Quantity Surveying Project Topics

Project Financing: Challenges and the Way Forward

Project Financing Challenges And The Way Forward

Project Financing: Challenges and the Way Forward

Chapter One

Aim and Objectives

The aim of this study is to investigate the challenges of project financing on construction projects in Akwa Ibom state and to examine ways of mitigating project financing in Akwa Ibom State. The specific objective includes:

  1. To identify the sources of project finance.
  2. To investigate the challenges of project financing in Akwa Ibom State.
  3. To examine various ways of mitigating the challenges of project financing in Akwa Ibom State.

CHAPTER TWO 

LITERATURE REVIEW

 INTRODUCTION

Globally, construction project infrastructure has been identified as a major driver for the improvement of the standard of living (Global Insight, 2013). The infrastructure gap that exists in developing countries further makes the need to provide infrastructure a pressing one. However, construction projects in developing countries are mostly unable to complete because of financing problems. For example, Oyedele (2013) observed that construction project finance is a major bane in developing countries and must be addressed if any meaningful development is to take place. Several methods of traditional financing of construction projects exist (i.e. Open Tendering, Selective Tendering, etc.). Surprisingly, they appear not to yield the expected results.

The Traditional sources of finance of construction projects in developing countries usually are wholly from taxation, subvention, etc. by the public. Unfortunately, the increasing accumulated infrastructure debt in Nigeria (Badu et al., 2012) and other developing countries suggests a more alternative and innovative methods of financing construction projects. Improving infrastructure financing is exigent, thus requiring a holistic approach to the issue.

This chapter seeks to give an insight on the various aspects of the project topic to give an in- depth understanding of the research area. The chapter starts with an overview of the construction industry, financing of projects in the GCI and the options available; financial engineering in the GCI, etc. The review attempts to cover at length the inherent challenges to financial engineering implementation in the GCI, derivatives of financial engineering whilst mitigating the challenges.

 OVERVIEW OF THE CONSTRUCTION INDUSTRY

Generally, construction of physical facilities makes up about half of the Gross Domestic Product and these tend to be concentrated on basic infrastructure in mining, transportation, etc. The contribution of the construction industry to Gross Domestic Product (GDP) and thus the development of economies has been explored by many researchers (Enshassi et al., 2007; Anaman and Osei-Amponsah, 2007; Xue et al., 2008; Enshassi et al., 2009; Hammad et al., 2011; Choy et al., 2011). Consequently, the industry has been identified as a locomotive for development (Kumaraswamy, 2006 cited from Enshassi et al., 2009) given the percentage of labour it employs directly and indirectly (Anaman and Osei-Amponsah, 2007). The industry does so by mobilizing and effectively utilizing local human and material resources in the development and maintenance of infrastructure to promote indigenous employment (Anaman and Osei- Amponsah, 2007). Also, the other sectors depend on the construction industry for performance (Oyedele, 2013).

The construction industry is the sector of the economy that ,vengages in the preparation of land, creation, renovation, repair or extension of fixed assets in the form of buildings, land improvements of an engineering nature and other such engineering constructions such as bridges, projects and dams (Oyedele, 2013; Anaman and Osei-Amponsah, 2007). Accordingly, construction projects usually involve the design and build of new structures (Zwikael, 2009). Despite the considerable potential and the vital role the sector plays in achieving economic balance and social development, few national development plans unequivocally consider the construction sector in relation to other sectors (Moavenzadeh and Rossow, 1976). This is very predominant in developing countries where most of the development plans are explicitly on the development of public sector.

The construction industry in Nigeria has experienced a steadily growth since 1970 (Nigeria National Commission for UNESCO, n.d.). The Industry is one of the major economic sectors in Nigeria and the third largest contributor to Gross Domestic Product (GDP) overtaking the Manufacturing Industry (Anaman and Osei-Amponsah, 2007). The sector also experienced a 10% growth in 2008 and a negative growth rate of 1% as a result of the global economic recession according to the Nigeria National Commission for UNESCO report (n.d.). Several attempts have been made by governments to improve the sector owing its importance to economic development. Palpable among the attempts are the creation of ministries and subsidiaries to oversee the activities of the industries (see for instance Nigeria National Commission for UNESCO, n.d.). For example the Ministry of Projects and Highways (MRH) with the support of its subsidiaries (i.e. Nigeria Highway Authority, Department of Feeder Projects and Department of Urban Projects) is mandated to provide and maintain a safe, reliable and efficient project infrastructure to promote economic growth.

 

CHAPTER THREE

 RESEARCH METHODOLOGY

 INTRODUCTION

In order to achieve the research aim and objectives, this chapter presents the philosophical assumptions underpinning this research as well as finding the best methodology to answer the research questions raised. This chapter threw more light on the research strategy, research design and development process used prior to administering the questionnaires. The chapter also defined the sampling technique and the characteristics of the sample size; including the statistical tools adopted for the data analysis.

 RESEARCH STRATEGY AND DESIGN

In order to answer the research problem, it is of paramount essence to technically disentangle relationship between or among variables in a situation and analyze the relationship devoid of external influences (Nenty, 2009). Consequently, Nenty (2009) opines that research design involves the procedures through which we can explore and analyze the relationship among the variables involved in our problem and consequently to argue the preference of particular procedures over others. Thus research design is a master plan that shows how the research is to be conducted. However, this research adopts a questionnaire survey in an attempt to examine the innovative financing approaches to project construction delivery. According to Janes (1999), the only available way of getting the current picture of a group, profession, organisation, etc. is a survey. Consequently, Cresswell (2005) cited in Ayyash et al. (2011) argues that survey helps to provide trends in the population. In addition, survey questionnaire has been identified to be less expensive and not time consuming to conduct (Ayyash et al., 2011).

The explanation to the direction of the researcher towards the conduct of research is very imperative (Bryman, 1992; Baiden, 2006). Naoum (1998) defines research strategy as the enquiry of research objectives. Accordingly, Baiden (2006) asserted that, the three main types of research strategies are quantitative, qualitative, and triangulation. However, the choice to adapt any particular strategy depends on the purpose of the study, the type, as well as availability of information for the research (Naoum, 1998 cited from Baiden, 2006). Hence, this research adapts a quantitative strategy.

 POPULATION, SAMPLING AND SAMPLING TECHNIQUE

Population in research methodology is understood to be objects, subjects, phenomena, cases, events or activities specified for the purpose of sampling (Brynard and Hanekom, 2005). Also, Population refers to a group or units of interest located in a geographic area of interest during the time of interest (Taylor-Powell, 1998). Consequently, this research focused on the construction industry in the Abuja and Lagos Metropolises with spotlight on the project construction industry.

The population in this study was the stakeholders in the project construction industry – Public sector, Private sector, Contractors, among others. Sample refers to using a part to represent a whole. However, Taylor-Powell (1998) argued that sampling may not be necessary if the population is small. Notwithstanding, Owing to the nature and kind of information needed; and also the resources available for this research surveying the entire population is not feasible. Accordingly, sixty stakeholders were targeted.

Purposive sampling was used to select the sample within the population. Purposive Sampling is a sampling technique whereby the researcher decides who to be engaged in the research. This was selected because it allows information-rich issues that are important to the study to be added and also focus on specifics rather than general (Tuuli et al., 2007; Taylor-Powell, 1998). The choice was based on contractors with project construction experience, specifically those in the A1 and A2 and D1K1 and D2K2; private sector with relative experience in project financing and the public sector in charge of delivering project projects. It is considered that people with such knowledge shall contribute immensely to the problem at hand.

CHAPTER FOUR

DATA ANALYSIS AND DISCUSSION OF RESULTS

 INTRODUCTION

This chapter presents the analysis of the primary data collected from the forty-three (43) project construction stakeholders (i.e. Contractors, Consultants, Public Sector and Private Sector) in Nigeria in the Abuja and Lagos Metropolises. Respondents were purposively sampled from various project construction stakeholders in the aforementioned metropolises. This chapter provides the analysis and discussion of the data collected to explore innovative financing of urban project projects in Nigeria. The analysis is hinged on the objectives of the study, that is, to identify the inherent challenges to innovative financing of urban project projects in Nigeria, to examine the drivers of innovative financing of urban project projects.

This chapter also presents the results of the analysis and discussions in the form of texts, figures and Tables. The chapter is organized as follows; Background information of Respondents and analysis of dependent variable. Out of the sixty (60) questionnaires administered, forty-three (43) were completed and returned representing 71.67%. The analyse was based on the 71.67% questionnaires completed and returned. The high response rate of 71.67% can be attributed to the fact that questionnaires were administered and successive follow-ups thereafter.

CHAPTER FIVE 

CONCLUSION AND RECOMMENDATION

 INTRODUCTION

The huge deficit in urban projects network and constraints on government fiscal budgets call for a paradigm shift in the financing of project projects in Nigeria. The study sought to explore innovative financing mechanisms to urban project projects in Nigeria. Through the review of extant literature, several factors were identified including barriers, drivers, innovative approaches of procurement, and ways of improving the situation. Adopting the quantitative research approach a questionnaire survey was employed to examine the identified factors by respondents with diverse background. The previous chapters presented the theoretical underpinnings of the study, procedures for addressing the research theme, analysed and discussed the results of the study. Finally, this chapter presents the findings of the study in relation to the laid out objectives of the study. Recommendations from the study are put forth. The study limitations and directions for future research are also presented

 ATTAINING THE RESEARCH OBJECTIVES

The study was articulated to achieve a particular aim that is to explore the sustainable innovative ways of project project financing in the Nigerian construction industry. To realise the above aim, specific objectives were set. The objectives of the study include:

  1. To identify the current state of project financing in
  2. To identify the inherent barriers to sustainable innovative financing of project projects in the Nigerianconstruction industry; and
  • To identify the drivers to sustainable innovative financing of project projects in Nigeria.

 RECOMMENDATIONS

The current strain on public budget makes it more important to find innovative approach to arresting the current urban project deficit in Nigeria. This formed the basis for this study.

Consequently, the findings from the study inform the following recommendations to be put forward. These recommendations include:

  • It has been noted over the years that the few infrastructure projects delivered through innovative financing were not realised using competitive bidding. The result has always been cost not meeting budget. The findings indicate that if competitive bidding is adopted for such projects, there is the possibility of getting value for money and quality is also assured.
  • Most of the projects also have not been transparent. Full details have not been disclosed to citizens. Communities affected have not been engaged and listened to. The end results usually are demonstration among others, which all lead to project cost and time overruns. It is thus recommended that there must be public engagement, since it has been established to aid in the achieving of desired

 LIMITATION OF THE STUDY

As with any research endeavour this study also had certain limitations. The study was limited geographically to only Abuja and Lagos in the Greater Abuja and Ashanti region respectively. Thus the sample used for the study was affected. There was the possibility of the mean values being affected if the sample size was increased.

REFERENCES

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