1

UGWU, ANTHONY O.

ASSESSING THE VIABILITY OF PUBLIC –

PRIVATE PARTNERSHIP (PPP) AS AN OPTION

FOR INFRASTRUCTURAL DEVELOPMENT IN

NIGERIA: A STUDY OF ENUGU STATE 2007 –

2012.

SOCIAL SCIENCES

PUBLIC ADMINISTRATION AND

LOCAL GOVERNMENT

Okeke,chioma m

Digitally Signed by: University of Nigeria,

Nsukka

DN : CN = Okeke,chioma maryrose

O= University of Nigeria, Nsukka

OU = Innovation Centre

2

ASSESSING THE VIABILITY OF PUBLIC – PRIVATE

PARTNERSHIP (PPP) AS AN OPTION FOR INFRASTRUCTURAL

DEVELOPMENT IN NIGERIA: A STUDY OF ENUGU STATE 2007 –

2012.

BY

UGWU, ANTHONY O.

PG/M.SC/11/59954

DEPARTMENT OF PUBLIC ADMINISTRATION AND LOCAL

GOVERNMENT

UNIVERSITY OF NIGERIA, NSUKKA

NOVEMBER, 2012

3

TITLE PAGE

ASSESSING THE VIABILITY OF PUBLIC – PRIVATE

PARTNERSHIP (PPP) AS AN OPTION FOR INFRASTRUCTURAL

DEVELOPMENT IN NIGERIA: A STUDY OF ENUGU STATE 2007 –

2012.

BY

UGWU, ANTHONY O.

PG/M.SC/11/59954

A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF

THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF MASTERS OF

SCIENCE (M.SC) IN PUBLIC ADMINISTRATION AND LOCAL

GOVERNMENT, SCHOOL OF POSTGRADUATE STUDIES

UNIVERSITY OF NIGERIA, NSUKKA

NOVEMBER, 2012

4

APPROVAL PAGE

This Project Report has been approved for the Department of Public

Administration and Local Government, University of Nigeria, Nsukka.

By

________________ _______________

Prof. Fab. O. Onah Prof. Fab. O. Onah

Supervisor Head of Department

_______________

External Examiner

___________________

Prof. C. O. T. Ugwu

Dean

Faculty of the Social Sciences

5

DEDICATION

This work is dedicated to my wife Grace and my lovely kids, Faith,

Samuel, Tony and David for all their support and understanding

6

ACKNOWLEDGEMENT

Numerous individuals had immense influence and contribution

towards the success of this work. My gratitude goes to each and every one of

them. Most especially, I want to thank God for seeing me through regardless

of the exigencies of my vocation. Moreso, I want to in no small way,

acknowledge the professional guidance and directions from my Supervisor

and Head, Prof. Fab. Onah for putting me through and raising my enthusiasm

on the project. Every other lecturer of our great department is appreciated.

My sincere gratitude to my colleague and friend, Paul Ezinna for his

immeasurable contribution. My secretary Lawretta Ugwu is appreciated for

contributions in typing the scripts as they came.

7

Abstract

This study is an assessment of the viability of Public-Private Partnership

(PPP) as an option for infrastructural development in Nigeria with a focus on

Enugu State. Following the obvious reality that government alone can no

longer finance infrastructural development, a collaborative strategy became

imperative and PPP was adopted as the most appropriate. In that regard, the

problem became how to identify the particular variant among the various

variants of PPP that best mitigate corruption, generate efficiency,

accountability and effectiveness in the management of public sector in

Nigeria and Enugu State in particular. Therefore, primary and secondary

sources were used for data generation. From the data generated, the study

discovered that PPP is making progress in Enugu State in terms of reduction

of corrupt practices, employment generation, poverty reduction, etc due to

enabling environment made possible through relative security experienced in

the state. The work concludes that collaborative government has become the

order of the day and recommended sustainability as cardinal factor among

other factors for the maximization of the benefits of PPP approach in Nigeria

and Enugu State in particular.

8

TABLE OF CONTENTS

Title page - - - - - - - - - - i

Approval page - - - - - - - - - ii

Dedication - - - - - - - - - - iii

Acknowledgement - - - - - - - - iv

Abstract - - - - - - - - - - v

Table of contents - - - - - - - - - vi

List of Tables - - - - - - - - - ix

CHAPTER ONE: INTRODUCTION

1.1 Background to the Study - - - - - - - 1

1.2 Statement of the Problem - - - - - - - 7

1.3 Objectives of the Study - - - - - - - 9

1.4 Significance of Study - - - - - - - 10

1.5 Scope of the Study - - - - - - - 10

1.6 Limitation of the Study - - - - - - - 11

CHAPTER TWO: LITERATURE REVIEW

2.1 Public-Private Partnership (PPP) - - - - - 12

2.1.1 Characteristics of Public-Private Partnership - - - 14

2.1.2 Private Sector Strengths - - - - - - 15

2.1.3 Public Sector Strengths - - - - - - - 16

2.1.4 The Thrust of Private-Public Partnership - - - - 17

2.1.5 Main types of PPPs in developing countries - - - - 18

2.1.6 Misconceptions about Public Private Partnerships - - - 22

2.1.7 Benefits/Advantages of Public-Private Partnerships - - 27

2.1.8 Potential Risks of Public-Private Partnership - - - - 29

2.1.9 When Should Public-Private Partnership be considered? - - 32

2.1.10 When to partner with the private sector - - - - - 33

9

2.1.11 Critical success factors for public-private partnership - - 34

2.1.12 Public-Private Partnership Practice in Nigeria - - - - 37

2.1.13 Infrastructure Concession Regulatory Commission

of Nigeria (ICRC) - - - - - - - - 39

2.1.14 Contract Agreement - - - - - - - 43

2.1.15 Contract Management - - - - - - - 43

2.1.16 Challenges of Public-Private Partnership in Enugu

State and Nigeria - - - - - - - 44

2.1.17 Public-Private Partnership and Privatization: A Comparism - 47

2.1.18 The Future of Public-Private Partnership in Enugu State - 49

2.2 Hypothesis - - - - - - - - - 51

2.3 Operationalization of Key Concepts - - - - - 51

2.4 Methodology - - - - - - - - 52

2.4.1 Location of Study - - - - - - - - 52

2.4.2 Population of the Study - - - - - - - 53

2.4.3 Sample Size - - - - - - - - - 53

2.4.4 Sampling Technique - - - - - - - 53

2.4.5 Method of Data Collection - - - - - - 53

2.4.6 Method of Data Presentation and Analysis - - - - 54

2.5 Theoretical Framework - - - - - - - 54

CHAPTER THREE: BACKGROUND INFORMATION ON

PUBLIC PRIVATE PARTNERSHIP IN

ENUGU STATE - - - - - 60

CHAPTER FOUR: DATA PRESENTATION, FINDINGS AND

DISCUSSION OF FINDINGS - - - 66

4.1 Data Presentation and Analysis - - - - - - 66

4.2 Findings - - - - - - - - - 77

4.3 Discussion of Findings - - - - - - - 77

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CHAPTER FIVE

SUMMARY, RECOMMENDATION AND CONCLUSION - - 80

5.1 Summary - - - - - - - - - 80

5.2 Recommendations - - - - - - - 81

5.3 Conclusion - - - - - - - - - 81

References

11

LIST OF TABLES

Table 4.1: Marital status of the respondents - - - - 66

Table 4.2: Age distribution of the respondents - - - - 67

Table 4.3: Distribution based on qualification - - - - 67

Table 4.4: The implementation of public-private partnership strategy

as an option for infrastructural development in Nigeria

and Enugu State in particular is timely - - - - 69

Table 5: PPP approach can address the issue of inefficiency and

corruption in the public sector in Enugu State - - 70

Table 6: Massive implementation of PPP in almost all the critical

sectors in Enugu State implies the government relinquishing

the control of the economy to the private sector. - - 71

Table 7: The massive implementation of PPP in Enugu State has

enhanced infrastructural development - - - 72

Table 8: The relative security experienced in Enugu State is part of

the reasons why private investors are attracted to

invest in the state - - - - - - - 73

Table 9: From 2007 till date, there has been improvement in

the public sector (government) service delivery in Enugu State 75

Table 10: PPP approach can create more employment opportunities

in the state - - - - - - - - 76

12

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The current global economic realities of the world economy is such

that the managers of various National economies especially sub-Saharan

Africa are increasingly faced with the challenge of adopting management

strategy or reform that will help them navigate their state out of economic

crunch, cut the cost of delivering public services, legitimize the government

by ensuring effective and efficient social service delivery and stable polity.

Giving the failure of state led and dominated development approach of

Nigeria and most African states after independence, the need for ideological

shift from a welfare or social state to a capital or market oriented economy

where the private sector will play significant role in the economy began to

emerge. This development was fast tracked by the eventual collapse of

socialism with the disintegration of the Soviet Union and consequent

dominance of capitalism as the world economic system. The collaborative

management style between the private sector and public sector became much

prominent with the New Public Management (NPM) approach that started to

make waves in the 1980s and 1990s of which public-private partnership is a

core feature. In sum NPM is nothing but private solutions sought to remedy

public sector problems. Hence,

13

Public-Private Partnership (PPP) is an

arrangement between government and private

sector entities for the purpose of providing public

infrastructures, community facilities and related

services. Such partnerships are characterized by

the sharing of investment, risk, responsibility and

reward between the partners. The reasons for

establishing such partnerships vary but generally

involve the financing, design, construction,

operation and maintenance of public infrastructure

and services, Kwan (1999:5).

PPP is therefore an infrastructure led development made possible

through combined human and material effort of both public and private

sectors. According to Obozuwa (2011:1), ―Many developed countries

quickened their economic development by accelerating their infrastructural

development; such as China and United State of America‖. In reference to

Late President J.F. Kennedy, ―America has good roads, not because America

is rich, but America is rich because it has good roads‖, Obozuwa (2011:1).

The implication of the above statement is that, no country can be economically

buoyant without good infrastructure. According to World Bank estimate in

Obozuwa (2011:1), ―every 1% of government funds spent on infrastructure

leads to an equivalent 1% increase in Gross Domestic Product (GDP), which

invariably means that there is a correlation between any meaningful inputs in

infrastructural development and economic growth‖. Good infrastructure

generates income, employment and thereby reduces the rate of poverty in an

economy. Impliedly, infrastructural development is equally a poverty

14

reduction strategy. Lack of it results to other multiple socio-economic

problems; likewise the provision of it brings about economic development and

other socio-economic progress.

In recent times, infrastructural development has assumed a central

importance in Nigeria’s fight to attain social and economic stability. Both

Federal and State government are using infrastructure as the focal point of

their administration and policy enactments. This is equally obvious in

President Yar’adua’s seven-point agenda: power and energy, food security and

agriculture, wealth creation and employment, mass transportation, land

reform, security and qualitative and functional education.

The mixed feelings at this juncture is that ab initio, t he problem of

Nigeria was not lack of infrastructures, due to massive infrastructure

embarked upon by the government during the oil boom of the 70s. At the time

of the oil boom era, state legitimacy was enhanced through massive public

expenditure in critical sectors of the economy such as construction, commerce,

industry, banking as well as in social services delivery, Adekunle (2011:4).

He also noted that ―at the first anniversary of the restoration of civil rule in

Nigeria, the federal government alone had about 600 state enterprises in

various sectors of the economy, most of which where in a parlous state and

had unimpressive record of long years of under-performance‖. For, (FRN,

2000), these state-funded enterprises constituted a drain-pipe on the national

treasury. The true picture is that, several of the state utilities were in a state of

15

dysfunction having been crippled by corruption, inefficiency and indebtedness

with many of them having no audit for years.

Given the preceding account, it becomes clear that, at the beginning, by

the providence of oil wealth Nigeria had so many infrastructures in place.

Fadahunsi (2005:91), attest to the fact thus; ―during the oil boom of the 1970s,

the military dictatorships of General Yakubu Gowon, Murtala Muhammed and

Olusegun Obasanjo made substantial public investments on capital goods,

physical and social infrastructure‖. There were several capital projects such as

universities, hospitals, river basin development authorities, road construction,

airports, refineries and steel mills.

It behooves one, at this point to get to the facts right that instead of lack

of infrastructure, Nigeria had the opportunity at the beginning to exploit,

sustain,and grow its economy via infrastructure but failed to maximize the

opportunity due to:

(1) Corruption

(2) Poor management and inefficiency

(3) Public sector dominance of infrastructure financing.

What these led to were decay of existing infrastructure with the consequence

of non expansion in consonance with the human resource expansion, creating

circumstantial lack of infrastructure in Nigeria.

Nigeria still basking on the 1970s oil wealth came the unexpected

world oil market crisis of the early 1980s and the consequent sharp reduction

16

of the oil earnings, ―from N10.1 billion in 1979 to about N5.161 billion in

1982‖, Adekunle (2011:4). Olukoshi (1993:1), maintained that the oil crisis

spawned a major industrial crisis with many industrial concern either closing

down or operating well below installed capacity utilization. In view of Ake

(2009) in Adekunle (2011:5) ―the fact that the economy has slid into crisis,

was further underlined by the increase in the percentage of budget deficit,

which grew to 12 percent of the GDP in 1983. All the efforts of the state to

stem the tide of the economic crisis including the economic stabilization Act

of 1982, instituted by Shagari Presidency, failed to prompt Nigeria not to

adopt World Bank and IMF – Inspired Structural Adjustment Programme in

July 1986. The implementation of SAP meant not only that the adjusting

countries need to generate export surplus to pay their debts, but also that they

needed to profoundly restructure their economies along neo-liberal lines

(UNRISD, 1995). With the reduction in public expenditure as one of the

major policy components of SAP, Kuka (1999) in Adekunle (2011:5), state

funding of infrastructure was adversely affected as the state’s ability to

maintain social services and infrastructure visibly declined under SAP

regime, till date, the Nigerian State’s ability to successfully finance the cost

of expanding, improving and maintaining its public infrastructure has

drastically declined. It is the same factors, for which President Goodluck

Jonathan in October, 2011, alarmed Nigerians that the state is going bankrupt

and cannot continue to subsidize premium motor spirit (fuel) and on the 1st of

17

January, 2012, the fuel subsidy was removed which threw Nigeria into

another three weeks of socio-economic crisis with lingering effects.

All the above preceding account goes to suggest the imperative need for

alternative source of infrastructure financing in Nigeria of which among the

other themes of NPM (Privatization, Commercialization, deregulation, down-

sizing, etc), emphasized in Nigeria, Public-Private Partnership (PPP appears to

be more appropriate and applicable in Nigerian context and at this time.

Fashola (2007:6) capped it thus: ―the stark reality is that Public-Private

Partnership offers the only realistic root to the actualization of Nigeria’s

potentials‖.

In line with the national aspiration regarding PPP, Enugu state

government has equally adopted PPP as the appropriate and timely economic

strategy to stimulate its economy for growth, employment and development.

This is demonstrated by the implementation of PPP scheme in each of the four

(4) point agenda of Governor Sullivan’s administration, which includes:

(1) Physical infrastructure (Housing, water and electricity)

(2) Economic Expansion and Employment (industrial development,

agricultural development, and tourism

(3) Rural development (Rural access, rural industry)

(4) Service delivery and good government basic social services (Health,

Education, Law and order/security) Public Service Empowerment

(Training, work environment, pension, Housing, transport) Citizens’

18

inclusion and participation (Women groups, Youths, traditional rulers

and elderly statesmen).

1.2 Statement of the Problem

In every economy, infrastructure is crucial to economic development.

Economies with inadequate or underdeveloped infrastructure are bound to

experience slow economic growth, and in some cases, social unrest with the

attendant human and material casualty, Adekunle (2011:1). When an

economy is faced with the challenge of infrastructural deficiency, it is

generally unattractive to capital, domestic or foreign. Such economy can not

successively develop sustainable human capital base or attract best skilled

manpower. Therefore, countries desirous of competing for investible capital

and exploiting the benefits of sustainable development need to upgrade their

infrastructure to world investment standard, Adekunle (2011:1). According to

World Bank (2008), ―infrastructural deficiencies remain a major challenge

undermining Africa’s capacity to compete in the global market‖.

Infrastructural deficit not only stunts economic growth and reduces

international competitiveness; it also seriously undermines the poverty

reduction efforts of African regimes, World Bank (2006).

In the case of Nigerian infrastructural situation, it is either obsolete,

over utilized or out of use. Apart from the fact that it does not meet the needs

of the investors, it inhibits investment and scales up the cost of transacting

business in the country (FGN, 2004). To address the problem of infrastructure

19

in Nigeria, government requires an annual infrastructural investment of

between USD 6 and 9 billion, which only the private sector is in a better

position to mobilize, Adekunle (2011:2).

The infrastructural situation in Enugu State is not different. According

to the commissioner for commerce and industry (Dr. Jude Akubuilo),

The current situation in the industrial estates is

heart-rending, as most of the manufacturing outfits in

the state, especially the sunrise flour mills, Niger

Steel and Niger gas, have remained shut for several

years, Sobechi (2011: 1).

He maintained that the state had been missing opportunities to position itself

as an industrial base in the South-East and Nigeria, arguing that there was no

justifiable reason for the companies to have shut down. He lamented that the

value addition to the food chain through the sunrise flourmills had been lost,

as well as the building and ancillary materials, foundries and engine tooling

from the Niger steel or the acetylene and oxygen gas that could have been

produced by Niger gas company.

However, the commissioner reiterated that he had discovered that jobs,

which would have been generated by the industries were also lost, adding that

his ministry had evolved a roadmap to see the firms come on stream using the

private-public partnership (PPP) approach.

Given the above account, the posing questions to guide this study is

therefore:

20

(1) How can private sector investors be attracted to invest in Nigeria and

Enugu State in particular?

(2) If the private sector mobilizes the needed fund, would that not imply the

government relinquishing its position to the private sector?

(3) Can Public-Private Partnership among other elements of New Public

Management (NPM) serve as one stroke, solution to the inefficiency of

public organization in delivering public services in Nigeria and Enugu

State?

In respect to the reality of the above questions and the precarious nature

of Nigerian economy, the problem of the study is therefore how to identify the

particular variant among the various variants of PPP, that is most applicable

and likely to generate efficiency, stability and fund for the effective

management of public organizations in Enugu State and Nigeria in general.

1.3 Objectives of the Study

The general objective of this study is to assess the viability of PPP as a

strategy in public organizations in Nigeria. The specific objectives are to:

(i) To identify the ways by which private investors can be attracted to

Nigeria, and Enugu State in particular.

(ii) Throw more light on the PPP as a concept for development.

(iii) To find out the effectiveness of PPP in the development of

infrastructure in Enugu State.

21

(iv) To make recommendations for better application of PPP in public

organizations in Nigeria.

1.4 Significance of Study

Empirically, this study is to bring to the fore the risks, rewards and

benefits inherent in PPP and douse misconceptions regarding the concept and

encourage its application or adoption more than any other model of New

Public Management (NPM) in public organizations in Enugu State and the

entire Nigeria. This will help the policy-makers and executors to avoid the

pitfalls or gray areas inherent in PPP during implementation.

Theoretically, the study will serve as a contribution to knowledge

regarding PPP as a viable option for infrastructural development in Nigeria

and Enugu State in particular. More so, it serves as a reference material for

administrators and policy-makers at all levels of government.

1.5 Scope of the Study

In terms of scope of the study focuses on the assessment of public

private partnership as an option for infrastructural development in Enugu State

and Nigeria as a whole. The study will examine in details the dominant issues

public-private partnership as an option for infrastructural development in

Enugu State. It spans over the period 2007 – 2012.

22

1.6 Limitation of the Study

The study of this magnitude cannot be completed successfully without

the researcher encountering some constraints or limitations. Therefore, this

work will not pretend to be containing all holistic information on public-

private partnership as an option for infrastructural development in Nigeria,

rather it will endeavour to highlight the dorminant issues on the justifications

and challenges of PPP as an option for infrastructural development in Nigeria

and Enugu State in particular.

The major limitations includes: paucity of data or near absence of

reliable data on the theme of the study, especially in hard copies, being a novel

public management strategy in Nigeria. More so, the fact that Enugu State,

unlike Lagos State for instance, does not have enough institutions or projects

borne out of PPP initiative is also a major limitation. In this regard, the study

had to glean and rely extensively on soft copies for data.

23

CHAPTER TWO

LITERATURE REVIEW

2.1 Public-Private Partnership (PPP)

PPP as we earlier noted is core a feature of New Public Management

(NPM). While NPM in its length and breath is an approach that employs

private solutions to remedy public sector problems. The focus here is to

explore views on PPP. Public- Private Partnership (PPP) is an arrangement

where private parties participate in or provide support for the provision of

infrastructure or public sector provided facilities. It describes a government

service or private business venture which is founded and operated through a

partnership between government and one or more private sector company.

PPP is not the procurement of an asset but the payment of a stream of services

under specified terms and conditions.

According to Infrastructure Concession Regulatory Commission

(ICRC) of Nigeria, (2011), ―A Public-Private Partnership is a contractual

agreement between a public agency (Federal, State, or Local) and a private

sector entity. Through this agreement, the skills and assets of each sector

(public and private are shared in delivering a service or facility for the use of

the general public. In addition to the sharing of resources, each party shares

in the risks and rewards potential in the delivery of the service and/or

facility‖. The goal is to combine the best capabilities of the public and private

sectors for mutual benefits.

24

On the account of (Ministry of Municipal Affairs, British Columbia,

1999), PPPs are arrangements between government and private sector entities

for the purpose of providing public infrastructure, community facilities and

related services. For (Canadian Council for Public Private Partnerships, 2009),

PPP is cooperative venture between the public and private sectors, built on the

expertise of each partner, that best meets clearly defined public needs through

the appropriate allocation of resources, risks and rewards.

In a similar vain, (Lawther, 2002) in (Mbanasor and Nwachukwu,

2011:2), defined Public-Private Partnership as a relationship among

government agencies and private or non profit contractors that should be

formed when dealing with services or products of highest complexity in

comparison to traditional contractor consumers relationships. Public-Private

Partnership (PPP) describes a government services or private business venture

which is funded and operated through a partnership of government and one or

more private sector companies, Obozuwa (2011:1). He further reiterated that a

PPP arrangement provides assets and delivers services by allocating

responsibilities and business risks among the various partners. In this

arrangement, he opined that government remains actively involved throughout

the projects life cycle. The private sector is responsible for the more

commercial functions such as project design, construction, finance and

operations. This distinction of responsibilities is secured by agreements.

25

The International Monetary Fund (IMF), made further explicit

description of PPP by situating it as project in one hand and as a strategy of

service delivery on the other. It described PPP as a wave that is sweeping the

world, rooted in a complex but contractual relationship between government

and private sector organizations. A new and increasingly popular strategy of

social delivery with global endorsement, PPP can be prosecuted as a project

(when private investors build and operate service delivery institutions) and as

a strategy of service delivery where private institutions discharge the

responsibility of providing services hitherto provided by the public sector

agencies. Fashola (2007:5), added that ―Public-Private Partnerships to finance

infrastructure development have become inevitable in most parts of the globe

because of the simple reality that government alone cannot muster sufficient

resources to meet the needs‖.

The bottom line of the preceding views gives credence to the fact that in

this era of global economic crisis, PPP remains the most appropriate approach

or arrangement that provides economic lifeline for the government in the face

of its depleting resources, as it offers business opportunities for the private

sector to be involved in social provisioning.

2.1.1 Characteristics of Public-Private Partnership

1. Basically, PPP is complementary in nature; that is, drawing on the

strength of each of the dominant partners – the public and private sectors.

This is why, effective public-private partnership is only possible through

26

mutually designed, analysed and accepted instruments of cooperation and

collaboration.

2. The roles and responsibilities of the partners vary from project to project.

The key consideration is the allocation of risk between the partners which

affects other aspects of the partnership agreements, including rewards

and investments. What should obtain in this regard is that the higher the

risk, the higher the reward.

3. On the whole, while the roles and responsibilities of the private and

public sector partners may differ on individual servicing initiatives, the

overall role and responsibilities of government do not change because

Public-Private Partnership is one of a number of ways of delivering

public infrastructure and related services. PPP does not substitute for

strong and effective governance and decision-making by government. In

all cases, government remains responsible and accountable for delivering

services and projects in a manner that protects and furthers the public

interest.

2.1.2 Private Sector Strengths

The private sector strengths lies on the result of market competition.

The private sectors possess the skill, competence and techniques of profit

making more than the public sector. The following elements of private sector

give credence to the above facts:

Management efficiency

27

Newer Technologies

Workplace Efficiencies

Cash Flow Management

Personnel Development

Shared Resources and Platforms

Access to Diverse Sources of Capital

2.1.3 Public Sector Strengths

The public sector strengths lie on the result of serving the public trust.

By this, we mean the exclusive right of government to determine the affairs of

the economy. It is this prerogative disposition of the public sector that most

critics point out as the limitation of PPP. However, with a well established

legal framework, it does not deter the application and progress of PPP.

More so, PPP is a solution seeking or problem solving strategy meant to

address real and existing infrastructural deficiency, therefore, does not give

room for any form of contractual imbalances or private-public suspicions.

The following elements accounts for the strengths of the public sector:

Legal authority.

Protection of procurement policies.

Broad prospective/balancing of the competing goals to meet

public needs.

Personnel – dedicated but constrained by rules and regulations.

28

On a final note, ―the secret of successful partnership is to balance the

strengths of sectors‖, Izuwah (2011).

2.1.4 The Thrust of Private-Public Partnership

This is mainly from the account of Mbanasor and Nwachukwu

(2011:3). PPP draws from the understanding that government recognizes that

there are some things which the private sector does best and others where the

public sector has more offer. The old argument, as to whether public

ownership was always the best or whether privatization was the only answer,

is simply outdated. The government firmly believes it will only deliver the

modern, high quality public services that the public want and increasingly

expect when it draws on the bset from both public and private sectors. The

starting point is, therefore, recognition of the contribution that the public and

private sectors can each bring to the partnership.

In bringing the best of the public and private sectors together, the key

test of the partnership arrangement is not whether it is classified to the public

sector or to the private sector. Instead, what matters is whether it provides the

structure most likely to deliver the people’s needs. Public-Private Partnership

was developed with three broad objectives in mind:

(i) To deliver significantly improved public services, by contributing to

increases in the quality and quantity of investment;

29

(ii) To release the full potential of public sector assets, including state-

owned businesses and hence private value for the tax payer and

wider benefits for the economy; and

(iii) To allow stakeholders to receive a fair share of the benefits of the

PPP. This includes customers and users of the service being

provided, the tax payers and employees at every level of the

organization.

It is note worthy to emphasize that the structural complexities of the

public sectors, the need for integrating policies and the multiple and diverse

contributions that are required for consolidating competitiveness and for the

dissemination of the benefits of development, demand special skills and

competences in horizontal multi-organizational systems and interfaced in

PPPs. The thrust of this partnership arrangement cannot be overemphasized.

2.1.5 Main types of PPPs in developing countries

There are a number of models of private sector participation in

infrastructure, primarily distinguished by three key factors:

(i) Varying levels of responsibility assumed by the public and private

sectors;

(ii) The length of the contract period and

(iii) The degree of risk allocation between the public and private sectors.

30

Types of

Models

description

Level of risk

assumed by

the private

sector

Length of

contract

(number of

years)

Capital

investment

Asset

ownership

Most common

sector in

developing

countries

Bro

ad D

efinitio

n o

f PP

P

br

Service

contract

Contract for

infrastructure

support services such as billing

Low 1-3 Public Public Water utilities

Railway services

Management

contract

Contract for

management of a

part/ Whole of the

operations

Low/medium 2-5 Public Public Water utilities

Lease contact Contact for

management of

operation and

specific renewals

Medium 10-15 Public Public Water sector

Core P

PP

s

Build-

operate-

transfer

contract

Contract for

investment in and

operation of a

specific

component of the

infrastructure

service

High Varies Private Public/

private Energy sector

IPPs

Highways

Sanitations/ desalination

plants

Concession Contract for

financing and operations and

execution of

specific

investments

High 25-30 Private Public/

Private Airports/ports/rail

Energy networks

Divestiture/

privatization

Contract of

transfer of

ownership of

public

infrastructure to

the private sector

compete indefinite Private Private Telecoms

Source: Izuwah (2011)

Other models of PPP includes:

Build-and-Transfer (BT): A contractual arrangement whereby

government undertakes the financing and construction of an

infrastructure project and after its completion hands it over to the

private sector for operation and management. This arrangement may be

employed in the construction of any infrastructure project, including

critical facility that will be difficult for both community and individuals.

31

Build-Lease-and-Transfer (BLT): A contractual arrangement whereby

the private party undertakes the financing and construction of an

infrastructure project and upon its completion hands it over to the

Government Agency on a Lease arrangement for a fixed period, after

the expiry of which ownership of the project is automatically transferred

to the government agency . This will ensure effective monitoring.

Build-operate-and-Transfer (BTF): A contractual arrangement whereby

the Government Agency contracts out an infrastructure project to the

private party to construct it on a turn-key basis.

Design-Build (DB): The private sector designs and builds infrastructure

to meet public sector performance specifications, often for a fixed price.

Many do not consider DB to be within the spectrum of PPP, Canadian

Council of Public-Private Partnership (2009). It is an aspect of

contracting out and has been the oldest technique involving the private

sector in implementing government projects. Most of the roads,

building and other infrastructure built even in non-liberal democratic

countries are carried out through this method.

Operation and Maintenance Contact (O and M): Here, a private

operator, under contract, operates a publicly owned asset for a specified

term. Ownership of the asset remains with the public entity (CCPPP,

2009). A typical example was the tollgates, which was built by the

32

federal government and contracted out to private companies to operate

and maintain. But unfortunately, they failed to maintain

Design-Build-Finance-Operate (DBFO): This model empowers the

private sector to design, finance and constructs a new facility under a

long-term lease, and to operate the facility during the term of the lease.

The private partner transfers the new facility to the public sector at the

end of the lease term or to have the lease renewed.

Build-Own-Operate (BOO): The private sector finances, builds, owns

and operates a facility or service in perpetuity. The public constraints

are stated in the original agreement and through on-going regulatory

authority. The deregulation of the communication sector in Nigeria

serves as an example of this method. The key players in the sector,

MTN, Globacom, Zain and the rest, build, own and operate their

facilities. This is however done under the supervision and regulation of

the National Communications Commission. The long-term entitlement

to own and operate facility is incentive for developer to invest

significant capital. But the private sector may not construct- operate the

infrastructure and/or service in the public interest since what is left with

the public sector may just be issuing of guidelines.

Build-Own-Operate-Transfer (BOOT): A private entity receives a

franchise to finance, design, build and operate a facility and to collect

user fees for a specified period to amortize investment. At the end of

33

this fixed period, ownership is transferred back to the public sector

authority even if operation remains with the private entity.

Buy-Build-Operate (BBO): Transfer of a public asset to a private or

quasi-public entity usually under contract that the assets are to be

upgraded and operated for a specified period of time. Public control is

exercised through the contract at the time of transfer.

Operation License: A private operator receives a license or rights to

operate a public service, usually for a specified term.

The CCPPP (2009) admits that these are not a complete listing of the wide

variety options in public private partnership. One significant point to note

about these models of PPP is that all are based on temporal or renewable

agreement and the public sector still retains a thread of relationship with

the private organization.

2.1.6 Misconceptions about Public Private Partnerships

(The views of Kwan (1999) is reasonably represented in this section)

Given the numerous forms of public private partnership potentially

available to government, there is some confusion as to what constitutes a

public private partnership. Public private partnerships are often not considered

due to erroneous information based on misconceptions. The most common of

these misconceptions are:

34

Public Private Partnerships are the same as Privatization

Only one form of public private partnership, known as Build-Own-

Operate (BOO) can be described as coming close to privatization. All other

forms require an ongoing partnership between the private and public sectors.

Even Build-Own-Operate involves a form of partnership in that the public

sector can place conditions and regulations on the private partner. One of the

key reasons for considering public private partnership is the ability to

introduce competition in the provision of government services, either between

private firms or between the private and public sectors. Full privatization

merely transforms a public monopoly to a private monopoly such that the

benefits of public private partnership are not realized.

By Entering into a Public Private Partnership Government Loses

Control Over the Provision of Services

By entering into a public private partnership, government does not give

up its ability to implement its policies or regulate the provision of services.

The government establishes the ground rules and has the ability to shape the

public private partnership to reflect its own objectives, policies and

regulations. While the partner make its profit which is the motive of entering

into partnership. It can be argued that the government actually has more

control; in that it has well-defined contractual remedies in a public private

partnership arrangement that it may not have with its own management and

staff.

35

Public Private Partnerships Apply Only to Infrastructure Projects

Public private partnerships can be an effective and innovative way of

delivering a range of government services and facilities. While large

infrastructure projects tend to capture the most public attention, public private

partnership can also be used to deliver services that do not involve capital

projects. Examples include provision of data services, refuse collection and

road maintenance. For instance, ―The 30-year-old Lagos-Ibadan express way

has been handed over by the Federal Government to a concessionaries‖ Bi-

Courtney Highway services Ltd, for effective management of the ever-

busy110 kilometer expressway‖ Adekunle (2011:6).

The Principal Reason for Governments Entering in to Public Private

Partnerships is to Avoid Debt

In the first instance, nobody or organization want to be indebt. The

principal reasons for government becoming involved in public private

partnerships are to benefit from increased efficiency, shorter implementation

time, greater innovation and ultimately better value in the delivery of services

brought about by increased competition. The ability to finance a project so

that the debt is ―off book‖ should not be the prime motivation for entering into

a public private partnership in that the government and the ultimate users of

the service are still responsible for servicing the debt in one way or another.

The emphasis should be on structuring, creative and cost-effective ways of

delivering services, not on creative accounting.

36

The Quality of Service will Decline under Public Private Partnership

Quality of service does not depend on whether the service is delivered

in a traditional manner or through public partnerships. The government has the

ability to stipulate the quality of service to be provided and ensure it can

enforce provisions of the contract dealing with quality control. The nature of

public private partnerships suggests that the quality of service would not only

be maintained, but enhanced. It is in the private partner’s interest to invest in

the service, become more efficient, and enhance the quality of service to

attract more customers or provide additional services to customers.

Government Staff will Lose under Public Private Partnership

Both union and non-union staff sometimes fear public private

partnerships because of potential job loss or reduced wages and salaries. Any

public private partnership agreement will need to reflect the labour laws of the

state and existing collective agreements. Often, the labour representatives are

invited at an early stage of the process to discuss options for service delivery.

Any changes in staffing levels are generally consistent with labour

contracts and occur through attrition rather than layoffs. Many of the benefits

of public private partnerships, such as increased efficiency and higher quality

of services, have been accomplished through former employees of

government. Reasons for increased productivity include increased investment

in employees through training, technology transfer and skill diversification,

Kwan (1999:15).

37

The Cost of Service will Increase to Pay for the Private Partner’s

Profit

Governments sometimes resist public private partnerships because they

believe that the cost of providing the service will increase to reflect the profits

the private partner must realize to stay in business. While the private partner

will need to make a profit, the profit must be earned within the existing or a

lower price for the service. Presumably, government would only enter into a

public private partnership if the price of providing a given service was lower

than if provided by the government, or if a higher level of service could be

provided for the same price by the private partner. (This assumes that the

government is not subsidizing the cost of providing the service). The private

partner’s profit can only be realized through increased productivity or

expansion of service, not through higher prices.

Government can Finance the Cost of Services at a Lower Cost than the

Private Sector

This may not always be the case. The objective of the government

should be to focus on the overall advantages of the public private partnership

arrangement.

There are Only Two Partners in a Public Private Partnership

From the narrow perspective of the public private partnership contract,

there are only two partners. In reality, there are additional parties and interests

that need to be on board as ―partners‖ for the public private partnership to

succeed. These include the customers of the service and the employees who

38

will operate or deliver the service. Public private partnerships cannot succeed

without the support of the end user of the service or the agreement of those

who will ultimately deliver the service. A four-way partnership is required to

successfully move service provision from the public sector to a partnership

arrangement. The following discussion provides an overview of some of the

potential benefits and risks associated with public private partnerships.

2.1.8 Benefits/Advantages of Public-Private Partnerships

PPPs provide an opportunity to:

1. Improve service delivery by allowing both sectors to do what they do

best. Government’s core business is to set policy and serve the public.

It is better positioned to do that when the private sector takes

responsibility for non-core functions such as operating and maintaining

infrastructure.

2. Improve cost-effectiveness. By taking advantage of private sector

innovation, experience and flexibility, PPPs can often deliver services

more const-effectively than traditional approaches. The resulting

savings can then be used to found other needed services.

3. Increased investment in public infrastructure. Investments in hospitals,

schools, highways and other provincial assets have traditionally been

funded by the State and, in many cases, have added to levels of overall

debt. PPPs can reduce government’s capital costs, helping to bridge the

39

gap between the need for infrastructure and the State’s financial

capacity.

4. Reduce public sector risk by transferring to the private partner those

risks that can be better managed by the private partner. For example, a

company that specializes in operating buildings may be better

positioned than the government to manage risks associated with the

changing demands of commercial real estate.

5. Deliver capital projects faster, making use of the private partner’s

increased flexibility and access to resources. A typical example being

the new Murtala Mohammed Airport 2 (MMA2).

6. Improve budget certainty. Transferring risk to the private sector can

reduce the potential for government cost overruns from unforeseen

circumstances during project development or service delivery. Services

are provided at a predictable cost, as set out in contract agreements.

7. Make better use of assets. Private sector partners are motivated to use

facilities fully, and to make the most of commercial opportunities to

maximize returns on their investments. This can result in higher levels

of service, greater accessibility, and reduced occupancy costs for the

public sector.

40

2.1.8 Potential Risks of Public-Private Partnership

As with conventional forms of service delivery, there are risks as well

as potential benefits associated with public private partnerships. The potential

risks include:

(1) Loss of control by Government

Public private partnerships, by their nature, involve a sharing of risks,

benefits and decision making between the partners. Public private partnerships

that involve significant investments and risks by the private partner often

provide for greater involvement of the private partner in decisions concerning

how services are delivered and priced. This often leads to concerns about who

controls the delivery of services. This issue of control needs to be addressed

at the time the project is defined and kept in mind when the contract is

negotiated. In the final analysis, government has the authority and

responsibility to establish servicing standards and to ensure that the public

interest is protected.

(2) Increased Costs

Not all governments consider the true costs of providing services when

establishing their pricing policies for fees for services. For example, the costs

of overhead or administration and depreciation of assets are often not included

in the pricing of individual services. In some cases, there are explicit

subsidies for specific services. The delivery of services through the public

private partnerships requires pricing policies and fees to reflect all relevant

41

costs. This can have the effect of increasing user fees for specific services.

The cost of managing public controversy over increased fees or developing

complex policies for staging fee increases can often negate the value of public

private partnerships for specific services.

(3) Political Risks

The combination of inexperience by government and stakeholder

unfamiliarity with public private partnerships may result in higher political

risks. Governments may wish to reduce potential risks by initially entering

into less complex and better understood public private partnership contracts.

(4) Unacceptable Levels of Accountability

Certain government services are more sensitive than others in terms of

public demand for accountability and responsiveness. With public private

partnerships, the lines of accountability for the provision of services are less

clear to the public than under conventional service delivery. This may result

in public criticism of the partnership arrangement and the private partner, or

require increased involvement of the government in ensuring compliance and

responding to public demands.

(5) Unreliable Service

Private partners may be prone to labour disputes, financial problems or

other circumstances that may prevent them from honuoring their

commitments. Public private partnership contracts should anticipate such

difficulties and put in place measures to deal with them.

42

(6) Inability to Benefit from Competition

Competition among private partners to secure the right to enter into a

public private partnership is an important benefit for government. Competition

leads to innovation, efficiency and lower costs. Governments may not be able

to benefit from public private partnerships if there are only a limited number

of potential private partners with the expertise or ability to respond to a

request for proposals.

(7) Reduced Quality or Efficiency of Service

If not properly structured, public private partnership contracts can result

in a reduction in service quality, inefficient service delivery or a lack of proper

facility maintenance. For example, cost-plus contracts provide little incentive

for the private partner to maintain quality or increase efficiency. Governments

should also consider the life-cycle cost approach in establishing evaluation

criteria for projects or services.

(8) Bias in the Selection Process

As with conventional forms of service delivery, there is always the

potential for government to be accused of bias in selecting proponents. This

may be more prevalent with public private partnerships given that ―low bid‖

may not always win the contract if the government has established other

criteria (e.g., value for money). The potential for accusation of bias can be

reduced through well-developed policy and procedures, and by ensuring

transparency in dealing with potential private partners.

43

(9) Labour Issues

Even though collective agreements and labour laws apply to public

private partnership arrangements there could be adverse reaction from labour

unions or government staff.

2.1.9 When Should Public-Private Partnership be considered?

Generally, most services provided by government could benefit from

bringing the strengths of the private and public sectors together. However,

PPP may be less suitable for government services to which access cannot be

restricted (such as services with ―public good‖ characteristics, including law

enforcement and environmental protection). PPP is also less suitable for

essential services (such as policing, fire protection and other emergency

services). Government tends to be more receptive to the provision of more

specialized services such as utilities, health, education, transport services etc.

Aspects of Services Delivery that Lend Themselves to Public Private

Partnerships are:

Project design

Project management

Construction and procurement

Financing

Operations and management

Maintenance

Marketing of services

Communications

44

2.1.10 When to partner with the private sector

Governments can consider partnerships with private sector where any of

the following circumstances exist:

The service or project cannot be provided with the financial resources

or expertise of the government alone

A private partner would increase the quality or level of service from

that which the government could provide on its own

A private partner would allow the service or project to be implemented

sooner than if only the governments were involved.

There is support from the users of the service for the involvement of a

private partner.

There is an opportunity for competition among prospective private

partner in the provision of services or a project.

The output of the service can be measured and priced easily

The cost of the service or project can be recovered through the

implementation of user fees

The project or service provides an opportunity for innovation

There is a track record of partnerships between government and the

private sector

There are opportunities to foster economic development.

45

2.1.11 Critical success factors for public-private partnership

Public-private partnership offers Enugu State government a hung relief

from the biting effects of the ongoing global economic crisis even as it gives

the private sector a greater stake in the management of its economy,

specifically in the area of infrastructure provisioning and management.

Neo-liberal scholars have contented that the private sector offers

developing economies the best prospects for rapid economic growth if allowed

to operate in competitive market conditions, (Moran, 1986) in (Adekunle,

2011:7).

However, as promising as PPP is as a strategy of economic growth and

infrastructure development, its efficacy in the state is contingent on the

availability of certain success factors without which the gains derivable from

the initiative tend to be elusive:

(i) Strong and Functional Institutional Framework: This is the primary

success factor for any PPP arrangement. In this context institutions are

conceived as sets of formal and informal rules that govern the actions of

public stakeholders in the PPP framework. The essence of strong and

functional framework is to ensure public sector competence and expertise that

will guarantee efficient and effective detailed preparation of projects and

adequate implementation of transactions. The existence of such institutional

framework would leaure the private investors to provide the huge financial

investment, infrastructure financing requires. The relative security currently

46

enjoyed in Enugu State more than other Eastern states is one of the major

factors that lure private investors into the state.

(ii) Political will and Transparent Policy: A Successful partnership can

only result if there is commitment from the ―top‖ of both the government and

private sector organizations to work together. The most senior officials must

be seen as willing and active in supporting the concept and take aggressive

leadership role in the development of each given collaborative venture. The

administration of Governor Sullivan, by all ramifications has demonstrated

the willingness and aggressive leadership in adopting various PPP

arrangement in the major sectors of the state economy.

Also, in reaching any PPP agreements, the major stakeholders (workers,

customers, public and private partner) should be involved in the process, so as

to allay fears of job loss and prohibitive user charges. This inclusive process

according to Adekunle (2011:8), ―will help in preventing post-concession

protests as witnessed after the handover of Tafawa Belewa Square, Lagos and

the old Domestic Terminal of Murtala Mohammed Airport to new private

sector managers‖.

(iii) Legal Framework for Partnership: There should be a legal/statutory

framework for the implementation of PPP within the state organizations.

Sometimes, state laws may limit clarity regarding the formation and

management of public and private sector partnerships. Without clarity, most

collaborative partners view it as very risky ventures and cannot take

47

advantages of this innovative and creative solution. Therefore a functional

legal framework is essential to enable private sector participation in an

efficient and effective manner.

(iv) Access to Capital: Successful partnership requires the availability of long

tenor private capital. It is the provision of huge capital by the private sector

partners that enable it finance public sector infrastructure which the

government alone cannot provide and without which the private partner

cannot successfully partner with the public sector.

Therefore, the first and foremost determinant factor for successful

partnership is the availability of capital.

(v) Effective Communication with stakeholder: PPP projects affect more

people than those directly involved in the projects. The need to ensure that all

the stakeholders; employees and government, Labour unions, proportion of

the public receiving the service (customers), the press and any other relevant

interest groups are carried along is imperative. For successful partnership, it

is important to communicate openly and candidly with all the stakeholders to

minimize misconceptions and unwarranted conflicts arising thereof.

(vi) Effective Monitoring: Once a partnership is established, there is the need

for both partners to develop a monitoring strategy to ensure that the project is

on course. The monitoring of on-going projects performance ensures success.

48

(vii) An Adequate Plan: The leadership of the partnership must be focused

and must be at home with the well crafted plan. A carefully developed plan

will substantially increase the probability of success of the partnership.

(viii) Review of Experiences with Public-Private Partnerships: In several

countries – Brazil, India, Kenya, Mexico, and South Africa, for example,

public sector organization are becoming increasingly reliant on collaboration

with the private sector and civil society to strengthen innovative capacity and

respond to the needs of the rural poor.

Results have been encouraging and suggest that such collaborations are

an important step in helping to achieve the Millennium Development Goals,

particularly the goals of eradicating extreme poverty and hunger and

developing a global partnership for development. The emphasis here is that

experiences from existing PPP arrangements in developed and developing

countries can help countries like Nigeria and Enugu State who are just

beginning to experiment with PPP to inspire new arrangements for

development.

2.1.12 Public-Private Partnership Practice in Nigeria

Public-Private Partnership (PPP) in the provision, maintenance and

management of social services and building of infrastructure has been in

practice in developed countries like USA, as far back as 1676, a century

before the American Revolution, Adekunle (2011:5). In Africa, it is a

relatively new initiative.

49

For the Nigerian State, it is a post-transition phenomenon. The post

1999 reform project, initiated by the Obasanjo Presidency, represents a

fundamental economic ideological shift from the socialist character of the

Nigerian economy to a full-blown free market economy with neo-liberal

policies such as deregulation, privatization, monetization and right-sizing of

public bureaucracy featuring prominently on the policy agenda of the

government, Adekunle (2011:5). The ideological shift of Nigerian economy

from the socialist character to full-blown market economy was borne out of

necessity. Prior to the inception of the 1999 civil rule and the institution of

the market reforms, several state utilities were organizationally crippled by

corruption and inefficiency and constituted a drain pipe to the national

treasury.

It was in attempt by the Obasanjo administration, to revamp and

restructure Nigerian economy that the neo-liberal economic policies of the

PPP, Privatization and the rest were initiated. According to Adekunle

(2011:5) two basic assumptions underpin PPP initiative in Nigeria:

1) More efficient social services delivery by the private sector which is

imbued with better risk management; and

2) Declining revenue accruing to government occasioned by economic crisis

currently troubling the global economy. He further identified four (4)

major areas PPP can be delineated from the current operation of the

initiative in Nigeria.

50

(i) Infrastructure development and management

(ii) Revenue generation in which private sector initiations collect revenue

on behalf of the government (particularly state and local),

(iii) Waste management, and

(iv) Technical management (for instance, capacity building in terms of

training of public sector workers in areas like Information and

Communication Technology (ICT) and tax administration.

Of all the variance of PPP, earlier identified in (section 2.1.5),

concessioning appears to be the dominant type currently in operation in

Nigeria. This fact is underscored by the setting up of the Infrastructure

Concession Regulatory Commission (ICRC) by Late President Umar

Yar’adua. However, the Act that brought ICRC into being was signed into

law in 2005 by President Olusegun Obasanjo.

2.1.14 Infrastructure Concession Regulatory Commission of Nigeria

(ICRC)

Since of all variants of PPP, concession is believed to be the dominant

one in practice in Nigeria. Therefore, the need to re-examine the ICRC as the

commission responsible for the implementations of concessions in Nigeria,

the philosophy behind the policy, legal framework, powers of the ICRC,

scope of concession, dispute resolution, and notable PPP transactions in

Nigeria.

51

ICRC, drives and regulates infrastructure concessions in Nigeria. The

commission was set up in 2008, Ohia (2011:3). A concession, simply put is a

government grant for specific privileges. As defined in the ICRC Act 2005,

infrastructure concession means:

A contractual arrangement whereby the project

proponent or contractor undertakes the

construction, including financing of any

infrastructure facility and the operation and

maintenance thereof and shall include the supply of

any equipment and machinery for any infrastructure

and the provision of any services”, (ICRC, 2005).

Basically, infrastructure concession allows participation of the private sector

in financing the construction, development, operation and maintenance of

public infrastructure, development project or network for a stated period. The

concession process allow private investors and operators to inject much

needed capital into upgrading and maintaining infrastructure. In some types of

infrastructure concessions, the cost of using the service is borne exclusively

by the users of the service. In other types, notably the ―private finance

initiative‖ capital investment is made by the private sector on the strength of a

contract with government to provide agreed services and the cost of providing

the service is borne wholly or in part by the government.

In practice, a private sector consortium forms a special company called

a ―special purpose vehicle (SPV) to develop, build, maintain and operate the

asset for the contracted period. In cases where the government has invested in

the project, it is typically (but not always) allotted an ―equity share‖ in the

52

SPV. The philosophy behind this policy is to meet the challenges of

developing and maintaining critical infrastructure by attracting massive

private sector led investments beyond the means available to government.

(A) Legal framework

The legal framework for the operation of infrastructure concessions in

Nigeria is principally the Infrastructure Concession Regulatory Commission

(Establishment, etc) Act 2005 and the Public Procurement Act 2007. These

laws set out the requirements for competition and private sector participation

in all public procurement as well as specify requisite approvals for all PPP

contracts.

(B) Powers of the ICRC

Essentially, the ICRC is empowered to:

(i) Provide general policy guidelines, rules and regulations for the

operation of PPP projects in Nigeria.

(ii) Take custody of every concession agreement entered into by the

Federal Government and any of it’s agencies.

(iii) Ensure efficient execution of concession contracts.

(iv) Ensure strict compliance both with the Act and with the terms of

the concession contract.

(C) Scope of concession

Under the ICRC Act 2005, the scope of opportunities for investment in

infrastructure in Nigeria exists in virtually every sector of the economy: power

53

plants, highways, seaports, airports, canals, dams, hydroelectric power project,

water supply, irrigation, telecommunication, land reclamation, environmental

remediation and clean up projects, housing, inter state transport systems.

Industrial estates or township development, housing, government buildings,

tourism development, trade fare complexes, warehouses, solid waste

management, satellite and ground receiving stations, ICT networks and

database infrastructure, education facilities, health facilities, sewerage,

drainage, dredging and other infrastructure and development projects as may

be approved, from time to time, by the federal executive council (FEC).

At this point, it is important to note here that types of concessions

equally overlaps as types of PPP earlier outlined; for instance:

Build, Operate and Transfer (BOT)

Build, Operate and Own (BOO)

Build, Transfer and Operate (BTO)

Build, Own Operate and Transfer (BOOT)

Design, Build, Finance, Transfer (DBFT), etc.

The key differences between these various concession arrangements lie in the

nature and extent of the risk, they transfer from the public agency to the

private concessionaire.

(D) Dispute Resolution

The settlement of disputes is an important element in Infrastructure

Concession Contracts. Private parties (Concessionaire, financiers and

54

contractors) feel encouraged to participate in PPP projects when they have the

confidence that any disputes between the contracting authority and other

governmental agencies and the concessionaire, or between the concessionaire

and other parties (for example, the users or customers of the facility), or

between the private parties themselves can be resolved fairly and efficiently.

2.1.14 Contract Agreement

This refers to the memorandum of understanding between the parties

involved in a PPP project regarding risks, responsibilities and rewards. It helps

to stream line administrative processes of a PPP project, facilitates

implementation processes and project realization.

Generally, acceptable terms of a PPP agreement must include a

preamble, the interpretation and definition of clauses for purposes of

identification of the parties, their responsibilities and clarity of the transaction,

Obozuwa (2011:6).

In the event of any misunderstanding, it is the responsibility of the legal

framework for dispute resolution acceptable in the country involved to give

fair interpretation to the areas of misunderstanding in the contract agreement.

2.1.15 Contract Management

The contract management process helps to fix responsibilities, allow

timely response to any deviation in project implementation or operation from

the provisions in the contract agreements and thus prevent disputes between

the parties at later stages.

55

The main tasks of contract management according to Obozuwa

(2011:7), includes:

(i) Formalization of management responsibilities at different levels

(ii) Monitoring of project delivery (construction phase)

(iii) Management of variations during project implementation (time

schedule, change of design, specification, etc) by (implementing

agency)

(iv) Monitoring of operational aspects and services outputs after project

implementation (implementing agency and regulator)

(v) Maintaining the integrity of the contract (implementing agency)

(vi) Fiscal obligations of the government (concerned ministry of

government)

(vii) Financial matters related to debt servicing (concerned bank of the

government).

2.1.16 Challenges of Public-Private Partnership in Enugu State and

Nigeria

1. Corruption: corruption is a major problem in Nigeria. As a respected elder

statesman once lamented, it is not just that officials are corrupt but

corruption has almost become official. However, much has been made of

the issue of corruption. Corruption is not exclusive to Nigeria. Many

monumental corruption cases making headlines around the world today do

56

not involve Nigerians. Two agencies (EFCC and ICPC) are also combating

corruption in Nigeria full time.

2. Multiple Taxation: A curious tax regime, internal revenue generation

competition, and the multiplicity of Ministries, Departments and Agencies

(MDAs) in Nigeria often result in multiple taxes which take a heavy toll on

business and investment.

3. Political Instability: Political instability and insecurity was more prevalent

in the period before Sullivan’s administration. This raises the risk of

administrative expropriation by successive government. It also often

results in fear of the ability of government to honour its contractual

obligations or counterpart funding obligations. This discourages private

investors.

4. Economic Instability: Economic instability which is the cumulative effect

of political instability, inflation and/or policy inconsistencies for which our

country is known also raises the red flag in the minds of serious investors

and constitutes a bad advertisement for prospective investment in a capital

intensive area like infrastructure.

5. Insecurity: Insecurity remains a major challenge. Nigeria is a huge country

with a turbulent political history. Although the country has enjoyed

relative stability since 1999, religious intolerance, intense competition for

political power, Niger Delta militancy, kidnapping for ransom, road safety

issues and, more recently, terrorist-style bombings have led to substantial

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unease among the citizens and consternation among prospective investors.

Although this has not been experienced in Enugu State, but it has generally

affected investment climate in Nigeria especially when foreign partners are

involved.

6. Negative Perceptions and Stereotyping: Nigeria and Nigerians are often

victims of negative perceptions and stereotyping by foreigners. Every

country has within its population the good, the bad and the ugly.

Unfortunately, bad eggs in Nigerian communities at home and abroad

create an image problem for the nation which is foisted on the silent

majority of law abiding citizens who, as a consequence, are exposed to

harassment and hostility. Nigerians are also guilty of self condemnation.

We easily say negative things about our country in self-righteous

indignation. In many online forums, Nigerians write revolting things about

Nigeria without caring about who reads it. This trend is unknown among

the citizens of any other nation who are circumspect about what they write

or say about their country no matter the circumstance. Sullivan’s

administration has given Enugu State a good face lift which has attract

positive commendation from the sons and daughters of the state but the

wholistic comment on Nigeria has to significant extent precluded the

reality to the wider world.

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7. Lack of Access to Financing: Nigerian banks are in the main not investor

friendly. Interest rates are high and even to access loans with the high rates

involves excruciating processes and hard to meet conditions.

8. Lack of Investment Awareness and Information: There is lack of

international awareness of investment opportunities in Nigeria. The ICRC

Act 2005 only allows the Commission to publish the list of projects eligible

for infrastructure concession contracts ―in the Federal Gazzette and three

national newspapers having wide circulation in Nigeria and such other

means of circulation‖. Invariably, the international media on which most

prospective foreign concessionaires depend for information are ignored.

9. Crime: Nigeria has a record of violent criminal activity and poor crime

detection for which it is classified as unsafe by foreigners. However, the

crime rate in Nigeria relative to the population is not higher than the global

average. The crime rate in Nigeria may in fact not be as high as the crime

rate in South Africa but Nigeria receives more negative publicity which as

well affect the security image of Enugu state, irrespective of relative

security enjoyed by the inhabitants of the state, achieved by Sullivan’s

administration.

2.1.17 Public-Private Partnership and Privatization: A Comparism

The essence of this section is to further delineate that public-private

partnership is not the same as privatization and that PPP is healthier to

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Nigerian economy and that of Enugu state than privatization which was

massively carried out under Obasanjo/Atiku administration.

As earlier noted in this work, that it is only one form of PPP, known as

Build-Own-Operate (BOO) can be described as coming close to privatization

but not privatization because it involves a form of partnership in that the

public sector can place conditions and regulations on the private partner.

Usually, PPP introduces competition in the provision of public services, either

between private firms or between the private and public sectors while full

privatization transforms a public monopoly to a private monopoly, which

marks privatization as an exploitative and predatory economic mechanism.

This is more critical, especially when the private operators are foreigners. This

happens more in a situation whereby the local businessmen lacks the capital to

purchase the infrastructure marked for sale. By this method also, foreign

capital subverts the sovereignty of the privatizing country, thereby re-

enforcing neo-colonialism. Of course, when a country has sold out its critical

sectors to foreign merchants, invariably it has lent itself to the control and

dictates of masterminded market force.

Under privatization all the risks inherent in the business rest with the

private operator, as such; the private operator can do everything possible

covert and overt to maneuver possible risks even to the detriment of the host

economy in order to maximize profit. Profit at all cost is the driving impetus

of every private enterprise. Privatization breeds and sustains corruption. No

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wonder claims of corruption trailed most of the privatization carried out in

Nigeria between 1999-2003, with Atiku Abubaka (VP) as the Chairman of

Bureau of Public Enterprise (BPE). However, under PPP all the risks,

responsibilities and reward inherent in the business are shared between the

public and private partners based on the terms of the contract. In this case,

there is no undue pressure on the private partner to begin to cut corners.

Moreover, both partners are expected to operate within the limits of the terms

of the contract.

Also PPP enables the public sector to retain fair and legal ownership of

the assets, thereby giving the government sufficient control of its economy.

So far, Nigeria has experimented with privatization and now Public-

Private Partnership, this paper insist and agrees with Fashola, (2007:6), ―the

stark reality is that Public-Private Partnership offers the only realistic route to

the actualization of Nigeria’s potentials is likewise Enugu State.

2.1.18 The Future of Public-Private Partnership in Enugu State

From the inception of the administration of Governor Sullivan in 2007

till date, there is a radical improvement in infrastructural development in

Enugu State, due to good management, prudent utilization of the meagre and

scarce resources of the state and dynamic forms of public-private partnership

in practice by the state.

In the inaugural address of the second tenure of Governor Sullivan, by

Chinedu Nebo on May 29, 2011, he noted that,

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“the past four years showed in glaring colour and

beauty of the face of good and responsive governance.

We watched our dear Enugu state go from wanton

criminal neglect to a place of nurture and beauty.

Compared to most other states, Enugu is one of the

poorest in terms of fiscal revenue. Prudent, accountable

and judicious utiliztion and deployment of resources

have however, made Enugu State Number one (1) in

terms of value acquired from available resources”, Nebo

(2011: 5).

He further reiterated that; there is a healthy, holistic, metamorphosis going on

in Enugu State now. Local Government now function as partners in

development, pooling resources together with the state government in

bringing roads, electricity, health, etc nearer to the people. Hence, more

entrepreneurs are looking at Enugu as a good business environment.

Under the PPP adventure, Enugu State government has awarded

contract worth over eight hundred and fifty million naira (N850m) for the

electrification of twenty six (26) communities in parts of seventeen local

governments areas of the state. The contract is financed by the state

government and the benefiting local government areas at 60:40 percent ratio,

(ENSG official website). At the national level, concessioning is the dominant

PPP practice by the federal government. Beyond concessioning, Enugu State

government engage in divers forms of partnership, ranging from state - local

government partnership, partnership with Non-governmental organisations

(NGOs), faith based organisations and private organisations. Even local

governments in the state, on their own capacity engage in PPP for effective

service delivery. For instance, Nsukka local government under the leadership

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of Anthony Ugwu is symbolized by the slogan ―partnership that works‖

which is a derivative from PPP concept. As a matter of commitment and

viable option for infrastructural development, there has been one or more

forms of PPP arrangement in the four (4) point agenda of Sullivan’s

administration since inception.

The fact is that, Enugu State government, just like the federal

government is down on earth with PPP as the most appropriate optio