An Investigation Into Build Operate And Transfer In The Provision Of Hostels

An Investigation Into Build Operate And Transfer In The Provision Of Hostels

Abstract

Inadequate hostel for students in Universities has been of great concern to Government and the University authorities. The Government has been trying to involve the private sector in the provision of hostel through Build Operate Transfer scheme since 2004. Challenges have been faced in implementing the scheme. The aim of the study was to investigate the slow adoption of the University Build Operate and Transfer scheme including readiness to adopt this policy. It also examined the cause of low participation of developers and investors in the BOT scheme. A structured questionnaire was designed and administered to Developers, Student Affairs Division and Physical Planning and Works Department of Federal Universities.

An interview was also conducted with the Infrastructure Concession Regulatory Commission. Data was analysed using Percentages, Mean and Relative Importance Index (RII). The study found that Federal Universities in Nigeria are ready to implement this policy with a readiness assessment score of 3.63 out of 5. Developers are aware and willing to participate in the scheme. The level of private sector participation was found to be low as only 5 BOT projects were identified. Inadequate knowledge and understanding of BOT scheme by prospective developers (RII=0.86); Time and Cost Intensiveness a BOT Project (RII=0.8), Preference for traditional procurement route (RII=0.78) were factors militating against implementation of the scheme by Universities.

High interest Rate on Loans (RII=0.83), Lack of availability of long term loan (RII=0.82), Inconsistent Government policy (RII=0.81) are most important challenges faced by developers in adopting Build Operate Transfer for provision of hostel accommodation in tertiary institutions. The study concludes that ensuring fairness, competitiveness and transparency in the procurement process, standard/rarely altered academic calendar, acceptable rent charges (flexible and adapted for adjustment) and mutual trust are practices that could enhance BOT adoption in hostel provision in Nigerian Universities.

Chapter One

Introduction

1.1 Background of the Study

Education in some developing countries like Nigeria has been suffering from inadequate funding. Poor funding of Tertiary education is seen as an African phenomenon (Onuka, 2004 and Ayo-Sobowale & Samuel, 2011). This lack of funding has been one of the major factors affecting the quality of education in Nigerian tertiary institutions. Babalola (2002) and Samuel (2003) further affirmed that Federal Universities in Nigeria are lacking the financial resources to maintain educational quality in the face of enrolment explosion. UNESCO recommended at least 26% of national budget to educational funding, but Nigeria has not been able to meet that percentage in previous years (Onuka, 2004).

The Federal Government of Nigeria in 2013 established 3 (three) new Federal Universities making the total number of Federal Universities in the country to 40 (Nigerian Universities Commission, 2013). One of the infrastructure problems facing institutions of higher learning in the country is inadequate hostel accommodation for the increasing students‘ population and this has been causing serious concern to the government and university authorities. Hostel accommodation plays an important role in the life of students in Universities. This is because, to get the best result from students, adequate arrangements must be made for their housing/accommodation. According to Okebukola et al,. (2004) in standardized academic communities, hostels in the form of dormitories, residential halls and bedsitting are the forms of residential accommodation developed for students. Ubong (2007) however laments that hostel accommodation is not given the necessary attention in the Nigerian tertiary education institutions.

Government have looking for a way to bring the private sector in to provision of infrastructure. Public Private Partnership is one of the method this could be achieved. Private companies in conjunction with the public sector or one of its branches have therefore introduced this solution which provide a more integrated financial design, construction, maintenance and operational solution to infrastructure in project. According to Bicourtney (2007); ECA (2005); NEPAD (2006), cited in Dahiru and Bala (2008), Build Operate Transfer concept in the context of Public Private Partnership (PPP‘s) has emerged as an important tool for improving economic competitiveness and infrastructure services in Nigeria and other developing countries. The scheme is increasingly being considered as a mechanism to fill the infrastructural deficit in developing countries.

Llanto (2008) described a BOT project as one in which a public sector organisation grants a concession for a period of time to a private company for the development of a project. The private company then builds the project to the specifications agreed, operates and manages the project for a number of years after its completion. This gives the private company the chance to recoup its construction costs and make a profit out of the proceeds coming from the operation and commercial exploitation of the project. At the end of the concession period, the rights of the project company in the project are transferred to the Government or its designee, normally free of any charge. Then the government is free to operate it, or contract its operation to another contractor or even to the same contractor (Argyris, 2003). In Nigeria, besides the on-going privatization programme, there is growing interest by government in using the Build Operate and

Transfer (BOT) system in a variety of infrastructure development ranging from road, tourism and hostel development to power generation (Ibrahim et al. 2007). Infrastructure projects procured using Build Operate and Transfer in Nigeria includes Tinapa business resort, Lekki-Epe express way, Garki II ultramodern market and Murtala Mohammed Airport terminal 2. According to Dahiru (2011) most BOT infrastructure projects fail at procurement stage in Nigeria. The long term nature and the complex contractual structure of a BOT project have proved a challenge to BOT in developing countries (Unido, 1996).

According to Knight Frank Research (2006), that private hostel accommodation provision is not only an investment, but a competitively high returning asset. This experience is seen in stable economies where the hostel market operates around the institutions running non-residential policy and whose academic sessions are rarely altered. His opinion explains why there is high competition for private hostel developments around the tertiary educational institutions in Nigeria in recent years. There is sufficient land to provide hostel within most universities (Edet, 2012). Private sector providing hostel would help in utilising this undeveloped lands. With the security challenges experienced in the country, parents, guardians and students prefer on-campus accommodation for safety and security. According to Onyike and Uche (2010), institutional owned hostels in Nigeria are overcrowded and poorly maintained. Private on-campus hostel would be better maintained and the universities would be able to regulate prices.

1.2 Statement of the Research Problem

There is rapid growth in admission intake every year due to sudden rise in student population. Lack of funds is making it difficult for Government and Universities to provide enough hostel accommodation for student. On-campus hostels are less available to students at tertiary institution. The report by the presidential committee on critical needs of Nigerian Universities stated that only 111,509 (8.9%) of the total student population of 1,252,913 students across 61 public universities are accommodated on campus (Edet, 2012).

Alaka et al. (2012) lament on the overcrowding in hostels in Nigerian universities and this has mounted pressure on the facilities. The conditions of most hostels in Nigerian universities to provide suitable accommodation congruent to students‘ academic pursuits are at their worst decline (Muhammad et al., 2014). Okebukola et al., (2004) observed that the inability of the university management to increase their accommodation capacity as student population increase annually has increase the room occupancy ratios, up to 10 students per room.

In 2004 the estimated cost of meeting the shortfall in student accommodation alone in Federal Universities was estimated at ₦63.19 Billion (Sulaiman, 2004). It is obvious that government will find difficult to do it alone. Esenwa (2003) adds that given the rate at which additional hostel facilities were provided in the Federal Universities in Nigeria, private sector intervention is needed to solve this problem. The government of Nigeria in encouraging private developers to go into hostel development and management gave a directive through the Federal of Ministry of Education in 2004 relieving Federal Universities of the duty of provision of student hostels. The directive was with a view of restoring an atmosphere conducive for learning in all Nigerian universities by providing decent accommodation (Muhammad et al., 2014). But the policy has not increased the number of hostels on university campuses. Private sectors constitute less than 1% of all on-campus hostels across public universities (Edet, 2012).

According to Iyizoba (2009) the government’s attempt to attract private sector in the provision of hostel accommodation under the Build Operate and Transfer (BOT) scheme has been a failure. Zaki (2011) concludes from his research that university hostel development scheme under the Build-Operate –Transfer scheme is economically viable and promise to be profitable to developers who engage under the scheme. But investors and developers haven‘t been able to participate in the scheme.

1.3 Justification of the Study

Several students‘ unrest demanding the provision of adequate hostel accommodation on their campuses has been witnessed. Yet, the problem of the hostel accommodation still lingers in our institutions till date. Sulaiman (2004) also asserts that lack of hostel accommodation is usually one of the major causes of student unrest in our institution of higher learning. This takes the form of riot, which result in destruction of property and sometimes loss of lives.

The greatest change witnessed in the Nigerian tertiary education system has been the explosion in student populations and in the number of aspirants seeking university admission. The total student enrolment in all Nigerian universities grew from just over 2,000 in 1962 to over 500,000 in 2002 (Okebukola, 2003). According to the Joint admission and matriculation Board (2013) 1,644,110 sat for the Unified Tertiary Matriculation Exams (UTME) in 2013. As student population and intake grows annually, researches on how to solve the problem of hostel accommodation is imperative. All economic indices confirmed that the private sector participation in hostel development promises to be viable and sustainable (Sulaiman, 2004).

The private sector was invited to get involved in the provision of hostel accommodation through participation in the Federal University Hostel Development and Management Initiative introduced in 2001. Many tertiary institutions have not been able to explore BOT as a solution to the problem of hostel accommodation shortages in their institutions. It therefore justify why the slow adoption of Build-Operate-Transfer in provision of Hostel accommodation in Tertiary institution in Nigeria should be thoroughly investigated.

1.4 Aim and Objectives

1.4.1 Aim

The aim of the study is to investigate the adoption of Build Operate Transfer in providing Hostels Accommodation in Nigeria Federal Universities with a view to enhancing its adoption in finding a sustainable solution to the prevalent shortage of hostels accommodation.

1.4.2 Objectives

The objectives are:

1. To articulate the principle and procedures used in provision of hostels accommodation through Public Private Partnership arrangement with special emphasis on Build-Operate and Transfer (BOT).
2. To assess the level of private sector participation in hostel provision through
   Build-Operate and Transfer (BOT). iii. To assess the Readiness of Federal Universities to implement BOT in providing hostels accommodation.
3. To investigate the factors militating against the application of BOT in providing hostel accommodation in Nigeria Universities.
4. To seek ways to improve the adoption of BOT in providing hostels accommodation.

1.5 Scope and Limitations

1.5.1 Scope

The scope of the study is to investigation of Build-Operate and Transfer in providing hostel accommodation in Nigeria Universities. Only federal universities in the northern Nigeria were considered. Result from pilot survey shows that there is slow adoption of Build-Operate and Transfer (BOT) in provision of hostel in Federal Universities in Northern Nigeria.

1.5.2 Limitations

The security challenge being faced in the country couldn‘t allow the researcher travel to some part of Northern Nigeria. Some universities and developers were not cooperative; the response rate would have been higher.

Chapter Five

Summary, Conclusions and Recommendations

5.1 Summary of Findings

The research investigated Build Operate Transfer for provision of hostel Accommodation in Nigerian Universities.

The study concentrated on Developers and Universities in Northern Nigeria. Highlight of the major finding are as follows;

1. Universities (Student Affairs Division and physical Planning/Works Dept) are aware of Build Operate Transfer for provision of student hostel in Universities as 91% show awareness.
2. Nigerian universities are ready to use/ implement Build Operate Transfer in provision of hostels on their campus. The readiness assessment score of 3.63 out of 5 shows that.
3. Only Five universities have gone into Build Operate Transfer for provision of hostels within the study area. Ahmadu Bello University Zaria, University of Ilorin, Bayero University Kano, Federal University of Technology, Minna and University of Maiduguri. Only one projected was found to be completed and has commenced operation.
4. Inadequate knowledge and understanding of BOT scheme by prospective developers (RII=0.86), Time and Cost Intensiveness a BOT hostel Project (RII=0.8), Preference for traditional procurement route in procuring hostel (RII=0.78) according to universities are the most significant factors militating against rapid adoption of BOT for hostel provision in universities.
5. Standard and rarely altered academic calendar (RII=0.84), acceptable rent Charges (RII=0.84), revenue guarantee (RII=0.84) are practices that can encourage the use of BOT according to Universities.
6. Majority (95%) of the developers are aware of the shortage of student accommodation in tertiary institutions.
7. 75% of developers perceive investment in Build Operate Transfer in the development of hostel as a feasible and viable business option and are willing to explore it.
8. Private developers‘ level of participation in provision of hostel accommodation is low. As 60% of developers perceive their participation as low
9. Private developer participation in the development of Hostel through Build Operate transfer is low as only five projects were identified. Only one has been completed within the study area. Which is low compared to the number of universities within study area. No record was found on any BOT hostel project in the Infrastructure Concession Regulatory Commission. ICRC is the custodian of all concession agreement in the country, it is surprising that that BOT hostel projects where identified and records can‘t be found in the ICRC archive.
10. High interest rate on loans (RII=0.83), lack of long term loans (RII=0.82), inconsistent government policy (RII=0.81) and time and cost intensiveness of a BOT hostel project (RII=0.81), are most important challenge faced by developers in exploring Build Operate Transfer for provision of hostel accommodation in tertiary institutions.
11. Developers perceive that government providing subsidy (RII=0.86), ensuring procurement clarity, fairness and transparency (RII=0.86), standard/ rarely altered academic calendar (RII=0.84), Acceptable rent charges (flexible and adapted for adjustment) (RII=0.84) would enhance Developers and investors participation in BOT for hostel provision in Nigerian universities.

5.2 Conclusions

Based on the results obtained in this research, the following conclusions were drawn.

1. The level of private sector participation in providing hostel accommodation in Nigeria tertiary institutions using BOT was found to be low.
2. Nigeria Universities are ready to use BOT in providing hostel accommodation.
3. Factors militating against the application of BOT in providing hostel accommodation in Nigerian Federal Universities are Time and cost intensiveness of BOT hostel project, high interest rate and non-availability of avenue of obtaining long term loan, inconsistent government policy and inadequate knowledge and understanding of BOT scheme by prospective Developers.
4. Practices that will enhance the application of BOT in provision of hostel accommodation are standard/ rarely altered academic calendar, Acceptable rent charges (flexible and adapted for adjustment), Revenue guarantee, and ensuring procurement clarity, fairness competitiveness and transparency, and mutual trust.
5. Finance was found to be one of the major causes of failure or abandonment of Build Operate Transfer in the provision of hostels in Nigerian universities.

5.3 Recommendations

Based on the result of the findings from the research work, observations and conclusion, the study proffer the following recommendations with the aim of improving or encouraging adoption of Build Operate Transfer in provision of hostel accommodation in Nigerian tertiary institutions.

1. The Infrastructure Concession Regulatory Commission and the Federal Ministry of education should organise seminars workshops and symposium to enlighten and educate management of universities, student, investors, developers and the general public on Private Public Partnership especially BOT for provision of hostels. So that the role of everyone in making it a success would be known. The study also recommends change in attitude among stakeholder especially developers on long term investment in Nigeria.
2. The Central Bank of Nigeria should use tight monetary control measure to stimulate growth in the economy and encourages lending to the real estate sector at single digit interest rate (using discriminatory interest rate). iii. The Nigerian Government could also introduce an intervention fund for BOT available at low interest rate for lending to investors and developers. iv. Government can give incentives and finance support mechanisms such as tax break or exemption, support loans, access to cheap loans, subsidies to developers and revenue guarantee to encourage developers and investors to invest in this part of the real estate sector.
3. Universities authorities should set up a committee comprising of representative of student, academic and non academic staff, works and physical planning department, student affairs, legal and academic planning on BOT for provision of student hostel. The institutions equity contribution should go beyond provision of land to include some financial commitment to reduce the developer‘s loan requirement, in view of the large capital required for a BOT hostel project.
4. Developers should be innovative and also input sustainable principles in design and construction of these hostels. To help in reducing construction and maintenance cost.

5.4 Contribution to Knowledge

1. The study contributed to proper understanding of the slow adoption and implementation of the University BOT scheme.
2. The study found out that finance and long term nature of BOT hostel investment as major challenges of application of BOT in hostel provision in Nigeria.
3. Areas to enhance application of Build Operate Transfer in provision of hostel in universities were identified as Standard and rarely altered academic calendar, ensuring fairness, competitiveness and transparency during procurement and mutual trust.

5.5 Recommendation for Further Research

1. Framework for financing BOT for hostel provision can be developed.

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