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Strengthening Institutions to Improve Public Expenditure Accountability STRENGTHENING INSTITUTIONS TO IMPROVE PUBLIC EXPENDITURE ACCOUNTABILITY Cost-Effectiveness and Benefits-Cost Analysis of Some Water Interventions (the Case of Bauchi State, Nigeria) Cost-Effective and Benefits-Cost Analysis: Water Sector Bauchi State, Nigeria ACKNOWLEDGEMENT The Centre for the Study of the Economies of Africa (CSEA) received a five-year grant from the Global Development Network (GDN) for a project entitled ‘Strengthening Institutions to Improve Public Expenditure Accountability’. This report presents the findings of the Cost Effectiveness and Benefits Cost Analyses of some Water sector interventions using data from Bauchi State (North Eastern), Federal Republic of Nigeria. CSEA wishes to acknowledge the assistance of several individuals and government agencies in Nigeria in providing data and technical advice for the successful completion of the third phase of the Strengthening Institutions project – Dr. Bright Okogu, Director-General Budget Office of the Federation, Federal Ministry of Water Resources, Bauchi State Water Board, Bauchi State Rural Water Supply and Sanitation Agency and the National Bureau of Statistics. Prepared by: Ebere Uneze, Ph.D. Ibrahim Tajudeen Ola Iweala ©September 2011, Centre for the Study of the Economies of Africa 4 Dep Street Off Danube Street, Maitama District, Abuja, Nigeria. Telephone: +234 (0) 9 8709070 Email: [email protected] Website: www.cseaafrica.org Page | 2 Cost-Effective and Benefits-Cost Analysis: Water Sector Bauchi State, Nigeria TABLE OF CONTENTS PAGE ACKNOWLEDGEMENT ................................................................................................................ 2 TABLE OF CONTENTS .................................................................................................................. 3 LIST OF TABLES ........................................................................................................................... 4 ABBREVATIONS AND ACRONYMS .............................................................................................. 5 ABSTRACT ................................................................................................................................... 6 1. INTRODUCTION ...................................................................................................................... 7 1.1 Scope of the Study................................................................................................................. 9 1.2 Research Objectives ............................................................................................................ 10 2. THE NIGERIA WATER SECTOR ............................................................................................... 11 2.1 The Federal Ministry of Water Resources (FMWR) .............................................................. 12 2.2 The River Basin Development Authorities (RBDAs) .............................................................. 13 2.3 The State Water Agencies (SWAs) ....................................................................................... 13 2.4 The Local Government Authorities (LGAs) ........................................................................... 13 2.5 Sources and Allocation of Funds .......................................................................................... 14 3. BACKGROUND ON PWS AND BWS PROGRAM ...................................................................... 15 3.1 Bauchi Township Pipeline Water Supply Project .................................................................. 15 3.2 Bauchi Borehole Water Supply Project ................................................................................ 16 4. LITERATURE REVIEW OF WATER CEA .................................................................................... 17 5. METHODOLOGY .................................................................................................................... 21 5.1 Assumptions ........................................................................................................................ 21 5.2 Data Sources ....................................................................................................................... 22 5.3 Cost Analysis ................................................................................................................ .......22 5.4 BASIC Cost Effectiveness Analysis ............................ .............................................................22 5.4.1 Effectiveness Measure for the BASIC CEA ......................................................................... 22 5.5 PROGRAM Cost Effectiveness Analysis ................................................................................ 23 5.5.1 Effectiveness Measure for PROGRAM CEA ........................................................................ 23 5.6. Benefit-Cost Analysis .......................................................................................................... 24 6. RESULT AND DISCUSSION ..................................................................................................... 25 6.1 Summary of Cost ................................................................................................................. 25 6.1.1 Summary of Cost of PWS Program .................................................................................... 26 6.1.2 Summary of Cost of BWS Program .................................................................................... 26 6.2 Cost Ratio for BASIC CEA ..................................................................................................... 27 6.3 PROGRAM CEA .................................................................................................................... 28 6.4 Benefits–Cost Ratio ............................................................................................................. 32 6.5 Sensitivity Analysis .............................................................................................................. 33 7. CONCLUSION ........................................................................................................................ 35 8. POLICY RECOMMENDATION ................................................................................................. 36 9. CHALLENGES TO CONDUCTING THIS WORK ......................................................................... 37 10. LIMITATION ........................................................................................................................ 37 11. PLANS FOR DISSEMINATION ............................................................................................... 38 REFERENCES ............................................................................................................................. 39 APPENDIX ................................................................................................................................. 40 Page | 3 Cost-Effective and Benefits-Cost Analysis: Water Sector Bauchi State, Nigeria LIST OF TABLES PAGE Table 1. Federal Government Total Spending on Water Sector (2006 prices) .......................... 14 Table 2. Computation of PWS/Hand pump BWS; Unit cost Per Household Per Year ............... 26 Table 3. Equations for the Computation of Effectiveness Measure of PWS/BWS Programs .... 28 Table 4. Estimates of Increase in Effectiveness of PWS and BWS Interventions ...................... 29 Table 5. Estimates of Cost- Effectiveness Ratios of PWS and BWS Interventions ..................... 31 Table 6. Estimates for the Computation of Monetary Benefits of PWS/BWS Programs .......... 32 Table 7. Estimates of Benefit-Cost Ratio of PWS and BWS Interventions ................................ 33 Table 8. One-way and Multi-way Sensitivity on BASIC CEA and Benefits-cost ratio ................. 34 Appendix: Table 1. Cost of a 110mm uPVC Lined Hand Pump 50m Deep .................................................. 40 Table 2. Definition of Parameters Used in Cost-Effectiveness and Benefits-Cost Analysis ....... 40 Page | 4 Cost-Effective and Benefits-Cost Analysis: Water Sector Bauchi State, Nigeria Abbreviations and Acronyms ADB African Development Bank AU Unit of Account BAURUWASSA Bauchi State Rural Water Supply and Sanitation Agency BCA Benefit-Cost Analysis BWS Borehole Water Supply BWSB Bauchi State Water Board CEA Cost-Effective Analysis DALY Disability Adjusted Life Year FGN Federal Government of Nigeria FMWR Federal Ministry of Water Resources FMAWR Federal Ministry of Agriculture and Water Resources JICA Japan International Cooperation Agency LGA Local Government Authority MDGs Millennium Development Goals NAFDAC National Agencies for Food and Drug Administration and Control NWRI National Water Resources Institute OPEV Operation Evaluation Department PHCN Power Holding Company of Nigeria PWS Pipeline Water Supply R4D Results for Development RBDA River Basin Development Authority RWSN Rural Water Supply Network SIIPEA Strengthening Institutions to Improve Public Expenditure Accountability SSA Senior Special Assistant SWA State Water Agency UA Unit of Account UNDP United Nations Development program UNICEF United Nations Children’s Fund UPVC Unplasticized Polyvinyl Chloride WHO World Health Organization WSSD World Summit on Sustainable Development Page | 5 Cost-Effective and Benefits-Cost Analysis: Water Sector Bauchi State, Nigeria ABSTRACT This report presents a Cost-Effectiveness analysis of water interventions in Bauchi state,
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