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).