The Infrastructure Concession Regulatory Commission (ICRC) Act 2005 created and vested the commission, in the words of the National Policy on Public Private Partnership (PPP), “with a clear mandate to develop the guidelines, policies and procurement processes for PPPs.” Nine years into ICRC’s existence which fall within three back-to-back federal administrations formed by the same political party, Finance Minister Ngozi Okonjo-Iweala (she has been minister during six out of the nine years) declared as timely, the launch early this month by the African Development Bank (AfDB) of the Public Private Partnership Foundational Training of Ministries, Departments and Agencies (ICRC participated) and State Governments’ PPP departments. The exercise was “to assist and support the government and other stakeholders in developing capacities to identify, procure and manage PPPs.” What has ICRC been doing all the while and what has the minister been coordinating? The minister also said that there was need to refine and improve the country’s use of PPPs for execution of important projects. After nine years, should the country look up to AfDB or outsiders for refinement of the PPP model with regard to improving financial legal and regulatory capacity?
Given sincerity of purpose and atmosphere of transparency, the federal bureaucracy through the ICRC, or vice versa, should be able to iron out uncomplicated and mutually beneficial legal and regulatory arrangements for PPPs. As for the minister’s fears about the national financial capacity to provide needed infrastructure in good time, the answer hinges on the Federal Ministry of Finance acceding to properly manage the ample national resources. Surprisingly, going by the 2013 and 2014 ICRC PPP Projects Pipeline List of 66 projects (a few are repeated), the Federal Government has apparently decided to cop out of executing key infrastructure projects. The Jonathan administration may as well abandon the business of governing the country altogether! On the 2014 List, for example, the Transmission Company of Nigeria has lined up six classes of high voltage transmission projects located nationwide (these are urgently needed and highly sensitive assets with national security implications), which are in all probability geared to foreign interests or fronts of government bigwigs. The former case will provoke national economic enslavement that cannot be justified under the 1999 Constitution; just as the latter case will signify gross betrayal of the public trust. Both situations are unacceptable.
Contrary to what the administration would like the public to believe, important and sensitive projects such as the sorely needed power and gas transmission grids can, and should be directly financed by government alone or jointly with Pencom. Accumulated contributory pension funds currently top the equivalent of US$19 billion. A simple amendment of the pension law should free a part of the pension funds for execution of specific infrastructure projects. Another minor amendment of the Nigerian Sovereign Investment Authority Act would produce a wholly FG-owned Nigeria Infrastructure Fund to serve as a veritable Nigeria Infrastructure Bank and which should be financed with appropriated portions of external reserves. A country in dire need of development does not have to tie down more than three months’ import cover in external reserves for purposes of neutralising any adverse movements in its balance of payments. It has been repeatedly explained that under the managed naira exchange rate fixing system, the exercise of sovereign right to cut off imports of unessential final goods will result in at least $10 billion of investable external reserves flowing annually into the revamped Nigeria infrastructure Fund or Bank to boost self-financed accelerated development.
Such rudimentary engineering of available resources will facilitate public quasi-public partnership between the Infrastructure Bank and Pencom, which would both deliver within the shortest technically feasible time key infrastructure projects and leave no room for compromising the national interest. Such projects will be expected to be run commercially with Pencom playing adequate role in their management. And because this easily attainable infrastructure development financing milestone is unenvisaged and an addition to the initially projected funding needs for infrastructure development in conjunction with PPPs, the model will drastically reduce the expectation for PPPs. Alternatively, because of the great dearth of various types of infrastructure, many more projects may be undertaken within the same time horizon.
At this juncture, it should be recalled that the wide infrastructure gulf arose from the extant faulty fiscal and monetary practices that have held sway for over four decades. The endemic hostile economic conditions are equally unfriendly to PPPs. The celebrated PPP achievement, the Murtala Mohammed Airport 2, whose ancillary structures remain uncompleted, shared in the blame for destabilization of the financial sector. No wonder the major ongoing PPP pipeline projects will not attract any investors under the present conditions. Without advocating for multilateral loans, they nonetheless point to the way forward. Just two days after the AfDB forum, the Federal Executive Council approved a multilateral infrastructural loan for irrigation. It offered a five-year grace period and spread repayment for over 20 years. The service charge, commitment fee and loan interest rate all came to 2.5 per cent. The terms and conditions of infrastructural PPP loans in the country should not be significantly different from this example. That outcome will only happen under a properly managed naira exchange rate fixing system.
Sadly, however, the implementation of the managed float system has been prevented by agencies under the Finance Ministry, namely the Accountant-General of the Federation and the Federation Account Allocation Committee. Both agencies direct the CBN to withhold Federation Account dollar accruals and to disburse in their place freshly printed so-called naira equivalent to the tiers of government for budget spending. The end result is illegal substituted excessive deficit financing that has smothered the economy for decades. Yet, the Budget Office of the Federation and the National Assembly duly set down the managed float system in the Medium Term Expenditure Framework/Fiscal Strategy Paper and the Appropriation Act that bears the presidential assent. Is it not strange and unpatriotic for the Finance Minister to pretentiously look elsewhere for solutions to economic problems created by arms of her ministry? Why is she playing the role of an economic hit woman?
The managed float system has other advantages including, firstly, doing away completely with the excessive fiscal deficit-created non-investable National Domestic Debt. Abolishing that fake debt will save over N700 billion annually in debt service costs. The savings could raise the annual federal spending on infrastructure from the current level of $6 billion to some $10 billion, which is the expected full contribution by the FG towards infrastructure annually under the PPP arrangement.
Second, favourable economic conditions will quickly evolve under the managed float system. As a result, there will be cheap bank credit amounting within a few years to the size of GDP to facilitate huge private sector investments in the various sectors of the economy, thereby expanding employment opportunities. Also, domestic financing of PPPs will cease to destabilise the financial sector. Furthermore, the much sought-after economic diversification will quickly spread.
And so, even with widely fluctuating oil earnings, sound management of the available resources particularly the national currency will make the economy boom and achieve self-sustained rapid growth and development. The executive arm of federal government should, therefore, stop shedding crocodile tears over the economic problems which it has created. The Jonathan administration should proceed to implement the begging sound economic policies.
