ABSTRACT

Public Private Partnership (PPP) involves the private sector in aspects of the provision of infrastructure which was hitherto the preserve of Government and her agencies. In a country like Nigeria, where the public expect that Government must perform her traditional responsibility of providing infrastructures like roads, railways, bridges, hospitals and telecom, there is a need to have a holistic  legal framework that will ensure the successful execution of PPP projects and to also ensure that investors benefit from their investments.

This research examines the current PPP climate in Nigeria, the need to involve local citizens in the initial stages of PPP projects in order to get their acceptance. Without this, the successful implementation of PP projects like the Lekki Toll Road may be doubtful.

 

 

 

CHAPTER ONE GENERAL OVER VIEW

1.0 Introduction:

The Federal Government of Nigeria (FGN) has identified¹ that it does not have the financial resources to reduce the wide infrastructure deficit presently in the country. In the same vein, a global policy shift towards a market economy has led to growing interests in PPPs in infrastructure development.² Nigeria presently needs an annual investment of about US$1billion allocated over the next 10 years in order to reduce its infrastructure deficit by about 60%.³

A way out for the Government is to key into the Public-Private Partnership (PPP) model in order to bridge the infrastructure gap. PPP describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies⁴. It has been argued that the regulation of PPPs in infrastructure delivery may result in conflict and endless litigations when poorly designed and executed.⁵ There is the need to ensure that PPP regulations guide the entire process and be clear-cut. For instance, in Nigeria people view private sector

                                                           

1  Dominic Obozuwa, ‘Developing Public Private Partnerships (PPPs) for Infrastructure Development in Nigeria- Fundamentals of the Contract Agreement, Contract Management and Dispute Resolution’ <<http:// http://www.wali–uwais.com/?page_id=788>> Accessed 5 February 2014 . 2

Egboh E.A. and Chukwuemeka E, ‘Public-Private Partnership in Nigeria: The Challenges of Human Relations

Management’ Kuwait Chapter of Arabian Journal of Business and Management Review, Vol 1, No. 5, January 2012 3

<http://www.alliancelf.com/wp–content/uploads/2013/01/INFRASTRUCTURAL–DEVELOPMENT–THE–VISION–OFNIGERIAN–SOVEREIGN–WEALTH–FUND.pdf> Accessed 5 February 5, 2014 . 4  Dominic Obazuwa, op. cit. 5  World Bank (2006), ‘Infrastructure Regulatory System’ A publication of the World Bank, Washington DC, USA.

participation in provision of public amenities with suspicion^{[1] [2]} .For instance, due to the resistance of the Ajah Community, the Lagos State Government commenced the process to re-acquire the concession rights for the Lekki-Epe Expressway from the Concessionaire only three years into the Concession arrangement when it was supposed to be a 30 year concession⁷.  This is not unconnected with the belief system that it is the primary responsibility of government to provide for the infrastructure needs of the people. It has been suggested that the best way to avoid a poorly performing PPP regulatory system is to periodically subject it to continuous reviews in order to firstly ensure that regulatory systems are fully functional and secondly, law reform must take into account the way of life of the people and As it is, the current regulatory framework applicable in Nigeria is due for reform in order to make significant progress as far as

PPP implementation and success is concerned.⁸

The     FGN⁹    enacted    the    Infrastructure    Concession        Regulatory Commission

(Establishment, Etc)  (ICRC Act) 2005 in order to set in motion a legal as well as policy framework for the PPP model in the country^[3] . The Act provides for participation of the private sector in financing the construction, development, operation, or maintenance of infrastructure or development projects¹¹ of the Federal Government through concession or contractual arrangements; and the establishment of the Infrastructure Concession Regulatory Commission ICRC to regulate, monitor and supervise the contracts on infrastructure or development of projects.¹² Some of the elements of the ICRC Act and the policy framework of the ICRC are laudable in the sense that they lay down the procedures to be followed to ensure that there are no gaps in agreements entered into by parties to the arrangement and others are to say the least, not in tune with what the people believe is the responsibility of the Government¹³. For example, the Lekki Concession Company (LCC) Toll Road, which is the seminal PPP Toll Road project in Nigeria, has faced many challenges including agitations by the Lekki-Epe residents for either LCC or the Lagos State Government (LASG) to provide alternative routes to users. Whilst the Lagos State Government felt that the Concession would be for the benefit of the road users who would have to pay tolls to use the road, the road users felt that they voted the Government into office and it was the responsibility of Government to provide roads and since they pay their tax, it was unfair to make them pay tolls to ply the road.¹⁴

Through the enactment of the ICRC Act of 2005 and the Public Procurement Act of 2007, the FGN has laid down the legal framework for the operation of infrastructure

                                                           

11  Explanatory Notes  to the Memorandum to the ICRC Act 2005 12  Ibid. 13

Ayuli Jemide, ‘Legal and Regulatory Framework For Public Private Partnerships in Nigeria Under the

Infrastructure                           Concession                          Regulatory                                                 Commission                               Act

2005’<http://www.google.com.ng/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CDYQFjAC&url=http%3A %2F%2Fwww.detailsolicitors.com%2Fmedia%2Farchive1%2Fspeaking_engagement%2FLegal_Regulatory_Framew ork_Under_ICRC.ppt&ei=5PHxUqyrJoOt0QXU_oCoDw&usg=AFQjCNHRXclTSQYdwjW5cbyJZ1HyKfg0Dw&bvm=bv.6 0799247,d.d2k> Accessed 5 February 5, 2014   14  Nigeria PPP Review, <http://www.detailsolicitors.com/media/archive2/articles/PPPreview.pdf> Accessed 21 October, 2013

concession in the country. These laws set out the requirements for competition and private sector participation in all public procurement as well as specify requisite approvals for all PPP contracts in the country. The ICRC was set up 2008 and it is empowered to inter alia:

• Provide general policy guidelines, rules and regulations for the operations of PPP projects in Nigeria.
• Take custody of every concession agreement entered into by the FGN and any of its agencies.

Ensure efficient execution of concession contracts.

• Ensure strict compliance with the Act and with the terms of the concession contract

This dissertation seeks to review Nigeria‘s PPP regulatory system. In so doing, the research will analyse the applicable legislations and policy framework currently in practice and will also make a comparison with the applicable framework in the United Kingdom (UK).

1.1 Statement of the Problem

One of the key development challenges militating against the growth of the Nigerian economy is the lack of and/or decaying of available infrastructure.^[4] In a deliberate move to address these challenges, the FGN has therefore recognised the need to

partner with the private sector in order to raise funds so as to bridge the nation‘s enormous^[5] infrastructure gap¹⁷ through an effective PPP framework. It is in pursuance of this objective that the FGN established the ICRC to provide the necessary framework within which all Ministries, Departments and Agencies (MDAs) can effectively enter into partnership with the private sector in the financing, construction, operation and maintenance of infrastructure projects.

The introduction of the PPP model has brought about attendant challenges¹⁸ raising a cause for concern. This is not unconnected to the fact that the framers of the legislation and policy model did not take into account certain lacunae at the time of the enactment of the legislation. The seeming mistrust by the people for PPPs as evidenced by the agitations by the Lekki Epe residents have brought to the fore the need for reform. In the light of the foregoing, this study aims to develop an understanding of the nature of the PPP arrangement, suggest reforms for the legislation applicable in Nigeria^[6] whilst comparing the system in Nigeria with the applicable PPP/PFI model applicable in the UK.

1.2 Objectives of the Research:

The research aims to:

• To discuss and outline the theory and practice of PPPs as distinguished from other methods of public procurement taking into account the Nigerian regulatory framework;
• To identify and analyse areas where there is a need to make amendments to the ICRC legislation and the Policy document of the ICRC bearing in mind the performance of current PPPs in the country;
• To compare the framework in Nigeria with the applicable framework in the UK in order to develop a more acceptable framework by stakeholders in Nigeria by highlighting the success areas of the PFI; and
• To propose mechanisms and structures to implement the proposed measures

 

1.3 Research Questions:

• What are PPPs and how do they establish a network of interrelated contracts?
• Has the ICRC Act fared well in the light of ongoing PPP projects in Nigeria?
• What are the strengths and weaknesses of the current regulatory framework for PPPs in Nigeria taking into cognisance the performance so far of PPPs in the country?
• What reforms to the ICRC Act can be made to encourage private sector participation within the country as well as attract investment from outside Nigeria?

1.4 Hypotheses:

The hypotheses which informed this research include:

• There is a growing global appetite^[7] for PPP as a vehicle for the delivery of public infrastructure projects;
• Apart from adopting the PPP model like a number of other countries, Nigeria has also set up a policy framework by enacting the ICCR Act of 2005 as well as putting together a National Policy material on PPPs for the country;
• The PPP model in Nigeria is presently suffering from mistrust by the ordinary end users.
  • Conceptual Framework:

PPPs are defined in this research as an enforceable binding contract between a public institution (such as a line ministry, local authority or public enterprise), and a private operator who becomes responsible for the delivery of services that have traditionally been provided by the public sector.^[8]

• Theoretical Perspective:

This study is informed by the need to develop the PPP framework in Nigeria in order to allow for growth of infrastructure within the length and breadth of the country. It is noteworthy that the attendant heavy cost associated with infrastructure development requires a reform that would facilitate the drive of private investment to a sphere that was hitherto the arena of the public sector.

The Initiative for Public Policy Analysis (IPPA), a Nigerian-based policy think-thank, have posited that the intention of all the tiers of governments to address the infrastructure challenges in Nigeria through PPPs might not achieve the expected results due to an inappropriate regulatory framework.^[9]

Infrastructure contracts require huge planning, construction and financing to be successfully implemented.^[10]   It follows therefore that there can be no underestimating the importance of a viable regulatory mechanism to ensure the success of PPP projects in any given jurisdiction.

• Research Methodology:

In the course of this research, desk study on the regulation, theory and practice of PPP arrangement will be used. The ICRC Ac as well as the policy governing PPPs in Nigeria will be studied and reviewed.

The researcher will hold consultations with members of the private sector and specialists in the field of built environment with the aim of obtaining current information especially as it concerns the progress towards implementation of several laws regulating PPP transactions in the country.

The researcher will also conduct library research to review the available literature, administrative publications as well as various statutes that govern PPPs in Nigeria.

Soft copies of materials available on the internet will also be consulted by the researcher to form a basis for the work. It is worthy to note that other materials such as statutes, articles, newspaper publications and textbooks h consulted dealing on the subject of this research and would be mentioned in the main body of the research.

 

1.8. Literature Review:

It will not be out of place to begin by noting that the complex nature of PPP/PFI contracts distinguishes it from the traditional means of public procurement for infrastructure development.^[11] PPPs can be defined as long-term contractual arrangements between a public sector agency and a private sector concern, whereby resources and risk are shared for the purpose of developing a public facility.^[12] Kwak et al also posit that there is a broad range of uncertainties and risk associated with the PPP/PFI; the concessionaire assumes far more responsibilities and much deeper risk than traditional procurement system; the financial issues in PPP/PFI projects are more complex; and the allocation of risks and rewards amongst participants is more difficult.

This is because of the number of contractual documents and forms involved.^[13] These features have led many countries to establish sound regulatory framework with a view to effectively regulate all manner of PPP/PFI projects in their jurisdictions. For example, the Public Finance Initiative in the United Kingdom as well as the Public Private Partnership structure in Canada have accounted for infrastructure development in both

jurisdictions.

Akitoye and Nah define PPPs as a long-term contractual agreement between a public sector concern, whereby resources and risk are shared for the purpose of developing a public facility.^[14] Thus it can be said that the aim of a PPP for the public sector is to achieve value for money in the services provided while ensuring that the private sector entities meet their contractual obligations properly and efficiently.²⁸

Uche Ohia^[15] opines, that infrastructure concession allows participation of the private sector in financing construction, development, operation and maintenance of public infrastructure, development project or network for a stated period. He holds that in some types of infrastructure concessions, the cost of using the service is borne exclusively by the users of the service. In other types (notably the private finance initiative), capital investment is made by the private sector on the strength of a contract with government to provide an agreed service. He argues that governments in emerging economies should go for the former in order not to give room to suspicion that the essence of the arrangement is meant to exploit ordinary citizens.

Babalakin^[16] on his part, attempts to explain some salient issues associated with the

PPP concept. He brings into the fore the Murtala Mohammed Airport Concession Agreement between FAAN and Bi-Courtney Limited noting the issues of funding and the ability of the concessionaire to source for loans. He defines infrastructure development to mean ‗structural elements of an economy that facilitate the flow of goods and services between buyers and sellers.^[17]

 

In an article, Muyiwa Akinyosoye^[18] , analyses Nigeria‘s infrastructure gap. He based his analysis on an Asia Development Bank report which indicates that a country‘s infrastructure development should amount to a minimum of 6% of GDP to attain a reasonable level of sustainable development. The author notes that Nigeria‘s infrastructure spending contributed to a meagre 1.9% per annum to GDP over the past decade.^[19] Akinyosoye is of the opinion that Nigeria has an uphill task towards development and needs to embark upon some major strategic reform programmes which puts infrastructure development top on its list of sectors that require urgent attention.^[20]

1. O Dike^[21] identifies the need for government to carry out series of economic, financial and legal reforms which only it can initiate. He specifically names these areas to include a PPP policy framework formulation, creation of enabling environment, establishment of an administrative mechanism, promotion of good governance, addressing of social and political concern and capacity of building the public sector.

The roles of the public and private sectors in the development of infrastructure have evolved considerably in history. Public services such as gas, street lighting, power distribution, telephony, steam railways and electrical tramways were launched in the 19^th century and in many countries, they were provided by private companies that had obtained a licence or a concession agreement from the government.  A number of privately funded roads or canal projects were carried out at the time that there was a rapid development in international project financing bond, including international bond offerings to finance railways or other major infrastructure.^[22] However, during most of the 20^th century the international trend was, in turn, towards public provision of infrastructure. Infrastructure providers were nationalized and competition was reduced through mergers and acquisitions with private operators playing only a relatively smaller role.^{[23] [24]}

The present trend where we have the private sector coming in to participate in infrastructure development started in the early 1980s and has been on the rise.^[25]

1.9  STRUCTURE OF THE RESEARCH:

In this chapter, the research will include the genesis of the dissertation. It will chronicle the objectives of the dissertation, the hypotheses, and the methodology of the research as well as the theoretical perspective.

Chapter two basically will outline and address the theory and practice of PPPs, distinguishing it from other contract forms, stating its historical perspective and generally discussing its benefits and practice.

Chapter three will focus on the Legal Framework of PPP in Nigeria.

The fourth chapter will discuss PPP/PFI projects undertaken in the UK in juxtaposition with the PPP model in Nigeria and how the former can develop her PPP framework drawing from the gains recorded in the UK.

The fifth chapter will address some of the disputes that arise in the course of PPP arrangements and execution.

The Sixth Chapter will include the conclusion and recommendations.

 

 

[1] <http://dailyindependentnig.com/2013/08/why–we–acquired–concession–rights–from–lcc–lagos–govt/> Accessed 5 February 2014. 7  Ibid. 8  Ayuli Jemide, ‘Legal and Regulatory Framework For Public Private Partnerships in Nigeria Under the Infrastructure

Concession                                          Regulatory                                         Commission                                                                   Act.

[2] ’<http://www.google.com.ng/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&ved=0CDYQFjAC&url=http%3A %2F%2Fwww.detailsolicitors.com%2Fmedia%2Farchive1%2Fspeaking_engagement%2FLegal_Regulatory_Framew ork_Under_ICRC.ppt&ei=5PHxUqyrJoOt0QXU_oCoDw&usg=AFQjCNHRXclTSQYdwjW5cbyJZ1HyKfg0Dw&bvm=bv.6 0799247,d.d2k> Accessed 5 February 5, 2014. 9  Nigeria is a federating unit of 36 states and a federal capital territory. A number of the federating states have replicated the ICRC Act by bills presented at the various state assemblies signed into law by the respective state governors.

[3] Section 2 ICRC Act, 2005.

[4] National Policy on Public-Private Partnerships in Nigeria (2009) Policy document prepared by the ICRC providing clear and consistent process and procedure guides for all aspects of PPP projects developed in Nigeria.

[5]   Put at $200 billion PPP Review << http://www.detailsolicitors.com/media/archive2/articles/PPPreview.pdf>> accessed 21 October, 2013 17  Defined as the difference between available resources and the amount of investment required to meet a country’s core infrastructure needs, has a negative impact on economic growth and job creation. << http://www.pppkosova.org/repository/docs/public_private_partnerships.pdf>> accessed 29 October, 2013 18  At this point it is worthy to mention two examples. The Buy Operate and Transfer (BOT) agreement between the Federal Airports Authority of Nigeria (FAAN) and Bi-Courtney Ltd (BCL) and the 30 year road concession agreement between the Lagos State Government (LSG) and the Lekki Concession Company (LCC) . With regards to the former, there has not been an end to claims and counter-claims of indebtedness by one party to the other. As at June 2010, FAAN claims BCL owes the FGN $6.7m (mainly 5% of annual turnover) and BCL claims FAAN is indebted to them to the tune of $73m (mainly proceeds from the operations at the General Aviation Terminal in Lagos. In the latter case, the residents of the Lekki axis of Lagos State feel betrayed by the LSG and they have been agitating against payment of toll at the Lekki – Epe Expressway in Lagos State.

[6] Nigeria is a complex country with a heterogeneous population. It is worthy to note that various forms of legislations adopted and adapted from other common law jurisdictions (especially the UK) still needs to pass the Nigerian complex situation test in order to be successfully implemented. This would be taking into account in the comparative analysis.

[7] Karim Bakhteyari, (2007) ‘Public Private Partnerships As a Public Infrastructure Optimiser, Diploma Work 20  Nottingham Trent University.

[8] Janelle Plummer, (2002) ‘Developing Inclusive Public-Private Partnerships: The Role of Small Scale Independent Providers in the Delivery of Waste and Sanitation Services’ presented at the Making Services work for Poor People’ World Development  Report (WDR) 2003/04 Workshop held at Evenshach hall, Oxford, 4-5 November 2004.

[9] Olusegun Sotola and Thompson Ayodele, ‘Inappropriate Regulatory Framework May Undermine Public-Private Partnership in Nigeria – Says Public Policy Think-Tank’ http://www.africaundisguised.com/newsportal/story/inappropriate–regulatory–framework–may–underminepublic–private–partnerships–in–nigeria–says–public–policy–think–tank.html accessed 15 July 2013

[10] Benkovic and S. Rakocevic, ‘Impact of Legislation on infrastructure Financing by Public-Private partnership

Concept’ Economics and Organisations Vol. 8 No. 4, 2011, p402

[11] Y.H. Kwak, Y Chih and C.C. Ibb (2009) ‘Towards a Comprehensive Understanding of Public-Private Partnerships for Infrastructure Development’ California Management Review, Vol. 19, No. 2, pp 51-57

[12] B. Akitoye and F. Nah, (2010) , ‘ Projects + A New Vision for Entprojectrise System in Managing Internet and

Intranet Technologies in Organisations: Challenges and Opportunities, Idea Group Publishing, Hershey

[13] Y.H. Kwak, Y Chih and C.C. Ibb (2009) Ibid.

[14] Akitoye B and Nah F. (2010) ‘Projects +eProjects+A New Vision for entroprojectrise system in Managing

Internet and Intranet Technologies in Organisations: Challenges and Opportunities, Idea Group Publishin, Hershey ²⁸ Kieran Lynch (2005), Privatisation and Regulation Case Study: A Report on UK Transport policy, Specifically the part-privatisation of the London Underground through Public Private Partnership, December 2005

[15] Uche Ohia op. cit. p 4

[16]   B.O. Bablakin, ‘Public Private Partnership: Infrastructure Development as a Vehicle for Economic Development’

A Paper Presented at the 2^nd Mustapha Akanbi Public Lecture organized by the Faculty of Law, University of Ilorin, Nigeria

[17]   ibid. 4

[18]   Muyiwa Akinyosoye, op. cit.

[19]   As at July 2010

[20]   Muyiwa Akinyosoye, op. cit. p 5

[21] D.O.  Dike, ‘Public-Private Partnership in Infrastructural Development for Raw Materials utilization,’ Unpublished Article, School of Engineering, Agricultural Engineering Department, The Federal Polytechnic, Ado-Ekiti, Ekiti State, Nigeria

[22] UNCITRAL (2001), Legislative Guide on Privately Financed Infrastructure Projects, Prepared by the United Nations Commission on International Trade Law (UNCITRAL) United Nations, NY

[23] J.H Stonehouse, ‘Public-Private Partnerships: The Toronto Hospital Experience,’ Canadian Business Review, 23 (2)

[24] -20

[25] UNCITRAL (1999) Year Book of the United Nations Commission on International Trade Law, 1999 Vol. 30, 251-

AN EVALUATION OF THE LEGAL FRAMEWORK FOR PUBLIC-PRIVATE

PARTNERSHIPS IN NIGERIA. GET MORE LAW PROJECT TOPICS AND MATERIALS

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