DocuDent of The World Bank FoR omvAL USE ONLY Report Ne. P-4122-UNI REPORT AND RECOMEDATION OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN OF US$53.0 MILLION TO THE FEDERAL REPUBLIC OF NIGERIA FOR A SECOND URBAN DEVELPMENT PROJECT June 28, 1985 InEs deme b a resulct.d dsibgtdai and =ay be uad by repients ouy in the performance of their oEdd dutIs. Us costeb s not odterwbe be dbioed widhot World Bnk xuhorkzaion. CURRENCY EQUIVALENTS Calendar 1984 June 1985 Currency Unit = Naira (N) N US$1 N 0.77 N 0.87 NI = US$1.30 US$1.12 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES I hectare = 2.47 acres 1 acre = 0.405 hectare 1 kilometre (km) = 0.62 mile 1 liter = 0.26 US gallon ABBREVIATIONS AND ACRONYMS CBN Central Bank of Nigeria FMGN Federal Military Government of Nigeria FMF Federal Ministry of Finance FMBN Federal Mortgage Bank of Nigeria FMW-H Federal Ministry of Works and Housing ISESA Imo State Environmental Sanitation Authority ISG Imo State Government LGA Local Government Authority MLG Imo State Ministry of Local Government MLSUD Ministry of Lands, Survey and Urban Development MWT Imo State Ministry of Works and Transport NEPA National Electric Power Authority NSUDP Nigerian States Urban Development Program PDD Project Development Department PIU Project Implementation Unit UDPEC Urban Development Project Executive Committee FOR OFFICIAL USE ONLY NIGERIA SECOND URBAN DEVELOPMENT PROJECT (IMO) LOAN AND PROJECT SUMMARY Borrower: Federal Republic of Nigeria Beneficiaries: Federal Mortgage Bank of Nigeria and Imo State Amount: US$53.0 million. Terms: Payable over 20 years, including 5 years of grace, at the standard variable interest rate. Relending Terms: US$16.3 million would be relent by the Federal Government to the Federal Mortgage Bank of Nigeria which would repay the loan on the same terms as the IBRD loan. The remaining US$36.7 million would be channelled through the Federal Mortgage Bank of Nigeria and onlent to the Imo State Government on the same terms as the IBRD loan. The Federal Government would carry the foreign exchange risk. Project Description: The project would seek to extend the experience of the first urban project in Bauchi State (Loan 1767-UNI) by providing affordable shelter, infrastructure and related urban services to low income households in Imo State. The project would also enhance the planning and project implementation capabilities of key institutions at the federal and state levels so as to strengthen the basis for a more extensive program of urban develop- ment. In this context funds would be provided to the Project Development Department of the Federal Mortgage Bank of Nigeria for studies and consulting services, and technical assistance and equipment would be provid- ed to state and local authorities participating in the project. Serviced housing sites would be developed in the three principal towns and low income residential areas would be upgraded. Sites would also be provided for small scale enterprises to generate employment. Low income families would be given access to construc- tion loans and supporting social facilities would be constructed in the project areas. Project Benefits and Risks: The project would directly benefit some 87,000 people, of which an estimated 80 percent have incomes below the relative urban poverty threshold. Urban development This document ha a resricted distribution and may be used by recipiei.s only in the performance of their official duties. Its contents may not otherwise be disclosed withowu Vorld Bank authoriztion. - il - projects of this nature are new in Imo and may entail risks associated with inexperience. However, xperi- ence gained during Itpl_mentation of the first urban project and technical assistance provided under the proposed loan is designed to minimize these risks. The project implementation unit is fully staffed, counter- part funding is assured and all major civil and build- ing contracts have been awarded. Estimated Cost: Local Foreign Total (US$ million) Urban Infrastructure 15.0 13.7 28.7 Community Facilities 2.9 2.3 5.2 Construction Loans 12.9 10.5 23.4 Technical Assistance and Training 0.2 0.3 0.5 Equipment, Vehicles and Spares 0.4 1.6 2.0 Studies 1.6 2.0 3.6 Total Base Cost: 33.0 30.4 63.4 Contingencies: Physical 1.7 1.4 3.1 Price 13.6 4.9 18.5 Total Costs: 48.3 36.7 85.0 Financing Plan: IBRD 16.3 37.7 53.0 Federal Mortgage Bank of Nigeria 21.1 - 21.1 Imo State Government 10.9 - 10.9 Total Financing Required 48.3 36.7 85.0 Estimated Disbursement: a/ FY86 FY87 FY88 FY89 FY90 - US$ million- Annual 11.7 12.1 12.2 10.1 6.9 Cummulative: 11.7 23.8 36.0 46.1 53.0 Economic Rate of Return: The land development and infrastructure improvement components representing abiut 90 percent of project costs would together yield an estimated economic rate of return of 27 percent. Staff Appraisal Report: No. 3295-UNI dated June 28, 1985. a/ Based on Bank-wide sectoral profile but adjusted to reflect the award of all major civil and building works contracts. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECONMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE FEDERAL REPUBLIC OF NIGERIA FOR A SECOND URBAN DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed loan to the Federal Republic of Nigeria for the equivalent of US$53.0 million to help finance a project for urban development in Imo State in Nigeria. The loan would have a term of 20 years, including 5 years of grace, at the standard variable interest rate. PART I - THE ECONOMY 1/ 2. The assessment of the Nligerian economic situation in this report is based largely on the work of an economic updating mission of November 1984 supplemented by further analysis undertaken by Bank staff on the basis of the 1985 budget speech. The findings of a 1982 economic mission were more fully reflected in a Country Economic Report (No. 4506-UNI) which was distributed to the Executive Directors on August 15, 1983. Annex 1 presents selected social and economic indicators for Nigeria. Background 3. Nigeria, with a population of about 94 million in 1984, is the most populous country in Africa. Among sub-Saharan Bank members, in 1980 Nigeria accounted for about 45 percent of gross output and more than 60 percent of regional investment. Its GNP per capita is estimated at about US$760 in 1983, which is twice the average for sub-Saharan Africa. While Nigeria as a major oil exporter since the early seventies enjoyed a substantially improved resource base from increased oil revenues, it still remains at a very early stage of development in terms of socio-economic indicators, in which it compares with other sub-Saharan countries. 4. Following a civil war and 13 years of military rule, a new federal constitution was adopted, and an elected civilian government came into power in 1979. This goverment was re-elected in September 1983. However, a military government (FMGN), led by Major-General Mohammadu Buhari, took power in December of the sae year. 1/ This section is substantially unchanged from Part I of the President's Report for the Borno Water Supply Project (P-3692-UNI) approved by the Board of Directors on May 7, 1985. -2- Macro-economic Davelopments 5. Nigeria has been undergoing a rapid socio-economic transformation since the upsurge of oil prices in 1973-74, which dramatically altered the country's resource position. Between then and the late seventies, Nigeria's development strategy was based on sustaining a high rate of growth and diversifying the economy through the resources generated by the oil sector. The principal objective of the policies pursued by the Nigerian decision-makers was to translate the large oil revenues accrued -- about US$100 billion in current prices during the 1973-81 period -- into investments in economic, social, and physical infrastructure. While there have been some "non-economic" investments and waste, significant development gains were made in both economic and social infrastructure. Transport infrastructure, particularly roads and ports, expanded conslderably. Power generating capacity tripled, and refining capacity has more than quadrupled since 1973. Manufacturing grew at an average annual rate of 10 percent during the 1973-82 period, although there was a highly distorted investment structure due to large variations in the rates of effective protection provided to various industrial sub-sectors. There also has been a rapid spread of education at all levels; in particular, the primary enrollment ratio which was about 35 percent in the early seventies has more than doubled. 6. Developments were not as positive in some other areas. According to official statistics, overall output in agriculture remained virtually stagnant during the 1973-83 period, with the production of grains increasing probably at the same rate as the population growth rate, but the production of root and export crops declining substantially. Within a decade, Nigeria became a major food importer (US$2.7 billion of imports in 1982) as domestic terms of trade moved against agriculture. Inflation, coupled with an appreciating domestic currency, pushed up domestic costs of production, thus putting the commodity-producing sectors at a disadvantage vis-a-vis imports and non-traded goods. This encouraged diversion of resources from commodity production to services (including trade and construction). Both agriculture and industry became "high-cost" activities. Trade and exchange rate policies, which were formulated in response to frequent swings in oil export earnings, were largely used to dampen inflationary pressures or ration imports rather than to provide appropriate incentives to domestic production. This was partly due to the fact that, as a result of the fluctuations in the world oil markets and their impact on the balance of payments and goverment revenues, Nigerian policy-makers were preoccupied with short-term crisis management. This diverted atten- tion from the formulation of longer-term policies to reduce the country's dependence on oil and to strengthen the domestic productive sectors. 7. The Fourth Development Plan (1981-85) was prepared in 1980 when the world oil markets presented a favorable outlook. Nigeria's oil exports for the year amounted to US$25 billion and foreign exchange reserves stood at US$10 billion. The Plan, accordingly, reflected an ambitious investment program. It envisaged a total capital investment of N80 billion (about US$145 billion at the 1980 rate of exchange) over the period 1981-85, half of which was to be invested directly by the Federal Government and a quarter directly by the states -- with the remaining quarter to be invested by the private sector. Emphasis was placed on the development of agriculture (through statewide agricultural support programs and massive irrigation schemes) and on heavy industry based on cheap energy (steel, petrochemicals, fertilizers, etc.), both supported by substantial investments in infrastructure. 8. Nigeria's development plans, however, were overtaken by the sharp decline in oil export revenues since 1981. Its economic problems during 1981-83 were exacerbated by the inability of Nigerian decision-makers to cut back the public investment program sufficiently, partly because of a continuing belief that oil markets would soon recover. Nigeria's imports reached US$24.2 billion in 1981, while oil production fell by one-third from its 1980 level of 2.06 mbd to 1.44 mbd. Although the oil price peaked at US$39 per barrel, oil export revenues declined 'rom US$23.4 billion in 1980 to US$17.4 billion in 1981, resulting in a current account deficit of US$6.5 billion, which was financed largely through the drawing down of foreign exchange reserves and external borrowing. 9. Confronted by a worsening balance of payments situation, the Government reacted in April 1982 by introducing a number of austerity measures aimed at stabilizing the domestic and external financial situation. However, these measures failed to achieve their stabilization objective: oil production declined further and, coupled with a decline in the oil price to US$34.4 per barrel, oil export revenues fell to US$12.8 billion. Imports of goods for the year declined only marginally to US$17 billion (from the 1981 level of US$19.1 billion), resulting in a wider current account deficit of US$7.7 billion. Reserves declined further to only US$1.4 billion by the end of 1982, whilst trade payment arrears of US$4 billion were accumulated. 10. By 1983, previous measures in the form of quantitative restrictions together with a growing reluctance of the trading partners to extend further trade credits to Nigeria led to a reduced import level of US$12.2 billion. Oil export revenues continued to fall, however, reaching US$10.1 billion in 1983. The trade deficit was largely financed by further accumulation of trade payment arrears (US$3.8 billion), a process which had already begun during 1982. Discussions with major overseas creditor banks resulted in the rescheduling of the arrears owed to these institutions (for confirmation of letters of credit) of about US$2.1 billion accumulated prior to August 31, 1983, with repayments to be made over a period of 31 months starting January 1984. In April 1984, the Government completed negotiations to reschedule US$4-5 billion of the remaining arrears incurred through "open-account" inter-company import financing. This agreement included only those arraars not covered by export credit insurance and rescheduled the payments ovor a period of six years including a grace period of two and half years at an interest rate of 1 percent over LIBOR. Outstanding arrears at this point are about US$2 billion insured by export credit agencies (ECAs). The terms under negotiation for these remaining arrears are similar although formal agreement to reschedule has been made conditional by the ECAs on Nigeria reaching an agreement with the IMF. The military government (FMGN) has so far been regular in making repayments due on earlier medium- and loug-term debt, as well as on the 1983 reschedulings. 11. The deterioration in the external financial situation had a severe impact on the fiscal position of the Federal and State Governments as well as on grovth. Federally collected revenues fell from N15.2 billion in 1980 to N12.0 billion in 1983, because oil revenues account for such a large percentage of total revenues (about 80 percent in 1980 and almost 60 percent in 1983). Until 1984, the Federal Government did not reduce expenditures in line with the reduced revenues, thus large budget deficits emerged over the period 1981-83, with the deficit/GDP ratio in excpss of 8 percent. In order to finance these deficits, the Government borrowed from the Central Bank. This, coupled with the physical shortages of many imported commodities, led to an acceleration in the inflation rate which rose to about 23 percent in 1983. As a result of a decline in Imports of about 30 percent in real terms, domestic output contracted by 6.0 percent in 1983 following declines of 5.9 percent in 1981 and 2.3 percent in 1982; as a consequence, most manufacturing industries, starved of imported raw materials and spare parts, are now operating at very low capacity levels. In addition to the decline in manufac- turing output, the construction sector suffered from an almost one-third decline in gross output in 1983. 12. In order to get the balance of payments situation under control, and accommodate the increase in debt service to about US$4.2 billion in 1984, the FMGN imposed in early 1984 very strict limitations on imports through the use of an import licencing/foreign exchange allocation scheme. As a result there was a sharp curtailment of imports which are estimated to have amounted to only about US$10 billion in 1984. Since oil export revenues increased by about US$1.3 billion over the 1983 level to US$11.4 billion, due to an increase in oil exports that more than offset the US$2 per barrel reduction in price in October 1984, there was also an improvement in the external balance. The current account deficit is estimated to have amounted to only about $150 million in 1984. The improvement of the external balance through measures to constrain imports carried with it, however, very high costs for the economy in the form of. further decreases in industrial production, construction and investment, accelerated inflation (officially estimated at 37 percent 5 in 1984) as well as increased unemployment. The manufacturing sector as a whole is estimated to have operated at only about one-third of capacity in 1984. However, due to the increased oil revenues as well as good performance in the agricultural sector -- in part explained by a return of workers to farming following recent years' increases in agricultural prices -- Nigeria was able to break three consecutive years of decline in overall production, and held it about constant in 1984. Adjustment Policy Issues 13. At present, the Nigerian economy faces two critical issues: first, the management of the short-run financial crisis and stabilization of the economy; and second, the longer-term structural adjustment of the economy by stimulating productive sectors, lessening dependence on oil, and developing a wider resource base. With regard to the short term, the measures that the FMGN has taken since January 1984 to reschedule trade arrears, control imports and restrain domestic expenditures which were reconfirmed in the 1985 budget released in January, may help to arrest a further deterioration of the external and internal financial situation. However, the remaining external arrears need to be rescheduled, particularly in view of the need for substantial external borrowing in the near future. 14. While a rebound in oil revenues would help Nigeria to overcome the current crisis, it will not resolve the structural issues facing the economy. More vigorous and consistent policies, beyond the measures taken to restore financial stability, will be needed to bring about structural change. The chief requirements comprise: (i) further incentives for efficient export promotion and import substitution, including appropriate exchange rate, tariff, and credit policies; (ii) complementary steps to strengthen the balance of payments through judicious management of foreign borrowing and external reserves; (iii) continued control of aggregate demand through prudence in monetary, fiscal, and wage policies; (iv) improvements in the composition and implementation of public investment to increase its efficiency; and (v) steps, such as raising interest rates and improv±ng tax collection, to increase private and public savings and investment. Prospects and Financing of Development 15. Although Nigeria's exportable crude oil surpluses are expected to be significantly reduced well before the turn of the century, the bulk of its foreign exchange resources will continue to come from the hydrocarbon sectors during the next twenty years. In addition to oil exports, this could include exports of liquefied natural gas (LNG) -- although the market prospects for LNG during the 1990s are more uncertain than before -- and some exports of petrochemicals. To maintain economic growth, major structural changes are needed in order to adapt the economy to lower levels of oil export -6- earnings. In the short run, the volume of Nigeria's oil exports is likely to be determined by the uncertain conditions of the world oil markets rather than by the deliberate extraction policies of the Government. It is projected that oil production would rise gradually, possibly attaining a level of 1.6 mbd in 1987, from its estimated level of 1.3 mbd in 1984. 16. The prospects for the Nigerian economy over the medium term are closely related to the kind of economic policies the Government pursues over the next few years. One option open to the Government is to pursue a "high growth/economic reform" strategy comprising policy measures which have been discussed in the context of a possible Extended Fund Facility (EFF) with the IMF and a Structural Adjustment Loan (SAL) from the Bank. Such a strategy would also give Nigeria renewed access to international borrowing from commercial banks, although the amounts that would be available are difficult to quantify. On the estiaation that about US$2-3 billion per year of international lending would be available from all different sources, this would permit a moderately high growth rate of about 4 percent per annum over the period 1985-1992. It would prevent a further deterioration in the average standard of living and allow employment to expand broadly at the same pare as population growth. In addition, it w-ould, over time, stimulate non-oil exports, which, in the longer run will need to replace oil as the engine of growth. In the "low" case, on the other hand, assuming no agreement is reached on an EFF/SAL package, and the only "reform" is in maintaining enough macro-economic discipline to avoid the reemergence of trade arrears as a major problem, the possibility of foreign borrowing would be very limited and balance of payments constraints would necessitate the continuation of restrictive policies. The result would be lower growth rates for the rest of the decade leading to a further deterio- ration of the average standard of living, low capacity utilization rates in many sectors and increasingly severe unemployment problems. 17. At present the Government is pursuing an intermediate strategy. In addition to the adjustments in the investment program mentioned above (para. 12), the Government has recently introduced new schedules of customs and excise duties that move in the direction of equalizing effective protection across industries. In the 1984 budget the Government made reductions in public expenditures in line with Bank recommendations and, to help rationalize future investments, instituted a Project Review Committee which has reviewed projects funded under the capital budget. The Committee has proposed that all projects be categorized as "core" or "non-core" with the former to receive full funding and the latter being shelved pending availability of funds or abandoned. The recommendations of the Review Committee have to a significant extent taken into account in the 1985 federal capital budget. Measures to streamline public sector employment have resulted in a reduction of some 55,000 employees; and a freeze an public sector salaries and wages has also been introduiced. Together these measures are estimated to have resulted in a reduction of the - 7 - Federal budget deficit from about 23 percent of GDP in 1981 to about 5 percent in 1984. The 1985 budget continues with the policy of stabilization and the sectoral allocation of public expenditures is *7nce again in line with the Bank's recommendations. The new Covernment has also enforced much greater financial discipline on 'tate Governments which has resulted in greater revenue raising efforts by the states together with improved focus on development priorities. T._ghter monetary policies including increases of 1.5 to 2 percent in interest rates have also been introduced. With this progress on fiscal reform, but little progress on incentive reform, growth would be higher than in the low case, but would result at best in a stagnation of per capita income. 18. The three policy scenarios differ more from each other in their impact on growth than in their impact on Nigeria's ability to service external debt. This is because in the low and intermediate cases, lack of confidence on the part of commercial lenders would mean severely limited access to international borrowing. Of course, if the moderate fiscal discipline assumed even in the low case is not maintained, there would be pressure on imports and an eventual risk of a build-up of trade arrears with a resultant further decline in access to external credits. At the present time, though, this does not appear likely, given the Government's firm commitment to austerity. Under all these scenarios there will be severe liquidity problems over the next few years, with the debt service ratio likely to range from 39 to 45 percent between 1985 and 1987. Under all the scenarios also, the debt service ratio begins to decline after 1987. The decline is somewhat slower -- although still marked -- in the high case, because with better growth policies, access to international borrowing is higher. In the high case, the debt service ratio in 1992 would be 22 percent, while in the intermediate and low cases it would be about 10 percent. The volume and composition of Bank lending would be determined by the policies pursued by the Government -- ranging from an expanded lending program including a Structural Adjustment Loan in the high case to a limited program focussing primarily on social and physical infrastructure in the low case. PART II - BANK GROUP OPERATIONS IN NIGERIA 1/ 19. Bank and IDA lending to Nigeria as of March 31, 1985 amounted to US$2,561.0 million (net of cancellations). The amount of loans and credits disbursed as of March 31, 1985 was US$1, 418.8 1/ This section is substantially unchanged from Part II of the President's Report for the Borno Water Supply Project (P-3692-UNI) approved by the Board of Directors on May 7, 1985. million, leaving an undisbursed balance of US$1,142.2 million. Agriculture accounts for about 49 percent of total commitments; transport, power, and water supply together for about 34 percent; and education, industry, urban, and the post-war rehabilitation loan for the remaining 17 percent. There have been only two IDA credits to Nigeria, for US$35.3 million; both are fully disbursed. IFC has made six loans to borrowers totalling US$24.5 million, and six equity investments totalling US$4.5 million. Of these amounts, US$7.4 million have been repaid, terminated, cancelled, or sold. Annex II contains a summary statement of Bank loans, IDA credits, and IFC investments. 20. As a result of the abrupt decline in earnings from oil, public revenues have fallen sharply, causing many of the ongoing projects to run into serious counterpart funding problems. The Bank, the Federal Government, and the relevant state governments are making concerted efforts to alleviate the situation. The Bank, under the Special Action Program, reallocated proceeds of several loans and increased disbursement percentages to speed up disbursements. Working within the resource constraints (which are likely to continue in the near future), the Federal Government supplemented the funding for selected projects for 1984 and has agreed to ensure that adequate funding will be provided for projects for 1985 on the basis of updated estimates of funding requirements. The state governments are instilling a greater degree of discipline in their budgeting processes and cutting back on new capital expenditures in order to fund existing obligations. As a result, the prospects for counterpart funding for Bank-assisted projects are expected to improve. 21. Provided appropriate policy changes are undertaken, the Bank's lending program would aim primarily at the urgent diversification of Nigeria's economy to reduce its excessive dependence upon petroleum as a source of foreign exchange and fiscal revenue. At the same time, the Bank would continue to support efforts to raise the productivity of the lowest income groups and thereby diminish the incidence of absolute poverty in Nigeria. As in recent years, the Bank would continue to provide support for agriculture and rural development with emphasis on institution-building and transfer of technology. These objectives are in line with the Federal Government's priorities and with the emphasis it is placing on the need to use the proceeds of the country's oil revenues to increase the productive capacity of the economy, and thereby raise the standard of living of its population, particularly the rural poor. The Bank would similarly support efforts to stimulate a well-balanced and integrated development of Nigeria's industrial sector. This approach would entail a combination of intensive sector work and policy dialogue with the Government, as well as Bank assistance for industrial projects in crucial subsectors. - 9 - 22. Projects in the agriculture, water supply and urban sectors together should account for a large share of Bank lending in the coming two to three years. Effective support for the commodity producing sectors will also require strategic investment in production-related infrastructure. There are good opportunities for the Bank to make a sign'ficant contribution in energy and highway maintenance. Similarly, there is a strong case of continued lending for education. In this context, vocational, technical, and teacher training would be given special emphasis. Finally, the Bank would support the Federal and State Governments' efforts to spread the benefits of growth to the social sectors. It is envisaged that some of the pressing problems of rapid urbarization will continue to be addressed through a number of urban development projects focussed on the needs of the urban poor and resource mobilization for urban areas. The Bank is also assisting the Government in overcoming the country's health problems with a project aimed at both federal and state (Sokoto) levels, and is continuing a dialogue with the Government on population issues, perhaps leading to lending in this area. 23. Although annual disbursements have increased from US$52 million in FY1978 to nearly US$272 million in FY1984, Nigeria's disbursement performance has lagged behind that of other countries in the region. The undisbursed balance now stands at 45 percent of the US$2.6 billion in loans and credits approved. One of the reasons for this development is the rapid expansion of the Bank's loan portfolio since 1979 as well as the fact that a number of large loans, with relatively large, planned disbursements during the early years, were extended during this period, mainly for agricultural projects. In many cases, however, disbursements have been slowed by long delays in loan effectiveness and institutional and management problems. Recently, the inadequate counterpart funding of projects by federal and state governments, resulting from lower oil revenues, has further slowed disbursements. The FMGN, with the assistance of the Bank's Resident Mission, is now carefully monitoring loan disbursements with a view to identifying problems early and taking corrective action. Also, the Bank has been taking a series of measures aimed at accelerating disbursements under both ongoing and new projects (para. 20). These efforts are showing results. PART III - THE URBAN SECTOR Urban Trends in Nigeria 24. Nigeria's 1984 urban population of about 29 million, some 30 percent of the total, is rising rapidly. It is estimated that rates of urban growth of between 6 percent and 8 percent will result in an urban population of over 75 million, or about half the total Nigerian population, by the year 2000. This growth, once mainly - 10 - confined to the largest centers and the traditionally more urbanized southwest has, in the last ten years, been far more widespread and caused in large part by migration from rural areas, a trend slowed in recent years by the economic stagnation. 25. The main cause of urban migration has been due to relatively better employment opportunities in urban areas accelerated by the oil boom of the 1970s. Despite the sizeable urban labor force expansion, however, an estimated 50 percent of urban residents' incomes fall below the absolute urban poverty level of about US$700 per capita per year. 26. The rapid growth of urban populations has severely strained the capacity of the institutions responsible for urban management and has overwhelmed the limited infrastructure networks. Many of the poorer residential districts have no provision for piped water, storm water drainage, sewage disposal or public transport. The shortage of housing is acute at all income levels and overcrowding, which is commonplace, is rising. It has been estimated that housing construction would need to average 440,000 a year nationally in the period 1975-1990 in order to satisfy requirements. Actual housing construction was probably no more than one quarter of this level during the period 1975-1983 and, due to current financial constraints, is not likely to increase. 27. Imo State, with an area of about 12,700 km2 and an estimated population of nearly six million, is one of the most densely populated and urbanized areas of West Africa. Lying in the densely populated and industrialized southeastern region of Nigeria, between Port Harcourt, Enugu and Onitsha, it has an average density of more than 450 persons per km2 and more than 50 towns of over 50,000 people. Densities of 1,200 to 2,000 persons per km2 have been recorded in the vicinity of major towns. 28. The pace of urbanization is likely to continue. The towns play an important role in the regional economic system. They are vital market, production, communication, educational, social and cultural centers, closely linked economically to their rural hinterland. The towns provide storage, transshipment and distribution facilities for the agricultural and artisanal products of the surrounding rural areas and also supply farmers with necessary inputs to support their production. Above all, they are the dynamic centers of the cash economy, entrepreneurship and modernization. 29. The three largest towns in Imo State are: Owerri, the state capital; Aba, the main trading and industrial center; and Umuahia, an important rail link with the north. Because of dislocation caused by the civil war and the lack of reliable census data, population estimates are difficult to verify. Current estimates are: Owerri, 180,000; Aba, 450,000; and Umuahia, 90,000. Growth is estimated at - 11 - 7 percent in Umuahia, 9 percent in Aba, and 10 percent per annum in Owerri. These towns are clearly major and rapidly growing economic centers in the state, accounting for over 60 percent of industrial establishments and a similar percentage of total employment. There are more than 1,800 registered industries in the state, of which nearly half are located in Aba. There is demand for serviced sites for small-scale industries in all three towns. 30. A large part of public and private sector investment in reconstruction and development in the nine years since Imo State was created out of the East-Central State, has been directed to these towns and resulted in substantial growth in employment. In spite of the significant investment in urban infrastructure and services, much of it to repair war damage, supply has not met the backlog and incremental demand. Projected growth in the state economy and in urban population will place additional strains on the already overburdened systems. 31. Past investments, also, have not benefited all areas within towns or income groups equally. For example, the extensive road and drainage reconstruction of the late 1970s in Owerri left pockets of dense, lower-income neighborhoods, the traditional "village cores", with poor access and drainage, little water and severe sanitation problems. The older main market, a major trading center in the state, was also neglected and is now beset by congestion, poor access and drainage, and hazardous sanitary conditions. Similarly, the infrastructure reconstruction programs in Aba did not benefit the densely-populated area of Ndiegoro, near the main market, and this has been subject to flooding, poor access and environmentally hazardous conditions. 32. Equally imbalanced have been the investments in housing in the state. Until now, investment in housing has focussed on middle- and high-income groups while serviced land for low-cost housing is unavailable close to employment. Rents in the towns are relatively high and rising. This forces many urban workers to commute from rural areas, causing them to spend between 25 percent and 50 percent of their minimum wage on transportation and wasting considerable travel time. In spite of all the recent construction it is estimated that the current housing shortfall in Owerri, Aba and Umuahia is 5,000, 14,000 and 3,000 units respectively, virtually all low-cost. Incremental demand is estimated respectively at 10,250, 24,800 and 4,000 units between 1985 and 1989. Institutional Framework and Constraints 33. A number of institutions have been established by the Federal Government to tackle the complex problems of urban - 12 - development. However, the field of responsibility and the jurisdiction of these public sector institutions are not always clearly defined and eometimes they overlap. 34. Responsibility for urban development, planning and most infrastructure investment rests with the states. The Federal Government, however, is involved in the provision of major infrastructure and utility networks of national importance such as federal highways, waterways, railways, airports, telecommunications and electricity. Through the Federal Ministry of Works and Housing (FMWH), formerly Ministry of Housing and Environment, it is also responsible for the formulation of a national policy of urban develop- ment and housing. As part of this function FMWH is charged with su- pervising both the Federal Housing Authority (FRA) which is primarily concerned with middle- and high-income housing, and the Federal Mortgage Bank of Nigeria (FMBN). FMBN is responsible for housing finance, and makes loans directly to individuals as well as to state-level development agencies. 35. A central aim of the first Bank-supported urban development project (Loan 1767-UNI), was to strengthen the planning and project implementation capability of the FMBN by furnishing technical assistance in project development, mortgage operations, accounting and systems management. As a result of this assistance FMBN has gained experience in project preparation and supervision and now participates actively in the identification and preparation of new urban projects. In this capacity it has provided assistance to the states by onlending funds for urban development feasibility studies which it is also helping to formulate and supervise. 36. In Imo State a number of state agencies and local govern- ments (LGAs) are involved in planning, capital investment, maintenance, service delivery and revenue collection in the three major urban areas. Most planning and technical functions have, since a reorganization in January 1984, been concentrated into the Ministry of Works and Transport (MWT), which includes Departments of Housing and Environment; Lands and Survey; and Works, in addition to the Project Implementation Unit. As such, MWT is responsible for planning and development control in urban areas, land registration, transport regulation and licensing, provision and distribution of water, construction and maintenance of state roads, housing and environmental control. 37. MWT is also responsible for two parastatals, the Imo State Transport Corporation and the Imo State Housing Corporation and oversees the Owerri Capital Development Authority. The Ministry of Local Government, which oversees local government administration and finances in the state, is also responsible for the Imo State - 13 - Environmental Sanitation Authority (ISESA) which provides solid waste management services on behalf of the local governments, presently only in Owerri, Aba and Umuahia. 38. There are no separate municipal or town governments, and the urban areas are administered by the local government authorities (LGAs) in which they are located. ThLe LGAs constitutionally are responsible for a broad range of services; from providing and maintaining local infrastructure and facilities (roads, drains, parks, markets, etc.) to licensing bicycles and canoes; from the maintenance of cemeteries to the management of solid waste, rate assessment and collection. They also share responsibility with the state government, for providing and maintaining health and education facilities. Their activities are monitored by the Ministry of Local Government. 39. In the past local governments have experienced financial constraints aggravated by limited personnel with suitable management, technical skills and training. They have been unable to perform even the most perfunctory infrastructure maintenance functions, let alone embark on significant capital development. As a result, either state agencies have taken over particular LGA responsibilities (such as solid waste management, provision of infrastructure), or services remain neglected. The Imo State Environmental Sanitation Authority set up in 1981, has been successful in dealing with waste collection. However, its future operational capacity is predicated on availability of spare parts for its fleet and revenues to enable it to function without State subventions, which in 1984 were estimated at N 1 million annually. Past Initiatives 40. The Federal Military Government in 1978 handed over the entire implementation responsibility for housing to the states. At the same time the Land Use Decree of 1978 was promulgated in which land allocation authority was vested in the State. 41. In 1980, because of dissatisfaction with the efforts of states, a Federal Low-Cost Housing Program was announced by the civilian government for the construction of 40,000 units per year: 2,000 units in each of the 19 states, plus the Federal Territory of Abuja. The scale of this program, lack of involvement by state-level personnel to complement the efforts of Lagos-based Federal Ministry of Housing and Environment (FMHE) staff in its implementation, poor coordination and cost control, delayed the program, led to cost overruns and effectively prevented FMHE from performing its main policy and program functions. Less than one year's planned program had been achieved by early 1984, when construction was suspended. - 14 - 42. The Federal Government has still to formulate a comprehensive and coherent policy framework within which to cast its urban development strategy. In its efforts to define clearly the difficult issues of incentives and controls, standards for shelter and infrastructure, cost recovery, subsidization and the identification of priority target groups, the Government has solicited the assistance and collaboration of the Bank. As part of its sector work program the Bank has already opened a dialogue with Government on the compatibility of the various federal and state initiatives. Recent Imo State Government Initiatives 43. In January 1984, after the coup the new Imo State Government inherited a difficult financial situation: declining revenues, a large foreign and local debt, a backlog of overdue payments to suppliers, contractors and civil servants' wages, and a stagnant economy. To overcome the severe financial constraints, the Imo State Government embarked on a program of austere budgeting on the one hand, and on seeking additional local revenues on the other. Recurrent expenditures have been trimmed through the releasing of redundant staff and "ghost workers", while capital expenditure has been limited to priority projects. State subsidies and subventions to parastatals were reduced and revenues mobilized. 44. Results have been impressive. Revenues in the first five months of 1984 were reported 240 percent higher than in the corresponding period in 1983. Efforts are being made to introduce user fees for urban services such as solid waste collection, and for hitherto free social services such as education and health care. 45. Additional improvements, however, depend on greater adminis- trative efficiency and financial control at both the State and LGA levels. Greater emphasis should be placed on operations and maintenance of existing assets while investments in neglected high priority services and infrastructure should be programmed. Constraints to productive enterprises, particularly those low-capital, small-scale units with many forward and backward economic linkages, should be removed wherever possible. To help alleviate some of these problems, the Imo State Government is participating in a Bank-assisted project of technical and financial assistance to small and medium businesses (Loan 2376-UNI). Bank Assistance Strategy 46. Bank urban assistance strategy in Imo State has focussed on the folloving key issues: an imbalanced state investment program that overly emphasized capital-intensive and social programs while neglecting to develop sound financing practices, and high levels of - 15 - subventions for housing (particularly for higher income groups). Improving access to reliable, basic services and utilities is a fundamental need if the economic growth of Imo State is to be maintained. Given the poor level of services in many areas, it is also seen as a necessary prerequisite for public acceptance of measures to increase tax revenues. Experience of the Bauchi Project 47. The Bank's involvement in Nigeria's urban sector began within the framework of the Nigerian States Urban Development Program (NSUDP), which has been incorporated in the Federal Government's Fourth Five-Year Development Plan (1981-85). Under this program, a pilot first project was funded and is being executed in Bauchi State, providing sites and services and area upgrading in Bauchi and Gombe, technical assistance at state and federal levels, and funds for feasibility studies in seven other states. 1/ 48. The Bauchi project (Loan 1767-UNI), approved in 1979 and scheduled for completion in 1985, is considered to be a success by the Federal as well as the Bauchi State Governments. It has already demonstrated the feasibility of providing affordable shelter, infrastructure and related urban services to low-income households. Initially plagued by administrative and start-up delays and subsequently constrained by counterpart funding problems, the project is progressing satisfactorily. In the upgrading areas, about 6,000 families, one quarter of Bauchi's population, have benefited from improved basic infrastructure such as roads, drains, water supply and electricity. In the site and services areas some 1,850 of the 2,050 plots have been allocated and beneficiaries are building low-cost houses with FMBN loan funds and other savings. Cost recovery from these sites and services beneficiaries iB satisfactory and repayments are not in arrears. 49. Lessons learned from the Bauchi project have been applied in the present project. To avoid start-up delays, all major contracts have been awarded, more than 60 percent of counterpart funding has been spent or deposited in the Project Account by the Imo State Government (ISG), and the implementation unit (PIU) is fully staffed. 1/ Imo, Benue, Lagos, Ogun, Ondo, Gongola and Niger. - 16 - PART IV - THE PROJECT Origin and Objectives 50. The proposed project was first identified in October 1977 by a Bank mission which visited Nigeria to assess the scope for Bank assistance. Subsequently, the Imo State Government engaged consultants to prepare a feasibility study which was completed in July 1980. The project was appraised in September 1980 and negotiated in July 1981. However, the project was not presented for Board approval at that time because Imo State had failed to provide counterpart funds for the Imo Oil Palm Project (Loan 1191-UNI), and because of Bank concerns about the ability of Imo State to fund this and other pressing development needs. Recently, the State satisfied all of its obligations under the Oil Palm Project and has undertaken a wide-ranging program of financial reforms. Outstanding conditions for Board presentation were met in early 1984, and the Staff Appraisal Report (3295-UNI), and loan documents were updated and amended to reflect changes in the project implementation, costs, financing plan, and institutional framework. However, further delays in loan processing were due to the new Federal Military Government's assessment of all proposed loans in its portfolio, including those from the World Bank. In October 1984 the FMGN gave the go ahead for this project. 51. The project has two major aims: At the Federal Level: to continue the long-term objective of the Nigerian States Urban Development Program by strengthening Government's capability for policy formu- lation, program monitoring and evaluation, and extending project preparation assistance to the states; At the Imo State Level: (a) to extend the demonstration begun in Bauchi of a replicable approach to providing shelter and related services that is affordable by the low-income urban population; and (b) to strengthen institutional capacity in the State to carry out future low-income urban development projects, while improving the local financial resource base. Rationale for Bank Involvement 52. The project would redress past investment imbalances by focusing primarily on the provision of improved infrastructure systems and services for lower-income, neglected areas of the project towns and meet some of the backlog in demand for serviced plots for - 17 - residential, mixed and small-scale enterprise use for lower income groups. This should encourage economic activity, raise productivity and justify the introduction and improvement of cost recovery mechanisms for urban infrastructure and services. Improved financial management, revenue collection and maintenance are critical to the State's and LGAs' efforts to plan, program and maintain urban investments without overrelying on external financial resources. Neither the State nor the Federal Government has sufficient resources and technical skills necessary to plan, coordinate, finance, and implement a low-cost scheme of the type proposed. Because of its oil revenues, Nigeria has, in the past 10 years been a low priority country for most bilateral assistance programs. Furthermore, the type of investments proposed, with a relatively low foreign content for both goods and services, is not very attractive to commercial or export credit sources. Project Concept and Summary Description 53. The principal focus of the project would be to alleviate the serious housing shortage in Imo's major towns through the development of some 8,500 plots for residential, mixed and small-scale industrial use in Owerri, Obioma NgwalAba and Umuahia for low-income groups. Plots would be serviced with the full range of urban infrastructure and utilities such as roads, drainage, water supply, electricity and refuse collection, located within well-planned communities. Supporting community facilities such as schools, health clinics and community centers would also be constructed. The three areas are expected to accommodate about 60,000 beneficiaries and meet some 25 percent of the projected demand for housing in the three towns in the coming five years. Families would be able to choose the most appropriate of five plot sizes according to their family income. 54. The project would provide serviced sites for small-scale businesses within the project areas in all three towns. More than 1,000 sites would be provided in total, of which two-thirds would be designed for mixed residential/business use. Businesses locating on these plots would have access to credit facilities and to technical assistance furnished within the context of a small- and medium scale enterprise project, that is being developed with Bank assistance in Imo State (para. 45). 55. To ameliorate the particularly acute problems caused by overcrowding and inadequate infrastructure in Owerri, five traditional village cores would be upgraded to improve the physical layout and by providing access to roads, drainage, electric power, water and sanita- tion facilities. The areas affected at present accommodate some 16,000 people in about 1,200 dwellings. In Aba, about 9,000 residents living in environmentally hazardous and frequently flooded areas in a - 18 - high-density, residential neighborhood (Ndiegoro) near the town center and main market, would be provided with drainage, roads and water reticulation. Home improvement and reconstruction loans would be offered to residents of the affected communities, particularly for construction of sanitary facilities and connections to water networks and sewerage facilities. 56. To complement the development of physical infrastructure, loans for the improvement and construction of shelter would be offered to project beneficiaries by the Imo branch of the FMBN. It is estimated that about 75 percent of the households locating in site and service areas would take up construction loans ranging from US$3,900 to USS8,600 depending on family income and plot size. Using some self-help labor, these loans would suffice for the construction of a minimum two-room shelter on a plot of 200 square meters with individual water connection and septic tank. Households in the upgraded area of Owerri would have access to loans ranging from US$930 to US$1,600 for purposes of repair and reconstruction. 57. Finally, the project would provide technical assistance to key federal, state and local institutions with the aim of enhancing their planning and project implementation capabilities. At the federal level, funds would be provided for FMBN to extend the program initiated under the first urban project, t1hrough which the Project Development Department (PDD) assisted states in identifying, preparing and financing urban development feasibility studies. In addition, sector studies and surveys would also be undertaken. Training in key areas of program formulation and coordination, project analysis and administration would also be provided for FMWH and FMBN staff. Under the Bauchi Urban Project FNBN agreed to discuss with the Bank by September 1985, recommendations of a study concerning FMBN's operational policies and procedures. 58. Technical assistance to the state and local governments would be related more specifically to project implementation and maintenance. Finance would be provided for 30 man-months of consultant services to assist the Project Implementation Unit (PIU), within the Imo Ministry of Works and Transport, ir start-up activities, accounting, planning and project supervision. The bulk of these consultant services would be for engineering supervision. A further 36 man-months of consultant services would be provided to local governments to assist with environmental sanitation cost recovery, equipment and infrastructure maintenance, property tax administration, and the training of local government administrative staff. The project would also finance studies and priority action plana related to flood control in Aba and market facilities in Owerri. Equipment, vehicles and spares for maintenance and solid waste col- lection would also be financed through the project. - 19 - Project Cost 59. Total costs for the project period 1985-1989 (including duties and taxes of US$4.1 million) are estimated at US$85.0 million of which the foreign exchange component would amount to 43 percent or US$36.7 million. A breakdown of cost by major category is given in the loan ard the project summary. Civil works costs are based on actual tenders already awarded. An allowance has been made for physical contingencies equivalent to 10 percent of base costs for civil works and buildings. Price contingencies for foreign costs allow for a rise in the annual rate of international inflation from 3.5 percent in 1984, 8 percent in 1984, 9 percent per annum thereafter. Price contingencies for local costs are estimated at 22 percent in 1984 and 14 percent per annum thereafter. On the basis of these considerations, total contingencies are estimated at US$21.6 million - some 34 percent of base costs. Project Financing and Flow of Funds 60. The proposed IBRD loan of US$53 million would finance 62.4 percent of total project cost (65.6 percent of the total cost net of taxes). The IBRD share would cover disbursements of 100 percent of estimated foreign costs (US$36.7 million) and US$16.3 million of local costs. Retroactive financing, to cover costs eligible for IBRD funding incurred from September 1, 1980, is estimated at approximately US$5.3 million. Retroactive financing would cover disbursements for detailed design, engineering and preparation of tender documents, technical assistance for start-up activities at the state level since first project appraisal, and some civil and building works construction, begun in June 1984 to avoid further delays due to rains. 61. The remaining project cost would be financed by the FMBN and the Imo State Government. Their contributions would amount to US$21.1 million (24.8 percent of total project cost) and US$10.9 million (10.8 of total project cost) respectively. The Imo State Government has already spent more than US$2.7 million of their contribution on the project. To ensure adequacy of counterpart funding it has also deposited the equivalent of US$3.7 million up to the end of 1984 into the project account. It is estimated that, to meet its counterpart funding obligations, the State will need an additional US$4.5 million equivalent (approximately) spread as follows: US$2.0 million in 1985; US$1.2 million in 1986; and US$0.5 million in 1987. In addition, the State will have to continue to provide for operating expenses of the Project Implementation Unit (PIU) over the life of the project. Assurances were obtained from ISG that budgetary provisinns would be made to cover these financial commitments. - 20 - 62. At the time the project was prepared in 1979-1981, the prospects for securing cofinancing were limited and were therefore not considered determining factors in project design. Nigeria, relatively flush with oil revenues, was at that time a low priority country for most bilateral assistance programs, and the relatively low foreign exchange content for goods and services in this kind of project is not attractive to commercial or export credit sources. 63. The equivalent of US$53.0 million is to be lent by the IBRD to the Federal Government. Out of the proceeds of this loan, the Federal Government would onlend the equivalent of US$16.3 million to the Federal Mortgage Bank of Nigeria (FMBN). FMBN would repay the loan over 20 years including 5 years grace at the same rate as the IBRD loan (Section 3.01(b) of the Loan Agreement). This was agrzed during negotiations to allow FMBN, whose effective onlending rate is 13.6 percent, a significant spread over the cost of its borrowings to enable it to develop a better financial base and to devote more attention to housing projects for lower incame groups. This US$16.3 million would be used by FMBN in part (US$13.1 million) to finance home construction and improvement loans associated with the project (paras. 66 and 69), and the remainder for states urban feasibility studies and sector consulting services. 64. The remaining equivalent of US$36.7 million out of the proceeds of the IBRD loan would be channelled through FMBN and onlent to the Imo State Government (ISG) on the same terms as those of the IBRD loan to the Federal Government (Section 2.01(b) of the FMBN Project Agreement). Of these funds, approximately US$22.5 million would be earmarked for on-site infrastructure, detailed design, and supervision. The remainder US$14.2 million would be used by ISG for off-site infrastr.jeture, upgrading and commmuity facilities (paras. 69 and 71). 65. It would be a condition of loan effectiveness that Subsidiary Loan Agreements be executed between the Federal Government and FMBN and between the FMBN and Imo State in a form acccptable to the Bank (Section 6.01 of the Loan Agreeme:Qt). Project Implementation 66. At the Federal level the principal project implementing agency would be the Federal Mortgage Bank of Nigeria (FMBN) subject to the overall supervision of the Federal Ministry of Works and Housing (FMWH). The FMBN would be responsible primarily for financing of housing loans in the sites and services areas and home improvement and reconstruction loans in the upgrading areas. At the Imo State level the Ministry of Works and Transport (MWT), through the Project Implementation Unit (PIU), would be responsible for project - 21 - coordination and execution. The PIU, which was established at the end of 1981, is fully staffed and operates a separate project account. Tenders for civil and building works have been awarded, wich B.nk concurrence under advance contracting procedures, and construction has started. Advanced contracting was authorized to avoid further delays due to the onset of the rainy season. 67. Below the state level, the Local Government Authorities would have an important role to play in terms of community organization and in the mobilization of population support for the development effort. Furthermore, local services must be delivered effectively to the project area. To strengthen administrative and technical capabilities, the LGAs would be provided with technical assistance in the field of tax administration and financial management, accounting and maintenance of infrastructure and equipment. They would also be involved in the beneficiary selection process through Local Committees to be established by September 30, 1985 (Section 2.01(d) of Imo State Project Agreement). 68. A project executive committee has been established to coordinate project activities at different levels and to provide the project director of PIU with guidance on those aspects of project implementation that touch upon the broader community Interest. The co-mitte- would be chaired by the project director and would include representatives from other pertinent state ministries as well as representatives from those federal and local goverment agencies that participate in the project. The Urban Development Project Executive Committee (UDPEC) would be established by September 30, 1985 (Section 2.01(c) of the Imo State Project Agreement). The committee would also preside over the selection of project beneficiaries by lottery and would determine the allocatlon of plots amongst beneficiaries. Cost Recovery 69. There is little or no tradition of cost recovery in Nigeria for infrastructure services provided by the public sector. Nevertheless, following the policy established in the Bauchi project, the proposed project would incorporate provisions for the recovery of all land and on-site infrastructure costs for the components involving the development of newly serviced plots, which represent more than 70 percent of total project costs. Occupants would repay these costs in monthly mortgage payments to the FMBN over 15 years, at an interest rate of 9.5 percent. In order to recover administrative costs, a 3 percent mortgage service charge applied on the original loan amount and recoverable over the life of the project, has been incorporated into the effective interest rate structure. The effective interest rate charged to all beneficiaries would thus average about 13.64 percent. - 22 - 70. The combined effective interest rate is below the projected annual inflation rate of 14 percent and is less than the average rate experienced over the past three years (about 19 percent). The rate to be charged is, however, considerably higher than that charged under the federal housing program, or FNBN's social loan schemes (between 6 percent and 9.5 percent) aimed at income ranges much higher than those of the proposed project's target population. It is also in line with the generp.l structure of interest rates prevailing in Nigeria today and compares favorably with the commercial lending rate charged by FMBN, currently 13.0 percent. Interest rates are fixed each year by the Central Bank of Nigeria and could not be changed in the context of this project. 71. A decision on an appropriate mechanism for the recovery of costs incurred by the State for the components involving infrastructure improvements (upgrading) in already built-up areas (representing about 7 percent of total project costs) will be made after a study, to be financed through the project, is carried out. The study will examine alternative methods and devise a mechanism for the recovery of upgrading costs that will be both effective and equitable. Agreement was reached with the Imo State Government at negotiations that the cost of upgrading will be effectively recovered from the ultimate beneficiaries. The cost recovery system will be determined in agreement with the Bank in the light of recommendations made by the study, which should be completed by the end of 1985 and this would be a loan covenant (Section 4.03 of FMBN Project Agreement). 72. In general, the cost of off-site infrastructure and community facilities, not being allocable to specific residential plots, would not be recovered. The cost of these investments, including education and health facilities, would be borne by the State Government and paid out of general revenues. It is expected that some costs would be recovered indirectly after ISG introduces/increases school fees, rates and taxes. Thus, of total prolect costs, some 70 percent would be recovered from beneficiaries directly, a further 7 percent indirectly, and eventually, about 5 percent from school fees, rates and taxes. 73. The proposed urban project is unlikely to be a strain on Imo State's financial resources. The state's required counterpart capital contribution, the balance of which is only about US$4.5 million, will be easily financed from its domestic surplus resources. The required amounts are to be spread over four years and will never exceed 2 percent of total capital available for investment. The incremental recurrent expenditure not covered by user charges will represent an insignificant proportion of the state's recurrent expenditure. - 23 - Procurement 74. Procurement arrangements are summarized as follows: Amounts and Methods of Procurement a/ (US$ million) Total Procurement Method Value of Items to be Procured ICB LCB Other N/A Contracts Civil Works b/ 33.9 4.0 - - 37.9 (27.2) (3.2) (30.4) Social Facilities b/ - 6.9 - 6.9 (3.5) (3.5) Home Construction and Improvement Loans - - - 32.7 c/ 32.7 (13.1) (13.1) Start-up Costs (PIU) - - 0.6 - 0.6 (0.6) (0.6) T.A. and Studies (Imo) - - 0.6 - 0.6 (0.6) (0.6) Vehicles and Equipment 1.3 0.4 - - 1.7 (1.3) (0.3) (1.6) States Studies, FMBN - - 4.6 - 4.6 (3.2) (3.2) Total Financing Required 35.2 11.3 5.8 32.7 85.0 (28.5) (7.0) (4.4) (13.1) (53.0) a/ Contingencies are included in the amounts shown. Amounts enclosed in parentheses indicate amount of IBRD participation. b/ Design and supervision costs of civil and building works included. c/ Beneficiaries of home construction and improvement loans would be selected on the basis of agreed criteria and therefore not subject to procurement procedures. - 24 - Disbursements 75. The proposed loan would be disbursed over the period L985-1989. Disbursements would be made against 80 percent of expendi- tures for civil works relating to on-site and off-site infrastructure and upgrading in Owerri, Aba and Umuahia and against 50 percent of expenditures for community facilities. Total disbursements for such items are estimated at US$29.7 million. Disbursements would be made against the full foreign exchange cost of technical assistance to the FMWR, Imo State and local authorities for consultant services and studies nud 70 percent of local expenditures. Total disbursements for these purposes are estimated at US$7.5 million. Disbursement would also be made against 40 percent of the loans issued by FMBN for home improvement and home construction in the project areas subject to an aggregate limit of US$13.9 million. The full foreign expenditure cost of directly imported vehicles and equipment would be financed or, if they are locally procured, 70 percent of the total cost would be eligible for reimbursement. An allocation of US$1.8 million has been made for this purpose. An additional provision of US$5,300,d00 has been made on an unallocated basis. Retroactive finance amounting to some US$5.3 million is recommended to cover project unit start-up costs, detailed design engineering, supervision, Aba flooded area study from September 1, 1980 and some initial civil works begun in June 1984. Reimbursement for FMBN home construction and improvement loans, civil works contracts of less than US$50,000 equivalent and other contracts of less than US$10,000 equivalent, would be made on the basis of statements of expenditures. Amounts so disbursed would be subject to special auditing provisions. Economic Benefits 76. The overall economic rate of return for the serviced sites and upgrading components of the project is estimated at approximately 27 percent. The economic rate of return is probably understated because benefits were calculated on the basis of rental values prevailing in neighborhoods that are due for upgrading. The value of property in such neighborhoods is probably less than that to be located in the proposed site and services scheme. Sensitivity tests show that a 20 percent change in the overall balance of benefits affect the rate of return by about 33 percent either way. These tests indicate that the project would still be economically viable if achievements are significantly less than anticipated. 77. Most of the project beneficiaries would be drawn from the lowest income groups. Some 80 percent of project beneficiaries would be families below the estimated relative urban poverty threshold of US$700 per capita and some 70 percent of total project expenditures excluding technical assistance would be targeted at this income group. By raising significantly the living conditions of these families; the proposed project would have a substantial poverty impact. - 25 - 78. The economic benefits that would accrue to the residents of the flooded areas of Aba and of the village cores to be upgraded in Owerri have not been estimated because of their intangible nature. The health and welfare impact, in addition to physical service improvements, would be considerable. At a broader level, the successful implementa- tion of this project would further reinforce the successes of the Bauchi project in demonstrating viable solutions to the shelter and infrastruc- ture problems associated with rapid urbanization elsewhere in Nigeria. 79. In this regard, the institution building objectives of this project assume particular importance. Technical assistance to the FMBN and FMWH would play a critical role in facilitating the establishment of a sector-wide policy at the federal level. Project Risks 80. Because of its still innovative nature, this project inevita- bly brings with certain risks associated with the introduction of relatively new project concepts to Imo State. However, experience gained in the implementation of the Bauchi Project has been used to minimize these risks. In addition, the project unit is fully staffed, counterpart funding is assured and all major civil and building works contracts have been awarded. PART V - LEGAL INSTRUMENTS AND AUTHORITY 81. The draft Loan Agreement between the Federal Republic of Nigeria and the Bank, the draft FMBN Project Agreement between the Bank and the FMB`N, the draft Imo State Project Agreement between the Bank and Imo State, and the Report of the Committee provided for in Article III, Section 4(iii) of the Articl&s of Agreement are being distributed to the Executive Directors separately. 82. Special conditions of the project are listed in Section III of Annex III of this Report. Conditions of loan effectiveness include execution of Subsidiary Loan Agreements between the Borrower and FMBN and between FMBN and Imo State (Section 6.01 of the Loan Agreement). 83. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank. - 26 - PART VI - RECOMMENDATIONS 84. I recomend that the Executive Directors approve the proposed loan. A. W. Clausen President Attachments Washington, D. C. June 28, 1985 - 27 - ANNEX I Page 1 of 5 NIGERIA - SOCIAL INDICATOPS DATA SNHeE NIGERIA REVERE GROUPS (WEIGHTED AVERUI)U HOST (MST RZCETr ESTIMATE) lb tw/b 19EOb RECENT "lo w. NC NDDOLE INOco 96W__ ,,OLk ESTIMATE- AFRICA S. OF SAHARA N. AFRICA I HILD EAST ARE (TOUSAND SQ. M) TOTAL 923.6 923.5 923.8 AGRLCULTURAL 471.0 497.4 511.1 - CP rU CArITA (USS) 200.0 330.0 860.0 1112.9 1149.6 r_UrY COUE?fPTU MM CAPITA (KILOGRAMS OF OIL EQUIVALENT) 20.0 35.0 141.0 529.0 622.1 POPATWO AlND VIL SWATISTICS PUPULATIONUMIu-YEAR (THOUSANDS) 51598.0 66382.0 90572.0 URBAN POPULATION (z OF TOTAL) 13.1 16.4 21.4 29.7 48.2 POPULATION PROJECTIONS POPULATION IN YEAR 2000 (HILL) 369.3 STATONARfY POPULATION (HILL) 637.7 POPULATION GHOENTM 2.0 POPULATION DENSrIT PER SQ. IN. 55.9 73.6 94.8 55.8 36.3 PER SQ. DI. AGRI. LAND 109.6 133.0 170.7 311.5 46l.7 POPULATION AGE STRUCTURE (t) 0-14 YRS 45.4 46.6 47.8 45.4 43.6 15-64 IRS 52.3 53.0 49.8 51.7 53.1 65 AND ABOVE 2.3 L4 *.4 2.9 3.3 POPULATION CROWTH RATE (2) TOTAL 2.*4 L5 2.6 2.6 2.8 URBAN 4.7 4.7 4.9 5.2 4.5 CRUDE BIRTH RATE (PER THOUS) 52.0 50.7 49.5 47.0 40.4 CRUDE DEATH RATE (PER THotS) 25.3 20.8 36.2 35.2 31.5 CROSS REPRODUCTION RATE 3.4 3.4 3.4 3.2 2.8 FAMILY PLANNINC AACCEFTORS. ANNUAL (THOUS) . 7.6 USERS (I OF HARRIED OE) .. .. 6.0 .. 22.2 M AIND NUErrTO INDEX OF FOOD PROD. PER CAPITA (1969-71-100) 100.0 102.0 92.0 91.6 97.3 PER CAPITA SUPPLY OF CALORIES CT OF REQUIREIENTS) 83.0 84.0 91.0 98.2 110.8 PROTEINS (GRAMS PER DAY) 45.0 45.0 49.0 56.7 70.1 OF WHICH ANIMAL AND PULSE 30.0 11.0 11.0 /i 31.0 37.8 CHILD (ACES 1-4) DEATH RATE 50.0 34.0 20.0 28.7 34.6 HEALTH LIFE EXPECT. AT BIRTH (YEARS) 38.7 43.7 49.6 53.7 57.5 INFANT MORT. RATE (PER THODS) 190.0 154.0 109.0 102.7 101.5 ACCESS TO SAFE WATER (ZPOP) TOTAL .. .. .. 35.6 59.7 URRAN .. .. .. 54.1 84.5 RURAL .. .. .. 27.3 38.4 ACCESS TO EXLRETA DISPOSAL (C OF POPULATION) TOTAL .. .. URBAN .. .. RURAL .. .. .. . . POPULATION PER PHYSICIAN 73710.0 24670.0 12550.0 Id 1194.-3 4345.1 POP. PER NURSING PERSON 4040.0 I. 5070.0 3010.0 rd 2248.9 1831.1 POP. PER HOSPITAL RED TOTAL 3020.0 If 2220.0 1180.0 Id 986.9 632.9 UREAM 43o.o 7c 490.0 370.0 7 368.7 545.5 RURAL 25630.0 18490.0 5490.01I 4012.1 2513.5 ADMrISSIONS PER HOSPITAL RED .. .. .. . 26.2 HOUSING AVERAGE SUZE OF HOUSENOLD TOTAL .. .. URIAN .. 4.7 /h RURAL.. . . AVERAGE NM. OF PERSONS/ROCP TOrAL .. .. URBAN 3.0 2.2 lh RURAL .. .. ACCESS TO ELECT. tI OF DWELLINGS) TOTAL .. .. .. . 46. Z URBN 813 62.4 /h .. .. 77.7 RURAL .. .. .. ,. 16.3 - 28 - ANNEX I Page 2 of 5 NIGCRIA - SOCIAL INDICATORS DATA 8HEET NIGERIA REPRESNCE GROUPS (WEIXGIHTD AVERAGES) Le MOST (MOST RECENT ESTDIATE) lb RECENT MIDDLE IlCZK MIDDLE INCOME L96/b_ im0bLk cETmiAYfIk AFnICA S. OF SAHARA N. AFRICA & MID EST EDUCATON ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 36.0 37.0 98.0 Li 91.0 88.3 MALE 46.0 47.0 .. 90.5 102.5 FEtALE 27.0 27.0 .. 73.6 73.6 SECONIDARY: TOTAL 4.0 4.0 16.0 /1 17.4 43.0 MALE 6.0 6.0 .. 23.7 52.3 FINALE 1.0 3.0 .. 14.8 33.0 VOCATIONAL (Z OF SECONDARY) 4.6 8.5 3.1 /1.j 5.3 10.3 PUPIL-TEACHER RATIO PRIMARY 30.0 34.0 .. 38.6 30.3 SECONDARY 19.0 21.0 .. 24.3 23.1 ADULT LITEPACY RATE (1) 15.4 /a . 34.0 35.6 43.5 consUMrTION PASSENGER CARS/THOUSAND POP 0.6 0.9 1.4 /A 20.7 17.8 RADIO RECEIVERSITROUSAND POP 2.8 19.3 66.1 10D.8 138.8 TV RECEIVERS/THOUSAND POP 0.0 1.1 5.3 18.5 46.1 NEWSPAPER (-DAILY GENERAL INTEREST-) CIRCULATION PER THOUSAND POPULATION 5.5 4.8 6.9 / 17.2 31.2 CINEMA ANNUAL ATTENDANCE/CAPITA .. .. 0.0 7d D.3 1.7 LABOR Oce TOTAL LABOR FORCE (THOUS) 21788.0 25992.0 32478.0 FEMALE (PERCENT) 41.3 40.6 39.7 33.8 10.8 AGRICLLTrUOE (PERCENT) 71.0 62.0 54.0 57.1 42.4 IMDUSrRY (PERCENT) 10.0 14.0 19.0 17.4 27.9 PARIICIFATION RATE (PERCENT) TOTAL 42.2 39.3 35.9 36.3 26.2 MALE 50.3 47.3 43.7 47.6 46.4 FEMALE 34.4 31.5 28.2 25.1 5.8 ECONOMIC DEPENDENCY RATIO 1.1 1.2 1.4 1.4 1.8 INCOME DISRIUBUTIOM PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5Y OF HOUSEHOLDS .. HIGHEST 20X OF HOUSEHOLDS .. LOWEST 20 OF HOUSEHOLDS .. LOwEST 401 DF HOUSEHOLDS .. POVERTY TA CRODPS ESTIMATED ABSDLUTE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 696.0 525.3 274.8 RURAL .. .. 341.0 249.0 177.2 ESTIMATED RELATIVE POVERTY INCOME LEVEL (US$ PER CAPITA) URBAN .. .. 621.0 477.4 402.6 RURAL .. .. 207.0 186.0 284.9 ESTIMATED POP. BELOW ABSOLUTE POVERTY INCOME LEVEL (2) URBAN .. RURAL .. NOT AVAILABLE NOT APPLICABLE NOT E S / The group averages for each Indicator are population-weighted arithmecic means. Coverage of countries amng the indicators depends on availability of data and is not uniform. /b Unless otherwise noted, -Data for 1960- refer to any year between 1959 and 1961; -Dats for 1970- between 1969 and 1971; and data for -MEst Recent Estltte- between 1980 and 1982. /c 1977; /d 1979; /e 1962; /f Including ex-North Cameroon under British administration; /g 1976; /h 1972; /i 1979; /L Certain fields of study previously classified ugder otber secoand level education of vocetLonal or technical nature are now reported under general educatlon. JUNE, 1984 -29- ANE -IsLQM ~~~Page 3 of 5 ta".I Alituslb It au.. sea tic ira Sara samIsi laigsl im -s abaiaa at notiS., Is as-ti L.. be asse Stat Sb. aspec ta illosrwa.Ssiat = Joaisth baas. a st l-0 Ci c.e-.atsaai d.icl.11a.S SeaSaps1 ces kr tsi.scc't Abmiss Sc .sS..S S . Wt. ices -i,ca..ls ac Sc basltb. ci... si sarsle,f. se.da-. Se.ai. Sat c -".S.ela cari .,c a ar isieimo Wstma arts,ia 7Th. ci.ra.a racifci. SuI b ca cindrsi a"` or SutSi sclc r at 4 2 (Et SSyA- hi-P cast -.e5 tLIRec ca.c1es S.c It. 5 a'assLy dgocap Wa- stcc ae. I-sa 'RIOsu Ses 555 Repattcs sa r.- *lSiSdi. Iq-u tilt APr15 55 SSStti* IRA.'5 Ic ihac been. at alraSci ecal,-uslscr se Te.As.Wic _bec tei _cse Sa..s Sb. cccc.ds eS aa,.crga -Sbfil Sasac . - 9 1k sslastltsa aW t.c aid -.laise asic -s be. *aaisaflIs v5.51 t sstt5 i-. Ias-scI aabe b.Mcil r at.sca =1IPIII aeiu et - aSic kg. -1 SIacac e tlu s..s. se- a-P a U=6 L.tI- a.1te -t-- ldlg:. %I.V- - P 1'.1 4. A.M.11 inifla. - Parlcssa tiscit raIlt at. p-mg`slAm 7~jfl- ~act acccca rac rc.rlsce Sa cnccci ateet cScc. Sil. ~ liq~lifatJS a a l.Sa coal -1 ssSa.iaslem Pcat. M jil..act tll is. Pulsata~i isascq erca- iclSuIowiaasii Th te taP 1 pcutlm bce -.l*.eut- auiasaci sssclsas cic assssaiial S s psuauaS 5 ~ et lasS aut.cc crac* sSSac cas. rcsISt sn..sa esca. rcaaefls.asita cci blub, teitsu - is ISaSuStaci 101. c.ic5 seSsISeus ." t . ;gIpol- = 91~~~~as m alisclua ..ptct. M aa-VeA I Itaatct -at it a (crpTcuesal.a iS cqS'.- aa.l ircse scssaeI o W cr ee .cIst . att-I ...e.. -a. .idslass asare be. c. aqtolm Eta be a tssaS oilaciecuistci tSct. i 94s. rtuc usilsa ctTric.usSs sscSSac, uia. alia. sudtoatiut asfc saetcuas-t a - W. I . I1 & IW. tore, at tut il ssiaiss&caiucm P cts ien-~ irc. an.nstte c as a abZ aCe" -as". a lacitar a I lan -, a ya W be sai"Wi S. . aau,Iftsesa 1151, sill, atW ista ...S. hobautc1i Psi asasSata pciiaa iacctcutaarnla-eesca1om IU bais aa tsgc aiia-rs au5 e ioaia fl sasSclsab c L W 5t us. a afta l cbi5 ia nht- r LIttl, iansct .11aftosj ssS -ains ssssa Sea . aec tata apiaasaacc israt 1 taaau cut &.-.A. sitcg...I. asceiccscsaSt-as.55.9cis-t-ic ca-Ist ulsa 5. iailt ceiia .Su..Sa atisiat itc -teai-ci-&-a-Iea--Iiss. 5-abaasscuadcus cbsuSa fl -Icsca - sa .ctce-Isas tastabscaaabi aats saata -t Ge,eae, eta cat Paa_ icsta e tbu scac a Sun a.sa. f L-ts ca -cracti Z icillSeif "ItFi.siil 1- Scat .. a -iac l.ctqcsia a'a".ataW sti its .at c. [teiats, Sbtntrt cc- cutccI. an e tastinitse ss.at n-c' aesePc - sac L la dca cb. ci -acaec' SasS.. sus. . sat cP-cuscl- e-l* alasa-icatsantc qcs 5 ileca uSe ba it sa. eta 1eilleaa W- ft- calca- a taint. 1--. , -Pisea eW eetsse cc.aca sesecc.a5 esscicc si ts-scbicstu..e ..s..l.a..as ua,ca Z.4 casa5 t ur~i eai-acd tM tcatesaiiu. ir.. caactrc-cca.leiei S.a5ars-a l~tG. tle.,ma misS icac. bililcea i. laW ulltit t.ScIta .ra2cccea i.fct a ucclua I.asL 6.ce - s a.a eA ciicua Ilseic'aca i .. ae cetccastI acaa ce iuilces -nstSaeicaaattj mct - al aerh a-p-tirce1 i citjesce aattaceaa-.I ., ,s.a tii.S.cl.,f Setia tacal.aa Sac ALcsi niss ABS ec..i naa n Pd.c iaite icacaa ca Mcc puusal- cts- saabjiaa -s- racsbstcs - ffuais` i-lt L-c f- atistaasaciss Cessa ant lute Psi, cbaaaaatl - N.sa5 Hee sic' ctasiLse P-am ad--s Sc sttsic;IcaS Mfas -n V. - -ao sarsi utua ac usc- iccalati. ta,-ttiltas eea Sstiaaatj ,-sIt,aSlac set,u, as aw Fc. aapia.ieeba-aL-Ss ctiacteaaiWeecr :as W-satauc.9 cc.. - Anna ase aS desean Snk.4 stat cae aa m MS ruAcaft -iscsca ltue auL siuan.d9 o, istliy 'atmal0 ssaecITI.pastrsc 110 ct.- ceucs' e cla uss Stne uacst ata asitits tile. sititeaala iscacat re~~~~Ituscit c - pacil p sisc -.I Se t arct iaact. cst.. - sasacca. s-st tcbaccei - asal s-s ar eanaact as 5 -AstIr-Ii Ic Scsa a taac isF- sas a mat at acs-Sesa .ucs cae sasa i cala- Pale istilPM, CIcaus c-sc cacaI,c - 1 a. Luc Scar a tact a7 eta 1e S.. isSac ileusce c tanfeec sce aCuscctat aus c---Aicac-aila.i asides 'ta_c ._Sa tat-bem u P- Saani -aa- el-c, ctI-Alt.u 'gm taclIta rae i-ctc-tibt,me' icu.sa.ia IP -L eBS euffdtTes aa.ta u tr -`_T--%I till dcct- tuc ci.a cr-iPect s.c -crse LeisclilS -L. otais . is, antis L"jj~~-astl tas ao isaaa.. Sc aep saas aedil cLal at icecS-is. casasescat to. cCcs eadcdfPina aac,tceeasi i-bat- alsic use. s-ta ~ttsM scptceat(a. ssi isuoteaelt scals,ststtledc ta -.t -uslm eaI maca - sass, "bS ""til -se Su su!s uie ccc's-aa. ast sisla.. F"sc acsc racanaset Geap"a,Id ir saea es--s- caL..catct - sat ask. Psi tae Sun.. - cue-sicasasci e aD .. ,Au etcati :tac met. insaint - tat -Lt. a iiacu b i ta sad=s neuara eettst.ca i-acW eaieecaun. bear , a 1sac7 ibaPIi,a-11 1ccca. di. i ea t 11-51 asmasel tea . na-c,, -A- d ace. as lime.... j tuucir tIl . c a.ccs a ccelrusect n ic at 1 jima at- wa- St as7 fb - L - - f . sum aaaa, .5silt IS ema tai be tat ntel. ltea esel cs_ "s-il t. ,oow I L. 0ttaeds a"la.odU. _ldS-W-,ba eataebat-ct!tat ne-ca cSsmc lse an lus_a a,t."in_-__sj_a_ _ us- ca itast - al si-c. 5-... ye "ft - elda sit .asc c a asas atclta iae Seam Issl te aa-ebet a laalse . .51& ae.: te., 1ft ag till3is. - ref iccasct.ttt o ta.4 'Isee laceui- ce NaIsa u tel-s. o IL. Waa l1C _U tts II Lau-AI.eI a - a -s-acau- cacat cea.. a, lcuist I -s-acaaise. Icat .-- atg -sal etet -cad!suss si-a- ccc-dcst atrt u aeHit as ple-EAd tetsc-seuai5. ccsasebeec -et siaalasups - 30 - ANNEX I Page 4 of 5 ICONOWIC INI7CATOES CROSS ArAIONAL PRODUCT IN 1912 ANNUAL RATE OF GROVTYNI, Constant Priea) U36 NIn. /I/ S 1975-80 1961 /2/ 1982 hi' _______ --- ___- ------- ---- ---- CGP at Market Prices 70,106 100.0 3.1 -7.6 -.2_ aross Domestic Investmont 1,6.15 24.0 1.3 7.6 -to.8 aroma NatiOnal Saving 9,070 12.9 5.2 -31.6 -24.0 Current Account Sninee -7,3141 -10.5 &aports of Cooda,NFS 13,590 ¶9.6 2.0 -34.6 -11.1 Importa of Cooda,NPS 19,989 28.5 15.6 -7.1 -31.9 OUTPUT. LABOR roPc! AND PRODUCTIVITY IN 1982 Value Added /1/ Labor Force /3/ V.A. PET Worker __________ ___________-__-___ ____---------------_________ US5INin. 5 M. 7 US 6 w Agriculture 15,66 21.1 19.6 59. 878 60.6 Industry A Mining 27.709 39.0 6.2 18.9 *.320 199.5 3ervices 27,817 39.2 7.0 21.3 3.978 163.7 Total/Avernge 71.020 100.0 32.1 100.0 2,165 100.0 GOVERNMENT FINANCE General Government Central Government (N Nln.2 I of CDP CU "n.) S of GDP ________ ___________________---- ------__- _______________ 1982 /11 1982 /1/ 1979.-1 /-/ 1982 /1/ 1962 /1/ 1979-i /6/ --- ------ __ _ _----_ ---- ------- Current Recelpts 12.620 26.4 29.5 T,320 15.3 21.3 Current Expenditure 9,612 20.1 20.1 6,o78 10.2 10.1 Current Surplus 3,003 6.3 9.4 2,J42 5.1 10.5 Capital Expenditure 9.567 20.0 11.0 6.270 13.1 12.9 Iaternal Assistance(net) 26 0.6 0.6 NONE?. CREDIT AND PRICES 1976 1977 1978 1979 19o0 1981 1962 (Million N Outstanding End Period) Money and Ouasl Money 5.813 7,813 7.521 9,649 16,390 15,239 16,694 Sank Credit to Publtc Soctor(net) 551 2,309 3.143 3.313 3,539 6,299 10.328 RanK Credit to Private Sector 2,382 3,659 *.t85 5.126 6,744 8,917 10,567 (Percentages or Index Numbers) money A OusWi Money as I or GDP 21.6 24.7 22.2 24.3 30.9 32.3 36.9 General Price Indezll97Su10) 123.9 143.0 166.T 186.3 206.9 2a7.5 266.5 Annual Percentage Changes in: General Price Index 21.7 15.6 16.6 11.3 10.0 20.8 7.7 Sank Credit to Public Sector 319.1 36.1 5.6 6.8 78.0 64.0 lank Credit to Private Sector 36.8 65.2 29.7 10.3 31.6 32.2 18.5 -------------------------------------------------------------------__--------__--- Not&:: All conversions to dollars in this table are at the average exchange rate prevailing durlng period covered. /1 Revised estimates. /2/ Offielal eatiastem. /6/ Provisional. /3/ The data is derived from planalng documents and refers to the number of gainfully employed'. Not Awailable. April lI, 1986. - 31 - ANNEX I Page 5 of 5 TRADE PATMENTS AND CAPITAL FLOWS BALANCE OF PATMENTS MERCHANDISE EXPORTS (AVERAGE 1981-1983) 14/ 1961 /1/ 1982 12/ 1983 /3/ US2 Nl". s (Millons US SI Laports of Goods f.o.b. 17.718 12.930 10.730 Crude Ol 13.421 96.7 of which:Petroleum 17.162 12.751 10.350 Cocoa Products 225 1.6 Imports of Goods r.o.b. 18.390 16.838 12.254 Palm Products 85 0.6 Services A Income -4.803 -3.060 -3.208 Tin 2S 0.2 ett Transfers -567 -373 -260 Other Comodltles 127 0.9 Current account Balance -6.042 -7.341 -4.992 Total 13.182 100.0 EXTERNAL DEBT. DECEMBER 31, 1983 /5/ Direct Foreign Investment 165 3S5 365 ---------------------------------- Met Officil NLT Borrowing 811 753 980 35 Wln. or which: AmortlzatLen -583 -477 1200 -------- Public Debt. ncl. Undisbursed 18,504 Other Capltal(Short-Tsrm) 409 496 -643 Non-Guaranteed Private Debt Bet Errors A Onissions -1543 -689 0 Total Outstanding A Dlsbursed 11.756 Overall Balance -6200 -641D -4290 Flnanclng 6200 6418 4290 --------- ----- ----- -C--U T SERVICE RATIO For 1983 /6/ Reaerve Movesent2(Incr.-) 6.200 2.367 518 ------------___-------------- Arrears 0 4.051 3.7T0 O Beserve Levels 4'261 1.429 1.092 Reserve as Month or Imports 0.18 0.07 0.07 Public Debt, Incl. Guaranteed 17.9 Non-Guaranteed Private Debt Imports 16.390 16.83B 12.'Z54 -- of whlch: Food 3.154 2.786 1,875 Total Outstanding & Disbursed 17.9 Consumer Goods 4.612 4.141 3.259 Intermedlate Goods 4.682 4'342 3,137 Capital Goods 5.942 5.569 3.983 IBRD/IDA LENDING (Feb. 29.1984) (MIllions 8) RATE OF EICHANGE _ ____________ I8IDdD IDA /7/ 1973: N1.D0 =US.l 57 1979: 1 .00 : 0U31.66 Outstanding A DIsbursed 841.0 '6.7 1980: N100 =U5631.D3 Undlsbursed 1,091.4 - 1981: N1-00 03US1.63 1982: NI.00 z US1.49 Outstanding mcnl Undlsbursed 1.939.4 16.7 1983: NI00 = US31.39 III Provlsional- /21 ofricial estimates. /3/ Starf etistes. /4/ Official estimates ror 1961 and 1982. /5/ Excluding 85.9 bIllion short-term arrears. /6/ Ratio-of MLT debt service to *eports of goods and non-ractor services. /T/ As of February 1984. Not Available April 18, 1984 - 32 - TH sBAm T N*us I=eam OPTAT INNEX II A. 07or USW. 0 IS NU/ Credi Amassvvu fee usies aslatm er Tsa Nroe r Teeny eight leew d cem crdts fully d4sbursed 743.7 35.3 a 1191 1971 Sies E.C state Ol. PaCl 19.0 7.5 1591 1976 NigerLa Pus. Est. Uselheldar OI1 10.0 1.6 1597 1976 Was Xadsteri Dweh_le 14.7 10.8 1167 1979 Nieria Apis. 3e. - SI" 23.0 2.9 1168 1979 Niewa Spin. 3e. - Elena 27.0 5.8 1679 1979 Nigeria isretry, 31.0 3.6 1711 1979 NigYria Watr Supply - Kdmas 92.0 67.0 1719 1979 Nigeria Apis. a Ntna Io. Eea. 9.0 5.3 1786 1930 NlA Por lawos 100.0 63.4 1767 1950 Nig&eia Orbs Davepeat - Nauh 17.8 8.1 1838 1980 Nigei ApIs. Dew. - Oye-USith 28.0 19.7 I156 1980 Nigeri A4is. Dew. - intl-Aobb 12.5 19.3 1883 190 Nigeria bes 76.0 22.1 1981 1931 Nigeria Agric. Dew. - Nascl 132.0 46.6 1932 1981 NIgerla Ate. Dew. - Kane 142.0 36.6 2032 19611 Nliser Tech. AsatateuCa - Agic4. 47.0 28.1 2031 1982 Nigeria aLter Supply - -Anbra 67.0 50.4 2"P 1982 NrA Powe - DitrIbutlou 100.0 70.6 - 1982 Nieria ASpi. Dew. - sowto 147.0 108.3 2299 1983 N3D3 ZfduatriAL Developmt 120.0 117.5 2345 198 Nigri a ertilize Iqurt 250.0 159.4 2376 1984 M= bal A Media Scale ILdutry 41.0 40.8 *2390 194 lts C Tech. Ast. - Gm Kugi0aring 25.0 25.0 2436 1984 Nigeris Sptc. Dew. - Madam 122.0 122.0 a20 1985 NgWr Tech. Saeieawe 13.0 13.0 "l303 L985 Nigeria Hedch - Soatco 34.0 34.0 Total zIs2s.7 35.3 1,142.2 Of which baa be repaid 299.7 4.6 ToL outat-odn 2,ZZ6. 3s7 Ant sold 16.8 Of which bs bee repad T3w 0.0 Total m held by sak & 1nA 2.226.0 30.7 Total Undlhursed 14142.2 S. STAUEDET Or UIC rIVESTEM UAs of March 31. 198S5 Flncal Typ of _Aount in us6 Willi *s Nuainess Los 5 -f Tot;aL 1964. 1967. Araw rattles Ltd. Tactila Hf,. 1.0 0.6 1.6 1910 1964 SNieria Industril Dew. Fin. Co. 1.4 1.4 Development Bank Ltd. 1973 Ftia Cottonseed Teg. Oil 1.6 1.6 Crushn Ltd. Crushig 1973 Nigeria Alurnirw Alum 1.0 0.3 1.3 Extrusion Ltd. Processing 1974 Lifiama Sugr Sugar a.i 0.1 Esarte 1980 nt Tetiles 6.2 0.7 6.9 1981 h1aa Motel Tourim 10.1 1.4 11.5 1985 Tgr Bettary Dry-cal 4.6 - 4.6 Nacterias Total groos c- c ts 24.5 4.5 29.0 Less cancellations. terduna.. tles. repaymens and sales 5.8 1.6 7.4 Teol coemmiet now hold by D1C 18.7 2.9 21.6 DndLsbursad 7.1 - 0.3 7.4 f Not yet effective. Ia4 The s of the proje lhaed Is Part A i deibed in eparte r o -a Mek/ma fianced proje-ct in exStUeS. whic iS updaed twin Yarly n circulted to the xecutive Director ma APtr 30 ad October 31. A Prior to exchange rate edjusmsrs. - 33 ~~~ANNEX III NIGERIA SECOND URBAN DEVELOPMENT PROJECT (IKO) Supplementary Project Data Sheet Section I: Timetable of key events (a) Time taken by the country to prepare the project: 18 months (b) The agency which prepared the project: Imo State MWT (formerly MLSUD) and consultants Cc) Date of first presentation to the Bank: October 1977 (d) Date of first Bank mission to consider the project: October 1977 (e) Date of departure of appraisal mission: September 1980 (f) Date of completion of negotiations: July 1981, re- negotiated May 1984 (g) Date of Government's confirmation of intention to borrow: June 1985 (h) Planned date of effectiveness: November 1985 Section II: Special Bank Implementation Actions: None Section III: Special Conditions: (a) The Federal Government would onlend US$53.0 million to the Federal Mortgage Bank of Nigeria (FMBN) under a Subsidiary Loan Agreement on the same terms as the Bank loan. Of this amount, US$36.7 million vould be passed on to ISG for infrastr:ucture and community facilities on the same terms and conditions as the Bank loan and the other US$16.3 million would be retained by FMBN for home construction and improvement loans (para. 63). It would be a condition of loan effectiveness that a SubsidIary Loan Agreement be executed between the Federal Government and the FMBN in a form acceptable to the Bank (para. 65); (b) The FMBN would onlend US$36.7 million of the proceeds of the loan to the ISG under a Subsidiary Loan Agreement. It would be a condition of loan effectiveness that a Subsidiary Loan Agreement be executed between the FMBN and the ISG in a form acceptable to the Bank (para. 65); and (c) The FMBN would recover directly from project beneficiaries the cost of land and the cost of plot development. Such costs are to be recovered over a period of 15 years (without grace) and with interest and service charges together amounting to an average effective rate of 13.6 percent per annum (para. 69). Kolmolo . #Wt ---SOKOMO I G E R 's- K 0 .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~DaGlb 1,ntCLpe- // ) n > K A D 10~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-2 B El N I NN I G E R BoIo ,/- '',._y' ,< i fS , A- p, a 4~~~~~~1 -v BodqS.~~ ~OO' Bid. WLTERRAL3R t~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~T BRd TORY 1 IL0_s;n-. < bORIN *, Abo1 ) I - Ogbo.a,os4'ClAjw Egbe g* \ r) 8EgO.,dodO N D ld h Ad L. L _ L ' Ayo |.A F R I C A ) q \M -"'NIGERIA _>a ~ M .- 1 i. Da0wa i BEOKUA .M E Id- R I *121~~~~~~~~~~~~~~~6 _~~ 0, B_, N F LBnI IT 100 IN~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~, C C~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Pr m3[_ | [ r B | ;;i g \ 9 ; t [~~~ ~ ~~~~~~~~~~~~~~~~~~~ _n j cIf / r- Jp oc ~ 0*f~.--/A~ z // 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ a.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ O