OBG talks to Peter Kieran, President, CPCS

Interview: Peter Kieran

What are the priorities for stakeholder management in infrastructure development projects?

PETER KIERAN: Generally speaking, monopolistic state-owned infrastructure projects in both developed and emerging markets can often be characterised by strong unions and well-paid workers. Given the critical role of infrastructure, the impact of any industrial activity will immediately be felt if these unions are unhappy with the direction of reform. It is very important that the private operator and the government engage organised labour throughout any privatisation process.

In most instances, privately operated infrastructure can mean better pay, conditions and upward mobility following a period of adjustment. A prudent government will communicate the benefits of reform to the country’s workers and pre-emptively compensate any workers adversely affected by the reform through severance, retraining or other measures.

What financing models have proven most attractive in Nigeria’s transport infrastructure?

KIERAN: Privatisation of the ports is a good example of concessions bringing efficiencies to public infrastructure. Back in 2006, at the start of the federal government’s port reform programme, we devised a strategy to divide each port into multiple terminals and pass them on from the Nigerian Ports Authority to private operators. While much of the soft infrastructure at the ports – Customs, agency overview and so forth – can still be further streamlined, service to users has improved on the whole. We’ve seen decreased dwell times and no more surcharges. Ports have the added financial advantages of generating foreign currency and forming linkages with the global shipping community, providing exposure to international businesses and skills.

In a country like Nigeria, where the commercial demand for infrastructure is so great, revenue-generating models are feasible and can attract private investment and private operators. Cargo rail in Nigeria is one example that might benefit from privatisation in the future. Investment and concession opportunities are equally attractive to both domestic and foreign investors.

A federal government structure like Nigeria’s also opens up opportunities for local participation from the states. Where the central government lacks the financial capacity to tackle multiple infrastructure challenges simultaneously, the government could choose to open up a role for the state-level government. One key example is that of greenfield ports. A country like Nigeria with a federal system could opt to follow the example of India, where states like Gujarat, Madhya Pradesh, Karnataka and Andhra Pradesh got involved in public-private partnerships in the port system, effectively serving as competition to the existing ports controlled by the central government. The states developed Private Finance Initiative Units in each state to facilitate the projects through the development cycle.

To what extent will the population accept charges to use the country’s transportation network?

KIERAN: Many examples of transport infrastructure across the world have had considerable impact and have shown the benefits of privatising critical national infrastructure. When private sector participation has brought major service improvements, individuals have accepted increases in tariffs or charges.

Nigeria has a unique opportunity to revive the railroads in a more cost-effective way. While the Nigerian railway system is actually 115 years old, the railroad has been more or less dormant for so long now that there is less social pressure from the people to charge a particular fare. Therefore, the government has an opportunity to introduce fares that more accurately reflect the cost of operating a railroad. It will be difficult to generate a return on investment in passenger rail, given that it must compete with low domestic air fares. However, rail transport of cargo has significant potential to attract private investment and also operate at a profit. This historic opportunity for greater cost recovery is a major boon to investors both foreign and domestic.