Nigeria is part of the developing world and is said to have one of the fastest growing economies in the African continent with over 140 million people and an average economic growth rate of 3.5% per year in the last few years. With such a thriving economy and an equally growing population comes the need for investments in areas such as electricity, road and rail transport as well as telecommunication. Recent projects at the federal and state level including the light rail mass transit project and the cable car transit project in Lagos State, Nigeria, are a testament to the efforts of the government to meet the growing needs of the population.
In the past, governments at all levels had either financed these projects through public revenue or a combination of such revenue and foreign or intergovernmental assistance. Severe strains on public finances in recent years, however, has forced governments worldwide to look to other modes of financing, most notably the public-private partnership (PPP) model. This mode of infrastructure financing typically involves an arrangement between a public sector authority and a private entity with regards to the development, financing, maintenance or operation of services that fall under the responsibility of the public authority. The PPP arrangement may be achieved through arrangements including management contracts, lease contracts and concessions such as build-operate-transfer (BOT) and build-own-operate (BOO).
Landmark projects where the PPP model has been adopted in Nigeria include the 2003 Murtala Mohammed Airport 2 project between the Federal Government of Nigeria and Bi-Courtney, the Lekki Toll Road Concession project, and the Bayelsa State Water Project, all under BOT arrangements. Recent developments in the power sector have also informed the adoption of the Rehabilitate/BOT model for Small and Medium Hydro Power Projects with the Federal Ministry of Power as well as the BOT model for the Kainji, Jebba and Shiroro Hydro Power Plants.
The Nigerian government recognises that investment in this area is driven by the investor's perception of guarantee against risks such as security and political, contract validity and enforcement, expropriation and capital movement, as well as transparency risks, and has taken steps to mitigate these risks with reforms in legal and regulatory frameworks.
PPP arrangements in Nigeria are governed by the Infrastructure Concession Regulatory Commission Act 2005 (ICRC Act), the Public Procurement Act 2007 and Regulations issued by the ICRC to govern relevant PPP process. Individual states also have laws to regulate such arrangements. The ICRC Act authorises the ICRC to monitor compliance with rules, while the Public Procurement Act grants the National Council on Public Procurement and the Bureau of Public Procurement monitoring and oversight responsibilities in relation to PPP procurement and also sets detailed criteria and procedure for transparent award processes.
Incentives for investment in this area include guarantee of unconditional transferability of funds through authorised dealers as well as capital repatriation under the Nigerian Investment Promotion Commission Act 1995. This Act also guarantees right of access to courts to challenge expropriation and provides for settlement of investment disputes by arbitration within the framework of any bilateral or multilateral agreement on investment protection to which Nigeria and the investor's country are parties.
Despite the progress made in recent years, investment is still required in several sectors to cater for the needs of the country's ever growing population and thriving economy. Sectors such as transport, health, power, oil and gas, agriculture and solid minerals remain open for investment and with appropriate PPP structures, are sure to boost the economy.