Economic and social benefits of Lekki Toll Project By Lateef Raji

The Lagos State Government is constrained to respond to an article titled,” Lekki Toll: Biggest Fraud Ever Conceived and Committed” published in The Herald of 13th February,

Governor Babatunde Fashola of Lagos State

2015, and many other online platforms. This has become necessary in order to provide accurate information to the public at large about the Project, put the record straight and correct a lot of misinformation and misconception in the jaundiced report. The way the story was syndicated confirms that it was a hatchet job meant to settle a political score for cheap electoral gains.Despite the sheer volume of literature that is out there on the subject, the writer failed to do any rigorous research before going to town with mere tales that do not in any way advance the knowledge and understanding of the readers on the subject matter. It is obvious the writer is ignorant and short sighted, and deliberately shut his eyes to the opportunities that the road has attracted to that axis.

It is necessary to give some historical background on the road project and what motivated the Lagos State Government to opt for Public-Private Partnerships (PPP) as a financing option in the delivery of the project. The choice of consummating the project through PPP in the first instance was part of the Lagos State Government’s forward thinking strategy to provide off-budget funding to enable it to implement infrastructure projects such as the Eti-Osa Lekki-Epe Expressway in view of its limited resources and to ensure that other pressing projects are not delayed to the detriment of the citizens of the State. The need to carry out upgrade and expansion works on the road became critical in view of the significant population growth along the corridor as the fastest growing area in the country. It was glaringly obvious that the 4-lane carriage road could no longer support the needs of the community. Furthermore, the road had exceeded the technical design life span of 25 years, having been built in 1981 and significant failures along the road sections resulted in huge traffic congestion that became a hazard to the health and security of motorists.

In response, the Lagos State Government through the Ministry of Works and Infrastructure advertised the road locally and internationally over a period, commencing from 2002, inviting interested private sector players to partner with Government in developing various road infrastructures, including the Eti-Osa Lekki Epe Expressway. Different platforms such as national newspapers, international road shows, Public Service Journal (PSP Journal), as well as the Ministry of Works and Infrastructure website were utilized in creating public awareness of the project.

At the time, five roads were presented for Private Sector Partnership within the State; however, response from investors was very sparse and uninspiring.  Only a few companies comprising of a consortium led by Asset Resource Management Limited (ARM), a company known as Denoi Konstruct and Messrs Warner West Africa Ltd, indicated an interest in the Eti-Osa Lekki Epe Road project.

It should also be noted that, PPP as a tool for infrastructure development was still evolving in the country at that time, and as such there was still much apprehension about its effectiveness and workability, especially in the midst of an uncertain and nascent political climate. The bomb blast of 2002 in Lagos also did not help matters, as it created an environment of insecurity that discouraged prospective investors.

Consequently, the initial local and international interest shown in the project did not progress beyond the signing of a Memorandum of Understanding which did not result in any commitment.  However, Messrs Asset and Resource Management Company Limited (ARM) unlike other bidders were resilient in their proposal and resolute in their negotiations with the State Government. This eventually led to the signing of a Concession Agreement with Lekki Concession Company Limited (LCC), the Special-Purpose Vehicle established by ARM and a consortium of local and international investors, to execute the project.

In compliance with the procurement process, the contract was consummated under the Lagos State Roads, Bridges, (PSP) Board Law of 2004. Consequently,the Notice of Intention to Award the Concession was issued in the Lagos State Government Official Gazette Extraordinary No. 15, Volume 39 of 28th April 2006. Furthermore, the Notice of Execution of the Concession Agreement was published in the Lagos State Government Official Gazette No. 16, Volume 39 of 2nd May 2008.

The road works are in two phases of which phase 1 is the expansion and upgrade of 49. 36km of the Lekki Epe Expressway, while phase 2  is the construction of a 20 km Coastal Road, with an option to construct the  Southern bypass. The protection of the coastal road shorelines by the State Government was, however, a precondition for the concessionaire to construct the coastal road, a venture which requires huge resources presently not within the reach of the Lagos State Government.  Consequently, the 4th Mainland Bridge has never been part of the pact of the Lagos Infrastructure Project as erroneously stated in the report.

The Lekki Concession Company (LCC) is the Special-Purpose  Vehicle (SPV) established to execute the road project. This is typical in structured finance transactions, such as PPP, asset securitization or joint ventures, to isolate certain company assets or operations and ring-fence a project-financed transaction. Part of its benefits is that it enables large organizations to meet specific objectives and perform specific investment activities. It also helps in reducing “red tape” and offers legal protection to member companies of the SPV among other benefits. The members of the SPV (LCC) consist of both local and international reputable equity holders such as Asset & Resource Management Company Limited (ARM), The African Infrastructure Investment Fund (AIIF) (which consists of strategic investors such as Macquarie Group – Australia, Old Mutual – South Africa), Larue Projects Limited and Hitech Construction Company Limited.

Similarly, top international technical advisers, consultants and contractors such as BKS and Aurecon (South Africa), Arup (Pty) Ltd (South Africa), Compsis (Brazil), Toll Infrastructure Services (South Africa) and High-Point Rendel (UK) among others, were engaged to support and underpin key aspects of the project. Apart from the equity contribution, the majority of the funding for the project came from; The African Development Bank, First Bank of Nigeria Plc, United Bank for Africa Plc, Zenith Bank Plc, Diamond Bank Plc, Fidelity Bank Plc, Standard Bank London and Stanbic IBTC Bank Plc. To impugn that there is an element of fraud in a project that involved the aforementioned investors is not only sickening but queries the competence and state of mind of the writer and the sponsors.

Similarly, there is nothing that has to do with allocation of prime land to LCC as part of the equity for the partnership in the Concession Agreement, which is a transparent document and sets out all the project details very clearly.  The contribution from the State Government to the project apart from providing the Right of Way, is the provision of a 20-years N5 billion (US$42m) mezzanine loan, with a 10 year moratorium to demonstrate Government’s commitment to the success of the project. This is consistent with global best practice in priority projects of this nature, and the concessionaire was to repay the loan on due date.

The writer also stated that there was no basis for the 30-year  Concession “for mere rehabilitation and expansion of an existing road, which government could afford on its own.” It must, however, be noted that the concession period is determined based on empirical input elements of the construction, operating, financing and maintenance costs whilst providing reasonable returns to investors. Typically, toll road concessions around the world range from 25 years to as high as 50 years, where such projects involve a large amount of capital expenditure. It helps to lower cost of toll rates if the period over which the concessionaire is allowed to recoup its investment is spread out over a longer rather than a shorter concession period.

Furthermore, it needs to be stressed that within the 30-year  concession period, Government would not have to be concerned with the operation and maintenance of the road because the toll provides a stable and timely source of road maintenance funds, which allows for prompt and adequate maintenance of roads and also frees up government resources for other socio-economically productive sectors such as Education and Health.  In addition, at the end of the concession period, the road would be handed back to the State Government in a fully maintained condition.

Furthermore, contrary to the writer’s assertion of “mere rehabilitation and expansion of an existing road,” additional value added to the road beyond rehabilitation, and expansion includes the  provision of complementary facilities such as street lights, traffic lights, drainages, pedestrian bridges, road signs, fencing (for security and safety), construction of underground ducts for fibre-optic and other buried infrastructure.  The novel 24/7 Incident Management Service comprising: Route Security Patrols, Breakdown/Vehicle Recovery Assistance, Toll Free Customer Helpline and Ambulance services on the road, is the first of its kind in Nigeria and West Africa. Since inception, over 15,700 road users in various levels of distress have benefited from the complementary incident management services. Independent surveys conducted by research outfits on the completed sections of the road, have described journey experience on the expressway as the best in terms of maintenance and safety in the country. Incidences of traffic congestion, travel time inconvenience, accident and armed robbery have been significantly reduced to the barest level in the completed sections.

Thus, contrary to the writer’s warped impression that the project is anti-people, it has, on the contrary, enhanced the quality of the lives of the people through the aforementioned socio- economic benefits.

NATION

1 Comment

  1. Good day Uncle Jimi.

    I really thank you and your crew members for the daily candid efforts on 97.3 FM and also for your perfect works on Sundays. May God bless you all.

    I’m one of your addicted listeners on radio. I will so much appreciate whatever effort you can put in place to unraffle the misery behind the non availability of the much talked about, PVC in most parts of Mafoluku, Oshodi.

    Sometimes in February, I heard it mentioned on one of your Newspaper analysis that the INEC Chairman claimed that the issue with the PVC was not production but NON collection. But the People can only collect what is made available.

    Thanks for your usual readiness to enlighten the public.

    God bless you.

    Emman. Kolawole

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