Two major concession agreements and the disagreements about them highlight the major factors that militate against the success of Public-Private Partnership (PPP) in the country.
Ironically, the political factor facilitates and frustrates. The news that an Arbitration Tribunal reached a decision in favour of Resort International Limited, concessionaire of the Federal Secretariat Complex in Ikoyi, Lagos, shows that arbitration can tame arbitrariness. The relevant Development Lease Agreement (DLA), dated October 10, 2006, granted Resort International Ltd a 99 years’ lease to redevelop the disused Federal Secretarial Complex into 480 luxury apartments.
Redevelopment work was disrupted by the Lagos State Government in September 2007 on the grounds that the land belonged to it and the area of Ikoyi where the secretariat is located was not meant for residential purposes based on its Ikoyi Model City Plan. This is what happens when a concession is not conceded by an interested party; it is understandable.
The dispute, Resort International Ltd claimed at Arbitration, created a situation in which it suffered damages totalling N88 billion as a result of the breach of a clause of the DLA by the Federal Government. Fundamentally, the company argued, the Federal Government, as a condition of the DLA, was expected to facilitate a ‘No-Objection Approval’ from the Lagos State Government, given that it had ‘good title’ to the Complex and full power and legal authority to enter into the agreement. The objection of the Lagos State Government, therefore, meant that the Federal Government had failed to fulfill an essential aspect of the concession agreement.
The Federal Government’s defence proved to be no defence and was regarded as such. It asserted that the undertaking to ‘facilitate’ a ‘No-Objection Approval’ was no more than an obligation to produce documents in support of the company’s application to the Lagos State Government. It also claimed ‘frustration’ of contract as a result of the subsequent promulgation of the Lagos State Model City Development Authority Law.
Interestingly, the Tribunal ruled in favour of Resort International Ltd and declared that the Federal Government had failed in its obligations to the company under the DLA entered into by both parties.
The Tribunal importantly observed: “…were it not for the default of the Respondent in facilitating the ‘No-Objection Approval’ and resolving the challenge to its title by the Lagos State Government, the contract between the parties would not have been frustrated…”
This is the heart of the matter. Political differences were at the centre of the conflict of interests that arrested the progress of the redevelopment project. At the time of the disruption, the then Federal Government and the then Lagos State Government were controlled by antagonistically different political parties and political forces. It remains to be seen how the matter will develop now that the two levels of government are controlled by one and the same party.
The Tribunal awarded damages. A report said: “The totality of the awards means that as at January 2016, the Federal Government owed Resort International Limited the sum of N54 billion which continues to accumulate interest at 17.26 per cent per annum. The Tribunal also confirmed Resort International Limited’s title to the Federal Secretariat property.”
It is useful to consider the backdrop. Resort International Ltd came into the picture following the movement of the seat of the Federal Government from Lagos to the Federal Capital Territory, Abuja, which necessitated the disposal of many of its assets. According to the Chairman, Bi-Courtney Group, Dr. Wale Babalakin, whose company won the concessional rights to the expansive secretariat complex, his company bid for the Federal Secretariat, Ikoyi, and won on September 28, 2006, after which the concession agreement was signed.
Babalakin was a fitting speaker on the problematisation of public-private partnership in the country at last year’s Nigerian Economic Summit in Abuja, where he shed some light on his company’s experiences regarding the Murtala Mohammed Airport Domestic Terminal II, Federal Secretariat, Ikoyi, and Lagos-Ibadan Expressway.
It is noteworthy that his group is still controversially enmeshed in another major concession agreement concerning the Lagos-Ibadan Expressway. Babalakin said the Development Lease Agreement in respect of the Federal Secretariat, Ikoyi, had anticipated the possibility of interference by the Lagos State Government, noting that a clause required the Federal Government to facilitate the obtaining of a ‘No Objection Approval’ from the Lagos State Government to change the use of the premises from offices to residential apartments. According to him, demonstration flats had been prepared, with 50 percent of the flats already sold and payments received.
Significantly, Babalakin listed the drawbacks to public-private partnership in Nigeria: the attitude of the government, lack of respect for sanctity of contracts and the rule of law, lack of investor security, corruption and malice. It goes without saying that any concessionaire faced with these troubles will have nightmares.
Arguing for public-private partnership, the Bi-Courtney chief said such arrangement would enable the government to harness expertise and efficiencies associated with the private sector in the delivery of certain facilities and services traditionally reserved for the public sector. He listed the advantages: “This will bring about basic amenities that are normally government’s responsibility, thereby allowing the government to concentrate on vital areas; reduce government burden of seeking and providing capital investment; serve as source of revenue generation for government; and help to reduce corruption and bureaucracy in the procurement of social infrastructure in government agencies.”
Babalakin continued: “Nigeria’s budget has been totally inadequate to fund the responsibilities of government, and the country has considerable infrastructure deficit due to age, increase in population and dwindling revenue base due to the fall in global oil price…I am reliably informed that our recurrent expenditure exceeds our total earnings. Elementary knowledge of economics tells us that this trend will invariably lead to disaster…Huge debt profiles of state governments have been accentuated by government participation in projects best left for the private sector. Bureaucracy in the public service hinders rapid development.”
Indeed, there may be arguments to counter the views of this champion of public-private partnership who carries his cross with such conviction that deserves contemplation, but there is no argument against the documented success of the PPP model in the development of sectors such as energy, mining, transportation and telecommunications in other countries. The PPP approach, which the concession concept represents, cannot be reasonably discounted in a modern economy, especially considering reported examples in Western Europe and U.S.A. where private investors are involved in infrastructure development based on concession agreements.
As long as the disagreement remains, the Federal Secretariat, Ikoyi, will remain an ugly testament to the forced failure of public-private partnership.
NATION
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