NIGERIA NEEDS REPUTABLE FIRMS TO MANAGE ITS ROADS
Osiegbu Azuka argues for the concession of critical roads to reputable global players
Roads are critical for development. They are the basic, most affordable transport investment with the widest reach, especially for a country like Nigeria which has a huge landmass. But, anyone who plies our roads knows that they are in very poor shape. Compared to some of its peers in the developing world, Nigeria’s road network of about 195,000 is grossly limited. According to data from the CIA World Factbook, Brazil had 2,000,000 km of roads as at 2023 and South Africa, 750,000 km.
I have been privileged to drive on most of our roads, whether the Federal Government Trunk A roads or States Trunk B roads that are supposed to be well-paved. Most of them have become seasonal, even some Trunk A roads are impassable during the rains on account of potholes and gullies. This has an impact obviously on vehicles, travel time and the economy.
Nigeria’s road stock is both inadequate and poor because of the fact that most roads are badly built and maintained on account of poor funding. This is why a typical road project in Nigeria almost takes forever to complete. For instance, the Lagos-Ibadan Expressway has been in construction since 2013 after its concession agreement was revoked, against the initial agreement that it will be ready in three years.
Because road infrastructure is financed largely from the annual budgets in Nigeria there is hardly enough money to build quality roads that are durable. The 2024 budget allocation for the Works Ministry is N657.22 billion (less than a billion dollars). Of this sum, contractors being owed will also be paid and the rest spread so thinly that it is doubtful that any outstanding road projects will be completed in 2024.
At the budget defence last December, the Minister of Works, Engr Dave Umahi, made a robust plea to raise the budget to N1.5 trillion (just about $2 billion). Even if the ministry gets that amount it is still a drop in our ocean of needs. It is also small in comparison to what many forward-thinking countries are spending. France, for instance, spent about $8.8 billion on roads alone in the year 2020. China’s ambitious Road and Belt initiative spanning three continents will cost between $4 and $8 trillion dollars when completed.
To sidestep the financing problem, the federal government in 2019 introduced the Road Development and Refurbishment Investment Tax Credit Scheme to encourage private-public participation in the construction and maintenance of key road infrastructure in Nigeria. Under this, corporate players make tax-deductible investments in building and rehabilitating public roads. Dangote and MTN have been enlisted. Though commendable, the money still comes from the federal purse because it is tax revenues spent forward. Focus should be on concession of critical roads to reputable global players in the business, who can mobilise finance and expertise.
Generally, there are three main types of concessions that can be undertaken but the most popular which will not cost the government money is the BOT (Build Operate and Transfer), which applies in many top-tier road projects around the world. If well managed, we can get solid roads that add value to the economy. A typical road that is well constructed lasts between 18 and 25 years, while a typical concession agreement lasts from 15 to 30 years.
Nigeria already has the legal framework to operate concessions with the federal government’s Infrastructure Concession Regulatory Commission Act 2005 for projects of this nature at the federal level. Some states too have their own laws. Under these legal frameworks we have seen some developments like the Lekki-Victoria Island road corridor undertaken by Lekki Concession Company, which invested in expanding the road and is licensed to toll it for 30 years after which the assets will be transferred to the Lagos State Government.
Though the Lagos-Ibadan concession to Bi Courtney in 2009 failed for a number of reasons, it should not close the door to concession arrangements that can scale up our infrastructure assets. The first step is to get the economics right. Every road is an economic asset. Given the fact that roads are Nigeria’s main mode of travel and movement of goods, most of the major roads have high traffic volumes. For instance, the Lagos-Ibadan highway, which is Nigeria’s busiest highway, is reputed to have an average of 250,000 Passenger Car Units (PCUs) daily, which means a total of a quarter of a million vehicles plying the road! Other roads like Sagamu-Benin-Onitsha, Aba-Port Harcourt, and Abuja–Kaduna also have significant traffic volumes and will have more in a better shape.
The economic loss from bad roads such as vehicle wear and tear and man-hours lost in traffic make the costs of tolls pale into insignificance. There is also evidence that Nigerians are not really worried about paying for service; our worry is paying and not getting service. Even up to 2003 when toll gates were on federal roads there were no agitations against them; they were removed because of corruption issues as the huge sums collected could not be accounted for as the roads were badly maintained.
Moving to concession therefore is for an efficient private sector-led alternative. The only challenge is for the government to attract globally-reputable operators in the sector who can bring in the funds to develop our infrastructure. Governments at all levels must avoid the temptation to simply concession roads without doing due diligence on the financial and technical capacity of the concessionaire, a case in point being the announcement in October last year that the Lagos-Abeokuta highway had been handed over to the Ogun State government to rehabilitate and toll. Pray, what value can a state government that does not have enough funds to provide basic services, bring to such a project?
Government should be looking to reputable global players in this sector. For instance, Cintra SA is one of the leading private developers of transport infrastructure in the world, managing 26 toll roads and managed-lane concessions over 2,072 kilometres in Canada, the U.S., Spain, the U.K., Portugal, Ireland, Greece, Slovakia, Colombia and Australia. Another concessionaire, Mundys, has a total of 43 concessions covering over 8,680 km of roads in 11 countries in Asia, Europe and America. There are many more and they bring expertise, finance and new opportunities. There is nothing against local companies, so long they show a detailed financial plan and construction expertise, else we will be struggling to make progress the way the country is groping in the dark even after privatizing our power sector assets.
Good roads are a must for any country to develop its economy. A well-articulated and executed road initiative will raise efficiency, and Nigeria’s economic and social development. Like they say, the best time to start is yesterday, the next best time is now.
Azuka, a Marine Transport and logistics specialist, writes from Concordia University, Montreal, Canada
