Case for adopting PPP model
September 20, 2017 | 12:50 am| | | Start Conversation
It has been estimated that for Nigeria to close its infrastructure gap and bring itself up to the international benchmark for infrastructure stock, it needs to spend as much as $2.9 trillion in the next 30 years and 48 percent of this sum, representing $1.4 trillion, has to come from the private sector. A breakdown of the $2.9 trillion shows funding sources that include private sector contributing 48 percent, which equals $1.392 billion; Federal Government, 29 percent, $841million; states and local governments, 23 percent, $667 million, and donor agencies, 0.4 percent, $11.6 million, giving a total of $2.911 trillion. As in many other growth and development indices, Nigeria lags behind many countries of the world in its infrastructure stock. The international benchmark for infrastructure stock as a percentage of GDP is 70 percent, but Nigeria currently stands at 25 percent. This, perhaps, explains the country’s low ranking in the 2015 Africa Competitiveness Report by the World Economic Forum, which ranks Nigeria’s infrastructure 134th out of 144 countries. Again, the World Bank’s latest Ease of Doing Business Index ranks Nigeria 169th out of 189 countries.
This realisation that both the government and the private sector must contribute their quarters towards building Nigeria’s infrastructure is now mainstream and all progressive governments are designing policies to ensure a robust public-private partnership where the private sector can invest massively in infrastructure. But not so with the Nigerian government.
This is a country where, last year, the president came out to say matters-of-factly that he does not trust individuals in the private sector. In his words: “We are averse to an economic team with private sector members” because such persons “frequently steer government policy to suit their narrow interests rather than the overall national interest”. Buttressing the president’s position further, the media adviser to the vice president, Laolu Akande further explained that the presidency considers economic management as purely “a government affairs”.
We are not surprised at this position by the presidency. In a way, it reflects the president’s ideological position which is yet to change since 1985 when he was removed from power. Mr Buhari is a staunch believer in a state-controlled economy and a closed state-centric policy process. His aversion for the private sector is classic and he considers private sector players as greedy, selfish, and inherently incapable of working with the government towards the development of the state. We recall that since 2003 when Mr Buhari began his quest for public office, he has always voiced his opposition to the surrendering of the “commanding heights of the economy” to the private sector and specifically, the privatisation of the largely inefficient and wasteful State Owned Enterprises that became established conduits for the siphoning of public revenues. This can be seen in how the president talks about the privatised SOEs in very nostalgic tones and never fails to excoriate past administrations for mortgaging Nigeria’s common patrimony to private and selfish individuals. That explains Mr Buhari’s push, on coming to power, to claw back the economy from the private sector, re-establish state dominance and control over the economy and position the state as the largest player in the Nigerian economy. Even when the government was forced to abolish the inefficient and wasteful policy on petrol subsidy and devalue or float the Naira, the President obviously agreed to these policies only to escape the current Venezuelan experience where the country’s outdated command and control economics have come full circle and has resulted in severe scarcity and a near total dislocation of the society and not because he believed in liberalisation as an economic policy.
This thinking by the president is deleterious to the Nigerian economy and will set the country back several decades if nothing is done to convince the president to abandon his outdated socialist ideology. The reality now is that government alone does not have the resources to provide the scale of infrastructure required by a 21st century society.
But rather than develop a comprehensive PPP model to ensure the smooth participation of the private sector, the government, rather prefers to go borrowing, at exorbitant interest rates, to provide some infrastructure. But even if the $30 billion sought is approved and secured, it is just a small fraction of the infrastructure needs of the country.
There is just no running away from the reality that the government must partner the private sector to provide modern and world class infrastructure. We urge the president and his minders to rethink its strategy. Private capital has alternative uses and many countries are competing for them. The sooner we develop an attractive PPP model the better for us.
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