Road concession will reduce insecurity, improve productivity, says Rewane

Bismarck Rewane, managing director of Financial Derivatives Company Limited, says the concession of Nigeria’s major roads in poor condition will reduce insecurity, and boost productivity.

Rewane, an economist and member of the highway development and management initiative (HDMI), spoke on Channels Television’s Business Morning show on Monday.

The HDMI is a federal government initiative designed to attract sustainable investment and funding for road infrastructure development and asset management along federal highway corridors through a public-private partnership (PPP) model.

According to the economist, the initiative allows the government to step back so that the private sector can put money into the roads and achieve maximum productivity.

He highlighted several benefits of the initiative, including lower cost of transportation, improved security, economic growth and productivity and inflation control.

“Kidnapping is low, productivity increase, the cost of transportation which reflects in the prices of goods. So, you would now see the prices of goods begin to come down,” Rewane said.

“Inflation is defined as the persistent increase in prices because of low productivity and an increase in money supply. So, we can take out the money supply by using the MPR (monetary policy rate) and the central bank but the persistent cause of inflation in the country is a reduction in productivity.

“Why is productivity reduced? Because when goods are produced, they cannot get to the market and there are post-harvest losses.

“So you will now begin to see the difference between rural and urban inflation, which are usually reflecting because the roads are bad, because of the post-harvest losses, and the price of petrol which was high.

“So, we have all these three factors leading to a reduction in inflation and when inflation reduces, your exchange rate begins to strengthen.”

’WELL-MAINTAINED ROAD WILL LOWER TRANSPORTATION COSTS’

The economist explained that the government spends trillions of naira annually on road maintenance, yet the results are poor due to infrequent repairs, and financial leakages.

Rewane added that road maintenance often causes major traffic disruptions, which he described as a major disaster.

“But now, when you concession the road to somebody that spends maybe N100bn or N200bn, and guards it with drone technology and central reservation and high barriers, only three or four outlets to get out of the way, it means that you cannot be kidnapped,” he said

“So, it means that when the road is well-built, well-paved, well-maintained, with tolls within, you enjoy greater efficiency and lower costs.”

The economist said the government grants 25 years concession to private operators, who then invest money into developing and maintaining the roads.

He said under this model, the private concessionaire collects tolls while remitting a percentage of revenue to the federal and state governments.

Rewane said it reduces government expenditure on road maintenance, freeing up funds for other critical sectors like healthcare and education.