Uche Usim, Abuja
As the Federal Government continues its search for solutions to close the infrastructure gap in the oil and gas sector, the Director General, Infrastructure Concession Regulatory Commission (ICRC), Chidi Izuwah, has described concession as the path to toe in solving the nightmare.
Speaking with Daily Sun on the sidelines of the recently held Nigerian International Petroleum Summit (NIPS), he said government alone can never shoulder the challenges and risks of the industry and therefore needs private sector participation.
According to him, the government should try the Public Private Partnership (PPP) option because the private partner can initiate operations and reach operational stability much faster than government’s in-house effort.
He said, “a developed nation is where the rich use public transportation not where the poor have cars. Transportation infrastructure brings about catalytic economic development. It creates economic corridors and boosts development. Cost of transportation is key to competitiveness and that is why we need to open several transport systems. One per cent increase in infrastructure stock results in one per cent growth in GDP.”
Izuwah joined the ICRC in 2009 as its pioneer Executive Director, Public Private Partnership Resource Department (ED P3RD) where he set up the department from scratch. In this role, he was responsible for catalysing public and private expertise and resources towards putting in place a world-class PPP pre-contract regulatory framework and guidelines for driving the preparation and development phase of federal PPP projects.
He remained the ED P3RD until June 2016 when he was made the Executive Director, Support Services Department (EDSS).
He holds a first degree in Civil Engineering from the University of Nigeria, Nsukka, and a Master’s degree in Hydraulic Engineering from the University of New Castle Upon Tyne in the United Kingdom. Izuwah is a Harvard, Wharton, Columbia University and Indian Institute of Management Ahmedabad Executive Education Alumni.
He started his career as a lecturer in Fluvial Hydraulics and Water Power Engineering at the University of Port Harcourt, Nigeria, in 1986. Thereafter, he held several senior oil and gas asset management positions in a career spanning over 21 years with SPDC (Shell Nigeria).
In this interview, he speaks more about government’s efforts to address infrastructure challenges via ICRC.
Improving the oil sector
Government has to play a role and break the back of public sector dominance in the downstream sector and bring in the private sector. This is the only way to go. When you bring in the private sector, you must change the incentive structure. The NNPC (Nigerian National Petroleum Corporation) refineries, we should be concessioned to the private sector. The investments would come. When you concession, they would rehabilitate, make further investments and recoup their money.
There is a huge opportunity in refining. Petroleum is the only thing that increases in volume when you process it. If you take 42 gallons of crude oil, it gives you 45 gallons. It actually breaks the laws of Chemistry and Physics. It increases in volumes because of the cracks. It is a profitable business and we need to bring in the private sector. The role of government is to create the enabling environment to attract investors into the sector, the way it was done for the telecommunications industry.
The same thing for the infrastructure for distribution and reticulation. The entire depot system is not functional. There is no will. The depot system has to work. The depot system is a profitable business. You should also at the same time concession it to the private sector; they would make the investment and then, those assets would start to earn revenue for government.
Primarily, the role of government is to create the environment and the framework to attract the private sector to take over those facilities and provide us with benefits. The future of the petroleum industry in Nigeria, for us to reap true value, is the private sector. Government does not have the money.
Concessioning the refineries
It is a PPP. You know, we have the public sector and the private sector. Both sides will partner to provide services to the people. Essentially, what I’m saying is that our refineries are run down now and we require investment not just in the refineries but in the entire value chain because if you build a refinery and don’t build the distribution network, you will not get from point A to B. So, one is a refinery and the other is the entire NNPC depot and pipeline system, which is very extensive. So, those things require significant investment, capital investment to refurbish them, to operate them and maintain them. So, you can concession them to private sector for them to make that investment, bring back the refineries to life. So is the depot system; transform it and recover their investment. But that is not the same thing as selling those assets because when you concession an asset, when you do a PPP, there is a fundamental difference because the assets remain the property of the Federal Government of Nigeria, which is driven by contractual relationship and whatever rights the government wants to enforce on those contracts in terms of local content, in terms of local engineering, in terms of employments, you put in the contract. The ICRC Act of 2005 provides you the framework for concessioning all assets of the Federal Government. Go and look at article one of that content, it says every government agency involved can bring in the private sector to invest, refurbish, repair and maintain assets of the Federal Government.
We require those huge investments and all that money is not in the budget, that is essentially what the principle is.
ICRC and states’ PPP programmes
ICRC regulatory role pertains to Federal Government PPP programme. However, a number of state governments are using PPP to develop infrastructure and ICRC is willing to lend its technical expertise in developing an appropriate PPP framework for any state which so desires.
Also, although each state is responsible for its own investment projects, many PPP projects within a state will be financed with the support of a guarantee by the Federal Government. In providing any such guarantees, the government will have recourse to best practices as exemplified by the National PPP Guidelines and Regulations.
It is not as if Nigerians are not aware we exist but also doing lots of work. You know the green silos (the warehouse in a box) have just been concessioned, the other water port and all that.
The gap will not be closed overnight. Let’s not joke with ourselves. It wasn’t created overnight. President Muhammadu Buhari is pushing because he believes totally in infrastructure that if we don’t do the infrastructure challenge here, we will not attract investments. It is one at a time and hopefully, we will achieve a lot in a short period. We will continue to move and you saw the same thing with the telecommunications sector. Nigerians seem to forget when they used to go and stand at phone boots and wait for hours to make a call. But that is a thing of the past. Some people have five phones today. So, what has happened in telecoms sector is possible in any other sector.
We have the framework for the roads. You need to realise that recently the president signed the Executive Order 007. That is great. Basically, it is all about bringing private investment into our road construction because roads are very important. Don’t forget like Chairman Mao said, if you want to grow rich, build a road first, because your highway to prosperity is a road. The dividend of democracy is in roads because if we cannot reach you, we cannot do much.
The President has driven it through the Executive Order 007 to ensure that we have private sector involvement because at the end of the day, 90 per cent of the goods and services in our country goes by road. Have you seen vegetables in the aeroplanes? But we need to spread carrots and vegetables around, so, you know, the roads are very important as the backbone for prosperity in our country.
Responses from the private sector
The Executive Order 007 was just signed recently. We are moving speedily and pushing out initiatives. The gains are going to be immediate. The day the President set up the Executive Order, he signed it. He gave the management committee of which ICRC is a proud member under the leadership of Minister of Finance and Minister of Power, Works and Housing, marching orders to move immediately and do it. They have switched on the light in Ariaria, Aba, Abia State. This wasn’t there some months ago. So, we are moving at the speed of light because the President is totally committed to the transformation of Nigeria and the only way you can transform Nigeria is to do things very quickly and that is what the objective is.
That is all part of the game to make sure that there is confidence in the investing public; you go around and inform and let people know about what is happening. That is happening under the leadership of the Minister of Finance and the Minister of Power, Works and Housing because they are members of the management committee of that Executive Order 007. This is the first time our government is using Executive Orders as policy instruments to fast-track things in Nigeria. We must acknowledge and praise the President for using the powers the constitution gives him to move our country forward.
Money is not a problem. The world is awash with capital. Just create the right environment and money will come. Look at the amount of money in our pension funds; look at the amount of money they are paying, look at our insurance companies, money is all over the way. The only people who have learnt how to utilise money are the churches and the mosques. The biggest church in the world is here. Where did they get the money to build it from? There is money in this society.