The Nigerian PPP Framework … The PPP Process II

7. Upon FEC approval, MDA’s TA commence procurement of private partner. 8. Upon procurement, MDA negotiates with preferred investor and submit Full Business Case (FBC) to ICRC for FBC Certificate of Compliance. 9. MDA submit FBC to FEC for approval. 10.Upon approval, PPP contract is signed and ICRC takes custody 11.MDA and preferred PPP Project Proponent (Investor) achieve Financial Close. 12.ICRC and the MDA conduct regular joint Inspections of the Project until the end of the contract.

FBC

Investor Procured Project Implemented

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PPP Projects under Implementation S/No

Sectors/Projects

Concession Contract Value

1.

25 Ports Terminals

441,690,643,800

2.

2 Generating Power companies :- (Kainji and Shiroro

179,445,777,210

Hydro Electric Plc)

3. 4.

Aviation:- MMA2 concession , Four star hotel and Maevis concession Urban Infrastructure:- Katampe District FCT

3,959,293,696 61,194,747,645

5.

Social Infrastructure (LIFTC and TBS)

46,200,000,000

6.

Telecommunication Infrastructure (TCN’s Fibre Optic Cable

25,200,000,000

Telecommunications )

7.

Inland Container Depot ( 6 ICDs around the country)

8.

Health Care Delivery Service (Garki Hospital Ltd)

9.

Marine Security concession project (NIMASA)

37,800,000,000

10.

Housing Development Project (Festac phase 2 Lagos)

25,765,000,000

11.

TOTAL (Naira)

1,567,125,000 225,000,000

823,047,587,351

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Ministry of Transportation … Nigerian Ports

• At inception, the ICRC inherited a number of PPP projects including the following concessions entered into in 2006: • Apapa Port Terminals (7) • Tincan Island Port Terminals (5) • Port Harcourt Port Terminals (5) • Calabar Port Terminal(4) • Warri port terminal (3) 15

Ministry of Transportation-Aviation … MMA-2 Concession

• 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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Ministry of Trade & Investment … Lagos International Trade Fair Complex

 Project Description: A concession was granted over this historic national asset to a company called Aulic Nigeria Limited in 2007 for 30 years. 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 neither running the contract as required nor amenable to renegotiating the concession.

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Ministry of Trade & Investment … Tafawa Balewa Square

 Project Description: Concession was granted over this historic national asset to BHS International Limited in 2007 for a period of 30 years.  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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Ministry of Power, Works & Housing … Lagos – Ibadan Expressway

 Project Description: A Concession was granted over this strategic road to Bi-Courtney Highways Limited in 2009. Owing to alleged non-performance, Government terminated the Concession. Government and Bi-Courtney have been enmeshed in a legal battle since the termination. The Infrastructure Bank is assisting the Federal Government to finance the reconstruction of the road and may grant a new tolling based concession over the road.

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Legacy Projects … Key Issues

1) Need for project development funding 2) Propensity to litigate/ Inadequate stakeholder engagement and consultation 3) Lack of clear understanding of roles and obligations by both parties in the concession 4) Insufficient funding to monitor and supervise the concession 5) Inadequate financing structure 20

Projects under ICRC Act Roads/Bridges Seaports & Inland Container Depot (Include 3 Deep sea ports) Social/Urban Infrastructure (Includes National Arts Theatre) Power (Including 8 Small Dams) Railways Immigration Health Trade & Investment ICT Tourism Agriculture (Including the 33 Silos as ne concession)

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Ministry of Transportation Narrow Gauge Railway Concessions (Brown Field) The Federal Government has received a proposal from World renown conglomerate General Electric for a concession over the two lines mentioned above. His Excellency, the VP has inaugurated a Steering Committee under the Chairmanship of Hon. Minister of Transportation. Western & Eastern Concessions M aiduguri

N guru K aura N amoda K ano Kad un a M inna

G ombe Jo s Kafanchan

Baro

Enugu

Idogo A ppapa L agos P ort

Port Harcourt

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Ministry of Transportation Project

Lekki Deep Sea Port Estimated Land Size 90 H Estimated Project Cost US$1.2b Equity FGN: State: Investor 20:18.15:61.85

Ibom Deep Sea Port 14,400 H US$2.64b 20:20:80

Badagry Deep Sea Port 10,000 H US$2.4b 100% private

Schematic Diagram of Ibom Deep Seaports

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Ministry of Transportation  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  Project Status: The Onitsha port has been completed and ready for operation. The ICRC has issued OBC Certificate of Compliance

… Inland River ports 24

Ministry of Transportation  Project Description: World Bank supported concession of Kirikiri Lighter Terminal 1 & 2 for a variety of uses including fishing and container operations.  Project Status: ICRC has issued the OBC Compliance Certificate advising that NPA meets with the operators of the terminals who have expressed opposition to the concession. … Kirikiri Lighter Terminal

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Ministry of Transportation-Aviation Concession of Murtala Mohammed International Airport, Lagos 2. Nnamdi Azikiwe International, Abuja 3. Port Harcourt International Airport and 4. Malam Aminu Kano International Airport, Kano • Project Status: The Hon Minister of State, Aviation has inaugurated a Project Delivery Team and Steering Committee. A business case will be developed by a TA to be procured by the Ministry.

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Ministry of Information & Culture • Project Description: Development of 65 hectares of the 134 hectares fallow land around the National Theatre - building a 5-star hotel, office buildings, leisure Park, shopping mall and multi level car park. • Project Status: A company called Topwide/APEAS emerged the preferred bidder. Negotiations have been completed and FBC Certificate issued by ICRC in March 2016. A court case by an interested company is stalling presentation of the project to FEC for approval. The Honourable Minister of Information is working to resolve the issues.

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Ministry of Information & Culture

Schematic of National Arts Theatre, Lagos

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Ministry of Agriculture … Grain Silos

• Project Description: The Ministry intends to grant concession over 33 Silo Complexes located in different parts of the country to allow for greater participation of farmers. • Project Status: ICRC is reviewing the OBC. Stakeholder consultations have taken place across the country.

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Ministry of Power, Works & Housing … MMA International Airport Road

• Description: 2.8km dual carriage Apakun - Murtala Muhammed Airport (MMA) road is to be expanded from 4 to 8 lanes including vehicular bridges and pedestrian bridges at appropriate locations. • Project Status: The Commission has issued a Certificate of Compliance in May 2016 and the Hon Minister is reviewing the dynamics of the project.

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Ministry of Power, Works & Housing Schematic Diagram of Second Niger Bridge

• Description: Bridge is a 6-lane dual carriageway of approximately 1.760km long including 14 km long. • Project Status: The consortium has submitted a report that the project is not viable as currently structured and has proposed options for viability. The Hon. Minister for PW&H is currently reviewing the report.

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Min of Power + Min of Water Resources • Project Description: Eight Small and Medium Hydro Power Projects to generate up to 34.8 MW from the dams.  Project Status: The OBC Compliance Certificate has been granted by ICRC and project is awaiting FEC approval.

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Debt Management Office • Project Name: Development of 20 Storey Twin Tower Buildings for the Debt Management Office; Cost: N41billion. This is an example of how MDAs can develop land allocated to them for offices • Project Status: Concessionaire procure. Awaiting the concessionaire to reach financial close and project commencement

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• Nigerian Investment Needs & Opportunities • The Nigerian PPP Framework – Overview – PPP Process in Nigeria – Nigerian PPP Experience

• Experience from other jurisdictions • Challenges and Lessons Learnt • Conclusion 34

Experience from other jurisdictions Kuala Lumpur’s Storm water Management and Road Tunnel (Smart ) Year operation Commences: 2007 Concessionaire: MMC-Gamuda Joint Venture Length: 4 km (2.5 mi) Number of lanes: 4, double-decked Investment cost: US$515 million Concession: 30 years PPP Model: Build Operate & Transfer (BOT)

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Portfolio of current PFI projects across government as at 31 March 2015

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Experience from the United Kingdom Ministry of Defence Key facts:•over 50 signed PFI deals and private sector capital investment of almost £9 billion •National audit Office has found that the MOD has achieved a good service delivery on a broad and diverse portfolio of PFI projects •MOD signed the largest ever PFI transaction for provision of the Future Strategic Tanker Aircraft to the UK’s Royal Air Force, valued in excess of £10 billion over 27 years •Future Strategic Tanker Aircraft (FSTA) is a British project to procure Airbus A330 Multi Role Tanker Transport aerial refuelling (AR) and air transport (AT) aircraft for the Royal Air Force, to replace ageing VC10s

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Experience from the United Kingdom Home Office The New Headquarters for the Home Office Key facts:•In March 2002, following a procurement that began in 1996, the Home Office signed a 29 year contract with Annes Gate Property plc for funding demolition of the old Department of the Environment building at 2 Marsham Street, design and construction of new headquarters accommodation on part of the site and provision of associated services. •The Home Office expects to a monthly charge for the building and associated services amounting to £311 million (net present cost) over the life of the project. •At the end of the contract in 2031, the Home Office will have the option of vacating or purchasing the building.

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Experience from the United Kingdom Department of Education Priority School Building Programme Key facts:•The Priority School Building Programme (PSBP) is a programme to address the needs of the schools most in need of urgent repair. •Through the programme, 260 schools will be rebuilt or have their condition needs met by Education Funding Agency (EFA). The first school was opened in May 2014.

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Experience from the United Kingdom Department of Transport The Mersey Gateway

Key facts:•The Mersey Gateway will bring about much needed traffic relief for the existing Silver Jubilee Bridge. Work started on the Mersey Gateway Project on 7 May 2014. In autumn 2017 a new six lane toll bridge over the Mersey between the towns of Runcorn and Widnes will open The main objectives of the project are to; •relieve the congested Silver Jubilee Bridge, •apply minimum toll and road user charges to both the Mersey Gateway Bridge and the SJB consistent with the level required to satisfy the affordability constraints, •improve accessibility in order to maximise local development •improve local air quality and enhance the general urban environment, •improve public transport links across the River Mersey,

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• Nigerian Investment Needs & Opportunities • The Nigerian PPP Framework – Overview – PPP Process in Nigeria – Nigerian PPP Experience

• Experience from other jurisdictions • Challenges and Lessons Learnt • Conclusion 41

Road Block to Good PPP Projects

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Infrastructure Financing Framework

Human Capital Development

Coherent Planning Framework

Institutional Framework & Capacity

Legal and Regulatory Framework

Policy; Objectives; Roadmap

Summary of PPP Framework

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Political Commitment EXCERPTS OF SPEECH OF PRESIDENT MUHAMMADU BUHARI ON AUGUST 23, 2015

“…..We also have a huge infrastructure deficit for which we

require foreign capital and expertise to supplement whatever resources we can marshal at home. In essence, we seek public private partnerships in our quest for enhanced capital and expertise.”

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Leadership Commitment Excerpts of speech of His Excellency Vice President Yemi Osinbajo AT 10th Year Anniversary Lecture of Crescent University, Abeokuta, Ogun State June 11, 2016

..........the Buhari Administration will tackle corruption in all

sectors of the economy and establish a sufficient tax culture. The Administration will encourage Public-Private Partnerships ensuring a transparent framework that reduces the bottlenecks in doing business. 45

Lessons Learnt so far 1. Proper project preparation is key to successful PPPs 2. There has to be an open and transparent process, public interest, capacity to deliver, proper risk allocation, etc. 3. PPP projects selected from a coherent infrastructure investment programme 4. PPPs are complex transactions to be approached with great care, discipline and patience. 5. PPPs require high level commitment from both parties to succeed. (ease of doing business ranking) 46

Challenges 1. Budgetary allocation is insufficient to cover responsibilities adequately; 2. Inconsistency in the PPP Project Pipelines (no long term planning); 3. Weak regulatory and enforcement powers in the ICRC Act; (An amendment Bill is pending before the Nat. Assembly) 4. Inadequate project preparation; 5. Technical skills and knowledge gaps – no funds to upscale MDA capacity; 47

• Nigerian Investment Needs & Opportunities • The Nigerian PPP Framework – Overview – PPP Process in Nigeria – Nigerian PPP Experience

• Experience from other jurisdictions • Challenges and Lessons Learnt • Conclusion 48

Conclusion … We

are in a race for funding with other Countries

.....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 Arabia reconstruction and expansion of Medina airport at a cost of US $ 1.2 billion under a Build-Transfer-Operate PPP model Source: ACCA Global Report 126 & Partnership Bulleting

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Conclusion … We

are in a race for funding with other countries

.....So we must compete for available Private Sector funds – Kuala Lumpur International Airport (Klia) Malaysia - US$3.5 billion – Aéroport International De Blaise Diagne, Dakar, Senegal with a total cost of : €575million (financed by loans), €17million (Senegalese Government) and €42million funded under BOT (build, own and transfer).

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INFRASTRUCTURE CONCESSION REGULATORY COMMISSION Plot 1270 Ayangba Street, Near FCDA Headquarters, Area 11, Garki, Abuja – Federal Capital City. Phone: +234 9-4604900, E-mail: [email protected] Website: www.icrc.gov.ng

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