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Lekki Toll: Enhancing Economic Growth And Crea...

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Gov. fashola
Gov. fashola

The Lagos State Government is constrained to respond to an article titled,” Lekki Toll: Biggest Fraud Ever Conceived and Committed” published in The Herald of 13th February, 2015, and many other online platforms. This has become necessary in order to provide accurate information to the public at large about the Project, put the record straight and correct a lot of misinformation and misconception in the jaundiced report, and probably in the minds of unwary members of the public. This is important because the way the story was syndicated confirms that it was a hatchet job meant to settle a political score for cheap electoral gains. Despite the sheer volume of literature that is out there on the subject, the writer failed to do any rigorous research before going to town with mere tales that do not in any way advance the knowledge and understanding of thereaders on the subject matter. It is obvious the writer is ignorant and short sighted, and deliberately shut his eyes to the opportunities that the road has attracted to that axis. The sponsors are desperate, and theirlegendary history of corruption and mismanagement of public resources is fast catching up with them, which iswhy they see others as corrupt even when they have no proof.
In addressing the issues raised in the aforementioned article, it will be necessary to give some historical background on the road project and what motivated the Lagos State Government to opt for Public-Private Partnerships (PPP) as a financing option in the delivery of the project.
The choice of consummating the project through PPP in the first instance was part of the Lagos State Government’s forward thinking strategy to provide off-budget funding to enable it to implement infrastructure projects such as the Eti-Osa Lekki-Epe Expressway in view of its limited resources and to ensure that other pressing projects are not delayed to the detriment of the citizens of the State.    The need to carry out upgrade and expansion works on the road became critical in view of the significant population growth along the corridor as the fastest growing area in the country. It was glaringly obvious that the 4-lane carriage road could no longer support the needs of the community. Furthermore, the road had exceeded the technical design life span of 25 years, having been built in 1981 and significant failures along the road sections resulted in huge traffic congestion that became a hazard to the health and security of motorists.
In response, the Lagos State Government through the Ministry of Works and Infrastructure advertised the road locally and internationally over a period, commencing from 2002, inviting interested private sector players to partner with Government in developing various road infrastructures, including the Eti-Osa Lekki Epe Expressway. Different platforms such as national newspapers, international road shows, Public Service Journal (PSP Journal), as well as the Ministry of Works and Infrastructure website were utilized in creating public awareness of the project.
At the time, five roads were presented for Private Sector Partnership within the State; however, response from investors was very sparse and uninspiring.  Only a few companies comprising of a consortium led by Asset Resource Management Limited (ARM), a company known as Denoi Konstruct and Messrs Warner West Africa Ltd, indicated an interest in the Eti-Osa Lekki Epe Road project.
It should also be noted that, PPP as a tool for infrastructure development was still evolving in the country at that time, and as such there was still much apprehension about its effectiveness and workability, especially in the midst of an uncertain and nascent political climate. The bomb blast of 2002 in Lagos also did not help matters, as it created an environment of insecurity that discouraged prospective investors.
Consequently, the initial local and international interest shown in the project did not progress beyond the signing of a Memorandum of Understanding which did not result in any commitment.  However, Messrs Asset and Resource Management Company Limited (ARM) unlike other bidders were resilient in their proposal and resolute in their negotiations with the State Government. This eventually led to the signing of a Concession Agreement with Lekki Concession Company Limited (LCC), the Special-Purpose Vehicle established by ARM and a consortium of local and international investors, to execute the project.
In compliance with the procurement process, the contract was consummated under the Lagos State Roads, Bridges, (PSP) Board Law of 2004. Consequently, the Notice of Intention to Award the Concession was issued in the Lagos State Government Official Gazette Extraordinary No. 15, Volume 39 of 28th April 2006. Furthermore, the Notice of Execution of the Concession Agreement was published in the Lagos State Government Official Gazette No. 16, Volume 39 of 2nd May 2008.
The road works are in two phases of which phase 1 is the expansion and upgrade of 49. 36km of the Lekki Epe Expressway, while phase 2  is the construction of a 20 km Coastal Road, with an option to construct the  Southern bypass. The protection of the coastal road shorelines by the State Government was, however, a precondition for the concessionaire to construct the coastal road, a venture which requires huge resources presently not within the reach of the Lagos State Government.  Consequently, the 4th Mainland Bridge has never been part of the pact of the Lagos Infrastructure Project as erroneously stated in the report.
The Lekki Concession Company (LCC) is the Special-Purpose  Vehicle (SPV) established to execute the road project. This is typical in structured finance transactions, such as PPP, asset securitization or joint ventures, to isolate certain company assets or operations and ring-fence a project-financed transaction. Part of its benefits is that it enables large organizations to meet specific objectives and perform specific investment activities. It also helps in reducing “red tape” and offers legal protection to member companies of the SPV among other benefits. The members of the SPV (LCC) consist of both local and international reputable equity holders such as Asset & Resource Management Company Limited (ARM), The African Infrastructure Investment Fund (AIIF) (which consists of strategic investors such as Macquarie Group – Australia, Old Mutual – South Africa), Larue Projects Limited and Hitech Construction Company Limited.  Similarly, top international technical advisers, consultants and contractors such as BKS and Aurecon (South Africa), Arup (Pty) Ltd (South Africa), Compsis (Brazil), Toll Infrastructure Services (South Africa) and High-Point Rendel (UK) among others, were engaged to support and underpin key aspects of the project. Apart from the equity contribution, the majority of the funding for the project came from; The African Development Bank, First Bank of Nigeria Plc, United Bank for Africa Plc, Zenith Bank Plc, Diamond Bank Plc, Fidelity Bank Plc, Standard Bank London and Stanbic IBTC Bank Plc. To impugn that there is an element of fraud in a project that involved the aforementioned investors is not only sickening but queries the competence and state of mind of the writer and the sponsors.
Similarly, there is nothing that has to do with allocation of prime land to LCC as part of the equity for the partnership in the Concession Agreement, which is a transparent document and sets out all the project details very clearly.  The contribution from the State Government to the project apart from providing the Right of Way, is the provision of a 20-years N5 billion (US$42m) mezzanine loan, with a 10 year moratorium to demonstrate Government’s commitment to the success of the project. This is consistent with global best practice in priority projects of this nature, and the concessionaire was to repay the loan on due date.
The writer also stated that there was no basis for the 30-year  Concession “for mere rehabilitation and expansion of an existing road, which government could afford on its own.” It must, however, be noted that the concession period is  determined based on empirical input elements of the construction, operating, financing and maintenance costs whilst providing reasonable returns to investors. Typically, toll road concessions around the world range from 25 years to as high as 50 years, where such projects involve a large amount of capital expenditure. It helps to lower cost of toll rates if the period over which the concessionaire is allowed to recoup its investment is spread out over a longer rather than a shorter concession period. Furthermore, it should be noted that within the 30-year  concession period, Government would not have to be concerned with the operation and maintenance of the road because the toll provides a stable and timely source of road maintenance funds, which allows for prompt and adequate maintenance of roads and also frees up government resources for other socio-economically productive sectors such as Education and Health.  In addition, at the end of the concession period, the road would be handed back to the State Government in a fully maintained condition.
Furthermore, contrary to the writer’s assertion of “mere rehabilitation and expansion of an existing road,” additional value added to the road beyond rehabilitation, and expansion includes the  provision of complementary facilities such as street lights, traffic lights, drainages, pedestrian bridges, road signs, fencing (for security and safety), construction of underground ducts for fibre-optic and other buried infrastructure.  The novel 24/7 Incident Management Service comprising: Route Security Patrols, Breakdown/Vehicle Recovery Assistance, Toll Free Customer Helpline and Ambulance services on the road, is the first of its kind in Nigeria and West Africa. Since inception, over 15,700 road users in various levels of distress have benefited from the complementary incident management services. Independent surveys conducted by research outfits on the completed sections of the road, have described journey experience on the expressway as the best in terms of maintenance and safety in the country. Incidences of traffic congestion, travel time inconvenience, accident and armed robbery have been significantly reduced to the barest level in the completed sections.
In addition, LCC innovativeness in eliminating traffic congestion at the intersection between Ozumba Mbadiwe Avenue and Adeyemo Alakija Street, led to the provision of the new Falomo On-Ramp Bridge.
On the allegation that landowners and prospective builders of homes are being charged heavily land use charges and personal income tax, and they now have to pay road tax (toll); it is pertinent to state that, while taxes are applied generally to all citizens irrespective of whether  they use a service or not, toll is a form of tariff, and it is applicable to only people that use the particular service.  It will therefore be absurd to argue that because someone pays income tax or land use charge; he/she is not supposed to pay water or electricity tariffs for specific services provided.
Beyond this, members of the public are not compelled to pay the toll because they have a choice of using the Alternative Roads to bypass the toll plazas.  The beauty of the road is that it is an open toll concept, whereby, motorists, which do not want to pay tolls can bypass the toll plaza and still get back on the road and use a significant part of the road free of charge. In addition to this, if they have any vehicle breakdown or other difficulties on the road, they would be assisted by LCC’s rescue team irrespective of the fact that they have not paid the toll.
In addition, there is a special discount of up to the tune of 60% for commercial vehicles, which means that low-income earners can now get public transportation at a cheaper rate because apart from the 60% discount, commercial drivers can now make more trips because of reduced travel time and the cost of the discounted toll is going to be spread over a number of passengers, which would make the transport fare cheaper per person. Government has also provided high-capacity  buses in the corridor to further enhance the accessibility of public transportation.
In the area of stakeholder’s relations, the State Government has continued to engage and consult stakeholders in the community. There is indeed a standing committee which membership includes that of Eti-Osa Heritage Group, Oniru Chieftancy Family, Eti-Osa Leaders of Thought, Coalition of Oodua self-determination  Group (COSEG) – representing Civil-Society  organizations and chairmen of three local Governments Areas (Eti-Osa LGA, Eti-Osa East LCDA and Iru/V Island LCDA), among others. During some of the interactions with stakeholders, they were enlightened that the reason why the road was being fenced was to enhance the security and safety of inhabitants, so that people and animal do not stray on to the road and constitute a danger to themselves and motorists. In view of this, and in deference to community request, the initial brick design of the fence was changed to clear view fences. It is pertinent to state that beyond various town-hall  meetings with members of the community, the State House of Assembly also held an open session before approving the contractual arrangements on the 21st of May 2007.
As regards the progress of construction works on the road, works presently progressed beyond 20km in contrast to the 2km stated in the write up. While the project may not be perfect, the intention of Government on the project is to reduce traffic gridlock along the expressway, and this has been considerably achieved. Security and safety have also been enhanced on the road unlike what obtainable in the past.
Beyond this, the road has provided a critical access to new developments in the area such as Lekki Free Zone, the future Lekki International Airport, Lekki Hydrocarbon Park, the $20billion Dangote Refinery & Petrochemical plant and Lekki Deep Water Seaport, all of which will become significant catalysts of economic development. The Lekki Free Zone alone which is now open for business with some manufacturing factories in operation, is forecasted to create over 15,000 direct jobs and has already attracted over USD$1 billion in offshore commitments for investment. While, the Eti-Osa Lekki Epe Road expansion project, on the other hand, has created over 2,000 direct and indirect employment since the financial closure of the project in 2008.
Consequently, the road expansion project along with other rapidly developed infrastructure has enhanced the value of properties and turned the Lekki corridor into a choice residential area for the burgeoning middle class and investors’ delight in terms of berthing their business locations.
The project has won various international Awards, which includes the    Award for Transport Deal of the Year in 2008 and IFC/Infrastructure Journal Top 40 Emerging-Market Award in 2013.
Thus, contrary to the writer’s warped impression that the project is anti-people, it has, on the contrary, enhanced the quality of the lives of the people through the aforementioned socio- economic benefits.

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