The Federal Government is thoroughly reviewing the eight road projects concessioned to private investors under the Highway Development Management Initiative.
The projects assigned to the concessionaire in 2023 were strategically planned with the expectation of generating a substantial N11.54tn in revenue through toll collections throughout their execution.
These projections, however, have been tampered with by a review prompted by the escalating costs of construction materials and the increasing recognition that the revenue feasibility of the previously signed agreements with the concessionaire is no longer achievable.
The Director of Press and Public Relations at the Works Ministry, Muhammed Ahmed, disclosed this development during an exclusive interview with our correspondent on Tuesday in Abuja.
He revealed that this review was triggered by the implementation of two major economic policies by the government: the removal of fuel subsidies and the devaluation of the naira.
The development comes days after the government inaugurated toll collection on the road, with fees ranging from N500 to N1,600 depending on vehicle size at each of the four toll plazas.
The director highlighted that the increase in petrol prices has prompted many Nigerians to abandon or sell their vehicles, resulting in a reduction of our previous vehicle projections, which in turn affects the anticipated revenue generation.
The situation indicates that the government may be forced to review the cost to be charged by the concessionaires to enable them recover their costs or extend the number of years earlier approved for tolling.
The PUNCH recalls on May 29, 2023, the former minister of works, Babatunde Fashola, issued an approval letter to six concessionaires from 75 investors who indicated interest.
At the commercial close and contract execution ceremony of Phase 1 of the Value-Added Concession Road Corridors held just a day before the expiration of the former president Muhammadu Buhari’s tenure, Fashola tasked the investors to perform effectively to set the pace for the second phase of the project.
But two years after the approval, none of the approved contractors is yet to mobilise to the site.
The roads include the 125 km Benin-Asaba road (Route 1), 195km Abuja- Lokoja road (Route 2), 161.2km Onitsha-Owerri-Aba (Route 3), 258km Shagamu – Benin road (Route 4), 100km Kano-Shuari road (Route 5), 200km road Enugu – Port Harcourt (Route 6) which also has a 25-year concession term. The seventh route is the 80km Lagos-Ota-Abeokuta road, and the 79km Lagos-Badagry-Seme Border (Route 8).
An analysis of a document obtained showed that Benin-Asaba (Route 1), a 125 km road was expected to generate N1.58trn within the period. The 195km Abuja- Lokoja road, which also has a 25-year concession period and is expected to generate N1.76trn, while the 161.2km Onitsha-Owerri-Aba route, which is the 4th route, was projected to generate N706bn.
Shagamu – Benin 258km road was expected to generate N2trn, Abuja-Keffi-Akwanga, a 175.9km road had an expected revenue of N540bn.
Enugu – Port Harcourt 200km road, which also has a 25-year concession term, had an expected revenue of N1.15trn. The 80km Lagos-Ota-Abeokuta road is expected to generate N1.57trn
Similarly, the Lagos-Badagry-Seme Border, a 79km route, had an expected revenue of N1.35trn, and the 100km Kano-Shuari road had an expected revenue generation of N813bn.
He said, “I can confirm that the remaining eight roads under the Highway Development Management Initiative are currently undergoing review. This is due to the drastic change in economic indications like the removal of fuel subsidies and the devaluation of the naira. So we had to go back to the negotiation table to work out new modalities, and that is what has been ongoing for some time now. The process is very tedious.
“The government is not changing the concessionaires but only renegotiating the terms of the agreement. A dollar was less than N400 when these agreements were signed. Many Nigerians have also abandoned or sold their vehicles after the hike in petrol price, which has led to a reduction in our earlier vehicle projections, which would determine the revenue to be generated.
“The feasibility study done on the number of vehicles expected to play the roads has reduced drastically too because of the removal of fuel subsidy and the high cost of petrol which has forced a good number of citizens to drop their vehicles at home.
“So the number of vehicles included in the outline business case has changed, and it won’t be appropriate to give a figure of vehicles that is no longer economically viable. We conduct our analysis on vehicles every year, and I can tell you our projections have drastically changed.”
He added, “The operators are asking for a reflective cost, but we are going back and forth with them so we can all have a middle ground and resolve all the issues. We had a complaint of 66 pages from one of the concessionaires under the previous agreement that we had to resolve. And you know concession involves other agencies and ministers. We all are going through the necessary documents.
“We were able to inaugurate the tolling point at Abuja-Akwanga Road seamlessly because it was already constructed with funds from international lenders. Other routes require construction before they can operate and maintain for a certain number of years.
“It’s clear that the government doesn’t have the finances to construct and maintain these roads and that is why we invited the private sector to assist while it is generating revenue. It takes a lot of money to maintain our roads and we don’t give them out for maintenance. These roads will get damaged and billions of naira will be spent to construct them. The roads are economically viable.”
When questioned specifically about a possible timeline for the tolling of the Lagos-Ibadan expressway, the director reaffirmed that fees will only be charged to commuters when the road is 100 per cent completed.
“The Lagos-Ibadan road is not completed yet, billions are still being voted for the road. So the tolling of that road is not happening very soon but will certainly be tolled,” he explained.
On the Lagos-Ota-Abeokuta expressway, the official explained that “palliative work has been done, and the concessionaire would only have to operate and maintain.”
Speaking further, he revealed that a cashless policy will be enforced at all tolling points.
“Tolling will be strictly cashless, nobody will pay cash to ensure transparency. Also, phase one of the initiative will see the operation and maintenance of 10 roads from 12 roads initially outlined. The remaining two roads will be part of phase two of the same project.”
