Abstract
The author, in this first major book on Public-Private Partnerships (PPP) in Nigeria, analyzes the PPP concept of infrastructure procurement focusing on the elements of risks and opportunities for the model. The 270-page book with 10 chapters, begins with an introduction to the PPP concept. The author pinpoints that there is no universally accepted definition for the concept. However, various institutions and authors have put forward definitions for PPP that are based on their objectives and involvement in the PPP process. The writer defines a PPP as “. . . a long-term relationship between public sector agencies and public sector agencies and private sector entities under which the responsibility for any or all of the combination of designing, financing, construction, management, and operation of the public sector are contractually shared and jointly undertaken by both the public and private sectors. . .” The author, by this definition seeks to capture vital elements of the PPP concept by attempting to differentiate PPP from other similar forms of procurement (Arimoro, 2019; Yescombe, 2007).
The volume addresses the attempts by the Nigerian government to ensure protection for PPP assets in Nigeria. However, the author notes the confusion in trying to use the National Policy on Public-Private Partnership to address the problems of gaps in the law and instances where the various laws regulating the sector overlap. Aside from the challenge of dealing with a web of laws regulating the sector that an investor has to grapple with, there is the question of having to deal with several regulatory bodies which leads to the question whether the sector is over-regulated. As such, the author calls for an overhaul of the legal framework for PPP in the country.
While it is acknowledged that the PPP process is a complex one, by highlighting the stages in the PPP life cycle in the country, the book reveals the multiple stages beginning from project identification/selection and culminating in project implementation. The author highlights how cumbersome the process for procuring PPP is in Nigeria. It is clear from the many approvals needed and the complex processes involved, that it is easier to arrange a PPP in a country for example, like South Africa where the procedure is much clearer.
The contractual structure of PPP is an important theme in the book. The author discusses the various agreements applicable in a PPP such as the concession agreement, that is, the main PPP contract and the subsidiary contracts which include, but are not limited to, the construction agreements, operations and maintenance agreements and off-take purchase agreements. Of significance is the analysis of risk management through PPP contracts. Contractual clauses can be used as the basic instruments for the transfer of risk as well as for risk allocation in PPP contracts. The author suggests that the PPP contract should be drawn up to take “. . . into consideration all eventualities that may affect the risk profile of the parties.” The various forms of risk that can be covered by the PPP contract include insurance risk, construction risk, planning and approval risk, legislative change risk, exchange rate risk, and political or legal risk.
Expectedly, the volume examines the value for money (VfM) question. Simply put, VfM is the argument that it is cheaper to procure a project using a PPP than via traditional procurement methods. Considering that Nigeria only recognizes concessions, VfM is the main reason why a country like Nigeria should adopt PPP for any selected project. The private finance initiative (PFI) PPP type as utilized in the UK has no place under the Infrastructure Concession and Regulatory Commission (Establishment etc.) Act of 2005 which is the main PPP law in Nigeria. The author posits that in Nigeria, provided that projects are arranged properly, there is a great chance of achieving VfM.
The book identifies steps and strategies to be adopted for risk mitigation. These include public loans, loan guarantees, equity participation, sovereign guarantees, tax incentives, viability gap funding, and annual operating subsidies. Given the prevalent political challenges often experienced in Nigeria, it is not out of place that the volume considers “political risk” as a major theme worth analyzing. The author explains that the exercise of political power is the root cause of political risk. To mitigate political risk, several strategies are suggested. These include good project governance, use of contractual clauses (to make room for less costly dispute resolution, force majeure etc.), government guarantees, as well as the use of formal risk mitigation instruments. The author identifies the need for strong political will on the part of leadership to ensure successful PPP in Nigeria. To deal with issues about political risk associated with PPP, the author suggests the enactment of a new Nigerian PPP law.
Investors are motivated by the prospect of return on investment and as such, the issue of demand risk is vital to the success of PPP in Nigeria as elsewhere. The author uses, for example, the Murtala Mohammed Airport 2 (MMA2) concession to drive home this narrative. To address the possibility that demand for the use of the facility could be lower than envisaged, the author recommends allocation and mitigation of demand risk.
The risk of stakeholder opposition is a major theme in the volume. The case of the Lekki Toll Road Concession exposed the impact of this risk in the Nigerian setting. The project, which won several international awards and was Nigeria’s flagship toll road project, exposed the importance of considering stakeholder opposition risk when structuring PPPs in Nigeria (Arimoro, 2015).
In conclusion, the author recommends an overhaul of the Nigerian legislation for PPP. The key areas noted for review include the institutional and regulatory framework, issues dealing with risk management for PPP, and the need to reposition PPP in the country to ensure successful delivery of PPP projects.
