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The story of Bi-Courtney on Lagos/Ibadan Expressway is the story of how not to do business. Bi-Courtney is not the best qualified to handle the concession of the 120km road but Wale Babalakin used his political connection and closeness to the then President Obasanjo to clinch the deal.
Of course one would expect that upon getting the deal the owners of Bi-Courtney will see the wonderful opportunity in the deal and clean up their acts to make sure that they deliver on the road and benefit from the reward while Nigerians enjoy commuting on a very good road compared to any similar Trunk A road in Europe or even South Africa. The road is one of the most important roads in Nigeria. Lagos/ Ibadan Expressroad records an average of 500,000 vehicular traffic daily going to almost all the 36 states of the federation and Abuja from Lagos excluding the RCCG and MFM camp days when the vehicular traffic could double or triple. At N100 toll that’s about N50m toll revenue daily in a worst case scenario. There are supposed to be 2 or more tolls on the road and weigh bridges that the trucks will pay for. In a year Bi-Courtney would be collecting an average of about N18billion as toll not to talk of other revenues including advert revenue and the real estate opportunities, malls, parks etc planned for the road. This huge revenue will be collected that for 20 years out of the 25 years concession period. The construction period is to be for 4 to 5 years. It is therefore a no brainer for banks. The project economics is very good and bankable. The expectation is that all banks will be falling over each other to be a part of the transaction.
They (Bi-Courtney) got a very good deal but Wale Babalakin through greed, bad reputation and track record messed it up. The evil that men do lives after them. The man is in court with almost all the banks in Nigeria that have borrowed him money and he could not get the local banks to support the project. When he was messing up with banks he did not foresee tomorrow. The foreign banks he approached needed a couple of local banks to be a part of the financing structure or at least guarantee it because they can’t be here collecting cash. They would need the local banks as local administrative agents. For this reason, Bi-Courtney has been struggling to raise debt to finance this cash flow rich project. Bi-Courtney engaged Rand Merchant Bank of South Africa as advisers and arrangers. Rand Merchant Bank wanted to do a syndication of the debt. They could not make progress because of the reputation of Wale Babalakin as a cantankerous business man who will go to court to avoid paying debts. The cost of fixing the road is projected to be about $400m which he would have recovered and paid back in 5 to 7 years. He would have 15 years to be collecting an average of N18billion yearly as toll revenue on that road.
It is also alleged that some people approached Babalakin for a Joint Venture on the project and use their name to borrow but he refused. The governments of Lagos, Ogun and Oyo States also approached him to see how the problem could be solved but his arrogance and greed killed any remedial opportunity.
Babalakin felt his political connection will make him to hold on to the deal in perpetuity not minding the number of people that die on the road daily and the agony road users go through. You can’t imagine the number of people that have died on that road and the trauma it gives people. Yet the greedy man has the guts to be asking for damages from Federal Government. President Jonathan has given him a long rope and his patience has been exhausted. The President is not un-mindful of the bad state of the road and the risk to lives. The President has also shown clearly that he can take difficult decisions and ruffle feathers no matter whose ox is gored. Withdrawing the concession from Bi-Courtney is the best decision. It would however have been better if it is concessioned to more serious minded companies because I’m not sure the Federal Government has the money or budgeted for it in the 2013 appropriation bill. Its not clear if FG’s intention is for julius Berger and RCC to just rehabilitate the road and make it better or if it is to completely reconstruct it.
It will be better for the road to be concessioned so that FG does not have to worry about its maintenance. That’s the practice everywhere in the world. And that is the only way we can be guaranteed a road that will always be a pleasure to travel on. Kudos to Mr President on this.
