PPP Revives Nigeria Airport

1. PPP
The Aviation Sector
In Nigeria
Revives

2. Domestic terminal of Muritala
Muhammed Airport, Lagos
Nigeria
TYPE OF PPP CONCESSION:
BUILD, OPERATE AND TRANSFER (BOT)

3. The project was to design, construct and operate a new domestic terminal and
ancillary facilities as a result of the destruction of the domestic terminal by
fire in 2000.
The new terminal, Murtala Muhammed Airport Two (MMA2), has a land
area of 20,000m2 and comprises a terminal building, a multi-storey car park,
and an apron.

4. The PPP procurement in Nigeria is regulated by
the following legislations
The Infrastructure Concession Regulatory
Commission (ICRC) Act 2005
The Public Procurement Act 2007
.
Legal Framework

5. Value for money analysis
The VFM method adopted was simply comparing the estimated cost of
implementing the PPP under Public Procurement with that of the private sector

6. In 2003, the Federal Ministry of Aviation advertised for bids for the project, and
after an evaluation process, Royal Sanderton Ventures Limited emerged as the
preferred bidder, while Bi Courtney Limited was the reserved bidder. Royal
Sanderton was awarded the contract.
Six months into the implementation phase, there was no significant construction
activities on ground, the government decided to revoke the contract signed with
Sanderton.
After necessary negotiations, the contract was awarded to Bi Courtney, the
reserved bidder.
The contract duration was initially for 12 years, and subsequently extended to 36
years through an addendum signed between the Federal Airports Authority of
Nigeria (FAAN) and Bi Courtney.
Bid Preparation

7. Allocation of Risks
The plan completely transferred all development and
operating risks to Bi Courtney Ltd .
The federal Government was to provide security at the
airport terminal
Bi Courtney was given the guarantee of first right of
consideration, if FAAN and the federal government elect
to build a new domestic terminal in Lagos state

8. PROCUREMENT AGENCY: Federal Airport Authority of
Nigeria
BIDDERS: Royal Sandeson Ventures Ltd.
Bi- Courtney Ltd.
SELECTED BIDDER: Bi- Courtney Limited
DURATION OF CONTRACT: 36 years
ESTIMATED COST OF
PROJECT:
US 200M

9. The Project was Part-financed by a Consortium of six
banks: Oceanic Bank International Plc, Zenith Bank Plc,
GT Bank Plc, First Bank Plc, First City Monument Bank
Plc and Access Bank Plc to the tune of $150m,in addition
to equity of the owner/proprietor.

10. The concessionaire regains his investment through charges for
the services provided in the terminal:
 Payment by airlines for terminal services
 Payment for car park services
 Payment for advertisement in the terminal
 Payment by shops and restaurants
Payment Mechanism

11.  MMA2 was the first major BOT infrastructure project to be completed by
a Nigerian company without ext ernal finance
 The project had been successfully completed
 The project boasts of the first and the largest Multi storey car pack in
Lagos
 The terminal also boasts of a fully equipped clinic that is open to all
terminal users, and handles over 50 flights daily

12.  There was initial paucity of fund had ,the company had to start
construction without a long-term financing agreement in place.
 In March 2007 secured a US$150m part-financing from a
consortium of six banks for the completion of MMA2
 Some airlines were reluctant to move from the international
terminal.
 FAAN reopened the old terminal General Aviation Terminal (GAT)
for some airlines because the apron at MMA2 was not able to
accommodate the growth in domestic services;
 There were disputes by the parties and claims of breach
of contractual right

13.  The importance of having an agreed financial model and long term
financing in place at the outset of the project;
 The initial bidding process also points to the importance of
managing politicians’ expectations and setting realistic goals regarding
timelines;

 Revoking a contract and re-awarding it to a different company not
only delayed the project but also triggered doubts in private
participants’ minds about whether such changes were spurred by
political rather than economic issues;

14. The difficulty of enforcing contractual agreements (e.g. while the
contract has a clause assuring that all scheduled domestic flights in
and out of FAAN’s airports in Lagos shall operate from the new
terminal during the concession period, FAAN continues to operate the
old domestic terminal,
Any conflict of interest faced by the Government puts significant
pressures on the ability of the private sponsor to recover its
investments and thus placed the financial viability of the project at
risk.

17.  ICRC PPP Toolkit
 Invest On line . Com
 Airport technology .com
 World Bank PPIAF Reference Guide
 Bi Courtney Aviation Services Ltd
 http://www.mma2.com.ng/about
 Framework Note PPP Nigeria www.tremolet.com
 Legal Framework of PPP Nigeria
www.dejure.up.ac.za/.
References