UNIVERSITY INFRASTRUCTURE

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UNIVERSITY INFRASTRUCTURE SERVICESConcession
Options, Considerations and Methodologies
by ENGR. MANSUR AHMED DIRECTOR GENERAL/CEO,
INFRASTRUCTURE CONCESSION REGULATORY COMMISSION
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AGENDA

• Introduction
• University Infrastructure and Services
• Challenges of Higher Education in Nigeria
• Funding of University Infrastructure and Services
• The PPP Typology
• Structure of PPP Projects
• The PPP Project Financing Process
• Nigerias PPP Framework
• Conclusion

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INTRODUCTIONA BRIEF BACKGROUND

• Before independence, less than 25 percent of all
  professional service posts were held by
  Nigerians, and most trade and industry was
  foreign-owned.
• This was due largely to the limited access,
  limited academic freedom and limited higher
  educational curriculum policies pursued by the
  then colonial government.
• At independence, the urgent challenge of higher
  education in Nigeria were
• to produce high level professionals to replace
  the expatriates in the administration of the
  country, and
• to train skilled manpower to be in charge of the
  emerging industrial sector, where activity was
  picking up as a result of the import
  substitution development strategy of the newly
  independent state.

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INTRODUCTIONTHRUST OF HIGHER EDUCATION-PAST 50
YEARS

• It would appear that the thrust of higher
  education effort in Nigeria for the past 50 years
  has remained largely unchanged.
• First, the legacies of colonialism had lingered
  and in some instances directed the thrust of
  higher education policy.
• Second, the state of the national economy, which
  is characterized by severe under-achievement in
  virtually all sectors of the economy.
• This state of economic gloom is compounded by a
  very volatile and unstable polity.
• Fourth, is the massive migration of talents
  (brain drain) due to frustration and low social
  expectation.
• Incidentally, these challenges work in concert
  with other traditional problems of higher
  education in Nigeria discussed below to
  precipitate the severe crises in higher education
  in the country.

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CHALLENGES OF HIGHER EDUCATION TRADITIONAL
CHALLENGES

• Education is recognized as fundamental to the
  construction of a knowledge economy and society,
  and a key to modernization and development.
• The ability of Nigerias academic institutions to
  provide education, research, and service is
  severely handicapped by some traditional
  problems.
• These are but a few of the problems that have
  laid the higher education sector prostrate
  include those of finance and funding, the growth
  of private higher education institutions,
  academic freedom, quality and excellence,
  governance and autonomy, and management
  challenges.
• Others are gender equality, research and
  publishing and the problems of scholarly
  communication, language issues, and the migration
  of talent or brain drain.
• Time and space would not permit me to
  exhaustively discuss these challenges, so I will
  concentrate on the problem of funding for the
  Universities in this discussion.

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CHALLENGES OF HIGHER EDUCATION THE CHALLENGE OF
FINANCE

• Severe financial crisis appears to be the bane of
  higher educational systems at the beginning of
  the twenty-first century.
• The pressures of expansion have added large
  numbers of students to most Nigerian academic
  institutions and systems.
• Economic problems facing Nigeria make it
  difficult, if not impossible, to provide
  increased funding for higher education.
• Inability of students to afford the tuition rates
  necessary for fiscal stability of the
  universities.
• Reluctance by public authorities to impose
  tuition fees due to political or other pressures.
  
• Poor prioritization of available financial
  resources, such as
• The tradition of providing free
• Highly subsidized accommodations and food to
  students
• Maintenance of large and cumbersome non-academic
  personnel and infrastructure.

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CHALLENGES OF HIGHER EDUCATIONIMPOSED BY
GLOBALIZATION-21ST CENTURY TRENDS

• Rapid developments and integration in computing
  technology, digital telecommunication and
  transportation over the past two decades have
  resulted in the globalization of trade, finance
  and investment.
• Such other global tendencies as liberalization of
  trade, privatization of public institutions,
  deregulation of economies, economic integration
  and the development of common markets, have all
  worked in concert with globalization (global
  economy driven by technology) to provide the
  platform on which the new world economic order is
  founded.
• In particular, the growth of the Internet has
  permanently changed the face of education,
  security, trade, commerce, finance and
  investment, and forced a paradigm shift from the
  established modes of conducting business.
• These global tendencies, acting in concert with
  rapid and sustained technological changes in
  computing, communication and transportation,
  permanently changed the face of education and
  business around the world, Nigeria inclusive.

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CHALLENGES OF HIGHER EDUCATION IMPOSED BY
GLOBALIZATION-IMPLICATIONS-1

• The impact of these global tendencies have been
  profound, and have forced a rethink on how we
  view education, the inherent challenges and what
  the universities must do if they must remain on
  top of the situation.
• First, the world is turning into a global,
  knowledge-based society, where ubiquitous and
  ever-opening access to information creates a need
  for skilled workers who can transform information
  to meaningful, new knowledge.
• The phenomenal growth of the internet has been
  the primary vector of this change. Technology has
  made it possible to hold jobs in locations quite
  remote from the employer. E.g. the toll-free
  answering services for most companies and
  institutions in the USA and UK have been
  outsourced to companies in India.
• Second, an innovation-based society is emerging.
  Invention and innovation are no longer the
  exclusive preserve of universities and research
  centres. Successful members of society create
  innovative- and contextually-relevant
  applications for new knowledge. Bill Gates
  created the personal computing revolution and the
  technology called Microsoft from his mothers
  garage, and as a college dropout.

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CHALLENGES OF HIGHER EDUCATION IMPOSED BY
GLOBALIZATION-IMPLICATIONS-2

• Third, knowledge and innovation-based jobs are
  moving to countries like India and China.
  Western companies have already learned that it
  makes sense to move industrial jobs offshore.
  Today, many companies are beginning to move their
  creativity and research and development jobs to
  markets with lower labour costs.
• Fourth, personal success in the innovation
  society will require novelty at the individual
  level. Standardization and centralization at the
  workplace are giving way to individualization and
  decentralization. Employees are now viewed and
  rewarded for their creative inputs as
  individuals, not for the roles they could play as
  automatons in a structure and hierarchical
  organization.
• Fifth, technology has changed human relations.
  Advances in technology allow people to interact
  in new ways that were previously obscured by
  geographical, economic or social boundaries.
  Technology allows people to acquire higher
  education online and hold jobs without ever
  visiting the physical location of the university
  or employer.

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CHALLENGES OF HIGHER EDUCATION IMPOSED BY
GLOBALIZATION-IMPLICATIONS-3

• Sixth, jobs that exist today will not necessarily
  exist when todays students finish school.
  Industrial boundaries are increasingly getting
  blurred. Jobs that existed before students were
  born may not exist when they finish school.
• Seventh, advances in sanitation, nutrition and
  medicine have extended life expectancy in many
  countries. We are thus saddled with an increasing
  ratio of an unproductive ageing population.
• The phenomenon of globalization compels students
  and schools to compete on a global scale.
• Due to advances in technology, change, in itself
  is accelerating at a pace never before witnessed
  in the annals of human history. The doubling time
  of information is now under one year, the
  boundaries between sectors and industries are
  becoming blurred and in a constant state of flux.

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FUNDING OF INFRASTRUCTURE A WORKING DEFINITION

• Infrastructure refers to those physical
  structures that facilitate the production of
  goods and services, without themselves being part
  of the production process.
• Often referred to as the stock of capital
  goods, they include highways, airports, harbors,
  utility production and distributive systems,
  water and sewer systems, communication networks
  and energy networks.
• In a university environment, infrastructure will
  include but not limited to lecture
  halls/theaters, student hostels, roads, staff
  quarters, information technology, utility
  production and distributive systems, water and
  sewer systems, and the like.

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FUNDING OF INFRASTRUCTURENATURE OF INFRASTRUCTURE

• Infrastructure projects are lumpy, meaning that
  they are large, immobile, space specific and long
  lasting, often with life span measured in decades
  and centuries, and construction often running
  into years.
• The implication for financing is that
• First, infrastructure finance tends to have
  maturities of between 5 years to 40 years.
• Second, the initial financial outlay tends to be
  quite large.
• Third, as large amounts of money are typically
  invested for long periods, it is not surprising
  that the underlying risks are also quite high.
• Last, real return on investment usually fixed and
  as low as near zero, although still positive.

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FUNDING OF INFRASTRUCTURE TRADITIONAL BUDGETARY
OPTION

• Traditionally, government has been the sole
  financier of infrastructure projects in the
  Universities and has often taken responsibility
  for implementation, operations and maintenance as
  well.
• Budgetary financing are often
• Volatile and rarely meet crucial infrastructure
  expenditure requirements in a timely and adequate
  manner
• Exerts constant pressure on fiscal budget due to
  competing demands
• Funding generally inadequate
• Receives a larger brunt of fiscal retrenchment in
  times of financial crises
• Rapidly declining financial resources
• Greater the potential for mismanagement and
  unwholesome practices
• Leads to lower quantum and quality of
  infrastructure.

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FUNDING OF INFRASTRUCTURE CHALLENGES FOR
UNIVERSITIES

• With rapidly dwindling financial resources
  arising in part from rapid population growth,
  rural-urban migration rapid urbanization, and the
  global economic crises, the challenges faced by
  Universities in building efficient infrastructure
  that delivers such the level of education for
  sustained economic growth would include
• Adequate and sustainable funding for
  infrastructure development
• Accelerated infrastructure and service provision
• Faster implementation of projects
• Reduced whole life cost of projects
• Better and sustainable incentive for service
  delivery
• Clearly, the traditional budgetary allocation for
  infrastructure development has proved wholly
  inadequate in meeting the infrastructure needs of
  the country.
• There is therefore a dire need for alternative
  options

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FUNDING OF INFRASTRUCTURE FUNDING OPTIONS
AVAILABLE -1

• Commercialization of Research Income sources
  include commercialization of research, income
  from international students, philanthropy and
  fund raising. 
• Commercialization of Non-Research Activities
  Non-research commercial activities include
  education provision such as short course
  offerings, professional development courses and
  tailored corporate education.
• Universities are also increasingly involved in
  the development and delivery of customized
  postgraduate education and training programmes
  for individual enterprises or professional
  associations. With the evolution of online
  learning, workplace project based learning and
  coaching and mentoring as tools for professional
  development, universities will need to become
  more adaptive to compete effectively with a
  growing range of other providers. 

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FUNDING OF INFRASTRUCTURE FUNDING OPTIONS
AVAILABLE-2

• Diversification of modes of access to university
  education The phenomenon of globalization
  compels students and schools to compete on a
  global scale through e-learning.
• Availability of Venture Capital Investors are
  increasingly keen on backing cutting edge
  technology developed by universities.
• Academic - Industry Partnership Most
  universities in Europe and North America now have
  commercial exploitation departments, exploiting
  their wealth of intellectual property and are
  bringing in entrepreneurs to help.
• Public Private Partnerships Governments and
  institutions are increasingly partnering with the
  private sector for the finance, design, build,
  operation and maintenance of infrastructure, and
  delivery of associated services as one means of
  meeting the need for modern, efficient
  infrastructure.

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FUNDING OF INFRASTRUCTURE THE PPP IMPERATIVE-1

• The private sector has a large pool of resources
  from which they can seek funding, which
  governments may not have access to, or the
  capacity to access, both locally and in
  international financial markets.
• Faced with many competing demands and dwindling
  resources, governments are increasingly focusing
  on fostering competitive environments to attract
  citizens and businesses particularly as they
  relate to issues such as infrastructure and the
  delivery of services.
• Partnerships between the public sector and
  private companies (PPP) for the finance, design,
  build, maintenance of infrastructure and delivery
  of associated services are means of meeting the
  need for modern, efficient infrastructure and for
  reliable cost effective delivery of public
  services.

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FUNDING OF INFRASTRUCTURE THE PPP IMPERATIVE-2

• These partnerships fill the resource gap in
  infrastructure delivery and operation
• They engender acceleration of infrastructure
  provision
• They also Promote faster implementation of
  projects, and reduced whole life costs of
  project
• They offers better risk allocation between public
  and private sectors, offers better and
  sustainable incentive to perform
• And engender accountability in fund utilization
• They improve the overall quality of service
• They often leads to the generation of additional
  revenue and overall value for money for the
  entire economy.
• Globally, governments have come to recognize that
  the collaboration between public and private
  sectors is crucial to securing dependable and
  sustainable funding for infrastructure and
  reducing the pressure on fiscal budgets.

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FUNDING OF INFRASTRUCTURE WHAT ARE PUBLIC
PRIVATE PARTNERSHIPS

• The design, build, finance and operation, by the
  private sector, of assets and services that the
  government has traditionally procured and
  provided to the community and which have
  previously been funded by taxpayers. In return,
  the private sector generates revenue either from
  the levying of tariffs on users or the receipt of
  periodic service payments from the government
  over the life of the PPP agreement
• KPMG.
• It is therefore a co-operative venture for the
  provision of infrastructure or services, built on
  the expertise of each partner that best meets
  clearly defined public needs, through the most
  appropriate allocation of resources, risks, and
  rewards. The public sector maintains ownership,
  oversight and quality assessment role, while the
  private sector is more closely involved in the
  actual delivery of the service or project.

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FUNDING OF INFRASTRUCTURE PUBLIC PRIVATE
PARTNERSHIP TYPOLOGY

• All partnerships have a unique risk/reward
  allocation.
• PPP can be categorized based on the extent of
  public and private sector involvement and the
  degree of risk allocation between the two.
• Public-private partnerships can take many forms
  including
• Service Contract (OM)
• Design/Build/Operate
• Concession/Lease
• Finance, Design Build and Operate
• Own and Operate
• Asset Sale/ Transfer
• Other combinations.

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STRUCTURE OF PPP PROJECT

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THE PPP PROCESS-1
The following cycle typifies public private
partnership arrangement for infrastructure
procurement.
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THE PPP PROCESS-2
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PPP FINANCING SOURCES

• Commercial Banks
• Private Equity and Debt Funds
• Pension Funds
• Nigerian Mutual Funds
• Foreign/Domestic Contractor Finance
• Sovereign Wealth Funds, etc.
• Insurance Companies
• Equity and Bond Market Issues

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NIGERIAS PPP FRAMEWORKLEGAL AND REGULATORY
FRAMEWORK

• Provided by the ICRC Act 2005
• Establishment of the Infrastructure Concession
  Regulatory Commission. (Sec 14. 1)
• MDAs may enter into a contract with or grant
  concession to any duly pre-qualified private
  sector proponent for the financing, construction,
  operation, and maintenance of any infrastructure
  that is financially viable or any development
  facility of the Federal Government. (Section
  1.1).
• Functions and powers of the Commission (Section
  19)
• Provides general policy guidelines, rules and
  regulations.
• Take custody of every concession agreement.
• Ensure efficient execution of any concession
  agreement or contract entered by the Federal
  Government.

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NIGERIAS PPP FRAMEWORK NATIONAL POLICY ON PPP

• Government Commitment
• Policy Objectives
• Economic
• Social
• Environmental
• Enabling institutional environment
• Guidelines for the PPP
• Coordination and planning
• Capacity building
• Effective communication
• Roles and responsibilities
• Market development
• Collaboration with states and other stakeholders

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NIGERIAS PPP FRAMEWORKROLE OF ICRC-1

• The roles envisaged by the policy and enabling
  laws for the ICRC are those of
• The PPP Resource Center
• Contract Compliance Monitoring and
• Policy Formulation.

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NIGERIAS PPP FRAMEWORKROLE OF ICRC-2

• Contract monitoring unit
• Take custody of agreements
• Monitor implementation
• Oversight of existing concessions as necessary
• Board will oversee both functions
• Recommend policies to FEC
• Propose legislative changes
• Advise FEC on project approval
• Annual report and accounts

• PPP Resource Centre
• Disseminate guidance, best practice
• Communicate plans / policies to private sector
• Coordinate PPP activity across Federation
• Standardise where possible
• Manage flow of projects to market
• Centre of technical expertise for MDAs/States
• procurement/negotiation, contract/banking law,
  land/planning, financial intermediation
• Overcome internal barriers eg tax law
• Maintain project database

The PPP Resource Centre will assist
Universities, through the Federal Ministry of
Education provide support from Project Ideation,
Identification, Appraisal, Design, to Procurement
and Implementation
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NIGERIAS PPP FRAMEWORKICRC KEY ACTIVITIES

• Provide technical expertise to MDAs and state
  governments in their procurement transactions,
  and provide support during negotiations, contract
  drafting, and financial mediation
• Ensure that adequate capacity for entering, and
  carrying out PPP projects on the basis of best
  practices exists both in the MDAs and the
  Commission itself
• Review and monitor the tendering process
• Harmonize the PPP process with other agencies
  such as the Ministry of Finance, National
  Planning Commission, Budget Office, and the like
  
• Take custody of every concession agreement,
  maintain a project register and ensure that they
  are implemented in accordance with the law.

• Streamline and standardize the process involving
  PPPs.
• Draft policies, guidelines and procedures to
  ensure that PPP transactions are carried out in
  an eminently controlled manner by all MDAs are
  being developed and will be circulated to the
  MDAs for review and comments. Once finalized,
  ICRC will ensure all MDAs comply with these
  procedures before approval is given
• Review of all projects identified by the MDAs and
  their structure before presentation to the FEC
  for approval
• Review of contract documents before they are
  signed
• Coordinate PPP activities across the country and
  manage the timing and flow of projects to the
  market

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CONCLUSION-1

• Traditionally, government has been the sole
  financier of infrastructure projects through
  budgetary allocations and has often taken
  responsibility for implementation, operations and
  maintenance as well.
• Low investment, improper planning, poor
  maintenance and corruption conduce with
  dwindling governments resources to dismal and
  rapidly deteriorating infrastructure base.
• Funding of infrastructure through budgetary
  allocation is volatile, rarely meet crucial
  infrastructure expenditure requirements in a
  timely and adequate manner, receives a larger
  brunt of fiscal retrenchment in times of
  financial crises, and has a greater potential for
  corruption.

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CONCLUSION-2

• PPP arrangements, on the other hand, have
  engendered acceleration of infrastructure
  provision, a faster implementation of projects,
  reduced whole life costs of project, offers
  better risk allocation between public and private
  sectors, better and sustainable incentive to
  perform, engender accountability in fund
  utilization, and improve the overall quality of
  service.
• They are, however, complex.
• The infrastructure market in Nigeria is vast,
  underdeveloped and unexploited. It covers such
  sectors as roads and highways, light railways,
  ports, waterways, airports, dams, bridges and
  tunnels. Others are electricity power, oil and
  gas pipelines, water and sanitation,
  telecommunication and indeed the entire spectrum
  of infrastructure services. These present
  opportunities for the discerning investor.

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CONCLUSION-3

• As the world awaits global economic recovery and
  the restoration of global credit, the legal,
  regulatory and institutional framework, together
  with policy and macro economic environment for
  PPP to thrive in Nigeria, is been put in place.
• The ICRC Act is in place and the relevant
  institutions have already been inaugurated.
• The National Policy on PPP has been approved by
  the FEC and the guidelines and procedures to
  ensure that PPP transactions are carried out in
  an eminently controlled manner by all are being
  developed with the robust engagement of all
  stakeholders.
• Universities can take advantage of the support of
  ICRCs Resource Centre to accelerate their own
  infrastructure development.

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THANK YOU