Value-Added Concession Under The HDMI Nears Implementation Stage as Six Concessionaires Signed Concession Agreements on The Project

The Value-added concession under the Highways Development and Management Initiative (HDMI) on Friday, May 26, 2023, inched to the implementation stage as six successful concessionaires signes concession agreements (commercial close) on nine out of the 12 selected pilot roads with the Ministry of Works and Housing. This was contained in a statement signed by Engr. Folorunso Esan, Director overseeing the Office of the Permanent Secretary.

According to the statement, these successful concessionaires were selected from the 75 companies that first applied after going through a two-stage PPP process in line with the ICRC guidelines.

In his short remarks at the signing ceremony, the Minister of Works and Housing, Mr. Babatunde Fashola SAN, reiterated that toeing the path of Public Private Partnership (PPP) in infrastructure development was not an easy path, yet according to him, many people think that PPP is a magic bullet, and everything would be fine.

The Minister, who expressed delight that the HDMI has gotten to the stage of commercial close in its first phase, however, cautioned that whenever it has to do with PPP people must have to pay attention because, according to him, “many parts of our economy have already been privatized”.

“At one time, there was only a National Airline, all newspapers were owned by government; all banks were owned by government”, he however, said that, today they’ve all been privatized, the idea of privatization is to improve service delivery.

He declared, “For me one of the things that excited me about this programme were the prospects, challenges and the learning curves. Whenever I hear people say, oh PPPs take time; yes, they do. Nevertheless, they confirmed that this HDMI has disproved that it doesn’t. It has taken almost four years; yes, it has and we haven’t started yet”.

Noting that people think that four years is too long to deliver a road, Fashola said that would depend on how people see it adding that the Private Sector is the answer. “There is no way anyone can run an economy without the Private Sector and it is striking the balance”, the Minister emphasized that the Muhammadu Buhari 2nd Niger Bridge, which was commissioned on May 23, 2023 was supposed to be a Private Sector project.

“But”, according to him, “At a point the project stopped because the numbers for the toll was not commercially viable. Exchange rate had changed, and the project was now a liability”. He stressed that when it became obvious that the project could not go on, he met with the President, urged him to take over the project, complete it and thereafter sell it to the Private Sector to manage.

He also noted that the same situation happened to the Lagos-Ibadan Expressway pointing out that it was because previous administrations thought PPP would not cost the government any money that it rushed to embrace it. He said the choice did not produce any road until the Buhari administration took it up in 2016, and that due to the choice by previous administration, the Nation had lost 10 years before building the road.

“A country that loses ten years loses a lot because time really is money”, the Minister said adding that the Buhari administration had to engage with alternative financing such as the SUKUK which, according to him, is one area of PPP which has been used to gain some traction in the road construction, rehabilitation, and expansion across the country.

Pointing out that the money is still not enough, Fashola declared, “So, when you have N100 billion to construct roads notionally you have N4 billion per road which clearly is not enough. So, we engaged with Tax Credit, another Private Sector Partnership initiative”.

“And since 2019 when the President signed that policy, at the twilight of his administration, four years down the line, that we are now seeing the heavy appetite; NNPC coming in to invest with over N2 Trillion, Mainstream coming in, BUA Group coming in, MTN coming in”, the Minister said what that means is that “between policy and result there is a distance to travel”.

Again, advocating patience and understanding in using the PPP, the Minister explained that if such virtues are applied, the policy would be further enriched. “The day government says this will happen, doesn’t mean its the same minute it starts to happen.”

Noting that some people thought the Tax Credit Scheme was favouring Dangote because he was the first to embrace it, Fashola, who expressed delight that through that scheme the Apapa-Oworonsoki Road was completed, added, “So these are some of the things we should focus on”, pointing out that out of the 75 firms that applied for the HMDI in February 2020 only six are still in.

The Minister noted that attaining commercial close by these six companies was only the first phase of the project. Fashola said “We were supposed to do 24 roads but we said let us kill this elephant slowly because there is no pot big enough to cook an elephant. So, we have to take small parts of it at a time”.

“So, the lesson from here is that we will be transferring to phase two. Your own performance in phase one will determine how the next set of people who are coming in for phase two will behave, he said adding, “I am happy with where we are and we wouldn’t have reached this point without the help of everybody, some of them not even visible but they know themselves”.

Expressing delight that his initial determination and insistence on not employing external consultants to oversee the projects has paid off, Fashola commended the Head of PPP in the Ministry Mrs Abimbola Asein, his Special Advisers Engr Olufemi Akinyelure and Mrs Adenike Giwa saying, “They really deserve every commendation”.

He also thanked other members of the Project Delivery Team, saying “I said no to external consultants and said we have our consultants, and this is going to be a wholly Nigerian initiative developed from end to end. We will slip, we will stumble but we won’t fall; and when we are done nobody can take the experience from us”.

“And we will see as I believe we will, that other projects that come we can now say we have in-house experts because we have done it before”, the Minister said. I am sure they now have more experience with PPPs working with BPE and other agencies”.

Expressing delight that the Ministry chose to look inwards instead of hiring external consultants, Fashola declared, “For me, this is a case study that has ended successfully.

In his goodwill message, the Director General, of ICRC, Mr. Michael Ohiani, commended the Minister for his foresight and vision in the formulation of the HMDI initiative and that his doggedness and commitment to its success has yielded dividends while the Director General of the Bureau for Public Enterprises (BPE), Mr. Alex Okoh praised the Minister for his unwavering commitment to the initiative.

Earlier in his welcome remarks, the Director, Overseeing the office of the Permanent Secretary, Engr. Folorunso Esan, defined the HDMI as an alternative avenue to finance road construction, rehabilitation, and maintenance.

In his response on behalf of all the successful concessionaires, Mr Lawal Garba (Avia Consortium) commended members of the project team for their professionalism through the procurement negotiation phase, and that the journey of over three years had been very rigorous but fulfilling. While also thanking the Honourable Minister for creating such an opportunity, he assured the Minister that the successful concessionaires will do all it takes to abide by all the terms in the agreement and attain Financial close as soon as possible to ensure the successful commencement of the project implementation.

The highlight of the occasion was the photo session with the concessionaires and the Minister. Others present at the occasion were the Minister of State for Works and Housing, Hon. Umar Ibrahim El-Yakub, the representatives of the successful Concessionaires, Directors, Special Advisers, and other top government functionaries.
END