Government-private sector partnership inevitable

Last week, President Muhammadu Buhari wrote to the National Assembly seeking approval to borrow $29.96 billion under the External Borrowing (Rolling) Plan to address the infrastructure deficit in the health, education, power, water resources and other sectors.

Buhari’s letters to both arms of the National Assembly and read at the plenary of both the Senate and House of Representatives gave a breakdown of what the proposed loan would be used for. $11.274 billion is for projects and programmes, $10.686 billion for special national infrastructure projects, Eurobonds of $4.5 billion, and federal government budget support of $3.5 billion.

Of the amount, $21,864 billion will represent the principal; interest fee, service fee, deferred service charge, commitment charges and a deduction of waiver credit will gulp the rest. In fact, this is a conservative figure as the loan may come with associated costs amounting to $11.960 billion.

Justifying the need for the loan, the President cited the declining federally collectible and distributable revenue and the huge infrastructure deficits and other pressing needs the country is being confronted with. To reassure on government’s intentions to use the loans judiciously, the president said the projects and programmes under the external borrowing plan were selected based on positive technical economic evaluations, as well as the contributions they would make to the socio-economic development of the country, including employment generation, poverty reduction, and protection of the nation’s vulnerable population.

Meanwhile, at the annual “Powering Africa Conference held between 12 and 14th October 2016 at Transcorp Hilton Abuja, It was estimated that over 50 percent of the participants from different parts of the world were potential investors interested in the huge undeveloped power sector of Nigeria.

According to research by AfriCapital, the sub-Saharan market is expected to grow by $645 billion between now and 2025 and Nigeria is expected to account for about 15 percent of that figure. They all recognise and acknowledged Nigeria’s huge business potentials and want to invest, but the question all of them are asking is: What is the policy framework for investment in the sector? Haven identified the potentials and the funding gaps in the power sector, they are ready and willing to invest and fill the gap but need a sovereign guarantee or policy guideline that ensures that they are able to recoup their investments.

This is where the government comes in. It is now being recognised even in developed societies that government alone cannot provide all the infrastructure needs of the society. Government’s therefore necessarily go into partnerships with the private sector where private capital can be used to provide such infrastructure. This is the model of the Public Private Partnerships which most sensible governments are pursuing these days.

However, since coming to power, President Buhari has not hidden his disdain for the private sector. In his mind, only government, without the cooperation of the private sector, can and must ensure development. And that is why despite the open willingness of investors to invest in our power and other infrastructure projects, the government is unwilling to allow them or provide a comprehensive policy framework for them to do so. Yet the government has no money to even meet its recurrent expenditure not to talk of capital investments. Obviously, that is why the President is seeking to go borrowing at very exorbitant cost and with realistically no means of paying back until such a time prices of oil rebounds, a prospect that is now quite remote.

But it is obvious that the government is repeating mistakes of the past where government borrowed heavily to invest in dead-end projects. That placed huge debt burden on us with interests and penalties for payment defaults surmounting the principal borrowed many times over.

Borrowing for funding infrastructure should be a last resort. There are investors willing to partner government to build most of the required infrastructure. Government should be compelled to partner with and utilise the private sector funds rather than borrowing to finance projects it ultimately will be unable to manage even if successfully built.

We urge the National Assembly to reject this request and compel the government use the PPP (public-private partnership) model to build and run most of our infrastructure needs in the country. The PPP model will yield higher dividend and assure incremental economic growth. The government cannot continue to operate on expired socio-economic policies. It must be helped to come into the 21st century.