RECIPE FOR SUCCESSFUL PPP
Wale Babalakin argues the need for government to abide by contractual agreements, writes Abdul Okwechime
Dr. Wale Babalakin, Chairman, Bi-Courtney Ltd, has identified sincerity as the biggest challenge to the public-private partnership (PPP) initiative of the federal government. He defined PPP as “a contract where a public function is executed by a private concern on agreed terms. And as a reward for its participation, the private sector is remunerated usually through the project for its service in accordance with the Agreement”. Babalakin was delivering a lecture on the “Constraints of Implementing Infrastructure Projects Through Public- Private Partnership (PPP), at the Banquet Hall of the Nigerian Air Force Conference Centre and Suites, Abuja over the weekend.
As the guest lecturer at the Eighth Fellowship Conferment Lecture of The Nigerian Society of Engineers, Dr. Babalakin observed “that government on its own cannot fund all responsibilities of government from its own resources”. Breaking this down and using the 2018 budget of the federal government as benchmark, he said “the total amount of money available for critical infrastructure like roads, power and housing is about N550billion”. He noted rather sadly that this amount can barely complete one road out of over 40 roads needing interventions. Even more worrisome is the complete inability of government to sustain the few roads infrastructure it manages to build due to “poor planning and maintenance”.
This underscores the Imperative of PPP in a developing economy such as ours. However, in his own words, “for PPP to work, it has to be created and monitored by an institution that is sufficiently empowered to act as an arbiter between the government and the investors”. Such a body or commission, according to him, must be empowered by law to act independently as an arbiter between government institutions and private investors.
He noted that the Infrastructure Concession and Regulatory Commission (ICRC) is a good idea. How- ever, for it to achieve a meaningful impact, Babalakin reiterated that once a PPP transaction is identified by the appropriate government institution, “the parameters for its implementation should be left to the ideal ICRC”. He insisted that “the ministry and parastatal must completely step aside to enable ICRC create an enduring transaction that will be just and fair to all parties concerned”. Babalakin’s experience shows that allowing the ministry or parastatal to continue to play a role in the implementation of PPP projects “creates serious conflict of interest”. Most of the PPP projects in Nigeria have failed due to these interferences. What we have on ground today, Babalakin says, “is a PPP that functions at the benevolence of the respective ministries and parastatals”. And he should know.
Once the biggest player in the PPP in Nigeria, Dr. Babalakin shared his experiences with his audience made up of mostly engineers. From the on-going issues of discrepancies meted out by the supervising ministries to the PPP at the Murtala Muhammad Airport in Lagos, to the lingering Lagos-Ibadan Expressway construction that was arbitrarily taken from him and other huge experiences he encountered while pioneering PPP in Nigeria, Wale Babalakin sees government’s impunity at flouting basic terms of agreement as a major issue in forging or upholding agreements in a PPP. He gave the Igbeti Marble case example where the revocation of the laudable project not only ruined Ashamu, the initiator of the idea, “Igbeti Town was denied economic development and Oyo State is the poorer for it”, he said. He pointed out how successive governments of Lagos State interfered and killed the larger dream of putting up a world class housing estate for Lagosians in the Victoria Garden City. He was a major player in this project where government meddlesomeness aborted the dream.
However, the Murtala Muhammed Airport Terminal Two (MMA2), described as the only working airport terminal in Nigeria today, appears a most traumatic PPP experience for him. It is here that the grantor of the concession is blatantly violating the terms of agreement by the day. First, the grantor, Federal Airports Authority of Nigeria (FAAN) “contrary to the executed agreements, started to run another terminal next door to the MMA2, thus taking away 60% of our traffic”. FAAN actually created a new terminal now called the General Aviation Terminal (GAT). The erudite legal scholar lamented that “in the world of PPP, this action is totally unimaginable. A situation where the landlord or grantor of a concession is in competition with its tenant for the same traffic”. And in this instance the grantor is using “government money to compete with private capital. This is the most unfair scenario and discouraging to investors”. Even when the highest courts in the land gave judgments to uphold the true position, the grantor disregarded all the courts decisions. The breach has continued and according to him, “the damages that have accrued to us till date is now in excess of N250billion”.
Babalakin pointed out that “this action of impunity portrays our country in a very bad light and speaks clearly of our lack of interest in developing infrastructure through private capital”. More importantly, he says “it is a major discouragement to any discerning investor. No serious investor will come to Nigeria for a long term project without examining what happened to previous investors “. He reasons that “we will be unable to attract investors who are interested in placing their capital in projects that will benefit Nigerians when they realise that even when you come through after the unduly long legal process, the authorities can still decide not to honour the decisions of the tribunal entrusted with the resolution of disputes”.
If the MMA2 example was confounding, the Lagos-Ibadan Expressway’s case is mind-bending. The contract was terminated via a news media announcement without prior hint on the action and to the chagrin of all investors involved, particularly the foreign partners who till date have not been able to come to terms with such level of executive impunity.
More ridiculous is the fact that government through the Ministry of Works and contrary to its evidence on oath, “had signed another concession agreement which was not advertised or properly processed”. Strangely enough, this illegal concessionaire was paid N50billion from government coffers to execute the project, while Bi-Courtney, Dr. Babalakin’s firm and the legal concessionaire were working with their private capital.
To address these interferences and impunity, Babalakin says “there is an urgent need for the government to invest considerably in the judiciary”. Expatiating, Babalakin says, “it is important that commercial disputes are resolved promptly if we are to regain the confidence of the investing public, especially the international community”. Reason is that the best transaction can go wrong, but with an “appropriate disputes resolution mechanism, the pains of such a failure will not be prolonged”.
He summed up: “Orders of arbitral panels and courts must be obeyed promptly”. He warned that “enforcing court orders is not discretionary, it is compulsory. This is very crucial if we are going to commence the journey to become a serious player in the world of project infrastructure”.
The night also witnessed the conferment of Fellows of the Society to some outstanding 28 engineers to whom Babalakin threw a challenge: to take the lead from the foreign contractors in the infrastructural turn around of Nigeria. He said, “I consider it very sad that 58 years after independence, there are no Nigerian constitution companies that can compare favourably with the foreign companies like Julius Berger. You have to accept the challenge”, he said, adding: “I seize this opportunity to call on the Nigeria Society of Engineers to lead from the front and use its knowledge of engineering to contribute extensively to the development of Nigeria.”