Hydrological-economic linkages in water resource management.

The main objective of this thesis is to improve economic analysis of the hydrological functions of a wetland system and to identify the contribution of these functions in terms of net direct and indirect benefits derived from water use within a geographically defined area. The thesis studies hydrological and economic linkages in the Komadugu-Yobe river basin in Northern Nigeria. The Hadejia-Jama'are floodplain wetlands, lying within this river basin, are under threat by upstream water diversion schemes which could reduce flooding within the wetlands. Using an optimal control framework, trade-offs in terms of benefits lost or gained from changes in water flow are considered in the analysis of development options within the river basin. The results indicate that by including indirect benefits from wetlands in an analysis of the basin wide economic value of water resources, the optimal path of the rate of diversion of water from downstream to upstream areas would be lower. To support the assertion that the indirect benefits of the floodplain wetlands are in fact positive, the second focus of the thesis is to develop and apply two methodologies to value an ecosystem function of the Hadejia-Nguru wetlands. Hydrological studies show that, aside from direct benefits obtained from the wetlands, the annual recharge of the underlying aquifer is an important indirect beriefit of the regular flooding. A partial value of this recharge function is therefore obtained through an analysis of domestic consumption of groundwater resources and dry season agricultural production within the wetlands, based on survey data collected during November 1995-March 1996. Household water demands are modelled using a modified household production function approach and by pooling contingent and observed data to augment information on demand for purchased and/or collected water. The study suggests that the household's choice of a water procurement method is determined by the relative prices of collected and purchased water and by household characteristics. Welfare changes due to hypothetical reductions in groundwater levels are calculated for each household to obtain a value for the groundwater recharge function. A change in productivity approach (alternatively called the production function approach) is used to assess the value of the groundwater used in irrigation. Production functions for agricultural crops are estimated using farm-level data collected by the study. Appropriate welfare change measures are developed and the results of the analysis are used to calculate welfare changes due to hypothetical reductions in groundwater levels. The results of the valuation studies show that the recharge function performed by regular flooding has positive benefits for wetland populations. The failure of the wetlands to provide the present level of recharge would result in a substantial economic loss for wetland populations deriving benefits from indirect uses of the wetlands. This result has important implications for the proposed construction of large-scale dams and diversion schemes in the upstream stretches of the Hadejia and Jama'are rivers. A comparison of welfare loss under various water development scenarios indicates that by reducing the productive potential of direct and indirect floodplain benefits, these upstream developments result in a net loss for society. The maximisation of net direct and indirect benefits across the river basin, as is shown by the economic-hydrological model developed in the study, is therefore a more appropriate planning tool for the management of a spatially linked resource such as water within a river basin.