Framework for managing risk in privately financed market projects in Nigeria

Abstract

Shortage of funds and the need to improve the living standards of the people are among the reasons advanced for the recent embrace of Public Private Partnership (PPP) arrangements in developing markets in Nigeria. Construction work generally, and especially projects procured using PPP arrangement are more risk prone than those procured using other forms. This is mainly due to the lengthy concession period and the multi-parties involved in the arrangement. It is therefore, an imperative to properly manage the multi-faceted risks associated with PPP market projects (MPs) in a developing economy like Nigeria. Review of the extant literature show that little has been done on risk management in PPP projects in Nigeria with no known effort on PPP MPs. This is due largely to the novelty of the PPP scheme in Nigeria. The main contribution of this research therefore, is better understanding of the risk management process in privately financed (PF) MPs in Nigeria. A holistic risk management framework is developed that identifies best practices in the risk management process with special emphasis on market projects. The structure specifies what should be done, who should do it and when it should be done throughout the whole life cycle of any PPP market project. Risks in (PF) MPs and their impacts were identified and assessed; allocation preferences of practitioners and mitigation measures to the risks were also assessed within the south-western part of the country Data for the study was collected through a mixed methods approach viz: quantitative and qualitative approaches. Questionnaires were administered to practitioners in the industry within the south-western zone of the country to gain general idea on risks that are likely to occur and affect PF MPs within the region. In-depth interviews were also conducted with stakeholders on three PF MPs in the region. Descriptive and inferential statistics were employed to analyse data for the study. The research identified inadequate knowledge of risk management concept in the Nigerian construction industry; especially in PPP projects, as being responsible for the poor performance of PPP projects using the Triple Bottom Line (TBL) - i.e. people, profit, and planet - as yardstick. It is believed that the framework will serve as a useful tool for rapidly learning about the risks involved in PPP market projects and for understanding viable options for their effective management.