By: Sola Fanawopo
Everyone I have spoken with agreed that something is broken about the cost of our infrastructure development. They all agreed that we are not getting values for the money we are spending.
A newly constructed road hardly last two raining seasons before it becomes portholes ridden. Most roads constructed in the first republic in the defunct Western Nigeria are still the best we have today.
The malaise cut across other infrastructure development. Check out the development in the brand new state Universities and compare them to the solid infrastructure we have in the likes of Obafemi Awolowo University, University of Ibadan and others old higher institutions.
Can we make it better? Yes. I am optimistic that things can be made better if we take the right steps.
I am particularly interested in Osun state for two reasons. First, Osun is my ancestral state and second, I want to contribute my little quota in getting the state out of its self-imposed economic depression.
Now, one of the things our amiable Governor, Alhaji Gboyega Oyetola must do is to make sure that the little funds available in the state’s treasury is well managed and allocated optimally for the benefit of the majority of our people.
At a time like this, Osun State Government has no choice but to manage its resources efficiently and provide services at the least possible cost. The era of awarding a kilometre of road for N1 billion should be consigned to the dustbin of history.
There are basically two major types of project execution in Nigeria and the decision to choose either of the two types may be based on a number of criteria.
The two types of project execution are:
( i ) Contract System
(11) Direct Labour System.
Just like most states in the country, Osun is applying both contract and direct labour systems for infrastructure development.
However, most people I have interacted with are not happy with output we are getting from the two systems. The qualities of work done haven’t been commensurate with the huge resources deployed by the state government.
Nevertheless, to arrive at a fair cost-saving arrangement and delivery of premium qualities, I would recommend a novel idea about how to structure a win-win Public-Private Partnership (PPP) model for public infrastructure development.
I actually began to form the idea in 2018, during our electioneering campaign trips across the state; I shared my thoughts with my friend, ‘Kunle Rasheed Adegoke (Krad), who contested the last gubernatorial primaries in the state under the umbrella of the APC. But we didn’t dimension the thoughts very well owed largely to the stress that accompanied those trips.
I have asked myself several times that wouldn’t it be more cost-effective for Osun government to own equity in a world class construction firm rather than waste huge amount of resources setting up a direct labour unit?
Almost all the states in Nigeria today have floated a miniature road construction or repairs unit under a different nomenclature. And most of them, if not all, do not deliver world-class construction jobs, in my view.
But while studying the PPP model adopted by the defunct Western Regional Government led by late sage, Chief Obafemi Awolowo, I discovered that my idea wasn’t even novel after all.
Recall that the original idea of floating an engineering construction consortium that would comprise as its owners, the indigenous contractors, an Israeli firm and the Western Regional Government came from the local contractors in early 1959, about 60 years ago.
To set up the construction company, some Western Region government officials embarked on an economic mission to Israel with the Mekoroth Water Company.
The mission resulted in the endorsement of a memorandum of understanding (MoU) with SolelBoneh, an Israeli company to set up two construction companies. The MoU was executed on January 14, 1959.
On the demand of the Nigersol Construction Company (NCC), the Nigerian Water Resources Development Company (NWRDC) obtained a letter of intent from the Western Region Government that the latter would assign the majority of its works to the companies. However, the Government could allow other contractors to compete reasonably with the NCC and NWRDC.
In the first year of the operations of these companies, they were to be assigned contracts only by negotiation with the Western Region Government. After series of negotiations, the Water Resources International Corporation and SoleIBoneh on one side, and the Western Region Government represented by the Ministry of Trade and Industry on other side formed the NCC and the NWRDC on July 25, 1959.
The equity capital of the NWRDC was £100,000. The share capital of the Western Region Government in the NWRDC was £60,000 or 60 per cent of its total equity capital. By August 10, 1959, the WNDC had invested into the NCC, the sum of £120,000 when the Israeli partners had not made good of their equity shares of £80,000 or 40 per cent of the total capitalization fund.
On the distribution of return on investment, the expatriate co-owners of the NCC and NWRDC were entitled to eight per cent profit made from operations of the companies before taxation. The dividend after tax was agreed to be shared according to each partner’s equity in each of the companies.
The Israeli were to sell their equity capital and any other interest they had in the companies to the Western Nigerian Government after five years of operation in the region.
The long term plan of the regional government was that by 1983, a total of £25,450,000 would have been spent on a water project for the provision of 122m tons of water per year. As of March 31, 1961, the NCC made a profit of £128,000. In 1962, its profit rose to £228,921.
In 1961/62 only, contracts valued at £852,948 were awarded to NCC. In 1961/62, out of the £5,703,114 value of contracts awarded by Government on road and bridge constructions, NCC got contracts of £2,487,671.112.
Unpaid accumulated dividends between 1962 and 1964 amounted to £60,000. The NCC debt portfolio grew to £1,575,000 by February 28, 1962. In 1966/67, accounting year, the NCC made a marginal profit of £3,008 and had no major contract.
The WRDC also had a profit of £3,809 for its 1966 operations.
This is the kind of PPP arrangement that I strongly recommend for Osun State government and other states that are desirous of fixing their broken infrastructure challenge.
The state government in partnership with all the local governments would assign contracts to the construction firm to ensure it is functional and busy all year round
-.Fanawopo, a social commentator hails from Igbajo in Bolorunduro Local Government Area of Osun State