Public-Private Partnership (PPP) In Nigeria: A Game Theoretic Conjecture of Low-Level Equilibrium in the Power Industry

Abstract

Given the strategic nature of the relationship between government (state) and the private agents in the provision of electricity infrastructure in Nigeria under a public-private partnership (PPP) framework, a game theoretic framework was used to analyze the economic outcome from the relationship existing between them. Based on the game, as far as the government was able to commit the private agent to staying into the PPP agreement, the private and government returns to capital were in equilibrium and maximized at 19½%. But when the private agent is able to undercut the PPP agreement, he will earn the double (26%) of what the government gets (13%) as the returns on capital. The disequilibrium worsens when government lacked capacity to monitor their private counterpart. When such situation persists, the private earns 78% return on capital while the government’s share will decline to a paltry 3¼%. These outcomes suggest that PPP projects in Nigeria as currently operated maximizes private benefit than the social welfare of the citizenry and represents a contributory factor for the low-level of per capita energy equilibrium.