Strategies to increase private sector participation

Increased private sector participation, both through PPPs and full privatisation, is required to decrease the burden of the required infrastructure investments by the public sector. To enable increased participation, the government needs to address issues that discourage private sector players from investing in infrastructure. Such issues include:

■       Difficulties in access to and cost of finance due to lack of maturity in Nigeria’s credit/venture capital market;

■       Security concerns, corruption and other governance issues;

■       A lack of economic incentives in some sectors to encourage private sector investment;

■       Inconsistency in enforcing policies and unpredictable regulatory regimes that limit investors’ ability to protect investments;

■       Insufficient public sector capability to design and implement PPP projects.

Nigeria will, therefore, need to address these issues in order to unlock the private sector investment required to successfully implement the master plan. Key actions that should be taken include [Figure 61]:

■       Access to capital: Establish long-term financing and refinancing mechanisms for viable projects, especially, in the early stages (e.g., specialised funds for infrastructure);

■       Risk: Assure macroeconomic stability, policy consistency and eliminate corruption; Provide electricity to support growth and reduce cost of operations; Provide critical infrastructure such as link roads; Ensure standardisation and central access to infrastructure; Provide partial risk guarantees to projects, as appropriate;

■       Fiscal incentives: Offer business and fiscal incentives to encourage private sector investments in infrastructure (e.g., granting pioneer status and duty exemptions, especially during construction);

■       Government rules and regulations: Establish a clear legal and regulatory framework for private financing of infrastructure, and establish a standard process for delegating authority from the Federal Government for infrastructure development;

■       Capabilities in managing PPPs: Establish a well-functioning PPP unit to build capabilities and manage financing of PPPs; Develop capacity building initiatives for public sector stakeholders; Identify/establish implementation teams within the MDAs; Develop templates for PPP procurement and implementation.

■       Create an Infrastructure Project Development Facility to finance early project development activities so as to create a pipeline of bankable PPP projects;

■       Establish a dedicated, cashbacked fund (Government Resource Fund) outside the annual budgetary allocation process to finance the government’s contributions on infrastructure involving the private sector;

■       Establish long-term refinancing mechanisms aimed at refinancing short-term infrastructure loans;

■       Provide fiscal incentives, such as exemptions from customs duties for equipment to be used for infrastructure development, for selected infrastructure projects.

 

he private sector has indicated its readiness to take complete responsibility for selected sectors, provided government puts in place a clear, transparent and consistent enabling environment for private sector investments. Such sectors include Agriculture, Aviation, Housing, ICT/Research, Manufacturing, Mining, Oil and Gas, SMEs, and Trade and Commerce.

The BSG also indicates readiness from the private sector to participate in the power and transport sectors under PPP schemes.