British Expertise/The CITYUK
PPP roundtable
11th February, 2013
Key Considerations for Financing PPP’s In Nigeria
Ayuli Jemide,
Lead Partner
1
Introduction
Let us assume for the next 15 minutes that I
have just been appointed the CEO of a UK
Financial Institution looking to lend money to
Nigerian PPP projects.
From experiential knowledge there are 3 things
I will consider doing in financing PPP projects
in Nigeria.
2
1.
Be an Early Bird on Projects.
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Benefits for Early Birds
a) Supporting a bidder at the Procurement Stage
is the best time to come on board.
b) Being on the team negotiating the Concession
Agreement is an opportunity to deals with the
risk allocation and bankability issues from
source.
c) Avoid substantial delays from 2nd guessing
Lenders during project negotiations.
4
2.
Change the approach to requests for Federal
Government (FGN) Support Agreements.
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FGN Guarantees on PPP projects
Typical Guarantees are Irrevocable Standing Payment
Orders ( ISPO) for a liquidated sum
Federal Account
States Monthly
Income
Accountant
General of
Federation
ISPO Application
Trustees Bank for
Bondholders
6
Does this really work with PPP projects
a) Irrevocable Standing Payment Orders for a liquidated sum
are different from FGN support agreements for project
contingent liabilities.
b) There is currently no clear policy regarding ISPO (or FGN
Support Agreements) for PPP projects.
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FGN Guarantees on PPP projects
b) The process for obtaining FGN support agreements
enlarge Long Stop Date for achieving CP’s and increase
project costs.
c) MIGA and other multilateral agencies are beginning to
accept guarantees from sub sovereigns and their agencies
– this may whittle the requirement for FGN support on
some projects.
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FGN Guarantees on PPP projects
d) There is a political risk with FGN support agreements on
both state government or FGN projects.
e) Some states generate more income internally than their
Federal allocations. Others have absolutely no wiggle
room on their Federal Allocations.
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FGN Guarantees on PPP projects
f) There may be several less painful options:
i)
An ISPO or other collateral backed bank guarantee from a
first class Nigerian bank with back-to-back guarantees
from a UK bank?
ii) A simple cash backed bank guarantee by Federal or State
where the sum guaranteed can be afforded and set aside
in an interest earning escrow account?
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3.
Pay attention
every project.
to
Procurement
process
for
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Procurement is the next big thing!
a) Federal Public Procurement & Infrastructure Concession
Regulatory Commission Acts have high procurement
standards.
b) Covers: Goods, Works and Services
c) Some states have PPP laws and procurement laws.
d) There are substantial overlaps on the procurement side
with some laws: - ICRC vs BPP and BPE
- BPE vs BPP
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Procurement is the next big thing!
•
The risk of project cancellation is increased
exponentially where the project has procurement flaws.
•
Procurement laws are taken very seriously – Ask Chief
Bode George for details!!
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Thank you for listening!
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