#PPP TRANSPORT INFRASTRUCTURE PROJECT: The Way Forward

Anyone contemplating investing in Road Infrastructure in Nigeria should examine this report. We help investors to conduct Due Diligence.

1.     EXECUTIVE SUMMARY: This work examines the current Road Infrastructure (hard and soft), a subset of Transport Infrastructure Project (TIP) in Nigeria. It is in within reason to deduce that over 80% of social-economic activities are carried out through roads' Infrastructure in Nigeria. According to the Nigerian Civil Aviation Authority (NCAA), in 2017, there were 14.1 million passenger traffic with 222,413 flights, compared 2016 figure of 14.9 million passengers with 220,333 flights. A marginal reduction of about 740,000 passengers in a country with an estimated population of 198 million. Air transport accounts for less than 10% to the overall passengers' traffic. While waterways and rail transport systems contribution to the overall transport sector is near zero. Though there are no statistical data to support the total number of road passengers' traffic, information from National Bureau of Statistics and Federal Road Safety Corps; it is self-evident that majority of Nigerians use road transport as means of moving persons, goods and services. Total vehicles in the country are about 12 million. Road passenger traffic is estimated to be 248 million passengers annually. It is against this background that the author decided to examine the transport sector: Road Infrastructure, identify the current status, the challenges and proffer solutions. This work provides some thought-provoking ideas with illustrations.

2.     BACKGROUND INFORMATION: Road Infrastructures are diverse in nature, characteristics and usage. It facilitates the movements of persons, goods and services. As a result, road infrastructure is critical to our survival and development.

2.1 THE HISTORY OF ROAD AND RAIL SYSTEMS IN NIGERIA: In 1906, the first motorable road linking Ibadan and Oyo was constructed. According to CBN (2003), road development in Nigeria dates back to 1925, when the then colonial administration established the Road Board. As of 1951, 1,782km out of the total of 44,414km of road built in Nigeria was surfaced. While the total estimated road coverage in Nigeria is 200,000km as of 1980. Between 1980 and 2017, the available information suggests that there has been some mixed grill in Road Infrastructure developments. While from 1976 there was massive Infrastructural development, the years that followed witnessed a slowdown and in subsequent years road infrastructure downgraded in quality and execution, lack of maintenance; the net effect is a near-total collapse of road infrastructure.

2.2 CURRENT STATUS OF NIGERIAN ROADS’ INFRASTRUCTURE: Decaying Infrastructure is one of the deficiencies every Nigerian government seeks to address. Efforts at privatizing Nigerian Railway Corporation, Seaport and Airports have yielded marginal dividends. However, these yields do not match the increasing demand by population explosion and needs of the populace. According to Dangote (2018), the state of bad roads costs Dangote Cement N27 Billion per annual, as illustrated in figure 1 below.  

Figure 1: Economic Cost of Bad Roads

Source: Dangote presentation at Federal Ministry of Power, Works and Housing (FMPWH) 2018

The Road Infrastructure has developed to the extent that its predictability can be scientifically calculated in an advanced economy, which calls for the need to address both hard and soft part of Road Infrastructure locally. I make the case that investments in road Infrastructures make it possible to create an ecosystem for data collection and mining - which helps for accurate management, planning, and expansion. Without reliable software to Road Management, it becomes guesswork. Decisions are left to the conjecture of many uncoordinated variables, which are not unpredictable.

Furthermore, cost of business' operations in Nigeria has a factor of 30% – 47% attributable to bad roads either in direct or indirect costs; some of these roads are shown in figure 2 (a-b) below.

Figure 2a: Bad Roads in Nigeria

Source: Dangote presentation at Federal Ministry of Power, Works and Housing (FMPWH) 2018

Figure 2b: Bad Roads in Lagos

Source: vanguargngr.com 2018

According to Punch (2017), out of the 2018 budget of N8.6 Trillion Naira (about US$28 Billion depending on the exchange rate), N555.88 Billion Naira is budgeted for Power, Works and Housing. The key projects and programmes to be implemented in 2018 were N10 Billion on 2nd Niger Bridge and about N300 billion for the construction and rehabilitation of strategic roads.

Also, there are other specific loans tied to specific projects, as shown in Table 1 below. The information used in computing this table is obtained from Adeyini (2018) and other sources. According to Adeniyi (2018), these loans came China, see Table 1. There is no public information on the relationship between these loans and executed projects across the country.

According to Shuaibu and Ogwu (2018), the Federal government has begun work with the flag-off of 222km Abuja – Makurdi road. The road will be reconstructed with concretes. The road was constructed in 1978, according to the Minister - Babatunde R. Fashola (SAN) of FMPWH (2018), since it's construction, the road has not undergone any major upgrade. Research evidence suggests that the road may be financed from the consolidated borrowing estimated at US$32 Billion. Notwithstanding this loan, road Infrastructure across Nigeria suffers neglect and abandonment, see figure 4 illustrating a typical road.

Figure 4: Some Bad Roads in Nigeria

Source: pulse.ng 2018

2.3 CAUSES AND IMPACTS OF ROAD INFRASTRUCTURES: What we have observed as the primary causes of inadequate Road Infrastructure in Nigeria includes; inferior and substandard materials, poor design, lack of adequate supervision, lack of regular maintenance, use of substandard contractors, systematic failure, wrong implementation framework and human errors. While secondary causes include deliberate destruction by persons and road users or contractors, driving habits, poor policing and non-compliance of traffic rules.

The impacts of Road Infrastructure has contributed to the development of many societies. I made the case that there is a relationship between development and investments in road infrastructure. According to Who Health Organisation [WHO] (2017), the 2030 Agenda for Sustainable Development includes an ambitious target to reduce road traffic deaths and injuries by 50% by 2020. It remains to be seen, how this can be achieved without adequate Infrastructure investments, especially in the third world.

The Safe System Approach (Figure 5 below) provides a viable framework to examine road traffic- injury risk factors and interventions from a holistic perspective. The Safe System Approach is based on Sweden's Vision Zero strategy, which has a long-term vision of achieving no fatal or serious injuries within the transport system (WHO, 2017).

Figure 5: The Safe System Approach

Source: WHO Save Lives Presentation 2017

To accentuate the development of any nation and her people, road Infrastructure is critical. A good road infrastructure leads to economic prosperity and the wellbeing of her citizens. Many experts posit that there is a linear relationship between wellbeing and Transport Infrastructure Projects (TIP) Investments. See figure 6, a robust healthcare support road infrastructure system.

Figure 6: A Robust Road Infrastructure

Source: WHO Save Lives 2017

3.     WHY (TIP) ROAD INFRASTRUCTURE? 

3.1 Economic Activities: It is estimated productivity and economic activities will improve when road infrastructure improves - see figure 7 indicating prosperity as a result of improved road networks in some countries.

Figure 7: Economic Prosperity Graph

3.2 Education, Health and Social Activities: Researches and reports are supporting the proposition that education, health and social activities improve when there are appropriate investments in Road Infrastructure; see figure 8 illustrates the multiplier effects of improved road networks.

Figure 8: Education. Health & Social Wellbeing

Source: Transportgeography.org

4.     INFRASTRUCTURE INVESTMENT – THE WAY FORWARD

Some have argued that road is a derived utility, needs more budgetary allocations and investments from governments. While this argument may be plausible, however, in recent years there is no empirical evidence to suggest that more government allocations necessarily leads to improved Road Infrastructures. Against the reasons advanced above, the author contends that it has become imperative to seek alternative solutions that will yield maximum benefits for the highest number, as well as accentuate development and growth for the individuals and the nation respectively.

Developing Road Infrastructure with debts as policy sounds logical. However, if there is a loan mismatch or misuse; future generations bear the transfer burden of debt. While direct investment reduces the overall debt portfolio; the repayment of investment will come from functional Road Infrastructure projects under a PPP Scheme. Consequently, every stakeholder in the project will ensure the project is delivered as planned to guarantee a return on investment, as well as being able to recoup capital investments. Nigeria based on the 2018 budget estimates, she currently spends about N2 Trillion Naira on debt servicing (about 25% of her earnings). Another loan without adequate due diligence could lead to multiple problems.

The Way Forward: The author recommends the use of direct investments — conduct due diligence before the execution of a loan agreement. We are prepared to design and develop the due diligence mechanism for Road Infrastructure Investment Scheme. Government do not need to own Road Infrastructure 100%; it should create an institutional framework which allows the private sector to participate in the ownership of road assets - its design, development, implementation and management. It will turn bad roads into a goldmine and create 10+ million jobs within a few years.