BUILD-OPERATE TRANSFER (BOT) FACTORING METHOD:A FINANCING SCHEME FOR CONSTRUCTION PROJECT
BUILD-OPERATE TRANSFER (BOT) FACTORING METHOD:A FINANCING SCHEME FOR CONSTRUCTION PROJECT
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Date
1998-07
Authors
PETER, KUROSHI A.
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Abstract
Public Sector Construction projects In Nigeria are usually beset with
the problem of finance; quantum reduction and erratic releases of
cash are common. It is usual to find that the projects fall into the category
of start and stop or non-commencement, despite budgetary allocations.
The use of alternative means of financing some of these projects is an
imperative. And the aim of this study is to present one of such alternative,
I.e. the BOT-Factoring method.
BOT have been a well tried method of construction project financing by
Governments. A scheme where Private Sector resources are used in executing
Public Projects.
An appraisal of a project for a BOT scheme, involves the following:
(i) estimating the project's cost,
(ii) income estimation and the determination of the project's economic
viability,
(iii) determination of the concession period, and
(iv) establishment of a safeguard. These constitutes the framework
of the study.
BOT schemes affords a Project Owner the opportunity to embark on a
project whose financial requirements are beyond the project owner's capacity.
The funds for a BOT project are usually long-term loans sourced from
the Private Sector. - vliThis
study has identified inadequancy of long-term loans in the Nigeria's
financial, market as a constraint for an effective BOT scheme. Thus, harmonising
the benefits of BOT and Factoring is believed will address this constraint.
The benefits of Factoring; viz, cash advancement and debt collection
have been applied in developing the BOT-Factoring concept.
Simple economic analysis was carried out, to determine the suitability
of the concept. The analysis is against the backdrop of the basic requirement
of free market economy where project selection largely depends on numerical
indicator's of the project costs and returns based on market prices i.e
the prices at which goods and services are traded.
The application of the concept was upon the basic premise of the cash
situation of a project.
It is here concluded that benefits of BOT-Factoring include the use
of cash resources other than the Project Owner's own funds and the accommodation
of erratic time of cash release that will cause time-overun during project
execution.
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Keywords
BUILD-OPERATE TRANSFER (BOT), FACTORING METHOD:A FINANCING