Over $100bn for Infrastructure Developments in Nigeria- Engr. Mansur Ahmed, DG ICRC

Engineer Mansur Ahmed is the Director General of the newly inaugurated Infrastructure Concession Regulatory Commission ICRC. Before his new appointment he had served as Director General/Chief Executive Officer of the Nigerian Economic Summit Group (NESG) since 2004 where he became a great advocate for public private partnership toward revitalization of the economy. He believes neither the public institution nor the private sector can solely shoulder the responsibility of providing the required infrastructures for a teeming populace like Nigeria. His passion is clearly demonstrated whenever he discusses Infrastructural development and concessional agreements with factual statistics and convincing innuendoes.
 
Engr. Mansur Ahmed retired from public service as Group Executive Director of the NNPC after a successful career spanning over 15 years in the oil and gas industry where he had served as the Chief Executive of Kaduna and Port Harcourt Refineries. He had held several other positions which included Chief Executive Officer of Kaduna Textile Mills and Director Real Estate Construction and Building Services of the New Nigerian Development Company (NNDC). He has also served on many Boards and Committees, including the Nigerian Vision 2010 Committee and the Oil and Gas Sub-Committee of the National Council on Privatisation.
 
Engr. Ahmed holds a M.Sc. Degree in Industrial Engineering and Administration from Cranfield University, England and a BSc. Degree in Mechanical Engineering from University of Nottingham England. In this exclusive interview granted to the Economic Confidential he bares his mind on the newly inaugurated Infrastructure Concession Regulatory Commission (ICRC) and expectations.
 
 
EC: What could have influenced the establishment of ICRC?
Ans: Most people believe provision of roads, bridges, railways, electricity, air travels, water ways are under the purview of public sector services. Government is primary providers for such social services and provision of infrastructural facilities. It is through effective and efficient provision of those services that we create development. In fact that is the main aim of government. In recent years between 20-30 years, the approach in providing these services has begun to change. Governments all over the world, many economies, developed and developing countries are finding it appropriate and desirable the involvement of private sector agencies to participate in the provision of those services, through various channels, mostly in concession. In simple terms, concession means a situation where government or public agencies enter into a partnership agreement… mostly long term agreement with a private agency or group to provide the service to the public. Many different configurations of the agreement are possible. Concessioning is recognized as most effective.
 
EC: What is the basic process on concession?
In a concession, an invitation is extended to private developers and investors who have capacity and resources to invest in the creation of the facilities. For example road, electricity generating plant, water supply scheme that government ought to provide. The investors provide the service on behalf of government. The investor is not doing a charity work but engaging in business venture to make profit. He is paid for his effort. The compensation for the job is structured either by direct payment from the government or the firm charges the public directly or the government charged the public and paid the investor.
 
EC: How is the interest of the public protected by that?
Ans: The major interest of the public is to get affordability of the services. The public’s interest is not on construction of power plant but on electricity generation to service their needs. The citizen wants availability and affordability of constant and uninterrupted electricity supply, while the government charges tariff for providing the service. What the citizen pays is the value of what he obtains. The essential issue is that the service is provided. It is a long term arrangement. For instance, an investment in power generation and efficient railways service are quite enormous. Such projects take years and huge financial and human resources to accomplish. They are services that are required continuously.
 
EC: What are the platforms for concessioning?
Ans: There are different ways of implementation. Agreements vary based on circumstances. We have what is called Build-Operate-and-Transfer, BOT. For instance an investor builds a power plant, operates it to recover his investment within a stipulated period and transfers (returns) the structure and facility to the government afterward. The contractor invests in building to specifications, operates the equipment and supply electricity on the agreed quality and quantity, with mode and capacity of supply. All these constitute parts of the agreement. We also have Build-Own-Operate-and-Transfer, BOOT and Rehabilitate-Own-and-Transfer, ROT. They have different configurations of agreement. In this case the government or its agency provides it structure or facility – let’s call it asset, to be owned for a period of time by a private entity and return back to the government. We must note that these processes are different from privatization where public institutions are sold outrightly or a procurement arrangement where government fully pays for the construction of such assets and facilities.
 
EC: How about the affordability? Can the ordinary citizen afford the charges?
Ans: That has to be addressed in the mode of payment. For instance, if the plant will cost N1billion and the investor has only 15 years to operate it, government can direct it to charge the public an agreed fee that is feasible and flexible. If the fee to be charged is exorbitant, government can provide a subsidy and ask the investor to charge lower tariff. The Nigerian Electricity Regulatory Commission, NERC  as a regulator is ensuring that the tariff charge electricity consumers is affordable while government provides subsidy to cover the gap of what consumers can pay and what the operator needs to recoup their investment. The subsidy may be reduced over time as economic conditions of citizens improved. Definitely as the economy improves through increased economic activities from good services, people will be better off and afford adjustments in tariff.
 
EC: How are we sure necessary legislations have been put in place to avoid conflict of interests?
Ans: To make the Public Partnership (PPP) arrangement workable and practicable, there must be a legal arrangement – legislative environment that recognizes the responsibility of the government to provide services and private sector to support the process by more investments that will automatically create more job opportunity and improve economic activities.  There should be appropriate law and legislative practices to promote healthy relationship between the government and the private sector. Apart from the ICRC Act which has been enacted since 2005, there are other laws/Acts empowering regulatory agencies responsible for ensuring that operators do not exploit the public. The NERC provides regulatory arrangement to facilitate private sector participation in electricity supply and recommend subsidy to government where necessary. We also have Nigerian Communication Commission, NCC to ensure adequate provision of telecommunication service by the private sector for the benefit of the citizens. The responsibility of ICRC is to look at the regulatory environment and ensure we have friendly and conducive business environment into infrastructural service arrangement. The regulators must harmonize their operations for a conducive environment.
 
EC: How much do you think may be required for all these envisaged projects, power plants, roads, railways, airports, oil and gas etc.
Ans: The nearest official estimate we have for such projects roads, electricity, oil and gas, railways is over $100billion over the next 6 years. You must have a source of funding … long term funding arrangement is necessity for any concession because they range between 15-20 years. But government doesn’t have that kind of money and absorptive capacity considering other recurrent needs. It must source for alternative funding from the private sector not only for funding but for effective management and operation of those services. Funding is crucial for all the projects on the concession list.
 
EC: How does your commission intend to fight corrupt practices since it has been the major issue that scares away potential investors?
Ans: Yes, as I was saying in order to attract investment you have to create a regulatory and institutional environment which ensure that people who want to invest find your country attractive. Private sector investors are always looking for a corruption free environment. They don’t want to come and bid for a project and then find out that they have lost because somebody has gone behind the door and make payments. If you call for bids, everybody knows that this bid has been called for and every element of that process is done on the open so that people can see that there is no behind the scene activities anywhere. So parts of regulatory and institutional environment must ensure that the processes are transparent, competitive and transparently competitive. These must be enshrined and entrenched in the process we are adopting.
 
EC: Will the competition be healthy for development?
A healthy competition is an effective anti-corruption measure. As you know we also have some institutions on ground to guide the process from derailing. As I was saying it is not just one Act. The law establishing the ICRC will not be solely responsible for everything.  We have the whole gamut of legal instruments. For instance, the Bureau of Public Procurement Act is one that is expected to help in this process. Similarly the Fiscal Responsibility Act is expected to contribute to this. These are all laws, regulating instruments that would help to create an environment which is transparent and which is accountable. Accountability and transparency will form parts of incentives for the domestic and foreign investors. It is gladdening to note that in Nigeria we have laws that enable participants in every entity to have recourse to justice if they feel they had not been fairly treated.  So with all these we are on track. The ICRC will relate very well with all other regulatory agencies to ensure we continue to do the right thing all times.
 
EC: Does it mean that ICRC will automatically takeover such projects? May be you want to be specific about taking over?
Ans: Let me first of all come back to what ICRC is supposed to do. There is a lot of confusion about whether ICRC will be taking over project or not. The supply of electricity is constitutional responsibility of the Ministry of Power. The provision of transportation services, whether water, roads of waterway is the responsibilities of Ministry of Transportation and the responsibilities will not be taking over by anybody or by ICRC. They require the responsibilities of these ministries or agencies of government. Therefore, what ICRC is expected to do is to provide the environment for all types of the concessions, to provide the guidelines and the processes which would ensure that every concession whether in the ministry of power, whether in the ministry of transportation, ministry of environment or in the FCT, is down on the basis of best practices to provide guidelines and procedures and necessary technical supports to every ministry that is going into concession. It is a coordination role, a regulatory role in a context to ensure that this is based on agreed policies. And it is also a monetary and compliance ensuring institution.  The ICRC will take custody of every concession agreement and ensure that is implemented in accordance with the law which means that if the ministry of transportation has identified a role which it wants to concession, for instance a bridge or airport, the actual process for developing a project in the process is the responsibility of the ministry. It is the ministry that will decide on projects. Then we have to harmonize the process with other agencies like the Ministry of Finance and Budget Office to say yes do you agree. If there is agreement, ICRC would be responsible for coordinating, developing and managing that process through the concession agreement to be signed and implemented. The ICRC takes responsibilities for the compliance by the private entity, the concessionaire and the compliance by the public agencies. So, in that regard the ICRC will operate as an umpire.
 
EC: How is ICRC going to handle failure by any of the parties to the agreement?
Ans: Indeed part of the responsibilities of ICRC is this issue of compliance to ensure that once you have signed a concession agreement between group A,B,C and ministry XYZ which is the public agencies, the ICRC has the responsibility to ensure that both parties comply with the terms of that agreement from the time the agreement is signed to the time when the facility is transferred back to the ministry. So in this context, of course, the ICRC will ensure the building capacity. The capacity to ensure the process itself is implemented on the basis of best practices. The contract itself is properly negotiated and that the risks involved in this contract are adequately shared because one of the key issues in the concession is that there are multiplicities of risk in the implementation of every concession process or concession contract. Some of these risks can either be bore by the private sector or the public sector. And in the concession agreement, every one of these risks must be identified and allocated to the party that is better able to bear it. That is why the concession agreement seems to be very complex. And if the risks are not properly and adequately shared you get into a problem halfway down several years after signing: somebody becomes unhappy or the contract begins to falter and is therefore one of the key responsibilities of ICRC in managing this whole process to ensure that every contract is adequately signed to anticipate changes in the environment that can create a risk on one party or another and to ensure that there is mitigation arrangement that risk does not lead to failure of the contract.
 
EC: Now ICRC has been inaugurated. When do we expect to see new development?
Ans: The ICRC board was inaugurated essentially three to four weeks ago and this is an institution that is going to stand from nothing. We have held about three meetings of the board. What we are trying to do is to ensure that we put in place a proper environment for the operation of the commission.
 
EC: Do you have an office yet?
Ans: We have only just identified an office. Our hope is that by the first week of January 2009 we will be operating from the office. There is a lot of preparatory works that have to be done to ensure that we have process and procedures that are internationally acceptable. Because as you may know, we are looking at the private sector’s funding and not just in Nigeria but also the private sectors across the world and especially in the present circumstances where we are facing with huge financial turmoil in the global environment. We have to make sure that our environment provide the most attractive, the most profitable destination for the scarce investment capital and this is going to be the great task. That is why we are confident about creating an environment in Nigeria which is superior for all investors across the world. The challenge is not just to rush into something when we don’t have enabling environment to attract serious investors across the world. We will create an environment which will give confidence to investors in China or United States, in Canada or in Germany that will look at our system and say that ‘I believe I can do business till the next twenty years in this environment and make money.’
 
EC: What strategies are you going to put in place to ensure that ICRC does not fall to the realms of the normal mismanagement of funds and embezzlement?
The members of the commission are people of high integrity from the former Head of State, Chief Earnest Shonekan and all other members, are people who are very concerned in ensuring that their names, their integrity are not sour. We have set up a very clear, very transparent judicious process to ensure that every kobo is spent appropriately. The institution that does not only deal with government money, we deal with private sector’s funds too. In concession process, funds from private investors are largely at stake and on the table. And believe me if you are private investor you are looking at where every kobo goes. So the partners themselves would be conscious of the expenditures. More importantly, the money does not come straight to the commission in anyway. You are also aware that across the county, government has put in place increasingly greater accountability institutions like Bureau for Public Procurement BPP, Fiscal Responsibility Commission, FRC and others that are key institutions to checkmate the process. The National Assembly is there too to perform their oversight functions. The bottomline is to have people of high integrity to guard the integrity of the institution. I have no doubt that we would have no problem with governance. Concession issues are processes that are becoming central to the internal financial system and therefore all the multinational and multilateral agencies are putting their eyes on this new drive. The World Bank, IMF and many financial institutions that have shown keen interest in one way or the other may pullout if they see any sign of failure of accountability or failure of governance. We held meeting with the World Bank and I can assure you that their greater concern is on the governance. We will ensure we eliminate any form of conflict of interest. We will ensure highest level of accountability and transparency in all our undertaking.
 
Source: Economic Confidential

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