The 4th Mainland Bridge in Lagos: What Has Gone Wrong and Why

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Tuesday, January 14, 2020 / 11:42 AM /  OpEd By Feyi Fawehinmi / Header Image Credit:  ECOGRAPHICS

 

Africa Finance Corporation (AFC) were approached by the Pastor Iluyomade who owns a company called Visible Assets, in partnership with Access Bank. An MoU was signed between all these parties and Lagos State Government (LASG) in March 2016 to be valid for six months. The MoU expired in November of the same year with LASG refusing to renew it. On the 23rd of May 2017, LASG indicated that the non-renewal was in fact an affirmative termination of the consortium's development rights.

 

Part of the consortium of Visible Assets was a group called Advanced Engineering Consortium (AEC) who have over the years been extensively engaged by and with LASG and the consortium's strength was leaning (in a slight conflict of interest) on AEC's "technical expertise" as they have done extensive primary work on traffic studies, road layout and route mapping in Lagos and on Visible Assets goodwill with the government.

 

A lack of tangible progress 

There was relatively little progress made during that MOU validity-period contrary to what might have been expected given AEC's extensive consulting for Lagos State.

 

In order to execute the development of this project credibly, there needed to be an incorporation of the core AEC raw-data into studies done by internationally credible organisations such as WPP-ParsonsBrinckerhoff/Mott MacDonald/Royal Haskoning, where AEC could act as the local partner who would "go into the bush" and do the rugged field work - so that the international partner would enhance the AEC work, and bring international engineering rigour and credibility to the entire project. This never happened as the project development funding and agreements never materialised from the core partners and project sponsors.

 

Although they succeeded in getting an in-principle partnership with the AFC, Visible Assets never managed to consummate their financial obligations, or their technical agreements with AEC, and this fatally jeopardised the project.

 

The board of the AFC approved $10m for project development work, their one-third contribution to the project development budget, which had been pegged at a total of about $30m (which meets an international norm of about 2 - 2.5 percent of total project costs). However, because Visible Assets never managed to raise their own share of counter-part funding, that money has remained unspent but available for the project, along with project development managers in London who have been paid around £1.2m already.

 

This funding was important and crucial as, on the technical side, the routing for the bridge had only been done in a preliminary fashion. There still needed to be a proper bathymetric study of the water bed, geo-technical studies and analyses along the proposed route alignment, as well as resettlement planning. Assignment of responsibilities between AEC and LASG had also not been properly agreed.

 

Ultimately what the AFC has is "nothing" in terms of concrete movement for the project. All of the spending and commitments listed above might thus come to nothing given that Access Bank and Visible Assets have never paid up their committed share of $20m. They did claim to have spent about $5.5m but when subject to an independent audit for these project development costs they weren't willing or able to substantiate their figures.

 

Where is it now 

Governor Sanwo-Olu has, in frustration, said he will fund the project from the state's budget to allow him break ground on it. In the 2020 state budget, substantial provision was made for the bridge but the nature of the provision means that it will take 10 years to complete the project given how poor the state's finances currently are.

 

Essentially this is the same route that was taken with the Blue Line rail infrastructure that has led to much trouble and extreme delays. The LASG runs the risk of (another) project that costs 3X what it should because there are serial mobilisations and de-mobilisations without the project ever being fully project financed.

 

There are suggestions that LASG, under former Governor Ambode, made N60bn available for the reticulating roads intended to supply infrastructure for the communities and commuters around the Ajah terminus of the bridge but no one can say for sure where that funding is or if it even exists.

 

The mess that is Visible Assets 

In order to attract third party funding however all of these studies above and the environmental impact assessment (EIA) - algae life, the fauna etc. over two seasons - have to be properly done. Merely having LASEPA - the state environmental protection agency - issue the relevant forms will not suffice. All of this is essential to attract third-party funding and will take a minimum of eight (8) months to raise what will be debt of around $1.2bn for the project.

 

Unfortunately, the Visible Assets and AEC consortium (particularly the good Pastor) couldn't grasp that this was essential to move forward; indeed AEC and Visible Assets had not even seen the necessity of formally consummating the relationship that they had with one another. And so even their own partnership wasn't down in writing or any formal form of documentation, meaning that they were making misrepresentations to the parties and the clients.

 

Because they had no formal agreements, AEC were unwilling to release their valuable information before a formal share had been agreed. And so, most of what they provided the AFC with were just presentations, and not any substantive information.

 

In fact, the first project cost estimate Visible Assets came up with was $4bn and the AFC gave them a "hard pass." At the next meeting they came back with a revised cost of $2bn. Another hard pass. Even at that it was impossible to see a payback without a viability gap funding programme from the State, even with a project-specific bond.

 

They further compounded their problems with a lot of unreasonable behaviour. Visible Assets wanted 60 percent of the project but on a project finance basis; a 70-30 debt to equity split. This would have meant that the equity portion being somewhere in the region of $300m, of which $180m would have had to be paid up. Their unwillingness to dilute themselves from what was effectively a fictional stake in the project has seen the whole thing grind to a halt. They further insisted on using their close associates as consultants and lawyers, to the extent that they wouldn't agree upon a draft JDA by any of the reputable firms proposed by AFC. This naturally raised even more suspicions.

 

A way forward? 

Given that much of the crucial data already exists with AEC (obtained in their role as consultants to the World Bank under the Lagos State Transport Strategy Mapping excercise), it might be prudent for any plans to save the project to begin with them. There is of course the added advantage that they know the inner workings of LASG quite well and are well connected there.

 

Following best practice, the next step would be to launch an international tender looking specifically for parties and developers to fund the project to take it to financial close, while mandating a local content proportion of around 40 -60 percent of the project development group. A joint venture agreement that pays for the AEC data and expertise and yields an agreement that settles who owns what and in what proportion might then be the output of such a JV. None of this is too complicated but it has proven beyond the capacity of Visible Assets to execute, so far.

 

Why studies matter 

The proposed bridge is to be located in what is a swampy area with the actual length of the bridge at 1.7 kilometres but the entire area span at 38 kilometres. Thus what is to be built is a kind of deck-on-pile which works like a sort of mini-bridge until you reach the actual bridge i.e you only need to build a bridge to span water for the aforementioned 1.7 kilometres. This goes to why the data and studies are quite important - for instance, a suspended bridge and then evacuating the earth in certain areas and filling other areas with sand might obviate the need for the deck-on-pile and cost less. This is crucial and might mean that the current estimates of up to $1.8m estimated per kilometre could be reduced. The current project estimates are based upon doing the deck-on pile for the entire swamp stretch and taken this approach as a given.

 

There are other questions that need to be answered such as what parts of the area need to be evacuated and compensation paid. The studies have not even been done to that level of detail yet LASG appears determined to proceed without having this information opening it up to costs that later spiral out of control.

 

Other opportunities

If the objective of the 4th Mainland Bridge is to link the Lagos Mainland and Island, then there might even be easier or better opportunities to get the same goal. Starting with Lekki; at the third round about (which used to be the second round about) The access road from there goes to the Lagoon - a bridge from there could go directly to Yaba on the mainland.

 

At the end of this road - recently dualised by HiTech Construction - could be a 8 kilometre bridge to Yaba and might be a higher-value proposition than the 4th Mainland Bridge. 4th Mainland Bridge, as currently planned, is supposed to begin in Ajah, cross Palaver Island and go on to Julius Berger (on the border of Lagos and Ogun states). However, people living in Ajah are unlikely to want to go to Julius Berger before going on to the airport, as an example. Yet the studies done so far indicate that about 50 percent of the potentially eligible traffic would be going to the airport, but Julius Berger takes you almost out of Lagos.

 

The Lekki-Adekunle bridge, however takes one from Lekki directly to Yaba and cuts out VI and Ikoyi to get to Ikeja. A suspended bridge, but for a very short distance, might do the trick and would certainly be financeable.

 

But as of today, nothing can be done either on the 4th Mainland Bridge or any of the alternatives. The fate of Lagos for the foreseeable future thus remains painful traffic gridlock and crumbling infrastructure.

 

 

Credits

The post The 4th Mainland Bridge in Lagos first appeared in Faye & Fraser Briefing Note on Monday, January 13, 2020.  To subscribe and follow click here

  

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