Costs of Deficient Infrastructure: The Case of Nigerian Manufacturing

As cities in developing countries continue to grow rapidly, the need to meet the increasing demand for urban infrastructure services has become an important policy problem, since failures to respond adequately to such demand affect productivity and the quality of life in those cities. Based on a survey of manufacturing establishments in Nigerian cities, this paper shows manufacturers' responses to the deficiencies of various public infrastructure services and the extent of the costs of private provisions which serve as the alternatives to the firms. From the empirical observations, the authors develop several policy options: (1) regulatory changes to enable fuller utilisation of existing private provision capacities, such as allowing the sale of excess private power supply; (2) private sector participation in the supply of infrastructure services to make such markets contestable; and (3) pricing policies which will be more efficient in the presence of congestion, systems failures and variations in private provisions by firm size and location.