Toronto, Canada - April 14, 2017
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The Paper – PROJECT DESIGN:
Citizen Engagement initiative in detail and the reasoning
behind it
By Dr Baba J Adamu
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Contact
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FRAMEWORK FOR PUBLIC-PRIVATE PARTNERSHIP IN
FINANCING LONG-TERM INFRASTRUCTURE DEVELOPMENT – A
CASE IN NIGERIA
Public-private partnerships (PPP) in infrastructure
development involve private-sector participation in
any or all of the design, construction, financing
and operation phases of a public-utility
infrastructure, service or both. This initiative is
geared toward achieving long-term infrastructure
development financing by the private-sector in
partnership with the public-sector; thus addressing
the societal problem
of infrastructure deficits. By engaging the
private-sector and giving it well-defined
responsibilities; Governments can broaden their
options for achieving and delivering better
services; faster and more efficient than traditional
methods within the fiscal constraints.
There is a significant co-relation on how
infrastructure development contributes to economic
growth and to improved quality of life for citizens.
In the case of Nigeria, there is the
urgent need to address these infrastructure deficits
(like power, water, road-rail networks, education,
health, etc.), which are very important and cannot
wait for the dwindling public resources to finance
them all. The objective therefore, is to induce the
private-sector to come in; to take the initiation
and finance these infrastructure development
projects, both in short and long-term, creating
enabling-environment for businesses to grow; thus a
multiplier-effect on return on investments and a
boost to the general economic output, which
ultimately leads to positive change.
SUMMARY
The digital artifact video has been created
specifically with the government, the general public
and private investor financiers and all other
stakeholders in managing development finances in
mind.
The paper discusses the impacts and issues
associated with private involvement in
infrastructure development projects through formal
public-private partnerships (PPPs). The analysis
suggests that in most cases, the private sector will
be most efficient in the construction phase but the
public sector will be best equipped to handle the
risks associated with ownership. However, it is
clear that PPPs will not be viable without a
concrete frame work to induce private sector
involvement in public infrastructural developments.
The paper clearly outlines the need for a concise
framework to provide risk mitigation strategies on
Public-Private risk-return objectives in order to
attract long-term private-investor financing with
guaranteed stable rate of return on investment in
line with a country’s economic and legal conditions.
Is citizen engagement a game changer for development?
PPP scheme allows the private-sector, which has bulkier
resources, to gain, manage and retain control over a
facility for a long, pre-specified period of time in order
to gain efficiency, cost reliability and financial security.
At the end of the contracting period the private-sector
would have recouped its costs and achieved the required rate
of return. In Nigeria, the private-sector has not been
material-contributor to national developments due to sector
risk-return. The private-sector assumes substantial risk
that would otherwise be held by the public-sector, in
exchange for compensation and the public-sector ceding
substantial control over the delivery of infrastructure
services and associated risks with ownership.
It is therefore necessary for a precise framework to be
set-up, outlining the procedures on how private resources
can be unlocked and channeled to the financing of long-term
development projects while ensuring a meeting point of the
public-private risk return objectives. The key players in
this regard are government, citizens and the private-sector;
with government better placed to spearhead the initiative
since the target is to deliver quality service to the
citizens. The target audience should include all
stakeholders recruited using both “Thin” and “Thick”
engagement methods and partner with other organizations or
bodies.
Since the traditional procurement of public infrastructure
and its related services has given way to private-sector
assuming responsibility, the right tool is the criteria for
PPP for a suitable framework to assess and control
efficiency gain with respect to a country’s economic and
legal conditions. The criteria here will enable the
initiative to involve the private-sector in the provision of
public-services, shifting the role of the public-sector from
the owner and provider to purchaser and guardian of the
interests of the public, thereby allowing the public-sector
to focus on its core functions without placing undue strain
on scarce public funds and without having to increase
taxation, leaving the private-sector to perform those
functions more cost-effectively and efficiently. Such
framework is not available in Nigeria or there is inadequate
campaign for it.
The initiative will work when public-sector does not lose
its sovereign task such as assessing and determining
infrastructure needs, monitoring and supervising of an
efficient and competitive procurement system; and assuring
all required environmental and safety standards in the
service delivery, plus including closing the "feedback
loop" between citizens and governments in the process
through overpassing existing "accountability gap" by
improving the responsiveness of governments to people's
requirements.
Risk-Return Relationship versus the Private-Sector
opportunity
objectives.
The framework should involve efficient risk-mitigation
strategies providing the private-sector with investment
opportunity and incentives that attract them to provide
long-term financing, emphasizing on timing, certainty,
stability and size of return on investment, which are
usually the main considerations by private-investors to
committing finances to projects.
Usually, risk and return have a positive relationship where
a higher risky investment may be accompanied by a higher but
more uncertain return, thus, private-sector, unless is sure
of positive return on investment, maintaining cash flow,
high liquidity and profit will hesitate to invest in risky
opportunities. Infrastructure-financing are long-term
initiatives with challenges in returns; and the longer the
timing; the more reluctant profit-making companies will be
willing to take risk unless attractive investment incentives
are offered. To address these challenges, risk mitigation
strategies must be framed to thwart this uncertainty in
return on investment thereby encouraging private
involvement. This can be achieved by applying
blended-financing where a portfolio of financial instruments
with correlated returns can be composed to overcome this
timing effect. In Nigeria very little has been done in this
regard. Other opportunities that can be leveraged in
long-term infrastructure financing in Nigeria are addressing
endemic corruption, lack of transparency and accountability.
Corruption, lack of Transparency and
Accountability:
Nigeria, with over 170 million populations holds huge oil
reserves, is
hobbled by insecurity, infrastructure-deficit,
endemic-corruption, lack of transparency and accountability.
Corruption has been a great impediment to
national developments from kick-backs and bribes, lack of
proper oversight, abandonment of payments for projects, lack
of transparency and accountability; and
frameworks to assess both long and short-Route to
Accountability; to failure to pay taxes.
Corruption has undermined the credibility of government,
impoverished the country and fuelled insurgency and
violence. Citizens have come to believe that their
government not only condones corruption, but facilitates it.
Moreover, an avenue for illicit financial outflows from the
country is corruption that is why the private-sector becomes
hesitant to deploy any resources for long-term
infrastructure-development. Similarly, donors and other
contributors are reluctant to commit due to lack of
transparency and accountability, where resources which had
been deployed for a particular project are partially or
completely not accounted for.
Conclusion
In conclusion, the initiative will succeed with the
establishment of a strong framework outlining the scope and
guidelines for private-sector participation in financing
long-term infrastructure-development projects; using existing
metrics/indicators used for the outcomes of
development-projects in; measured and toward achieving the most important
Sustainable-Development-Goals (SDGs) by year 2030.
Is citizen engagement a game changer for development?
