25 November 2012

Nigeria: Bi-Courtney and the Expressway Fiasco

On Monday last week, the Federal Government took the very drastic step of revoking the concession granted to Bi-Courtney Highway Services to repair, upgrade and manage the 106-kilometre Lagos-Ibadan Expressway.

The revocation announced in a terse statement by Minister of Works Mr. Mike Onolememen came less than 24 hours after President Goodluck Jonathan expressed indignation with the snail slow pace of work on the critical road during his presidential media chat on Sunday night.

The minister also announced that government would commence the immediate rehabilitation of this road, this time through direct contract which was awarded to the construction giants Julius Berger Plc and R.C.C Nigeria Limited.

While Julius Berger would handle section 1 from Lagos to Shagamu interchange, RCC Nigeria Limited will be responsible for section II from Shagamu to Ibadan, according to the minister.

Government's action was received with great excitement and relief by many Nigerians, especially the hundreds of thousands who ply the Lagos-Ibadan expressway every day. Needless to say, this is the single busiest road in the country, the artery to the nation's commercial capital city of Lagos which leads to and from it to all parts of the country. The dilapidated nature of this road and the epileptic efforts by Bi-Courtney to repair and upgrade it, coupled with the deaths and injuries and great sufferings suffered by motorists every day on this road, easily explain the relief and excitement felt by many that help is at last on the way.

Yet, there are many serious issues and lessons to learn from this sorry episode. The Lagos-Ibadan road concession is the flagship event of the government's new policy of Private Public Partnership, under which a private firm wins a concession to build or rehabilitate a major infrastructure, then collect tolls on it for a number of years before it returns to public ownership. Under such terms, Bi-Courtney Highway Services owned and led by Dr. Olawale Babalakin signed a Build, Operate and Transfer deal with the Federal Government on May 8, 2009. It is to source its own funds of N90 billion to repair and upgrade the road within 4 years, then erect toll gates and collect tolls on it for the next 25 years before it reverts to government ownership.

Exactly six months to go before the repair and upgrade work is supposed to be completed, it has barely taken off. Works Ministry officials say Bi-Courtney did not so much as supply to it completed performance bonds, copies of the construction contracts, copies of the Financial Agreement or copies of the Operations and Maintenance Contract, all duly provided for in the 2009 lease.

Clearly, officials believe, Bi-Courtney failed to secure the necessary financing from banks to execute the job. Its earlier claims that officials of the Lagos and Ogun State governments were obstructing the lease do not seem to hold much water.

Given this situation, there is little else government can do other than to end the lease agreement and instead embark on a rebuilding of this critical road through the usual contract system. That one often comes with problems too, though not usually when it is undertaken by Julius Berger.

Observers would however be right to say that the PPP system has suffered a very big blow with the Bi-Courtney cancellation. By handing the job over to Julius Berger and RCC, all talk of challenging local contractors with major projects so that they too acquire experience and capacity has also suffered a major blow.

In a way however, it is not at all surprising that this flagship lease agreement with many-sided implications for indigenous Nigerian business should sail into such stormy waters. For many years now, Babalakin's name has become nearly synonymous with controversy and trouble in big business deals.

Under the Obasanjo and Yar'adua administrations, firms associated with him won sales and concessions on the Murtala Mohamed Airport Two terminal, the Lagos-Ibadan road as well as the Ikoyi Federal Secretariat.

All three mega deals have been awash in controversy. Only two days ago, the Economic and Financial Crimes Commission [EFCC] named Babalakin among the four persons it said laundered N3 billion in foreign banks in order to facilitate a private jet purchase by former Delta State governor James Ibori.

Some observers have said that Babalakin's troubles stemmed from the recent public spats between his business mentor, former President Olusegun Obasanjo and current ruler Goodluck Jonathan. While such factors cannot be discountenanced in Nigeria, at least with respect to the Lagos-Ibadan road it is clear that Babalakin and Bi-Courtney did not live up to the terms of the contract, whatever reasons they may have.

Nor did they do a good job of informing Nigerians or government officials as to the constraints they faced. But whatever these may be, the Lagos-Ibadan expressway is far too important to the security, economic and social life of Nigeria to be allowed to remain in its current state any longer.

There is a big lesson to learn here. The argument still holds true that government will not have enough money to undertake all major infrastructure projects on its own. The PPP plan should therefore still be tried.

However, before any company, foreign or indigenous, is granted any concession under it again it must show demonstrable technical and financial competence, not just connection to key state officials.

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