Lack of investment, finance make water service inadequate
Access to high quality, reliable and sustainable water still remains low, despite considerable progress in Water Supply, Sanitation and Hygiene (WASH) sector,
The country, in fact, failed to achieve the Millennium Development Goals (MDGs) for water and sanitation in 2015, as only 61 per cent of citizens had access to improved water.
The National Action Plan for revitalisation of the sector released by the Federal Ministry of Water Resources revealed that in the last few decades, Nigeria has reversed its progress in access to pipe-borne water and improved sanitation.
According to data from the UNICEF-WHO Joint Monitoring Programme (JMP), while access to improved water at the national level increased, access to piped water on premises in urban areas declined from 32 per cent in 1990 to less than 10 per cent in 2015, suggesting an erosion of utility service coverage. Access to improved sanitation also decreased from 38 per cent to 29 per cent during the period.
These shortcomings, it was gathered, were the result of deficiencies in the performance of water agencies, water points and water distribution schemes. Almost half of the existing water points and schemes are non-functional. This multidimensional failure has not only fueled mounting water stress in the country, but has also created a poverty trap by adversely affecting poverty and human development outcomes.
These woes have remained unabated, years into the Sustainable Development Goals, with most state water agencies (SWAs) in death throes and struggling for survival, while others depend on development agencies or international financial institutions for reforms amid accelerated urbanisation and migration of population into the cities.
WASH poverty diagnostic
ANALYSIS conducted by the World Bank on Nigeria’s WASH Poverty Diagnostic confirmed with new details, the degree to which the sector is underdeveloped compared with regional standards.
The country’s WASH sector is in critical condition, calling for priority policy attention and bold action by federal and state governments, the analysis revealed.
The 2019 National Outcome Routine Mapping of Water, Sanitation, and Hygiene Service Levels (WASH-NORM) revealed that the amount and quality of water for individual use is lower than the required standard.
The average amount of water each person receives in Nigeria is nine litres per day. The minimum acceptable range is between 12 and 16 litres per day, according to national standards.
The findings from a second round of the WASH NORM II exercise, carried out in collaboration with the National Bureau of Statistics and UNICEF, revealed that about 28 out of 36 states plus FCT, have urban utilities that produce water. Of the 28 states, only 16 have functional urban water utilities. There are an estimated 1,239 waterworks connected to urban water utilities across the 36 states of Nigeria, including the FCT serving urban settlements.
These waterworks consist of 891 (72 per cent) groundwater schemes and 348 (28 per cent) are surface water schemes. It was revealed that about 42 per cent of waterworks were functional and 58 per cent were nonfunctional at the period of survey.
Similarly, more than two-thirds (64 per cent) of urban water utilities’ consumers do not depend solely on tpublic tap water for drinking as combined installed capacity of all waterworks assessed is 7,723,383 cubic meters (m3) per day or 6,607m3 per day per waterworks, while operating capacity of all waterworks is 2,694,007 m3 per day and 2,174m3 per day per waterworks.
According to World Bank, lack of investment coupled with the lack of finances of most state water providers makes Nigeria’s water service unusually inadequate even when compared with much poorer African nations.
Though the average urbanisation rate required by SWAs under their nominal responsibility is three per cent a year, the actual number is much higher, especially in large cities, such as Abuja, Lagos and a few others in the South region that are magnets for migrants.
Currently, less than 40 per cent of urban residents get water from state controlled utilities; the rest get water from other sources and generally consume substantially less water than the World Health Organisation (WHO) recommends, while paying substantially more for this life-supporting service.
If this trend continues, in the next 10 years, less than a third of the municipal population will get water from SWAs, and the costs will swell to $1.5–2 billion a year for just basic water services.
“Water consumption is adequate only in the North Central region, though it is close to the WHO recommendation of 50 litres per capita per day (lpcd) in the North East region. In all other regions, consumption is significantly lower than recommended. Low consumption affects providers, as well as users: Service below 50 lpcd does not correspond to the design standards for water supply systems—no utility can be sustainable and guarantee safe water when consumption is so low.
“There are, however, other elements of service that require swift attention and that need to be built into the assessment of investment needs. For instance, water services tend to be intermittent, with only Abuja (in the Federal Capital Territory) and Cross River reporting 24/7 service; in the last three years, the national average has dropped below 12 hours a day,” revealed the report authored by Macheve, Berta, Alexander Danilenko, Roohi Abdullah, Abel Bove and L. Joe Moffitt.
How inability to manage distribution, collection of revenue affect performance
THE Guardian gathered that the inability of most SWAs to professionally manage distribution and collection of revenues has been the bane of poor performance of the agencies. They have limited financing and spending capabilities because the State Governments (SGs) supply most of the funds for daily operations, expenses and salaries.
Even those that do collect customer revenue still largely depend on SG transfers to cover all operational expenses. Even though, 28 of 35 SWAs (80 per cent) claim that customer tariffs and fees are one of their main sources of income, in some of these, the state government do the actual collections.
In those cases, tariffs and fees are, like taxes, more motivated by SG political decisions than by recovery of water distribution costs. When the tariffs and fees collected are not enough to cover operational costs, as is usually true, the SG through subsidies covers the deficit. It is, therefore, not surprising that water tariffs vary significantly from state to state.
While Bayelsa, Benue and Zamfara provide water free to residential consumers, others charge based on groupings of customers, which can mean they have 20 or more different tariff schedules. Consumption metering and billing is operational only in Cross River (100 per cent of connections), Abuja (86 per cent), Kano and Oyo (35 per cent) and parts of Lagos State (1 per cent).
In most other areas, a variety of tariffs are set in the form of taxes on specific municipal industries. Generally, since there are few reliable commercial systems with monitored meter readings, customer bills are not related to service actually provided. From the World Bank performance data collected, it appears that less than 20 per cent of water sold is metered. In fact, the share of sales related to consumption that is reliably metered may be lower than reported since so few cities and states use metering, which may lead both SWA staff and consumers to estimate tariffs inaccurately.
On the question of setting tariffs, SWAs reported that not only do they not have power to set tariffs, they do not regularly review them. SGs set tariffs for SWAs and it is not clear who is responsible for regular tariff review. About 16 SWAs (46 per cent) reported that their tariffs had been reviewed in the previous four years and 10 (29 per cent) had not been reviewed for four years or more. “When water is seen as an economic good, customers are charged for the service and providers issue bills to all customers and then collect the revenue,” World Bank said.
However, not all SWAs follow this practice. In fact, only 18 of 35 SWAs (51 per cent) reported that they issue the bills and two of these do not collect the payments. In all, 17 SWAs, five of them in the North West region, reported that they do not issue bills or collect payment from customers of the SWAs that issue bills to customers, 10 (30 per cent) reported that not all customers get invoices and those that do are mainly fire departments, schools, hospitals and public buildings and offices.
The SG pays for the main operating expenses, electricity and chemicals, for more than half the SWAs. In fact, only 10 (29 per cent) of 35 SWAs pay for both electricity and chemicals and only two (6 per cent) pay for electricity, chemicals, spare parts, and other disposables. Five (14 per cent) reported not having to pay any expenses.
Also, in many cases, billing is done by an entity external to SWAs or by another state agency, such as the tax authorities. Eight SWAs do not know what their uncollected balances are. In Ogun and Borno, water is billed by the utility but tax authorities collect payments.
The 16 SWAs that issue bills and collect payments themselves are Kaduna, Katsina, Benue, Niger, Adamawa, Taraba, Bauchi, Yobe, Ekiti, Ondo, Osun, Lagos, Oyo, Akwa Ibom, Rivers and Enugu.
The state dominates every phase of SWA development, from financing or guaranteeing capital investments, to approving the investment programme, providing the necessary permissions to proceed, approving the design and the financial plans, and managing the bidding process. SGs also lead when it comes to supervision of projects (more than 60 per cent of SWAs), commissioning the investment and then transferring it onto the SWA balance sheet.
No utility has ever financed any investments and no utility has ever conducted its own investment programme. Nine SWAs (26 per cent) reported that the Federal Government had provided some investment funds. These are usually national projects financed by large international financial institutions (IFIs), such as the World Bank, the African Development Bank, the French Development Agency, Japan International Cooperation Agency (JICA) and the Islamic Development Bank.
However, again, the financing usually comes, not directly to the utility, but to the SG, which finances installations for the utility and then transfers them to the SWA balance sheet. While about 33 SWAs (97 per cent) confirmed that some form of investment funding was channeled through the SG, 13 (38 per cent) reported getting it through multiple sources. In the end only one (3 per cent) stated that investment funds were available in-house.
The common thread across all SWAs in Nigeria, however, is that they do not have the authority to borrow on their own from capital markets or donors or to securitise future collections as collateral for investment borrowing. This situation may to some extent explain why all SWAs without exception are in dire need of investment to develop new projects; 20 of 35 (57 per cent) have identified the need for expansion of water intakes and 21 (60 per cent) recognise a need to expand networks and rehabilitate old distribution systems.
At present, 22 SWAs (63 per cent) have projects under way, but none were developed by the utilities themselves. Also, none of the projects, current or past, invested more than $25 per customer. Interestingly, though, 25 SWAs (71 per cent) had investment plans and only 10 (29 per cent) did not—even though access to resources to undertake or fulfill investment needs may be least 25 (71 per cent) have a detailed engineering design for an investment project ready and 29 (83 per cent) stated they had shovel-ready projects that they cannot finance; 27 (almost 77 per cent) also had a feasibility study or design document ready for such a project.
Among states that have re-engineered or in the process of reforming their utilities are Taraba, Rivers and Bauchi. Taraba State Water Supply Agency with the support of USAID E-WASH programme, Federal Government through FMWR reformed its processes.
The Managing Director, Musa Siam, said: “This is dawn of a new era – the birth of TAWASCO- signifying a paradigm shift and transition from a non performing public utility aspiring to be a pacesetter in water and sewerage service delivery in Africa.
“We are determined to be a role model in water and sewerage in Africa and call for cooperation as we strive to improve the standard of living through the provision of effective and efficient water services to our people.”
In Rivers State, the government two years ago signed contracts for the rehabilitation and upgrading of 496 kilometres of pipeline to produce 330,000 cubic meters of potable water to Port Harcourt and Obio/Akpor council areas.
The government secured a $200 million credit from the AFDB for the scheme, which is supposed to be completed in 18 months. The contract was awarded to Messrs CGC Nigeria Limited, Top International Engineering Corporation and Mothercat Limited.
The Managing Director, Port Harcourt Water Corporation, Chief Ibibia Walter, said the contract has been extended to next year due to some unforeseen circumstances, while on completion; the state will have a storage capacity of 10,000 cubic meters.
He stated that the project would have four new reservoirs located at Rumuola, Diobu, Moscow and Borikiri in Port Harcourt and Obio/Akpor, as well as eight elevated tanks with carrying capacity of about 1,000 to 1,500 cubic meters of water and about 17 boreholes in about six cluster areas connected to water treatment plants.
In Lagos, the Managing Director of Lagos Water Corporation, Muminu Badmus, said the government has plans for the expansion of waterworks to more communities, but the challenge has been the increasing population influx. Other challenges include aging infrastructure, epileptic power supply, disruption of supplies due to road constructions and funding.
He revealed that the construction of Adiyan II water treatment plant is ongoing and is at about 85 per cent completed. “At completion, an additional three million people will get access to water.”
Badmus also disclosed that the corporation has begun rehabilitation on the four million gallons/day (Mgd) Ishashi water project, as well as maintenance and upgrade of the mini waterworks across the state. While dredging the Ogun River, which will add major raw water intake into the Iju and Adiyan water plants has commenced. According to him, when this is completed, water supply in Lagos will improve. “I believe when people see this expansion, they will be willing to embrace public water supply,” he said
FMWR, in collaboration with Japan International Cooperation Agency (JICA), in 1995, developed the National Water Resources Master Plan, the first comprehensive development plan aimed at optimising the nation’s water resources, as well as financial and economic investment opportunities in water resources development and management, agricultural production and food security.
THE fact remains that the Federal Government through the Federal Ministry of Water Resources (FMWR), created in 1975, is responsible for formulating and coordinating national water policies; managing water resources, including allocations to states; and approving development projects.
It is also responsible for data collection, resource and demand surveys, monitoring, evaluation, and coordination of water supply development and management, research and development, national funding and technical support, and creation of an environment that will, among other factors, enable meaningful private participation.
While the State Governments (SGs) through water supply authorities, state water boards (SWBs), and the Small Towns Water and Sanitation Agency are responsible for the establishment, operation, quality control, and maintenance of urban and semi-urban water supply systems and in some cases for rural supply.
They are also responsible for licensing and monitoring private water suppliers, monitoring the quality of water supplied to the public, and providing technical assistance to local governments.
Responsibility for potable water supply was traditionally entrusted to departments of SGs. As the importance of drinking water supply grew during the 1970s, most water departments were gradually transformed into SWAs, one per state, plus the Federal Capital Territory (Abuja), making all 37.
Generally, SWAs were established by edict to develop and manage water supply services within a given state and to meet sound financial objectives. The SWAs are accountable to SGs, generally through a state Ministry of Water Resources. In some states, responsibilities for rural water supply remain with or have been transferred back to the SG or a rural water supply and sanitation agency.
The Minister of Water Resources, Suleiman Adamu, said recently that the implementation of National Water Resources Master Plan has been poor, more than 26 years after it was developed due to lack of political will and weak implementation structure.
He stated that the water plan developed in 1995 between Nigeria and Japan had also suffered from poor budgetary provision and appropriations, weak synergy between stakeholders and lack of understanding of the expected roles of the various stakeholders.
He identified other challenges of the plan to include: increased population growth, leading to increase in water demand; uncoordinated water resources development among the three tiers of government, development partners and end users; over abstraction of groundwater resources in some parts of Nigeria owing to uneven distribution of rainfall across the country; and impact of climate change.
He identified some of the critical issues highlighted in the revised master plan to include: projection of future water demand, projected population of 154.4 million in 2010 to 257.8 million in 2030. He added that it would include domestic, commercial and industrial water challenges.
“It is important to state that the overall water sector development is being guided by the National Water Resources Master Plan and its implementation must be in partnership with states, local councils, line ministries as well as the private sector, amongst others,” he said.
The FMWR has also announced the start of a reform that, if it is to guarantee water services to current residents, will cost an estimated $3.3 billion. It will require construction of 20–30 water treatment plants to guarantee needed volume and at least 100,000 kilometers of additional mains to distribute the water to customers.
Access to quality WASH services is a fundamental right and in the wake of the COVID-19 pandemic, this has proven to be even more crucial,” said Peter Hawkins, UNICEF Representative in Nigeria. “Today, the importance of adequate and safe water, basic sanitation and proper hand hygiene practices in stemming not only the spread of COVID-19, but also many other preventable illnesses that take the lives of far too many children, cannot be overemphasised.”
The founder, Rural Africal Water Development Project, Dr. Joachim Ezeji, described their general performance as abysmal. “There are enormous cogs on the wheel of performance. Factors responsible for this include corruption, absence of regulation, infrastructure decay and lack of motivation for staff and management. To easily feel the level of good governance of any state when you visit one, just visit the water board premises. Most of them are moribund.
“But the worse off are mostly states in the southern part of Nigeria. Most of them, no longer provide water services. But the situation in the northern part of the country is different. Water boards in many parts of the north are functional.”
He pointed out that commercialisation is definitely an option but not the sole option. “A business case should be developed as a first step. This will enable the ability to identify leakages in the system,” he added.
In their report, the World Bank experts recommended that the national and state tariff policy guidelines and regimes have to be improved. There is no clear, transparent, shared, and detailed definition and description of tariff policy and its application in terms of objectives, responsibilities, and methodologies for setting up cost-recovery tariffs, reviewing and indexing them and designing an efficient and equitable tariff structure.
Tariffs should be reviewed for adjustment in terms of both cost recovery and affordability. As of now, the state sets the tariffs. Because low tariffs are considered an important element of social policy, SGs make affordability a key argument for them, but this argument does not match Nigeria’s development situation. Tariffs have not been changed even to account for inflation or the rising cost of energy resources; in some extreme cases they have not been changed for decades.
This results in a financial paradox: even as almost all SWAs get subsidies of some kind, they still provide services below cost, thus subsidising all customers, including public and commercial companies, as they wear out their assets and accumulate debt. For SWAs, it is just technically and financially simpler to continue to provide poor services and remain in deep debt rather than conduct sustainable operations.
The Federal Government should issue clear general guidelines on setting tariffs. The SWAs should then draw on the government guidelines and simplify the structures to send a clear signal to consumers of what their consumption costs are. Preferably, the tariff structure should be a fixed monthly charge for lifeline consumption (say, six cubic meters per month plus connection costs) and then a unit rate for metered consumption above the lifeline allowance.
Metering of both water production and consumption needs to be institutionalised at all SWAs. This will help to get clear performance data; it is also the basis for accurate billing and cost-accounting, water conservation, and demand management. Customers should be considered a potential source of revenue for services rendered. Customers seem to be in a position to pay the SWAs because they are already paying a lot more for alternative sources and self-provisioning.
The coping cost of getting water from alternative water providers is assessed at $700 million a year, and this amount is growing. This flow could be turned into a significant source of financing to cover the costs of investment. SWAs have to prepare for short-term financing and a pipeline of projects.
Most SWAs are operating at the very edge of their ability to serve their current customers. It is important to create a state grant programme using a formula of “reforms-for-investment” where investment grants will be allocated competitively to SWAs that are interested in and ready for reforms, such as corporatisation, universal metering, tariff revisions, coverage of the poor, or other objective and measurable targets. As many SWAs already have shovel-ready projects, the programme can start operating very quickly and bring quick results in terms of stabilising the water sector and generating a new pipeline for investments.
SWAs and SGs together need to prepare for sector medium- and long-term financing for projects. It is important to ensure that the legal standing of the SWAs makes them eligible to seek credit. SWAs should explore access to medium- and long-term financing.