CIRCULATING COPrY RESTRICTED TO BE RETURNED TO REPORTS DESIK Report No. P-1046 FILL tupy This report is for official use only by the Bank Group and specifically authorized organizations or persons. It may not be pubished, quoted or citcd without Bank Group authorization. The Bank Group does not accept responsibility for thc accuracy or complctencss of thc report. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF T HE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO NIGERIA FOR A SECOND EDUCATION PROJECT March 16, 1972 INTERNATIONAL BANK FOR RECONSTRUCTIOM AND DEVELOPMENT REPORT MI) RECOMMENDATION OF THE PRESIDENT TO T14E EXECUTIVE DIRECTORS OI3 A PROPOSED LOAN TO NICERIA FOR A SECOND EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed loan to the Federal Republic of Nigeria for the equivalent of $17.3 million to help finance a project for the reconstruction and expansion of 23 secondary schools and 7 primary teacher training colleges in the East-Central, Rivers and South Eastern States and related technical assistance. The loan would have a term of 25 years, including 10 years of grace, with interest at 7-1/4 percent per annurfm. PART I - INTRODUCTION 2. The proposed loan - the sixteenth Bank/IDA operation in Nigeria and thic second for education - would increase total Bank/IDA lending to $391.4 million (net of cancellations), representing over 40 percent of Nigeria's ex- ternal debt. A summary statement of Bank loans, IDA credits and IFC invest- ments as of Februarv 29, 1972 is given in Annex I. 3. Nigeria's performance in executing Bank/IDA financed projects was described fully in paragraphs 34-42 of my report and recommendation on the rehabilitation program loan (P-911, dated April 2, 1971). Developments since then are described in the following paragraphs. 4. The status of the first education project (Credit 72-UNI) was de- scribed in my memorandum of March 3, 1972 (IDA/R72-26). Project implementa- tion outside the three Eastern States is now proceeding satisfactorily and, following approval of amendments to the Credit Agreement in respect of the Eastern States' component, that part of the project is expected to move ahead quickly. The entire project is expected to be completed by the revised Clos- ing Date of June 30, 1974. 5. The serious problems affecting the Apapa Road project financed under Loan 426-PNIT were reported to the Executive Directors in a memorandum from the Secretary dated June 10, 1970 (SecM70-271) and in my report on the rehabilita- tion program loan referred to above. Since then, the Federal Government and Messrs. Gutfanti-Bonrniger have negotiatedl a revised construction contract, which was apnroved hy the Federal. Executive Council in October, 1971 and is awaiting signature., Meanwyhile, work has continued and the Federal Government expects to stubrilt the signed contract and withdrawal applications in respect of paymlents for construction since March, 1970 very shortly. As soon as these have been received, disbursement of the remaining $7.5 million of this loan can resume. The project is now expected to be completed by about mid-1973. Disbursement of twro subsequent transport loans - for highway rehabilitation (040-UNI) and trnnsnort rehabilitation (694-UNI) - has been extremely slow, owing to delays in tendering (640-UNI) and the time taken to -reach an under- standing with the Government on the items to be included in the project (694-UNI). However, contracts have now been awarded and equipment ordered for both projects and work has commenced. The first withdrawal. applications, amounting to about $1.4 million (640-UNI) and about $2.9 million (094-TRIT), have now been received and disbursement of botlh loans is expected to accelerate considerably during 1972. Disbursement of the rehabilitation program loan (732-UNI) is proceeding satisfactorily; about $64.5 million h4ad becn withdrawn at the end of February and I expect the loan to he fully disbpursept before the end of this fiscal year. The $7.2 million loan (764-UtTI) for the Wlestern State Cocoa Project was declared effective on November 5, 197f1, and the first withdrawal applications have just been received.. The Nigerian Industrial Development Bank (NIDB) will probably commit the full amount of the second Bank loan (705-UNI) by about the end of 1972 and an appraisal mission is currently in the field with a view to preparing a possible third loan. 6. Uitherto, Bank/IDA lending to Nigeria has concentrated on transport and power (about 67 percent of total Bank/IDA lending). Bothlsectors are given high priority in Nigeria's Second National Development Plan (1970/71- 1973/74) and, in view of their substantial capital requirements, continued external assistance is expected to be required. A transport sector mission visited Nigeria in mid-197i and its report, currently under reviewi by the Governmuent and the Bank, identifies projects in highways, railroads, ports and aviation. I expect to recommend a loan for a fifth highway project very shortly. In power, the proposed merger of the Flectricity Corporation of Nigeria (ECN) and the Niger Dams Autlhority (DTA) into a sinhIe entity for the generation, distribution and marketing of power, a move which the Bank strongly supports, is now scheduled to become effective in April, 1972. Later this fiscal year, I expect to recommend a substantial loan to the new corporation to help finance its expansion program. 7. To date, the Bank Group has made only one loan for agriculture (764-UNI) and one credit for education (72-UNI). However, both sectors were the subject of survey missions in 1971, education by UJNESCO and agriculture by the Bank. In addition, a Bank-sponsored and financed CommonxYealth Develop- ment Corporation (CDC) mission reviewed the livestock sub-s6ctofr in the North and West in 1970 and another CDC mission recently completed fieldwork for a possible tree-crop rehabilitation project in South-Eastern State. The aari- culture and education sector surveys, both now under review by the Nigerian authorities, identify priority prolects suitable for external financing. 8. The Government and the Bank are thus currently engAged in substani- tial project preparation work, with particular emphasis on sectors which have received far less attention in the past than their importance.requires. As emerges from the followinig -iscussion on the economy, inadequac"y of project preparation and limited adimiinistrative capability stand out a.lt the more sharply as obstacles to economic development. Nigeria's growing revenues from petroleum are greatly expanidng the resources available to finance investment, but they also pose a challenge to her financial and economic management. This new situation calls for a careful review both of the level and the composition of future Bank support for Nigeria. This review is currently under way and -3- I expect to indicate its main conclusions when presenting the proposed power loan to the Executive Directors before the end of this fiscal year. PART II - TIE ECONOMY 9. An economic report on Nigeria (AW-22a) was distributed to the Exe- cutive Directors on January 29, 1971 an(d my report on the rehabilitation pro- gram loan (P-911, of April 2, 1971) contained additional material relating to the Ni-erian economy. An economic mission returned from Nigeria in November, 1971 an(I its report will be distributed to the Executive Directors within the next two months. The principal conclusions of the mission are summarized in tii, following paragraphs. A country data sheet is provided at Annex II. 10. Two years after the end of its 30-month civil war, Nigeria appears to be making good progress in overcoming the legacies of that conflict, in rehabilitating its economy and in turning its attention once again to the problems and opporttunities of long-run growth, development and social better- ment. The current rapid growth of production and indome and the marked im- provement in the country's balance of pavments (both developments due largely to the oil. boom) are helping to ease the burdens of reconstruction, while pro- viding a strong resource base upon which to plan the development of the eco- nlOmly. 11. Crude oil production has now reached a level of 1.7 million barrels per day - more than three times the maximum pre-war rate - and is projected to rise to 3 million barrels per day by 1977. The contribution of the petro- leum sector to Government receipts and to the country's exports has reached 50 percent and 75 percent, respectively, and these proportions are still rising. The sector's share in CDP in 1971 amounted to 12 percent. By the middle of the decade, this may anproach 16 percent but will still provide only insig,nificant direct employment opportunities. Thereafter, the sector's share is expected to decline as the rate of growth in other sectors acceler- ates. 12. Compared to an average annual growth of 5.5 percent for GDP during most of the early Sixties, the post-war increase of national product and in- come has been unprecedented. BetwJeen 1969/70 and 1971/72, average growth has been 14 perce,nt per annum. Only part of this growth is the result of thie vast increase of crude-oil produlction over these years, as the other sec- tors of the economv were growing on the average by 7.5 percent per year in real terms. For the remaining years of the Second National Development Plan a slower increase! is expected, but the average annual growth rate of rDP for the full Plan pertiod (1970/71-1973/74) will nevertheless probably exceed 10 percent - 26 perc'ent in the petroleum sector and 8.5 percent in the rest of the economy. Exports nre risinp, much more rapidly than imports of goods and non-factor servic!es, thus reversing the resource gap of earlier years. The increase of priva'te consumption is expected to be only modest in relation to available resoulrces, amounting to some 8 percent per year in real terms during - 4 - the Plan period, or 5.5 percent per year per capita. Because of the important role and special nature of the petroleum sector, there w.ill he large Increases in Government savings. 13. The current year (1971-72) has witnessed a dramatic inprovement in the fiscal position of the Federa] and State Governments. Largely as a result of the greatly expanded volume of petroleum production and increases in the posted-price of crude oil, Federal recurrent revenues',have approxi- mately tripled since 1969/70 to over EN 600 million. A current surplus of about EN 170 million this year is expected to replace a deficit of tlhat magnitude which existed two years ago. State revenues have also showm sub- stantial improvement, primarily because of larger Federal statutory trans- fers, which now account for 78 percent of the States' currentt receipts, ra- tlher than as the result of any significant new tax efforts. Together, Fed- eral and State recurrent revenues have increased from 14 percent of GflP at factor cost in 1969/70 to an estimated 24 percent in 1971/72. 14. Federal non-defense recurrent expenditures will probably rise by about 20 percent in 1971/72 over the previous year. Of particular note, Federal recurrent spending for economic and social services sh6ws a significant increase above the hitherto nearly static level maintained for tlhe past decade. Substantial wage and salary adjustments recently granted to the civil service and the army also account for much of the increase in recurrent expenditures at both State and Federal levels. Defense and se- curity expenditures (including defense capital) dipped in 1970/71 but hiave probably risen again, still accounting for an estimated 58 percent of the Federal recurrent budget, compared writh the war--time peak of 63 percent. Little data is available regarding State expenditures in recent years, al- though here, too, the trend is upward. This refllects, in large part, the rapid expansion of administrative expenditures in the several.inew states. 15. Total non-defense public-sector capital expenditures in 1971/72 are likely to be about EN 160 million - up from the EM 100 million spent in 1970/71, but still well below the Plan and budget target of more than EN 200 million for the year. Federal and State receipts are expected to yield a sufficient surplus to cover all anticipated public capital exPCn- ditures in 1971/72 and, for the first time since independence, there may even be an overall government surplus. Nigeria's domestic savings and bal- ance-of-payments position will continue to provide a strong basis for develop- ment during most of this decade. Current fiscal concerns relate to the non- inflationary employment and efficient allocation of resources which are ex- pected to rise by nearly 50 percent over the next two years and to continue growing at a rate.of at least 10 percent per year thereafter. 16. In the two years ending last June, the Nigerian money supply (including savings deposits) grew by 183 percent. 1While some of this increase was accounted for by remonetization in the East and t-he additional liquidity created by arrears on import payments, most of it, stemming fron -5- the heavy reliance of the Government on largely short-term borrowing from the banking system, has been highly inflationary. Domestic inflation, as measured by the urban, low-income consumer price index, accelerated during the first half of 1971. In June, the price index was 19 percent above its level of a year earlier. Most of the increase in 1971, as reflected in the index, was attributable to food prices and, in view of the geographically widespread nature of this phenomenon, appears to be largely related to the rapid expansion of money and credit. Government measures against inflation appear to have had little or no effect so far and appropriate monetary pol- icies remain to be identified. 17. There has been a striking turn-about in Nigeria's external finan- cial position during this second post-war year. Confident that realized oil revenues would soon exceed import payments, the Government liberalized im- ports early in the year and took steps to restore much needed regularity and certainty in the allocation of foreign exchange. Oil exports doubled again in 1971/72 and the net foreign exchange impact of the petroleum sector rose from EN 165 million in 1970/71 to an estimated EN 385 million this year. Since April, 1971, imports - which are expected to show a further 30 percent rise this year - have been paid for on a regular basis. At the same time, the Government has liquidated the backlog of commercial payments which ap- peared to pose a serious threat to the economy a year ago. The country's net international liquidity position has improved substantially as a result of the reduction in short-term liabilities, but reserves of about EN 100 million are equivalent to only two months' imports. With careful management of the economy, it would be possible for the Government to relax remaining foreign exchange controls and restore import payments to a fully current basis over the next two years. 18. Agricultural exports which have traditionally accounted for almost all of Nigeria's foreign exchange earnings, are expected to grow very little. Although the prospects for crude oil exports are good, Nigeria's heavy de- pendence on one commodity introduces a new element of uncertainty in its ex- port prospects and points to the urgent need to utilize resources now avail- able to establish a base for sustained development in the non-petroleum sec- tor. Moreover, after the middle of the decade, as further expansion of pe- troleum production slows, the rate of growth of imports is likely to be greater than that of net oil receipts. 19. Despite the growing importance of other sectors, agriculture, including forestry and fishing, which accounted for about 50 percent of GDP at factor cost in 1970/71, will remain a key factor in Nigeria's economic development as the largest employer of labor (currently about 72 percent of the labor force), the principal source of food and raw materials for the in- creasing population and a significant earner of foreign exchange. The ac- celeration of agricultural growth and the provision of additional employment opportunities in the sector is, therefore, crucial to the country's future progress. 20. The Bank agricultural sector mission which visited Nigeria last year concluded that, if immediate steps were taken to improve producer price incen- tives and the supply of farm inputs and transportation and to restore produc- tion in the East, agricultural output could achieve an average annual growth -6- rate of 3 percent through 1975, provided weather were favorable and food out- put responded to the pressures of demand. This woutld still, he less than the 3.3 percent average annual increase recorded from 1958/5') through 1966/67 and also less than is needed to provide adequiate domestic supplies tinder condi- tions of rapid income growth, particularly in the urban areas. This may he less a problem of the potential for expanding the supply of agricujlturAl pro- ducts, which appears to be substantial, than one of expanding facilities for the transport, marketing and storage of agricultural. produice for domestic con- sumption and of providing adequate credit at several stages from the, produicer to the market outlets. 21. The promotion of agricultural growth wiJl rentire an increasing share of the country's resources in the coming years, both throug,h direct in- vestments in the sector and by way of the provision of economic infrastructure conducive to agricultural development. The distribution of resource uses be- tween urban and rural areas is not only crucial. for balanced growth and the restoration and maintenance of price stability, but can also serve the purpose of stemming the present rapid growth of urban centers and concomitant income inequities within the urban areas and between the urban dwellers and the rural population majority. Problems of planning and project preparation associated with a development strategy of that nature are serious and will necessitate a substantial infusion of technical, organizational and managerial skills from abroad. 22. Since independence, the manufacturing sector has expanded very ra- pidly: the growth of value added has averaged over 11 percent annually. In large-scale manufacturing alone, it has risen over 15 percent annually since 1960 and about 20 percent during each of the past two years. Development be- gan from a small base, however, and manufacturing's contriblutioni to GDP is still well below 10 percent. The surplus capacity of earlier yeats has dis- appeared in many industries and recent increases in output haved hot kept pace with the rapid growthl of consumer demand. Vigorous investment activity and lively forcign interest in new ventures have resulted. 23. Despite the improvement in the country's financial anl balance-of- payments position since the Plan was prepared early in 1070, tCe Goverinment is experiencing difficulty in meeting its public investment targets. Prclim- inary data indicate that there was substantial slippage in 1970/71, but some imiiprovenment in 1971/72. Moreover, the extent of Plan fulfillment thus far lias varied greatly between sectors and among the individual States. In narticu- lar, public capital expenditure in agriculture and by some of the new states is behind the Plan schedule. 24. For the balance of the present Plan period, it will probably not be possible to expand absorptive capacity - especially that of the States - suf- ficiently to take full advantage of the improved resource position. There has been some strengthening of administrative arrangements for planning and imple- menting public sector programs, but much remains to be done in this regard. It is essential that Nigeria resolve these problems, for a much larger public investment program is clearly required in terms of Nigeria' s economic and so- cial needs. Project preparation and investment capacity more generally now loom as the major developmental constraints and are the issues to which the Government will have to apply increasing attention. PART III - THE EDUCATION SECTOR 25. Nigeria's education system consists of (i) a six-year primary cycle commencing at age seven, (ii) a five-year secondary cycle leading to the "Or- dinary" West African School Certificate (WASC) and a further two-year course leading to the "Advanced" level, (iii) vocational and teacher training at various levels after the primary cycle, and (iv) higher education of three to five years at universities and other institutions. 26. During the 1960s, primary and secondary school enrollment grew some- what less than the estimated 2.5 percent annual population growth. Enroll- ment in technical and vocational schools doubled and university enrollment tripled, both, however, from low base figures. Nigeria spent about 3.2 per- cent of GDP on education in 1970, a proportion which has remained almost cons- tant since 1963, is low compared with other African countries and is not ex- pected to increase during the present Plan period. The States are primarily responsible for financing education, which accounted for about 35 percent of their recurrent expenditures in 1970/71. They receive Federal Government grants for part of their capital expenditures. 27. Nigeria's Development Plan, which points to serious problems in the education sector, outlines proposals for capital investment but does not offer a strategy for educational development. Its main policies are: (a) to restore facilities and equipment damaged or disrupted by the civil war; (b) to expand education at all levels to achieve higher enrollment ratios, im- proved quality and educational equality between the States; and (c) to develop and expand technical and teacher training. The Plan's public sector investment program allocates about EN 139 million (13.5 percent) to education, EN 49 mil- lion by the Federal Government and EN 90 million by the States; about 45 per- cent of the total is for primary and secondary education, 9 percent for tech- nical and teacher training and 30 percent for university education. The specific objectives for education during the present Plan period are as fol- lows: (i) Reconstruction and Rehabilitation The Plan envisages specific Federal Government assistance to the Eastern States to restore and reactivate education- al facilities and services disrupted by the civil war. The proposed loan will contribute directly towards this objective. (ii) Improyed Enrollment Ratios and Geographical Balance In 1970, primary and secondary school enrollment ratios for the country as a whole were about 34 percent and 4 percent respectively, ranging from about 5 percent in one State to about 80 percent in another at the primary level and from 0.4 percent to 9 percent at the secondary level. - 8 - The six Northern States were at the lower end of both scales. The Plan's objective is a national minimum enroll- ment ratio of 50 percent at the primary level by the mid- 1970s and 25 percent at the secondary level before the end of the 1970s. The Plan emphasizes the need to equalize edu- cational opportunity between the States; however, while some Federal Government assistance will go to the North, it is not clear, on the basis of the uneven States' investment pro- grams, how this objective will be achieved. (iii) Qualitative Improvements Increased primary school enrollments over the past .20 years have been accompanied by a 60 percent drop-out rate, one-of the highest in the world. Poor facilities and teaching, both reflecting inadequate financing, are the main deficien- cies, common to all levels of education in Nigeria,, although drop-outs are lower at post-primary levels. Moreover, the secondary school curriculum, geared mainly to university en- trance and biased towards the arts, does not prepare students for higher education in science and technology or middle-lev- el occupations requiring prevocational training. Accordingly, the Plan envisages the strengthening of science training and the introduction of practical, employment-oriented shop work. In this connection, secondary grammar schools in the Eastern States are being converted into comprehensive schools; the proposed loan will support this objective. (iv) Coordinated Expansion Because development of secondary education has lagged behind that of primary education, serious unemployment and frustra- tion among primary school leavers has occurred at a, time when skilled, middle-level technical manpower is in short supply. The Plan aims at selective expansion of secondary, especially technical and vocational, education to absorb the increasing primary school output and to mitigate the manpower shortage. (v) Supply of Teachers A serious shortage of qualified teachers is a major con- straint on the development of primary and secondary educa- tion in Nigeria. About 2,000 teachers have already been or are currently being trained under the Federally-financed Emergency Teacher Training Program, which will continue dur- ing the current Plan period. 28. While these objectives are sound, it is difficult to translate them into a comprehensive and specific program because of the inadequacies of edu- cational and manpower planning in Nigeria and the lack of data for such plan- ning. Information on manpower needs, development and utilization is meager -9- and it is therefore virtually impossible to match educational outputs with em- ployment needs and hence derive an optimum distribution of investments within the education and training system. Even sd, the expansion of primary and sec- ondary education will probably remain of high priority, based on social demand and the shortage of secondary school graduates. While the Federal Government is engaged in training educational planners with UNESCO assistance, much needs to be done to improve educational and manpower planning, at both Federal and State levels, to relate educational development more closely to projected economic growth and, more specifically, all specialized and higher education and training programs to some measure of anticipated needs. The Federal Government is also considering the establishment of a national commission to study the education system. 29. The 1971 UNESCO Project Identification Mission confirmed the need to expand and improve primary and secondary education in the Northern States with the dual purpose of reducing disparities between the States and removing the bottleneck of a shortage of secondary school graduates. Priority areas recommended for early action are primary teacher training, the expansion of industrial training at skilled worker and technician levels, the expansion of secondary education, reform of secondary school curricula to increase their relevance to the country's needs, expansion of adult education and improved provision for agricultural training with special attention to non-formal training systems. PART IV - THE PRDJECT 30. A report entitled "Appraisal of a Second Education Project in Nigeria" (PE-33a dated March 9, 1972) has been distributed separately. A Loan and Project Summary is attached to this report as Annex III. 31. The genesis of the project was the Federal Government's request in January, 1970 that the Eastern States' component of the first education project (Credit 72-UNI) be reactivated and that these States' additional needs for school reconstruction as a result of the civil war be considered for supplementary Bank assistance. Bank missions visited Nigeria in October/ November, 1970 and in March, 1971 to re-appraise the Eastern States' compo- nent of 72-UNI in the light of post-war priorities and to identify and ap- praise this second project. During negotiations held in September, 1971 in Washington, the proposed $14 million loan was increased to $16 million to accommodate an additional three schools requested bylSouth-Eastern State and, following the revaluation of the Nigerian pound in relation to the US dollar at the end of December 1971, it was increased further to $17.3 million. Presentation of the proposed loan has been held up by the time required by one State to approve'the draft Loan Agreement. The inter-related objectives of the project are threefold: (a) to rehabilitate selected war-damaged secondary schools and primary teacher-training colleges; - 10 - (b) to consolidate and expand these schools and colleg,es into viable units; and (c) to strengthen science teaching and implement secondarv school curriculum reform. The scope of the project has taken into account the States' capital allocations for education under the Plan, their own prlorities for the selection of key secondary schools to be converted into comprehenslve scllools and their ability to provide teachers for the schools concerned. The main components of the project are described below. A map showing the location of the proj- ect institutions is attached. Secondary Comprehensive Schools 32. East-Central State, the most populous of the three Eastern States, suffered the greatest war damage to its schools, has the largest Plan capital allocation for education, and consequently comprises the largest share of the project. The project will rehabilitate ten secondary schools anfl provi(de additional facilities and equipment for their expansion and conversion into comprehensive schools, with a total of 11,230 student places (7,659 rehabil- itation and 3,575 additional) or about 12 percent of the State's expected total secondary school enrollment in 1974. The schools will be co-educational and all but two will enroll 1,000 - 1,400 students. Most wll have arts, science, technical or agricultural, commerce and home economics streams and three will have two sixth form streams of arts and science. 33. Rivers State. The project will rehabilitate five secondary schools and provide additional facilities and equipment for their exparision and con- version into comprehensive schools, with a total of 3,700 studeTit places (1,770 rehabilitation and 1,930 additional) or about 37 percent of the State's expected total secondary school enrollment in 1974. Each school will enroll. 740 students with one arts, science and technical or agricultural stream and two sixth form streams of arts and science. 34. South-Eastern State. Existing facilities in eight secondary schools, including one to be re-sited, will be re-equipped and additional facilities and equipment provided for their expansion and conversion into comprehensive schools, with a total of 5,900 student places (2,600 rehabilitation and 3,300 ad(litional) or about 32 percent of the State's cxpected total secondnry school enrollment in 1974. Each school will, enroll 600-940 stuidents wi3th arts andl science streamls and technical or agricultural, commerce or home economics streams; five schools will have two sixth form streams of arts and science. Primary Teacher-Training Colleges 35. To assist East-Central State with primary teacher training, the project will rehabilitate seven primary teaclher training colleges al.e pro- vide additional classrooms, science teaching workshops and worklshops for home economics, arts and crafts. Thereafter, primary teaclher training for the entire State will be largely concentrated in these seven co-educational colle-es, whclCh will accommodate 600 students in two-year post-secondary courses. Together, they will graduate about 2,000 much needed primary teachers annually. They are located near primary schools for easy access to practice teachling. Technical Assistance 36. The project includes three types of technical assistance: (a) five and ton one-year fellowships for East-Central and Rivers State respectively and two experts for five man- years for South-Eastern State to organize and teach ac- ceJ.erated training courses for some of the additional techlnical subject teachers required for the comprehensive schlools bv 1974, (b) one curriculum specialist for each State for one year to help local staff develop the broader curricula required for the comprehensive schools, and (c) twelve man-years of consultant architects' services to assist the States in preparing standardized designs and specifications for the project schools and bidding documents. To ensure continuity, Nigerian counterparts will be assigned to work with con- sultants and specialists employed under the project. Project Costs and Financing Plan 37. The total. project cost is estimated to be $27.8 million, inclutding $15.fl million in foreign exchange. Detailed costs are given in Annex III. The proposed $17.3 million loan will finance the entire foreign exchange cost and $1.5 million of interest and other charges on the loan during con- struction. The Federal Government will pass the loan proceeds on to the three State Governments and will also finance the estimated $12.0 million local costs. Project Admi3istration 33. A fiill-time project director, reporting to the Permanent Secretary of th1e Federal Ministry of Education, and with quallfications acceptable to th)e Banlk, will be responsible for project implementation. His function will bn to supervise the implementation and financial control of the project, main- tain lJaison with thc Bank and coordinate the work of the three project units to he established in the Itinistries of Education in each of the three States. Each State project unit will be headled by a project manager, responsible to the State Permanent Secretary of Education, and with qualifications acceptable to the Bank. Under the guidance of the project director, each project manager will supervi.se andI coordinate project implementation at the State level. The project units will he provided with adequate supporting staff and their op- erating costs met by each State Governmcnt. - 12 - 39. The consultant architects referred to above will assist the project managers in surveying project schools, developing standardized design giuildes and preparing bid packages for construction, furniture and equipment. Space requirements, design and building standards developed] in the first project (72-UNI) will be applied wherever feasible to economize on professional fees and to speed implementation. A consultant finn satlsfactory to thc Bank ha3 been selected and signature of its contract wxitli the Federal (ovornment is a condition of signature of the proposed loan. Ministries of Works' architects or local private architects will design the individual school and coll ege buildings, using design guides developed by thc-consultant firm. Procurement 40. Contracts for civil works, equipment and furniture will be awarded on the basis of international competitive bidding in accordance with Bank guidelines. All civil works contracts are expected to be won by Nigerian companies or by foreign companies already worlcing in Nigeria; most of the furniture is expected to be supplie(I locally but equipment will come largely from overseas. Domestic manufacturers of furniture andI equipment will be al- lowed a preference in bid comparison equal to the prevailing duty on competing imports or 15 percent of their c.i.f. price, whlichever is lower. Disbursement 41. The proposed loan will be disbursed against tlhe c.i.f. price of imported furniture and equipment, 50 percent of the cost of civil works, professional services, technical assistance and locally procturerl goods, repre- senting the estimated foreign exchange component, and interest and other charges durin- construction. While the draft Loan Agreement provides for withdrawals in respect of expenditures on professional services and technical assistance incurred after October 1, 1971, actual expenditures are unlikelv to exceed $80,000, of which $40,000 would be eligible for reimhtursement. PART V - LEGAL INSTRWUENTS AND AUTHORITY 42. The draft Loan Agreement between the Federal Republic of Nigeria and the Bank, the Report of the Committee provided for in Article III, Sec- tion 4 (iii) of the Articles,of Agreement and the text of a resolution ap- proving the proposed loan have been distributed senarately. The detailed covenants under which the three States will carry out the project, usually contained in Project Agreements between the Bank and project executing agencies, will in this case, for reasons of procedural convenience to the Nigerian au- thorities, take the form'of Undertakings from each of the three States to the Borrower and the Bank, satisfactory to the Bank and meeting the requirements set forth in Schedule 5 of the draft Loan Agreement. The submission to the - 13 - Bank by the Borrower of these Undertakings, signed by the three States, and the appointment of the Federal project director and the three State project managers will be conditions of effectiveness of the Loan Agreement. 43. I arn satisfied that the proposed loan would complv withi the Articles of AGreement of the Bank.. PAPT VI - RFCOM>ķENT)ATION 44. I recommend that the Executive Directors approve the proposed loan. Robert S. McNamara President Attach menCts Oashing, ton, D).C. March 16, 1972 ANNEX I SUMMARY STATEMENT OF BANK LOANS AND IDA CREDITS TO NIGERIA AS AT FEBRUARY 29, 1972 Loan or Credit Amount (US$ millions) Number Year Borrower Purpose Bank IDA Undisbursed Five Bank loans and one IDA Credit fully disbursed 168.0 15.3 72 1965 Republic of Nigeria Education 20.0 16.4 426 1965 Republic of Nigeria Apapa Road 17.5 7.5 427 1965 Republic of Western Nigeria Roads 14.5 4.2 588 1969 Nigerian In- dustrial Develop- ment Bank Industry 6.0 0.4 640 1969 Republic of Highway Nigeria Rehabilitation 10.6 10.6 694 1970 Republic of Transport Nigeria Rehabilitation 25.0 24.6 705 1970 Nigerian In- dustrial Develop- ment Bank Industry 10.0 8.7 732 1971 Republic of Nigeria Rehabilitation 80.0 15.5 764 1971 Republic of Nigeria Agriculture 7.2 7.2 Total (less cancellations) 338.8 35.3 of which has been repaid to Bank and others 28.8 Total now outstanding 310.0 Amount sold 14.4 of which has been repaid 13.1 1.3 Total now held by Bank and IDA 308.7 35.3 Total undisbursed 78.7 16.4 95.1 ANNEX I Page 2 STATEMENT OF IFC INVESTMENTS AS AT FEBRUARY 29, 1972 Amount (US$ million) Year Company Loan Equity Total 1963 Arewa Textiles Ltd. 1.0 0.6 1.6 1964 Nigerian Industrial Development Bank Ltd. - 1.4 1. Total 1.0 2.0 3.0 less sold or repaid 1.0 0.1 1.1 Now held - 1.9 1.9 ANNFX II BASIC DATA COUNTRY: NIGERIA 2 P 2 AREA: 923,768 km POPUIATION: 68 milion (1971) DENSIT: 74 per kmn Rate of growth 2.6 percent per annum 15 gro ~~~~~(at const. GROSS NATIONAL PRODUCT at market prices (1970/71)- annual rate of growth prices) (value, curr. pr.) % 60/61-64/65 65/66-70/71 1970/71 GNP per capita (1970/71) GNP at market prices lN2380 100.0 5.5 5.4 14.0 WNt2 GDP at factor cos, 2346 98.6 4.4 5.5 16.0 US$97 Gross Investment / 450 18.9 8.8 13.5 Gross Savings (domestic) 400 16.8 13.7 26.7 Resource Gap -50 2.1 Government Recurrent Revenue 408 17.1 7.5!! 21.81Z/ OUTPUT, LABOR FORCE AND Value added Labor Fbrce Value-added per worker PRODUCTIVITY IN (1970/71) (LN million) % (000) i LN % of national average Agriculture 1173 50.0 16,790 69.8 69.8 71.6 Industries 572 24.4 3,121 13.0 183.3 188.0 Services 601 25.6 4,143 17.2 145.1 148.8 Total/Average 2346 100.0 24,054 100.0 97.5 100.0 PUBLIC FINANCES IN 1970/71 All Governments Federal Government Amount % of GDP Amount 5 of GDP Current Receipts 417.9 17.8 235.6 10.4 Current Expenditures 406.4 19.5 271.4 11.6 Current Surplus/Defici (_) -38.5 -1.6 -35.8 -1.5 Capital Expenditures o 90.6 3.9 31.6 1.4 External Assistance (net) 0.2 - 0.2 - 1 ~~~~~~~6/ Bank Credit to MONEY, PRICES, CREDIT: Money Su ly5 Price Index' 1960 ' 100) Private Sector end of year: Amount $ change Average Index % change Amount 5 change 1968 203.0 - 120.3 - 109.2 - 1969 266.6 31.3 132.3 10.0 117.3 6.8 1970 383.7 43.9 150.6 13.8 178.4 52.1 June 1970 304.9 - 153.4 - 119.8 - June 1971 369.5 21.2 182.7 19.1 219.2 83.0 BALANCE OF PAYMENTS IN 1970/71 (millions US$) Merchandise Exports ($m) 1970 % 1969 % Exports of Goods and NFS 1538 Crude petroleum 785.9 58.0 397.6 41.9 Imports of Good and NFS 1690 Cocoa and products 225.9 16.7 185.4 19.5 Resource Balance -152 Grcundnuts and products 118.0 8.7 157.2 16.6 Tin metal 50.5 3.7 42.3 4.5 Interest payments (net) -18 Palm produce 48.9 3.6 45.3 4.8 Other factor payments (net) -447 Rubber 26.8 2.0 29.2 3.1 Net Transfers 61 Total merchandise exports 1354.6 100.0 949.4 100.0 Balance on Current Account -556 Direct Foreign Investment 496 EXTERNAL PUBLIC DEBT AS OF JUNE, 1971 ($ mill.) Net Medium and Long-term Loans: Private -61 Medium and Long-Term Credits Public 15 Other Disbursements 36 Amortization 21 Total Outstanding including = Other capital (net) 258 undisbursed 825 All other items -12 -Thcrease-in official reserves 140 DEBT SERVICE RATIO (1970) 5.3% of exports Official and semi-official reserves (US $m) IBRD/IDA LENDING, rune 1971 IDA IBRD end 1969 174.5 Outstanding and Disbursed 17.7 166.4 end 1970 274.5 Undisbursed 17.8 148.A November 15 1971 290.3 Outstanding including Undisbursed 35.5 314.7 Rate of Exchange: US $1.00 * LNO.329 EN 1.00 UtS$ 3.040 1/ Because of the civil disturbances, the coverage of the three Eastern States for the period 1966/67-1969/70 is uneven and incomplete. 1 Official estimate; other estimates are as much as 10 million lower. 3/ Fiscal year ending March 31. / Excluding defense capital expenditures of LN28 million. _/ Includes savings deposits at commercial banks Urban low-income consumer price index / At current prices. ANNEX III Page1 NIGERIA LOAN AND PROJECT SUMMARY Borrower Faderal Republic of Nigeria Amount US$17.3 million equivalent. The proposed loan would cover the project's estimated foreign exchange component and interest and commitment charges during construction. Terms Payable in 25 years with 10 years grace at 7 1/4% interest per annum. Beneficiaries East-Central, Rivers and South-Eastern States. Project Second Education Project Reconstruction and expansion of 23 secondary schools and 7 primary teacher training colleges and technical .assistance,for technical teacher training, curriculum development and project implementation. Special Project Combination of rehabilitation/reconstruction with Features curriculum reform (conversion of secondary grammar to secondary comprehensive schools) and consolidation. Cost Of Project US$ million Component Local Foreign Total Construction 7.47 7.58 15.05 Furniture 1.10 0.90 2.00 Equipment 0.19 3.61 3.80 Technical Assistance 0.18 0.73 0.91 Contingencies 3.08 2.95 6.03 Total Project Cost 12.02 15.77 27.79 Interest and Other Charges during Construction 1.53 Total 17.30 Financing US$ million Local Foreign Total IBRD Loan - 17.3 17.3 Local Sources 12.0 - 12.0 12.0 17.3 29.3 ANNEX III Page 2 Procurement International competitive bidding with local manufacturers Arrangements of furniture and equipment allowed a preference equal to prevailing duty on competing imports or 15 per cent of their c.i.f. price, whichever is lower. Estimated (US$ Million) Disbursements FY 1972 1973 1974 1975 1976 0.1 0.7 5.5 9.4 1.6 Consultants Consultant firm to assist project implementation in surveying project schools, developing standardized design guides and preparing bid packages for construction, furniture and equipment. Appraisal Report No. PE-33a, March 9, 1972, Education Projects Report Department. tA F R, c \ ......... .-- * .-- BEENNUE -PLATEAU | NIEA X nhlGE^ < | *. ~K W A R A * 1 -. . IGERIA ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~IEI N G G ER A AWA SECOND EDUCATION PROJECT t / EASTERN STATES * TEACHERS TRAINING COLLEGES 15 W * SECONDARY SCHOOLS * CENTER FOR TECHNICAL TEACHER TRAINING / E T4 S R A L O Numbers refer to schools as listed in Annexes . \E N T R A L 8, 9, and 1O0HAL KG~ Iksb ......... STATE BOUNDARY 6 0 _ _ MAIN ROADS 0* OGU SECONDARY ROADS A am* - RAILROAD s o! i\/MAI z*°*s> GD. - INTERNATIONAL BDRY. 441OE moo AI (Th. boundorie shom, on ths map do not fmpy -&--smet .. ....ept.... by the IK ~~~~~~~~~~~~~~~~~~~~~WrdBonk end ift fifiliotfs. EKPE~~~~~~~~~ 9 tu YO 2~~~~~~~~~~~~~~~~~~~~~~~~~~~~IRO32R NOVEMBER 1971IBR3413