Issues in Highways Concessioning

By Salisu Ɗambatta

The Federal Government has released a Ministerial notice for the commencement of the process of concessioning or leasing 12 highways in the six geopolitical zones to private sector operators. It is under the Highway Development Management Initiative (HDMI), being driven by the Minister of Works and Housing, Alhaji Babatunde Raji Fashola, to ensure that financial constraints do not stop the development of good highways to support the economy.
The need to overcome the perennial financing constraints and ensure the provision of durable motorable highways informed the option of involving private sector financing in road development and management. It was however made clear that even in the face of existing financing constraints, the Federal Government is currently implementing 700 contracts for roads reconstruction and maintenance, and building new bridges on 13,000 kilometres of Federal Highways.
Already the Federal Executive Council has been notified of the concessioning plan, which Fashola said was endorsed by the National Assembly, while a template on how to actualise it was issued to the Ministry by the Infrastructure Concessioning Commission. Eager potential investors have inundated the Ministry of Works and Housing with inquiries on the process of participating in the potentially profitable project.
Works and Housing Minister Fashola explained further that, the intended leasing out of the 12 Highways, totalling 1,963.24 kilometres to private sector operators will bring investments to highways development: “The initial capital investments that we foresee is something in the order of N1,134,690,048,000.76 and the employment potentials are an estimated 50,000 direct jobs and 200,000 indirect jobs”.
The Minister gave additional reasons for the concessioning: “There is also the need to finance other complementary services like weigh bridges, rest houses, towing vehicles and road furniture which seem better suited for the commercial initiative of the private sector. In the interim, government is constrained to borrow, offer tax credit, increase her revenue mobilization capacities, in order to sustain this massive infrastructure renaissance.”
The 12 roads selected for concessioning are Benin–Asaba (125KM); Abuja–Lokoja (193KM); Kano– Katsina (150KM); Onitsha–Owerri–Aba (161KM); Shagamu–Benin (258KM); Abuja– Keffi–Awanga (122KM); Kano–Maiduguri (lot 1 Kano-Shuwarin 100KM ; ) ( lot 2 Potiskum-Damaturu 96.24K ); Lokoja–Benin (270KM); Enugu–Port Harcourt (200KM); Ilorin–Jebba (129KM); Lagos–Ota–Abekouta (80KM) and Lagos–Badagary (79KM).
The HDMI is of two types, the Value-added Concessions (VAC) and the Unbundled Assets Approvals (UAA). Under the VAC, the road pavement and entire Right Of Way (ROW) is concessioned for development and management by the concessionaire. The UAA on the other hand, provides opportunity for small businesses to take advantage of the commercial opportunities that are available along the ROW.
While it is true that concessioning some Highways to private companies to manage is practiced in Africa and around the world for varied reasons, and different outcomes and impact on road users who pay tolls, certain peculiarities around the Right Of Way should be recognised, appreciated and tackled to avoid misunderstanding.
The peculiarities include using the pits and burrows along the ROW for watering livestock by herders and using the waters for irrigation farming. A way out may be evolved right from the onset to ensure that herders, irrigation farmers and others drawing water from such ponds will continue to do so freely. The ponds and farmlands are presumed to belong to the communities along the ROW. What will be the future of markets and other structures in settlements the highways passed through? Will they belong to the companies that win the concessions as Unbundled Assets Approvals? These issues and more that will become obvious as the concessioning process reaches specific stages of implementation need to be factored and properly addressed in the concessioning arrangement.
To pre-empt any potential crisis, the Federal Ministry of Works and Housing should engage in long-term, frank, appropriate and adequate public awareness campaign to sensitise the citizenry on the entire implications of leasing the roads to private operators, an action that will impact on their daily, practical life. One-off sound bites is not enough.
An observation in an analysis by Ashurst titled ‘Road Infrastructure in Africa’ says: “Certain legal and institutional issues must be identified and addressed to ensure the successful implementation of road PPPs in Africa. Most of them are, of course, no different from those encountered when developing and financing roads in other parts of the world; the solutions in Africa will, however, sometimes significantly differ from those which apply elsewhere.” The principle fits the Nigerian environment.
Concessioning roads and other infrastructure is widely practiced around the world among both rich and developing countries. In Africa, South Africa, Mozambique, Senegal, Zimbabwe, Morocco and Algeria have done it. The Ashurst report noted, “There has been an increasing number of privately-financed road projects in various parts of Africa – some already completed, some currently under development – indicating that private financing can – and will – play an increasing role in the financing and development of the African roads network.”
In Europe, France has the most number of leased roads. Germany, Denmark, the Netherlands, Russia and Poland, among others, have conssissioned some of their highways and user-charges are paid. In some countries the road charges are embedded in high fuel costs.
There are sources of lesson for Nigeria on the best highways concessioning model to adopt. There are at least 10 African countries that have done it successfully or managing their highways effectively that can be under-studied by the Giant of Africa.
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