Saturday, April 18, 2009

Lagos-Ibadan Expressway Concession

The recent approval by the Federal Executive Council of the concessioning of the Lagos-Ibadan Expressway for 25 years to Bi-Courtney Nigeria is a call for sober reflection. Under the Public-Private Partnership (PPP), Bi-Courtney will invest N89 billion on rehabilitation and upgrade of the highway and recoup the cost of its investment through charging of tolls.

As we know, the concessionaire (Bi-Courtney) is not a new player in the emerging Nigeria PPP market; it currently operates a $250 million Build-Operate and Transfer (BOT) contract at the Murtala Mohammed International Airport Terminal 2 (MMA 2). The Lagos-Ibadan Road project will be done under a similar BOT deal with 100 per cent private investment funding.

On paper, this deal seems to represent a ‘win-win’ situation for all parties. The government will enjoy a 25-year rehabilitation and upgrade of arguably the busiest and most strategic federal highway without spending a kobo. Also, Bi-Courtney will enjoy a 25-year ‘monopoly’ on providing a strategic road link between the south-west and south-east region. And the average punter is also enjoying a well maintained road- albeit at a cost.

Countries all over the world are currently struggling to find private investors to fund toll roads projects due to the current global economic crisis and the unreliability of the traffic forecasts used in financial modelling of such projects. However, the Lagos-Ibadan Expressway will be a ‘money spinner’ because of its ‘monopoly’ status. So why is it a money spinner? There is currently no decent alternative route between the south-west and south-east region. There are also millions of religious worshippers who travel on this road on a weekly basis. And most importantly, there is no competing public transport system such as rail. And sadly, road public transport vehicles will also be subjected to toll charges. For me, this is probably the most viable PPP road project I have seen from an investment point of view. But whether it provides ‘value for money’ for the taxpayer is a different ball game altogether.

I have always questioned the rationale behind of some of these so-called PPP. The more I look into the details, the more disillusioned I get. Following my review of some of these PPP road projects and the emerging trends, I have come to a conclusion that PPP is now becoming a mode for ‘legalised’ corruption. Most of these PPP contracts lack transparency. As an example, I can’t remember seeing the public ‘Call for Tenders’ for the Lagos-Ibadan Expressway anywhere. We only got to know it’s been approved on the front pages of the newspapers. How can a contract of N89 billion not follow any ‘due process’. And if it did, we are yet to know how many investors put in a bid. Or was Bi-Courtney the sole bidder? Or are you telling me that the public procurement rules in Nigeria allows a contract of N89 billion to be awarded on the basis of ‘sole-invitation’? These issues bring me back to the issue of ‘value for money’. And the question remains, when due process is not followed, how can we be sure that the taxpayer is getting value for money?

Unfortunately when these sorts of arguments are raised at public forums, you get shouted down by other members of the public for reasons I sometimes understand but do not entirely agree with. Due to the paucity in infrastructure development since independence, an average Nigerian just wants to see things done. The way and manner such projects are undertaken seems not to bother them at this stage. When you query the underlying principles of certain projects, the quick response is “at least Governor X or Minister Y is doing something, unlike in the past when nothing was done”. But does that mean we should all keep our mouth shut even if Governor X or Minister Y is mortgaging our future as a result of his/her ignorant or corrupt actions? I strongly believe that we should not sit back and allow our future to be mortgaged to few individuals under the guise of PPP.

With the specific regards to Lagos-Ibadan Project, I do not have any problem with Mr Wale Babalakin (CEO of Bi-Courtney), as he his just a businessman looking to maximise his opportunities.  But we need to challenge the system that is allowing these dubious PPP contracts to perpetuate. After reading about the Lagos-Ibadan PPP, the question I asked myself was, does it mean the government cannot undertake any project? If the government has to concession all the federal highways to the private sector, then it needs to tell us what it is set up to do. They keep complaining that the cost is too much for them to bear. But that has been the excuse for the last 20 years or so. The same excuse was given for the failure of the power sector, the same excuse was given for the failure of the refineries, the same excuse is given when civil servants are retrenched, and the same excuse is currently being paraded regarding the looming removal of petrol subsidy. But it was not the case, when the Speaker of the House of Representative and Deputy purchased five bullet-proof ‘special utility vehicles’ at a cost of N300 million! A government that cannot undertake mundane tasks such as road maintenance is nothing short of a ‘failure’. I still maintain that the government cannot abdicate its statutory responsibilities. The government is set up to promote social equity and not to encourage the rise of Oligarchs.

While the government might saved itself N89 billion, someone is still picking up the cost. And that is the average Nigerian that will be using the highway on a daily basis. And let’s not be deceived, it does not mean that the savings made by the government will be used to provide key infrastructure in other sectors of the economy.

Let’s accept that the government is a ‘failure’, but why the choice of Lagos-Ibadan Expressway? Why can’t the N89 billion be invested in providing an alternative route (i.e bypass) through a PPP and tolled accordingly.

You need not to be transport specialist to know that the strategic importance of this highway has been undermined by the proliferation of religious organisations in the last 10 years or so. Vehicular accesses have provided along this corridor without any regard for highway safety and efficient movement of through traffic. The corridor is also one of the fastest growing in the country due to rapid urbanisation. For me, it is a ‘glorified’ local road. And it is difficult for the government to remedy these inherent problems now because of public outlash. How Bi-Courtney will deal with these religious organisations will be very interesting. It would have been better if this road is ‘downgraded’ and probably handed over to respective state governments. The government should have then worked in partnership with the private sector in providing an alternative. Upgrading the road to three and four lanes in each direction will only offer little benefit in the long term.

Lastly, whether we agree or not, the monopoly advantage given to Bi-Courtney will further undermine the possibility of having a decent rail system connecting Lagos-Ogun-Oyo states at least in the short to medium term. We need to understand that the more vehicles using the road, the more money Bi-Courtney makes. Do you think Mr Babalakin will support the construction of a rail line that will have a huge impact of road traffic numbers on Lagos-Ibadan Expressway. One of the unintended consequence of the government action, is the introduction of another major player that will work against (either secretly or openly) the development of a mass transit system along the Lagos-Ibadan corridor. But having invested N89 billion can he really be blamed?


Anonymous said...

Whoever you are Seyi i don't think you appreciate what Nigerians are going through in this Country. In all what i read, your most "credible" argument here is that the tax payer is probably being fleeced. Lets take a hard look at this. That road has been bad for as long as i can remember. It's bad nature guarantees that it takes away peoples lives all the time. FRSC will give you a reliable statistics on that. Each year govt votes billions of naira on it. We never see the naira nor the repairs (That is taxpayers money being stolen directly from source). The road continues to kill.Govt has shown time and again and for several years that it is a big failure in maintaining that road and indeed other strategic roads in the country (Like Shagamu-Benin) Road. So what next. We need to look for a different solution that excludes Govt maintaining it. That is very very clear. I have not found any suggestion in Seun's posting that tells us the part to go. As an enterpreneur and head of a for-profit organisation i am sure that the best chance we have is to put the road in the hands of private for-profit organisation in such a way that the organisation will have to maintain the road well to make its money back. That is the only way forward. What i have seen so far is that Bi-Courtney will invest 89billion. That is really patriotic on their part for a country that is very unstable policy wise. They are taking a big risk. A huge one in fact considering the country we live in. A profit is a natural thing for a for-profit organisation. In fact the law creates such organisation to make profit so they can be taxed and govt derives its revenue. So we don't expect Bi Courtney to be a charity. I don't know the level of profit Seyi is trying to point out here. Assuming that Seyi's alarm is true its natural that anyone who invests in a high risk project expects high returns. This investment is high risk for anybody. That is why foreign investments don't go that way. And i wouldn't be surprised if other local investors shy away from it. I remember that the airport was first given to another company before Bi Courtney. Its worth knowing the truth behind the transfer of Concessionaire. I am sure inability to deliver on such a complex investment will feature prominently.
It simply shows that Seyi is not a business minded person. My guess is your are either a civil servant or in government in one form or another parasiting on the peoples fund. If i am permitted to guess further you might be a parasite in the ministry in charge of the road.

So my dear Seyi, the people of this country don't want to die anymore, no amount of future profit Bi Courtney will make will ever tally with one life. If the investment can save a life so be it. Secondly i would rather Bi Courtney gets the "big profit" Seyi talks about, save lives, employ Nigerians and pay taxes (that Govt will steal) than Leave it for Govt where you know the same (if not more) of the money will be stolen directly from treasury, The money stashed abroad to develop other economies and Nigerians keep dying.

So my dear Seyi you have "NO POINT".

All i pray is that Bi-Courtney did a good job by binding the hand of Government in the contract so that subsequent Government will not truncate it and secondly that it actually maintains the highway well.

Moscovite (Abuja)

Anonymous said...

I failed to comment on your suggestion on bulding another road. Handing over the road to state governments. I think this are just suggestion to attack the fact that the road was given to a company to manage. Maybe you have a problem with Bi Courtney. Come on! In one breath you say Government is a failure, in another breath you say they should give it to state govt. Are you confused. Most State Govt can barely maintain their roads. Even Lagos State govt operates on a PPP so what are you trying to say hear. That Lagos State PPP is better than FG PPP. I just can't understand you.

Why the hell should we build another road. Jesus! you definitely must be a Civil or Public Servant (Most likely in the Federal Govt) to think this way. You can't maintain one properly you want to go build another one????

You also talked about it undermining rail development. The same rail development that has continued to fleece taxpayers???. If they find another Concessionaire for the rail then let them give it. If its Bi Courtney that will have it then ley him have it. Afterall its for a limited period. 25 years is nothing in the life of a nation my brother. If we enjoy good monopoly for 25 years I am all for it than extremly bad competition. Afterall Microsoft isn't a bad monopoly. We have all benefitted from it.


Anonymous said...

Moscovite, I just want to point out that Seyi's comments are personal views and law against that. If you do not agree then state your case and refrain from making personal attacks. What about his views shows being a Civil servant and a parasite? You seem to be getting rather defensive and that does not indicate objectivity so let's keep this to views and opinions.

your comments clearly lean towards your association with for-profit organisation so I guess it is expected and as I said everyone is entitled to their own opinion.

In development privatisation is not the solution to all problems. Basic infrastructure should remain with the Govt Fed or State. and I agree with Seyi in that we will have a monopoly if a route that has no alternatives is handed to a single individual or organisation.

No one expectes Babalakin not to charge accordingly and recoupe his money it makes no business sense. But where is the watchdog to monitor them and where is the competition?