A PAPER ON THE FEDERAL MINISTRY OF WORKS AND ISSUES OF ABANDONED PROJECTS IN NIGERIA PRESENTED BY DAUDA S. KIGBU,

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1 A PAPER ON THE FEDERAL MINISTRY OF WORKS AND ISSUES OF ABANDONED PROJECTS IN NIGERIA PRESENTED BY DAUDA S. KIGBU, mni, PERMANENT SECRETARY, FEDERAL MINISTRY OF WORKS AT THE BREAK-OUT SESSION OF THE 2015 ANNUAL GENERAL CONFERENCE OF THE NIGERIAN BAR ASSOCIATION HELD AT THE INTERNATIONAL CONFERENCE CENTRE ON MONDAY, 24 TH AUGUST, 2015 Protocol It is my distinct honour and privilege to present a paper on The Federal Ministry of Works and Issues of Abandoned Projects in Nigeria at this august gathering. I wish to thank the organizers for the invitation extended to me and bringing this topical issue to the fore. The vision of the Federal Ministry of Works is, to elevate Nigeria roads to a standard where they become national economic and socio-political assets, contributing to her rapid growth and development; to make federal roads functional, pleasurable and an avenue of inventing Nigerians trust and confidence in government. Road transport is an important sector of the economy in both developed and developing countries, contributing to the growth of GDP. In Nigeria, the road transport constitutes over 90% of freight and inland transportation services. With the sub-optimal performance of the rail system in the country, road transport has become the dominant mode for the transportation of goods and services. Agricultural produce are transported to the markets from the hinterland by road as well as finished products from factories. In recent times, the preponderance of pipeline vandalisation has resulted in the haulage of petroleum products to Depots across the nation by road. Roads form the arteries for facilitating transport and are the life wire of any economy, constituting the core of the supply chain. An 1 P a g e

2 efficient road system gives a country a competitive edge in moving goods economically and the lack of it can create barriers to agriculture, industry and trade, and may hinder the entire development effort. The socio-economic benefits of road transport have generally been limited to quantifiable user savings such as travel time, vehicle operating costs and fatalities. These offer consumers and producers significant benefits by reducing logistics costs of doing business. However, there are several other outcomes of road development that are often ignored. A world Bank study on the social and economic impacts of rural road improvements in the State of Tocantins, Brazil concluded that improved rural road connectivity changed the population s choices with respect to modes of transportation with a shift to public transport and individual cars, increased school attendance especially among girls and increased household income by creating more agricultural jobs in certain regions. It is universally accepted that Highway improvements affect economic development indicators such as regional employment, personal income and business sales. The provision of road infrastructure increases the value of real estate property and productivity of business. Brief History of Road Development in Nigeria Nigeria over the years has made tremendous strides in the area of road development starting from 1926 when the first bituminoussurfaced road linking Lagos and Abeokuta was constructed. By 1945 the country had a total of 13,240 kilometers of road classified into Trunk Roads A & B (Trunk A were Federal roads while Trunk B belonged to the Regional Governments). The federal network increased to 16,000km by 1973 and by October 1974, on the recommendation of the National Council of Works, additional 16,000km of State roads were taken over from the State 2 P a g e

3 Governments and designated as Trunk F roads, thus bringing the total Federal road network to about 32,000km. Today it is estimated that the country s Road Network covers about 200,000 kilometers with 18% or approximately 35,000km owned by the Federal Government, 17% by the State Governments and the balance of 66% by the Local Governments. Out of this stock of 200,000km, only about 65,000km or 33% are paved. The country ranks second to South Africa (362,099km) in Sub-Saharan Africa in terms of road network coverage. During the oil boom years, the government invested substantially in the development of federal roads, creating a network once considered to be the best on the African continent. Between 1970 and 1975, Nigeria invested over N8.0 billion on rehabilitation and the upgrading of the country s road network. The upgrading involved reconstructing single-lane carriageways to two-lane carriageways and construction of earth roads to bituminous allweather roads. Further investments were made from to the tune of about N2.1bn. However, decades of lack of maintenance due to funding shortages and lack of institutional capacity have caused the network s deterioration. This is reflected in an annual loss to the economy in the region of US$1.0 billion (US$450 million due to loss in asset value and US$550 million due to increase in Vehicle Operating Costs). With the advent of the present democratic dispensation in 1999, various programmes were put in place to recover the road network and keep it in motorable conditions for the benefit of road users. The Federal Ministry of Works embarked on Federal Roads Rehabilitation Programme (FRRP) in The Programme aimed at restoring the Federal road network within the shortest time possible in order to provide the dividends of democracy to the citizenry. It was designed to address the deplorable conditions of the federal road network nationwide. Between , 215 projects 3 P a g e

4 covering 10,293km were awarded with a total contract sum of N971,647,940,540. Some of the major completed projects within the period are: Dualization of Abuja-Keffi road (51km); Dualization of Ibadan-Ilorin road section III (Ogbomosho-Ilorin) (40km); Rehabilitation of Jos-Bauchi road (118km); Rehabilitation of Kaduna-Kachia-Gimi road (379km); Dualization of Onitsha-Owerri road in (92.3km); Completion of Rehabilitation of Warri-Benin Dualization (95km); Construction of Benin Bypass (45km) amongst several others. Within this period the Presidential Initiatives Programme (PIP) was introduced. The Programme, initiated in 2006 involved the dualization of the 196km long Abuja-Abaji-Lokoja road in the North Central Zone, the 553km Kano-Maiduguri road cutting across the North West and North East Zones and the 328km East-West road in the south South Zone of the Country. The works are still on-going on the Abuja-Abaji-Lokoja and Kano-Maiduguri roads, while the execution of the East-West road project was handed over to the Niger Delta Ministry. In 2009, another road rehabilitation programme was embarked upon by the Ministry and named Zonal Intervention Programme: (ZIP). The concept of the programme was to rehabilitate the most distressed sections of selected major Federal trunk routes running North-South and East-West of the country within the limited Budget provisions of Year 2009, while the other sections would be addressed in subsequent years when funds became available. This would continue until the entire routes were fully rehabilitated. The goal was to improve their conditions and level of service so as to enhance the 4 P a g e

5 socio-economic development of the country. 34 No. projects were awarded under the programme at a total contract sum of N140,080,445, Some of the roads included: Rehabilitation of Ilorin-Jebba-Mokwa Road: Ilorin -Jebba Section Phase I in Kwara State; Rehabilitation of Mararaba-Pambeguwa-Saminaka-Jos Road Section II: Pambegua-Saminaka-Jos in Kaduna/Plateau States; Rehabilitation of Gombe-Numan-Yola Road section II: Numan -Gombe in Adamawa/Gombe States; Rehabilitation of Maiduguri-Bama-Gwoza-Hong Road Sections I & II: Maiduguri-Bama-Gwoza in Borno State; Rehabilitation of Kano-Katsina-Kaura Namoda-Jibia Road Section III: Kaura Namoda-Jibiya in Zamfara/Katsina States; Kano -Kazaure-Daura-Mai Adua Road in Katsina State; Rehabilitation of 9th Mile-Enugu-Port Harcourt Dual Carriageway in Enugu/Abia States; Rehabilitation of Calabar-Ugep--Ogoja-Katsina Ala Road Sections I & II (Calabar-Ugep-Katsina Ala) in Cross River State; and Rehabilitation of Ibadan-Oyo-Ogbomosho Road Section I: Oyo-Ogbomosho in Oyo State. While some of the sections on these road alignments were completed, lack of consistent funding affected the programme, thus the desired objectives could not be totally achieved. From 2011 to date, efforts have been made to consolidate on the modest gains of the past in the development of the Federal road network. The Government initiated a robust programme to connect major economic centers in the country with dual carriageways and improve network connectivity by building new bridges and upgrading 5 P a g e

6 substandard ones. Substantial progress has been made on the dualization of Lokoja-Benin road, Expansion and Rehabilitation of the Lagos-Ibadan expressway, Dualization of Suleja-Minna road, rehabilitation of Benin-Shagamu dual carriageway, and construction of Loko Oweto Bridge over River Benue. Modest progress has also been recorded on other major projects like the Rehabilitation of Enugu-Port Harcourt Highway, Dualization of Sapele-Ewu road and Construction of 2 nd Niger Bridge. Profile of On-going Projects Presently, the Ministry has a total of 206 on-going and newly awarded projects with a total contract sum of N2,157,484,608, Out of this, N84,819,584, is for payment of advance on contracts awarded in Some of the projects were awarded as far back as 2006, like those under the Presidential Initiative programme for the dualisation of Kano-Maiduguri and Abuja-Abaji-Lokoja. These projects are yet to be completed due to persistent underfunding. The intervention of the Subsidy Reinvestment and Empowerment Programme (SURE-P) on the major projects between 2012 and 2014 helped to increase the progress of works. The projects include: Dualisation of Kano-Maiduguri; Dualisation Abuja-Abaji-Lokoja; Reconstruction of Benin-Shagamu Dual carriageway; Reconstruction of Lagos-Ibadan Dual carriageway; Construction 2 nd Niger Bridge; and Construction Loko-Oweto Bridge across River Benue. The sum of 199,553,115, was expended on the SURE-P projects but the money was not adequate to ensure their timely completion. It is important to note that more than 40% of the portfolio of on-going projects are constituency projects, initiated by 6 P a g e

7 members of the National Assembly, many of which were not on the federal road network. This has led to inefficient and ineffective utilization of the Ministry s annual budgets by spreading funds thinly on too many projects to the detriment of projects on major federal trunk roads. Challenges to Road Development: Issues of Abandoned Projects The delivery of road projects that is supposed to act as catalyst for socio-economic development is becoming a big challenge due largely to time and cost overruns and in some cases abandonment. In March 2010, former President Goodluck Ebele Jonathan, GCFR setup a 20-member Presidential Project Assessment Committee (PPAC) to take inventory of all on-going projects awarded by the Federal Government and examine why projects were not executed in accordance with their terms of contract agreement. The Committee took inventory of 11,886 projects with total commitment of N7.8 trillion and concluded that many projects could not be completed or were completely abandoned due to poor conceptualization, design and execution. It also identified inadequate budgetary allocation as one of the causes of delay in execution of projects and abandonment. For the nation to move forward therefore, it needs to find solutions to delays in the execution of projects to avoid abandonment and constituting drains on the Nation s resources. An abandoned project is one where work has stopped and or when the construction company is under receivership. A 7 P a g e

8 project can also be said to be abandoned when no activity is noticed at the construction site for more than Six (6) months. By the second definition therefore, many highway projects can be said to be abandoned. There are a number of causes of project abandonment. These include: Inadequate Funding Inadequate funding for road projects has been the major bane of the road sector. This has led to cost and time overruns on many projects which exerts more pressure on public revenues and delay road user benefits. Whereas the funding is decreasing over time, there is a continuous increase in both the number and cost of the projects to be executed. If the goal of providing the levels of connectivity of the network and service to enhance the socio-economic development of the country is to be achieved, the twin issues of funding and proper planning need to be adequately addressed. The Chart below shows the widening gap between annual requirements to actual available funds for the development of federal road network. 300,000,000, ,000,000, ACTUALT AMOUNT REQUIRED (N) AMOUNT BUDGETTED (N) ACTUAL FUNDS RELEASED (N) Funding Profile for Highway Construction & Rehabilitation Projects from ,000,000, ,000,000, ,000,000, ,000,000, P a g e -

9 The 2015 Budget makes a provision of about N18bn for Highway construction and rehabilitation projects, whereas there are outstanding certificates in excess of N250bn. It is estimated that the road sector requires an average annual funding of N500bn over the next five years to bring the road network to a condition that will provide road users with the level of service required in terms of travel time savings, reduction in vehicle operating costs and reduction in fatalities. Lack of Appropriate Institutional Frameworks Apart from insufficient funding, the lack of institutional capacity has worsened the situation. The management of roads is currently vested in the Federal Ministry of Works (for Federal Roads) or States Ministries of Works/Transport (for States Roads). These institutions are currently steeped in civil service bureaucracy and redtapism which has adversely affected the efficient management of the road sector. Previous attempts to reform the sector started in 1971 through to Road Vision 2000 ( ) which led to the formation of the Federal Road Maintenance Agency (FERMA). However, this has not met the desired institutional reform in the road sector. The FGN recognized the urgency to act and had through the Federal Ministry of Works put in place a ten-year Road Sector Development and Maintenance Program, with the intention of identifying the required investments as well as all crucial reforms to be undertaken. 9 P a g e

10 Political Interference The introduction of constituency projects in the Ministry s annual budgets by members of the National Assembly has continued to distort the programmes of the Ministry. This has led to proliferation of projects which cannot be funded from the budgetary envelop of the Ministry. The result is that all projects; constituency projects and projects on Federal trunk routes suffer from inadequate or lack of funding. If the Ministry is to fulfill its main mandate of developing and maintaining roads on the federal road network as listed in the Federal Highway Act, political interference has to be minimized so that Federal roads, especially Trunk A roads should be given priority attention as they carry very high volume of traffic. Security Challenges Another cause of Project delay and abandonment is the issue of safety of the client and contractor s personnel and contractor s plant and equipment. With the upsurge in the North Eastern part of Nigeria, many of the road projects that were being executed in Borno, Yobe and Adamawa States were abandoned. For example six (6) road contracts were awarded in Borno State between 2006 and 2010 with a total contract sum of N106,340,362, have been abandoned. The executed works have deteriorated and the projects have to be reassessed when the security of lives and properties are restored in the State. This will lead to cost overrun on the affected projects in the States 10 P a g e

11 5.0 Way Forward It is noteworthy that no government in the world has been able to adequately fund road development from the public purse. This is because there are several other competing sectors that need equal attention. Roads therefore, have to compete with other sectors like defense, power, water, agriculture, education and health. In both developed and emerging economies, attention has been shifted from total public funding to building partnerships with the private sector for road development. Nigeria must not be left behind. The country must develop alternative sources of funding for its road development programmes in order to lessen the pressure on the national budget. It is clear that going forward less funds will be available for the development and/or maintenance of the national road network. Nigeria must also develop the culture of prioritizing projects and managing road assets in line with global best practices to optimize value to the national economy. In order to bring about positive change in the current suboptimal performance of the road sector and to ensure that it plays its role as a major contributor towards economic growth, the current efforts at truly reforming the sector must be pursued spiritedly and expeditiously while other innovative measures must be identified and taken. These measures include: Road Sector Reforms: This will strengthen the capacity of the road sector to plan, program, budget and execute federal road programmes on a sustainable basis. Bureaucratic bottlenecks in the management of the road sector needs to be removed. The Ministry should be re-structured and strengthened to address only policy issues while separate entities such as the Road Authority and the National 11 P a g e

12 Road Fund (NRF) are established to plan and manage the development of the road infrastructure as well as fund road maintenance in accordance with global best practice. Currently, the World Bank is working closely with the Federal Ministry of Works through the Road Sector Development Team (RSDT) to carry out sector reforms. Some of these reforms include the creation of a National Roads Fund with a Roads Board, Federal Roads Authority, Governance and Accountability reforms, development of roads using scientific Highway Development tools such as Highways Development Model HDM-4 etc. The Road Sector Development Team is proposed to be the nucleus of the proposed Federal Roads Authority and is already at advanced stages of bringing these reforms to fruition. Already, the Federal Government has proposed the Bills for the Establishment of the National Roads Fund (NRF) and Federal Roads Authority (FRA) which were already forwarded to the National Assembly for passage into law. Efforts need to be intensified to ensure that these bills are expeditiously enacted into law by the 8th National Assembly. For other critical road sector studies that are necessary for the success of the Road Reform, the Road Sector Development Team again is at advanced stage of these studies, especially the Road Asset Management Studies, Review of national Road Design Standards and Implementation, and Calibration and Adaptation of the HDM-4 to Nigerian environment. Road Sector Management Reform Studies and Capacity Development have also been concluded. These efforts should be supported in order to accelerate the process. 12 P a g e

13 It is instructive to note that several African Countries that initiated road sector reform programmes at the same time with Nigeria had long completed their institutional reforms and formed their road authorities. The table below shows a cross section of some of these countries with the year of establishment of their road authorities. Country Benin Ethiopia Ghana Kenya Malawi Tanzania Zambia Year of Establishment of Road Authority An update on the performance of the road authorities shows a major improvement in the management of the road networks in these countries. For Nigeria, the time is ripe to ensure that the reform process is brought to its logical conclusion by the establishment of the FRA and NRF. Giving Impetus to Public-Private-Partnerships (PPP) With the heavy funding gap currently bedeviling the critical infrastructure, the need for a robust PPP culture cannot be over-emphasized. Efforts should be made at refining areas that militate against the effective take-off of this concept in Nigeria. The legal framework, the business environment, and the social aspects should be reexamined so as to create the enabling environment for PPPs to thrive. In recent times, the Ministry has procured two projects under the PPP. The execution of the 2 nd Niger Bridge and the Lagos-Ibadan Highway under the Public-Private Partnership (PPP) arrangement currently has given hope that several other bankable road and bridge projects can be undertaken under the same 13 P a g e

14 arrangement to ease government spending on road projects as well as tapping into the efficiency of the private sector to deliver projects on schedule. This innovative funding initiatives need to be strengthened and extended to cover a wider array of projects on the federal road network to take advantage of private investment funds that may otherwise be lying idle. Other Sources of Funding The World Bank (WB), African Development Bank (AfDB), and other donor agencies are currently collaborating with Government in various sectors of the economy including the road sector. However, apart from the WB and the AfDB, not much assistance is coming from other donor agencies. These donor agencies are usually known for their recognition of international best practices and adherence to rules that give their loan/grant recipients real value for money. Their oversight functions also help to achieve this. More efforts should therefore be made to encourage these donors and others to invest in the road sector. The efforts of China Export-Import Bank in venturing into the road sector should really be encouraged and supported. However, these loan/grants should be tailored in a way to make them attractive and not burdensome to the country. Other veritable sources of funding that can be explored include Bond financing, Viability Gap funding and adoption of Annuity contracts for key arterial routes, which the country can leverage on for its road development programmes. 14 P a g e

15 6.0 Immediate Steps in the Short Term In the mean time, the need for the Ministry to concentrate on its core mandate of management and control of Federal Highways as specified in the Federal Highway Act CAP 135 cannot be overemphasized. Out of the 206No. on-going highway projects in the Ministry, over 40% are constituency projects on road alignments that are not on the Federal road network. It is important to prioritize the execution of the on-going projects to make optimal use of the funds currently available. It is therefore recommended that in addition to any other step, the Government may find it necessary to take; All on-going constituency projects that are not on the Federal road network whose contract periods have lapsed and have not achieved more than 50% completion may be reviewed; All other projects on the Federal road network that are under performing with low progress and high lapse in contract periods may also be reviewed. It is believed that the implementation of these proposed measures will streamline the operations of the Ministry and free the much needed funds to complete projects that are critical to the economic development of the country. 7.0 Conclusion In conclusion, it is necessary to restate that the growth of the Nigerian economy is dependent on the availability of an adequately developed and maintained road infrastructure. This is because roads are the life wire of the nation s economy. Nigeria made efforts in the past for road development and maintenance which have yielded limited results. The time has come for the nation s huge road asset to be adequately and properly developed and managed in line with global best practices. This can be done through the establishment of appropriate institutional frameworks that promote sustainable 15 P a g e

16 development, and provide enabling environment for private sector participation in the financing, maintenance and management of the road sector. Efforts need to be intensified to ensure that Road Reform Bills for the establishment of National Roads Fund (NRF) and Federal Roads Authority (FRA) are expeditiously enacted into law by the 8th National Assembly. This will not only improve the road sector and impact strongly on the Nigerian economy but will also greatly contribute towards bridging the Nation s infrastructure gap as well as avoid the cases of abandoned projects. Thank you for listening. 16 P a g e