This paper models the economic and hydrological impacts of upstream water diversion on downstream floodplain activities. The model is illustrated and applied to the example of the Hadejia-Jama'are River Basin, northern Nigeria. Full implementation of all the upstream dams and large-scale irrigation schemes in the river basin would produce losses of US$20.2–20.9 million in present value terms in terms of flooplain agriculture, forestry, and fishing. The associated annual losses from declining groundwater levels in surrounding areas would be around $1.2 million for tube well irrigation and $4.76 million for domestic water consumption. The introduction of a regulated flooding regime for upstream dams would probably protect the groundwater recharge function of the downstream floodplain and reduce substantially the losses to agriculture, forestry, and fishing to around $15.4–16.5 million.
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 The following study is concerned with the allocation of water upstream and its impacts on economic activities downstream. First, the basic hydrological and economic issues of upstream water diversion are reviewed. Then a model of upstream water diversion with downstream impacts is constructed. The model is illustrated with the example of the Hadejia-Jama'are floodplain in northern Nigeria, in which the downstream losses from dams and other barrages constructed upriver include agricultural production, fishing, and fuelwood collection as well as the impacts on the recharge of shallow aquifers that are important for dry-season irrigation and water use by villages located outside of the floodplain.
 The Hadejia-Jama'are case study illustrates that the economic costs of upstream water diversion can be substantial, particularly in a semiarid environment where downstream uses of water are critical to the economic livelihoods to a large number of rural households. Unfortunately, in northern Nigeria the construction of dams and other water projects upstream have already affected irreversibly the hydrology of the Hadejia-Jama'are floodplain. Some of these impacts could be mitigated by the implementation of regulated flood regimes that would reduce some of the downstream economic losses with little impact on upstream water uses. As this case study demonstrates, it is imperative that such a management plan is implemented as soon as possible.
2. Hydrological, Ecological, and Economic Issues of Upstream Water Diversion
 Lower catchment rivers and ecosystems in a drainage basin receive their water discharge and nearly all their sediment from the upper watershed, and over long periods of time, adjust and adapt to these flows of water and sediment from the upper catchment [Wilcock, 1993]. In Africa, one of the most significant downstream riparian ecosystems in river basins are the seasonally inundated savanna or forested floodplains. These “wetland” ecosystems are relatively flat areas adjacent to rivers created by sedimentary deposits of meandering channels as well as periodic flooding. During seasonal flood events, water often leaves the main river channel and inundates a floodplain. Water velocity decreases across the floodplain owing to lower flows and increased friction from the land surface [Cech, 2003]. As this occurs, sediment rapidly falls out of the floodwater and is deposited. These alluvial deposits make for extremely fertile soils, which have been exploited for centuries in many regions of Africa by traditional “flood recession” agriculture. That is, as the floods abate and recede, crops are planted in the naturally irrigated soils.
 Around half of Africa's total wetland area consists of floodplains, and they include famous, large-scale examples that cover several thousand square kilometers such as the Inner Niger Delta in Mali, the Okavango Delta in Botswana, the Sudd of the Upper Nile in Sudan and the Kafue Flats in Zambia [Lemley et al., 2000; Thompson and Polet, 2000]. There are also many smaller and less well-known floodplain systems that are locally important.
 Africa's floodplains typically serve as critical habitat for birds, including wintering grounds for migratory species, and the availability of water in many floodplains during the dry season is an important resource for grazing wildlife. Millions of people across the continent are also dependent on the floodplains for their economic livelihoods. Production activities dependent directly on the floodplains include agriculture, fishing, grazing and wood and nonwood harvesting of riparian forest resources [Adams, 1992; Scudder, 1991]. In many instances, the uses of these wetlands are integrated with those of surrounding semiarid, or “dry lands”, and thus floodplains have an economic importance beyond the initial areas inundated [Scoones, 1991]. Hydrologists also maintain that floodplains in some semiarid regions may also recharge groundwater resources in surrounding areas [DIYAM, 1987; Thompson and Hollis, 1995].
 By influencing transfer of water and sediment downstream, economic activities and developments in upstream areas can drastically affect both the inundation area of a floodplain and its crucial ecological functions. This will in turn impact on the various economic activities that may be dependent on the floodplain. For example, diversion of upstream water supplies for irrigation, water supply, flood control and hydroelectricity generation will interrupt the continuous downstream transfer of water and sediment which would otherwise take place. The result is a change in channel flow regime and morphology, sediment transport rates, water quality and water temperatures, which will have dramatic consequences to the ecology of lowland river ecosystems and floodplains [Wilcock, 1993]. If the latter disruptions have a negative impact on downstream economic activities, such as irrigated agriculture, fishing and recreational activities, then there could be significant costs involved.
 Thus, in the presence of significant environmental impacts, the net benefits of a development project or program cannot be appraised in terms of its direct benefits and costs alone. The forgone net benefits of disruption to the natural environment and degradation must also be included as part of the opportunity costs of the development investment.
3. Upstream Water Diversion
 Upstream water diversion is clearly an example of a unidirectional economic externality. Water that is diverted upstream means less water downstream, and the result is that upstream activities benefit at the expense of downstream activities. Determining the optimal level of water diversion between upstream and downstream uses is therefore a critical issue. A simple production function model of a river basin can illustrate this important water allocation choice.
 For example, consider a river basin in which there are two competing uses for water flowing through the basin: water diverted upstream for irrigated agriculture and water flowing downstream for natural floodplain agriculture. Thus floodplain agricultural production is entirely dependent on the stock of water available downstream and ‘stored’ in the naturally occurring floodplain. This downstream water supply, W, is freely available to the agricultural system, which uses a fixed proportion of it, kW. Output per hectare in the agroecosystem, h1, is therefore a function of the available water stock, W, and a vector of other inputs, z1 (e.g., labor, purchased inputs, etc.). Assuming that the agricultural system produces for a market in response to a given market price, ph, and faces a vector of given input prices, c, the discounted economic returns of present and future production in the agroecosystem can be represented as
where δ is the rate of discount and T is the time period over which the downstream agroecosystem is in operation.
 However, the continuous diversion of water for upstream projects, such as irrigation or water supply, reduces the flow of water through the watershed and drainage basin, directly affecting the supply of water available downstream for the floodplain. This diversion can be represented by:
Thus d represents the amount of water diverted each period by upstream projects, and hence the amount of water no longer available for the stock of downstream supply, W. If it is assumed that water in a river basin is being continuously diverted upstream for an irrigated agricultural system, then the discounted returns per hectare for this system, V2, may take the following form
where agricultural yield, h2, is presumed to be an increasing function of both current water diversion, d, cumulative diversion into the upstream irrigation network, ∫ddt, and variable inputs, z2. Output is sold at the given market price for irrigated crops, ph, and cost of inputs is c. In this simple example, it is assumed that there is no user charge imposed on the agricultural system for the irrigation water supplied through the upstream water project. In what follows, for simplicity, the fixed costs of establishing the upstream water project and irrigation will also be ignored.
 In this case, the economic externality problem arises because any farmer benefiting from the diverted irrigation from the upstream water project is unconcerned about any resulting impacts on downstream water availability. For example, it is clear from equation (3), that the economic agent would maximize discounted returns by choosing a rate of water diversion, di, in each period t, that would satisfy the following condition
i.e., from the standpoint of the upstream irrigation farmer, optimal diversion of water to the upstream irrigated agricultural system in every time period should occur until there are no more gains to be had from using additional water inputs.
 In contrast, if there was a single river basin planning authority, this agency would be concerned with maximizing not only the returns to upstream irrigated agriculture, e.g., equation (3), but also the returns to the downstream agroecosystem as well, e.g., equation (1). Denoting λ as the costate variable, or ‘shadow price’, of the downstream water supply, the current value Hamiltonian, H, and relevant first order conditions of concern to the river basin authority might be:
 In comparison with (4), the first order conditions in (5) show that the optimal rate of water diversion for the entire river basin occurs where the marginal benefit to upstream irrigated agriculture of diversion equals the shadow price, or value, of water supply to the downstream agroecosystem. By definition, λ(t) is the imputed value of the downstream water stock, W, in terms of the net returns to the agroecosystem in the lower catchment. As this shadow value is positive, and is likely to be increasing over time as W is depleted, then the optimal rate of diversion, d*, for the entire watershed and drainage basin will be less than the rate, di, that an upstream farmer would decide on his or her own.
 Consequently, the valuation problem facing the river basin planner is to determine the contribution of the available downstream water to the returns to the lower catchment agricultural system, and how these returns might change over time as more water is diverted to the upstream project. As the following example indicates, overcoming this incentive problem and ensuring an optimal rate of diversion in a river basin system is particularly difficult if plans and development for upstream water diversion are already well advanced.
4. Case Study: Hadejia-Jama'are River Basin, Northern Nigeria
 In northeast Nigeria, an extensive floodplain has been created where the Hadejia and Jama'are Rivers converge to form the Komadugu Yobe River, which drains into Lake Chad (see Figure 1). Although referred to as wetlands, much of the Hadejia-Jama'are floodplain is dry for some or all of the year. Nevertheless, the floodplain provides essential income and nutrition benefits in the form of agriculture, grazing resources, nontimber forest products, fuelwood and fishing for local populations [Thomas and Adams, 1999]. The wetlands also serve wider regional economic purposes, such as providing dry-season grazing for seminomadic pastoralists, agricultural surpluses for Kano and Borno states, groundwater recharge of the Chad Formation aquifer and many shallow aquifers throughout the region, and “insurance” resources in times of drought [Hollis et al., 1993; Thompson and Hollis, 1995]. In addition, the wetlands are a unique migratory habitat for many wildfowl and wader species from Palaearctic regions, and contain a number of forestry reserves [Hollis et al., 1993; Thompson and Polet, 2000].
 However, in recent decades the Hadejia-Jama'are floodplain has come under increasing pressure from drought and upstream water developments. The maximum extent of flooding has declined from between 250,000 to 300,000 ha in 1960s and 1970s to around 70,000 to 100,000 ha more recently [Thompson and Hollis, 1995; Thompson and Polet, 2000]. Drought is a persistent, stochastic environmental problem facing all sub-Saharan arid and semiarid zones, and the main cause of unexpected reductions in flooding in drought years. The main long-term threat to the floodplain is water diversion through large-scale water projects on the Hadejia and Jama'are Rivers. Upstream developments are affecting incoming water, either through dams altering the timing and size of flood flows or through diverting surface or groundwater for irrigation. These developments have been taking place without consideration of their impacts on the Hadejia-Jama'are floodplain or any subsequent loss of economic benefits that are currently provided by use of the floodplain.
 The largest upstream irrigation scheme at present is the Kano River Irrigation Project (KRIP). Water supplies for the project are provided by Tiga Dam, the biggest dam in the basin, which was completed in 1974. Water is also released from this dam to supply Kano City. The second major irrigation scheme within the river basin, the Hadejia Valley Project (HVP), is under construction. The HVP is supplied by Challawa Gorge Dam on the Challawa River, upstream of Kano, which was finished in 1992. Challawa Gorge also provides water for Kano City water supply. A number of small dams and associated irrigation schemes have also been constructed or are planned for minor tributaries of the Hadejia River. In comparison, the Jama'are River is relatively uncontrolled with only one small dam across one of its tributaries. However, plans for a major dam on the Jama'are at Kafin Zaki have been in existence for many years, which would provide water for an irrigated area totaling 84,000 ha. Work on Kafin Zaki Dam has been started and then stopped a number of times, most recently in 1994, and its future is at present still unclear.
 Against the benefits of these upstream water developments must be weighed the opportunity cost of the downstream floodplain losses. Economic valuation studies have focused on three types of floodplain benefits that are likely to be most affected by impacts on the floodplain: (1) flood-recession agriculture, fuelwood and fishing in the floodplain [Barbier et al., 1993], (2) groundwater recharge that supports dry season irrigated agricultural production [Acharya and Barbier, 2000], and (3) groundwater recharge of domestic water supply for household use [Acharya and Barbier, 2002].
4.1. Impacts on Flood-Recession Agriculture, Fuelwood, and Fishing
 A combined economic and hydrological analysis was recently conducted to simulate the impacts of these upstream projects on the flood extent that determines the downstream floodplain area [Barbier and Thompson, 1998]. The economic gains of the upstream water projects were then compared to the resulting economic losses to downstream agricultural, fuelwood and fishing benefits, using the present value estimates in Table 1.
Table 1. Comparison of Present Value of Net Economic Benefits: Kano River Irrigation Project (KRIP) and Hadejia-Jama'are Floodplain (HJF), Nigeria (US$ 1989/1990 Prices)a
Based on a total net benefits from agricultural, fuelwood, and fish production attributed to the Hadejia-Jama'are floodplain (HJF) and total net project benefits of irrigated crop production from the Kano River Irrigation Project (KRIP).
For HJF, weighted average of per hectare agricultural, fuelwood, and fish production with weights determined by total cropland (230,000 ha) forest area (400,000 ha) and fishing area (100,000 ha) to total production area (730,000 ha). For KRIP, based on a total crop cultivated area of 19,107 ha in 1985/1986.
For HJF, based on an estimated annual average river flow into the floodplain of 2,549 106 m3. For KRIP, based on an estimated annual water use by the project of 15,000 m3/ha.
Table 2 indicates the scenarios that comprise the simulation. Since scenarios 1 and 1a reflect the conditions without any of the large-scale water resource schemes in place within the river basin they are employed as baseline conditions against which scenarios 2–6 are compared. Scenario 2 investigates the impacts of extending the Kano River Irrigation Project (KRIP) to its planned full extent of 22,000 ha without any downstream releases. In contrast, scenario 3 simulates the impacts of limiting irrigation on this project to the existing 14,000 ha to allow a regulated flood from Tiga Dam in August to sustain inundation within the downstream Hadejia-Jama'are floodplain. Challawa Gorge is added in scenario 4 and the simulated operating regime involves the year-round release of water for the downstream Hadejia Valley Project (HVP), but not for sustaining the Hadejia-Jama'are floodplain. Scenario 5 simulates the full development of the four water resource schemes without any releases for the downstream floodplain. In direct comparison, scenario 6 shows full upstream development, but less upstream irrigation occurs in order to allow regulated water releases from the dams to sustain inundation of the downstream floodplain.
Table 2. Scenario for Upstream Projects in the Hadejia-Jama'are River Basin, Nigeriaa
 In Table 3, the impacts of scenarios 2–6 upon peak flood extent downstream are evaluated as the difference between maximum inundation predicted under each of these scenarios and the peak flood extents of the two baseline scenarios. The gains in upstream irrigated area are also indicated for each scenario in Table 3. The estimated floodplain losses are indicated in Table 4 for each scenario compared to the baseline scenarios 1 and 1a. Given the high productivity of the floodplain, the losses in economic benefits due to changes in flood extent for all scenarios are large, ranging from US$2.6–4.2 million to US$23.4–24.0 million. As expected, there is a direct tradeoff between increasing irrigation upstream and impacts on the wetlands downstream. Scenario 3, which yields the lowest upstream irrigation gains, also has the least impact in terms of floodplain losses, whereas scenario 5 has both the highest irrigation gains and floodplain losses. The results confirm that in all the scenarios simulated the additional value of production from large-scale irrigation schemes does not replace the lost production attributed to the wetlands downstream. Gains in irrigation values account for at most around 17% of the losses in floodplain benefits.
Table 3. Impact of Scenarios on Mean Peak Flood Extent and Total Irrigated Areaa
Based on the mean of the net present values of per ha production benefits for the Kano River Irrigation Project in Table 1 and applied to the gains in total irrigation area shown in Table 3.
Based on the mean of the net present values of total benefits for the Hadejia-Jama'are floodplain in Table 1, averaged over the actual peak flood extent for the wetlands of 112,817 ha in 1989/90 and applied to the differences in mean peak flood extent shown in Table 3.
−15 432 952
−14 876 447
−17 059 901
−16 503 396
 This combined hydrological-economic analysis would suggest that no new upstream developments should take place in addition to Tiga Dam. Moreover, a comparison of scenario 3 to scenario 2 in the analysis shows that it is economically worthwhile to reduce floodplain losses through releasing a substantial volume of water during the wet season, even though this would not allow Tiga Dam to supply the originally planned 27,000 ha on KRIP.
 Although scenario 3 is the preferred scenario, it is clearly unrealistic. As indicated above, Challawa Gorge was completed in 1992, and in recent years several small dams have been built on the Hadejia's tributaries while others are planned. Thus scenario 4 most closely represents the current situation, and scenario 5 is on the way to being implemented - although when the construction of Kafin Zaki Dam might occur is presently uncertain. As indicated in Table 4, full implementation of all the upstream dams and large-scale irrigation schemes would produce the greatest overall net losses, around US$20.2–20.9 million (in terms of net present value).
 These results suggest that the expansion of the existing irrigation schemes within the river basin is effectively “uneconomic.” The construction of Kafin Zaki Dam and extensive large-scale formal irrigation schemes within the Jama'are Valley do not represent the most appropriate developments for this part of the basin. If Kafin Zaki Dam were to be constructed and formal irrigation within the basin limited to its current extent, the introduction of a regulated flooding regime (scenario 6) would reduce the scale of this negative balance substantially, to around US$15.4–16.5 million. The overall combined value of production from irrigation and the floodplain would however still fall well below the levels experienced if the additional upstream schemes were not constructed.
 Such a regulated flooding regime could also produce additional economic benefits that are not captured in our analysis. Greater certainty over the timing and magnitude of the floods may enable farmers to adjust to the resulting reduction in the risks normally associated with floodplain farming. Enhanced dry season flows provided by the releases from Challawa Gorge and Kafin Zaki dams in scenario 6 would also benefit farmers along the Hadejia and Jama'are Rivers while the floodplain's fisheries may also experience beneficial impacts from the greater extent of inundation remaining throughout the dry season. The introduction of a regulated flooding regime for the existing schemes within the basin may be the only realistic hope of minimizing floodplain losses. Proposed large-scale schemes, such as Kafin Zaki, should ideally be avoided if further floodplain losses are to be prevented. If this is not possible the designs for water resource schemes should enable the release of regulated floods in order to, at least partly, mitigate the loss of floodplain benefits that would inevitably result.
 Currently, as a result of such economic and hydrological analyses of the downstream impacts of upstream water developments in the Hadejia-Jama'are floodplain both the States in northern Nigeria and the Federal Government have become interested in developing regulated flooding regimes for the existing upstream dams at Challawa Gorge and Tiga, and have been reconsidering the construction of Kafin Zaki Dam. If these revised plans are fully implemented, then this suggests that some outcome between scenarios 3 and 4 in Table 4 is likely for the Hadejia-Jama'are River Basin.
 Finally, it should be noted that floodplain farmers downstream from the dam developments on the Hadejia and Jama'are Rivers have proven to be highly adaptive to changes in flood patterns that have occurred so far. For example, Thomas and Adams  suggest that since the mid-1970s there have been considerable agrarian changes downstream in response to the construction of the Tiga Dam and subsequent drought years. The authors argue that “while in the short term the socioeconomic impacts of dams and drought were strongly negative, over a longer period the environmental changes caused by the dam and drought were strongly negative, over a longer period the environmental changes caused by the dam and drought gave added impetus to the diversification and expansion of agriculture” [Thomas and Adams, 1999, p. 154]. Table 5 summarizes some of the adaptive responses to changing flood patterns and environmental conditions that have occurred in the agricultural systems in the Hadejia-Jama'are floodplain.
Table 5. Agrarian Change Downstream of the Tiga Dam, Nigeriaa
Expansion of rain-fed farming on areas that no longer flood
increased rain-fed area and yields at Zugobia; relocated rain-fed area at Dallah with higher yields
forest clearing, land use conflicts between Dallah and Gabaruwa, land use conflicts with Fulani pastoralists
Expansion of flood recession farming
introduction of drought-tolerant cow peas by migrants returning from Lake Chad to replace cassava
cassava would normally be preferred as it produces higher returns, uses less labor and is more pest resistant
Expansion of dry season irrigated farming
increased vegetable and wheat production through introduction of pumps, tube wells, credit and extension
forest clearing, increased erosion, crop and pest disease, agrochemical pollution; conflicts with Fulani pastoralists
Expansion of mechanized rice farming
in Tavurvur, increased yields and reduced labor costs
concentration of land ownership, reduced employment, agrochemical pollution; dependence on government subsidies and special loans.
Increased off-farm employment
increased income from salaried employment; cash income safety net for drought years and crop failures
increased income inequality between wage earning and nonwage earning households; increased rural-urban migration
 The most important adaptive responses include expansion of rain-fed farming on areas that no longer flood, and even the expansion of flood recession farming through the introduction of cowpeas; expansion of irrigated dry season farming and mechanized rice production; and increased off-farm employment (see Table 5). However, there are some important negative aspects to these trends. The sustainability of irrigated wheat and mechanized rice production has been questioned, especially due to the problems of soil erosion, declining fertility and overuse of water [Kimmage, 1991; Kimmage and Adams, 1992]. Moreover, the expansion and shifting of agricultural production on to new lands has led to increased conflicts among farmers and between agriculturalists and the migrating Fulani pastoralists in the region, who for hundreds of years have had traditional communal dry season grazing rights to pasture within the floodplain area [Thomas and Adams, 1999]. While permanent emigration in search of new employment opportunities may in the short run reduce pressure on local land and water resources, in the long term it may affect the provision of rural health and educational services and the available pool of local agricultural labor.
 Overall, the adaptive agrarian changes in response to the decline of flooding pattern downstream of the dams built in the Hadejia-Jama'are River Basin may mitigate somewhat the floodplain losses estimated for the different scenarios reported in Table 4. However, there are two notes of caution. First, as pointed out by Thomas and Adams [1999, p. 159] it is optimistic to consider all of the agrarian adaptations to be responses solely to the construction of Tiga Dam and the loss of downstream flood recession agricultural benefits: “most of the positive features of agricultural change in the Hadejia-Jama'are floodplain (new forms of recession farming, irrigation, improved marketing, etc.) would be likely to have happened anyway, without the dam, as they have elsewhere throughout northern Nigeria.” Second, some of the farming innovations that have occurred in the floodplain, such as the expansion of dry season irrigated crop production, are themselves threatened by the impact of upstream water diversion on the downstream wetland areas and their ability to recharge the shallow aquifers that are used for tube well irrigation [Acharya and Barbier, 2000; DIYAM, 1987; Thompson and Hollis, 1995]. It is the latter impacts on dry season irrigated agriculture that we now turn to.
4.2. Impacts on Dry Season Irrigated Agricultural Production
 Several hydrological studies of the Hadejia-Jama'are River Basin suggest that the “standing water” of the inundated areas of the downstream floodplains appears to percolate through the subsoil to recharge many of the shallow aquifers in the area [DIYAM, 1987; Thompson and Goes, 1997; Thompson and Hollis, 1995]. As noted above, these shallow aquifers are increasingly being accessed through tube well irrigation to expand dry season vegetable and wheat production. If upstream water diversion is causing less flooding and standing water downstream, then the resulting reduction in groundwater recharge could have important implications for dry season irrigated agricultural production downstream.
Acharya and Barbier  have conducted an economic analysis of the impact of a decline in groundwater levels on dry season vegetable and wheat irrigated agricultural production in the floodplain region. They surveyed a sample of 37 farms in the Madachi area, out of a total 309 dry season farmers on 6600 ha of cropland irrigated through tube well abstraction from shallow aquifers. Wheat, tomato, onions, spring onions, sweet potatoes and pepper are the main cash crops grown by the farmers, although okra and eggplant are more minor crops grown principally for home consumption. On average, irrigated dry season agriculture in the Madachi area is worth $412.5 per ha, with a total estimated annual value of $2.72 million over the entire 6600 ha.
 Employing a production function approach, Acharya and Barbier value the groundwater recharge function of the floodplain as an environmental input into the dry season agricultural production in the Madachi area. They model crop-water production relationships for both vegetable and wheat production, and based on this analysis, the authors are able to calculate the welfare changes to farmers in Madachi of a 1 m fall in groundwater levels from 6 to 7 m in depth. The latter is the projected fall in mean water depth of the shallow aquifers in the area due to the declining flood extent and recharge function of the floodplain wetlands [Thompson and Goes, 1997]. The analysis was then extended to estimate the welfare impacts for all dry season irrigated farming on an estimated 19,000 ha throughout the floodplain.
 The results of the analysis are summarized in Table 6. They suggest that a 1 m change in groundwater recharge would reduce the welfare by $32.5 annually on average for vegetable farmers (7.6% of annual income) in Madachi and by $331 annually for farmers producing vegetables and wheat (77% of annual income). Total loss in annual income for all 134 vegetable farmers in Madachi is $4,360, and for the 175 wheat and vegetable farmers $57,890. The total loss for all 309 Madachi farmers of $62,250 amounts to around 2.3% of the annual economic value of irrigated dry season farming in Madachi.
Table 6. Welfare Impacts on Dry Season Farmers of a 1 m Drop in Groundwater Levels, Hadejia-Jama'are River Basin, Nigeriaa
 In the entire downstream region of the Hadejia-Jama'are River Basin, the annual losses to vegetable farmers amount to $82,832. For wheat and vegetable farmers, the welfare loss is around $1.1 million. The total welfare impact of around $1.2 million annually is around 15.1% of the economic value of irrigated dry season agriculture in downstream areas.
4.3. Impacts on Domestic Water Supply for Household Use
 Any impacts on the groundwater recharge of shallow aquifers due to a decline in the Hadejia-Jama'are flood inundation area will also have a major impact on village water wells that supply domestic water to households throughout the region. Villagers prefer to use well water for drinking, cooking and cleaning. Other activities such as watering of animals, washing clothes and utensils and house building may use water obtained directly from the wetlands in addition to well water. All households procure water from wells in one of three ways: (1) they collect all their own well water, (2) they purchase all their water from vendors who collect well water, or (3) the households both collect and purchase their well water.
 In order to estimate the value placed on groundwater either purchased or collected from village wells by households in the wetlands region, Acharya and Barbier  have combined a hypothetical method of valuation, the contingent behavior method, with a household production model of observed behavior. Three villages in the Madachi region of the Hadejia-Jama'are floodplain and one village in the Sugum region were chosen for the economic valuation study, based on the hydrological evidence that the villages in these areas rely on groundwater recharged mainly by wetlands [Thompson and Goes, 1997]. The flooding in Madachi is caused by the floodwaters of the Hadejia River. The Sugum region is located in the eastern part of the wetlands and is influenced by the flooding of the Jama'are River.
 The first step in the valuation approach was to derive and estimate the demand for water by the various types of households. To do this, a household production function model was constructed to determine the factors influencing a representative household's decision to choose its preferred method of water procurement: collect only, purchase only, or both collect and purchase. The second step in the valuation procedure was to use the household water demand relationships to estimate the effect of a change in wetland flooding on the welfare of village households dependent on groundwater well supplies. As noted above, hydrological evidence suggests that reduced flooding in the wetlands will result in lower recharge rates and hence changes in groundwater levels in wells [Thompson and Hollis, 1995; Thompson and Goes, 1997]. Changes in groundwater levels in turn affect collection time and the price of vended water, assuming all other household characteristics remain constant. The welfare impacts associated with these price changes were therefore estimated as changes in consumer surplus in the relevant household water demand equations.
 To value the change in the recharge function due to reduced flooding within the wetlands, it was hypothesized that a decrease of 1 m in the level of water in village wells would result in an increased collecting time of 25% and an increase in the price of vended water of approximately one cent. The price of vended water in the surveyed villages ranged between 2.3 to 5.7 cents per 36 L of water. The average amount of water collected either by vendors or households per trip is 36 L, which is carried to houses in two 18-L tins. These assumptions are based on the evidence provided by the survey data on the relationship between collection time and well water levels and on the change in price indicated by vendors as likely to occur, in the event of a 1 m decrease in water levels. Using the estimated demand equations, the welfare effects due to changes in both collection time and the price of vended water were calculated for the sample of households surveyed. These effects were then extrapolated to entire the population of the floodplain in order to calculate an aggregate welfare impact. The results are depicted in Table 7.
Table 7. Welfare Impacts on Households of a 1 m Drop in Groundwater Levels, Hadejia-Jama'are River Basin, Nigeriaa
 The welfare estimates suggest the average welfare effects of a 1 m change in water levels is approximately $0.12 per household per day. This impact is equivalent to a daily loss of approximately 0.23% of monthly income for purchase only households, 0.4% of monthly income for collect only households and 0.14% of monthly income for collect & purchase households. The total value across all floodplain-households of maintaining the current groundwater recharge function (i.e., avoiding a 1 m drop in well water levels) amounts to $13,029 per day. This translates into an annual value of $4.76 million for the groundwater recharge of village wells by the floodplain wetlands. Such estimated welfare losses indicate that the failure of the Hadejia-Jama'are wetlands to provide the existing daily level of recharge would result in a substantial economic loss for wetland populations presently deriving benefit from groundwater use for domestic consumption.
 Upstream water investments and developments should not be based on the assumption that water is a “free” good. The correct economic approach to assessing dams and other water projects upstream that divert water is to consider the forgone net benefits of disruption to the natural environment and degradation downstream as part of the opportunity costs of the development investment. This is particularly important where substantial impacts on economic livelihoods will result from the hydrological and ecological impacts of upstream water diversion, as the case study of the Hadejia-Jama'are River Basin in northern Nigeria illustrates.
 As the case study demonstrates, there is a direct trade-off between increasing irrigation upstream and impacts on the floodplain downstream. Full implementation of all the upstream dams and large-scale irrigation schemes would produce the greatest overall net losses in net present value terms, around US$20.2–20.9 million (Table 4, scenario 5). In addition, the reduction in mean peak flood extent associated with this scenario is predicted to cause a 1 m fall in groundwater levels in the shallow aquifers that are recharged by the standing water in the floodplain wetlands. This is likely to lead to annual losses of around $1.2 million in tube well irrigated dry season agriculture and $4.76 million in domestic water consumption for rural households.
 These substantial losses suggest that the expansion of the existing irrigation schemes within the river basin is effectively “uneconomic”. The introduction of a regulated flooding regime would probably protect the groundwater recharge function of the downstream wetlands as well as reduce substantially the losses to floodplain recession agriculture, forestry and fishing, to around $15.4–16.5 million (Table 4, scenario 6). However, the latter losses could be reduced even further if the plans to construct Kafin Zaki Dam and to implement the Hadejia Valley Project fully are abandoned. The result would be an outcome between scenarios 3 and 4 reported in Tables 2–4. The net downstream losses would therefore be in the region of $2.2 to $8.1 million. This may be the best outcome, given that Tiga Dam, Challawa Gorge and many small dams on the tributaries of the Hadejia River have already been constructed.