Guardian Posers for Lagos over N25.3b road concession buyout plan WEDNESDAY, 04 SEPTEMBER 2013 00:00 BY WOLE OYEBADE NEWS -NATIONAL • Residents fear fraud, exploitation through scheme KEY actors in the Lagos State government are upbeat that the concession buyout plan for the Eti-Osa-Lekki-Epe expressway is in the interest of Lagos residents. But some members of the public are sceptical of government’s motive in the multi-billion naira purchase. The state government plans to re-acquire the concession right of Eti-Osa-Lekki-Epe expressway and purchase its managing company – Lekki Concession Company (LCC). The 49.36km road is to be bought at an estimated sum of N25.3 billion . The road has never been immune from controversies since it opened in 2008, and Lagos residents are at this time asking: “in whose interest is the new buyout plan, the masses or the authorities?” The concession buyout plan came to the fore last week Tuesday, when Governor Babatunde Fashola’s letter on the “2013 Supplementary Budget proposal” was read at the Lagos State House of Assembly. In the proposal, Fashola stated that it had become necessary to further amend this year’s budget due to unforeseen developments in terms of the state’s internally-generated revenue performance and emerging financial commitments. Central to the “emerging financial commitments”, according to the governor, is the need to fund the acquisition of existing concession rights and toll revenue benefits held by the LCC, the concessionaire for the Eti-Osa-Lekki-Epe expressway. “This will effectively accelerate the transfer of ownership of the road to the state, leaving the state with wider policy options with regard to that important road infrastructure,” Fashola’s letter read in part. To meet this demand, the governor proposed a re-ordering of some expenditure provisions and also direct supplementation of the 2013 budget, given an upward review from N499, 605 billion earlier signed into law on January 2, 2013 to N507, 105 billion (a N7.5billion increase). At the event of Tuesday, there was an apparent sense of urgency in the proposal and the planned concession buyout. Not only were the Lagos lawmakers forced out of their three-week-old recess, to expedite action on the proposal, the state government had also prepared the trio of commissioner of budget and economic planning and his counterparts in finance and works and infrastructure to attend the emergency plenary and answer lawmakers’ questions, paving the way for a speedy passage of the bid. The Commissioner for Finance, Ayodeji Gbeleyi, upon questioning, said to acquire the LCC holding, the state would be paying N15 billion for the buyout; N6.8 billion to service existing debt obligations and N3.5 billion for third-party liability, totaling N25.3 billion. However, the question on the mind of the public is who stands to benefit from this buyout ? A businessman in Lekki, Olusegun Ashimiyu, told The Guardian in an interview that the purchase seemed good on the surface, but that it was not likely that the masses would get any benefit from it. He said: “The only benefit anyone plying that route can hope to get is the outright removal of tolling on that route. But if I know this government very well, then the era of tolling will assume a new dimension and possibly grow worse than what we are seeing currently,” Ashimiyu said. Another Lagos resident, who spoke on the condition of anonymity, expressed misgivings on the project. “We foresaw something of this nature right from the beginning of this protest. That is why we demonstrated against toll collection and we were locked up then. “There are some people that are benefiting from this project, and this is another attempt to scoop from the state treasury. Don’t forget, this is the fund that could have gone into infrastructural development in other parts of the state,” the respondent said. Continuing, he said: “The entire project needs thorough probe. Yes, the state government is doing very well but there are just some things that are not right about its programme. We need to know who signed what and at what rate it has been given. How much has the government paid into it and how much left and where is it going? The state belongs to all of us, and not to a small clique trying to buy over everything, without consideration for the public,” he said. According to a businessman in the Ikota area of the state, Emmanuel Onah, the initiative is laudable, if it would crash the exorbitant toll rate on the road. Onah observed that since they started collecting toll on that road, cost of transport and living had gone up because of the exorbitant rate vehicles pay per passage. “From what we hear, there is going to be up to three tolling plazas on that road alone, two of which are already functional. But with the planned buyout, I think it will be good if the toll rate comes down to something like N10 for the maintenance of the road. Even at N5, the government can never be at a loss, considering the high traffic of vehicles plying that route on daily basis. “They must for once consider that the majority of the people here are very poor and have been more impoverished by the system. But, you never can trust this government, with what we have seen of the recently opened Lekki-Ikoyi toll bridge,” he said. Onah’s concern is apparently not out of place in the light of the controversy that trails the Lekki-Ikoyi toll bridge. Since the bridge was commissioned on May 29, 2013, “Ratification of the electronic tolling system operation, maintenance, concession terms and conditions for the Lekki-Ikoyi toll bridge,” has not been approved by the Lagos Assembly. The House members had freely expressed reservations on its concession to Lagos Tolling Company, (working with two foreign technical partners) and tolling agreements under a Public Private Partnership (PPP) arrangement, when the N29 billion worth of bridge was solely funded by the government. The Lagos lawmakers, at four plenaries in June, had condemned the proposal document, which stated that 73 per cent of revenue generated would go to the state government, while 27 per cent goes to the tolling company. Also, 80 per cent of all incidental activities like adverts go to the state government, while 20 per cent for the operating company. The concession agreement is for 10 years, and has five years renewable period. Besides their worries on having the bridge restricted to commercial buses and lorries, among others, the lawmakers also could not understand the rationale for initial maximum tolls of N250 for saloon cars; N300 for mini vans, Sport Utility Vehicles (SUVs) and light pick-up trucks; N400 for non-commercial buses with a maximum sitting capacity of 26 persons; N100 for motorcycles with 200cc capacity and above, especially when the state government is owing no one for the bridge. The Deputy Speaker, Kolawole Taiwo, had wondered if the plight of residents was taken into consideration in the whole arrangement. “We must be very careful in the way we carry on. We need to be very open. Why is it that we should always emphasise toll collection anytime we build a befitting road?” the deputy speaker had queried. Several weeks after the bridge was commissioned and commencement of tolling regime, the House has not officially approved the agreement, and has since not mentioned the matter in the House. Presenting the governor’s request for debate, Speaker of the House, Adeyemi Ikuforiji said: “In line with our earlier agitation and yearnings of the teaming population, our government has decided to buy over the project which we sponsored under the Public Private Partnership (PPP).” Continuing, Ikuforiji said: “It is supposed to be a 49km project and I think it is nearing completion. If you remember, the first tollgate came several months back, and a few months ago the second tollgate was put in place and the trial run has begun. “But of course, we are also conscious of the yearnings of our constituencies, hence the need to work out an acceptable arrangement with the concessionaire. This is the major purpose of this documentation. “I know a number of us have been away on recess and we are all back today to honour the invitation of the House to consider this bill, I will want us to give it a speedy consideration. Therefore, we have invited the three key functionaries on the matter,” Ikuforiji said. The 27 lawmakers in attendance at the Tuesday emergency plenary indeed echoed the minds of the public, asking questions earlier raised by concerned members of the public on the new proposal to buy out Eti-Osa-Lekki-Epe expressway. Their questions ranged from what immediate benefit it would bring to the people, to time left in the existing agreement, total cost of the project, reasons for the buyout and whether the buyout would reduce toll rate or see an outright end to toll collection, among others. Explaining the rationale, Commissioner for Budget and Economic Planning, Ben Akabueze, observed that the negotiation for this concession bid started some 10 years ago “at a time when the state’s circumstances were significantly different and at a time it was really healthy and commendable decision to develop that road using private concession.” The concession was indeed the first project under the PPP arrangement in the state. Akabueze added that given the existing circumstances and challenges experienced in operating that concession, “as responsible and people focused government, we are honest and humble to take a look at the choices we have made.” “So, we came to the conclusion that it will be in the overall best interest of the people of the state to buy that right under that concession and therefore, it will become a state-owned road. When we do, then, we can then make decision on what the toll rate will be.” For instance, under the original design of the road, there are to be three tollgates. One of the “wider policy options” open to the government is to determine if it still wants the tolling arrangement. Under the current concession also, the concessionaire has rights to set the tariffs in line with certain parameters that include inflation. “And the truth is that the concessionaires have already proposed to increase the toll tariffs by another 20 per cent from next year.” The commissioner added that in lieu of the plan, the state government had in the last few months engaged the concessionaire in intense negotiations and “they feel satisfied we have negotiated the best deal possible for the state in the circumstance.” Akabueze said further: “All over the world, often times, there are always issues with concession and when that happens, they can either choose to fight themselves, reach an amicable settlement or submit themselves to an arbitration process. In our own case, we choose an amicable settlement. The fact that we were able to reach an amicable settlement with our concessionaire is a plus, in the sense of the global reputation of the state,” Akabueze said. The road project started in 2008 when the agreement was executed during the second tenure of the then governor, Bola Tinubu. With the delay of the Federal Support Agreement (from the statutory federal allocation account), the project did not take off in effect until November 2008. The current concession has a life of 30 years, running from November 2008 to October 2038. The 49.36km road section is broken down into four sections. Section one runs from kilometre zero to six, which is from Falomo to Marwa Bus Stop and its expansion has since been completed. Section two runs from that section, up to Kilometre 16, terminating after Chevron Roundabout but before Ikota Village. That section is also fully operational. Section three goes all the way to Abraham Adesanya and Lagos Business School. The section has not been completed, though currently has construction work at its peak. From there to kilometre 49.36 is section four, awaiting rehabilitation of the existing road to end at around Eleko junction. The Commissioner for Finance, who was also the Director General of the Lagos PPP agency until early this month, Gbeleyi, added that the buyout proposal would give the government the right to determine toll tariffs on the road. “By the concession agreement, the concessionaire can actually increase the tariff, in relation to inflation rate, every quarter. In July of this year for instance, they were meant to increase toll from N120 to N144 for car and from N150 to N180 for SUV. These are the things we think might be difficult for us to push to the public at this time. “Sometime in June next year, toll rate for cars would have increased to N166 and N207 for SUV. As such, if we then reacquire this concession right, the state, just like we have the Lekki-Ikoyi link bridge, we will be at liberty to determine the toll tariff.” Gbeleyi further explained that the project has been funded on the project finance principle. Therefore, it has principal lenders from the likes of Standard Bank of London, African Development Bank and other six local banks, led by First Bank, UBA, Zenith, Fidelity, Diamond Bank in that transaction. “The transaction we are negotiating is such that the Special Purpose Vehicle (SPV) would be maintained but government will acquire 100 per cent interest in the SPV (LCC), to become a commercial entity of the state government just like we have Ibile Holding Limited for the oil and gas sector.” According to Gbeleyi, the total equity investment of the shareholders in the project is N8 billion and the compensation for investment over the period till now that the concession buyout is being negotiated is N7 billion. The project till date has accumulated about N32 billion loan, while a total of N35 billion has been spent on the road “and of course, there are other details on how much they will be paid to banks to service the loans,” Gbeleyi said. The 27 lawmakers present had little left to question four hours into the emergency plenary and they approved the supplementary budget as proposed. Fact file • Project valuation: N50 billion • Total sum spent till date: N35 billion • Accumulated loan till date: N32 billion • Deposit by state government: N5 billion • Current concession life: 30 years (Nov. 2008 – October 2038) • Total realised since tolling regime till date: undisclosed • Buyout cost: N15 billion • Servicing of existing debt obligation: N6.8 billion • Third party liability: N3.5 billion • Total: N25.3 billion
Posted on: Wed, 04 Sep 2013 07:13:41 +0000