Detail Commercial Solicitors on Nigeria’s PPPs

Transcript

PPPs in the power industry are burgeoning in Nigeria, with the government working to ensure the environment is more robust and welcoming. On hand to help companies negotiate the legal aspects of these sectors is Detail Commercial Solicitors. World Finance speaks to its representative, Partner Dolapo Kukoyi, to find out more.

World Finance: Dolapo: Nigeria has the strongest of all African economies. How well set up are the incentives and regulations surrounding PPP and foreign investment?
Dolapo Kukoyi: Foreign investment – I would say that investors are well incentivised. Our foreign exchange laws and regulations allow for foreign investors to repatriate their capital, our company law is also set up such that investors are actually able to own 100 percent of a Nigerian subsidiary or a Nigerian business.

Coming down to PPPs: first of all, the Infrastructure Concession Regulatory Commission, for example: it totally prohibits expropriation, which is the major, major concern for a new investor who is actually making an investment in countries like Nigeria or in Africa. And we now begin to see more to encourage investment; we begin to see that a lot of our agreements are looking a lot more at risk allocation, which is so static in current investment. And I’ll give you a few examples.

But in terms of the opportunities: the opportunities are ripe

In the power sector for example, you’d find that performance agreements: things like expropriation are actually events of default, or sometimes what we call local political force majeure. Expropriation is defined so that it’s not just the usual expropriation, but some things which could be termed expropriation. And in the event that there’s an expropriation, you’d actually have the private parties being compensated.

So I would say that right now, they’re well incentivised.

World Finance: How well developed is Nigeria’s infrastructure, and where are the main investment opportunities?
Dolapo Kukoyi: It’s clear that there’s currently a dearth of infrastructure. And this is across oil and gas, across power, bridges, transportation, even when you talk about health, education and housing. So there is obviously a dearth of infrastructure.

But in terms of the opportunities: the opportunities are ripe. But I think what’s most important is that when an investor is looking to invest in Nigeria, you need to look at where governments’ priorities are, and then be able to do a needs analysis on that basis.

World Finance: Security is of course a challenge in Nigeria; what challenges does this pose for your clients, and what advice do you offer in this department?
Dolapo Kukoyi: There is obviously a security problem, but I would say however that it’s predominantly in the south-eastern part, or the north-eastern part, of Nigeria.

That said, for everyone who’s investing in Nigeria… if you’re doing portfolio investment for example, I would say there’s really no risk. But if you’re actually investing in an operating business in Nigeria, then I would say investors need to look at where they’re investing, look at what risks exist, and then look at ways of mitigating those risks.

There are some things that you need to think about, that are key. One is choosing the right partners. And two is choosing the right professional advice; you know, advisors to help you navigate through the issues.

World Finance: You actually head Detail’s power practice; what does your firm offer in this area, and how established is the power sector in Nigeria?
Dolapo Kukoyi: The power sector in Nigeria is growing; it’s growing very, very quickly. And that’s because we are trying to get somewhere in a very short time, because we need to get somewhere in a very short time.

We offer advice around power sector development. So whether it is an IPP startup, or first of all the power sector privatisations which we’ve been involved in since 2010, since it was restarted. So we’ve been involved in the PCM privatisation; we are also currently involved in the privatisation of what we call the Nigerian integrated power projects.

We also do a lot of gas supply and gas transposition and gas purchase agreements. We also deal with the financing side and financing. So while we are on the project development side, we are also on the financing side as well, throughout the whole value chain.

And we’ve become known, very well known, for our power sector experience, and our power sector knowledge. So much so that as a testimony to that, we recently got engaged on the CBN intervention fund, which is about NGN 213bn, which is supposed to be across the power sector value chain. There’s been debt accruing in the power sector value chain, which needs to basically be dealt with so that we can have a power sector that’s viable, and can have proper investment in there.

It’s very interesting times for us at the firm.

World Finance: Looking to the future now, and how do you see Nigeria’s power and infrastructure sectors developing?
Dolapo Kukoyi: For me it’s very bright; the first thing that the present administration has done is that they’ve actually done what everybody else has been afraid to do. Which is privatise generation and distribution, and in the process also privatised to some extent our transmission.

So right now there’s a lot that is going on. The generation companies, which have been privatised now, are trying to overhaul their assets to make them more productive. The distribution companies are also trying to overhaul their assets and refurbish their assets. Also looking at how more private sector players can come in to invest in gas supply and gas infrastructure.

I would say that a lot is going on, with all the moving parts going on. We are likely to see exponential growth in our power generation, in our distribution, in our transmission.