Evaluating risk factors of build-operate-transfer highway projects in Nigeria

Abstract

Build-Operate-Transfer (BOT) has been one of the preferred models of Public–Private Partnership (PPP) for attracting private finance in the Nigerian highway sector. This paper evaluates the risk factors in the Nigerian highway sector with a view to identify significant risks and drawing the attention of the stakeholders on the need to focus attention on these risks. The population for this study includes major stakeholders such as: public sector organizations (government agencies) especially those in charge of BOT/PPP projects, highway engineers, quantity surveyors, concessionaires, registered contractors and selected financial institutions who have participated in BOT projects in Lagos and Abuja, Nigeria. The list obtained from Infrastructure Concession and Regulatory Commission showed that one hundred and fifty (150) experts fall into this category in which a sample size of one hundred and ten (110) was determined. The study adopted stratified random sampling technique. One hundred and ten (110) questionnaires were administered to respondents, 72 questionnaires were valid and used for the analysis. Out of the seventy (70) risks identified, twenty-one (21) risks were rated significant by the respondents, but the most significant risk factor is interest rate volatility. Others are geotechnical conditions, exchange rate fluctuations, interest rate volatility, high cost of finance, and corruption risk and respect for rule of law etc. Majority of the significant risk factors are economy related. However, there was agreement in the rating of the respondents. The paper concluded that stakeholders should concentrate efforts on these significant risk factors to improve the BOT highway sector which has performed below expectation.