The Vice-President, Prof. Yemi Osinbajo, on Tuesday said that the right application of risk allocation principles in infrastructure projects was key to ensuring bankability and long-term viability of public-private partnership (PPP) interventions in the country.
The Vice President, who pointed out that any attempt to relegate the centrality of risk allocation in PPP contracts could be costly for the country, said that the use of the contract management and risk assessment tools in project management would promote transparency and accountability in the country’s PPP environment.
Osinbajo, who made these remarks while delivering his keynote address at the opening of the PPP workshop on a Joint West African Regional PPP Risk Allocation and PPP Contract Management Tool Dissemination, in Abuja, commended the Infrastructure Concession Regulatory Commission (ICRC) for the deployment of the PPP Web Disclosure Portal to stimulate investor confidence in the nation’s PPP model.
According to him, the aggregation of current efforts at improving transparency around PPPs has the potential of providing “more assurance to our people, as they can now monitor the progress of implementation of PPP projects in the country”.
The vice-president maintained that the government lacked the resources to solely finance, build and manage public infrastructure, noting that ICRC had since inception taken over about 55 PPP projects across the country.
He listed some of the major PPP projects as including the Murtala Muhammad Airport 2, Garki Hospital, Kainji/Jebba and Shiroro Hydro Electric Power projects, and about 25 port terminals already concessioned to private operators, amongst others.
According to him, managing these PPPs through stakeholder management, performance monitoring refinancing, re-negotiation, and disputes is probably as crucial for governments as the PPPs themselves.
Osinbajo commended the Global Infrastructure Hub for developing the PPP Risk Allocation and PPP Contract Management tools and for dedicating this workshop to the dissemination of the tools for the West African sub-region.
He noted the initiative was important because the public sector in most developing economies, especially in our sub-region, simply lack the necessary skills and tools to effectively manage PPP contracts.
He explained further: “Drawing up this contract management tools and the annotated set of risk matrices demonstrating the successful allocation of risks between public and private parties in PPP transactions, is a great service to public sector parties in all of our countries.”
“The participation of top international law, and finance practitioners, the multilateral development banks with the hub in this endeavour, greatly enhances its usefulness and worth.
It also demonstrates the new approach to doing business in a globalised environment, the key being collaboration.
“Time was when the better resourced private sector looked to game the public sector in PPPs.
“Usually such victories, if they could be so described are pyrrhic, one more failed PPP, one more failed project. But this new approach where the parties are helped to adopt best practices in drafting and management of PPP contracts, is a win-win for everyone”, Osinbajo added
In her remarks, the Senior Manager, Global Infrastructure Hub, Mrs Morag Baird, said Nigeria required over $400 billion to bridge her huge infrastructure deficit while also estimating that
Africa needs to spend $3.3 trillion to bridge the current gap in infrastructure between now and 2040.
To tackle the huge infrastructure gap, Baird recommended two approaches, namely efficiency and effectiveness of infrastructure investment as well as increased infrastructure investment in both public and private sectors.
While noting that the infrastructure need of the African continent is estimated at $7.6 trillion, she
said that “it’s estimated that worldwide, up to 30 per cent of infrastructure investment is wasted due to inefficiency, mismanagement and corruption.
The infrastructure investment expert clarified further: “Government reforms and increment in efficiency and effectiveness can make a substantial headway in closing the gap. The second approach is to increase infrastructure investment in both public and private sectors.
“Governments around the world are looking to draw private sector to public-private partnerships to help deliver major infrastructure projects. They recognise that the private sector can help drive innovation and efficiency and provide additional financing solutions.
“The trail-blazing work of Nigeria’s ICRC of PPP Web disclosure on their portal makes important contribution to increasing transparency and can contribute both to reducing inefficiencies in investments and to attracting increased private investment”, Baird added.