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The Challenges of Public Private Partnership (PPP) Projects in a Developing Country

FEATURED PAPER

The Case Study of the Lekki Toll Road Infrastructure Project in Lagos, Nigeria

Christian Azuka Olele, MSc.

Lagos, Nigeria


ABSTRACT

In developed and developing countries, government has significant constraints in their ability to make investment in the provision of public infrastructure. This has brought about the involvement of private sector participants in the provision of such services.

Nigeria as a developing country, since the embracement of democracy in 1999 the civilian democratic government took up the application of PPP framework as a medium to providing important infrastructure through the involvement of the organized private sector. In other to make PPP attractive to the private sector in Nigeria, the government set up attractive investment opportunities for PPP investors and also provide fair legal framework where the private sector investor will be allowed to come up with concession companies, have guarantee that compensation will be paid by the government if she defaults.

In the development of PPP infrastructure projects, the private sector participants are exposed to risks associated with assets investment in public projects. As a result, the private sectors generally are inspired to ask for soaring investment guarantees, special considerations and other investment enticements so as to guard their investments.

This paper is aimed at looking at the recent PPP infrastructural developments in Nigeria where the government has clinched the PPP framework policy since the passing of the PPP act 20. And secondly, to look at the benefits associated with the investment of the private sectors in the development of infrastructure.

Keywords: Project Management, Public Private Partnership, PPP, Nigeria, Lekki Toll Road Infrastructure Project, Lekki Concession Company, LCC, LASG

Introduction

This paper looks at the challenges of Public Private Partnerships (PPPs). First it looks at the demand for PPP infrastructure and the expected benefits to stakeholders. This is then followed by the following sections: the overview of Lekki Toll Road Infrastructure Project, the demand for PPP Infrastructure and the expected benefits to stakeholders, the regulatory and political context, the environmental and social implications, the stakeholder’s interest, involvement and how their needs were managed and overcome.

In many countries, implementing infrastructure development projects have always been an issue because the projects are not always completed, and it results in failure on government or the public sector. Failures in these projects gave way for the formation of PPP Models that making the private sector organizations to synchronize with the public sector to see how project can be embarked upon and be delivered effectively. Today, the government of many countries (both developed and developing) are involved in public-private partnership. Adebanjo & Mann (2000) explained that regardless of its enormous advantages, the concept of public-private partnership concept is on the increase, and a report by Jamali (2004) has also listed the following reasons why PPP Projects in many countries are not successful

  • Lack of Government Commitment
  • Poor Risk Management Policies
  • Poor Banking Policies and Unavailability of Loans
  • Poorly drafted Regulatory and Legal Framework
  • Inadequate Mechanism to Attract Foreign Investors and the Local Private Sector Participants.
  • Lack of Transparency and Competition

On the political dimension, Mewu (2009) for example suggested that some projects being conceived under the PPP model had encountered several problems due to political instability in Thailand. Levy (1996) also noted that in the U.S Highway projects under the PPP Model in Washington State and Arizona had encountered problems due to political opposition from congress.

In the PPP Concession model, a separate company is set up for each project and the services are provided as specified in, for example, Design, Build, Operate and Maintain (DBOM) contract.

The concession company does not carry out the works by itself, but it subcontracts the design and construction, as well as the operations and maintenance work. Funding for the project is provided by its own equity and external capital. Wolmer (2002) concluded that PPP models vary from short-term to long-term contract and the variation to these models are identified as follows:

  • The duration of Contract
  • The Capital Assets Ownership
  • Risks Allocation and Responsibilities
  • The Value on Return of Investment (ROI)

Hayford (2004) explained that in PPP policies and guidance materials, there are some common principles binding them and are listed as follows:

  • Private Sector Confidence: This is an objective of fostering private sector confidence in the ability of government to facilitate PPP projects and properly assess PPP proposals, with a view to encouraging private sector investment by ensuring that enough players are invited for the bidding process especially for smaller social infrastructure projects.
  • Safeguarding the Public and Stakeholders Interest: The Public and Stakeholders are interested in their security whereby their interest is protected and this is done by measuring PPP proposals against public interest criteria relating to efficiency, accountability, fairness, public admittance, end user rights, security, confidentiality and right of representation and appeal at the planning stages by affected individuals and the project host communities.
  • Competitive Tendering and Probity:  There should be assurance that the project will be subject to a tendering process that will be competitive with probity and fairness maintained in the procedure.

More…

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About the Author

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Christian Azuka Olele

Lagos, Nigeria

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Christian Azuka Olele
is a registered Professional Engineering Geologist with the Council of Nigerian Mining Engineers and Geoscientists (COMEG) and an experienced project manager in the construction sector in Nigeria, West Africa. He received his B.Sc. and PGdip degrees in Geology from the University of Port Harcourt, Choba, Nigeria; and his M.Sc. degree in Project Management from the University of Liverpool, Liverpool, U.K

Mr. Olele supervised several projects that had to do with Geotechnics on the Lekki Toll Road Infrastructure Project which included: Pedestrian Bridges, Falomo Ramp Bridge and Toll Booths & Plazas, Osborne Jetty Terminal, Ikoyi & several Road construction Projects in Lagos, Nigeria.

He is Interested in managing projects in Nigeria and Africa. Currently he is heading the construction management team of EdgeGold Concept Services Limited in Lagos.

He can be reached via email at [email protected]