How Nigeria Can Fix Infrastructural Deficits – Izuwah

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As Acting Director General of the ICRC, how would you describe the general state of infrastructure in Nigeria?

Everybody is affected by the poor quality of infrastructure in Nigeria. The President himself, while speaking at the Nigerian Bar Association, NBA, annual conference in 2015, talked about the huge infrastructure deficit in Nigeria across the economic sectors like the port, power, rail and roads.

A good example is power, if you look at power, we are currently producing 4,000 megawatts(as at the time of this interview) but research has found out that around the world you need 1,000 megawatts per a million people as benchmark.

So if Nigeria’s population is above 170million, the power we need today is about 170,000 megawatts. So you see the huge gap. For me, as the Director General of ICRC, I am not dampened by the deficit because I see it as an opportunity.

A good example is that 16 years ago, how many phone lines did we have in Nigeria? We had less than N400,000 phone lines working and at that particular time we had about 5 million Nigerians who had applied to NITEL and waiting for phone lines and about 10 million Nigerians who were on the queue waiting to be allowed to get into the various NITEL offices. You remember people hire people to stand on the queue for them to make calls. But some people saw that as an opportunity. Today with the private sector participation, we have 150 million telephone lines.

I do not want to dwell on the deficit but dwell on the opportunities available to provide world class infrastructures, whether in roads, hospitals, schools and accommodation across the entire economy. We should have sufficient infrastructure in Nigeria that will be economically competitive and by this we will create jobs, we create a globally competitive economy and we will have tourists. It will be a wonderful place to live. Yes, we have deficit. I do not see the deficit as a hindrance. I see the opportunities abound and that opportunity is an opportunity for us to be a force to be reckoned with. And that it is my role as the Director General of ICRC to create the regulatory framework that would allow the private sector to come in and partner with the government and create these infrastructure like it has been done in other parts of the world; like South Africa, Malaysia and other places. We Nigerians can be in the global competition.

What challenges are you facing in the course of providing the regulatory framework?

There were a number of challenges. The first challenge we had was because what we are driving is the private-public sector participation in providing infrastructure. Though the PPP model, is a model that makes it possible for private and public sectors to partner. The private sector will invest money to provide infrastructure and then recover her money over a period of time. One of the major problems we had is capacity, awareness and understanding of that type of methodology. To a large extent, the public sector who are mostly public servants are grappling with  methodology and how to use it. That is one problem we had because that method is a very complex and sophisticated model, projects have to be prepared well and made bankable before you can take them to the markets.

The second challenge we had is what we call project development funding to prepare that project, to do the feasibility study, to do the traffic study and be able to demonstrate to the private sector that these projects are bankable. You require money to do it; so we had limited project development funding to be able to develop these projects and take them to the private sector. The consultants who do the project studies are very experienced and it requires use of methodology that is not very common. We had to bring in foreigners to help us build our capacity like what is done elsewhere. The third challenge is budgetary allocation, even in the existing concession we have, ICRC has a legal responsibility to ensure enforcement, ensure that these concessions are well delivered, we require budgetary funding to support us to be able to look at them to study those concession agreements and make sure the entire project goes well. So those are some of the key challenges that we face. There is also the issue of private sector capacity. Assuming for now that Nigeria is said to need about 2,000 kilometer of road network even if we have all the money, do we have enough contractors who can do the job. Do you have enough private sector people who can do it?

There is the issue of long term funding. Infrastructure development requires long-term funding, low interest and long-term funding but the macro challenges we face also affect that ability. Take a look at bond markets. The world infrastructure are mainly financed with capital market. Recently, I had a meeting with the Director General of the Nigerian Stock Exchange, Mr. Oscar Onyema, and we are doing a lot to be able to address these challenges.

On the issue of capacity building, recently we came on a courtesy call on the Nigerian Shippers’ Council and immediately we identified the gap, we did training and all the people that went through that training are going to be certified and become more knowledgeable in doing PPP and we are doing that across the MDAs.

We are also working together to adopt the World Bank certification training so that it becomes a standard training for Nigerians so that Nigerians can have an appreciable knowledge of the PPP model. The World training programme has three levels, namely; the awareness level, intermediate level and professional level. We want a situation that anybody that will want to work on the PPP model will have that training.

We are also working with the Ministry of Budget and National Planning to provide additional funding for project development. We are working with development and Finance institutions like the African Development Bank, Global Infrastructure Hub, IFC, and others. We are going around the world trying to talk to people that Nigeria is the next frontier for infrastructure for them to come here and work with us. These are some of the things we are aggressively doing to confront these challenges. Like I said earlier, we don’t need to dwell on the deficit but we need to address that deficit.

Our President had always said that if we do not kill corruption, corruption will kill us, it is the same thing with our infrastructure, if we don’t kill the infrastructure deficit, the deficit will kill us.

How is your Commission tackling this infrastructure deficit?

The mandate we have is to create the framework. The aim of a regulator is to create framework for the private sector to invest. To create enabling environment for investment destination. What did NCC do, without building a single mast; they put in framework for private sector to invest. Our role as ICRC is to create the same framework for the comfort that will make people know that Nigeria is the most attractive and best investment destination and once we do that successfully, the private sector will bring the capital to partner with our people.

So, on both sides we are working with that framework, which is to create the capacity in the public service. I talked about bankable project so that the private sector will know there is an independent agency that is able to do that. And in total compliance, the private sector knows that there is an independent regulator they can go to if they have problem. So you do not have a situation where the government agency which is the guarantor of the concession or the PPP is also the regulator. So our main role is to put in that regulatory framework and once we put in the regulatory framework other things will fall into place. Part of what we are trying to do is that we are working together to generate an Executive Order, that Executive Order will be focused on methodology for accelerating PPPs in Nigeria.

We are hoping that we can do it and that we can present  it to the presidency and that the presidency will find it good  and fit enough to approve. The draft Executive Order and then will be something that will become a mechanism because the ICRC Act in the National Assembly for repeal, will take some time to do. But we need these infrastructure now, you need to go to our universities to see where the students sleep, it is disheartening. There has to be PPP.

What you are saying now is that all the infrastructure government has interest in, your agency must be able to regulate it for PPP development

Not all infrastructure can fit into PPP model. PPP is a procurement methodology. Government has three ways it procures services; the first one is the traditional procurement where government pays through the budget. The second one is privatization where government will divest her interest and the third one is PPP where it partners with the private sector.

Not everything is PPP-able, anything that is PPP-able must have sufficient revenue to reward the investor.

Because the investor is there to make money, the investor is not a gambler; the investor is not a charity organization. So not every infrastructure is PPP-able.

However, what we regulate is that when government chooses their PPP methodology, we regulate. Like our roads are self-financing. Government does not have to bring out the upfront money. The treasury is shrinking and the Minister of Finance has made it very clear to us. Even the Director General of Debt Management Office, the physical space is now constrained; we need to bring in the private capital. And there is a lot of private capital around the world; I can show the information here on my ipad that demonstrates that around the world there is a $120trillion of capital that is available under management by banks. We should be able to attract that money that is what is important.

We should be able to attract that money. We attracted it for the mobile phone industry. We should attract it for the hospitals. Health tourism in Nigeria is a $1Billion industry. I am sure some of us contributed money for somebody to be taken to India for treatment; did we do these things in 1970s? Don’t  people remember that the University College Hospital in Ibadan used to be the referral hospital for the entire West Africa?

So this is what we want to go back to. It is in our interest to do these and provide these infrastructure for ourselves. People will fly to Owerri to go to Onitsha, does that make sense? Because the roads are too bad, he has to spend that huge money in that journey. The example I often give people is that, there is a road in Malaysia that runs from the Thai border down to Jahol which transverses the whole country. That road used to take 19 hours to travel, they awarded a contract and concessioned that road to a private firm and when it was completed, it  dropped the traveling hour from 19 to 6 hours and business developed on that corridor.

Look at Lagos-Ibadan expressway, that road has a direct impact on our Gross Domestic Product, GDP. If that road is good the economy on the corridor will improve. The same will apply to Sagamu-Benin-Asaba. These type of infrastructure that are PPP-able and viable because of the traffic, we should get the private sector to turn them into world class roads and create economic corridors. That is how a country develops.

You will have a Lagos-Ibadan-Ilorin-Ogbomosho to Kaduna economy corridor. You will have a Sagamu-Benin-Asaba-Onitsha-Enugu to Port-Harcourt economic corridor. You will have another corridor from Enugu up to Maiduguri, and another from Kano to other part of the country. That is how a country develops.

When you have economic corridors because transport is very critical, you are able to move goods and services to various parts of the nation. Transportation is very key to the economy.

Nigerian Shippers’ Council conceived the idea of the Inland Dry Ports, in selected zones many years ago. Some of the licensed IDP operators are yet to take-off. What do you think is responsible for this?

You must put these things in historical perspective. When those projects where concessioned ICRC was not in existence and there wasn’t a national policy on PPP. People had the good intention but they did not appreciate what they needed to do in terms of preparation to develop the projects. The feasibility studies for the licensed IDPs were not properly done, there wasn’t proper due diligence in terms of the promoters. Had they developed any Inland Dry port before, what is their track record? For you to have IDPs, you have to have good connectivity between the ports and the IDPs.

In Malaysia and the Far East, they use IDPs; in fact, it is a standard process. The only thing you do at the port is vessel handling, you do not clear  your goods at the port, the container will just leave the vessel and land and the ship goes away and they move the container to the IDP. It is at the IDPs you go and do your Customs formalities and clear your goods. So what you have is that those Inland Ports are also point of origin and destination. So if you are a businessman from Kaduna, and you are importing a container, and you live in Kaduna, what bill of landing reads is Kaduna Dry port. So it is multi-modal bill of landing

So when it lands in Lagos, what is done is that the container is moved to Kaduna and you go and clear it yourself. Some of those were not done properly and that is why we are now working together with the Shippers’ Council to see how we can put these measures in place to plug those gaps and make them bankable so that they will attract the right level of financing from lender and make them viable but the intentions are very good.

The Executive Secretary of Nigerian Shippers’ Council is very determined to make it successful, the Minister of Transportation is very determined to make it successful, the Vice President is very determined to make it successful.

The IDPs are included in the national Economic Recovery and Growth Plan because the fastest way to increase such capacity in any country is to build dry ports.

The IDPs will become growth polls because people will build industries around them because it is about transport. So those areas where they are located will develop and we grow our GDP.

Since you have the Dry Port standing on its own and the connectivity is not there by rail thereby depending only on the road, we do not know if your commission is advising the government to ensure rail connectivity for ease of doing business?

The government is working very hard, we have to face reality, building a rail is expensive and takes time; we are not going to finish a rail tomorrow.

Do not forget that the existing narrow gauge lines transverse our country very well and the government is in the process of concessioning that narrow gauge lines to provide freight services. And you discover that many of the existing IDPs are located near the rail lines, so it is just to put a siding.

The one in Isiala Ngwa is near the rail, the one in Kaduna is near the rail and the one in Jos is near the rail. So a bit of thought went into this so the point is to provide good people who can operate the rail system. Let us not forget the Kaduna refinery was built in Kaduna. Is there a port in Kaduna? The same thing with PAN, those CKD, how did they get to Kaduna, because rail is the cheapest way to transport goods because the cost of production is very important. Another way is the inland water ways, we are very lucky in this country.

Nigeria is one of the few countries in the world that is blessed with two major rivers. So the National Inland Water Ways Authority(NIWA) is working hard to unbundle vast opportunity in the inland water ways. In fact, the inland water ways is even the one that is most powerful because if you look at the specifics, what you can carry in 15 barges, do you know the number of road trucks you will need to carry it is 215.

Rivers transportation is very efficient, the point is that the nation is looking at multi-modal transportation, we need all the modes of transportation and you merge your economic activities and your economic corridor against this and the arteries will be road, water and air in an integrated transportation system in the country and provide the economic power to oil the economy.

Many of the port concessionaries have accused the government of failing to fulfill its own obligation in the concession agreement especially as it has failed to put in place the necessary infrastructure. Do you agree with them?

The government is working very hard on many things. Part of the major problem we are facing is the contraction in the budget space and we need to bring in the private sector to help us do that and it takes a bit of time. The government is working hard to provide these things. We need to partner with the concessionaires to be able to see how to solve these problems. And frankly blaming somebody will not solve the problem. Everything we talked about is covered in the National Economic and Growth Plan. Government is very aggressive about these things, the government is aware that port connectivity with the rail is very key. Look at what the government is doing about the Wharf-Apapa road. All these things are being documented. What is happing is the implementation. The implementation may not be going fast as it can because of funding and that is why we are working on the side to bring the private sector to help us. So government is working day and night to create a better Nigeria for everybody. That is the change agenda of president MUHAMMADU BUHARI. Also the commitment of the vice president,Yemi Osinbajo who is also the chairman of the Presidential Enabling Business Environment Council (PEBEC). He has this business section with the private sector, looks at their problem, hear them and finds solutions to their problem.

That is a demonstration of the commitment of this government. Look at what is happening at the ports in terms of agencies at the port. Look at Abuja airport runway, government said the runway will be ready within a specific time and the project was ready just as the government promised. This is credible government.

Is your commission sharing the vision of Nigerian Shippers’ Council in establishing Truck Transit Parks across the country?

We had a big workshop in Abuja with the Nigerian Shippers’ Council and they are following the national PPP policy in doing this. There will be a bankable study that will be done to establish the optimal location to position the Truck Transit Parks. To establish the traffic that goes and then thecomplimentary activities that will attract the truck park to the location, all these will boost economic activities in that location. It will be done in a way that will make it viable and bankable and the private sector will invest. We have learnt some lessons from the past and we hope to do things better.

Let us not forget that we have done some projects in the past. The port concession is doing very well, we might complain about the inadequacies but let’s look at what the ports were about twenty years ago in terms of demurrage. Like I keep telling people, nobody hears about Wharf rats anymore. For the first time in a tropical country that a specie of rodents have been eliminated. The wharf rat has been eliminated completely because of port concession. The same thing you will say about the Garki Hospital which was run down and which was concessioned to the private sector

Are you in support of the extension of port concession that was recently granted to some concessionaires?

 

We are doing an in-depth study with the Nigerian Ports Authority to find out what best mechanisms to use for the review.  There may be some cases where some concessionaires may not have fully recouped their investment. The review will not be based on emotions, nor on man know man, it will be based on pure data because anything that needs to be done under the ICRC will be approved by Federal Executive Council.

So whatever will be the outcome of the review process every Nigerian will know. And do not forget the ICRC has developed a disclosure framework, a situation where the key information of every concession contract in this country will be disclosed to the public.

We are hoping to get live at the end of August and we are presently preparing a letter to the presidency to commence the launching of that portal. So you will know what the concessions are. In fact, every Nigerian will become enforcer of concession and government agencies could be directly challenged if they are not living up to their responsibilities.

We are doing everything that Nigerians are aware and informed and things are done in a transparent way.

The only way you can invite international investors is to ensure that your processes are transparent and meet certain standards that are applicable anywhere in the world.  I met a business man in the United Kingdom who had tendered for a contract in Rwanda, the first time he went to Rwanda was the day he went to sign the contract. He didn’t know anybody.

That is the way we hope to go, that we have this transparent processes, you do not need to know anybody, you do not need to be the son of anybody to get a job, it will come to you if you are the best.  And everybody will follow the requirements of the law.  If you do not do that lenders will not put in money.

 

How far have you gone with the concession of KiriKiri Lighter Terminal?

 

I want to make this correction. First, what we focus on is the Public Private Partnership and concession is only a part of it and the second is that we are not the one doing concession. Thirdly, it is the agency that carries out the concession, what we do is to regulate and guide the process because they are assets owners and for that particular case, the agency is doing it, they are the asset owners. They have just finished the business case because what happened is that, you have existing trawler operators there. So you do not want to do anything that will truncate their businesses.

Their process is to ensure that the regulatory framework is adhered to and also to ensure that the concession process meets global practice and also takes care of the fishing terminals that have been doing business there. Though the facilities are temporary, we should have a world class fishing terminal where people can go.

In most parts of the world, people go to the fishing terminals in the morning to go and buy their fish. Once the business case is approved by the Federal Executive Council, it will go through a thorough competitive process and we will have a stakeholders’’ consultation.

They are issues about the land because you need to expand the land and they have been some encumbrances and once these issues are finally resolved then we can proceed with the concession process.

In the aviation sector, apart from Lagos and Abuja, other airports in the country are nothing to write home about. What advice would you give Government concerning these airports?

 

You know there is already a programme to concession the four international airports which is Lagos, Abuja, Port Harcourt and Kano airports. Transaction advisers have been appointed and the particular process is going through due diligence of developing the project. We need to do these things very carefully. We do not want to repeat the mistakes of the past, so the process is following the national policy where you develop the project, prepare the concessionaire and you implement. That process is ongoing.

The problem we have is that FAAN has about 22 airports and most of them are not viable. Her revenue is also shrinking and qualities of their facilities are declining. However, if you concession those major airports which are viable on their own, it means that FAAN will now have additional money to put into those airports to make them viable in terms of traffic. Some airports are strategic because of their location as they are self funding. A good example is what happened in the Qeen Aliya airpot in Jordan. The Jordanian government was spending $30million to maintain that airport until, it was concesssioned and it started giving the government $100million every year.

That is extra money that will bring your exchange lower, that is what will happen to our airports, that extra money will be used to address the un-viable airports. It is just like what happened to the telecom industry. Before GMS licenses were issued, the industry was a consumer of national treasury but it is now a revenue contributor to the national treasury.

That is what our airport will become, the concessioned airport will now become sources of revenue for the government and then Nigerian will become a hub. Go to Dubai and look at what the aviation industry contributes to their GDP. Imagine if our airports contribute ten percent to our GDP, Nigeria will be a tourist attraction.

You need to bring the private sector to provide these world class facilities to be able to do that because where Nigeria is located geographically is like in the middle of the world. People in cotonu do not need an airport they can fly out from Nigeria, if you provide the right facilities, Nigeria can become a hub for air transportation in West Africa.

Your agency is doing everything to attract private investment, is there any extra thing you will need so as to create a better enabling environment for private businesses to thrive, considering the harsh operating environment in the country?

 

The thing to note is that, ICRC is not doing it alone. I mean all government agencies are involved because if you look at the National Economic recovery and Growth Plan (NERGP), the basis is that it is a private sector led growth. What creates jobs in an economy is private sector.

You need to synergize the private sector. What is happening is that we are doing PPP, it is like a marriage, and everybody has a responsibility of its own. What the private sector is saying is that some of the things government is supposed to do, should  do it because government has a key role to play.

Do not forget that each of these contracts is contracts entered into with obligation. The private sector will not go outside her obligation to do otherwise. If you concession the road to the ports, then the ports will work. That is how port operators get revenue. If the roads are not good and people start to move goods to other ports, private terminal operators will lose revenue.

There is a rumor that Nigeria is losing its cargo traffic to ports of neighboring countries. The cargo through-put influences their charges. So if you have a situation where there are enablers which are supposed to be and are not there and the cargo are not coming, of course it will impact on our revenue.

Between your commission and the Nigerian Shippers’ Council, how will you describe the relationship?

 

The relationship is excellent and we will take it to a new level. We see the shippers’ council as a very professional run organization that protects the interest of Port Operators and plays a very key role in the transportation industry and we will continue to partner with them as a regulator to ensure that they will deliver on their mandate.

The president has given me responsibility and I give glory to God that in all my life I have never failed in any given responsibility. I will give my morning, I will give it my afternoon and I will endeavor to meet with the vision of the president because Nigerians deserve good infrastructure, good infrastructure base is good for everybody.