BY LATE ENGR (BARR) TOPE ORIBUYAKU, BSc, LLB, LLM, MBA, MNSE, MNICE, MNIStructE, MNBA, MCIArb(UK), Road Sector Development Team (RSDT), Abuja
The theme of this year’s conference “Strategies for Reducing the Burden of Civil Infrastructure on Public Budget” cannot have been chosen at a better time considering the current global economic meltdown which is affecting the different facets of the economy as well as the performance of the various tiers of government in Nigeria. This has manifested in forms of reduced revenue inflow to the Federal, State and Local Government, which in turn, has engendered planning failure and budget under-performance and increased demand on public infrastructure and social services. Specifically the problem has resulted into dwindling resources to governments, as manifested in reduced internally generated revenue and reduction in other inflows into the Federation Account.
These declines have no doubt imposed serious constraints on the various tiers of government in the country as regards effective planning, budget performance and fulfilment of electoral promises. It is therefore most appropriate that NICE has chosen the theme as a way of assisting government in searching for solutions.
The benefit of good infrastructure in any society is well known as high quality infrastructure assets enhance a country’s national output. It has been argued that a large part of private sector productivity growth is connected to the size of a country’s infrastructure base and annual investments in it. Infrastructure spending generates a large multiplier effect across the full economy by creating additional demand for materials and services.
Financing of Road Infrastructure in Nigeria: Why the Heavy Burden on Government Budget?
Two main reasons can be adduced to the heavy burden that infrastructure imposes on government budget in Nigeria. One is that the financing of road construction and maintenance is traditionally dependent on public budget as the sole source, and road works being usually involving huge financing, a large proportion of government budget goes to it at the expense of other sectoral demands. Secondly, the management of road projects in Nigeria, even on the basis of the available financing, is generally not cost effective.
- Public Budget as the Sole Source of Road Financing
In Nigeria, the only source of finance for road construction and maintenance is through government budget, although there have been efforts to attract private funds through PPP recently. Government has many economic and social responsibilities including education, health, security, etc and all these other areas have to compete for fund from the same budget. Therefore, as much as is given to road, as less will be available to these other sectors. Some examples will paint this picture:
- Of the N75.989 billion Budget proposal presented by the Ondo State Governor for the 2010 fiscal year, road construction and maintenance has the largest sectoral share of N13.807 Billion (or 18.2%), while other sectors have lesser shares. It should also be noted that this amount will not be sufficient to cope for the demand of road works even if it is fully released during the year.
In the case of Ekiti State, the situation is even more pronounced. There, a total sum of N17,060,465,278.50 or 42% of the total capital budget was allocated to road construction in year 2009
- In his ministerial score card on road infrastructure presented to the press recently, the Hon Minister for Works, Sen Sanusi Daggash stated that FERMA requires N120 Billion annually for maintenance of federal roads in Nigeria, and that about 10 – 40% of this is being provided.
- The DG of ICRC, Engr Mansur Ahmed, also stated recently that Nigeria needs $15 Billion (about N2.25 Tr) to bridge her infrastructure gap.
Therefore, it is clear that there is heavy burden on public budget in Nigeria due to the huge demand for the construction and maintenance of road infrastructure.
What are the solutions?
- Establishment of Road Fund: This is the trend in many countries of the World including some African Countries like Ghana, Kenya, Zambia, etc.
- The PPP initiative:
- Floating of revenue bond : In this direction, the Federal Government recently stated that it cannot raise enough funds through the yearly budget to build critical infrastructure, especially roads and bridges, and therefore set to raise N500 billion bond staggered up to 2015 to make impact in the transportation sector.
- Establishment of Infrastructure/Construction Bank
Management of road projects
Travelling round the country including Ondo and Ekiti States where huge budgetary attentions are being given to the road sector, it will be observed that it is poor roads everywhere. This speaker has observed that if half of the funds being expended on roads in Nigeria ‘’reaches’’ the roads truly, effectively and efficiently, we will not be talking of poor roads in Nigeria.
- Does the budget truly ‘’reaches’’ the roads?
Like in all sectors in Nigeria, corruption is known to be a barrier to attainment of development objectives. It is however more pronounced in the construction industry in general. We read in papers daily how incompetent contractors get sizeable jobs, how contractors collect mobilisation and disappear, how poor jobs are certificated and so on. Definitely these are signs that much of the budgeted funds do not reach the roads.
On the issue of competition, this speaker has observed the wide advertisements being given to tender opportunities by the Ondo State Government. Apart from the wide advertisements, bidders are usually given sufficient periods to prepare their bids or proposals before the deadlines for submission.
Ladies and gentlemen, it must be clearly stated that this is a good example by the Ondo State Government. The wider the advertisement, the higher will be the competition and it has been established that the cost of a project is inversely proportional to the level of competition during the bidding phase. Even if any other thing would go wrong, the mere fact that the public is made widely aware of the proposed tendering opportunities has scored some good marks in the procurement process.
- The Institutional Structure for road management in Nigeria
The length of the Nigerian road network shown that the total network is about 195,530 Km for the three tiers of government with Federal Government owning 18%, States 16% and Local governments 67%.
However, Nigeria, which should really be a leader in the implementation of the road reform has remained one of the few countries yet to modernize and implement a comprehensive reform in road management. Countries like Zambia, Ghana, Sierra Leone, Tanzania, etc, whose individual national road network is less than 20% of that of Nigeria in size, have instituted comprehensive road reform programmes with various advantages.
Such reform programs would structure the road sector into the polcy making, which should be the role of the Ministries of Works and project planning and implementation, which should be the role of another body, which is called ‘’Road Board’’ or ‘’Road Authority’’ in various countries.
In Nigeria, it is the Ministry that will make policies and plans for roads, it is the same ministry that will design the roads, appoint contractors, supervise the contractors and certify the works as good or not. There is therefore role conflict. Compared to other sectors in Nigeria, this type of scenario does not exist. For instance, in the aviation sector, the Ministry of Aviation makes the policy and supervises FAAN and other agencies responsible for implementation; in the housing sector, there is the Ministry of Lands and I think this conference should look at this issue critically and come up with landmark recommendations to the governments.
- Practices and Procedures of the Road Managers
I now come to the aspects that affect us most as engineers.
Pertinent issues are:
- How do we manage the design phase of road projects?
In the planning and design of roads, we should be conscious that Road Deterioration depends on a number of factors, including: original design, material types, construction quality, traffic volume and axle loading, road geometry, pavement age, environmental conditions, maintenance policy selected
Therefore, adequate data should be collected and analysed taking into consideration all the above factors before finalising a design.
- Appointment of Consultants
In appointing design and supervision consultants, emphasis should be placed on quality and not too much on cost. A competent consultant hired at a high cost can save much cost for the client on projects whereas one that is not so experienced but with a lower cost can increase cost substantially through design reviews and poor instructions during project execution.
- Selection of Contractors
Emphasis should be on previous accomplishment and cost and not necessarily the ‘’bigness of name’’. It is better to group contractors into small, medium and large sizes and prevent the crossing of the borders during any bidding.
- Encouragement of indigenous contractors
If government intends to reduce the burden of civil infrastructure on public budget, there should be deliberate policy to develop and patronise indigenous contractors. One of the main problems is the acquisition of construction equipment which are very expensive.
- Use of Direct Labour
If properly organised, direct labour system can save much cost for government on road projects, in addition to the advantage of ready mobilisation at any time. Necessary precautions however include that oversized works are not entrusted with a direct labour team, that the team is headed by competent and experienced professionals, that is devoid of public sector bureaucracy and that a system of proper accountability and quality assurance is put in place. Otherwise, direct labour system can constitute a financial draining pipe.
- The Use of Technical Auditors
One of the mechanisms for ensuring value for money in highway projects in the modern days is the use of technical auditors. A technical audit is a formal assessment of the extent to which a project has complied with the procedures, design and specifications.
NICE should involve strategies to popularize the appointment of external auditors by road project clients in Nigeria. It is a step in reducing the lifecycle cost of a project.
- Continuing Professional Development (Training)
This is one area where there is generally problems in Nigeria, especially in the public sector and among consultants and contractors. It is Albert Eistein who said that it is insanity to be doing something the same way and expect a different result.
Things change on daily basis in the field of technology and therefore regular training is crucial in order to be up to date.
Under the World Bank project, training is always an important element of any major project because of the benefit of properly tapping knowledge and experience from any project executed. Government in Nigeria needs to lay emphasis on continuing training of professionals in the road sector in order to achieve long-term improvement and eventually save cost.
I believe one or two points could be picked from this speech in order to achieve the objective of reducing infrastructures cost in Nigeria and particularly in reducing the burden of road infrastructure on public budget.
Once again, I feel much honoured to be invited to deliver this speech and I thank the authorities of NICE for graciously inviting me to deliver the speech.
As we say in Nigeria, All Protocols Observed.
Thank you for your kind attention.
The above lecture has been reduced.