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Private Sector Participation in Water Supply: Prospects and Challenges in Developing Economies

IWRA World Water Congress 2008 Montpellier France
6. Water Conservation and Demand Management
Author(s): E.O. Longe
M.O Kehinde
C.O. Olajide
(1) Department of Civil and Environmental Engineering, University of Lagos, Akoka, Yaba, Lagos, Nigeria E-mails: eolonge@unilag.edu.ng; dapolonge@yahoo.co.uk (2) Environment Agency (Anglian), Ireni House, Cobham Road, Ipswich IP3 9JD michael.kehinde@environment- agency.gov.uk (3) Lagos Water Corporation, Water House, Ijora, Lagos.

Keyword(s): Water Supply, Private Sector, Privatization, and Stakeholders.

AbstractLagos State Water Corporation (LSWC), a Government agency since 1981 took over the responsibility of providing potable water to the people of Lagos State. However, the challenges facing the corporation continue to mount in the face of increasing demand, expendable water sources and need for injection of funds. In the recent past most developing countries embarked on large-scale infrastructure through public sector financing and control. Reliance on such public sector financing, and management however has not proved effective or sustainable while the successes of projects are not guaranteed. Adduced reasons are not far fetched and these ranged from deteriorating fiscal conditions, operational inefficiency, excessive bureaucracy and corruption. Consequently, the need for the private sector participation in public sectors enterprises becomes therefore inevitable in the provision of investment and control. Lagos State Water Corporation programme for Private Sector Participation in potable water supply commenced about seven years back. In order to realize this objective a complete due diligence of the corporation was carried. The technical baseline findings showed that raw water sources yield far exceeded present LSWC capacity, while production capacity is utilized at less than 50% of installed capacity. Inadequate distribution network system and One North- South transmission route, also characterized the system. It also identified new assets close to physical collapse, primary pipelines at the risk of rupture, and problematic energy supply. Commercial performance is very low, 30% while non-revenue water was 96%. Financial due diligence reveals depressed revenues and inflated expenses resulting in increasing operating losses pointing to an unrecoverable fall while deficit has grown to bankruptcy level. The gloomy picture made the consideration of alternative finance and management structure inevitable. Privatization therefore becomes the veritable alternative since it promises among others improved standard and level of service, profitability, and attraction of investment funds as the case was in similar water corporation like SODECI in Cote d’ Ivoire, Aguas Argentina and SONEG in Guinea after privatization. The Corporation preferred options, consist of two different concession contracts covering the eyebrow areas of the metropolis made up of Lagos Mainland at Lagos West and Lekki and the Islands at the eastern end as a case study. Despite the anticipated promises of privatization, genuine stakeholder concerns necessitate adequate legal and regulatory framework that will protect all interest. *1To whom all correspondence should be made
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