A Practical Review of Mechanism Design: How Implementable is it Within the Nigerian Context? Investigating the Role of PPP on Social Outcomes in Nigeria

According to statistics of the Federal Ministry of Works Nigeria (2012), total road network in Nigeria currently stands at approximately 195,000 Kilometers, with the Federal, State and Local Governments responsible for 22, 21 and 51 percent of this network respectively. In another report, The Central Bank of Nigeria (2011) also states that Nigeria needs to invest at least 100 billion dollars on roads in the next ten years. This study explores how social needs are realized within the public private participation (PPP) scheme in Nigeria. The study also situates public private partnership, in the Nigerian procurement and project operation context. The study’s objectives are achieved by revisiting the mechanism design paradigm (through reviewing the historical evolution of Public Private Partnerships (PPPs) in Nigeria) and its impact on social goals as developed by Tirole and Maskin (2008), within the Nigerian context. Data on credit provided to the private sector as a percentage of GDP were used as proxies for PPP involvement from 1960 to 2010 although some years of data were missing. The method of estimation used included ordinary least squares, linear mixed effects models and seemingly unrelated regression estimation methods, which all allow for the investigation of relationships between a set of unrelated weakly exogenous variables, with the mixed effect method particularly suitable for iterative optimization processes. The findings show that cost implication concerns and the choice of the social function has an effect on PPP. It was also found that the electoral process which determines the social function mattered in the project selection stage and had significant effect on the PPP formation process