The Lagos state government awarded a contract for rehabilitation and upgrade of approximately 50km Lekki-Epe Expressway to Lekki Concession Company Limited (LCC). The project, which will be executed under as Public-Private Partnership (PPP), also grants LCC a 30-year concession. LCC will build the infrastructure, operate it for 30 years and later transfer it to the Lagos state government. This model in PPP lingua is known as Build, Operate and Transfer (BOT). Like most PPP, this project is being funded through private finance, which means LCC will be charging tolls on the road in order to recover its costs and make a decent profit.

It was however reported last week that communities bordering the stretch of Lekki-Epe Expressway in the Eti-Osa council area that is to be subjected to tolls rose up in arms against the plan, protesting what they deem to be unfair financial burden on the residents. The issue according to the representatives of the groups is that two of the three proposed toll gates would be located in Eti-Osa, thereby subjecting residents in the area to payment of tolls each time they needed to leave their homes.

The toll road sector is evolving rapidly and has become increasingly global, as entities with the expertise to build, operate, maintain, and finance these facilities have lent their services across international boundaries. LCC for example is a ‘special purpose vehicle’ set up by a group of Nigerian and South African companies. Proponents of toll roads believe that the private sector can bring a level of competition and efficiency that can benefit road project development and operations.

Toll road financing, construction, revenue generation, and operation can be undertaken through several organisational structures and frameworks. Revenues can be generated through traditional ‘direct user’ charges, in which motorists using the facility pay a toll, or through third-party payments. Third-party payments are typically from a public sector sponsor to a private sector concessionaire, either in the form of shadow toll payments based on facility usage or availability payments based on the concessionaire's ability to meet certain performance benchmarks. With regards to the Lekki-Epe project traditional ‘direct user’ charging regime will be employed. Under this system, a vehicle makes a payment via cash or an electronic method for the use of the road facility.

On face value, the Lekki-Epe project PPP delivery mechanism seems laudable, as it has facilitated the delivery of a key transport infrastructure. But from a technical perspective, I find it hard to understand the rationale behind PPP arrangements and hence share local residents’ concern.

It is inevitable that these tolls will have a huge impact on local road users. Experience as shown that private toll operators have had greater success at regularly imposing toll rate hikes in order to maximize their profit. The management of toll operating companies are also less concerned about the political or social implications of such price hikes. When concessions are initially granted, toll rates tend to be lower than revenue maximisation levels. Nevertheless, once under concessionaire control, toll rates will likely increase to maximum economic or legal revenue levels.

Tolling of Lekki-Epe expressway is not anyway appropriate. Why will the Lagos state government enter into a PPP contract that will allow tolling on a strategic road, in an area without an alternative road access or decent public transport system?  It’s been reported that three tolling booths are proposed on the road corridor at Maroko, Sangotedo and Epe. If that’s case, the question needs to be asked about the concessionaire tolling strategy. Is the toll being targeted towards local traffic or long distance travellers? Why should a local resident making a short trip between Sangotedo and Ajah be subjected to a toll, in the absence of an alternative road access?  Compelling local residents to payment of roads in the absence of an alternative raises serious equity issues. This makes the concessionaire (LCC) a monopoly service provider, and therefore will create a serious distortion in the market.

As we all know, the Lekki-Epe corridor is one of the fastest growing corridors in terms of urbanisation. The road is only link between towns along the Lekki axis and Victoria Island. The govt has allowed intensification of development along this corridor to perpetuate over the years without a long term strategy of how it will provide key infrastructure.  Instead of the government to grapple with this issue, it has decided to hand it over to the private sector. The toll will have a massive impact on local residents, some of whom are currently struggling with everyday life. The lack of alternative road access can only result in the concessionaire making a ‘killing’ out of this project in terms of financial returns. It would have been more appropriate if the private sector is encouraged to finance the construction of a ‘bypass’, which can then be tolled accordingly. Road users who value their time and do not want to be stuck in traffic will use the bypass but at a premium.

However, if the government feels a desperate need for a PPP, a better approach could have been through ‘shadow tolls’. Whereby a private contractor receives payments over time for the successful construction and operation of the facility from a public sponsor, and the user is not responsible for a payment. The amount of such payment will be a function of a theoretical toll rate per vehicle with revenue minimums and maximums. This funding method is appropriate in this situation where there is, lack of alternative free roads, and likely community backlash, which could arise with direct user charging.

Whilst I agree that Lekki-Epe Expressway is a critical transport infrastructure that is in dire need of rehabilitation and upgrade, I do not agree that the way and manner the contract has been executed is appropriate. For me, it is one of two things. It’s either there’s been ‘foul’ play in the award of contract or an error of judgment on the part of Lagos State Government. I however want to believe it is the latter rather than the former.

Whatever be the reason, it is high-time some of the PPP contracts signed by the government (either Federal or State) come under scrutiny. PPP should be aimed at delivering ‘value for money’. Prior to entering into PPP contracts, the government should endeavour to assess infrastructure projects against a ‘public sector comparator’, as part of project appraisal. This should determine if the most cost-effective way of delivery is through a PPP. It is likely that sometimes, that certain projects could be delivered cheaper by the public sector.

The ideal thing would be to embark on the alternative road. The lagos state govt is supposedly going to provide this. I doubt it since they should have started building the alternative route prior to the completion of the expressway.
Tolling is a good idea. The only thing is that it should not be mandatory. It should be optional.
It should be such that you choose to take the slow traffic-ridden alternative route or pay the toll and get fast access to your destination.
I believe they can take a que from the Sam houston freeway in Houston.
The idea that commuters would have to pay tolls "twice" before getting to VGC may not go down well.
Sure, the people that live in VGC are rich, but then the fees add up.
I don't see the toll being anything less than N200 naira. It'll probably be closer to 500 bucks.
Imagine paying N800 naira minimum just to leave ur home everyday from VGC to ozumba mbadiwe.
They'll probably initiate the "easypass" system as well but even that will cost you at least 500 bucks daily.

Probably N500 to N1000 a day depending how far along the road you live as you might encounter their 3 tolls everyday. Considering a good number of car owners there will have to travel to work in VI, Eko, Ikoyi etc everyday (with no alternative but to take this road and pay this TAX!) and that's even before you fuel your car. Fashola na correct governor