Why we should not sell Nigeria, by Babatunde Fashola


We are gathered at a historic time to discuss an important matter.

Some may see a Pension Conference, but I see more.

I see a future for Africa, led by Nigeria, using the resources of the people to build a future that includes the people.

It is not a vision or an idea. It has gone beyond that. It is a journey, one that started a while ago when the Pension Reform Act was signed into Law.

That journey started with the coming together of some Nigerian minds. Minds like that of  President Olusegun Obasanjo and Mr Fola Adeola. It has been nurtured by the dedicated hands of men and women who have served in the pension commission who are represented by the current Director- General Mrs Chinelo Amazu- Anohu.  It has reached a major milestone from where it must reinvigorate itself .

The tools for that reinvigoration have been provided by our legislators in the Amendment they passed into in 2014. The success of this phase of the journey now rests with you and I. And this is why we gather.

In the letter of the Pension Commission inviting me to be a Keynote Speaker at this event, no topic was assigned.

However, some paragraphs of the letter which I have excerpted provide some directions as to the thinking of the organizers and I will share them with you:

(a)“Two of the most strategic themes, positive that returns (on investment) and visible (measurable) impact on the economy”

(b)“creating solutions to the binding constraints that Nigeria faces in developing “bankable projects” in infrastructure and real estate that pension funds can invest in…”

(c)“While the pool of Pension Funds are a veritable source of capital, lack of suitable investable vehicles with low risk profiles and sufficient comfort continues to hamper the drive to make visible economic impact”

It seems to me that the key words such as “positive real returns”, “visible impact on the economy”, “bankable products…that pension funds can invest in”, “low risk profile and sufficient comfort” makes it easy to create my own topic “Overcoming the Challenges and Managing the Risks and Constraints that Inhibit the Investment of Private Capital and Funds in Nigeria’s Infrastructure Landscape in Order to Make a Visible Economic Impact”.

In seeking to address this topic, which I hope accords with the objective of the organizers, I will attempt to be empirical by a case study discussion where I will review some of the public infrastructure that have been funded by private capital, and I will do some comparisons of what the Pension Funds are achieving in other economies.

In this way, I hope to highlight the differences between us and those economies, and in that way, make my recommendations about what we should be doing.

The History of Pension Funds in Nigeria

It is impossible in this kind of forum to exhaustively deal with the issue of Pension Funds and its management in the Nigerian public service.

What is appropriate is to highlight the largely unsuccessful initiatives that have been characterized by such brand names as the National Provident Fund (NPF) and the National Social Insurance Trust Fund (NSITF).

Those brands represent the era when pension was only the responsibility of the employer,

What simply happened was that from a failure of governance, coupled with lack of funds as a result of planning deficiency, and sometimes incompetence, pensioners faced a life of uncertainty after a lifetime of service and at a time when they had become frail, unable to work or earn income and often then left disappointed by a system that had taken all they had to give.

It is sad a story that is written on so many faces characterized by many living and dead people whose lives tell the story of anguish.

It is a chapter of Nigeria’s story that is perhaps best forgotten, but regrettably they cannot yet be consigned to history because there are still debts to be paid, there are still beneficiaries who are owed, there are still Nigerians, who gave a lot, almost everything under a defined benefit scheme that is yet to give them benefit.

The current pension regime, whose managers are the organizers of this event happily have a better story to tell. It is a story of mutual contribution, where the employee and the employer share the responsibility of planning for the tomorrow.

It is a story different from the past, where the funds are safe and have exceeded N5 Trillion.

It is a story of better management.

It is the starting point for this discussion because there is a hard lesson here.

If people put their money into what they believe in, it is likely to serve them better.

The old scheme where there was no contribution by the employee perhaps reduced their role as stakeholders but does not justify the mismanagement.

But the real story is about contribution, paying your share; and it takes me to the next point which is diversification and the relevance of diversification to our subject.


For over 3 (Three) decades we have mouthed the need to diversify our economy in order to open up more sectors for productive activities, income, economic growth and jobs.

But we failed to follow through because of oil resources. It was quick and bountiful income even though there were boom and burst cycles.

Every time the cycle burst, we scampered, and promised to diversify, we take tentative steps, we feel pain. We do not endure, and it is easy to escape because not too far on the horizon is a boom in oil prices and we go back to an old life.

Remember 1970s up to 1976; remember the early 1980s and the burst. Remember the late eighties and Gulf War boom, remember the 1990s and the drop, remember the period of 2009-2014 when oil sold for over $100 per barrel for almost 5 years.

What did we do? We went on a spending spree. Politicians promised everything free.

Everyone got a wage increase, sometimes up to 80% (minimum wage from N7,500 – N10,000 raised to N18,000.00). Did our income as a Nation increased by 80%?

As we sought after free health, free education, free fuel, free housing and free everything, we refused to confront the reality that life is not free.


It was difficult to get private capital into critical sectors of our economy like infrastructure. Private capital and fund managers were not going to invest funds entrusted to them in infrastructure if we wanted to use them for free.

As a people, we were willing to pay for these services outside our country but demanded that they be provided for free in our country.

The new pension fund has shown what can happen if people resolve to contribute and pay their way.

Health insurance is another area that can open up access to top class health service for even the poor , if people are ready to contribute and save for their well being.

Insurance will give them a choice and access to the best medical service when they need it.

It will give them a second highway away from public health service, which even with its best intentions cannot provide every service free (examples).

But today’s reality is that we are in another cycle of burst. Oil prices have crashed from over $100 per barrel and is now hovering around $30 per barrel and there is a real chance that it will fall lower.

Put very simply, our main source of revenue has taken a big blow. This household has lost its bread winner.

However, it is not without options. It has assets, it can raise money, it has savings such as the private money belonging to pensioners, but it cannot be used like oil money.

Whatever is used must return.

This calls for a new attitude. There is no free money.

Ladies and gentlemen, I have news for you.

After 3 (three) decades of prevaricating about diversification, diversification has walked into the front door of the Nigerian household.

We must either embrace it, with a new attitude, or idle in agony and anguish until when hopefully the price of oil will rise again, as it will surely do.

The pension funds, which are under the management of pension funds administrators will not go into roads, rail, housing, hospitals or universities unless we change our attitude.

Attitude Change

As I said earlier, I intend to be empirical. So instead of prescribing what to do, I will simply share the experiences we are all familiar with and leave us with the options first to make rational choices, and also to be agents for change in the areas where we can influence others.

In the course of my public service, I have been privileged to be involved in getting private capital to operate in areas that were once the sole preserve of government and I will share the experiences and the results.

(a)Lekki-Epe Expressway

This is a 60km road in the eastern axis of Lagos State that was built in the 1970s and has scarcely seen any maintenance.

Potholes had taken over its surface, the population it was serving was growing daily and neither Lagos State Government had the funds to rebuild it and the Federal Government at the time was not interested even though oil income was increasing.

Accidents were claiming lives regularly and nothing seemed to offer a solution until the Lagos State Government in 2005 signed a concession with a private group of financiers.

They were very skeptical of many things not the least our political environment and behaviour.

We had previously nationalized assets of investors in the oil and gas sector and other sectors before.

Investors don’t like that and they don’t forget.

But their sense of entrepreneurship if nothing else, keeps them from staying away. In spite of risks they sometimes come back when they think the waters have calmed.

But they do so with conditions, which they hoped will mitigate risks, especially political risks.

They are used to and trained to deal with business risks, but often unprepared to deal with, and frequently unable to deal with politically induced risks.

In the Lekki-Expressway, after doing their traffic studies, satisfying themselves that the business was “bankable” (which is what the organizers of this event are looking for) they asked the Lagos State Government to pass a law; in effect to tie the hands of the next government that the concession will not be cancelled.

In other economies, a contract, which Lagos State Government gave them, would have been enough; however, as I said, investors never forget, so they asked for a law, which the State House of Assembly passed.

But when we thought that will suffice, they then asked for a “Federal Support Agreement”, which was akin to a sovereign guarantee.

Of course Lagos and the Federal Government at the time had different political colours and a Federal Support Agreement was delayed by politics for 3 years.

During that time, prices changed, exchange rates changed, many economic indices changed leading to cost impact, but eventually one was signed, during the tenure of President YarAdua.

This meant that with the Federal Support Agreement, Nigeria’s Sovereign credit rating had entered the equation.

Regrettably, when the road was finally built, and tolls were to be charged to repay the financiers, all sorts of informed and misinformed players took centre stage.

There was no resistance during the painful period of construction when children had to wake up at 4a.m to get to school at 8a.m. But as soon as the road was motorable and ready for use and Tolling , some sympathizers of the Federal Government of the day, on a political front mobilized resistance to the payment of tolls.

They promised that if they were elected, they will cancel the toll.

That is not good news to investors.

I got all sort of letters from around the world. Investors sent representatives from around the world to meet with us, asking what was happening.

All lies were told against our officials after the road was built.

But we were undeterred. We bore the lies. We managed the orchestrated protests. Some artisteswere mobilized to pour red paint on their faces and posted these on the social media as evidence to incense people falsely that we had used violence to stop their protests.

One newspaper falsely and recklessly carried a headline that our government had killed a person protesting illegal tolls.

That was the first and only time I used the coercive power of the State.

We deployed Policemen to the toll plazas. They were instructed to allow protests which was legitimate, but they must also protect those who were not interested in protesting and wanted to pay tolls, because those who were opposed to paying had no right to obstruct those who wanted to pay.

We begged, pleaded and held meetings for understanding.

We explained that those of us who enunciated the policy were going to be affected by it as well. I drove through the toll and paid, to show this.

In all of this, my biggest concern was not the road , it was Nigeria’s credit rating and the need to ensure that the project did not fail.

What was at risk was now bigger than the road and the Lagos State Government. It was a national reputation in the international business climate.

I am happy to say that we preserved our country’s business integrity against all odds and I will do it again.

For me, the lesson of this story is that we must not play politics with our economic survival. Investors want continuity of policies, even if Government changes.

Our politics must therefore mature to the level where we must refrain from campaigns that threaten to cancel contracts. We will be poorer for it.

Even when we perceive that the government of the day has poorly negotiated a contract, threats of cancellation do not help.

What we may at the worst seek to do is to re-negotiate after elections are over where it is possible to do so.

If we compare the quality of service on the Lekki-Epe Expressway where toll is paid to the Lagos-Ibadan Expressway where toll has been removed, the choice is ours to make.

Is it cheaper to drive on a road free of toll, and spend 5 hours for a 1 (one) hour journey? If you calculate the fuel burnt in 5 hours of standstill traffic and the stress, you will see that the toll free is not free.

The Security Trust Fund

Another example of private capital in a public area reserved for government was in the area of security.

This is the primary responsibility of Government and it is not an area of return in CASH for private business. But still there were returns and I will demonstrate it.

Before we set up the Trust Fund in Lagos, there was a State Police Command of about 103 (One Hundred and Three) Divisions that were poorly resourced. No cars, no fuel, no uniforms etc.

Banks were robbed at least 3 (three) times a week without capacity for response either by the Command or by the Rapid Response Squad, which was the special unit set up to respond to violent crimes.

They often get to crime scenes after the crime had been completed and the criminals had left.

I found out that this was deliberate partly and unavoidable partly.

It was deliberate to the extent that in a 2,000 strong squad to protect 18 million people at the time, they had only 37 rifles.

It was unavoidable partly because they barely had a dozen vehicles in poor condition and there was no clear and predictable strategy to get fuel.

Businesses closed at 7p.m and there was barely a night economy. So people worked only during the day, if they could avoid getting robbed.

The injection of private capital to support the larger portion of funding provided by Government, the constitution of the Board of Trustees, dominated by the representatives of the donors, with a minority by Government, led to the procurement of 10 Armored Personnel Carriers, 5 pairs of uniforms for over 2,000 officers, bullet proof vests, 2,000 rifles, 2 million rounds of ammunitions, 200 patrol vehicles at start, a regime of 25 litres of fuel per day.

The results were astonishing. Crime reduced by over 80%, no bank robbery for 2 years, no successful bank robbery until 2015 (7 years after).

A bustling night economy of 24 hours petrol stations, drug stores, night clubs , hotels, supermarkets, shopping malls and hospitality facilities unfolded and provided jobs for thousands.

This was the real return for the business community.

It might interest you to learn that private capital has found a safe haven in the American prison service and in some states the prison service is the 5th largest employer of labour topping malls and supermarkets which come 7th in a survey of 20 highest employers. So if private capital is looking for where to put money apart from roads, hospitals and bridges in Nigeria, the prison system that is overcrowded, badly managed, and not reformative is one area I will recommend. Clothing, feeding, drugs, and pharmaceuticals are some of the spin-offs.


Our “Adopt a School Initiative” where we opened a structured platform for private individuals,and corporations to enter into schools, which were hitherto the investment preserve of Government and religious missions (Christians and Muslims) is another area of our successful use of private capital coupled with government funding like the World Bank supported Eko Project.

The “Adopt a School Initiative” was so flexible that it allowed individuals and corporations to intervene according to their resources in a classroom or an entire school.

Nothing was too small. You could give cash or material or you could rebuild, refurbish or donate a school facility by yourself, once we reached an agreement with you.

Again the results were spectacular. From a result based performance where only 7% of students who sat for placement examination to universities and other tertiary institutions secured credits in 5 (five) subjects, numbers rose to 11%, 18%, 39%, 42% and 47% between 2009-2013.

The Lagos-Ibadan Expressway

The Lagos-Ibadan Expressway is a story of what investors don’t like.

The FGN granted a concession to a private company (Company A) and later withdrew and cancelled it.

The FGN then entered into a construction and financing agreement with another company (Company B).

Company A went to court and got an order to cancel the financing agreement made with Company B.

As things stand, work has been stopped on the construction of the road.

The construction companies cannot get financing because of the court order, so they have laid off about 2,000 Workers, in an economy that has so much to do and needs to create work.

These 2 (two) companies are Nigerian companies investing in Nigeria, which is a positive sign because the local investors are the most important to any economy.

Regrettably, while not going into the merits and demerits of the FGN’s cancellation of Company A’s “concession”, it sends a not welcoming message to foreign investors if the decision was without basis or influenced by politics, which I cannot comment upon.

If that was the case, as a foreign investor I will be asking myself the kind of treatment that awaits me as a foreigner if the Government does that to a citizen.

But that is only one half of the story.

The other half is judicial intervention in commercial cases.

Investors know that there will be disputes. They are used to it and that is why they insert Arbitration Clauses because they do not want disputes to drag too long in courts.

As far as the practice of law goes, my advise will be for judges called upon to decide commercial disputes to:


Act in a commercial and expeditious manner;


Refrain from granting injunctive orders that will stop the business. A worrisome number of power projects are caught up in protracted court cases while the nation waits for electricity to drive the economy;


Focus on resolving the dispute without detriment to the business, and award damages instead to the injured party;


Decline jurisdiction whenever there is an arbitration clause and refuse the invitation which is frequently made, to set aside arbitral awards unless there is a PATENT case for doing so;


Nigerian judges must be encouraged to attend annual conferences of the International Bar Association whenever possible, because they offer very rich sessions in PPPs.


We create a lot of arbitration businesses and opportunities, but we do not take the benefit of it because we have developed anti-business reputation for not respecting arbitral decisions;


Nigerian universities, the Nigerian Law School and the National Judicial Institute must compulsorily teach the law and practice of Public Private Partnerships (PPPs) which is an emerging global area of practice.

Having completed my empirical effort at what has worked and what has not worked, I will review what some pension funds are delivering across the world.

Pension Funds in Africa

Perhaps the appropriate starting point will be to acknowledge that Pension Reforms are just beginning to gain foothold across most of Africa in jurisdictions like Nigeria, Ghana, Botswana, Kenya and Uganda to mention a few.

But perhaps the biggest and most advanced of the Pension Funds, especially in sub-saharan Africa is the South African Pension Fund.

But while the sizes of these funds are happily growing, and the number of contributors is increasing, the impact in the quality of life on the continent is not yet anywhere near minimum globally acceptable standards.

The reason is not farfetched once we take a look at where the funds are being invested.

The funds are largely invested in equities and bonds, and in the case of Nigeria, so much of it is held in Government bonds.

It is tempting therefore to argue that although the pension funds contain contributions of the working class they do not as yet penetrate enough into giving value to the lives of the contributors.

Across all of Africa, there is a visible infrastructure deficit. No country to country rail service across most parts, the highways that connect most of the countries such as in the ECOWAS region are in very poor shape and these are roads that can easily be built, and tolled to earn income to secure the return of pension funds invested in building them.

Air travel is no better. Airports are not of the quality of design and construction or efficiency that are obvious in Europe.

These are places where pension funds can be impactful.

An online publication of “Institutional Investors” estimated that Sub-Saharan Africa’s ten largest pension fund markets had approximately $310 billion in assets recently.

But while these funds are not serving the “REAL SECTOR” of roads, bridges, hospitals, rails, airports, fee paying universities, there is a palpably visible poverty in most of these countries, some of who gathered to seek funding support in South Africa recently at the instance of the Chinese Government who offered funding support (loans) of $60 billion for all of Africa, when 10 (ten) pension funds had $310 Billion to invest.

Many of these countries are scurrying after multilateral agencies looking either for aid or loans, while sitting literally on a pot of money.

If Africa is poor today it is not because of a lack of resources; rather it is likely a poverty of ideas or the abundance of risk elevating attitudes, some of which I have alluded to, such as judicial and political, and these must change, as I will contend in my conclusions.

It must be mentioned of course that the attitudes that once mired pension funds management in scandals and lack of transparency, had led to very stringent legislative interventions that limited the scope of activities that pension funds could participate in.

For example, until recently, the Nigerian Pension Fund Law limited the contributor from using part of his pension to secure a mortgage.

How, one may ask is a person supposed to finance or part finance ownership of a home if he cannot use his own savings.

Happily the Amendment Act of 2014, has rectified this by the provision of Section 89 (2) of the Act which provision provides that:

“Notwithstanding the provision of sub-section (1) (c) of this section, a Pension Fund Administrator may, subject to guidelines issued by theCommission, apply a percentage of the pension assets in the retirement savings account towards payment of equity contribution for payment of residential mortgage by a holder of Retirement Savings Account”.

In contrast to the mismanagement that used to be the story of our own pension funds, the most prolific of the pension funds in Africa, which is the South African Public Investment Corporation (PIC) has over $150 Billion assets under management.

In Nigeria alone, they have $289 million in Dangote Cement , $98million approved but yet to be drawn for Notore Fertilizer, $230million in MTN Nigeria, $270million in Erin Energy (formerly CAMAC) and $150million in Mainstream Energy Solutions (in the power sector of Nigeria).

By contrast, the question to ask is what is the ‘home based’ pension fund doing? If as I have shown, the “visiting” pension fund from South Africa has a total of $897million in our economy.

The answer is obvious, that is why we are here, that is why my host in their invitation spoke of“…suitable investible vehicles with low risk profiles and sufficient comfort…” as the reason that“…continues to hamper the drive to make visible economic impact” in the letter to me.

Ladies and gentlemen, I have news for you. Those investible vehicles exist.

They are in roads that can be tolled, like housing, the 4th Mainland Bridge, the Coastal Roadlinking several coastal states from Lagos to Bayelsa ; the new seaport in Lekki and Badagry, the refinery by Dangote, Ajaokuta Steel, a petrochemical plant in the Niger Delta; the broken textile mills in the North and South of Nigeria that require new equipments and disciplined fiscal, technical and organizational management; prison in each of the 6 (six) geopolitical zones of Nigeria that can help strengthen our justice system and decongest the colonial prisons we have kept as relics of our own sense of justice; they are in hostels for students in Nigerian universities, embedded power plants in the universities, most of which have teaching hospitals and provide an opportunity to power education and healthcare and the list is endless.

It is as long as we can imagine. The time for it is now. This is the biggest opportunity to act towards diversification rather than sloganize about it.

This is the time to show that our Nation and our National economy is bigger than the challenges posed by the dwindling oil prices. This is the time to diversify and change the face of our economy once and for all.

But the risks that stand in the way are caused by us and they must be changed by us.

As I have pointed out, the list of assets to invest in is almost limitless.

Let me share with you some of the preliminary data coming out of the preparatory work we have commissioned on Housing Economies and impact.

One block of 12 (Twelve) flats will require about 93 workers multiplied by 40 Blocks amounting to 3,720.

Each block will require an estimated number of the following materials:

225 mm block 13,395

150 mm block 17, 430

100 mm block 450

Binding Wire 33 Rolls

Nails                   50 Bags

This does not include Roof timbers, sharp sand, cement, granite, paint, windows, Tiles, and other finishes.

This is where the real economic impact that local Pension Funds seek lies.

This is where they must go in funding housing construction to address supply.

We are working not only on the design of the Housing, but also on standards of doors , windows and other fittings to unify sizes and provide incentive for mass production.

We are also working on the quantities of materials so that all producers, suppliers, financiers will know to put their money.

All of these will be completed before the end of Quarter One 2016 and make public.

Our ministry is determined to use our mandate to diversify the Nigerian economy and create opportunities for inclusion for those who want to work.

“The economic impact” that the organizers of this event seek to achieve with pension funds will be phenomenal not only in growth per GDP,but in inclusion by jobs for construction and maintenance.

Foreign pension funds have taken the leap of faith with mouth watering rewards, in spite of our attitudes. They have taken the risks and earned the rewards. It seems to me that if we wait for rewards to be assured without confronting the risks which we ourselves create it puts us in a position that I can only describe this way: “should we sell Nigeria or own Nigeria?”

In the few instances where we have embraced the risk, we have not only managed them, we have returned with rewards.

Imagine if we did not allow private capital into the newspaper business by licensing private newspapers, banks, telcos, radio and TV stations?

Imagine life without Vanguard, ThisDay, The Nation, Champion, and others and the people they now employ. Where are the once state owned newspapers today?

Imagine the competition and choice that banks like GT, Access, Skye, Zenith and others brought to the industry; and the people they employ along with technology they have embraced such as ATMS and others. Would we still be queuing with tally numbers?

Imagine the breathtaking work that brands like Intercellular, Multi-Links, Glo, Econet, MTN brought to our communications? Would we still be waiting for NITEL to provide ring or dial tone, or be carrying files with hundreds of pages of telephone bills to reconcile payments?

Imagine life without radio stations like Cool FM, Silverbird, TVC, Wazobia and several dozens across the Nation, the people they employ and the choice of information that they give? Compared to only NTA that used to close at midnight.

It was private capital, and competition that forced these changes and created expanded opportunities for jobs.

Ladies and gentlemen, my comparisons are done.

It now remains only for me to conclude by making recommendations which I concede may not be exhaustive, but which I believe will begin our journey of change that will reduce the risk and increase the appetite of our local pension fund administrators to get their feet wet and test the waters in the place we call home.

I have identified 5 (five) areas about which I will make recommendations namely: (1) politics, (2) Governmental action, (3) socio-cultural, (4) Legal, and (5) judicial.

While each of these areas is itself capable of being the subject of a keynote speech, I will attempt to be brief and succinct in making only highlights of the topical issues.


Very often, concessions, PPPs and private ownership of public assets are complex, sometimes misunderstood transactions that some people view with suspicion.

Some of the perceptions that influence these complexities, misunderstanding and suspicion arise from the fact that people sometimes begin to question why they should begin to pay for services that government used to provide for free or at a subsidy.

For example, today, the cost of self generation of power by residents, using their own generators, buying diesel or petrol, and sometimes adding inverters to augment, is estimated between N48 toN70 Kw/h.

There are already at least 7 (seven) cases in different Federal High Courts in Nigeria. 3 (three) are in Lagos, 1 (one) is in Abuja, 1 in (Umuahia) , 1 (one) in Owerri and 1 (one) in Awka.

The curious thing is that even manufacturers have taken up some of these cases as plaintiffs, as if they themselves have maintained the same price of their finished products.

The truth is that Tariff is about price and if the raw materials like Gas, power plants , spare parts, Labour etc  have gone up the price of the finished product cannot be the same.

If the price of the product is not right there is no incentive to produce more of it.

This can only result in scarcity and high prices . It is simple economics.

Without the right tariff there will be no power because it is now in the control of entrepreneurs.

It is left to us to make the rational choice of paying the right tariff which is cheaper than generating ourselves at between N48 Kw/h to N70 Kw/h.

In similar vein,people pay averagely N7,000.00 (Seven Thousand Naira) per tanker of 11,000 litre of water, approximating to N0.63K per litre of water, which is not treated, but they will question a decision to produce water at a commercial rate of about N0.35K per litre of water and insist that it must not sell for more than N0.15K per litre, in spite of the fact that the water is at least treated with chlorine which sells at N600.00 (Six Hundred Naira) per kg  .

This state of affairs has been the fertile theatre of deception for some unprepared and fly by-night politicians who mount the soap box and threaten to cancel existing concessions once voted into power.

What they do not understand is that they are sending out messages that no investor wants to hear.

They are raising risk to private capital on a political front which investors seldom understand. They understand financial and return on investment risk but are seldom equipped to deal with political risk.

Even outside the political class, those who ought to know display shocking ignorance.

In response to the recommendation to raise tariffs to competitive market rates, the Punch Newspaper in its editorial of December 22, 2015 Edition said:

“…Fashola…should not hesitate to explore the option of revoking existing contracts to pave the way for foreign companies with the relevant expertise and financial capacity to deliver the good.”

The question I ask is this, if we needlessly cancel concessions granted to our own people, what incentive and assurance do we give to “outsiders” to invest if the investment of our own people is not secure in their land?

If you consistently horsewhip your own children in your home, why should I let my own children visit your home?

2.?Governmental Action

Closely related to political risk, but slightly different from it is Governmental action.

Whereas the former occurs during the campaigns and the quest for political power, the latter is often the follow up to the acquisition of political power.

Newly formed governments begin a review of all contracts signed by their predecessors, cancel or frustrate them even when they are performing.

They do so under one guise or the other. The previous government has done something wrong, they did not adequately protect the interest of the people and so on.

What they do inadvertently, is to create a climate that diminishes the sanctity of contracts, negatively affecting the ease of doing business.

It is a practice that is particularly prevalent on the African continent and I argue that in some part contributes to our continental deficiency of infrastructure.

I am not saying that government must not terminate non-performing contracts. Indeed these are rights that are standardly provided in all well drawn contracts.

What I am saying is that contracts cannot be terminated or frustrated on trumped up reasons simply because a new government does not like the affiliation of the holder of the contract.

It weakens the economy, it frustrates enterprise and leads to poverty and unemployment through job losses, loans taken from banks are endangered and the knock on effect is more than we often can see on the horizon, because the bad word spreads around the global investment community very quickly like wildfire.

Yes it may be the case sometimes, that the past government did not act in good faith, or even compromised or was even negligent. The answer is not cancellation, if the contract is performing. The answer is renegotiation.

You can invite the holder of the contract, confront him with evidence of compromise, bad faith or recklessness, and this is easy to get if there is diligence, and you propose new terms.

This I think will enhance the reputation of the state or country or continent for honouring contracts and it is music to the ears of investors. Even then , I say, it must be sparingly resorted to, once the contract has been signed and is performing.

This is the business friendly route. It is one thing to mouth slogans of being business ready and business friendly. It is quite another thing to practice it.


There are many variants and manifestations of this but I will cite only one example which is our cultural outlook to land, especially land owing families and government.

Unlike the first world, we still cling to bare land and ownership for itself, without understanding that it is no more than a factor of production and capital formation.

All communities that have clung to ownership of land for no reason other than the fact that they do not want to lose it, have invariably been characterized by poverty.

First they do not welcome visitors to their land, including surveyors.  Without surveys, title to land cannot be created.

Land that is not titled and measured, cannot be valued and is therefore not useful for investment.

Without investment, there is no development, no jobs, no prosperity.

I will cite only one example to make my point.

Most of what is Victoria Island today, and the entire Oniru Estate, belongs to the Oniru Chieftaincy Family. They are a forward looking land owning family who have welcomed visitors, allowed surveys and titled their land.

It is no wonder that some of Nigeria’s prime real estate, banks, hotels, toll road, offices and multi-billion dollars land assets are located there.

The examples of the other attitude are replete and living evidence of how we have perpetrated old cultural beliefs to our own detriment and prosperity.

Those who are ready to sell their land to investors, and guaranty safety of title, or use their land to buy equity into businesses will attract more investment and prosperity.


As it stands today, it seems to me that the legal regime for regulation of privatization of public assets can do with some reform.

On a general note, let me use the opportunity to call for the re-invigoration of the National Law Reform Commission with the mandate to focus vigorously on the reform of our body of laws.

As things stand, many new laws have been passed since the return of civil rule in 1999 and they need to be harmonized for ease of access to update the last reform carried out around 1990 when the Laws of the Federation 1990 was presented.

If an example is required, Lagos State Government revised its laws in 2003 and recentlypresented an updated version by its Law Reform Commission in 2015.

Specifically as far as privatization and concession of public assets is concerned, it will require the immense skills of very experienced legal practitioners to carefully navigate through the provision of at least 5 (five) general laws in order to be able to give sound advice to any investor who seeksadvice.

These laws are (1) Infrastructure Concession Regulatory Commission Act; (2) Public Enterprise (Privatization and Commercialization) Act; (3) Pubic Procurement Act; (4) Debt Management (Establishment) Act; and (5) Utilities Charges Commission Act.

If the concession is in respect of a road for example, one will then have to look at a 6th (sixth) law, the Federal Highways Act.

I should not be mistaken for suggesting that it is impossible to have a successful privatization, as we have seen with telecoms and lately power, but it seems very clear that things can be a lot better by law reform and harmonization, and the challenges that road concessions have been beset with cannot be divorced from the complexities of the legal regime.

Indeed, we probably will not be having this kind of discussion if the Pension Reform Act had not been recently amended. So it is amendments that open up the space for expanded business enterprise and ease business efficiency that I have in mind.

It might delight investors to hear that our Ministry has commenced an internal review of these laws and the Federal Highways Act, with a view to making recommendations to the Ministry of Justice to consider and effect some changes.

For example, our current review shows that:

a.?The Infrastructure Concession Regulatory Commission Act (ICRC) does not contain a “saving provision” with regard to other existing legislation. This means that the law is subject to other legislations that relate to concessions.

b.?The law makes no clear provision for the commission with regard to the approval process for PPP projects and the authority to grant a concession. This is obvious from the provisions of section 20 (a) – (d) of the Act which seems to vest the Commission with ‘monitoring’ and ‘advisory’ responsibilities rather than regulatory.

c.?The Act also does not make provision for alternative dispute resolution, which is a more efficient platform for resolving commercial disputes in contra-distinction from regular courts.

This takes me to the final point of my 5 (five) recommendations and this is the judicial action.

5.?Judicial Action

It may seem that the absence of compulsory provisions for arbitration, leaves parties to make the choice whether to include them in their agreements.

Sadly with and without arbitration clauses, the resort to the law courts, where disputes are long and tedious, has not helped our economic investment and development cause as a Nation.

Even where arbitration clauses exist and are resorted to and an Arbitral Award is given, we have demonstrated an unhealthy respect for, and compliance with such awards and have often proceeded to courts to seek to set aside such awards.

This is a behavior we must rethink and refrain from. Our businessmen must refrain from being sore losers. The challenge to an arbitral award must be the exception rather than the rule (AES Power case).

It is development that suffers and the economy that loses when commercial disputes are tied up in long litigation.

For example, I have inherited a contract for the supply of 3 million meters awarded in 2003 which has been caught in Arbitration, and the Federal High Court, and all this goes on while the whole country is waiting for meters to ensure that consumers of electricity pay for only what they consume.

Our team is currently seeking to negotiate a compromise so that the meters can be supplied.

The Lagos-Ibadan Expressway has been caught up in 2 (two) court cases in which an order has been made cancelling a financing agreement to fund contractors.

The effect is that contractors are not paid, work has stopped, almost 2,000 workers (bread winners of their families) have been laid off and we don’t have a completed road, especially such a critical economic highway that is the evacuation and supply artery for our ports and oil tank farms for goods and petroleum products from the South to the other parts of Nigeria.

As if this was not bad enough, we have dozens of cases in court impeding the progress of transmission line construction work across the country.

The result is that increased supply of power from the generation companies to the distribution companies is fraught with avoidable challenges.

My recommendation is that judges, lawyers and law students, in the universities and the Nigerian Law School will do well to acquaint themselves with how PPPs work, and practitioners must seek to keep projects and enterprise going, while sorting our disputes.

Particularly in the universities and the Nigerian Law School, I recommend the introduction of courses in PPPs and Privatization into their Contract and Commercial Law curriculum if they do not already exist.

For lawyers and judges, I urge a full consciousness of their role as social and economic agents because their actions and inactions impact the lives of people such as workers who they may never meet.

Ladies and gentleman, this is not the end of the discussion, but I argue that it must be the beginning of definitive and audacious actions to change some of the things I have highlighted and those that I have not, but which you are aware of.

I am done. I thank you for listening

Babatunde Raji Fashola, SAN

Honourable Minister of Power, Works & Housing

Written by Web Master

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