Nigeria Signs MoU – Triple P For Port Harcourt–Enugu–Calabar–Abuja Standard Gauge Line

As part of the initiative to consolidate the ongoing railway modernization projects consistent with the Renewed Hope Agenda of Presidential Bola Ahmed Tinubu’s Administration, the Minister of Transportation, Senator Said Ahmed Alkali has executed a Memorandum of Understanding (MoU) on behalf of the Federal Ministry of Transportation with Messrs MPH Rail Development (UK) Limited to enable the Company carry out the design, construction, commissioning, operation and transfer of the PortHarcourt–Enugu–Calabar–Abuja Standard Gauge Rail Line on Public – Private Partnership basis.

This memorandum is the first of its kind executed by the Minister in the company of the Permanent Secretary of the Ministry, Olufemi Oloruntola, the Director Rail Development, Engr. Zirra Fimbarr, the Director Legal Services, Pius Oteh and the Management of the Company, under Bola Ahmed Tinubu’s administration which prioritises the provision of efficient transportation in its “Renewed Hope” agenda.

The memorandum was executed following the approval of the Outline Business Case and issuance of a compliance certificate by the Infrastructure, Concession and Regulatory Commission (ICRC).

This development will enable the Company to concentrate on preparing relevant documents to support a request for approval of the Federal Executive Council to execute the project.

The documents that are necessarily needed in furtherance of this initiative include a comprehensive feasibility studies report, the development of a full Business Case Study, Environmental and Social Impact Assessment, the Production of a Resettlement Action Plan, the design of a Financial Model to execute the project and subsequent transfer to the Federal Government on PPP basis subject to 100% funding with no loan or debt for or against the Nigerian government or any of its agencies.

The project represents a landmark achievement for the Tinubu-led administration, which seeks to provide effective, efficient, affordable and sustainable rail transportation in Nigeria.

In his closing remarks during the MoU signing ceremony, the Honourable Minister of Transportation assured the investors of the Ministry’s support to ensure the successful execution of the project. He also urged them to ensure diligent production and submission of all relevant documents that will facilitate the grant of FEC’s approval.

In a follow-up clarification released by the Federal Ministry of Transport Nigeria, it is noted that:

For clarity, a memorandum of understanding, or MOU, is a non-binding agreement that states each party’s intentions to take action, conduct a business transaction, or form a new partnership. It is not a legally binding agreement. It provides only a platform for further engagement, discussion, scrutiny, and the provision of required guarantees by the parties to reach an agreement if they are satisfied.

The MoU in question arose from an unsolicited proposal presented by the British African Business Alliance (BABA), an Association based in the United Kingdom with an interest in business in Africa. Its proposal was initially submitted to the Ministry on 27th August 2019.

As required, the proposal (Outline Business Case) was submitted to the Infrastructure Concession and Regulatory Commission (ICRC) on 8th December 2023. The major attraction of the proposal is BABA/MPH’s initiative to achieve 100% private sector funding for the project ‘with no loans or debt to the Nigerian Government or any of its agencies’, as captured in Article 3.3 of the MoU. The Regulatory Commission on 27th December, 2023 granted approval and issued a conditional OBC Certification. It is pertinent to note at this juncture, that COVID-19 was a major contributor to the time lag between initial proposal and the ICRC OBC Certification.

Messrs. MPH Rail Development (UK), is the company incorporated by BABA, as the Special Purpose Vehicle (SPV) to ‘deliver’ the project. It must be emphasized that a Company to be used for such a purpose is usually new with nominal shareholding to allow for stakeholding by parties to the project at the investment stage.

For the avoidance of doubt, the following are the major terms of the MoU:

• The primary purpose of the MOU, is to provide a platform for further discussion between parties to ascertain the possibility of executing the project or otherwise. It does not create a legal or contractual agreement neither did it commit the Federal government in any way;
• Article 3.3 of the MoU affirmed that BABA/MPH’s initiative is to achieve 100% private sector funding for the project ‘with no loans or debt to the Nigerian Government or any of its agencies’;
• A fundamental deliverable under the MoU is for MPH to design a funding and implementation model and submit same to the Ministry within 90 days of the MoU for further consideration and scrutiny;
• MPH, within the above-stated 90 days period will equally submit its Programme of Action to demonstrate its achievement of all the preconditions highlighted by ICRC, before further engagement with Government; and
• The MoU also sets up a bilateral Technical Committee to monitor the Company’s commitment towards achieving the above milestones and ensuring that the project objectives are well within sight.

The Ministry therefore considers it expedient to put out this Statement to reaffirm as follows:

1. This initiative is still at its preliminary stage. As the proponent, MPH is expected to submit within 90 days of the signing of the MoU evidence of commitment by potential financiers, an Environmental and Social Impact Assessment Report, a Financial Model and Programme of Action, a Full Business Case Study Report, and a Comprehensive Feasibility Study Report;
2. It is the submission of the above-listed documents and the outcome of their evaluation that will determine the desirability or otherwise of the proposal;
3. ICRC as the Regulator of PPP is fully and duly in charge of the oversight of this process;
4. The MoU therefore constitute only the beginning of a long process that will lead to the project after due diligence and scrutiny by the Ministry and other appropriate authorities; and
5. The nascent and nominal share value of the SPV company (Messrs. MPH Rail Development) does not diminish the plausibility of the business proposal at this early stage.