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Improving Transport Project Appraisals

In the Islamic Countries

128

sector and to meet international best practices in planning, procurement, maintenance and

financing of the targeted Federal Roads infrastructure.

In its role, RSDT is an active player and key contributor to road transport project appraisal. RSDT

carries out feasibility studies and is supported in this by specific contributions from the private

sector. RSDT has a team, capable of running HDM-4 (see tools below), used for the economic and

financial feasibility studies. Staff members from MoPWH are seconded to the RSDT, facilitating

spread of knowledge and experience in applying HDM-4 and additional skills needed for

managing road infrastructure. The RSDT has a clear and important role as

expertise centre

in the

sector and as such provides a strong knowledge basis and a catalyst function in developing

capacity in the sector, which adds to the credibility of the road sector and the collaboration

opportunities with IFIs.

Tools

In the road sector, the dominant model that is applied for appraisal of projects is the

HDM-4

. As

indicated above, the TSDT has strong knowledge and experience of HDM-4 and applies this on a

structural basis. This can also be said for MoPWH, often collaborating with TSDT on applying

HDM-4. HDM-4 has been calibrated for the Nigerian situation, which means that many

parameters are already incorporated in the system. As such, HDM-4 needs project specific

information, based on the scope of the project, such as project capital investments costs, as well

as information on traffic levels and composition, road conditions and additional aspects (soil

and geology, topography, vegetation). Additional input parameters, such as the project lifetime

(for example 20 years) and applied discount rate (12% inmany cases), are often used in a similar

way, also contributing to a more harmonised approach. HDM-4 is capable of calculating benefits

and costs and present results in the formof NPV and ERR. This is an important input in assessing

the financial and economic viability of a project.

Guidelines

No specific guidelines on how to carry out feasibility studies, or specifically for CBA in the case

of economic and financial feasibility, were recorded. However, it should be noted that for road

projects, a great number of input parameters are harmonised, as a result of the calibration of

HDM-4 for the Nigerian situation. Furthermore, when applying HDM-4, a standard discount rate

of 12% is applied, in line with WB recommendations. As such, for the projects were HDM-s is

used, a large extent of standardisation is in place, as indicated above.

8.5

Content

Methodology

Themethod of appraisal that is most frequently used is CBA. Sometimes, an alternative approach

is applied, for example in the case of the Economic Recovery and Growth Plan (ERGP) focus lab,

as presented below (see special case).