FG projects N9tn annual revenue from asset concession

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FG projects N9tn annual revenue from asset concession

Public assets put on concession by the Federal Government are expected to generate N9.1tn revenue every year over the next 55 years, according to documents obtained by Saturday PUNCH.

The generated revenue will be shared between the government and private investors based on a contractual agreement.

This implies that the new administration of President Bola Tinubu-led administration may receive N36.4tn in its first four-year tenure.

An analysis of reports sourced from the Infrastructure Concession Regulatory Commission showed that the concession includes projects in sectors ranging from transportation to ports, energy, dams and hydropower plants.

It also noted the concessions had to do with infrastructure and special projects, which were franchised between 2021 and 2023 to private investors under the administration of former President Muhammadu Buhari.

Some of the franchised assets include the establishment of a Planetarium and Museum at the National Space Research and Development Agency, expected to generate N30bn for the Federal Government and the private sector investors.

Also, the Federal Executive Council recently approved the concession of the Nnamdi Azikiwe International Cargo Airport, Abuja; the Mallam Aminu Kano International Airport, Kano; as well as the Expatriate Employment Levy, expected to generate $1.76bn, $596m, and $13.4bn, respectively.

The FEC also approved for concession the establishment of an Aviation Leasing Company and the development of an Electronic Civil Registration and Vital Statistics System, a platform that would effectively keep electronic records of births and deaths registrations.

Other projects for concession are Secure E-ticketing Solutions for the Lagos Ibadan Rail Service and the Warri-Itakpe Rail Service as well as the Device Management System, a project designed by the Nigerian Communications Commission.

This new development is coming amid a recent decline in revenue generation which has resulted in more borrowing.

Some of the projects are at the implementation stage while a few others are at different stages of procurement.

To arrive at the yearly figure, the total amount of revenue for each project was divided by the number of years concessioned.

A breakdown revealed that the government would earn N1.35tn annually from the N6.27tn in five years for two concessioned projects, while N905.7bn would be paid into the government coffers per year for N9.05tn revenue generated in 10 years from 11 projects.

Four projects under 15 years of concession would generate N133bn with N8.87bn remitted yearly, while N40.73bn would be paid annually for the 20 years of two franchised assets at a total of N814.73bn.

The government would also earn N461.75bn per year from 25 years project concession worth N11.54tn. 30 years of two concessioned projects would create revenue of N9.2bn per year from a total of N274.62bn.

Also, a yearly payment of N1.44tn would be paid into the treasury from 40 years of one franchised asset worth N57.84tn. For 45 years of three concessioned assets, N4.3tn would be paid annually from a total of N193.17tn generated during the period under review.

50 years of two concessioned projects would generate revenue of N544.33bn annually from a total of N27.21tn, while N478.23m would be paid per year from total revenue of N26.3bn from two projects in 55 years.

In total, the Federal Government is expected to make N9.1tn annually from each category of projects to be concessioned.

Saturday PUNCH reports that the ICRC was established to drive Public-Private Partnership policy of government and bolster public infrastructure, premised on the fact that government alone cannot meet all the infrastructure needs of the people.

In October 2022, The PUNCH exclusively reported plans by the government to either sell or concession public assets to fund the 2023 budget deficit of N10.7tn.

In the report, sources at the Ministry of Finance, Budget and National Planning told The PUNCH that the government was considering selling or concessioning the Tafawa Balewa Square in Lagos as well as all the National Integrated Power Projects in Olorunsogo, Calabar II, Benin (located at Ihorbor), Omotosho II and Geregu II plants.

It said more than 25 of such projects would be turned into active assets that would generate money in some ways for the Federal Government. In contrast, others would be offered to investors for equity while others would be sold to reduce waste.

Also, speaking at the 2023 first quarter PPP Consultative Forum earlier this month, the ICRC Director-General, Micheal Ohiani, revealed that over 200 projects were at different stages of development and procurement.

He said, “We have over 200 PPP projects at different stages of development and procurement. In addition, we have 75 PPP projects at the implementation stage.

“There are also many PPP projects at the inception stage waiting to commence development, and I believe that together, we can do even more in the coming year.”

Speaking with Saturday PUNCH, the Chief Executive Officer, Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, described PPP as a good model to manage critical infrastructure as the government did not have adequate capacity to do it alone.

According to him, the role of the private sector in the management of assets must be expanded as it remained an excellent way to convert some assets that were liabilities into proper assets.

He said, “PPP is a good model because there are so many projects that the government doesn’t have the capacity to manage and that is why for many of the government projects, you will see that at the beginning they look good but with time, they begin to deteriorate both in terms of delivery of value and revenue generation.

“The public sector generally is not cut out to be managers of projects except it is a purely social project. The private sector may not have the capacity but the government can set it up and give it to the private sector. That way, the government will be able to have better returns on such projects.

“For example, if the refineries were being managed by businessmen without interference from the government, we would get more value from the refineries and they would not collapse the way they did.”

He noted that there were many properties wasting away, which something had to be done about to unlock the value.

He added, “To get the best value for assets, we should expand the role of the private sector in the management of those assets. They can bring a lot of value and if you add value, it will generate revenue and create jobs through service delivery.”

Yusuf expressed hope that the concessionaires had the capacity to deliver the projects.

Meanwhile, a professor of Financial Economics at the University of Uyo, Leo Ukpong, dismissed beliefs that the policy was an alternative source of generating revenue, saying he didn’t believe assets should be sold or concessioned to raise funds.

Speaking with Saturday PUNCH in a telephone interview, he cautioned that this should be done in a manner that would be of maximum benefit to the citizens, rather than creating loopholes that would make the private sector exploit the taxpayer.

He stated, “I think it is a wrong financial approach to resolve our future financial change. You don’t sell your assets to generate revenue. The philosophy of selling assets is wrong either outright sales or concessions. There is a scramble to liquidate the assets and then mismanage the money.

“For example, the privatisation of power holding has not in any way improved access to electricity. The lack of revenue is not a justifiable reason to concession airports and critical infrastructure, because when the revenue goes into government coffers, it will definitely be mismanaged.

“It is better to invest in technology. The government should invest money in the productive sector of the economy and manufacture what we import and not sell it (the asset) to the highest bidder. We should actually use what we have and invest in things we used to import so as to cut down on importation and produce what we need. We need policies that will stimulate Nigeria’s economy.”