Course: Public-Private Partnerships.
Lagos State can be described as the economic capital of Nigeria as it is the nation's largest urban area.
Population figures of Lagos State as at the 2006 census was estimated at 17,500,000 people, with a projected population of 25,000,000 by the year 2025 ,with a land size of about 3,577 sq m it is one of the most densely populated cities in the world.
45% of Nigeria's skilled manpower reside in the city of Lagos and it houses the nations principal commercial sea and airports.Its transportation system is highly inadequate to contend with estimated passenger traffic figures of 7,000,000 per day,It has limited Infrastructure facilities for non-motorized transport and a railway system that caters for only 8,000 passengers a day .
Taking all this highlighted figures into consideration ,vehicular traffic is arguably one of the worst problems faced by its inhabitants.
With a convergence of most of the nations high profile corporate offices in Lagos Island which is the principal and central local government area of the metropolitan state, the three large bridges which crosses the Lagoon and links the Lagos Island to the mainland is grossly inadequate to handle the traffic of commuters going to and fro from this destinations.
A fourth Mainland Bridge linking the ever busy Lagos mainland areas and Lagos Island would be a welcome relief for commuters.
The Project has been delayed due to controversial issues that have arisen during the evaluation and survey phase .These issues majorly have to do with costs and compensation for structures developed on the proposed route.
|A picture depicting Lagos Traffic|
Infrastructure problems this project would solve include;
Traffic: The bridge would provide alternative access to commuters navigating from the Lagos Mainland and Lagos Island as the Three Bridges connecting these areas are overburdened with human and vehicular traffic.
Economic Growth : The initial proposed route for the Fourth mainland Bridge was to run through a communal town Epe to Ikorodu Town across the Atlantic,with an International Sea Port already being constructed within that vicinity and major plans for the construction of an International Air Port, construction of the Bridge would further develop the area and attract Foreign Investment.
There are various reasons why the Private Sector will be interested in this project the first and probably one of the most important is Revenue.
The fourth Mainland Bridge Project will be one of the biggest infrastructure projects in Lagos State, with an estimated passenger traffic of 7,000,000 a day in the State, a small toll fee charge for usage of the bridge would be more than sufficient to cover the costs spent on the project after a period of time.
The status and number of the commuters who would be expected to use the bridge would attract major advertisement campaigns which in turn will generate revenue.
There are numerous risks involved in this project some of them are detailed below.
- Market and Revenue Risks: Majorly this risk is borne by the private entity, however there are various arrangements that could be employed to mitigate or cushion against this risk .
- This Project is capital intensive consequently It would be expected that the Private entity would request a cash compensation from the government for a deficiency in income from fares or tolls.
- Where there is insufficient income from other operations, the private entity could request that the concession period be extended or toll fares be increased.
- Insufficient Traffic; It is important for the PPP contractor to obtain a commitment from the government to the extent possible, with respect to anticipated traffic levels and to negotiate a sufficient compensation arrangement for deficiencies
3) Construction Risks: These constitutes of various individual risk factors that may affect the construction of the project within the time frame specified and agreed standards.
- Land Expropriation : This is already a factor for which the commencement of this project has been stalled, The Federal Government needs to adequately sensitize and ensure the required licenses are available for construction.
- Increased Financing Cost: This risk flows directly to the Public Authority,which may attempt to mitigate this risk by either a new injection of equity or stand by finance from project lenders.
- Force Majeure event:: This Risk accrues to the Public Authority and would result typically in a claim by the project insurers, however most insurance clauses do not cover force majeure events.
- Exchange rate risk: Nigeria derives 90 percent of export earnings and two-thirds of government revenue from oil, Consequently the country has been hammered by a 47 percent plunge in Brent crude prices since June. The naira has weakened 18 percent against the dollar in that period, more than any of the 24 African currencies tracked by Bloomberg. Consequently Exchange rate risk is a significant risk to consider.
- Interest rate Risk: This may force the project to bear additional financing costs.
5) Political Risk: This is a red alert risk faced by private parties handling PPP projects in developing countries, The private entity and the lenders face the risk that the project execution may be negatively affected by acts of the government.
Nigeria has experienced uninterrupted democratic governance for sixteen years. The recent change in government marked the first time power would shift hands from a ruling party to an opposition party, electing President Muhammed Buhari as Nigeria's fifteenth head of state.
This may be an underwhelming achievement to some, but for an African nation with about 250 different ethnic groups this is a major milestone in its polity, however the current political climate does not negate the crystallization of factors that can be categorized under political risk.
It would be advisable for the private entity involved to negotiate standardized contracts that would protect its rights during the project cycle even in cases of a change in government.
Other risks to be mentioned include Legal Risk:Environmental Risk and Force Majeure Risk.
|Some images from the web on the proposed fourth mainland bridge|
In conclusion it is important to note that apart from the commercial benefits that is expected to accrue when this project is completed , The Infrastructure problem this PPP would solve is unquantifiable.
This project would also open other areas of Lagos State to development and discourage urban concentration.
It is important for the Government to sensitize all stake holders and provide adequate information to the public during this projects life cycle.
It is also important for the government to facilitate a transparent and fair bidding process so as to legitimize the infrastructure project process in the eyes of the public, and contract the best Private partner with superior technical knowledge and capability to complete the project within a reasonable period.
The time frame to begin this PPP is now and the new government should take this into consideration whilst it decides on its current goals and projects for the country.