Proposed Privatization of Water Service Delivery in Lagos: Reviewing the Evidence of Water Utilities Privatization

Abstract

One of the major reform options considered by governments in developing countries to improve financial investment and service efficiency of water utilities is privatization, based on the public-private partnership (PPP) model. Hence, this study reviewed the evidence on the proposed privatization of water service delivery in Lagos State. The study was based on a comprehensive review of the literature on privatization of water utilities. Studies reviewed include case, comparative, cross country and systematic reviews, which were obtained from academic journals, research reports, commissioned studies, conference papers and proceedings. The study revealed that privatizations of water utilities are generally hinged on two major hypotheses: improved performance efficiency and financial investment. However, the literature on public utilities privatization has shown conflicting results on these two major hypotheses, as some empirical studies confirm these hypotheses, while others reject them. The study revealed that the major types of water utility privatizations were lease, service and management contracts, which are not suitable, if the focus is to obtain new sources of financial investment for expanding water network. This shows that privatization of water utility is not a magical solution to an inefficient and poorly financed water utility. Therefore, before the Lagos State Government finally decides to go ahead with the planned privatization of the Lagos Water Corporation (LWC), it should review the available empirical evidence and the major success factors, which may act as barriers to a successful privatization of water service delivery in Lagos.