What Is Public-Private Partnership
According to the International Monetary Fund (IMF), a public-private partnership is a contractual arrangement in which the private sector provides infrastructure assets and services that were previously delivered by the government. [1]
In Nigeria, there is no legal definition of PPPs. PPP, according to the explanatory memorandum to the Infrastructural Concession Regulatory Act 2008 (ICRA), entails:
“The participation of the private sector in financing the construction, development, operation, or maintenance of infrastructure or development projects of the federal government through concession or contractual arrangements,’’.
As a result, a public-private partnership can be defined as a collaboration between the public and private sectors, in which the government and private sector work together to complete a project based on an agreed-upon division of tasks and risks, as long as each party retains its own identity and responsibilities. It’s a mechanism for governments to raise finances and offer what they wouldn’t be able to otherwise, such as public infrastructure and services that citizens demand[2].
The Infrastructure Concession Regulatory Commission Act (ICRCA) was passed in 2005, and the Infrastructure Concession Regulatory Commission (ICRC) was established in 2008 to support the federal government’s push to use the PPP model to fund much-needed infrastructure projects[3].
Service contracts, management contracts, concessions, and leases are examples of public-private partnerships in Nigeria. Design-Build-Finance-Transfer, Build-Operate-Own, and Design-Build-Finance-Operate models are also popular in Nigeria[4].
Legal Framework
The ICRCA, which provides the legislative foundation for the procedures outlined in the National Policy for PPPs, is Nigeria’s primary legislative framework for PPPs. The Public Enterprises Privatisation and Commercialisation Act 1999, which establishes the legal framework for Nigeria’s privatisation and commercialisation programme; and the Public Procurement Act 2007, which establishes the Bureau of Public Procurement (BPP) as the regulatory authority responsible for the monitoring and oversight of public procurement, are other relevant legislation that governs PPPs.
By regulating, defining standards, and developing the legislative framework and professional competence for public procurement in Nigeria, they unify current government policies and procedures. The Public Procurement (Goods and Works) Regulations 2007 were released by the BPP in 2007, and they set out procedures for public procurement in general as well as the many types of public procurement that are commonly seen in PPP agreements (such as Build-Operate-Own, Build-Operate-Transfer, Build-Own-Operate-Transfer, etc.)
Although these Regulations suggest that the ICRC and BPP’s roles in the PPP procurement process overlap, in practice BPP has remained neutral in the PPP procurement process (except for the procurement of transaction advisers by MDAs, which is done within the framework of the PPA), and it refers any PPP proposals it receives from MDAs to the ICRC.
The Fiscal Responsibility Act of 2007 and the Debt Management Office Establishment Act of 2003, for example, set forth rules to ensure government accountability, transparency, and prudence in the preparation of budgets and expenditure frameworks, as well as to govern all federal government loans, borrowings, guarantees, and other long-term contingent liabilities[5].
PPP legislation has also been implemented by various state governments. The Lagos State Public Private Partnership Law of 2011 and the Rivers State Public-Private Infrastructure Development Law of 2009 are two examples.
Various services are governed by sector-specific legislation and agencies. The Electric Power Sector Reforms Act 2005, for example, establishes the Nigerian Electricity Regulatory Commission to regulate activities in the electricity sector, and provides a statutory framework for private companies to participate in electricity generation, transmission, and distribution; the Federal Highways Act Cap F13 LFN 2004, which empowers the Minister of Transport to construct federal highways as well as operate toll gates and co-ordinate toll collection; and the Utilities Charges Commission Act 1992, which regulates tariffs charged by public utilities in Nigeria[6].
The Nature of PPP Transactions
The complex structure of PPP transactions necessitates that not only the principal contract but also the ancillary contracts and sub-contracts, be drafted and negotiated with exceptional care and consideration to ensure that they are all aligned. Details and care are frequently paid attention to avoid a mismatch between the principal contract and the minor subcontracts. For example, the “force majeure” clause in one contract should have the same meaning in other connected contracts. Again, in all contracts, the desired dispute resolution system should provide for the same methods and consolidation. As a result, the importance of the key parties engaging a capable and experienced Transaction Advisory Team cannot be overstated. Furthermore, when negotiating PPP contracts, it is critical to take into account municipal legislation, rules, and requirements for permits, licenses, and approvals, among other things, to avoid deadlocks that may emerge as a result of non-compliance[7].
Regulatory Agencies Responsible for Public-Private Partnership Management and Services in Nigeria
The ICRCA, which is Nigeria’s main regulatory authority, allows any federal government ministry, agency, business, or body involved in infrastructure development and finance to enter into contracts with private sector proponents for infrastructure construction, financing and operation. As established in the ICRCA, the ICRC establishes the institutional and regulatory framework for MDAs[8] to interact with the private sector on infrastructure projects. The Act, however, primarily applies to federal MDAs working on federal projects, leaving state government entities and infrastructure out[9].
The BPE is also in charge of implementing the privatization and commercialization of the public businesses listed in the Privatization and Commercialization Act 1999, whether fully or partially[10]. Since its formation in 1999, the BPE has facilitated the privatization (wholly or partially) of numerous Nigerian state-owned firms, and it retains public assets in trust for the Ministry of Finance until they are successfully sold or commercialized.
In practice, when enterprises listed in Part I and Part II of both Schedules of the Privatization and Commercialization Act are to be developed as PPPs, the ICRC and BPE must work together to ensure their success, and this process typically involves the relevant MDAs under the ICRC‘s coordination and the BPE‘s procedural advice.
Procedures for Remunerating Private Party in Public-Private Partnership Arrangements
In Nigeria, the private party’s remuneration in a PPP transaction is determined by the contract’s conditions. PPPs can be structured so that the private party receives the money directly from user fees, which is a common payment method in PPP road projects like toll highways. The government may also pay the private party directly in the form of availability payments (where the government pays when the private party delivers services that meet certain quality standards), minimum revenue guarantees (where the government compensates the private party if actual revenues from users fall short of the guaranteed amount), or subsidized payments.
Conclusion
The Infrastructure Concession Regulatory Commission (ICRC) of Nigeria, founded under the Infrastructure Concession Regulatory Commission Act 2005, is tasked with tackling Nigeria’s physical infrastructure deficit, which is impeding economic progress. The organization has been active in the development of public-private partnerships, with one of its main operations being the formation of Nigerian PPP projects.
In general, PPP participation in Nigeria should be promoted and increased because the benefits much outweigh the drawbacks. However, it is critical that both the government and the private sector embrace transparency and accountability, while cooperating to guarantee that the basic needs of the people who are the intended beneficiaries of these partnerships, are adequately satisfied. The terms and conditions under which funding is secured should always be properly negotiated and structured, due to the intricacies involved in Public-Private Partnership agreements.
