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EVALUATION OF COST RECOVERY FOR WATER SUPPLY

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EVALUATION OF COST RECOVERY FOR WATER SUPPLY

 

ABSTRACT

As urban areas in Nigeria continue to grow, the need to meet increasing water demand for the population has become a major problem of concern to Urban Managers. The State water agency that are supposed to provide adequate and potable water supply to urban population have records of poor performance. To achieve the national and state water supply policy objectives of the issue of cost recovery reforms was introduced, imperatively, however to carry out cost recovery in our water sectors to provide efficient and sustainable water supply for the urban needs in a bid to protecting the vulnerable groups is important. In view of the stringent need to understand the intricate of cost recovery, the research study on the evaluation of cost recovery for water supply was instituted, the study evaluates the existing scenario of cost recovery for water supply service and its implications in Makurdi town with the population of 503.114. The survey investigation was based on a three settlement groups namely; high, medium and low residential density which has ten (10) substantive neighbourhoods settlements as the sampling framework in where a sample of 326 households was sampled (representing 0.3%sample size of the 95,577 total households in Makurdi) the sample size was drawn across the three settlement hierarchy named above which are served by the Water Board. Therefore, a systematic random sampling was used to administer questionnaires. Another sample of 1 questionnaire template was administered to the water board to source out information on their opinion pertaining cost recovery. The results obtained shows that the cost recovery for the operation and maintenance (O&M) of water supply in Makurdi urban area was only 43% and 57% of the cost recovery enquired during water supply and provisioning in the study area were not recovered by the water board. From the 43% of the cost recovery for water supply in the study area out of which appreciable percentage, precisely 22.7% is recovered from the vulnerable groups (i.e. low and medium income earners), while 77.3% of the cost is recovered from high income earner. Also, 59.2% of the households have their houses connected while 40.8% were not connected to official networks but depend on public taps and other sources. In addition, the result of the willingness and ability to pay for% water supply, by the households is 49% while those not willing to pay are 51% this express the challenge and stiff opposition cost recovery practice is experiencing in Makurdi. More so the result of the implications of cost recovery policy shows that, the standard of living and expenditure level of the vulnerable group i.e. low income earners is grossly affected. The study proposed prepaid metering system and/or cross subsidy in the tariff regime arrangement based on the selected cost recovery model and recommend strong political will and commitment from government to promote cost recovery for water supply system, establishment of management regulatory committee o taskforce for cost recovery in water supply. In view of the fact that there will be increase in tariff due to the new reform which some households may be unable topay for water supply, sector targeting measures, geographic targeting measures and social targeting measures are recommended. Basically the measures is targeting the poor such as low-cost options of obtaining water supply through the public stand posts and commercial distribution outlets. Finally, the research has provided useful insights as to the way forward for cost recovery for water supply commercialization in Nigeria, and that there is no one-model-suits-all approach to cost recovery for water supply. Each country must therefore design a framework most suitable to its environment.

 

 

 

CHAPTER ONE

BACKGROUND OF THE STUDY

1.0. Introduction

The state of cost recovery in Nigeria has remained a matter of concern given the importance of cost recovery in the economic wellbeing of the entrepreneurs and the growth and development process of the economy. Unfortunately, cost recovery for water services has no consensual recommendation across the world. While some international organizations from the developed world tend to recommend it as being essential for the financial sustainability of water utilities (OECD, 2006), that is not the case for some worldwide reaching organizations such as the United Nations, which is more concerned with the impact such a principle would have on the poor, leading it to recognize the role that subsidization may have on the improvement of population provision levels in water supply and sewage drainage and treatment (UNDP, 2006. This may be due to the fact that in developed countries, the water outlays represent a very small portion of the average household income, whereas in developing countries the implementation of full cost recovery would put greater stress on households‟ budgets.

The provision of clean water to consumers entails a cost both in terms of initial capital outlay and ongoing operation, maintenance, management and extension of services. However, because of poor planning of cost-recovery, a lack of government funding and inadequate tariff rates, the ability of water services sector to recover costs is often limited even for routine operation and maintenance. This has led to problems in providing sustainable water services to poor communities.

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