The rollout by the Bureau of Public Enterprises of a timeline of activities to manage federal Public-Private Partnership projects serves as a reminder of the despairingly long pause in the national privatisation programme. Featuring engagements with Ministries, Departments and Agencies, financial institutions and advisors, managers and investors, the two-year-long timeline aims to draw in partners to jointly deliver the much-needed infrastructure projects through PPP arrangements. But the pace is too leisurely. The President, Major-General Muhammadu Buhari (retd.), needs to unfetter the economy by reviving and accelerating the privatisation and liberalisation schedule.
Buhari, among other failings, in over five years in office, has not registered any major privatisation or concession of state-owned enterprises despite inheriting an enabling law and a long-running programme. The economy has suffered for it, held back by an overbearing public sector and fostering inefficiencies. Privatisation and its handmaiden, PPP, however are strongly recommended by development agencies as “low-hanging fruits” to be plucked by fragile economies to garner revenue, unburden the treasury and eliminate subsidies, promote competition, innovation and productivity; create jobs and instil efficiency. For recession-hit Nigeria, battered by low public revenues, debts and a massive infrastructure deficit, vigorous privatisation, concessions and PPP should be pursued as a matter of economic survival.
The Buhari regime fails to appreciate this. Yes, there are pronouncements and manoeuvres, especially from the National Council on Privatisation headed by Vice-President Yemi Osinbajo and the BPE, to try to keep the privatisation programme alive. The BPE timeline is one, and it follows from a Federal Government circular mandating it to take charge of all public enterprises and infrastructure already listed in the Public Enterprises (Privatisation and Commercialisation) Act. While the BPE shall act as the “counter-party” on infrastructure projects undertaken on PPP basis, the Infrastructure Concession Regulatory Commission remains the regulator “with powers to inspect, supervise and monitor PPP projects and processes and ensure compliance with relevant laws, policies and regulations.”
Osinbajo said the aim is to deepen the national infrastructure stock through PPP and to facilitate this, the government, through the CBN, the Nigerian Sovereign Wealth Fund managers and other financial institutions would create a N15 trillion Infrastructure Fund to unlock local private capital and attract foreign private investment.
But the plan hardly inspires confidence. First, the schedule of webinars and talks “in the next 12 months to two years” as announced by Alex Okoh, the director-general of the BPE, does not convey urgency. It reveals no radical plan to unload the SOEs and does not reflect the precariousness of the economy. The FDI is projected to be a mere $1.2 billion this year, down from $1.9 billion in 2019 and well below the $6.4 billion of 2018, according to UNCTAD. The country is in recession: at 21.76 million persons, the number of unemployed has more than tripled under Buhari. As outlined in its long-term master plans, the country needs $3 trillion over the next three decades to close the infrastructure deficit and as the VP noted, the total national budget cannot meet this even if all of it is ploughed into capital projects.
Two things the government needs to do very urgently: quickly sell off some and concession other SOEs and key facilities; refineries, steel assets, airports and seaports, river basin and rail assets to raise cash, then enter into PPP arrangements for critical infrastructure, including new highways. Its benefits have been proved elsewhere. The Privatisation Barometer Report said globally, privatisation proceeds fetched $1.1 trillion between 2009 and 2014; and N431 billion January 2014 to November 2015. Privatisation deals in China totalled $133.3 billion in 247 sales in the first eight months of 2015, said the London School of Economics Research Online.
Raising funds for investments in infrastructure through PPP should therefore be a top priority. According to the World Bank, infrastructure raises economic growth, new economic opportunities, and facilitates investment in human capital. “PPPs can be a tool to deliver much needed infrastructure services. When designed well and implemented in a balanced regulatory environment, PPPs can bring greater efficiency and sustainability to the provision of public services such as energy, transport, telecommunications, water, healthcare, and education.” Investments in PPPs grew from $7 billion in 1991 to $97 billion in 1997 and reached $158 billion in 2012, driven mainly by Brazil, China, India, Mexico and Turkey.
There should be no more delay in transparently granting concessions for the loss-making airports, ports and railways. Trying to single-handedly fund railways through endless Chinese loans is unsustainable; instead, concession the existing railway tracks and let private operators provide and operate the rolling stocks. New tracks and lines should be built on PPP arrangements. Others have done well with such initiatives. With acknowledged expertise in PPP, the United Kingdom has over 600 PPP projects in economic and social infrastructure – hospitals, schools, public housing, prisons, railways and highways. Launched in 1994 to facilitate private sector investment in infrastructure, South Korea’s Build-Transfer-Lease PPP programme had over 400 projects by 2012. By November, India had 1,103 ongoing PPP projects amounting to $274.95 billion in investment commitments.
Outright privatisation of commercial assets is the most preferable option, while certain strategic assets should be given as concessions and new highways, railways, ports, hospitals, housing, schools and correctional centres built on PPP arrangements. The NCP and BPE should work out favourable modalities, avoid the corruption and cronyism that marred previous transactions and insist only on the best global players as partners.
The OECD says transparent privatisation involves best practices for drawing upon external advice; determining company valuation and establishing sound pricing methods; determining potential buyers and handling bids; and, active and ongoing communication with stakeholders and the public. Buhari should transparently follow through on the privatisation plan and the asset sales mandated by the 2021 Finance Bill. Effective liberalising policy measures should accompany the programme to improve the ease of doing business and achieve the goals of competition, wealth generation, productivity and job creation.
