The Role of the Financial System in Nigerias Economic Development

Transport Sector Pre-Read

December 3 5 2010

Executive Summary
Nigerias transportation infrastructure is mostly in a state of disrepair as a result of decades of inadequate investment and maintenance In recognition of the huge infrastructure deficit, the government has accepted the use of Public Private Partnerships (PPP) in the development and maintenance of transportation infrastructure While there have been some success stories in the use of PPP, private financial institutions still face sizeable challenges in funding transport infrastructure. The absence of an enabling environment and lack of strategic support from the government reduces the pool of projects that can be made bankable A look at South Africas situation yields learning points and change imperatives for Nigeria in her quest to develop an adequate, safe, environmentally sound, efficient, affordable and integrated transport system Key to this success is the governance framework - the structures, policies, institutions etc are in place to procure, deliver and manage transportation infrastructure
2

Executive Summary
Aside from the governance framework, the strategic approach of government to the use of PPP is critical PPPs are a tool to enhance the quality of government spending, and not just a channel to route private investments into public infrastructure projects
Key learning points for Nigeria include:
o o o

Focus on procurement of services rather than assets Role of public sector should be on policy and strategy formulation, not asset operations Application of PPP in transport infrastructure development should be broadened beyond concessions to private operators, to include government spending on public works

This presentation provides an overview of the Nigerian transportation system, the opportunities and challenges with financing transportation infrastructure and recommendations to drive development of the sector

Outline
Recap of 2009 Bankers Committee Retreat Overview of the Nigerian Transportation System Governance and an Enabling Framework in Transportation Infrastructure Development Case Study: South Africa Appendix

The 2009 Bankers Committee Retreat identified seven (7) key areas to address to expedite reform of and investments in the Nigerian transport sector
Proposed Intervention
1. Articulate framework and guidelines for special assets

Responsibility
CBN

Progress to-date
Done

Status

What else needs to be done?

Creation of framework for special assets

2. Tax relief and special grants for project development costs

Government

Government has granted sector pioneer status-new industries in sector can avail of tax holiday of up to 7 years NTC Act is still being reviewed prior to submission to Senate and House of Reps

N/A

3. Approval of the ICRC Act , National Transportation Commission Act and other sub sector bills

Government

Passing of bill into law

The 2009 Bankers Committee Retreat identified seven (7) key areas to address to expedite reform of and investments in the Nigerian transport sector
Proposed Intervention
4. Support agencies and governments with clear integrated strategies and plans by funding specific projects 5. Build capacity for project delivery within private and public sectors 6. Create a larger pool of debt and equity capital to achieve 7. Articulate the criteria required to finance transport infrastructure projects

Responsibility
Financial System

Progress to-date
Projects to date include LCC Lekki-Epe expressway funded by a consortium of local banks N/A

Status

What else needs to be done?

Increase funding for additional infrastructure projects

Financial System

N/A

Financial System

Introduction of the PENCOM policy to utilise PFA funds for infrastructure finance Criteria has been articulated

Explore debt raising from multilateral institutions e.g. World Bank N/A

Financial System

Outline
Recap of 2009 Bankers Committee Retreat Overview of the Nigerian Transportation System Governance and an Enabling Framework in Transportation Infrastructure Development Case Study: South Africa Appendix

Nigerias transportation infrastructure is insufficient to meet the aspirations of Vision 20:2020 and the infrastructure is in a state of disrepair
Nigeria has 193,200 km of roads, made up of 34,123km of Federal roads, 30,500km of state roads and 129,577km of local government roads More than 50% of the roads are dilapidated based on the last review; almost 90% of current inter-state movement are done by road 3500km of narrow gauge rail lines, with 827 km of narrow gauge sidings and loops; 306 km of standard gauge rail lines

Rail infrastructure comprises wagons, coaches, railcars, rail buses, cranes, workshops, and station buildings, most of which are in a dilapidated state
Nigeria has a total of 23 airports distributed all over the country Due to the high fixed costs and relatively low income involved in running these airports, only three of the airports operate at a commercial self sufficiency, while the others operate at a substantial loss Nigeria has 13 major ports

Cost of doing business at the ports is high as a result of multiple taxes and levies imposed on operators
This has resulted in diversion of cargo to other countries within the West African sub-region
Source: Draft National Transport Policy: August 2010

Low level penetration of inland waterways in most states of the country due to lack of infrastructure8

Globally Nigeria ranks low in the quality of its infrastructure, which impacts the ease of doing business
Criteria Quality of roads Quality of railroad infrastructure Quality of port infrastructure Quality of air transport infrastructure Overall Infrastructure Ranking Country Ranking on Global Competitiveness Index 2010 11 Ranking / 139 128 104 121 101 135 127 2009 - 10 Ranking / 133 112 104 122 78 126 99 Change (from 2009-10) -16 0 +1 -23 -9 -28

As part of the Global Competitiveness Report, a survey was conducted to determine the most problematic factors for doing business in each country Inadequate supply of infrastructure and access to financing were identified as the two most problematic factors for doing business in Nigeria

Source: World Economic Forum: The Global Competitiveness Report 2010-11; 2009-2010

Sub-optimal investments in transportation have resulted in the current infrastructure deficit

Nigerias infrastructure spend is low and largely sourced from government
Private Investment in Transportation (US$ per US$1,000 of GDP)
12 10 8 US$ 6 4 2 0

Nigeria
Source: Team Analysis, 2009 Bankers Committee Documents

Brazil
10

South Africa

Russia

China

Key challenges include inadequate investment and poor management of transport infrastructure - which have created a huge infrastructure deficit
General Infrastructure Challenges
Federal government is the primary financier of infrastructure projects Annual budgetary allocation is insufficient to meet the countrys infrastructure demands Process of allocating budget to rehabilitate existing infrastructure is slow, opaque and inefficient Capacity gaps exist for project development, management, operations and maintenance

Specific Infrastructure Challenges

Poor roads and road network Weak regulatory environment Inadequate strategic planning, oversight and regulatory functions

Poor contracting procedures and quality control

High dependence on public sector subsidies Highly dilapidated infrastructure and lack of serviceable locomotives and rolling stock Poor management of the Monopoly player, National Railway Corporation Inadequate visual and navigational aids High cost of air travel

Source: Team Analysis

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Lack of a well-articulated national air transport policy and weak enforcement of existing policies

Outline
Recap of 2009 Bankers Committee Retreat Overview of the Nigerian Transportation System Governance and an Enabling Framework in Transportation Infrastructure Development Case Study: South Africa Appendix

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An estimated US$15b is required annually to adequately fund Nigerias infrastructure deficits

Traditionally, government has been the sole financier of road infrastructure projects, often taking responsibility for implementation, operations and maintenance.

Public-Private Partnership

Partnership between a public authority and private sector organisation to fund or operate a public service.

Capital infusion through the fiscal budget to rehabilitate or replace infrastructure, instead of periodic maintenance makes funding increasingly difficult, thereby accelerating infrastructure deterioration.
There are gaps in capacity for project development, management, operations and maintenance. It is clear that Private sector participation is imperative to transform transportation sector and attain national development aspirations

Project-Based Debt Financing

Long-term financing of projects, the debt of which is expected to be paid back using cash flow generated by operation of the project

Such a debt is typical of funding for concessions

Share issue or outright sale of assets

Privatisation

Part-owners/ managers of public assets or full ownership transferred from public authorities to investors

Source: Infrastructure Concession Regulatory Commission; Team Analysis; 2009 Bankers Committee Documents 13

The government has adopted the use of Public Private Partnerships

A governance framework has been set to ensure success in the use of PPPs

Policy

PPP Policy Framework - Adoption of a Policy framework for the private sector to play an important role in providing investment through Public Private Partnerships (PPPs)

ICRC Act (2005) PPP Policy Framework Regulations National Transport Commission Bill (in progress)

Institutions

Infrastructure Concession Regulatory Commission National Transport Commission (in progress)

Source: Draft National Transport Policy: August 2010; Corporate Nigeria: The Business, Trade and Investment Guide 2010/2011

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in alignment with global trends in transportation infrastructure development

Local Bus BRT Interchange Guayaquil, Ecuador

Transmilenio, BRT/Local Bus, Bogota, Colombia

Lekki-Epe Expressway, Lagos Nigeria

Metro/Local Bus/BRT Interface, Mexico City, Mexico

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Herndon-Monroe Transit Center, Virginia Dulles Corridor, USA

Development of road infrastructure via PPP remains in the infant stages

Policy governing Infrastructure Financing
Existing policies include: oNational Transport policy (currently being reviewed) oFederal Government of Nigeria's PPP framework; and oInfrastructure Concession Regulatory and Commission Act of 2005 established to promote opportunities for Public private partnership in the sector The Government has made a few attempts to adopt the PPP model but yet to be successfully completed Lagos States and LCC - Lekki-Epe Expressway Federal Government and Bicourtney Lagos Ibadan Expressway Privately developed or commercially operated roads (with the exception of LekkiEpe expressway) are not in existence in Nigeria despite several attempts by the government

Current Status

Execution Success to Date

Challenges Experienced

Conflict in policy objectives between the State and F.G. Absence of clear responsibilities Non-transparent procurement process Non- credible sponsors or promoters
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Source: Draft National Transport Policy: August 2010

Development of rail infrastructure via PPP is still in the conception/design phase

Policy governing Infrastructure Financing Current Status
Same as policy governing Road infrastructure

The Government has initiated the process of concessioning the two main lines of the Nigerian Railway Corporation Lagos State is negotiating with bidders for operation and maintenance of Red & Blue Railway Lines None

Execution Success to Date

Challenges Experienced

Outcome of current exercise will indicate potential challenges

Source: Draft National Transport Policy: August 2010

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Only one successful example of concessioning exists in the Nigerian aviation industry
Policy governing Infrastructure Financing Current Status
Same as policy governing Road infrastructure

Efforts have been underway by agencies of Government to design a Concession Model for the Airports, however, this is still inconclusive The recent governments have provided direct funding for Terminal Upgrades and Runway Extensions in recent time in a bid to ramp up the quality of infrastructure Only one successful example of concessioning Terminal II of Murtala Muhammed Airport to Bicourtney Ltd

Execution Success to Date

Challenges Experienced

Policy inconsistency and uncertainty as a result of change in government Key risk factor for investors An example is the revocation of the Nnamdi Azikiwe Airport concession to Abuja Gateway Consortium
18

Source: Draft National Transport Policy: August 2010

Concession of seaports has been the most successful when compared to other modes of transportation in Nigeria
Policy governing Infrastructure Financing Current Status
National Inland Waterways Act Same policies governing road transportation

Most of the seaports have been leased out to private sector operative under 2 models (the landlord model and the service port model) The landlord model seems to be the most preferred option

Execution Success to Date

The concession of seaports is most successful when compared to other modes of transportation

Challenges Experienced

N/A

Source: Draft National Transport Policy: August 2010

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An enabling framework is critical to the success of PPP models in transportation infrastructure financing and development
GOVERNMENT Infrastructure Policy & Objectives Legislative Framework REGULATORS Industry Focus Economics / Pricing Standards

Enabling Environment
Anti-Corruption Measures

Levels of Service
Capital Investment

INFRASTRUCTURE INVESTMENT
COURTS & TRIBUNALS Judicial Independence Rule of Law FINANCIAL Diversity of Financing Terms & Conditions

Enforcement of Contract
Arbitration Legal Redress & Protection

Liquidity & Credit

Risk Management & Mitigation

Source: Transportation Infrastructure , Institutions and Operations: Importance of Institutions20 A presentation by Opuiyo Oforiokuma Managing Director/CEO, Lekki Concession Company at the 5th Lagos Economic Summit

Outline
Background Recap of 2009 Bankers Committee Retreat Overview of the Nigerian Transportation System Governance and an Enabling Framework in Transportation Infrastructure Development Case Study: South Africa Appendix

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South Africas transport sector is a key contributor to her competitiveness in global markets and is increasingly being seen as a crucial enabler of economic growth and social development
Nigeria
Colonized by Britain Gained independence in 1960 Experienced prolonged military rule between 1966 & 1999, with a brief democratic interregnum Return to democracy in 1999

South Africa
Increased racial segregation culminated in apartheid in the early 20th century Apartheid legislation and ban on political organizations lifted in the early 90s First universal elections held in 1994

Political Context

Transportation System

Roads are primary means of transportation but are largely in a state of disrepair Rail infrastructure remains in dilapidated state Sea ports are currently concessioned to private sector

Extensive, quality road and rail network Rail networks connect to other countries in Southern Africa Sea ports serve as hubs for traffic to and from Europe, Asia, the Americas

Infrastructure Development

Overall investment in the economy paradoxically reduced following the discovery of oil in the 70s Heavily dependent on government for financing Decades of neglect have created a huge infrastructure deficit

Investment in infrastructure during the apartheid era localized around four economic centers Key challenge for South Africa is spreading infrastructure development to other regions of the country Significant investments in transport took place in preparation for World Cup 2010

Source: CIA Factbook, Wikipedia

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South Africas transport infrastructure is considerably more developed than Nigerias

Criteria
Land Area (sq. km) GDP (2009) GDP per Capita PPP (2009) Road Network (km) Road Density (km of road per 100 sq. km of land area) Rail Network (km) Rail Density (km of rail per 100 sq. km of land area) Number of Airports Number of Seaports Cargo Throughput (Million tonnes) - (2008) 1,214,470 $ 285.9bn $ 10,291.3 362,099 29.8 20,872 1.7 85 8 185 910,770 $ 168.9bn $ 2,150.1 193,200 21.2 3,505 0.4 22 13 65

Source: World Bank Development Indicators; CIA World Factbook; Transnet, Nigerian Ports Authority Airports by International Civil Aviation Organization (ICAO) code - http://en.wikipedia.org/wiki/List_of_airports_by_ICAO_code:_F#FA_-_South_Africa 23 http://en.wikipedia.org/wiki/List_of_airports_by_ICAO_code:_D#DN_-_Nigeria

Evolving over the years into what we see today

World Class Transportation Infrastructure 2005 - 2010

Definition of a Public Transport Strategy (2007 2020) Investment of R170 billion into the transport system from 2005/06 to 2009/10 Rail Network = 24487km Road Network = 362099km Passengers carried by air transport = 32.6m Bus Rapid Transit (BRT) systems begin operations Construction of new Seaport at Ngqura Launch of Gautrain rapid rail system King Shaka International airport begins operations More than 70 international airlines flying into the South Africa

Defining A New Beginning 1995 - 1996 The Apartheid Era < 1995
Transportation system inadequate to meet basic accessibility needs in developing rural and urban areas Over dependence on roads for internal passenger and freight movement (three quarters of such movement) Only three national ports classified as hub ports Fewer than 12 international airlines flying into South Africa Review of 1980s National Transport Policy Preparation of new White Paper on National Transport Policy Decision made to build more hub ports and airports to maximize South Africa's participation in the global economy Rail network = 20319km Road network = 264000 km Airports = 130 Seaports = 7 Passengers carried by air transport = 6.4m

Sources: Green and White Papers on National Transport Policy, South Africa Pocket Guide to South Africa 2009/2010 24 SouthAfrica Info: http://www.southafrica.info/business/economy/infrastructure/transport.htm

A transport infrastructure that surpasses others within the African continent

Busiest airport in Africa Transported 17.56m passengers in fiscal year 2009/10

Transports 16,000* commuters every day

Rea Vaya Bus Rapid Transit System

OR Tambo International Airport

Exceeded 400,000 passengers in first month of operation Achieved 1m passenger after 4 months in existence

Busiest seaport in Africa Handled 74,683,597 tonnes of cargo during fiscal year 2008/09

Gautrain

Durban Port

Source: Rea Vaya - http://www.reavaya.org.za/news-archive/march-2010/262-close-to-16-000-commuters-use-rea-vaya-every-day (*figures for 2009) http://www.engineeringnews.co.za/article/rail-2010-10-08; http://www.engineeringnews.co.za/article/tentative-joy-as-gautrain-numbers-exceed-expectations-by-two-thirds-2010-07-19; 25 ORTambo International Airport Total Passengers September 2010; Ports & Ship, Durban: http://ports.co.za/durban-harbour.php

Although the public sector is still the primary source of funds, South Africa is increasingly reliant on PPPs to finance transportation infrastructure development
Table 4.8 Public sector infrastructure expenditure and estimates, 2006/7 2012/13
2006/07
R million PPPs constitute a small percentage of the capital expenditure for infrastructure build National departments Provincial departments Municipalities Extra-budgetary institutions 4 631 27 112 21 084 3 699

2007/08
Outcome 5 712 29 395 30 736 3 726

2009/09

2009/10
Revised estimate 6 382 41 185 37 480 10 859

2010/11

2011/12

2012/13

Medium-term estimates 6 847 45 623 41 305 11 175 7 758 49 971 50 449 15 083 10 703 50 786 56 028 18 821

6 318 36 094 39 577 6 194

Public-private partnerships
Non-financial public enterprises

1 343
25 736

3 857
56 765

4 942
103 322

13 751
125 504

9 939
147 025

11 389
148 665

6 109
157 970

Source: Budget Review 2010, National Treasury, Republic of South Africa; Infrastructure Finance: The Changing Landscape in South Africa, Deloitte

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The PPP approach to infrastructure procurement and delivery entails a shift from the traditional government procurement model
Focus is on strategic approach to procuring infrastructure services rather than physical assets Public sector sees role as focusing on policy and strategy formulation, not asset operations

Public Sector Strategy & Approach

Focus is on fostering climate that encourages private participation in the ownership, planning, financing, construction, maintenance and management of transportation infrastructure

Strategic approach is to exhaust private-sector service delivery and financing options before direct public intervention Government approach is to make investments based on ROI analysis, not merely expenditure appropriations Key tenet of National Transport Policy is for services to be user-pay and/or self-sustaining

Policy

o o

Economic infrastructure considered commercial and is not subsidized as far as is possible Social infrastructure more amenable to government subsidy, but still privately-run as far as is possible

Infrastructure project conception and financing strategy undertaken simultaneously Investment decisions taken against a set of criteria including:
o o

Infrastructure Financing

Lifetime cost Economic and social returns to the country Returns to the transport system and the customer Social-access projects, requiring government funding or subsidy Infrastructure suitable for indirect user charging, e.g. fuel levies, license fees, tax on fares Infrastructure suitable for private sector investment, e.g. toll roads

Strategic categorization of infrastructure projects based on financing sources

o o o

Infrastructure service procurement and transportation infrastructure delivery focuses on: private-sector service delivery sustainable funding arrangements

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Source: Team Analysis

with emphasis placed on private-sector based service delivery and utilization of PPPs in procurement of infrastructure, even when government funding is required
PPPs are utilized as a central government procurement and investment catalyzing tool

Inception
Register Project Appoint Advisors

Feasibility Study
Needs Analysis Due Diligence Valuation Procurement Plan

Procurement
Design fair, equitable, transparent, competitive process Prepare bid documents and draft PPP agreement Conduct bid process Select, negotiate and finalize management plan

Development
Measure Output Monitor Performance Regulate Progress Settle Disputes

Delivery
Annual Reporting Scrutiny by Auditor General

Exit
Evaluate Status Coordinate Exit

South Africa employs a fairly standard PPP model, but prioritizes private service delivery in all government spending
Public Institution

PPP Agreement

Direct Agreement

Shareholders

Shareholders Agreement

Private Party

Financing Agreement

Lenders

Construction Subcontract

Operations Subcontract

Construction Subcontractor Source: Team Analysis

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Operations Subcontractor

Despite the picture painted, South Africa is not without its transportation challenges
Infrastructure expenditure has not historically kept pace with the rate of economic growth
Financial sustainability in the long run, arising from the twin goals of meeting customer goals and national objectives over time

Transport operating models in a number of critical entities are behind international best practice
and exacerbate the lack of investment Safety (particularly on road and rail) is a weak link that creates its own significant economic costs

Skill gap in the transport sector, including capacity to execute and project manage large scale
transport projects

Source: Importance and Shortcomings of Transport in Society by Dr. Meshack Kosha29 National Public Consultation Workshop on Prioritising at the Thematic Areas in the Transport R&D Strategy

The primary supports for infrastructure financing model include:

Support
Policy & Legal Framework

South Africa
White Paper on National Transport Policy PPP Legislation

Nigeria
Draft National Transport Policy ICRC Act PPP Policy Framework

Stakeholders & Institutions

Department of Transport PPP Unit Public Entities of the Department of Transport e.g. ACSA, SANRAL, SACAA, PRASA etc

Federal Ministry of Transport Federal Ministry of Aviation ICRC Other agencies & parastatals e.g. NPA, FAAN, NRC etc

Sources of Funding

Primary Sources o National & Provincial Governments o Municipalities o Operators, Developers or Contractors within the transport sector Secondary Sources o Equity funds focused on infrastructure investments o Bilateral Institutions e.g. DBSA, IDC o Other Financial Sponsors e.g. INCA

Primary Sources o National & State Governments o Operators, Developers or Contractors within the transport sector Secondary Sources o Multilateral Institutions e.g. World Bank o Financial Institutions e.g. Banks o Equity funds

30 Source: Draft National Transport Policy : August 2010; Green and White Papers on National Transport Policy, South Africa ; Infrastructure Finance: The Changing Landscape in South Africa, Deloitte

Comparing Nigerias financing & procurement model to South Africa, we see key differences
South Africa
Funding Approach
Rely on the government and private sector for funding Government exhaust all other alternative funding sources before funding any project Government in some instances provides seed funding and leverage Governments financing with private sector funding Has a transparent procurement policy that can attract funding from International Financial Institutions (IFI)

Nigeria
Until now, relies heavily on the Federal Government and State Government for funding Awards contract directly to contractors who bears little or no risk Recently seeking to grow a diversified funding by attracting private sector funding Procurement policy needs to be reviewed to attract IFIs Emphasis is now being placed on a transparent procurement process using the ICRC and Bureau of Public Procurement The PPP model is currently being adopted

Procurement Policy

PPP Approach

The PPP approach as a procurement process has been long adopted by South Africa

The PPP approaches are similar, but there are fundamental differences in the funding approach and procurement policy
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Source: Team Analysis

And have identified gaps in the Nigerian model and recommendations to improve sector performance
Gaps to Address
Service Delivery versus Asset Procurement

Recommendations for Improvement

Nigeria model focused on paying for physical

infrastructure roads, bridges, rail lines; rather than procuring service availability

Institute service procurement approach to annual transport

capital expenditure budget, issuing service purchase guarantees not construction contracts

Public-Private Risk Allocation

Risk allocation too heavily skewed towards

government in Nigerian transport infrastructure procurement (contract-to-build versus pay-forservice)

Implement changes to payment model for transport capex

projects, require private operators to raise funding backed by government offtake contracts

Application of PPP Beyond Concessions and User Pay Projects

PPP application tied too closely to concessions and

user-pay projects, as opposed to a broader tool of government procurement from a self-funding private sector

Broaden application of PPP use beyond concession issuance

for existing road, rail and port assets, to service delivery on new capex, and operations/maintenance projects

Hierarchy of Government Recourse for Financing Projects

Operating philosophy in Nigeria is to look first to

government for funding, with private finance and PPP options seen only as a side opportunity

Institute additional planning element to annual transport

budgeting process that seeks to exhaust private financing potential before public spending

Strategic Focus on Creating a Private Sector Service Industry Financial Planning in Tandem with Project Conception Source: Team Analysis

PPP model requires an industry of service

providers, not just traditional contractors reinvented as concessionaires

Begin process of developing private infrastructure service

delivery industry through use of annual budget spending power

Project conception, prioritization and selection

must be in tandem with a plan to source financing
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Institute additional planning element to budget process that

analyzes extra-budgetary funding options for every proposed transport project

In summary, the primary learning points for Nigeria include:

Focus on procurement of services rather than assets
Role of public sector should be on policy and strategy formulation, not asset operations Broaden the application of PPP use beyond concessions this has implications for the current framework of ICRC

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What goals should Nigeria set for its transportation infrastructure?

34

Outline
Background Recap of 2009 Bankers Committee Retreat Overview of the Nigerian Transportation System Governance and an Enabling Framework in Transportation Infrastructure Development Case Study: South Africa Appendix

35

The future state transport system is expected to have the following envisioned characteristics
Meets the needs of all Nigerians for access to the market, place of employment and to basic social services

Adequate

Adequate transport services can be enjoyed by all classes of Nigerians at reasonable cost

Affordable

Safe

Nigerias Transport System

Transport services are provided in a way that ensures resources are used efficiently - achieving sustainable gains in productivity, reduced costs and improved service quality

All reasonable standards are set and actions taken to prevent accidents and minimize the number of potential victims and the destruction of property

Efficient

Environmentally Sound

Reasonable, effective actions will be taken to diminish atmospheric, water and other pollution

Effective connectivity between ports, rail, road, inland waterways and air
Source: Draft National Transport Policy: August 2010

Integrated

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In alignment with this vision, specific goals have been set for each transport mode (1/2)
Modern Railway of 1435mm Standard gauge; High speed Train of at least 250km/hr passenger and 200km/hr freight travel Double line network of up to 9,000km total route kilometre in addition to the existing narrow gauge track Develop Railway at the rate of 800km per year of new line; rehabilitation of the existing narrow gauge to 50% of its installed capacity Reduction by 6% per year of Road dependent traffic so that by year 2020 Railway should

carry 40% of total national traffic generated

Funding target towards railway expansion should be at the rate of US$ 3 billion per annum with at least 40% expected from private investment

The overall target for the aviation industry is to meet the ICAO standards There is also a target of achieving full capacity utilization in the sub-sector; this will

mean the generation of increased demand for air transportation

Source: Nigerias Vision 2020 Economic Transformation Blueprint : Mid-Term Review of the National Technical Working Group Reports June 2009

37

In alignment with this vision, specific goals have been set for each transport mode (2/2)
Improve routine, periodic and emergency maintenance coupled with better construction design Enhance coordination in the construction and maintenance of road networks Establish a coherent national road policy, uniform regulation and road standard

Improvement of axle load control and road design standards to keep pace with increasing
traffic volumes and vehicle weights expenditures in road maintenance Improve drivers safety through road markings and signals

Reduce Customs clearance for containers in the ports to 24 hours Enhance terminal availability (preferably all-year-round and 24-hournavigation) Increase total capacity of Nigerian seaports by an additional 10 million tons Increase security standards (fencing, guarding, etc.) to avoid pilferage

Source: Nigerias Vision 2020 Economic Transformation Blueprint : Mid-Term Review of the National Technical Working Group Reports June 2009

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Transportation Sector Policy & Regulatory Framework

Land
Water Air

Federal Ministry of Transport

Federal Ministry of Aviation

Rail

Road

Local

Intl

Local and Intl

Nigerian Railway Corporation (NRC)

Ministry of Agriculture

Federal Road Maintenance Agency (FERMA)

Nigerian Inland Waterways Authority (NIWA)

Nigerian Ports Authority (NPA)

(Nigerian Civil Aviation Authority (NCAA) Federal Airports Authority of Nigeria (FAAN) Nigerian Airspace Management Agency (NAMA) Nigerian Meteorological Agency (NIMET) Nigerian College of Aviation Technology (NCAT) Skypower Aviation Handling Company (SACHOL)

Nigerian Institute of Transport Technology (NITT ) Ministry of Works Finance and Supplies (FS)

Maritime Academy of Nigeria (MAN)

Nigerian Maritime Academy (NMA)

Nigerian Shippers Council (NSC) Joint Maritime Labour Industrial Council (JOMALIC) Nigerian Clearing and Forwarding Agency (NACFA)

Roles: Regulatory Supervisory Execution (Investment, Ownership, Operation, etc.)

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Source: Bankers Committee 2009 Documents

Investment Opportunities Road (1/3)

Project
Lekki-Ikoyi Bridge

Summary
Link bridge from Lekki Phase I to Ikoyi across the Lagoon When completed, will help decongest traffic on the LekkiEpe expressway

Owner
Lagos State Govern ment

Estimated Cost
$ 200m

Financing Structure
SPV will be created for financing the project LASG N5 billion expenditure is converted to equity capital in the SPV SPV will raise 36-month bridge facilities of N20 billion from Financial Institutions SPV to be sold to interested investors under the States PPP programme Optimal mix of State and Private Sector Financing

Start Date / Duration

36 months

Current Status
Construction Foundation of pier, abutment and steel piling in progress

Murtala Mohd Airport Road Expansion

Expansion and tolling of existing 2-lane road into 8-lane divided carriageway inclusive of 2-service lanes and an elevated ramp from Ajao Estate Road length is approximately 4km An alternative route to LagosIkorodu Road being proposed The project will increase the real estate potential along that axis and reduce man-hours spent commuting considerably The project will be in 4phases The road will be tolled and include a bridge

Lagos State Govern ment

$ 70 - 100m

18 24 months

Pre-feasibility Study and Preliminary Drawings have been completed Selective tender process in progress Traffic and preliminary feasibility studies have been undertaken Feasibility study and EIA to be undertaken

BergerIsawo-Ita Oluwo Toll Road

Lagos State Govern ment

$ 400m

State to concession tolled road Concessionaire to recoup investment from toll fees Terms of concession will be subject to negotiation with the State

TBD

40

Source: LAGOS STATEINFRASTRUCTURE DEVELOPMENT PLAN: Presentation to the Bankers Committee

Investment Opportunities Road (2/3)

Project
LagosBadagry Expressway

Summary
10-lane dual carriage expressway project that will provide modern transportation as well as access for people coming to Nigeria from the West African sub-region Lot 1 Orile to Mile 2 105-kilometre road granted to Bi-Courtney on as a concession contract Entails redesign, reconstruction, expansion, modernisation and maintenance for 25 years 166km dual carriageway

Owner
Lagos State Government

Estimated Cost
$ 270m (Lot 1)

Financing Structure
Optimal mix of State and Private Sector Financing

Start Date / Duration

36 months (Lot 1)

Current Status
Work has commenced on Phase 1 of Lot 1

Lagos-Ibadan Expressway

Federal Ministry of Works

$ 600m

PPP, concession

Concessioned in May 2009

Operator yet to begin work at site

Abuja-Kaduna Carriageway Kaduna-Kano Carriageway ShagamuBenin Carriageway Benin-Asaba Carriageway

Federal Ministry of Works Federal Ministry of Works Federal Ministry of Works Federal Ministry of Works

$ 138.3m

TBD, owner leaning towards PPP, concessioning TBD, owner leaning towards PPP, concessioning TBD, owner leaning towards PPP, concessioning TBD, owner leaning towards PPP, concessioning

Immediate Prospect Immediate Prospect Immediate Prospect Immediate Prospect

Pre-feasibility/ OBC study Pre-feasibility/ OBC study Pre-feasibility/ OBC study Pre-feasibility/ OBC study

212km dual carriageway

$ 176.7m

268km dual carriageway

$ 422.7m

139km dual carriageway

$ 139m
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Source: LAGOS STATEINFRASTRUCTURE DEVELOPMENT PLAN: Presentation to the Bankers Committee; World Bank

Investment Opportunities Road (3/3)

Project
Niger River Bridge at Nupeko River Katsina Ala Bridge at Buruku Ibadan-Ilorin Road Lagos-IseyinKishi-Kaiama KaiamaKonkwesoKanje-Tugar Gwambe Onitsha-Enugu Road Enugu-Port Harcourt Road

Summary
1.2km, 11m wide single carriageway, greenfield 0.8km, 11m wide single carriageway, greenfield 150km, completion of middle segment 375km, construction & rehab 410km , extension of Lagos-Kaima corridor, Involves greenfield construction 122km, rehabilitation and upgrade 215km, upgrade and modernization

Owner
Federal Ministry of Works Federal Ministry of Works Federal Ministry of Works Federal Ministry of Works Federal Ministry of Works

Estimated Cost
$ 44m

Financing Structure
TBD, owner leaning towards PPP, concessioning TBD, owner leaning towards PPP, concessioning TBD, owner leaning towards PPP, concessioning TBD, owner leaning towards PPP, concessioning TBD, owner leaning towards PPP, concessioning TBD, owner leaning towards PPP, concessioning TBD, owner leaning towards PPP, concessioning

Start Date / Duration

Short-Medium Term Prospect Short-Medium Term Prospect Short-Medium Term Prospect Short-Medium Term Prospect Short-Medium Term Prospect

Current Status
RFP issued for pre-feasibility RFP issued for pre-feasibility RFP issued for pre-feasibility RFP issued for pre-feasibility RFP issued for pre-feasibility

$ 29.3m

$ 250m

$ 500m

$ 547m

Federal Ministry of Works Federal Ministry of Works

$ 122m

Short-Medium Term Prospect Short-Medium Term Prospect

RFP issued for pre-feasibility RFP issued for pre-feasibility

$ 148.3m

Source: World Bank

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Investment Opportunities - Rail

Project
Light Rail Mass Transit

Summary
Network of seven intracity rail lines Two are to be developed as a matter of priority o Red Line - a 37 kilometer rail road from Alagbado to Marina o Blue Line - a 27 kilometer rail road from Okokomaiko to Marina Represents third of the first three of six lines that are planned for a light rail system in Abuja

Owner
Lagos State Government

Estimated Cost
Total = $2,554 bn Red Line = $1,019 bn Blue Line = $1,535 bn

Financing Structure
Combination of Debt, Equity & Export Credit Financing LASG, the preferred bidder and other core investors to invest equity via a Special Purpose Vehicle (SPV) which will be created specifically for financing the project TBD, owner leaning towards PPP, concessioning

Start Date / Duration

2010

Current Status
Preferred Bidders for both Red and Blue Lines have been selected Negotiations with the Preferred Bidders have commenced

Abuja Light Rail, Lot II

Federal Capital Territory Admin

$ 1.2bn

ShortMedium Term Prospect

Conceptual design stage Lots I, III ongoing

43
Source: LAGOS STATEINFRASTRUCTURE DEVELOPMENT PLAN: Presentation to the Bankers Committee; World Bank

Investment Opportunities - Air

Project
Lekki Airport

Summary
International Airport located in Lekki Circa 5 million passengers per year (Phase1) Modular Terminal for easy expansion Future use by the Airbus A380 aircraft Modern architecture

Owner
Lagos State Government

Estimated Cost
TBD

Financing Structure
Optimal mix of State and Private Sector Financing

Duration
TBD

Current Status
Master plan and EIA completed Geotechnical, topographical and perimeter road ongoing

44
Source: LAGOS STATEINFRASTRUCTURE DEVELOPMENT PLAN: Presentation to the Bankers Committee

Investment Opportunities Seaports & Waterways

Project
Kiri-Kiri Terminal, Phases I & II Onitsha River Port

Summary

Owner
Ministry of Transport / NPA Ministry of Transport / NIWA

Estimated Cost
TBD

Financing Structure
TBD, owner leaning towards PPP, concessioning TBD, owner leaning towards PPP, concessioning

Duration
Short-Medium Term Prospect Short-Medium Term Prospect

Current Status
Early project preparation, steering committee formed First concession attempt cancelled

TBD

Source: World Bank

45