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The funding pattern of the land swap project is designed in a way to ensure that projects would be completed on schedule
One of the beauties of the land swap programme is the dynamic financial solution it offers to all the stakeholders – the government, the subscribers and the investors. The structure of the total project cost consists of the construction cost, financing cost, professional fees, resident supervision cost, 12 months’ operating cost, resettlement and compensation cost and return on investment.
The approved funding structure of the land swap project is both developer friendly and yet protective of the government and subscribers. Under the land swap framework, the implementation of the project is funded 100 per cent by the private sector; no single kobo was budgeted by government for the programme.
However, the FCTA recognises that the projects are capital intensive. Though the selected 15 investors for phase one are competent, government felt it would be very difficult for an investor to fund the development of a district 100 per cent. It requires about N32 billion to develop a district. Mindful of the international best practices in the execution of such projects, the primary investor is seen as a promoter who should attract appropriate secondary investors to invest in specific components of the project. This brings in more funds and expertise, and also minimises risks of project failure.
Consequently, the funding structure of the projects must be according to the following approved ratio:
- Debt – 50 per cent
- Equity – 15 per cent
- Off-plan sales – 35 per cent
The investors are required to provide N350 million for the execution of the technical works. The administration of this fund was cleverly designed to build confidence in the investors. Unlike what is the norm, the N350 million provided by the investors for technical works are neither paid into the FCTA account nor that of any of its agencies; rather, the money is controlled by the investors who are the signatories to the account.
“The main reason for this structure is because it is at the proposal stage and FCTA is only helping investors to come up with acceptable proposals that meet the technical standards of FCDA,” explained Faruk Sani, coordinator of Abuja Infrastructure Investment Centre, AIIC.
The N350 million commitment fund for preliminary technical works is further structured into four subheads:
- Engineering services – N200 million
- Planning services – N50 million
- Survey & Mapping – N50 million
- Miscellaneous – N50 million
Miscellaneous covers expenses for demographic survey for resettlement and compensation, meetings, legal services, financial services, media and publicity and other ancillary services. In the course of the implementation, media and publicity and community relations proved very demanding and this led to the amendment of the budget heads to reflect this realty:
- Engineering services – N185 million
- Planning services – 45 million
- Survey & Mapping – 45 million
- Community relations, media & publicity – 25 million
- Miscellaneous – 50 million
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On why AIIC allowed the primary investors to keep the N350 million commitment fund for preliminary technical works, Sani explained that, “The Honourable Minister had made it clear in the beginning that he wanted utmost transparency in the implementation of the land swap programme. We therefore calculated what each investor would pay and required them to pay the supervising directly.”
For payments to coordinating consultants and other service consultants who expect their payments from all the investors, they paid the money into the Land Swap Contributory Fund Account under AIIC for transmission to the beneficiaries. The FCDA further structured the consultancy fees to be 30 per cent of normal district consultancy fees for supervising consultants and 20 per cent of supervising consultant fees for the coordinating consultants.
To further ensure the integrity of the process and achieve the aims and objectives of the policy, the FCTA gave basic conditions to keep the investors in check. The investors shall not commence any sale or property development until at least 35 per cent of functional infrastructure work is achieved. This guarantees that the investors bring in the expected funds and not leverage on the subscribers to develop the districts. In addition, the land titles are released based on interim measured works. The investor must also provide at least 15 per cent of infrastructure cost as condition for the effectiveness of the development agreement with the FCTA. This funding structure ensures all the necessary checks and balances.
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