International Journal of Engineering Science Invention

ISSN (Online): 2319 6734, ISSN (Print): 2319 6726

www.ijesi.org ||Volume 5 Issue 8|| August 2016 || PP.08-14

PPP Bankable Feasibility Study: A Case of Road Infrastructure

Development in North-Central Region of Nigeria
Adamu, Mudi1, Adamu, Fatima Monisola2, and Bioku, J.O3
1

Department of Construction and Surveying, School of Engineering and Built Environment, Glasgow
Caledonian University, G4 OBA
2
Department of Construction and Project Management, Faculty of Science and Engineering, School of
Architecture and Built Environment, University of Wolverhampton, WV1 1LY
3
Department of Estate Management and Valuation, School of Environmental Studies, Federal Polytechnic Idah,
Kogi State Nigeria

Abstract: Adequate and reliable bankable project feasibility study according to Adamuet al. (2015) determines
the private sectors investment interest in a PPP transaction which centers around project demand forecast
taking into account the willingness to pay, inter and intra-model competition, ramp-up effects, and long-term
macro-economic effect and population growth rate. In order to achieve this, WEF (2013) noted that public
sector needs to determine the project technical specifications, and also carry out a detail cost benefit analysis so
as to determine the projects commercial viability to be followed by proactive and professionalized stakeholder
engagement. Efforts must also be made to mitigate the social and environmental impact of the proposed
infrastructure. This is very essential in determining the bankability of any infrastructure development.
This study is aimed at assessing the effectiveness of bankable feasibility study and factors affecting bankability
of road infrastructure development under PPP concession. In order to achieve this aim, the study examined the
concept of PPP models for infrastructure development and bankable feasibility process in a PPP framework.
Data collection was through administration of well-structured questionnaire on the target population. Data
collected were analysed using both descriptive and inferential statistic analytical techniques.
The study revealed that there is urgent need to review the current Nigeria National Policy on PPP, institutional
structure and individual capacity building in the area of PPP project preparation in order to encourage more
private sector participation in the drive for provision and development of road infrastructure facility.
Keyword: Public-Private Partnership, Development, Project, Bankable, Feasibility Study

I.

Background

The drivers behind the implementation of PPP strategies in infrastructure development according to Wamuziri&
Jiang, (2008); and Kwaket al. (2009) are hinged on the need by the public sector in meeting the high
infrastructure demand by the populace, improve service delivery to the public, and steer the economic growth.
However, Ijigahet al (2012) and Amobi (2013) cited in Adamu (2016) reiterated that the most pressing road
infrastructure development challenges under PPPs in Nigeria are lack of effective PPP project preparation and
acceleration towards bankability, while the development investors also held substantial assets in the road project
under their management, for which they will be seeking attractive long-term infrastructure investment
opportunities in the road project. As a result of this, many road projects became stalled in the project pipeline.
Hence the major reason for the adoption of Public-Private Partnerships for road infrastructure development
according to Flyvbjerget al. (2003) cited in WEF (2013) is that the traditional public delivery of road
infrastructure projects has often proved to be disappointing in many countries of the world because many of the
road infrastructure projects procured under the traditional models regularly experience cost and time overruns,
as well as disregarding the resulting life-cycle costs of the road infrastructure project. Examples of such
challenges of the traditional delivery model was shown in a survey of major rail and road projects in Europe and
North-America in the year between 1927-1998 where an average overruns of 28% of the contract sum was
experienced.
PPP Concepts in Infrastructure Development
Globally, the Public-Private Partnerships (PPPs) approach to infrastructure development and maintenance has
continued to grow tremendously as a result of the financial constraints being experienced by public sectors in
the provision of required infrastructure facilities. In practice according to Lubi& Majid (2013), most
governments adopt PPP principles as a matter of ideological persuasion and need by implementing and utilizing
private sector expertise to lever greater efficiency and change management in infrastructure provision thereby
boosting social-economic growth and development. Because according to Muralidhar&Koteswaea (2013),
Public-Private Partnerships provides opportunity for private sector participation in financing, designing,

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PPP Bankable Feasibility Study: A Case of Road Infrastructure Development in north-central...

construction, operating and maintenance of public sector services, programmes and projects. Hence the creation
of a structure that is bankable and to minimize the stakeholders risk by allocating certain risks to parties that
can better manage the risks in the infrastructure development.
Cui et al. (2010), described Public-Private Partnerships as an agreement between a public agency (Federal, State
and Local Governments) and a private sector in a contractual manner. Furthermore Cui et al. (2010) stated that
the PPP arrangement involves bringing in creative skills and management efficiency from business practice and
by reducing government risk involvement in the development and provision of public services by using private
companies for effective approach in enhancing project delivery. For example by providing a right-of-way and
the right to collect user fees by the public sector while the private partner also provides financing, technological
innovation, and on-going services or infrastructure. Similarly, Lubis& Majid, (2013) stated that the World Bank
also gave a broad definition of Public-Private Partnership as a procurement strategy covering management and
operating contracts, lease/affermage, concessions and joint ventures as well as partial divesture of public assets.
Bult-Spiering&Dewulf (2006) and Ibrahim et al. (2006) stated that practices such as Joint Venture (JVs) and
Build-Own-Transfer (BOT) strategies and its several variants, which hitherto do not qualify as Public-Private
Partnerships have evolved to involve some of the core features of partnerships such as shared authority and
responsibility, joint investment, sharing liability/risk-taking and mutual benefits, and are now accordingly
considered as such. The partnership variants are commonly used in the global construction industry in procuring
infrastructure facilities which are classified as: Develop and Construct; Package Deal; Turn-Key; Management
Contracting; Construction Management; Design-Build-Operate; Build-Own-Operate; Build-Own-OperateTransfer; Lease and Operate Contract; Buy-Build-Operate; Build-Own-Operate-Transfer; and Design-BuildOperate-Finance (Akintoye& Beck, 2009; Babatundeet al., 2010; Ojoet al., 2011; Adamuet al., 2015).
Meanwhile, the primary objective of PPPs is to facilitate the economic delivery of high-quality public facilities
and services by the private sector over an extended period of time at a cost that represents value for money,
whilst at the same time transferring an appropriate level of risk to the private sector (Lane & Gardiner, 2003;
Ibrahim et al., 2006; Haran et al., 2013).
On the implementation of PPPs, Cui et al. (2010) noted that PPP has a long history in many countries of the
world, but became more popular worldwide in the 1980s. Furthermore Cui &Lindly ( 2010) cited in Cui et al.
(2010) opined that United Kingdom and Australia are widely recognized as forerunners in the implementation of
PFI in the world having been employing PFI strategies in various sectors of facility development and
maintenance since the 1980s. In a related development according to Cui &Lindly (2010), in the United State of
America due to an increasing funding shortfall in the transportation sector, more states have started to embrace
PPPs in the development and maintenance of transportation infrastructure.
According to BPD (2009), Public-Private Partnerships (PPPs) has four key characteristics which includes;
Involvement in an efficacious sharing of risks between public and private sector;
Providing public services;
Offering value for money; and
Long term partnership over many years.
The PPP arrangements involve competitive tendering while successful bidder (or franchisee) is selected on the
basis of the value for money (VfM) outcome from the investment for public sector. VfM is determined using
both quantitative and qualitative criteria (Smyth &Edkins, 2007). Quantitative analysis involves the comparison
of private investors bids with a risk-weighted model often referred to as public sector comparator (PSC) after
adjustment for competitive neutrality, risk transfer, and retention (European Commission, 2003). Similarly, the
qualitative test examine or assess the bidding consortiums capabilities and track record, the innovation and new
technology brought in for delivery solution, and a comprehensive public interest test.
Project Bankable Feasibility Study
According to WEF (2013) and Omisore (2014), in conducting a PPP road projects feasibility study, the public
sector needs a clear picture of the technical scope, the commercial attractiveness and the road project
prerequisites in the area of social, economic, financial, technical, environmental and administrative factors by
forecasting the demand that the feasibility will attract which requires a robust and unbiased approach, ensuring
that the road technical specifications are innovation-friendly, realistic and cost-conscious. Furthermore WEF
(2013) opined that for a PPP road infrastructure to be bankable user charges and other funding sources of the
road project need to be a major focus in the feasibility study and the subsequent testing of the road infrastructure
projects bankability through internal business-case analysis and external market sounding. Figure 1 depicts the
features of PPP bankable feasibility study.

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PPP Bankable Feasibility Study: A Case of Road Infrastructure Development in north-central...

Figure 1: Bankable PPP Road Project Feasibility Study

Factors Affecting Bankability of Road Infrastructure Development
In a related development, Omisore (2014) in a study on bankable PPP infrastructure projects in Nigeria
enumerated the major factors affecting bankability of road infrastructure projects in Nigeria to include; (i) legal
and regulatory framework; (ii) political risk; (iii) macro-economic factors,; (iv) tariff sustainability; (v) size and
location of the road projects; and (vi) fiscal space. These factors clearly explained the reasons why the private
sectors are not keen on investing in PPP projects in Nigeria see figure 2. In view of this, Okonjo-Iweala (2014)
and Omisore (2014) reiterated that the current PPP framework for road infrastructure development in Nigeria
needs to be reviewed to enhance the effectiveness and efficiency of the framework in the development of road
infrastructure in north-central region of Nigeria.

Figure 2: Factors Affecting Bankability of Road Development in Nigeria

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PPP Bankable Feasibility Study: A Case of Road Infrastructure Development in north-central...

II.
Research Methodology
Drawing from review of relevant literature which involves various epistemological paradigms leading to
adoption of quantitative research approach, data collected through structured questionnaire were analysed using
quantitative analytical procedures. The results from the analysed data were interpreted in the study.
In order to obtain an effective measurement tool, the questionnaire was revised in two stages i.e. pre-test and
pilot study for a better understanding of various questions therein by the respondents. The pre-test process
utilized a convenience sampling method by selecting 20 respondents who were assumed to have been involved
in road infrastructure development through PPP in Nigeria for an in-depth interview. The result of these
interviews revealed that the meaning and interpretation of some questions in the proposed questionnaire was
unclear. Sentences and wordings of the questions were therefore rephrased while different relevant terms were
used.
A total of 320 questionnaires were distributed through a convenience sampling method, after eliminating all the
invalid questionnaires, a total of 276 valid questionnaires representing a return rate of 86% of the distributed
questionnaires were found suitable and considered sufficient for the study which was subsequently analysed (see
table 1).
Table 1:Valid Questionnaires from Respondents
Respondents
Public Agencies-MDAs
Concessionaires
Banks-Lenders/Sponsors
Architects
Engineers
Quantity Surveyors
Total

FCT
25
20
15
10
14
28
112

KogiNasarawa Niger Plateau Kwara

6
7
5
6
5
10
9
10
5
5
8
6
5
3
3
4
4
3
2
2
5
5
7
6
5
6
5
7
5
5
39
36
37
27
25

Total
54
59
40
25
42
56
276

Data Presentation, Analysis and Interpretation

Data collected from the empirical survey was analysed using both descriptive and inferential statistic analytical
techniques. In the descriptive statistics, data were analysed as uni-variants inform of measures of central
tendency, percentiles, and bar-charts which were used in analysing professional competency of the respondents
and the general expert opinion of the respondents on the implementation of PPP for road infrastructure
development while the inferential statistics was carried out using Mean Score (MS).
The application of means score (MS) involves allocating numerical values to respondents variables ranking for
example; highly significant, highly important, highly frequent, highly effective, and excellent at 5 point, very
significant, very important, very frequent, very effective, good at 4 point, significant, important, frequent,
effective, and average at 3 point, slightly significant, slightly important, slightly frequent, slightly effective, and
fair at 2 point, and not significant, not important, not frequent, not effective, and poor at 1 point. The mean score
(MS) for each ranked factors are then calculated from the equation bellow;
=

( )

1 5

.1.1

Where s stands for the given score of each factor as ranked by the respondents while the ranges depend on the
ordinal scale in use for the ranking i.e. 1-5; similarly, f is the frequency of responses to each ranking of 1-5
values for each variables and N stands for the total number of responses relating the variables.
Figures 3 and 4 depict the professional working experience of the respondents and also the numbers of road
projects handled within their respective years of professional experience. The aim is to assess the professional
competency of the respondents in the subject area of the research work. The summary of the survey in the
figure shows that a total of 82 out of the 276 respondents have between 21-25 years of professional working
experience which stands at 29.7% of the total respondents, while 77 respondents have between 26-30 years of
professional working experience which also stands at 27.9%. This clearly indicates that over 57.6% of the
respondents have acquired reasonable and adequate years of professional working experience in road
infrastructure development under PPP concession. In a related development, figure4 indicate that a total of 82
and 86 respondents have handled between 21 and 25; and above 30 road infrastructure development under PPP
concession respectively under survey. These also indicate that reasonable number of the respondents have been
involved in sufficient number of road infrastructure development under PPP concession thereby acquiring
adequate knowledge in PPP transactions. In view of this, the above information therefore clearly confirms that
the respondents have adequate and or sufficient knowledge and experience in PPP transaction whilst the data
provided by the respondents are adjudged to be suitable and reliable for the purposes of analysis in this research
work.

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PPP Bankable Feasibility Study: A Case of Road Infrastructure Development in north-central...

Fig 3: Respondents Years of Experience

Figure 4: PPP Road Project Handled by Respondents

Table 2 depicts the expert opinion on the assessment of the effectiveness of bankable feasibility study for road
infrastructure development in the study area of north-central region of Nigeria. It is evidenced from the table
that bankability study for road infrastructure development in the study area is just slightly above average. The
first five variables were having a MS of 2.00; 2.05; 2.23; and 2.28, while the lowest rated variable has a MS of
1.90.
However, it is evidenced from review of literature that bankable feasibility study stands to be very important
element under PPP concession since the result of the study determines the funding status of any infrastructure
development. To this end, the respondents believed that bankable feasibility studies for road infrastructure
development under survey need to be improved upon in order to achieve the road project objective as well as
PPP objectives in the road development. This assertion is supported by the view of Omisore (2014) where the
researcher noted the ineffectiveness of bankable feasibility study is the major reason why private investors are
not keen in investing in most infrastructure development in Nigeria.
Table 2: Bankable Feasibility Study for Road Infrastructure Development
Project Preparation Criterial

Demand Forecasting
Technical Specification
Users and Other charges
Bankability Testing
Stakeholders Engagement
Legal diligent due and Permits

Respondents Mean Score on Bankable Feasibility Study

1
2
3
4
5
MS
15
14
9
0
2
2.200
7
21
9
2
1
2.23
15
19
3
1
2
1.90
7
20
9
3
1
2.28
10
20
8
2
0
2.05
11
13
12
2
2
2.28

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Rank
4
2
5
1
3
1

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PPP Bankable Feasibility Study: A Case of Road Infrastructure Development in north-central...

Table 3 depicts expert opinion on major factors affecting bankability of road infrastructure development in
north-central Nigeria. It is evidenced from the table that the first five factors that affects bankability of road
infrastructure development in the study includes unsustainable macro-economic policies, government
legislation, government priority, credit worthiness of government, regulatory mechanism, financial capacity of
government, and affordability of full cost tariff. These variables have the following as their MS 4.53, 4.40, 4.40,
4.40, 4.35, 4.30, and 4.28.
Review of literature revealed that funding of PPP project depends solely on the bankability of the said project by
meeting certain criterial or conditions, it is therefore very clear from the respondents assessment in table 3 that
many factors affects the bankability of road infrastructure development in north-central region of Nigeria as
indicated in the respondents assessment having ranked the variables very high above average. It is clearly
evidenced the unsustainable macro-economic policy of the Federal Government of is a major setback in funding
road infrastructure development, the second group of factors affecting bankability of road infrastructure
development are government legislation this is very poor and weak in its implementation; government priority,
the inability of the government or public sector setting their priority is another major challenge in this direction,
credit worthiness and regulatory mechanisms of the public sector is also a source of major impediment to source
of finance for road development. The other two major factors affecting bankability of road development in the
study area based on the respondent assessment are financial capacity of the public sector and affordability of full
cost tariff.
Table 3: Factors affecting Bankability of Road Infrastructure Development
Project Preparation Criterial

Government Legislations
Regulatory Mechanism
Change in Government
Government Priority
Fiscal Capacity of Government
Credit worthiness of Government
Economic Volatility of the Nation
Unstable Macroeconomic Policies
Project Sizes
Project Location
End Users Satisfaction
Affordability of Full Cost Tariff

III.

Respondents Mean Score on Factors Affecting

Bankability of Road Development
1
2
3
4
5
MS
0
1
3
15
21
4.40
0
1
4
15
20
4.35
0
2
1
23
14
4.23
1
2
1
12
24
4.40
0
0
3
22
15
4.30
1
0
5
10
24
4.4
0
1
2
26
11
4.18
0
1
4
8
27
4.53
0
3
5
25
7
3.90
0
2
13
9
16
3.98
0
3
4
26
7
3.93
0
0
10
9
21
4.28

Rank

2
3
6
2
4
2
7
1
10
8
9
5

Conclusion and Recommendation

This study has explored the concept and implementation of PPP models in the provision and development of
infrastructure facilities as an alternative procurement method to traditional procurement method in an attempt to
measure up with the demand for more infrastructures by the teeming Nigeria populace. However, in spite of the
efforts of Nigerian government at encouraging private sector participation in the development and provision of
infrastructure facilities, the ambition was impacted by many challenges of ineffective bankable feasibility
studies and certain inhibiting factors affecting the bankability ofthe infrastructure project development as
evidenced in the empirical survey conducted in the course of the study.
In order to achieve the aim of the research work, the study started with the review of relevant literature on
concept and adoption of PPP models for infrastructure development in Nigeria with emphasis on assessing the
effectiveness of bankable feasibility study process and factors affecting the bankability of road infrastructure
development. Quantitative research method was employed in the study; data collection was through
administration of well-structured questionnaire on the target population. Data collected was analysed using both
descriptive and inferential statistic analytical techniques.
The study revealed that there is urgent need for the Federal Government of Nigeria to enhance the current
bankable feasibility study process and the Nigeria National PPP Policy geared toward eliminating the inhibiting
factors affecting bankability of road infrastructure development in order to encourage more private sector
participation in the drive for provision and development of road infrastructure facility.
The study therefore recommends that the Federal Government of Nigeria should take a giant step in reviewing
the current National Policy on PPP and development or formulation of a sustainable and robust PPP framework
in order to enhance the provision of infrastructure facilities which serves as the bedrock to national economic
growth.

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PPP Bankable Feasibility Study: A Case of Road Infrastructure Development in north-central...

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