2017

Alex A. Okoh

Corporate and Government Partnering

(PPPs and other formats) for Societal

Impact

Outline

• Introduction

• Infrastructure in Nigeria

• The Public Private Partnership Model

• Potential Societal Impact of PPPs

• Conclusion

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Introduction

• Infrastructure and Urban development in Sub-

Saharan Africa (SSA) remain slow paced compared

to the level of deficit across the continent.

• In Nigeria in particular, while both public and private

participation in investments are on the rise, years of

poor domestic savings necessitates significant

infrastructure spending from all stakeholders, which

should be supportive of job creation and GDP

performance over the medium to longer term.

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Infrastructure in Nigeria

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According to the Nigerian Industrial Revolution Plan, Nigeria currently

has an infrastructure deficit estimated at $100bn per year. This dearth

in infrastructure has in turn limited human capital development, urban

development and economic growth.

Research on more developed economies shows that infrastructure

investment of 1% of government funds would result in an equivalent

increase in Gross Domestic Product (GDP), highlighting the correlation

between infrastructure development and economic growth.

Infrastructure in Nigeria

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The value of infrastructure development cannot be overemphasised. A

report from the Infrastructure Concession Regulatory Commission

(ICRC) showed the following required investment in the Oil and Gas,

Power and Transportation sectors:

Some other sectors that require investments include; housing and

highways, ports, airports, dams, bridges and tunnels, water and

telecommunication.

”The total amount of

funds required to

provide quality

infrastructure in

Nigeria over the next

six years is about

$100 billion per year”

- ICRC

SECTOR AMOUNT

Oil and Gas $60 billion

Power $20 billion

Transportation $35 billion

The Public Private Partnership

Model

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Public–Private Partnership (PPP) : a contractual

relationship between public (governments) and private

entities (companies, foundations, academic institutions or

citizens) in the context of infrastructure and other services

for a considerable period of time (fixed period or perpetuity).

This model affords the private sector the opportunity to play

a vital role in financing, building and operating infrastructure.

The Public Private Partnership

Model

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PPP Fundamentals;

Shared risks; Involves sharing and transferring of risks and rewards between

public sector and the partners.

Shared goals: Attempts to utilise multi-sectoral and multi-disciplinary

expertise to structure, finance and deliver desired policy outcomes that are in

public interest.

Shared resources: It aims to leverage private sector expertise and capital to

obtain efficiency gains in service delivery and asset creation.

Shared benefits: Profits are shared between parties. However, under the

typical PPP model, the Governments ultimately retains control of

assets/businesses.

PPP Options

• Service Contracts: Public sector employ private

sector to assist in running certain services.

• Management Contracts: Private sector takes over

management of part/all of a service.

• Leases: Private sector builds a facility and operates

it for a given period.

• Concessions: Public sector passes full responsibility

for operations and investment to the private sector.

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PPP in Nigeria

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Nigeria has gradually shifted towards creating a conducive,

transparent, and competitive environment for foreign investments.

As such, we have seen significant offshore and local interest in

partnering with the Government (both at federal and state levels).

While there is yet significant room for improvements, recent moves

by the government such as the planed concessioning of the federal

airports are indicative of a gradual shift towards more private

involvement, and a radical improvement in infrastructure networks.

PPP in Nigeria

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• Multilateral Investors• Institutional Investors• Commercial Banks

• Federal Governments,• State Governments• Municipal Governments• MDAs

PPP

Accelerating PPP Investments

in Nigeria

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Given that Infrastructure development will play a critical role in promoting

economic growth, an enabling environment must be created to capture

investor interest:

Fair and Transparent

bidding process

Standardized Structures

Contract Enforceability

Strong Project Economics

Capable Transaction

teamPolitical Will/ Commitment

Investors are likely to

participate if the process

meets the following

criteria

Accelerating PPP Investments

in Nigeria

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While the PPP landscape in Nigeria is in the evolutionary phase, Nigeria

offers investors a vast range of opportunities :

Attractive Returns

Strong GrowthProspects

Preferred African

Investment Destination

Largest African Economy

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Potential Societal Impacts of PPPs

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• Infrastructure development will play a critical role in:– Promoting economic growth,

– Improving standard of living,

– Poverty reduction,

– Enhancing productivity

– Improving competitiveness in the country.

• There is a direct correlation between infrastructural investment and economic growth and development, adoption of the PPP model will facilitate much needed investment and open up the economy which is critical for small businesses and overall social well being

• Given Nigeria’s recent

experiences and the current

state of its finances, the PPP

option is one to pursue in order

to foster economic growth and

social development

• A shift in focus from debt

financing to PPP (the nation’s

debt service to revenue stood at

c.40% in H1 2017) to meet its

capex will put less pressure on

the government’s finances.

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Potential Societal Impacts of

the PPPs

• Less pressure on government finances will lead to a re-allocation of government resources to other key sectors of the economy that are socially imperative:– such as healthcare, education,

etc. and encourage the private sector to be the engine room of economic growth and development, leading to operational efficiencies in the projects that are being run via the PPP model and job creation opportunities.

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Conclusion

In order to continually attract PPP investments, different stakeholders

are working together to attain specific improvements in the operating

environment.

Key objectives include:

Creating appropriate financing vehicles to enable the federal, states and local

governments in the country achieve the objective of infrastructure development.

Delivering an enabling institutional/regulatory environment with set guidelines

for PPP coordination, capacity building, legal issues etc.

Designing appropriate project delivery models (project structure, financing

structure, appropriate mix of debt - senior debt, subordinated debt , equity,

etc.) for the different PPP transactions to be undertaken.

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2017

Alex A. Okoh

Corporate and Government Partnering

(PPPs and other formats) for Societal

Impact