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An Application of Cost Benefit Appraisal Technique in Sustainable Urban Infrastructure Provision in Nigeria

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By Dr. Francis P. Udoudoh and Dr. Michael G. Oladoku

Faculty of Environmental Studies
University of Uyo

Uyo, Akwa-Ibom State, Nigeria


ABSTRACT

Cost benefit analysis is an appraisal technique used in assessing the desirability of an urban infrastructure investment which is likely to have an impact on the people. It emphasizes the economic efficiency in resource use for the project development to better the lives of the people. The research focuses on how Cost Benefit Appraisal technique can be applied in urban infrastructure provision in Nigeria. Data were collected to determine if the amount of public funds incurred in the provision of urban infrastructure equates the benefits derived by the users from such projects. To achieve the aim of the study, several appraisal techniques were studied, including social cost benefit analysis, planning balance sheet analysis, development balance sheet, urban threshold analysis and goal achievement matrix (GAM). This research uses a modified GAM to evaluate the development of urban infrastructure in terms of achievement or non-achievement of set objectives to the users. The result indicated that the distribution of urban infrastructure and tariff are reasonable; while adequacy and quality, regularity of supplied, maintenance of provided infrastructure, among other variables studied were not achieved. In all, the costs of providing the infrastructure outweighed the benefits to the people. The research concluded by recommending that appropriate investment appraisal should be carried out before embarking on urban infrastructure provision

KEYWORDS: Appraisal Technique; Economic Efficiency; Investment; Urban Infrastructure;     Sustainability.

  1. INTRODUCTION

Cost benefit analysis is an appraisal technique used in assessing the desirability of an investment or project, which is likely to have an impact on a group of people or the entire community (Udechukwu, 2006). It is used on projects with both quantitative and qualitative implications, thus mainly applied in the appraisal of public sector related projects with social, economic, financial or political implication. Certain aspects of urban development process requires more funds than others, thus the need to carry out investment appraisal that would guide in taking decisions to either embark or reject such proposals. Project evaluation techniques of a more sophisticated nature are normally applied to urban development projects. According to Barlowe (1978), the decision making process in this case is usually guided by public investment criteria and by private desires for the maximization of returns. An ideal investor embarks on projects that promise more benefits above costs, meaning that such projects should have the potential to pay for itself

The documentary application of cost benefit appraisal technique to public infrastructure has been traced to France with Dupuit’s paper on the utility of public works which appeared in 1844. In the United Kingdom, CBA applications was largely transportation based, starting with the MI motorway project in the 1960s and the closure of rail routes; and was applied in the 1970s to the Channel Tunnel proposals, Third London Airport and road bridges over the River Tay and Severns. Studies have also been made on its application on road development and railways (Umeh, 1977; Hanley and Spash, 1993). The application of Cost Benefit Analysis to proposals for Town Planning and Urban Redevelopment projects was pioneered by Lichfield (1974), evaluation of water resource development project proposed for public funding in the United States of America (Barlowe, 1978) and other categories of land use decisions (Kehinde-George, 1999). This research is hoped to underscore the rationale for Nigerian government to follow the developed countries in appraising the relationship between costs of projects and the expected benefits before embarking on any projects. So much public funds have been sunk into unviable projects or projects that have not impacted positively on the public over the years.

This research is justified on recognition that cost-benefit analysis provides a leading appraisal technique that can be applied to evaluate economic prospects of urban infrastructure proposals vis-a-vis development. It is designed to provide a guide for effective use of the required economic resource to produce goods and services to satisfy human wants. Cost benefit analysis emphasizes economic efficiency in resource use. To achieve this, several appraisal stages must be conducted. Though many analysts will disagree on the identification and essence of some stages, the listed structure provides a guide to the analysis. Hanley and Spash (1993) list the essential steps to include: defining the projects, identifying impacts which are economically relevant, physically quantifying impacts, calculating a monetary valuation, discounting, weighting and sensitivity analysis. The steps to be adopted depend on the type and extent of the project

The main trust of this research is to study how Cost Benefit Appraisal technique can be applied in urban infrastructure provision in Nigeria, while the objective is to critically analyze the cost and benefit of such infrastructure to the funding organization and the users using appropriate appraisal techniques.

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About the Authors

pmwj38-Sep2015-Udoudoh-PHOTO1Dr. Francis P. Udoudoh

Head of Department of Estate Management,
University of Uyo
Uyo, Akwa-Ibom State, Nigeria

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Dr. Francis P. Udoudoh attended Regina Coeli College, Essene and Methodist Secondary School, Ette, both in Ikot Abasi Local Government Area of Akwa Ibom State, Nigeria. He proceeded to the Polytechnic, Calabar, now Cross Rivers University of Technology, Calabar where he read Town and Regional Planning. He thereafter, attended the prestigious University of Nigeria, Enugu Campus to study Estate Management and graduated with the BSc in 1990, MSc in 2006, and PhD in 2014. Currently, Francis is a Senior Lecturer and Head of Department of Estate Management, University of Uyo, Nigeria. He has published his research output in both local and foreign academic journals. Dr Udoudoh is a Registered Estate Surveyor and Valuer and can be contacted at [email protected].

 

pmwj38-Sep2015-Udoudoh-PHOTO2 OLADOKUNDr. Michael G. Oladoku

University of Uyo,
Uyo, Akwa-Ibom State, Nigeria

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Dr. Michael G. Oladokun is a Senior Lecturer in the Department of Building, Faculty of Environmental Studies, University of Uyo, Nigeria. He holds a Bachelor of Science Honours degree in Building from the Obafemi Awolowo University, Ile-Ife, Master of Science in Construction Management from the University of Lagos, Nigeria, and Doctor of Philosophy in Construction from the Heriot-Watt University, Edinburgh, United Kingdom. Before joining academia in 2008, Michael worked in a number of construction companies under varied roles like Senior Project Engineer, Building/Civil Engineer, etc., where he was deeply involved in a number high profile construction projects. His research output are published in high impact academic/professional journals and in refereed conference proceedings. He has research interest in sustainability issues in the built environment, modelling complex systems in the built environment, and system dynamics applications to construction. Michael is licensed to practice as Registered Builder by the Council of Registered Builders of Nigeria and can be contacted at [email protected]