Abstract: Background and Objective: Water is an essential commodity to life. Economists most of the time claim that an increase in price always leads to a decrease in demand. This research is aimed at finding out the impacts of changing water price on consumer demand by using Nsukka as a case study. Materials and Methods: A statistical sampling approach was used in conducting and sharing the questionnaires within the scope of study. Physical observations and field trips were used in addition to the questionnaires to acquire more data for the study. The Midpoint formula for calculating price elasticity was used in calculating the price elasticity of water demand. The target population was the residents of Nsukka that buy water and the water vendors. Results: The results gotten from the questionnaire showed that the price of water changes due to a variety of reasons like the season of the year, the proximity from the source of water to where it is been supplied, festive periods, etc. The law of demand does not seem to apply here in some months of the year, as it was seen that despite an increase in price the demand also increased or remained the same, and vice versa. This means that price has little impact on the demand for water in Nsukka. Conclusion: The price elasticity of water demand for the year was gotten to be 0.89. This value which is less than 1, implied that the demand for water in Nsukka is inelastic which means that despite the changes in price the demand for water remains the same because there is no substitute for water.
INTRODUCTION
The importance of water for sustenance of life, whether it is in use for running our homes, rearing animals and growing crops in our farms or the increased uses in industry, remain immeasurable. It can be seen in recent times that the demand for water has increased at a considerable rate whereas the water resources are been depleted due to the effects of global warming, industrialization and population growth, etc. Nations of the world are beginning to look into the issue of sustaining water resources for the ever increasing population. Water is an essential resource in the production of most types of goods and services including food, energy and manufacturing1.
Water supply (in terms of quantity and quality) at the place where the user needs it, must be reliable and predictable to support financially sustainable investments in economic activities. Around the world, human activity and natural forces are reducing available water resources. Although public awareness of the need to better manage and protect water has grown over the last decade, economic criteria and political considerations still tend to drive water policy at all levels. Water use has been increasing as the global population has risen over the last century. This has minor effect in industrialized nations because of their low birth rates but will keep on escalating in developed nations having higher water consumption rate1-3.
There is serious demand on water resources in virtually all dimensions. These are aggravated by climate change and variations in natural conditions. Each of them has its own specific impact, usually directly on ecosystems and in turn on water resources4.
Effective demand management is now the focus of leading water policy worldwide. This is in recognition not only of the detrimental environmental impacts of increasing water diversions, but also of the cost involved in large scale projects such as desalination; dams and conduits. Leading policy-makers are now turning their attention to improving efficiency before increasing supplies. A variety of mechanisms are being implemented to achieve effective demand management, and these are education and public awareness, water restrictions, sustainable building design and pricing5.
Nsukka is a local government in Enugu state comprising of several communities, which makes the availability of steady water supply a necessity. The government-provided-water- services is not enough for the increasing population, thereby making members of the community to seek out other means of getting water. This leads to the issue of the price at which these water services cost.
This study is important because, it will help the government know the amount people in the community pay for water services and how the increase or decrease in the price affects their demand. The information gotten from this study will bring about awareness to improve water services in communities in Nsukka so, that in the nearby future, members of the community won’t suffer lack of water especially with the issues of global warming. Hence, the main aim of this project is to find out the impacts of changing water price on consumer demand.
MATERIALS AND METHODS
Study area: This field study was carried out in Nsukka, which is a town and Local Government Area in Enugu state, in Southeastern Nigeria (Fig. 1) from January-December, 2018. Towns that share a common border with Nsukka are Eha Alumona, Edem, Alor-uno, Opi (archaeological site), Orba and Ede-Oballa, Obukpa, Obimo. Other nearby towns includes Enugu-Ezike, Ibagwa, Ovoko, Iheaka, Obollo-Afor (formerly centre of the palm oil trade), Nimbo, Adani, Uzo Uwani and Nkpologwu, now also lay claim to the name Nsukka6.
The climate of Nsukka is tropical. The average temperature is 24.9°C. The average annual rainfall is 1579 mm. A wet season is experienced from April to October with the wettest month being June. Also, a dry season is experienced from November to March with the driest month in January, with 10 mm of rain. In September, the precipitation reaches its peak; with an average of 299 mm. March is the warmest month of the year. The temperature in March averages7 27.0°C. The random number tables were used in the distribution of questionnaires to various areas in Nsukka (made up of residents of Nsukka town that buy water), while a particular number was randomly given to water vendors in the chosen areas8-14, resulting in Table 1 and 2. One hundred copies of the questionnaires for the residents that buy water were printed and distributed, while 20 were given to water vendors in the selected areas. A random number table is a series of digits (0-9) arranged randomly in rows and columns. There are two features of a table of random digits. The first being that every digit from 0-9 is just likely to appear in every entry of the table. The second feature is that the entries are independent of each other.
Data analysis and presentation techniques: The research made use of statistical tools for analyzing of the data collected from the field. Descriptive statistics was used because it allows for meaningful description of scores or measurements by using few statistics.
| Fig. 1: | Map of Nsukka20 |
| Table 1: | Random Number Table used to assign numbers to various communities in Nsukka for questionnaire purpose |
| Table 2: | Random number table used to assign numbers to selected communities in Nsukka for questionnaire purpose |
The price elasticity of water demand was also calculated using the Midpoint formula for elasticity.
For this study, the price elasticity of water demand will be calculated using the Midpoint method6,15-19.. The price elasticity is calculated to know how the people respond to a change in price. It is mathematically expressed as:
| (1) |
| (2) |
| (3) |
| (4) |
RESULTS AND DISCUSSION
Questionnaires: Questionnaires (comprised of open ended and structured questions on the issues that are related to the research) printed and given out to residents that buy water in the selected areas of Nsukka and another prepared and distributed to the water vendors in the selected areas, the results are shown in Table 3.
From Table 3, according to Mugenda and Mugenda21, a response rate of 50% is adequate for data analysis and reporting, 60% is good and 70% is very good. For this research the response was above 50% which is good for data analysis.
| Table 3: | Response of the questionnaires |
Questionnaire type one: response from the residents: The response from the residents were collected and due to the bulkiness of the data, the average values for the water price and demand were calculated to represent the variations in water price and demand over a year for residents in Nsukka (Fig. 2).
From the clustered chart, it can be seen that there are various responses to change in price with respect to demand in the different months of the year. This is basically a representation of the data gotten from the questionnaires given to the residents, it can be seen in some months that despite the increase in price, their demand did not reduce, this can be due to the season in which the price increased. It is common knowledge that in dry season there is more consumption of water for drinking, domestic uses and irrigation purposes, etc. So it doesn’t matter what price the water is been sold for, demand for it will most likely remain the same or increase.
| Fig. 2: | Variations in water price and demand |
| Fig. 3: | Water Consumption Sufficiency |
This also goes for festive seasons, Nsukka being a LGA comprising of several communities, there will be an increase in the population because natives of these villages who live in other states and countries will come back to be with their family during the festive period. This increase in population also means an increase in water consumption and for residents that buy water, it means they have to spend more on water at an increased rate.
Questionnaire type two: response from water vendors: The response from questionnaire type two followed the same trend as questionnaire type one. The water vendors are also residents of Nsukka and they also buy the water they sell to other residents. The price they buy water changes in different months of the year, same as the price they sell.
Water consumption sufficiency: This is the result gotten from observation (field survey). In addition to the questionnaires, it was necessary to find out if these water services been bought were actually sufficient for the residents. The pie chart (Fig. 3) above showed the number of people that buy water and the water is sufficient for their daily or monthly consumption and those that have insufficient water. It can be seen that a majority of the population do not have sufficient water for their household, this showed the neglect on the part of the government. There is no way a city as big as Nsukka can fully function without adequate water resources. A majority of the residents have become accustomed to paying for water services and see borehole as a luxury and this should not be so.
Price elasticity of water demand: Price elasticity of water demand is a measure of the degree of change in water demand to the change in price of water22-26. It can be elastic (greater than one) which means with a change in price there is a high change in demand, unitary (equal to one) which means with a change in price there is an equal change in demand or inelastic (less than one) which means with a change in price there is a low change in demand. Usually, price elasticity of demand is elastic (greater than one)22-26, but for some commodities which have few substitutes it will be inelastic (less than one). The results gotten from questionnaire type one (Fig. 2) was used to determine the price elasticity. Since, there are values from January to December, the values that were used for this calculation were the ones for January (beginning of the year) and June (middle of the month).
| Initial quantity (Q1) | = | 1000 ltrs |
| New quantity (Q2) | = | 440 ltrs |
| Initial price (P1) | = | ₦3,500 |
| New price (P2) | = | ₦1,300 |
ΔQ = Q2 - Q1 = 440 – 1000 = -560 ltrs
ΔP = P2 – P1 = ₦1,300 - ₦3,500 = - ₦2,200
| (5) |
Thus, price elasticity of water demand is 0.89 (Eq. 5). This value is less than one which means it is inelastic. This implies that water is an inelastic commodity, there is no substitute for water, so no matter the price at which water is put at, it will still be sought for.
Significance statement: This study discover that the demand for water in Nsukka is inelastic, which means that despite the changes in price the demand for water remains the same, that can be beneficial for planning and managing the water resources of the area. This study will help the researcher to uncover the critical areas of population growth and economic management that many researchers were not able to explore. Thus a new theory on these environmental factors and possibly other combinations may be arrived at.
CONCLUSION
The results gotten from the questionnaire showed that the price of water changes due to a variety of reasons like the season of the year, the proximity from the source of water to where it is been supplied, festive periods, etc. The law of demand does not seem to apply here in some months of the year, as it was seen that despite an increase in price the demand also increased or remained the same and vice versa. This means that price has little impact on the demand for water in Nsukka. The price elasticity of water demand for the year was gotten to be 0.89. This value which is less than 1, implied that the demand for water in Nsukka is inelastic which means that despite the changes in price the demand for water remains the same because there is no substitute for water.
RECOMMENDATIONS
It is recommended that Nsukka local government together with Enugu state government should look into the water production plant and work on it in order to provide a centralized water supply system for the community at large. Also, a uniform tariff can be placed for all residents for the provision of water supply and this tariff can be used to maintain the water production plant and also to sustain and ensure the availability of water all year round.
ACKNOWLEDGMENT
The author thanks immensely Miss L.N. Nnagboro for helping to carry out this research.