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PPP Final Project - Coursera
- 1. June 2015 Addressing theLagos State Traffic Situation Leveraging Public Private Partnership
- 2. 1. About LagosState 2. Lagos State Financing Situation 3. Project Case Study and Design 4. Proposed Structure Table of Contents
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- 4. About Lagos ADDRESSING THELAGOS STATE TRAFFIC SITUATION LEVERAGING PUBLIC PRIVATE PARTNERSHIPS 4 • Lagos is the most populous city in Nigeria, the second fastest-growing city in Africa and the seventh in the world • The population of Lagos urban area, according to the Lagos State Government is 17.5 million, a number disputed by the Nigerian Government and judged unreliable by the National Population Commission of Nigeria • Lagos was reported in 2014 to have a metropolitan population of 21 million, making Lagos the largest metropolitan area in Africa • Lagos is a port which originated on islands separated by creeks, such as Lagos Island, fringing the southwest mouth of Lagos Lagoon while protected from the Atlantic Ocean by barrier islands and long sand spits such as Bar Beach, which stretch up to 100 kilometres (62 miles) east and west of the mouth • From the beginning, Lagos has expanded on the mainland west of the lagoon and the conurbation, including Ikeja (which is the capital of Lagos State) and Agege, now reaches more than 40 kilometres (25 miles) north-west of Lagos Island • Some suburbs include Ikorodu, Epe and Badagry, and more local councils have recently been created, bringing the total number of local governments in Lagos to 57 (This includes Local Community Development Areas or LCDAs) • Lagos is traditionally and locally referred to as Eko and it has a popular slogan thus "Eko o ni baaje" meaning "Lagos will never collapse" Source: Wikipedia; https://en.wikipedia.org/wiki/Lagos
- 5. About Lagos Lagos isin a dire traffic Situation ADDRESSING THE LAGOS STATE TRAFFIC SITUATION LEVERAGING PUBLIC PRIVATE PARTNERSHIPS 5
- 6. Lagos State GovernmentInterventions Lagos State Transportation Masterplan ADDRESSING THE LAGOS STATE TRAFFIC SITUATION LEVERAGING PUBLIC PRIVATE PARTNERSHIPS 6Source: Wikipedia; https://en.wikipedia.org/wiki/Lagos • The Lagos State Government trough its agency “Lagos Metropolitan Area Transport Authority (“LAMATA”) has designed a long term plan to solving the transportation challenges within the state • The plan recommended an integrated approach, incorporating Road, Water, Rail as well as Cable Car transport systems • Interestingly, the Government of Lagos identified that it could not singlehandedly finance the infrastructure deficit in the State • This is as a result of the state’s dire infrastructure needs and funding available to the government • The State unlike many other states in Nigeria have a bulk of their funding from Internally Generated Revenue (“IGR”) rather that Monthly Federal Allocation
- 7. Lagos State GovernmentInterventions Lagos State Transportation Masterplan ADDRESSING THE LAGOS STATE TRAFFIC SITUATION LEVERAGING PUBLIC PRIVATE PARTNERSHIPS 7 Lagos State Rail Master plan Lagos State Bus Rapid System Master plan Lagos Cable Car Project Master plan Lagos Water Transport Master plan
- 8. Lagos State FinancingSituation 8
- 9. Lagos State FinancingSituation Federal Allocation Across States in Nigeria ADDRESSING THE LAGOS STATE TRAFFIC SITUATION LEVERAGING PUBLIC PRIVATE PARTNERSHIPS 9 1,600 136 100 96 82 55 43 36 35 34 34 33 31 31 30 30 30 30 29 29 29 28 28 28 27 27 27 27 27 27 26 26 24 23 23 21 21 20 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 October 2014 FAAC Breakdown • Total FAAC Revenue Allocation – N593.33bn Statutory Revenue – N484.32bn Subsidy Reinvestment & Empowerment Programme (SURE-P) – N35.55bn NNPC Refund – N6.33bn VAT – N67.14bn Revenue Sharing Breakdown Federal – N224.25bn State – N113.75bn Local – N87.69bn Key Highlights • Net FAAC allocation is the residual allocation payable to State Governments after all deductions at source have been made. Such deductions include: Irrevocable Standing Payment Orders (“ISPO”) set up for payments of municipal bond repayment obligations and bank loans • Given deductions are made before net allocations are distributed to states, states with huge external debt and bond repayment obligations will have reduced net allocations • Lagos ranks 5th in the allocation distribution to states from the Federation Account
- 10. Lagos State FinancingSituation Internally Generated Revenues Across 10 States ADDRESSING THE LAGOS STATE TRAFFIC SITUATION LEVERAGING PUBLIC PRIVATE PARTNERSHIPS 10 • Lagos also generate the highest revenue internally from its effective tax system as well as the huge economic activities within the State • However the State’s infrastructure is constantly under pressure as the state population continues to grow due to high influx of people into the State annually
- 11. Lagos State FinancingSituation 2015 Budget Analysis ADDRESSING THE LAGOS STATE TRAFFIC SITUATION LEVERAGING PUBLIC PRIVATE PARTNERSHIPS 11 • The Lagos State budget is also the largest across states in Nigeria, with over $2bn budgetary provision for 2015 • The budget includes a 51% and 49% capital and recurrent expenditure distribution respectively • The strain on the State’s budget makes it quite impossible for it to finance the construction of the rail line via the regular public procurement process, hence the need for a PPP Arrangement Amount (N'Bn) Amount ($'Bn) % Contribution Capital Expenditure 249.74 1.25 51% Recurrent Expenditure 239.95 1.20 49% Total Budget 490 2.45 100%
- 12. Project Case Studyand Design Rail Transportation – Orange Line (Redeem to Marina) 12
- 13. Project Case Study RailTransportation – Orange Line (Redeem to Marina) ADDRESSING THE LAGOS STATE TRAFFIC SITUATION LEVERAGING PUBLIC PRIVATE PARTNERSHIPS • Lagos state like many other densely populated cities has the need to immediately address its transportation challenges. • Because of the structure of the city, most residents work on Lagos Island end of the city and live on the Lagos mainland • As it stands today, there are 3 links from the mainland to the island – Eko Bridge, Carter Bridge and the longest being the 3rd Mainland Bridge. • These bridges and their route are very congested during peak times • The other alternative to these 3 bridges has been the ferry service which is not popular because of the risks associated with water travels • For the purpose of this course, I will recommend the construction of the Orange Line rail network, linking extreme Lagos suburbs and outskirts to the business centres of the Lagos Island • The Orange line will open up the Lagos-Ibadan Express Way axis in Ogun State, while making travel time from those extremes shorter • In context, on a Monday morning, depending on the time you leave your house, from the Ojodu end of the stretch of the axis, it could take an average of 2.5 – 3 hours to travel from these axes to the island. This journey will take less than 45 minutes on a Sunday morning
- 14. Project Case Study RailTransportation – Orange Line (Redeem to Marina) ADDRESSING THE LAGOS STATE TRAFFIC SITUATION LEVERAGING PUBLIC PRIVATE PARTNERSHIPS • Lagos state like many other densely populated cities has the need to immediately address its transportation challenges. • This axis of Lagos accommodate a wide class of people from the lower to the upper class • Over this stretch, there is no other alternative to getting to the island save this route, thus making transportation along this axis very difficult • I suggest that a railway line linking this axis directly to the island will sufficiently solve the congestion problem in the axis • It currently takes about N500 ($2.5) to move from Ojodu to Victoria Island. Leveraging the volume of traffic, the rail line management could afford to charge a premium to this in exchange for 3 hours of agony in traffic • The line could potentially be extended to Ibadan the capital of Oyo State via Ogun State
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- 16. Proposed Structure Leveraging PublicPrivate Partnership ADDRESSING THE LAGOS STATE TRAFFIC SITUATION LEVERAGING PUBLIC PRIVATE PARTNERSHIPS • Having understood the capital constraints within the state, it would be extremely difficult for the state to finance this rail project using the regular public procurement process. This is also corroborated by its lack of expertise and experience in managing a project of this nature • The Public Private Partnership model will not only save the state a huge construction cost, but also allow the state access to a well built and managed rail transport system • I will propose a “Build, Finance, Operate, Train and Transfer” model (“BFOTT”). Because the state is trying to manage its funding sources, the state will not want to finance the project. The structure will also ensure that the private partner or concessionaire not only operate the rail system, it also trains professional from the Lagos State Ministry of Transport • The private sector will be interested in this project not only because it reduces the huge road traffic congestion, it is also a major source of revenue and daily cashflow • The Lagos State Government has also implemented quite a number of successful PPPs, so we expect the private sector to be willing to participate in the partnership • The Lagos traffic situation is well discussed topic, with a huge interest and keen anticipation of Government policy direction at tackling the challenge, so we do not expect that the private sector will not want to participate • We however recognize that the Government will have to solve issues regarding the right of way and settlements for the project
- 17. Risk Allocation ADDRESSING THELAGOS STATE TRAFFIC SITUATION LEVERAGING PUBLIC PRIVATE PARTNERSHIPS Land and Compensation Construction Risk Financing Risk Currency Risk Revenue Guarantee The Government will have to take responsibility for the right of way for the trains as well as compensation to displaced residents Since it is a BFOTT structure, the concessionaire will take full responsibility for every construction risks except those caused by civil unrest or other external factors The Private sector is expected to finance the project, hence they have to determine the optimum funding mix for the project In case of an anticipated devaluation of the Naira, the government will have to support in loan repayment to the extent of the devaluation. The currency risk could also be hedged The concessionaire will have to embark on its traffic study to ensure that the project will be accepted, used and paid for by commuters
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