CHAPTER 1

INTRODUCTION

1.1 INTRODUCTION

Public projects in Nigeria encompass projects made for the general use of Nigerian residents. They can be infrastructural projects that cut across various sectors of the country such as transportation, industrialisation, water resource management, education, natural resources management, electrification, manufacturing, and so on. They are used directly by the public, or by a certain group of people with the intention of developing the nation with the proceeds.

Many public projects are constructed and managed by the federal government every year. In Nigeria as a democratic nation with the rotation of power occurring every four years, the execution of public projects has been a vital part of every government, with an additional purpose of garnering public approval and trust. As such, the planning, construction, implementation and operation of public projects in the country is of vital importance, and this whole life cycle of the project is handled with top priority. Besides the government, partnership of private and public firms in the construction of projects is seen over the years. In addition, funding of projects by foreign governments and agencies has been incorporated into the system of governance over the past years, and it is considerably growing.

In Nigeria, like everywhere else in the world, high risks are associated with the entire phase in a public project. Because of the importance associated with public projects, different risks become associated with part/whole phase of the project. Hence, the risks involved in public projects’ execution must be carefully studied, investigated, analysed and discussed, in order to enable involved parties to have a good idea of what to expect, what they are getting into and how to transfer and handle such risks, with the sole goal of ensuring a successful project.

Risks are uncertainties that happen along the lifetime of a particular endeavour. Because of the high uncertainties in their occurrence and impacts, studying, identifying

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and analysing these risks is essential to ensure near – perfect conditions and scenarios in the execution of public projects. Either impacts of risks can cause strengths or weaknesses, and/or threats or opportunities to parties involved, and the correct identification, analysis can aid appropriate parties in dealing with such risks. Several risks have been identified by various research studies as being associated with public projects. Some of them include safety risks, financial risks, operational risks, construction risks, management risks etc. Most of these risks are interrelated and they can cause setback or become advantageous to the project. In present study, financial risks associated with public projects in Nigeria are studied.

Financial risk is the major risk associated with public projects in Nigeria (Aluko, 2008) Nigeria being a large and populous country, with a relatively high Gross Domestic Product and blossom economy has struggled with keeping an optimum performance in the financial aspects of public projects. The present research took a step in the right direction, of identifying these financial risks, and analysing them using SWOT analysis. Several factors contribute to the financial risks. Such factors emancipate from either the stakeholders involved in the project, or other unavoidable external parties, that have impact on the project. These factors can be either strengths, weaknesses, threats or opportunities; hence, their investigation, analysis, and discussion was essential.

Several parties/stakeholders are involved within public projects in Nigeria. They include the client, contractor, consultant, regulatory bodies, labour unions and the public. Keeping the project within stipulated costs and time is of essential importance to these parties. Responsibilities are distributed amongst each stakeholder to ensure the smooth sailing of the phases in the public project, until a successful project is achieved.

The construction and execution of a public project occur in several phases from the beginning to the end. These phases are generally identified as: (Hendrickson & Au, 2008).

·         Public demands and perceived needs

·         Conceptual planning and feasibility study

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·         Design and engineering

·         Procurement and construction

·         Operation and maintenance

·         Disposal of facility

Rationally, these phases can be classified as: (PMBOK, 2013)

·         Project Initiation

·         Project Planning

·         Project Execution

·         Project Performance and monitoring

·         Project Closure

Several factors are responsible for the financial risks that emancipate in each phase of the project. There are always factors associated with each or all of the phases. These factors influencing financial risks are identified, and a research into them was conducted. Afterwards, an in-depth analysis based on information gotten from a well-crafted detailed questionnaire survey was done. This necessitated the need for a thorough discussion into these factors and their impacts, as well as improvement recommendations and conclusions.

Moreover, the SWOT analysis of public projects’ financial risks in Nigeria encompasses the identification and study of the factors that cause financial risks; an in-depth questionnaire survey targeted at the parties involved in the life cycle of a public project; an analysis ranking the factors in order of importance and understanding the impacts of these factors as either strengths, weaknesses, threats or opportunities; appropriate discussions and recommendations and conclusions of the research study.

1.2 SCOPE OF THE STUDY

The financial risks associated with public projects in Nigeria have always had a big impact on the entire phases of the projects. Parties involved in the actualisation of these projects know these impacts. However, a research into the types of risks, a

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detailed information about the factors causing such risks, an analysis and the impacts of these risks has not been widely conducted. Nigeria, being a developing country works to improve efficiency of every sector in the country; as such, this research was conducted in the country to help understand these financial risks.

1.3 LIMITATIONS OF STUDY

Similar to most research works, researchers encounter certain number of limitations over the entire course of research. With the main goal of reducing limitations to the lowest as possible, through the conduction of extensive research and the study of alternative options, the limitation encountered in the course of this research work was major in the aspect of data collection. Nigeria is a big country; hence, data collection was limited to major cities where many government public projects are executed, including Abuja where all government agencies with constitutional powers to execute public projects are situated. Likewise, major construction industry headquarters are situated in the capital city.

Some of the limitations associated with the data collection include:

·         Difficulty in accessing appropriate personnel

·         Delay in answering questionnaire survey, and its return

In addition, being a research on the financial risks in public projects, the research work is limited to the factors necessary for financial risks and their impact/effects. The research work did not consider the financial costs in numbers of these risks and risks factors.

1.4 AIMS AND OBJECTIVES

The aims and objectives of this research work include:

·         Studying the financial risks in public projects in Nigeria

·         Investigating the factors responsible and influencing the financial risks in the life cycle of public projects in Nigeria

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·         Analysis of the risk factors using the SWOT analysis technique

·         Characterising each risk factor in order of SWOT group, importance, impact, and responsible stakeholder

·         Discussion of the analysis and characterisation, and providing risks management guidelines

·         Recommendations and conclusions

1.5 RESEARCH METHODOLOGY

This research work was done extensively to cover essential aspects, with the sole intention of getting near-perfect accuracy in the information and data gathering, as well as work done.

The methodology of the research work consists of the following steps:

·         Detailed literature review studying public projects in Nigeria, financial risks associated with their construction and execution, and the factors influencing these financial risks.

·         An in-depth, well-crafted questionnaire survey targeting the major stakeholders in public projects in Nigeria. These include government ministries and agencies tasked with executing public projects and construction companies tasked with their construction and execution.

·         Analysis of collected information and data, which includes ranking the factors, based on their importance in causing financial risks in projects, discerning their impacts on these projects; and finding out the responsible stakeholder/body necessary for the control of each factor.

·         Discussions and recommendations that can help stakeholders, other researchers and the public in understanding financial risks in public projects in Nigeria.

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