Frederik Veldman/ On Monday 10th March, the President of the Federal Republic of Nigeria, Goodluck Jonathan, presided at the ground-breaking ceremony for the second Niger Bridge, with several ministers and state governors in attendance. It marked the culmination of more than a year’s work in bringing a critical infrastructure project to construction, one that will make a real impact on millions of Nigerian citizens.
Connecting communities to reduce poverty
Reducing poverty is strongly associated with increasing numbers of a country’s population having access to infrastructure services. The World Economic Forum estimates the annual global deficit in infrastructure spending is $1 trillion. Nigeria makes up a significant proportion of that. Even optimistic assessments estimate that Nigeria will have inadequate fiscal resources and public savings to meet these needs. Moreover, Nigeria has a poor track record in delivering public infrastructure projects on time and to cost.
The Nigerian Infrastructure Advisory Facility (NIAF), a DfID-funded programme implemented by Adam Smith International, has been working closely with the Federal Government of Nigeria to accelerate infrastructure development by using public-private partnerships. Leveraging private finance means the government can raise additional finance, improve on the commercial viability of project proposals and enhance the performance of the existing capital budget.
Part of NIAF’s engagement strategy involves installing public-private partnerships in processes and policies at both federal and state levels. One of the most significant barriers for investors is the perception of poor project governance. A crucial part of our approach has therefore been to work on, and complete, a number of flagship transactions to ensure domestic support for public-private partnerships as a financing mechanism, which also improves investor confidence in project governance.
The second Niger Bridge is one example of this type of investment. The proposed 1.6km bridge and associated approach roads and bypasses for the cities of Asaba and Onitsha will provide vastly improved connections between northern and southern Nigeria, supporting social and economic development. It will replace the existing bridge, which has limited longevity, high traffic levels and inadequate load-bearing capacity, and is notorious for its congestion and traffic delays in both cities.
Designing a workable approach with private and public funding
A year ago, the project, initially valued at £500m (N132bn), had almost collapsed under soaring construction costs and opaque project governance. However, Nigeria’s leadership identified the bridge as a priority project. It has now been designed as a combination of public-private partnership and publicly financed project, with connecting roads at either end provided by the Federal Ministry of Works.
NIAF designed an engagement strategy through both the Federal Ministry of Works and the Nigeria Sovereign Investment Authority (NSIA). NIAF brought benefits in providing these government agencies, which had limited pre-existing public-private partnership capacity, with embedded transaction, legal and policy advisors to ensure that the project was properly structured. NIAF also provided the support of further specialist advice and provided access to over six years of relevant infrastructure studies through its database.
NIAF’s advisors recommended a restructuring of the consortium, introducing NSIA as lead financier, bringing cheaper long term financing and ensuring better value for money in the engineering, procurement and construction contracting process. Following extensive cost reviews, the project cost after NIAF assistance was reduced to £400m (N108bn), which represented a saving of £100m. This restructure led to the departure of AIIM, for whom the transaction no longer met their targeted return.
Benefit to all citizens seen in lower toll costs
This creates huge benefits for all Nigerian citizens, which they will see in lower toll costs. Through lower construction costs, the required public sector investment has also been reduced. The construction project now also requires less equity investment. It is most likely that without the reduced project cost, this bridge would not have been built at all.
At the ground breaking ceremony this month, Ngozi Okonjo-Iweala, Co-ordinating Minister for the Economy, commended the Federal Ministry of Works and the Nigerian Sovereign Investment Authority for their work in developing the financial package and renegotiating the cost.
Through NIAF support, the project meets and advances the government’s socio-economic agenda through improved infrastructure. It importantly is also serving to re-establish the credibility of public-private partnerships as a financing mechanism for capital projects. Improved structuring of deals and the associated increase in transparency will result in cheaper financing and significantly enhanced value for money. NIAF continues to work closely with NSIA on other infrastructure projects to help achieve strong value for money and efficiency gains.
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