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Frequently Asked questions

    Public-Private Partnerships (PPPs) – What are they?  


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    What is a Public-Private Partnership (PPP)?
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    Basically, a Public-Private Partnership (PPP) is an arrangement between the Government of Lagos State and a private company for provision of infrastructure and services.
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    Are PPPs the same as privatization?
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    No. Privatization is the disposal (usually the outright sale) of assets or functions owned by a government that are not considered a core public function of a government. Once the asset or function has been privatized (or sold), the government has no or very limited further formal relationship with the party who bought it.

    • Who are the ‘partners’ in PPPs?  


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    Who are the partners in a PPP?
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    At the centre of a PPP is a contract signed between a Public Agency (Public Partner) and a private company (Private Partner). The Public Agency is usually the public organization responsible for the infrastructure or services and authorized to sign such a contract. The private partner is usually a company undertaking the project that signs the contract with the Public Agency. Depending on the project specifics, the private company may also bring in separate companies to do the construction, the operation and the maintenance, and in some cases to provide inputs (e.g. water for a water purification facility or coal for a thermal power station). Depending on the project, there may also be formal arrangements with the users of the service (e.g. for electricity an Agency that buys electricity from a power plant). There are often also insurance companies involved providing insurance, as well as financial institutions (e.g. banks). To organize this, the lead company often sets up a Special Purpose Company (SPC), which is a company whose only objective is to undertake the PPP project. The SPC then enters into agreements with all of the other private partners involved. In some cases there may also be a Regulator involved.
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    What kinds of companies are interested in PPPs?
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    Often construction companies are first to respond to PPPs announced by government, since they have been doing traditional government construction projects in the past. As the PPP market develops in a country, it is usual for the local industry to reorganize in response. Specialized project development firms can emerge that are skilled at bringing all the needed partners together to respond to PPP projects. Often construction companies buy up smaller project management firms to enable them to respond to integrated PPP projects.
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    Can the private company in a PPP be foreign, or must it be Nigerian?
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    Foreign firms can respond to PPP projects and become partners in a PPP. However the requirements regarding foreign investment in Nigeria and Lagos State must be followed.
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    Which kinds of financial institutions and investors are usually interested in PPP projects?
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    PPP projects are usually financed by a combination of equity (an investor’s own money) and debt (money usually borrowed from a bank). Equity is often sourced from the companies taking the lead in the PPP, but can include wealthy individual investors or institutional investors (e.g. pension funds). Institutional investors often like PPP projects as they need large amounts of money to be invested with returns over a long period of time. Such projects suit the investment needs of these institutional investors. Banks working alone or more commonly together usually provide loans when projects need debt financing. To finance PPPs, bank loans often need to be large and to have long maturity periods