A new approach to transport investment appraisal for developing economies : a case study of Lagos, Nigeria

Abstract

There is currently no standardised approach to transport investment appraisal (TIA) that can be applied in developing economies. There is a need to develop economy standards to reduce the reliance on 'traditional' Cost Benefit Analysis (CBA). TIA in developing economies often fails to include the full costs of road accidents, Wider Economic Impacts (WEI) (consisting of indirect benefits from transport investments) and appraisal of monetised and non-monetised impacts. There was an end-user demand to develop a method that improves the presentation and clarity of appraisal results to decision-makers. This facilitated a more efficient selection of the most appropriate transport investments among various options. The shortcomings in the current methodology can lead to less viable transport investments and even a biased view of schemes. This research addresses a clear gap in the appraisal approach for these developing economies. In Nigeria, it has been identified that the transport sector contributes less than 2% to the GDP of the country. There is a need for a new approach to transport appraisal, as the current approach cannot fully capture and improve understanding of the full impacts of essential transport investments. Transport investments can deliver much more transformative and wider benefits for local and regional communities in Nigeria. Overdependence on conventional CBA limits the chances of achieving socio-economic integration and development. The demonstration for the first time in Nigeria and West Africa of this new appraisal framework used a case study of Lagos and a mixed-method research approach was adopted, combining surveys with interviews. This was undertaken to explore the willingness to pay of commuters to reduce their chances of death from road accidents and to estimate the resource cost (human capital) lost by the economy per fatality and injury from road accidents. This research successfully applied the economic valuation methods (Willingness-to-pay and Human Capital) to determine the value of a statistical life for a fatality as $262,005 and $81,656, respectively. This is important as it can be adopted for transport appraisal in Lagos, Nigeria in the future. Also, for the first time in Africa, this research has successfully developed a model that can estimate the indirect wider impacts of transport investments (WEIs) from transport investments for developing economies namely Agglomeration Impacts, Output Change in Imperfectly Competitive Markets and Labour Supply Impacts. Finally, and significantly, this research provides a breakthrough in developing a multi-criteria decision analysis model that forms a holistic approach to TIA, which has not been formally achieved ii and applied in developing economies until now. Direct analysis of the performance matrix was adopted with qualitative and numerical scores to help improve and simplify decision-making. The model is categorised by economic, environmental, and social criteria, combining qualitative (non-monetised impacts) and quantitative (monetised impacts from the CBA and WEIs) assessments and qualitative and numerical scores. This is a clear advance in the stateof-the-art and a significant contribution to knowledge in transport investment appraisal for developing economies.