MOFI: Private Sector Participation Essential to Revamping Nigeria’s Ailing Infrastructure

The Ministry of Finance Incorporated (MOFI) has said that for Nigeria to revamp its ailing infrastructure, the public and private sectors must embark on strategic collaborations.

The organisation in its quarterly knowledge series, noted that this had become even more imperative due to the prevailing high debt levels and macro challenges which have placed significant limitations to government’s capacity to provide funding for infrastructure investments.

“Private Sector participation through Public-Private Partnerships (PPPs) and other structures are essential to ensure much needed private sector support to drive the investments and development activities needed to build Nigeria’s infrastructure.

“Hence finding innovative, efficient and effective ways to partner with the private sector will play a critical role for Nigeria to meet its infrastructure development targets,” MOFI stated.

It encouraged private sector participants to actively engage in partnerships with the government to drive national development, stressing that these collaborations provide private entities with access to large-scale infrastructure and service projects that may otherwise be difficult to undertake independently.

According to MOFI, by partnering with the public sector, private organisations benefit from a structured framework for risk-sharing, mitigating financial, operational, and project-related risks.

Furthermore, such partnerships, it said, can come with the added advantage of government support, including potential subsidies, tax incentives, or guarantees, which could significantly reduce project costs and enhance profitability.
“Engaging in PPPs not only contributes to national development but also creates substantial growth opportunities for the private sector.

“Nigeria, in the adoption of these recommendations, can create a more conducive environment to attract private investment and expertise to drive infrastructure development.

“Additionally, by leveraging the strengths of both the public and private sectors, PPPs can deliver high-quality, efficient, and sustainable infrastructure solutions,” it added.

As Nigeria’s population continues to grow, increasing by c.88 per cent in the last two decades, the organisation noted that the inadequacies of its infrastructure, one of the major hindrances to economic growth and development, has become even more evident.

Despite being one of Africa’s largest economies, the country, it said, struggles with inadequate transportation networks, unreliable power supply, and insufficient water and sanitation facilities.

These deficiencies, according to MOFI, limit business operations, restrict access to essential services, and reduce the quality of life for millions of Nigerians, and overall, negatively impacts economic growth.

Addressing this challenge, it pointed out, is therefore crucial to the way of life of the average Nigerian and mitigating efforts will require addressing the infrastructure gap in the country. 

Quoting the World Economic Forum (WEF) it stated  that the world will be faced with an infrastructure gap of $15 trillion by 2040.

“In Nigeria, the story is not different as the country has limited access to electricity and insufficient road networks, which prevents domestic economic integration that would facilitate the wide-scale utilisation of the country’s large market size,” it added.

It explained that the PPP model can take three major forms and other variations, including the Design-Build-Finance-Operate            (DBFO), Build-Operate-Transfer (BOT), and Concession agreements. 

MOFI added that private sector participation encourages the need for proper project preparation.

“By requiring detailed planning and analysis from both public and private stakeholders, they promote accountability and ensure that projects are thoroughly vetted before implementation, increasing their likelihood of success.

“For countries to fully leverage the potential of private sector participation in addressing infrastructure needs, through PPPs and other applicable structures, several key steps can be taken to create a more conducive environment for their success.

“First, strengthening the legal framework governing PPPs is essential. A robust and transparent legal foundation provides clarity and protection for all parties involved, ensuring smoother execution and reducing uncertainties.

“In addition to legal reform, it is critical to streamline the approval processes by developing the right framework, which can significantly reduce delays and bureaucratic hurdles, making PPPs more efficient,” it said.

Following the Federal Government of Nigeria’s (FGN) efforts to encourage and regulate PPPs and address the infrastructure deficit in Nigeria, it said  the Infrastructure Concession Regulatory Commission (ICRC), guided by the ICRC Act 2005, was established in 2008.

It added: “The ICRC ensures that robust, transparent, efficient, equitable and consistent processes are developed for managing the selection, development, procurement, implementation and monitoring of PPP projects and that the advantages of PPP are well appreciated by potential investors and other relevant stakeholders.

“Benefits of the commission’s legal, institutional and regulatory framework for PPPs include: Facilitating investments in PPP arrangements, reducing transaction costs on the part of the public agency, ensuring appropriate regulatory controls, enabling the efficient and speedy resolution of contract disputes and making PPP arrangements possible and functional.”