PPPs, Investors and Dr. Goodluck’s Circus – Abimbola Agboluaje

The columnist this week is public policy analyst Abimbola Agboluaje.

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I was delighted when I discovered that President Goodluck Jonathan handed the autobiography of Lee Kwan Yew, From Third World to First World, to members of his 42-persons cabinet. Nothing more inspirational to get our Ministers into Transformation mode. One of the most striking passages in the book is where Mr. Yew recounted how he ordered that the road leading from the airport to his office be spruced up – flowers, tarred roads, zero hawking – so that visiting investors to his then dirt-poor country would know that Singaporeans are hardworking and serious people who would ensure their investments flourished. The country’s GDP per capita is now higher than America’s and France’s. Airports may indeed tell investors almost all they need to know about a peoples’ quality of government and their resolve to escape poverty and count for something in the world.  The message Nigeria’s major international airport, the Murtala Mohammed in Lagos has for the visitor is unequivocal; we are unserious, in fact we are a joke. Power outages leave the airport dark and sweaty. Conveyor belts break down. VIP cars neglect the car park and crowd the entry and exit to the departure and arrival halls. Toilets don’t flush; visitors have to do it with buckets. A woman visiting for the first time was reported to have succumbed to tears during the hot wait for her luggage.

Just fifteen minutes from Nigeria’s international eyesore is the Muritala Mohammed 2, an airport built and maintained under a concession by a Nigerian company. MM2 is neat and cool with the sort of stores and restaurants international travelers are accustomed to. The CEO of Apple or General Motors will find very little to complain about flying through MM2. According to a leading Nigerian economic commentator, the new airport “was an eye opener as to what Nigerians could do if given the enabling environment”. Under President Obasanjo, a decision was reached to transform Nigerian air travel infrastructure through Public-Private-Partnerships under which investors would refurbish and operate airports. Private management of airports worldwide has driven growth in efficiency and jobs as investors funded information technology projects and retail space.  Net income has grown, allowing operators to cut landing charges for airlines. In Britain BAA, owned by the Spanish global infrastructure company Grupo Ferrovial, assumed full ownership and operation of the major airports after their complete privatization in the mid 1980s (when the British Airports Authority, equivalent of Nigeria’s state-owned operator, the Federal Airports Authority of Nigeria (FAAN), ceased to exist). The competition authority compelled BAA to sell some airports to avoid market concentration, thus creating an opportunity for Global Infrastructure Partners, led by Nigerian Bayo Ogunlesi, to buy Gatwick Airport and recently Edinburgh Airport from BAA.

Despite the policy pronouncement (to upgrade and operate Nigeria’s airports through PPPs) under President Obasanjo, the successor PDP governments reverted to the “tried and failed” method of full government ownership and operational control and the attendant contract bonanzas. The first post-Obasanjo Aviation Minister awarded a N6.4 billion contract just to refurbish electricity supply lines and purchase generators at the Muritala Mohammed International, a sum regarded as sufficient to build a small power plant. The current Minister is embarking on a N38 billion “remodeling” of Nigerian airports. Medium-grade rumours are already flying around regarding the quality of the remodeling design and the process of contract award. What Nigerians can see is a privately built airport that is befitting for anyone to fly through and government-operated airports that can’t even maintain air conditioners and toilets. Why should reasonable people assume that the latest FAAN contract bonanza will make any difference? After 12 years of near consistently high oil prices, Nigeria’s airports are as grubby as ever. FAAN, an agency which is yet to deny media reports that it spent a whopping N918 million on “staff training” in 2011, may also possess the uncanny gift of making billions of naira disappear with little to show for it that some FGN agencies have been revealed to possess. Do we always have to wait for National Assembly probes to discover avoidable waste of public funds?

Sadly, the government is not leaving the door open for when the latest round of billions it is sinking in the airports disappear as usual and it decides to go back to the PPP strategy to make Nigerian airports look like airports rather than Molue bus terminals. In late March 2012, FAAN terminated the concession given in 2007 to the Nigerian company Maevis to install and operate an Airport Operations Management System (AOMS) despite a Federal High Court ruling directing both parties should go to arbitration.  The AOMS installed by Maevis at the cost of N7 billion (which the company says it borrowed from Nigerian banks) was one of the very few things functioning in the airport. Basically, the AOMS allows airlines using Nigerian airports to seamlessly capture, store and transmit passenger data between various operating centres and also accurately and transparently invoice airlines for landing charges and other services such as parking. Maevis is said to have invested in an enormous clean power centre and extensive cable laying to operate its data room, the boarding gates and the 62 check-in desks it installed when FAAN couldn’t provide the uninterrupted power required to operate the sophisticated data relay system. The concession enhanced passenger processing efficiency and security, thus Nigeria’s ability to meet AITA Simplifying the Business (StB) requirements. In a commando-type action, FAAN gained forced entry into Maevis’ data room, ejected staff and installed SITA, a Swiss Firm which it has given the contract to manage the AOMS. It is not clear whether SITA is using the equipment Maevis installed.

What is very clear is the message FAAN’s action sends to investors in Nigeria: we can destroy your investment in the twinkle of an eye regardless of what the piece of paper we signed, the law or the courts say. In short, you are bringing your money into a jungle. Of course, neither President Jonathan Goodluck nor the Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala will ever agree that this is Government’s message to investors. But it is a message that will surely cross the mind of any bank’s executive board when they have to take lending decisions on the $20 billion worth of privately financed projects that the Bureau for Public Enterprises recently announced is required to attain stable electricity supply in Nigeria. One hopes there isn’t a plan to follow FAAN in the energy sector, terminate power reforms and reinstate NEPA. Nigeria cannot afford a crisis of economic policy coordination which allows each of President Jonathan’s 42 Ministers to pursue policies that suit them or the self-interested bureaucrats advising them regardless of the FGN’s commitment to private-sector led development.  We have already seen the pathetic outcome of this poor coordination in January when careful, confidence-building planning of the petrol subsidy withdrawal was hijacked and replaced by a senseless orgy of full and front-page advertising. `In contrast to security challenges where everything is not under its control, the Goodluck administration would have only itself to blame if the impression of “cluelessness” comes to define its economic policy agenda.

FAAN has made both the President and Dr. Okonjo-Iweala look very much like circus directors by forcefully driving away a Nigerian concessionaire from a N7 billion naira investment despite a Federal High Court ruling that Maevis and FAAN take their dispute to arbitration in accordance with Article 15 of the Concession Agreement and the advice of the country’s Attorney General that FAAN abide by this ruling. If President Jonathan is to achieve anything meaningful, this circus has to be urgently transformed into coordinated policy making under the unambiguous leadership of the coordinating Minister. And there’s something else he must pick from Lee Kwan Yew’s book apart from the lesson on the state of airport as a sign of investment readiness-the courage to quickly show populist and self-serving officials (attributes that often go together) the door.

Abimbola Agboluaje runs Traject, a public policy consultancy. He writes from Lagos.