Document of

The World Bank

FOR OMCIAL USE ONLY

Rewt No. P-3692-TJU

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

IN AN AMOUNT EQUIVALENT TO US$72 MILLION

TO THE

FEDERAL REPUBLIC OF NICERIA

FOR A

BORNO STATE WATER SUPPLY PROJECT

February 27, 1985

This et ry recipiet ody hi the peof_nee ofThdr fdlksa ftella ws d.. otb ee dbded wi _t Waa Ba Jo

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CURRENCY EQUIVALENTS

Currency Unit - Naira (N)

Calendar 1983 December 1984

US$1 - N0.72 10.81N1(100 kobos) - US$1.38 US$1.24

Used in this report: Nl - US$1.43,the August 1983 rate.

MEASURES AND EQUIVALENTS

1 cubic meter (m3) - 264 US gallons1 cubic kilometer (km3) - 264,000 million US gallonsm3/h - cubic meter per hourm3/d - cubic meter per daymbd * million barrels per day

ABBREVIATIONS

BSG - Borno State GovernmentBSWB - Borno State Water BoardCBDA - Chad Basin Development AuthorityFGN - Federal Government of Nigeria

FISCAL YEAR

January 1 - December 31

FOR OMCLCL USE ONLY

FEDERAL REPUBLIC OF NIGERIA

BORNO STATE WATER SUPPLY PROJECT

LOAN AND PROJECT SUMMARY

Borrower: Federal Government of Nigeria (FGN)

Benefici8ry: Borno State Water Board (BSWB)

Amount: US$72 million equivalent.

Terms: Payable over 20 years, including 5 years of grace at thestandard variable interest rate.

Relending Terms: The Feleral Government would onlend the full amount ofthe loan to the Borno State Government (BSG), which inturn would relend US$57.6 million to the Borno StateWater Board (BSWB) on the same terms and conditions asthe Bank loan. The remaining US$14.4 million would begiven to BSWB by BSG as equity contribution. BSG vouldcarry the foreign exchange risk on the entire loanamount.

Project The project would expand the water supply service in theDescription: Borno State capital, Maiduguri, to include some 74,000

people who are presently not served by BSWB and to meet.the demand of the projected population of 543,000 by1992. The project would improve the quality of serviceand assist in strengthening BSWB both financially andinstitutionally, through the provision of technicalassistance. The project includes (a) a plant forthe treatment of raw water from the Alau dam andreservoir; (b) pumping and storage facilities; (c)transmission mains and an improved distribution system;Cd) headquarters building and workshops;Ce) generators, drilling rigs and vehicles; (f) technicalassistance for financial management and accounting,project implementation and plant operation,management improvement and training; and (g) studies of

* sanitation in Maiduguri and tariffs for the State. Aspecial account would be established with part of theproceeds of the loan. The amounts advanced into thisaccount would be used to prefiuance reimbursable localcosts and small foreign expenditures.

The principal benefit of the project would be to makesafe drinking water available and to improve the qualityof service to the population of Maiduguri. Project riskscould arise from delays in securing the source of water,inadequate and tardy counterpart funding, and BSWB'sinexperience in the operation of the proposed plant.Construction work for the Alau dam is well underway.Assurances have been obtained from FGN that funding forthe completion of the de-.a would be provided.

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties Its contents may not otherwise be disclosed without V.orld Bank authorization.

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In order to ensure timely counterpart funding, establishmentof a project account and a schedule of BSG payments into ithave been agreed at negotiations. Technical assistance wouldbe provided to facilitate smooth plant operation in the earlyyears and to train BSWB staff for eventual takeover ofoperational responsibilities.

Estimated Costs:Foreign Local Total---- US$ million

Water Treatment Plant 8.6 12.0 20.6Transmission Line (Raw Water) 4.6 3.7 8.3Transmission & Distribution 18.0 15.0 33.0Generators, Rigs, Vehicles, Meters etc. 7.0 2.6 9.6Headquarters Bldg., Workshops 2.4 3.5 5.9Technical Assistance & Training 2.6 0.7 3.3Consulting Services & Studies 5.0 1.3 6.3Base Costs 48.2 38.8 87.0

Phvsical Contingencies 4.5 2.6 7.1Price Contingencies 7.4 13.5 20.9

Total Project Cost 60.1 54.9.-/ 115.0

a/ Of which US$5.6 million in taxes and duty.

Financing Plan:Foreign Local Total

US$ million

.IBRD 60.1 11.9 72.0BSG 43.0 43.0Total 60.1 54.9 115.0

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Estimated Disbursemnt:

IBRD Fiscal Year

86 87 88 89 90 91 92 93 94-- - - -__ --

Annual 3.1 8.2 11.4 12.8 11.7 9.9 7.1 4.3 3.5Cumulative 3.1 11.3 22.7 35.5 47.2 57.1 64.2 68.5 72.0

Economic Rate of Return: 6 percent in border price 1/

Staff AppraLeal Report: 4830-UNI, dated February 21, 1985

Map: IBRD No. 17516RI

.

1/ This is the minimum ERR with expected incremental revenues to BSWB as aresult of the project taken as a proxy for project benefits. Thisunderstates the true benefits, however, as other benefits (such asconsumers' surplus) have not been quantified, and externalities (such asimproved health conditions) are not included.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPNENT

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE E)ECUTIVE DIRECTORS ON A

PROPOSED LOAN TO THE FEDERAL REPUBLIC OF NIGERIA FOR ABORNO STATE WATER SUPPLY PROJECT

1. I submit the following report and recommendation on a proposedloan to the Federal Republic of Nigeria for the equivalent of US$72.0million to help finance a project for water supply In Borno State. The loanwould have a term of 20 years, including 5 years of grace, at the standardvariable interest rate. The Federal Goverument would relend the fullproceeds of the loan to the Borno State Government (BSG), which wouldfurther onlend US$57.6 million of the loan to the Borno State Water Board(BSWB) on the same terms as the Bank loan and give them the remainingUS$14.4 million as equity contribution. BSG would carry the foreignexchange risk on the entire loan.

PART I - THE ECONOMY I/

2. The assessment of the Nigerian ecoromic situation in this reportis based largely on the work of an economic updating mission of November1984 supplemented by further analysis undertaken by Bank staff on the basisof the 1985 budget speech. The fiudings of a 1982 economic mission weremore fully reflected in a Country Economic Report (No. 4506-UNI) which wasdistributed to the Executive Directors on August 15, 1983. Annex I presentsselected social and economic indicators for Nigeria.

Background

3. Nigeria, with a population of about 94 million in 1984, is themost populous country in Africa. Among sub-Saharan Bank members, in 1980Nigeria accounted for about 45 percent of gross output and more than 60percent of regional investment. Its GNP per capita is estimated at aboutUS$760 in 1983, which is twice the average for sub-Saharan Africa. WhileNigeria as a major oil exporter since the early seventies enjoyed a

* substantially improved resource base from increased oil revenues, it stillremains at a very early stage of development in terms of socio-economicindicators, in which it compares with other sub-Saharan countries.

4. Following a civil war and 13 years of military rule, a nev federalconstitution was adopted, and an elected civilian government came into powerin 1979. This Government was reelected in September 1983. However, a

I/ Except for minor changes to reflect the 1985 Federal Budget, thissection is substantially unchanged from Part I of the President'sReport for the Technical Assistance Project (P-3648-UNI), approved bythe Executive Directors on December 29, 1984.

military government led by Major-General Mohammadu Buhari, took power inDecember of the same year.

Macro-economic Developments

5. Nigeria has been undergoing a rapid socio-economic transformationsince the upsurge of oil prices in 1973-74, which dramatically altered thecountry's resource position. Between then and the late seventies, Nigeria'sdevelopment strategy was based on sustaining a high rate of growth anddiversifying the economy through the resources generated by the oil sector.The principal objective of the policies pursued by the Nigeriandecision-makers was to translate the large oil revenues accrued--aboutUS$100 billion in current prices during the 1973-81 period--into investmentsin economic, social, and physical infrastructure. While there have beensome "non-economic" investments and waste, significant development gainswere made in both economic and social infrastructure. Transportinfrastructure, particularly roads and ports, expanded considerably. Powergenerating capacity tripled, and refining capacity has more than quadrupledsince 1973. Manufacturing grew at an average annual rate of ten percentduring the 1973-82 period, although there was a highly distorted investmentstructure due to large variations in the rates of effective protectionprovided to various industrisl sub-sectors. There also has been a rapidspread of education at all levels; in particular, the primary enrollmentratio which was about 35 percent in the early seventies has more thandoubled.

6. Developments were not as positive in some other areas. Accordingto official statistics, overall output in agriculture remained virtuallystagnant during the 1973-83 period, with the production of grains increasingprobably at the same rate as the population growth rate, but the productionof root and export crops declining substantially. Within a decade, Nigeriabecame a major food importer (US$2.7 billion of imports in 1982) as domesticterms of trade moved against agriculture. Inflation, coupled with anappreciating domestic currency, pushed up domestic costs of production, thusputting the commodity-producing sectors at a disadvantage vis-a-vis importsand non-traded goods. This encouraged diversion of resources from commodityproduction to services (including trade and construction). Both agricultureand industry became "high-cost" activities. Trade and exchange ratepolicies, which were formulated in response to frequent swings in oil exportearnings, were largely used to dampen inflationary pressures or rationimports rather than to provide appropriate incentives to domesticproduction. This was partly due to the fact that, as a result of thefluctuations in the world oil markets and their impact on the balance ofpayments and government revenues, Nigerian policy-makers were preoccupiedwith short-term crisis management. This diverted attention from theformulation of longer-term policies to reduce the country's dependence onoil and to strengthen the domestic productive sectors.

7. The Fourth Development Plan (1981-85) was prepared in 1980 whenthe world oil markets presented a favorable outlook. Nigeria's oil exportsfor the year amounted to US$25 billion and foreign exchange reserves stoodat US$10 billion. The Plan, accordingly, reflected an ambitious investmentprogram. It envisaged a total capital investment of N80 billion (aboutUS$145 billion at the 1980 rate of exchange) over the period 1981-85, half

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of which was to be invested directly by the Federal Government and a quarterdirectly by the states-with the remaining quarter to be invested by theprivate sector. Emphasis was placed on the development of agriculture(through statewide agricultural support programs and uassive irrigationschemes) and on heavy industry based on cheap energy (steel, petrochemical.etc.). both supported by substantial investments in infrastructure.Nigeria's development plans, however, were overtaken by the sharp decline inoil export revenues since 1981. Its economic problems during 1981-83 wereexacerbated by the inability of Nigerian decision-makers to cut back thepublic investment program sufficiently, partly because of a continuing

0 belief that oil markets would soon recover.

8. Nigeria's oil production fell by one-third from its 1980 level of2.06 mbd to 1.44 mbd in 1981, and subsequently declined further to 1.23 mbdin 1983. Coupled with a decline in the oil price from a peak of US$39 perbarrel in 1981 to US$29.9 per barrel in 1983, oil export revenues declinedfrom US$23.4 billion in 1980 to US$17.4 billion in 1981 and to only US$10.1billion in 1983. Imports peaked at US$24.2 billion in 1981, resulting in acurrent account deficit of US$6.5 billion, which was financed largelythrough the drawing down of foreign exchange reserves and externalborrowing.

9. Confronted by a worsening balance of payments situation, theGovernment reacted in April 1982 by introducing a number of austeritymeasures aimed at stabilizing the domestic and external financial situation.However, these measures failed to achieve their stabilization objective;imports of goods for the year 1982 declined only marginally to US$17 billion(from the 1981 level of US$19.1 billion) resulting in a wider currentaccount deficit of US$7.7 billion. Reserves declined further to only US$1.4billion by the end of 1982, while trade payment arrears of US$4 billion wereaccumulated.

10. By 1983, however, previous measures in the form of quantitativerestrictions, together with a growing reluctance of the trading partners toextend further trade credits to Nigeria, led to a reduced import level ofUS$12.2 billion. This was largely financed by further accumulation of tradepayment arrears (US$3.8 billion), a process which had already begun during1982. Discussions with major overseas creditor banks resulted in the

a rescheduling of the arrears owed to these institutions (for confirmation ofletters 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 January1984. In April 1984, the Government completed negotiations to rescheduleUS$4-$5 billion of the remainlng arrears incurred through "open-account"inter-company import finarcing. This agreement included only those arrearsnot covered by export credit insurance and rescheduled the payments over aperiod of six years including a grace period of two and half years at aninterest rate of 1 percent over LIBOR. Outstanding arrears at this pointare US$2 billion insured by export credit agencies (ECAs). The terms undernegotiation for these remaining arrears are similar although formalagreement to reschedule has been made conditional by the ECAs on Nigeriareaching an agreement with the IMF. The military government has so far beenregular in making repayments due on earlier medium- and long-term debt, aswell as on the 1983 reschedulings.

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11. The deterioration in the external financial situation had a severeimpact on the fiscal position of the Federal and State Governments as wellas on growth. Federally collected revenueo fell from N15.2 billion in 1980to N12.0 billion in 1983, because oil revenues account for such a largepercentage of total revenues (about BO% in 1980 and almost 60Z in 1983).Until 1984, the Federal Government did not reduce expenditures in line withthe reduced revenues, thus large budget deficits emerged over the period1981-83, with the deficit/GDP ratio in excess of 8 percent. In order tofinance these deficits, the Government borrowed from the Central Bank.This, coupled with the physical shortages of many imported commodities, ledto an acceleration in the inflation rate which rose to about 23 percent in 4

1983. As a result of a decline in imports of about 30 percent in realterms, domestic output contracted by 6.0 percent in 1983 following declinesof 5.9 percent in 1981 and 2.3 percent in 1982; as a consequence, most ofthe manufacturing sectors, starved of imported raw materials and spareparts, are now operating at very low capacity levels. In addition to thedecline in manufacturing output, the construction sector suffered from analmost 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 in1984, the government imposed in early 1984 very strict limitations onimports through the use of an import licencing/foreign exchange allocationscheme. As a result there was a sharp curtailment of imports which isestimated to have amounted to only about $10 billion in 1984. Since oilexport revenues increased by about $1.2 billion over the 1983 level, therewas also a drastic improvement in the external balance with the currentaccount deficit estimated to have amounted to only about $150 million in1984. The improvement of the external balance through measures to constrainimports carried with it, however, very high costs for the economy in theform of further decreases in industrial production, construction andinvestment, accelerated inflation (officially estimated at 37% in 1984) aSwell as increased unemployment. The manufacturing sector as a whole isestimated to have operated at only about one-third of capacity in 1984.However, due to the increased oil revenues as well as good performance inthe agricultural sector - in part explained by a return of workers tofarming following recent years increases in agricultural prices - Nigeriawas able to break three consecutive years of declines in overall production,and held production 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 theeconomy; and second, the longer-term structural adjustment of the economy bystimulating productive sectors, lessening dependence on oil, and developinga wider resource base. With regard to the short term, the measures that thegovernment has taken since January 1984 to reschedule trade arrears, controlimports and restrain domestic expenditures (which were reconfirmed in the1985 budget released in January), may help to arrest a further deteriorationof the external and internal financial situation. However, the remainingexternal arrears need to be rescheduled, particularly in view of the needfor substantial external borrowing in the near future.

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14. While a rebound in oil revenues would help Nigria to overcom thecurrent crisl, it will not resolve the structural issues facing theeconomy. More vigorous and consistent policies. beyond the measures takento restore financial stability, will be needed to bring about structuralchnge. The chlef requirements comprise: (t) further Incentives forefficlent export promotion and import substitution, Including appropriateexchange rate, tariff, and credit policies; (ii) complementary steps tostrengthen the balance of payments through judicious management of foreignborrowing and external reserves; (iii) continued control of aggregate demandthrough prudence in monetary, fiscal, and wage policies; (iv) improvementsin the composition and implementation of public investment to increase itsefficiency; and (v) steps, such as raising interest rates and improving taxcollection, to Increase private and public savings and investment.

Prospects and Financing of Development

15. Although Nigeria's exportable crude oil surpluses are expected tobe significantly reduced well before the turn of the century, the bulk ofits foreign exchange resources will continue to come from the hydrocarbonsectors during the next twenty years. In addition to oil exports, thiscould incluJe exports of liquefied natural gas (LNG)--although the marketprospects for LNG during the 1990s are more uncertain thait before--and someexports of petrochemicals. To maintain economic growth, major structuralchanges are needed in order to adapt the economy to lower levels of oilexport earnings. In the short-run, the volume of Nigeria's oil exports islikely to be determined by the uncertain conditions of the world oil marketsrather than by the deliberate extraction policies of the Government. It isprojected that oil production would rise gradually, possibly attaining alevel 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 areclosely related to the kind of economic policies the Government pursues overthe rext few years. One option open to the Government is to pursue a "highgrowth/economic reform" strategy comprising policy measures which have beendiscussed in the context of a possible Extended Fund Facility (EFF) with theIMF and a Structural Adjustment Loan (SAL) from the Bank. Such a strategywould also give Nigeria renewed access to international borrowing fromcommercial banks, although the amounts that would be available are difficultto quantify. On the estimation that about US$2-3 billion per year ofinternational lending would be available from all different sources, thiswould permit a moderately high growth rate of about 4 percent per annum overthe period 1984-1992. It would prevent a further deterioration in theaverage standard of living and allow employment to expand broadly at thesame pace as population growth. In addition, it would over time stimulatenon-oil exports, which, in the longer run, will need to replace oil as theengine of import growth. In the "low" case, on the other hand, assuming noagreement is reached on an EFF/SAL package and the only "reform" is inmaintaining enough macro-economic discipline to avoid the reemergence oftrade arrears as a major problem, the possibility of foreign borroving wouldbe very limited and balance of payments constraints would necessitate thecontinuation of restrictive policies. The result would be lower growthrates for the rest of the decade leading to a further deterioration of theaverage standard of living, low capacity utilization rates in many sectorsand increasingly severe unemployment problems.

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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 hba recently introduced now achadulea of customsand excise duties that move in the direction of equalizing effectiveprotection across industries. In the 1984 budget the Government madereductions in public expenditures in line with Bank recoaendations and, tohelp rationalize future investments, instituted a Project Review Co itteewhich reviewed projects funded under the capital budget. The Committee hasproposed that all projects be categorized as "core" or "non-core" with theformer to receive full funding and the latter being shelved pendingavailability of funds or abandoned. The recommendations of the ReviewCommittee are currently being reviewed by the Government. Measures tostreamline public sector employment have resulted in a reduction of some55.000 employees; and a freeze on public sector salaries and wages has alsobeen introduced. Together these measures are estimated to have resulted ina reduction of the Federal budget deficit from about 23 percent of GDP in1981 to about 5 percent in 1984. The 1985 budget continues with the policyof stabilization and the sectoral allocation of public expenditures Is onceagain in line with the Bank's recommendations. The new Government has alsoenforced much greater financial discipline on state governments which hasresulted in greater revenue raising efforts by the states together withimproved focus on development priorities. Tighter monetary policiesincluding increases of 1.5 to 2 percent in interest rates have also beenintroduced. With this progress on fiscal reform, but little progress onincentive reform, growth would be higher than in the low case, but wouldresult at best in a stagnation of per capita incomes.

18. The three policy scenarios differ more from each other in theirimpact on growth than in their impact on Nigeria's ability to serviceexternal debt. This is because in the low and intermediate cases, lack ofconfidence on the part of commercial lenders would mean severely limitedaccess to international borrowing. Of course, if the moderate fiscaldiscipline assumed even in the lew case is not maintained, there would bepressure on imports and an eventual risk of a build-up of trade arrears witha resultant further decline in access to external credits. At the presenttime, though, this does not appear likely, given the Government's firmcommitment to austerity. Under all these scenarios there will be severeliquidity problems over the next few years with the debt service ratiolikely to range from 39 to 45 percent between 1985 and 1987. Under all thescenarios, the debt service ratio begins to decline after 1987. The declineis somewhat slower--although still marked--in the high case, because withbetter growth policies, access to international borrowing is higher. In thehigh case, the debt service ratio in 1992 would be 22 percent, while in theintermediate and low cases it would be about 10 percent. The volume andcomposition of Bank lending would be determined by the policies pursued bythe Government--ranging from an expanded lending program including aStructural Adjustment Loan in the high case to a limited program focussingprimarily on social and physical infrastructure in the low case.

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PART II - BUNK GROUP OPERATIONS IN NIGERIA 1

19. Bank and IDA lending to Nigeria as of September 30, 1984, amountedto US$2,514.4 million (net of cancellations). The amount of loans andcredit disbursed as of September 30, 1984 was US$1,338.5 million, leavingan undisbursed balance of US$1,175.9 mlllion. Agriculture accounts forabout 50 percent of total commitments; tranwporL, power, and water supplytogether for about 34 percent; and education, Industry, urban, and thepost-war rehabilitation loan for the remaining 16 percent. There have beenonly two IDA credits to Nigeria, for US$35.3 million; both are fullydisbursed. IFC has made six loans to borrowers totalling US$24.7 million,and six equity Investments totalling US$4.6 million. Of these amounts,US$7.5 million have been repaid, torminated, caneelled, or sold. Annex IIcontains a summary statement of Bank loans, IDA credits, and IFCinvestments.

20. As a result of the abrupt decline in earnings from oil, publicrevenues have fallen sharply, causing many of the ongoing projects to runinto serious counterpart funding problems. The Bank, the FederalGovernment, and the relevant state governments are making concerted effortsto alleviate the situation. The Bank, under the Special Action Program, hasagreed to the reallocation of loan proceeds and the upward revision ofdisbursement percentages to speed up dlsbursements. Working within theresource constraints (which are likely to continue in the near future), theFederal Government is supplementing the funding for selected projects for1984 and has agreed to ensure that adequate funding will be provided forprojects for 1985 on the basis of updated estimates of funding requirements.The state governments are instilling a greater degree of discipline in theirbudgeting processes and cutting back on new capital expenditures in order tofund existing obligations. As a result, the prospects for counterpartfunding for Bank-assisted projects are expected to improve.

21. Provided appropriate policy changes are undertaken, the Bank'slending program would aim primarily at the urgent diversification ofNigeria's economy to reduce its excessive dependence on petroleum as asource of foreign exchange and fiscal revenue. At the same time, the Bankwould continue to support efforts to raise the productivity of the lowestincome groups and thereby diminish the incidence of absolute poverty inNigeria. As in recent years, the Bank would contir to provide support foragriculture and rural development with emphasis on institution building andtransfer of technology. These objectives are in line with the FederalGovernment's priorities and with the emphasis it is placing on the need touse the proceeds of the country's oil revenues to increase the productivecapacity of the economy, and thereby raise the standard of living of Itspopulation, particularly the rural poor. The Bank would similarly supportefforts to stimulate a well-balanced and integrated development of Nigeria'sindustrial sector. This approach would entail a combination of intensive

1/ This section is substantially unchanged from Part II of the President'sReport for the Technical Assistance Project (P-3648-UNI), approved bythe Executive Directors on December 20, 1984.

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sector work and policy dialogue with the Government, as well as Bankassistance for industrial projects in crucial subsectors.

22. Projects in the agriculture, water supply and urban sectorstogether should account for a large share of Bank lending in the coming twoto three years. Effective support for the commodity producing sectors willalso require strategic investment in production related infrastructure.There are good opportunities for the Bank to make a significant contributionin energy and highway maintenance. Similarly, there is a strong case ofcontinued lending for education. In this context, vocational, technical,and teacher training would be given special emphasis. Finally, the Bankwould support the federal and state governments' efforts to spread thebenefits of growth to the social sectors. It is envisaged that some of thepressing problems of rapid urbanization will continue to be addressedthrough a number of urban development projects focussed on the needs of theurban poor and resource mobilization for urban areas. The Bank is alsoassisting the Government in overcoming the country's health problems with aproject aimed at both federal and state (Sokoto) levels, and is continuing adialogue with the Government on population issues, perhaps leading tolending in this area.

23. Although annual disbursements have increased from US$52 million inFY1978 to nearly US$272 million in FY1984, Nigeria's disbursementperformance has lagged behind that of other countries in the region. Theundisbursed balance now stands at 47 percent of the US$2.5 billion in loansand credits approved. One of the reasons for this development is the rapidexpansion of the Bank's loan portfolio since 1979 as well as the fact that anumber of large loans, with relatively large, planned disbursements duringthe early years. were extended during this period, mainly for agriculturalprojects. In many cases, however, disbursements have been slowed by longdelays in loan effectiveness and institutional and management problems.Recently, the inadequate counterpart funding of projects by federal andstate governments, resulting from lower oil revenues, has further sloweddisbursements. The government, with the assistance of the Bank's ResidentMLssion, is now carefully monitoring loan disbursements with a view toidentifying problems early and taking corrective action. Also, the Bank hasrecently agreed to a series of measures aimed at accelerating disbursementsunder both ongoing and new projects (para. 20). These efforts are beginningto show results. w

PART III - THE WATER SUPPLY AND SANITATION SECTOR

General

24. Water supply and sanitation is the responsibility of the stategovernments and each state bas its own development plan, which is acomponent of the national plan. While provision of safe and adequate watersupplies is an important social goal in Nigeria, the resources actually madeavailable by the states to the water supply and sanitation sector havefallen far short of needs as well as plan targets. On a general level, thesituation has stemmed from a sharp reduction in resources, principallybecause of the decline in national oil revenues; and more particularly atthe state level, these shortages have been aggravated by inadequate tariffs

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and revenues, poor billing and collection systems, and the low level andintermittent release of state funds to neet recurrent expenditures which hasled to poor operations and maintenance practices. Sewerage, drainage andsolid waste disposal systems are even more inadequate. The Bank has alreadymade two loans to two states (Kaduna in FY79 and Anambra in FY82) for thedevelopment of water supplies. Implementation of both projects has beenslowed by the lack of counterpart funds, but recent steps taken by the newmilitary governors in the states have noticeably improved the status of bothprojects.

Borno State

25. Borno State, with an area of 112,000 km2, is the largest ofNigeria's 19 states. It has an estimated population of 5 million and isone of the poorer states in the federation. Maiduguri, the State capital,is the comnercial and industrial center with a population of about 323,000.Except Lake Chad, which is the only notable perennial source of surfacewater, the rivers in the State are seasonal and tend to dry up during thelong, hot, dry season. Fortunately, artesian aquifers stretch across about70 percent of the State and serve as the source for year round supplies ofwater for the bulk of the population. However, as the demand for waterrapidly increases, the groundwater level in Maiduguri is rapidly declining,and the need for an alternative source for water supply is urgent.

Water Supply and Sanitation Sector OrEanization

26. The Borno State Water Board (BSWB), a parastatal organizationestablished in 1977, is responsible for the development, operation,distribution, and maintenance of drinking water supplies throughout theState. The other organization involved in the water supply sector is theChad Basin Development Authority (CBDA), which is the federal agencyresponsible for the integrated development of the water resources of theChad River Basin area. The CBDA is responsible for the construction of theAlau dam and reservoir, vhich would be the source of future water forMaiduguri. The Ministry of Health monitors drinking water quality.Sanitation, drainage and refuse collection are constitutionally theresponsibility of local government authorities. In practice, developmentfunds channelled through the Ministry of Local Government are utilized bythe Ministry of Works acting as agent for local governments in theimplementation of drainage projects. This arrangement is not satisfactorybecause the Ministry of Works does not have the resources to effectivelycarry out this responsibility. Linkages between the various sectororgania-tions are weak and ill-defined and, as a result, there is littlecoordination in sector programs. The proposed project would finance studiesfor a master plan to improve this situation and the efficient carrying outof the plan would be monitored by a special unit which would be establishedby BSVB (Section 2.01(d) of the Project Agreement).

Existing Water Supply and Sanitation Facilities and Services

27. While BSWB is responsible for urban and rural water supplythroughout the State, its service covers only about 43 percent of the totalurban population and a small fraction of the rural population. The suppliesin many areas are irregular and unreliable. In Maiduguri, BSWB operates 69

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boreholes producing an estimated 40,400 m3 per day. The estimated dailyaverage per capita consumrtion is 60 liters. There are 20,000house-connections serving about 122,000 people and 254 standpipes providingaccess to at most 127,000 people. The rest of the population, at least74,000 people, who are not served directly by the BSWB facilities, obtainsservice from a combination of vendors, neighbors who have house-connections,and a few existing private wells.

28. In practice, however, even fever people are served by BSWB becauseonly a fraction of the standpipes is in good working order. The service isunreliable due to frequent power failures and lack of spare parts and fuelto run standby generators. The situation is getting worse becausepopulation growth is outstripping the pace ot which service is beingprovided and, in the future, it would be threatened by a decreasingavailability of water. The production ceiling from the current waterfacilities would be reached in the next three years and the aquifers arebeing depleted at a rate which would, within three to five years, make itundependable as the sole source of water supply for Maiduguri.

PART IV - THE PROJECT

29. Recognizing the urgent need for an alternative source of water forMaiduguri, CBDA and BSWB had reached an agreement to share the waters of theAlau reservoir, which is being constructed with federal government funds(para. 47). Subsequently, Borno State requested Bank assistance to financea facility to treat the raw water from the Alau reservoir on the RiverNgadda near Maiduguri. Following an exploratory mission in 1979, theproject was identified in 1980. A feasibility study on the Maiduguricomponent was completed by consultants of BSWB in March 1983, and theproject was appraised by the Bank in May 1983. A Staff Appraisal Report(No. 4830-UNI) is being circulated separately to the Executive Directors.Negotiations were held in Washington in April 1984. The loan documents, aswell as the capacity of the Federal and State Government to service theproject, were reviewed and subsequently cleared by the new militarygovernment. Supplementary project data are provided in Annex III.

Project Objectives, Bank Role, and Justification

30. The objectives of the project are to provide adequate and reliablesupplies of safe drinking water to people in Maiduguri by supplementingcurrent supplies with water from the Alau reservoir and by improvingexisting services; to strengthen the technical, financial and managementcapabilities of BSWB; and to establish the basis for an effective sanitationsystem in Maiduguri.

31. The basic water needs of the low-income consumers would be givenspecial attention in this project. Priority would be given to improvementof the distribution system and densification of standpipe coverage in thedensely populated areas where the low income consumers mostly live and whereshortage of water is critical.

- 11 -

32. Since 1980 the Bank has maintained a dialogue with BSWB andoffered advice on its operations and policies, as vell as on itsorganization, management and training. At the Bank's suggestion, BSWB hiredconsultants to prepare the feasibility study and design the proposedproject. This project would be the Bank's first participation in the watersupply sector in Borno State, although the Bank will also be involved in therural water supply subsector through a proposed agricultural developmentproject in the southern part of the State. The Bank's main objectives insupport of the proposed project are to bring about institutionaldevelopment, financial viability of a sector institution (BSWB) and thepolicy reforms needed to address these issues. Showing strong commitment tothe project and willingress to work with the Bank towards these objectives,at the Bank's suggestion the State accepted the principle of cost recoveryand recently enacted a new tariff structure, which increased the existingflat rates for water by 50 percent.

33. As indicated above, the capital city, Maiduguri, is entirelydependent on groundwater for its water supply; and in the last five years,the water level has dropped an estimated seven meters, indicatingoverabstraction at the present rate of demand. At this rate of abstraction,coupled with growth in demand, in about three years the city would not beable to meet the water needs of its population from this source. Theproposed project would provide Maiduguri this urgently needed supplementalwater supply. In addition, the project would assist in developing andstrengthening the State's water authority by providing technical assistancefor financial management and control, the accounting system, operation, andoverall management, as well as providing extensive staff training.

Project Description

34. The principal components of the project are as follows:

A. Water Supply

(i) Construction of (a) pimping stations for raw and treatedwater, (b) a 67,000 m /d treatment plant consisting ofmixing/flocculatiou, sedimentation and filtration units withpH adjustment and disinfection facilities; (c) one groundand one elevated reservoir; and (d) rehabilitation of theexisting elevated reservoir;

(ii) Provision and laying of approximately 48km of transmissionand 190km of distribution pipe; and

(iii) Provision of eight generators (standby power for treatmentplant), 10,000 meters and connection materials andinstallation of 300 standpipes.

B. Operating Facilities

(i) Construction of headquarters building, operational staffquarters, zonal workshops and stores and meter repair shop;and

- 12 -

(ii) Provision of two drilling rigs, siX vehicles, leakagedetection equipment and office equipment (including billingmachines).

C. Technical Assistance, Training and Studies

Technical Assistance

(i) To assist BSWB in the areas of (a) financial-commercialmanagement and control (24 man-months), (b) accountingsystems (12 man-months), (c) project implementation and plantoperation (36 man-months), and (d) management improvement(24 man-months); and

(ii) To prepare the final design, preparation of tender documentsand construction supervision of the water supply andoperating facilities outlined above.

Training

(i) Reviev of the manpower and training needs of BSWB andformulation of a training plan (12 man-months);

(ii) Establishment of a development program for training BSWBstaff (6 man-months) and provision of training equipment andmaterials; and

(iii) Overseas training for BSWE staff to develop practical skillsand experience in progressive and well-managed waterutilities (15 man-years).

Studies

(i) Preparation by 1989 of a follow-up project to increase watersupply to cover the entire Maiduguri area and to consolidateinstitutional improvement initiated under the proposedproject and to improve the quality of service in other areas;and

(ii) A tariff study for the State and studies for a master planfor drainage/sewerage and solid waste disposal for Maiduguri,including optimum arrangements for institutionalresponsibility of this subsector by end-1987 (para. 26).

The Project Area and Population Coverage

35. The estimated population of Maiduguri was 323,000 in 1982 and isexpected to reach 543,000 by 1992, the final year of implementation of theproposed project. The increased resources and service improvements providedunder the proposed project, together with the dramatic reduction in domesticconnection fees (from N190 to N15) being recommended by BSWB, shouldincrease coverage from 77 percent of the current population (about 249,000people) to 100 percent of the estimated 1992 population.

- 13 -

Proiect Preparation and Implementation

36. The project would be implemented by BSWB over seven year. withassistance from consultants Its major component would be the constructionof the water treatment plant scheduled to start by mid-1986 with completionin late 1989. Construction would be tendered as described below in para.43. Contracts for detailed design and preparation of tender documents forthe physical works of the project have been awarded to Dar Al-Randasah,Lebanese consultants who had prepared the feasibility study. Thesecontracts are about to be completed. At the Government's request the Bankhas agreed to provide the first tranche ($500,000) of a one million dollarProject Preparation Facility (PPF) to carry out these contracts. The secondtranche of the PPF would be used to fund technical assistance, as well asconnectors for water meters which would accelerate revenue collections(para. 45).

37. While it is overstaffed at the lower and unskilled levels, BSWBhas a serious deficiency in senior professional and middle management staffand has difficulty in recruiting and retaining qualified staff in the faceof the more generous and flexible conditions in the private sector. Themajority of the current professional staff are expatriates under contract.To ensure that BSWB would have the capacity to execute the project and totrain Nigerians to assume increased responsibilities, and to graduallyreplace the expatriates, a substantial amount of technical assistance andtraining is included in the project. It is hoped that these trainingopportunities would help retain staff in the future. The proposed trainingprogram (outlined in para. 34) was discussed in detail and agreed to atnegotiations. The possibility of providing the technical assistance teamthrough a "twinning" arrangement with a water utility company from adeveloped country is being explored. In order to ensure timely andappropriate measures are taken on these and other operational and managementproblems (such as illegal connections and billing and collection), adetailed action program was discussed and agreed to during negotiations(Section 3.07 and the accompanying Schedule 2 of the Project Agreement.)

Project Costs

38. The total cost for the project is estimated at US$115.0 million.s The use of Lake Alau water is the least cost option; groundwater supplies

are inadequate, and the most accessible surface water is from the Alaureservoir. The distribution system has also been designed to supply themaxilum number of consumers at minimum acceptable service levels at leastcost. Total project costs include US$28.0 million for physical and pricecontingencies and US$5.6 million for duties and taxes. The foreign exchangecomponent amounts to US$60.1 million. A breakdown of costs by majorcategories based on preliminary designs of project facilities is given inthe Loan and Project Suiary. A provision of five to ten percent has beenmade for physical contingencies on top of the base costs. Pricecontingencies have been added to this. For foreign costs they are estimatedat 3.5 percent in 1984, 8.0 percent in 1985, and 9 percent thereafter, andfor local costs at 22 percent in 1984 and 14 percent thereafter.

- 14 -

Project FinancinR

39. The proposed loan of US$72 million (66 percent of the project costnet of taxes and duties) would co,ver the full foreign exchange cost andUS$11.9 million of the local cost. FGN, as the borrower, would onlend theentire loan to BSG, which would further onlend US$57.6 million (80 percent)of the loan to BSWB on the same terms and conditions as the Bank loan. BSGwould provide the remaining US$14.4 million (20 percent), together with itsown contribution of the equivalent of US$43 million, to the project costs asequity for BSWB. This would result in a project financing by 50 percentequity and 50 percent loan. BSWB is not envisaged to contribute toward thecosts of the project due to its inability to generate cash for investmentsbefore 1990. BSG would pay the commitment charges and assume the foreignexchange risk. The execution of the Subsidiary Loan Agreements between FGNand BSG, and between BSG and BSWB would be a condition of loan effectiveness(Section 6.01(a) of the Loan Agreement). Co-financing was discussed with theborrowers during project preparation and, at their request, it was notpursued further.

40. To ensure the timely and adequate provision of counterpartfunding, assurances have been obtained during negotiations that:

(a) as a condition of effectiveness, a project account would beestablished by BSWB at a commercial bank with an initialpayment by BSG of 12 million into the account (Section6.01(b) of the Loan Agreement, Section 2.01(b) of the ProjectAgreement, Section 2.02(c)(i) of the Borno State Agreement);

(b) BSG would make quarterly installments of N1.5 million perquarter in 1986 (excluding the initial payment) into theproject account (Section 2.02(c)(ii) of the Borno StateAgreement);

(c) BSG would provide its subsequent contributions to the projecton a quarterly basis in advance of the due date according tothe schedule of payment agreed upon during negotiations(Section 2.02(c) of the Borno State Agreement);

(d) in the event the project does not receive funding from BSG,the Federal Government would be authorized to pay directly tothe project account that part of the State's statutoryallocation corresponding to its agreed financial support forthe project (Section 2.02(d) of the Borno State Agreement).

Financial Position and Cost Recovery

41. Because water in Borno State is sold at below production cost andcollection is not enforced, BSWB's finances have depended on statesubsidies. As a result of the dialogue with the Bank, BSWB has begun toacknowledge the role of revenues as a means of financing. By taking variousmeasures such as increasing the existing flat rate tariffs by 50 percent,strengthening manpower for collection, and introducing metered tariffs forlarger consumers, in three years BSWB increased revenues ten-fold from lessthan N100,000 in 1980 to nearly N1,000,000 in 1983. To assist BSWB in

- 15 -

promoting the principle of cost recovery through the adoption of a meteredconsumption tariff structure, the proposed project would finance purchase ofmeters and connection materials.

42. In view of the recent tariff increase, another imdiate tariffincrease to achieve full cost recovery does not appear feasible.Furthermore, without reliable information on BSWB's cost of production anddistribution, the proper level of tariff increase cannot be decided atpresent, nor can the tariff study be undertaken because of the absence ofsufficient information. To determine the proper level and timing of futuretariff increases which will unsure adequate revenue targets for BSWD, Inpreparation for the tariff study, BSWB would, no later than June 30, 1985and January 31, 1986, employ a financial controller and a financialconsultant, respectively, to develop the basic accounting system in 1986 andcollect data necessary for the tariff study (Section 2.02 (a) and 3.07 ofthe Project Agreement). In the meantime, however, it seems possible toincrease revenues gradually through adopting further measures for betterbilling and collection, limiting recruitment at the unskilled level andreducing the unaccounted for water from leakages and illegal connections.At negotiations, an action program of measures was discussed and agreed upon(para. 37) and assurances have been obtained that the tariffs will be set atlevels which will ensure coverage of BSWB's operational expenditures inMaidiguri not later than 1986 and generate profit after its fiscal yearending in December 31, 1989 so that from 1990 onward, a rate of return onaverage net fixed assets in operation would not be less than 5 percent forMaidiguri and 2 percent for BSWB annually (Sections 4.03 and 4.04 of theProject Agreement). Assurances were also obtained during negotiations thatthe recommendations of the tariff study, after consultations with the Bank,would be implemented (Section 4.06 (a) of the Project Agreement).

Procurement

43. Contracts for the supply and installation of treatment plantequipment, pumps, pipes. meters, rigs and generators and other itemsestimated to cost above US$250,000 as well as civil works contracts for theconstruction of the treatment fi'clities, transmission mains and ground andelevated storage reservoirs would be awarded under international competitivebidding in accordance with Bank Group Guidelines. Prequalification would berequired. Procurement of vehicles, spare parts, and miscellaneous suppliesunder contracts estimated to cost more than US$100,000 but less thanUS$250,000, or equivalent, for equipment and US$250,000, or equivalent, for

* civil works would be procured on the basis of competitive bidding, locallyadvertised, conducted in accordance with procedures satisfactory to theBank. Cortracts for the purchase of goods estimated to cost less than theequivalent of US$100,000 would be procured on the basis of negotiatedpurchases after solicitation of price quotations from at least threeestablished and reliable suppliers. Domestically manufactured goods wouldbe allowed 15 percent preference or the applicable import duty, whichever islower, for the purposes of bid evaluation. Consultants for the variousstudies and specialists recruited under the project for technical assistanceand training would be selected on the basis of qualifications and experienceand on terms and conditions acceptable to the Bank. The following tablesummarizes the amounts and methods of procurement with the categoriesproposed for Bank financing shown in parentheses:

- 16 -

Amounts and Methods of Procurement(US$ millions)

TotalProcurement Methods Cost

Project Element ICB LCB Other

Equipment, plant, and materials 51.3 2.5 - 53.8(34.0) (1.3) - (35.3)

Civil Works 34.4 16.2 - 50.6(18.5) (10.0) (28.5)

Consulting Services, TechnicalAssistance and Training - - 10.6 10.6

(8.2) (8.2)

Total 85.7 18.1 10.6 115.0(52.3) (11.3) (8.2) (72.0)

Disbursements

44. The proposed loan would be disbursed over the period FY1986-1994.Disbursements on equipment, plant and materials would be made against 100percent of foreign costs for direct import and 72 percent of localexpenditures. Disbursements on civil works would be made against 35 percentof total expenditures. Disbursements for consulting services, technicalassistance and training would be made against 100 percent of foreign costsand 80 percent of local expenditures.

45. A Special Account vould be established in a comercial bank inNigeria on terms and conditions acceptable to the Bank in order to eliminatethe need for the Borrower to pre-finance local expenditures that areeligible for financing under the Bank loan (Section 2.02 (c) of the LoanAgreement). An initial deposit of US$600,000 would be made into thisaccount from the proceeds of the Bank loan. Disbursements would be made onthe basis of full documentation with the exceptions of minor civil workscontracts and small contracts for equipment and consultant services, as wellas training expenditures which would be disbursed on the basis of Statementsof Expenditures (SOEs). In addition, an advance of US$1 million is beingproposed under the Project Preparation Facility for technical assistance,detailed design and preparation of tender documents and connectors formetering. The PPF advance, which would be realeased in two trenches at$500,000 each, would be refinanced under the Bank's loan at the date ofeffectiveness (para. 36).

Project Benefits and Risks

46. The economic rate of return (ERR) for the Maiduguri components ofthe project has been estimated at about 6 percent. The rate has beencalculated from an analysis of quantifiable benefits, such as incrementalwater supplies resulting from the project, and costs, including project

- 17 -

investments. incremental operating cost., and replacem_nt over tha life ofthe project. The principal benefits of thi proposed project would be theexpanded coverage and improved quality of *ervice provided by BSWB inMaiduguri. Densification and ezpanmion of the distribution system wouldpermit more people to have direct access to piped water. The project wouldparticularly benefit the residents of the high density, low income areas ofcentral Mlaiduguri who are poorly served at present. The strengthening anddevelopment of BSWB through the technical assistance and training componentsof the project should better enable BSWB to carry out its responsibilities.

47. Some risks to the project relate to the source of the raw water,in this case, the unsecured water from the River Ngadda where the Alau damis being constructed. However, assurances have been received from FGN thatthe necessary funds would be ma.4e Available and that the Alau dam would beconstructed in time in order not to jeopardize the proposed project (Section4.02(a) of the Loan Agreement). The FGN has already paid mobilization feesto the civil vorks contractor. During negotiations, it was also agreed as acondition of effectiveness, that an agreement satisfactory to the Bank wouldbe reached between CBDA and BSWB for the sharing of waters of the proposedAlau reservoir based on a schedule of releases to provide the needs ofMaiduguri (Section 4.02(b) of the Loan Agreement).

48. During the project implementation period, an estimated average of22 percent of BSG's annual investment funds would be required as counterpartfunds to the project, and failure to release local counterpart funds in anadequate and timely manner could jeopardize the successful implementation ofthe project. The Borno State Government, however, gives water supply highpriority and based on the available information, it is estimated that theState would have enough resources to meet the requirements of the proposedproject. Recently, reconfirming the priority and the financial commitmentthe State is according to the proposed project, the new Governor included inthe State's 1984 budget the initial State contribution of N2 million for theproject. The new Federal Military Government has made realistic statefinancial planning a top priority, and accordingly, the state governors havegiven a great deal of attention to reviewing their current expenditures,revenues and future obligations. The recent reconfirmation of thecommitment to the project by the new Governor and inclusion in the State'sbudget of the initial State contribution of 12 million for the project,would appear to give reasonable assurances that the State will makeavailable the necessary local funding. To reinforce this position, duringnegotiations we obtained BSG agreement that FGN, if necessary, would deductany amounts outstanding to the project from the Borno State's federationaccount. In addition, BSG's assurance was received to provide itscontribution to the project according to the payment arrangements agreedduring negotiations (para. 40).

49. There are some technical risks for this project relating to BSWB'sinexperience with the proposed treatment plant. However, the provision fortechnical assistance under the project to facilitate plant operation in theearly years and to train BSWB staff to take over the responsibility laterwould reduce these risks.

- 18 -

50. Through providing access to piped water for a larger segment ofMaiduguri's population, the project would iucrease consumption andcorresponding waste water. Proper disposal of the waste water is,therefore, imperative to avoid a public health hazard. BSG has been alertedto this potential hazard and has agreed to review the institutionalresponsibilities for this subsector. A review and analysis of thesanitation needs of Naiduguri is Included in the project (para. 34).

PART V - LEGAL INSTRUNENTS AND AUTHORITY

51. The draft Loan Agreement between the Federal Republic of Nigeriaand the Bank, the draft Project Agreement between the Bank and Borno StateWater Board, the draft State Agreement between the Bank and Borno State, andthe report of the Committee provided for in Article III, Section 4(iii) ofthe Articles of Agreement are being distributed to the Executive Directorsseparately.

52. Special conditions of the project are listed in Section III ofAnnex III including the following conditions of effectiveness of the loan,set out in Section 6.01 of the Loan Agreement:

(a) signing of the Subsidiary Loan Agreements between theBorrower, the Borno State Goverrent and the Borno StateWater Board (Section 6.01(a) of the Loan Agreement);

(b) opening of a project account by the Borno State Water Boardand the initial payment of N2 million into the account byBorno State (Section 6.01(b) of Loan Agreement; Section2.01(b) of the Project Agreement; Section 2.02(c) of theBorno State Agreement); and

(c) satisfactory conclusion of the agreement between the ChadBasin Development Authority and the Borno State Water Boardto share the Alau Dam and Reservoir waters to provideadequate water to meet the needs of Maiduguri (Section4.02(b) of the Loan Agreement).

53. I am satisfied that the proposed loan would comply with theArticles of Agreement of the Bank.

- 19 -

PART VI - R3CO"NNDATION

54. 1 recoumend that the Executive Directors approve the proposedX, loan.

A. W. ClausenPresident

Attachments

February 27, 1985Washington, D.C.

-20- ANNEX IPage 1 of 5NI3ORRI _ - nOdAL INDICATORS ATA SHUT

HIDNT uTr IICUw UTImATl) /buccht MIDDLE INCOC EDET.

lu,oot l,70t1k EUIxSATULk AFtICA 6. or S A N. AFRICA4 HID EAST

UAR (TlNOLUD M IN) -TOTAL 923.6 921.6 923.6AGRICULTliAL 471.0 497.4 31.13

GNP Ma CAPITA (D") 2no.0 330.0 U60.0 3132. 1140.6

WNtW CODUFUOl MN CAPITA(XltROINAN OP Oil. EQUIVALNT) 20.0 31.0 243.0 329.0 022.1

IPOPLATID a nTAL mnutATICnPUPULATtlM,NMID-YRAN TTHNUSAD) S15ua.0 wib1A2. 90572.0tIIANN POPLATION (X OF TOTAL) 11.1 13.4 21.4 297 43.2

POPULATION PROJECTIONSPoPULATIoN IN YEAR 2000 (HILL) 309.3NTATIONARY PUPULATION (NILL) 617.7POPULATION NIOHEFl,o 2.0

POPULATION WNH ITTPKR SQ. M. 13.9 71.1 94. 33.4 30 .1pEE SQ. KM. AUDI. LAND 101.6 133.0 170.7 111.5 461.7

PUPULATION ACI STRUCTURE CR)0-14 YR6' 4.4 46.0 47.6 *5.4 43.0

15-04 MRS 52.3 51.0 49.6 51.7 53.163 AND AnOVn 2.3 2.4 2.4 2.9 3.3

POPULATION 135WTH RAITC 2)TOTAL 2.4 2.5 2.0 2.6 2.6URIAN 4.7 4.7 6.9 5.2 4.1

CRUDE SIRTH RATE (PER THDUS) 12.0 30.7 49.5 47.0 40.4CRUDE DEATH RATE (PER TNaIn) 25.3 20.6 16.2 25.2 33.5GMOSS REnIFOUCTION RATC 3.4 3.4 3.4 3.2 2.8

PAEILY PLANNINGAcCCxWO's. ANIUAL (THOU1) ., 7.1 *-USCRS (2 OF ARRID WM) .. .. 6.0 . 22.2

7m AIID IuImIIINDCX o0 P00D PROD. PCR CAPITA(1909-71-100) 100.0 102.0 92.0 91.6 97.3

PER CAPITA SUPPLY OFCALORIES CE OP REQUIREMENTS) S3.0 64.0 91.0 98.2 110.8PROTEINS (CRAMS PCR DAT) 45.0 45.0 49.0 50.7 70.3

OF WHICH ANIMAL AND PULSE 10.0 11.0 11.0 I 17.0 17.8

CHILD (ACS 1-4) DEATH RATE 50.0 34.0 20.0 18.7 14.6

AtLTLIFE EXPECT. AT BIRTH (TEARS) 38.7 43.7 49.6 51.7 57.5INFANT NC?T. RATE (PER THOUS) 190.0 134.0 109.0 102.7 101.5

ACESS TO SAFE WATER (CPOP)TOTAL .. .. .. 13.6 39.7URtAN .. .. .. 34.1 U.5RURAL .. .. .. 27.3 36.4

ACCESS TO EXCRETA DISPOSAL(2 Or POPULATION)

TOTAL .. ..

URBAN .. ..RURAL .. ..

POPULATION m PHYSIC1AI 73710.0 24670.0 12550.0 /d 11946.3 4345.1POP. PER NURSING PERSON 4040.0 La 3070.0 3010.0 l 2246.9 1631.1POP. PER HOSPITAL BED

TOTAL 3020.0 If 2220.0 1160.0 fd S6.*9 632.9URlAN 430.0 / 490.0 370.0 f 368.7 545.5RURAL 25630.0oj 38490.0 5490.0 4012.1 2513.5

AIIIISSIONS PER NHSPIL SED .. .. .. .. 26.2

gmimAVEtAGE SIZE OF HOUSSDLD

TOTAL .. ..

U33AN .. 4

.7

..RURAL .. ..

AVERaGE NO. or PEUSousRaoTOTAL .. ..

UR 3.0 2.2/.RURAL .. ..

AcCSS To ELECT. (2 OP DIHLLMCSI462TOTAL .. .. .. .. 46.2UBAW 6.3 N.. .. 77.7RURAL .. .. .. .. 36.1

-21-ANN Page 2 of 5

MIDiT ("tDST SCEN IIuSTIWr)08IC NlODI INC NSDDW

9inal 107ic R1TCETi HRC ISCOF HALA . oI RiD AuST

ADJUSTED INROLJUINT RATIOSPRIATus TOTAL 36.0 37.0 @6.0 /1 *1.0 *1.3

MALE 46.0 47.0 .. 90.J 101.1FiNALE 27.0 27.0 .7 3.6 13.6

SECONDNBTI TOTAL 4.0 4.0 16.0 L 17.4 43.0HALE 6.0 6.0 .. 23.7 12.3

rFf 1.0 3.0 .. 14.5 33.0

VOCATIONAL (2 OF SECONDY) 4.0 D.S 3

. t 5 3.3 1O.3

PUPIL-TEACHER RATIOPEJLARY 30 0 34.0 .. 3. 30.3ICOINDARY 19.0 21.0 .. 24.3 23.1

ADULT LITERACY ATIE (S) 13.4 a .. 34.0 23.6 43.5

FArSEECR CA/THOUSAND POP 0.6 0.9 1.4 it 20.7 17.6RADtO hzCuxVvl/T0UaShAD POP 2.8 19.3 66.L 100.3 13.NTV RECEIVRRS/TIOUSAD POP 0.0 1.1 5.3 is.3 46.1NSrPAPER (-DAILY GEHNL

INTElAS") CIRCULATIONPCX THNOUSAND POPULATION 5.5 4.N:09 .32 1. 7

CINDIA ANNUAL ATTENDANCE/CAPlITA . . 03 17

TOTAL LABOR FORCE (THOUS) 21758.0 23992.0 32476.0FEMALE (PERCINT) 41.3 40.6 39.7 33.- 10.8AGRICULTURE (PERCENT) 71.0 62.0 54.0 57.1 42.4INDUSTRY (PERCENT) 10.0 14.0 19.0 17.4 27.9

PARTICIPATION RATZ (PERCENT)TOTAL 42.2 39.3 35.9 36.3 26.2MAUL 30.3 47.3 43.7 47.6 46.4FENALE 34.4 31.5 28.2 25.1 3.6

ECONONIC DEENIDENCY RATIO 1.1 1.2 1.4 1.4 1.8

tuLn "suuamnfhPERCENT OF PRIVATE INCOMERECEIVED BY

HICNEST Y o0 HOUSEHOLDS ..HIGHEST 2CR OP HOUSEHOLDS ..LOHEST 20S o HOUSEHOLDS .LOSEST 42 OF HOUSE;HOLDS ..

ESTIMATED AUSOLUTE POVERT INCSELEVEL (US$ PER CAPITA)

URBAN .. .. 696.0 525.3 274.oRURAL .. .. 341.0 249.0 177.2

ESTIMATED RELATIVE POVERTY INCOUSLEVEL (USS PER CAPITA)

URBAN .. .. 621.0 477.4 402.6RURAL .. .. 207.0 186.0 2R4.9

ESTIMATED POP. IIELOW ABSOLUTEPOVERTY INCOMIC LEVEL (2)

IIURBAN ..RURAL ..

ROT AVAILABUNOT APPLICABLE

N OT E S

/a The group averagee for each indiestor are populetioe-wighted arlthmtic me_. Covers" of countrle among thetmdie-tore mdepend oon ailabiltty of data ad Is not uniform.

/b Uolmao otberide noted, "Date for 1960S refer to say year betwee 1959 and 1961; "Data for 1970" between 1969 and1971; end dats for "Ibt Ratent srlntt" betwee 1980 and 1982.

/C 1977; Id 1979; fe 1962; If Including es-North Cameron under British adtnoletration; IL 1976; /h 1972; /1 1979;Cert-ain filde of stiy preiousely claseif td under other second levl uducatlon of vocational or technical

necure are mm reported uner enoral education.

JUNE. 1954

-22 - ANEX I- SMQL I.O[COM ~Page 3 of 5

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telis 155ftscsss Ia tod Kare -LI Mrsnss _e n.I -uddt. issu Sb Alriss ad US: 55.' Ia kbsa bus.. or u(55f sut .euIs

55 - 5~* h t iedlcutt. 'las tr Cer.a so - 5.5dla55 d.55* - l 55.55 .5-Ls -t . -10ls.. usif1- = --511t_ Su _stsSt crdud .55 sa.u..~.u aa.-tt-.InI Is s-a- tuusus - ldSss.u. C. Iste -V fl5 a5 -4

tds iS,.ads.u Sal.s15u SIsuti.. . la-rut.._ ditsjw Wr -b of Pasu:ctttu-S lost1 *s'r s o.tl. ussd . tt S.s lts u5Ststs.edrtseut-ut.tfr1u

U11511 - -5 ea..L- runtrtt-d - l se.- - 15.1 rs..- 11 -91ps.Sta. -551.

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- 23 -

AMNEX IPage 4 of 5

EcoNomic inrCAT1oS____..____._______

GROSS NATIONAL PRODUCT IN 1982 ANNUAL RATE OF GEOWTNIS. Constant Pricis)- ------ … -- - -_

USC Nln. /1/ 7 1975-10 1981 /2/ 1982 /1/.___- -- ---.

CUP at Market Prices 70,106 100.0 3.1 -7.6 -a.2Cross Domestic Investment 16,515 24.0 1.3 7.6 -1838

L Cross National Saving 9,070 12.9 5.2 -31.4 -24.0Current Account Balance -7,341 -10.5 -Exports of Goods.NFS 13.590 19.8 2.0 -34.4 -19.1Imports of Goods,NFS 19.909 28.5 1S.6 -7.1 -31.9

OUTPUT. LABOR FORCE ANDPRODUCTIVITY IN 1982

____________________

Value Aded 1I Labor Force /31 V.A. PER Vorker

US$ "in. S Kn S US . S

Agriculture 15,466 21.8 19.6 59.8 878 *0.6Industry & Mining 27.709 39.0 6.2 18.9 4,320 199.53ervices 27T.87 39.2 7.0 21.3 3.978 183.7

TotallAverage 71 020 1000 32.1 100.0 2.16S 100.0

OATERNMENT FINANCE

General Government Central Goverment

CN Nn. S or CDP (N KIl.) S of GDP

1982 /1/ 1962 /1t 1979"81 /8/ 1932 12/1 19?9-81 /86

Current Reeiopts 12,620 26 . 29.5 7.320 15.3 21.3Current Expenditure 9.612 20.1 20.1 *.878 10.2 10.5

Current Surplus 3,008 6.3 9.4 2,482 5.1 10.5Capital Expenditure 9,5T7 20.0 1a.0 6.270 13.1 12.9External As3lstance(net) 26 0.6 0.6

MONEY, CREDIT AND PRICES 1976 1977 1978 1979 1980 1981 1982

(Million N Outstanding End Period)Money and Quasi Paney 5,843 7T813 7.521 9,9849 1t,390 15,239 16698Dank Credit to Public Sector(net) 551 2.309 3 143 3.313 3.539 6,299 10,328Banit Credit to Private Sector 2.382 3,J59 , 495 5,126 6,7JJ 8.917 10,567

(Pereentages or Index Numbers)Money & Quasi Money as S or GDP 21.6 24.7 22.2 24.3 30.9 32.3 3J.9General Price [ndex(1975=100) 123.9 143.0 166.7 186.3 208.9 287.5 266.5

Annual Percentage Changes in:General Price Index 21.7 15.4 16.6 11.8 10.0 20.8 7T7Dank Credit to Public Sector 319.1 36.1 5.1 6.8 78.0 64.0Bank Credit to Private Sector 3.a8 45.2 29.7 16.3 31.6 32.2 18.5

Note: All conversions to dollars in this table Ore at the average exchange rate prevailing during periodcovered.

1/i Revised estimates. /2/ Officil estimates. /4/ Provisional.131 The data is derived from planning documents and refers to the number of 'gainfully employed'.

lNot Available.April 18, 1988.

- 24 -

ANNEX IPage 5 of 5

TRADE PATETS AND CAPITAL FLOWS

ILbAUCE OF PATIENTS NEIRCHADISE EXPOITS (CAERAGC 1981-1963) /6 /

1981 III 1982 /2/ 1963 /3/ U5$ Nin S

(Nillion US $33aperts Of Goods f.o.b. 17.T18 12.930 10.730 Crude Oil 13.421 96 7of wikeh:Petroleum T,162 12.751 10.350 Cocoa Products 22S 1.6ports of Geodes f.o.b. 11,390 16,835 12,256 Palo Products eS 0.6

Services & Income -6,603 -3.060 -3,208 Tin 25 0.2Not Transfers -567 -373 -260 Other Co_oditesa 127 0.9

Curroot account Solance -6,062 -7,3Jr -_.992 Total 13,632 10O0

EXERNAL DEBT. DECEMBER 31. 1963 IS/ftrect Foreign Investment 16S 3S8 365 _- … - --

Eat Ofricial NLT Beorrowing i11 75 980 USS NIn.of which: Amortlzation -533 -677 1200 ----

Publc Debt, mci. UndLabursed 15,504Other CopitalCShort-Term) *09 496 -663 Non-Guaraated Prlvate Debt

Net Errors & Onissions -1563 -689 0 Total Outatanding & Dibursed 11.756

Overall Balonee -6200 -6Jl -4290

FImaecing 6200 641e 4290-- -- - - - -- DEBT SERVICE RATIO For 1983 f6f

Uesrve Nowements(Incr.-) 6.200 2.367 S16Arrears 0 4.051 3.770 5JSomrve Levels d,261 1,629 1.092eserve as Month of Imports 0.16 0.07 0.07 Public Debt, Icl. Guaranteed 17.9

Non-Guaranteed Priwate DebtMports 18.390 16.836 12.254 67

or wblc: Food 3.1S5 2.736 t.e75 Total Outstamding I Disbursed 17_9Consumer Goods *.612 eZ 1* 1 3.2S9Interm_eate Goods *,682 4.342 3,13TCapital Goods S,992 5.569 3.963 12DIDA LENDING (Feb. 29.1984) (Nllilons 5)

RA OF ExCNANGEISOD IDA /71

19T7: U1100 a US51.571979 dl .00 USS31 66 Outatanding & Olsbursed 866.0 36.71966: l_100 USt1.83 Undisbursed 1,091.6 -1911: 1.00 US$1.631962: 11.00 z USS1.49 Outstanding nel. Undisbursad 1,939.6 J6.71983: *1100 = US$1.39

II1 Provslional. /2/ Orriciai estimtes. /3I Staff *timates./X/ Official estimates for 1961 asd 19U2./S/ Fscluding $5.9 billion short-term arrears./6/ natio or ELT debt service to esports of goods and non-ractor services.17/ As of February 1988.-- Not Available

April 18. 1966

-25- -s

S STATUS 07 DUNQ 0Q01? OPhDA

A. 5545Lf 0? DiESK SOUP 0IaflONI5 NI0i j,/A. (As of SaptabNr 30.M1A3I/

oa r of UStCredit f (loea ccll-ti ns)Saber Tear Dorrar Purpose _IDA tburscd

Tenty SIx loan. nd two credita fully daburned 682.1 35.3 2/

1191 1976 Nigeria LC. State Oil Palo 19.0 9.71454 1977 Nigr. Agric. Dew. Lafia Z7.0 0.51455 1977 Nigeri Agerc. Dew. Ayantbe 35.0 0.21591 1978 lgria Mae. gat. eallbolder Oil 30.0 3.71597 1978 PIDS Induarial Dweloent 54.7 14.81667 1979 Nieria Agric. Dv. Ride 23.0 4.2

L 1668 1979 gria Agric. Dew. forIn 27.0 10.61679 1979 Nigeria orertry 31.0 5.31711 1979 Nigria Mater Supply - Kaduna 92.0 70.71719 1979 Nigeria Agrile. Rural Itut. loat. 9.0 5.71766 1980 UIIA Poaer Lagoe 100.0 65.91767 190 Niria Urlbn Dwe$o t - Daabi 17.8 10.31838 1960 Niria Aglc. Dwv. Oyo-Narth 28.0 11.91854 1980 Nilria Agrie. Dw. -iti-Akoko 32.5 20.418U3 1980 NIri Road. 78.0 25.6191 191 Nipia Agic. Dew. - uchl 132.0 55.91982 1981 Nieria Agilc. Dew. -lao 162.0 97.62029 196 N ria Tech. Anaiatance-Agr1c. 67.0 31.3Z036 192 Nigria vater Supply - Anmbra 67.0 54.42085 1982 ERUA Paver - DMtailbuaton 100.0 62.12185 1982 Nigeria Agilc. flew. - Sokoto 147.0 119.62299 1963 NDI Industrial Denlopnot 120.0 118.22345 1964 Ngri Fertilzer Import 20.0 139.82376 1984 MNUM Small i Hadiu Scale Indutry 41.0 40.92390 1964 MleC Tech. asmt. - Gs Engneering 25.0 25.0

* 2436 1964 Nigeria Agile. Dew. - Kadan 122.0 122.0

Total 2,279.1 35.3 1,175.9Of which baa been repaid 293.3 6.0Toga Outstaning 2,1-5.6 31.3

Amount aeld 16.8Of wbich hbs been repaid 16.8 0.0

Toal nm bheld by Dank IDa 2,185.8 31.5

Total undiabursed 1,175.9

D. STMNr OF IFC INVESTN2TS(an of Sptber 30. 1984)

Fiscal Type of Amount io USS illonTear Buineas Loan Total

1964, 1967. Arew Texcil-e Ltd. TextiLe Mfg. 1.0 0.6 1.61970

1964 Nigerls Industrial Dev. Fin. Co. 1.4 1.4Development Dank Ltd.

1973 Funtua Cottonseed Vwg. OIL 1.6 1.61, Cakhing Ltd. Czahing

1913 Nigerian slundnts Aluminim 1.0 0.3 1.3Extrusion Ltd. ProesaiDng

- 1974 Lifiaga Sugar Sugar 0.1 0.1Eatate

1980 Wm TextILes 6.2 0.7 6.9

1981 laeja Hotel Tours 10.2 1.5 11.7

1985 Trime Battery Dry-call 4.7 _ 467

Toeal Croa Co_mirenta 24.7 4.6 29.3

La"s cancelationa. ttma-tiSm, repsyang and a4LdA 5.9 1.6 7.5

Total Co_airnt -ow bld by IFC 18.6 3.0 21.8

Undlaburmed 7.2 1.4 5.6

5 Not yet signd.1/ The Statue of tbe projecta lIated in Part A in described in a aeparata report on all D&anIDA

finaced projecta In execution, whicb ia updated twice yearly and circulated to the ExectiveDirector. on April 30 and October 31.

Z7 Frior to exchange rtae adjuatuce

- 26 -

ANNEX III

NIGERIA

BORNO WATER SUPPLY PROJECT

Supplementary Project Data Sheet

Section I - Timetable of Key Events

(a) Time taken by the country to prepare the project: two rears(b) The agency which has prepared the projects:

Borno State Water Board with assistance byconsultants and Bank staff.

(c) Date of first presentation to the Bank: 1979(d) Date of first Bank mission to consider the project: May 1981(e) Date of departure of the appraisal mission: May 1983(f) Date of completion of negotiations: April 1984(g) Planned date of effectiveness: October 1985

Section II - Special Bank Implementation Action

PPF advance of US$1 million (in two tranches) for detailed designand preparation of tender documents required for water supplyfacilities, and for technical assistance.

Section III - Special Conditions

1. Signing of the Subsidiary Loan Agreements between Federal Governmentand Borno State Government and between BSG and BSWB (condition ofeffectiveness, para. 39);

2. Agreement satisfactory to the Bank between CBDA and BSWB to sharethe Alau Dan and Reservoir waters in order to meet the needs of )Maiduguri (conditiou of effectiveness, para. 47);

3. Opening of a project account by BSWB with an initial payment o' ''million by BSG (condition of effectiveuess, para. 40); and

4. Payment by BSG into project account of Y6 million in 1986 (N 1.5million per quarter) (para. 40);

5. Deduction by federal government of necessary state contribution fromfederal statutory allocations to BSG, should BSG fail to provideadequate and timely financing (para. 40); and

6. Appointment by BSWB of a financial controller by June 30. 1985(para. 42).

NI6A L IJ -0 N I G E RMAL 0^\ .X S;?>\/oeo

BURKIN A. Ia*or---

s5¢olZr NIGERIA a . ' eirN~~~~~~O,

0,A N hi G E '. I 'A-

S1 CAMEROON

G;udf cf Guinec f- ,_- ----

Airport

AR,mor

College ~ ~ Cllge~

13 ;Cole,.CHAD~no

KANO, B 0

-12'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~"

Afafon Forest Resere

+<Ls~ ~~~~~~~~~~~~~~~~~ 2 9.. rf99.9

1~ 1 /C A __ _ _ _ _____, __ __'_ __.:-___

B A Ii C I / CAMEROON 0 5

10 ve >.;~~~G O _0 10 lr,, ro rai 1 A 14-/HD_ _

IBRD 17516R1

N IGERIA

BORNO STATE WATER SUPPLY PROJECTMAIDUGURI

4 / 0 \ ./ , /

L...J Treotment FacilitiesED < 11 Proposed Primary System Pipelines

8 t z , ; W A N GE.. Proposed Secondary System Pipelines

Existing Pipeline

Boreholes

- __ _NdAirok,lnvikekn ^. Ground Reservoirs

i~ _Elevated Reservoirs

* End of Pipes

Rivers

fuel RaW \rTeaching Rcilway

A- Xt IF - Trunk Roads

Fede/Rl Other RoadsG F? ~ ~ ~ ~~ -College

/ , -- ~ - State Boundaries

< / } S ~ - \ -@- International Boundaries

- 911 ! , ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~14

*\ 5 ~~~~~University of\ \id~~~~oiugun,

! ~ ~~ 3KILOMETERS'v

10 1l5 MILES

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a* Ce.ww o

*.. - Tm I< meo md mei*W_m._...E m e b '. .ye.. V mw -.

C m.d VWme adonsh.W R.Nnft CwvpmueF NW 19

FEBRUARY 1985