Document of

The World Bank

Report No: 24162-UNI

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 88.1 MILLION(US$110.00 MILLION EQUIVALENT)

TO THE

FEDERAL GOVERNMENT OF NIGERIA

FOR A

COMMUNITY BASED URBAN DEVELOPMENT

PROJECT

May 13, 2002

Water and Urban 2Country DepartmentAfrica Regional Office

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CURRENCY EQUIVALENTS

(Exchange Rate Effective March 31, 2002)

Currency Unit = Nigerian NairaN1.00 = US$0.0085837

US$1.00 = Nl 16.5

FISCAL YEARJanuary I -- December 31

ABBREVIATIONS AND ACRONYMS

APL Adataple Program LoanCAS Country Assistance StrategyCBO Community-based OrganizationCDS City Development StrategyCFAA Country Financial Accountability AssessmentCPA Consumer Price IndexCPAR Country Procurement Assessment ReportCTC Community Technical CommitteeDCA Development Credit AgreementDPP Detailed Procurement PlanEA Enviromnental AssessmentEIA Environmental Impact AssessmentEMP Enviromnental Management PlanEOI Expression of InterestERR Economic Rate of ReturnFGN Federal Govermment of NigeriaFMAP Financial Management Action PlanFMC Financial Management ConsultantFMF Federal Ministry of FinanceFMM Financial Management ManualFMS Financial Management SystemsFMWH Federal Ministry of Works and HousingFOS Federal Office of StatisticsFPAS Federal Project Accounting SectionFPCU Federal Project Coordination UnitFRR Financial Rate of RetumGDP Gross Domestic ProductGIMPA Ghana Institute of Management and Public AdministrationGPN General Procurement NoticeGPSP Global Procurement Strategy PlanHIV/AIDS Human Imm-unodeficiency Vims/Acquired Immime Deficiency SyndromeHRDO Human Resource Development OfficerLkDs Intemal Audit DepartmentsIBRD International Bank for Reconstruction and DevelopmentIC Individual ConsutlantICB International Competitive Bidding

ICR Implementation Completion ReportIDA International Development AssociationIS International ShoppingISA International Standards on AuditingJISU Joint Interim Strategy UpdateKIP Kampung Improvement ProgramKM Knowledge ManagementLACI Loan Administration Change InitiativeLGs Local GovernmentsLIB Limited International BiddingLIL Learning and Innovation LoanM&E Monitoring and EvaluationMIS Management Information SystemNACA National Action Committee on AidsNCB National Competitive BiddingNGO Non-Govermental OrganizationNS National ShoppingNWRI National Water Resources InstituteO&M Operation and MaintenanceOCSPR Procurement Services Policy GroupOMR Output Monitoring ReportPAD Project Appraisal DocumentPAS Project Accounting SectionPCD Project Concept DocumentPFS Project Financial StatementsPIM Project Implementation ManualPIP Project Implementation PlanPIU Project Implementation UnitPMR Project Management ReportPPF Project Preparation FacilityPSC Project Steering CommitteeQCBS Quality and Cost Based SelectionRFP Request for ProposalRIAPs Revenue Improvement Action PlansSA Special AccountsSACA State Action Committee on AidsSDR Special Drawing RightSGs State GovernmentsSOEs Statement of ExpensesTOR Terns of Reference

Vice President: Callisto MadavoCountry Manager/Director: Mark D. Tomlinson

Sector Manager/Director: Letitia A. ObengTask Team Leader/Task Manager: Alison C.N. Cave

NIGERIACOMMUNITY BASED URBAN DEVELOPMENT

CONTENTS

A. Project Development Objective Page

1. Project development objective 32. Key performance indicators 3

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 32. Main sector issues and Govenmment strategy 43. Sector issues to be addressed by the project and strategic choices 5

C. Project Description Summary

1. Project components 52. Key policy and institutional reforms supported by the project 83. Benefits and target population 94. Institutional and implementation arrangements 9

D. Project Rationale

1. Project altematives considered and reasons for rejection 142. Major related projects financed by the Bank and other development agencies 153. Lessons learned and reflected in the project design 154. Indications of borrower commitment and ownership 165. Value added of Bank support in this project 17

E. Summary Project Analysis

1. Economic 172. Financial 183. Technical 194. Institutional 195. Environmental 216. Social 227. Safeguard Policies 24

F. Sustainability and Risks

1. Sustainability 242. Critical risks 243. Possible controversial aspects 25

G. Main Credit Conditions

1. Effectiveness Condition 252. Other 26

H. Readiness for Implementation 27

I. Compliance with Bank Policies 27

Annexes

Annex 1: Project Design Summary 28Annex 2: Detailed Project Description 31Annex 3: Estimated Project Costs 38Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary 45Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 48Annex 6: Procurement and Disbursement Arrangements 49Annex 7: Project Processing Schedule 59Annex 8: Documents in the Project File 61Annex 9: Statement of Loans and Credits 62Annex 10: Country at a Glance 64Annex 11: Financial Management Arrangements 66

MAP(S)IBRD 31317

NIGERIACommunity Based Urban Development

Project Appraisal Document

Africa Regional OfficeAFTU2

Date: May 13, 2002 Team Leader: Alison C. N. CaveCountry Manager/Director: Mark D. Tomlinson Sector Manager/Director: Letitia A. ObengProject ID: P069901 Sector(s): UU - Urban Development AdjustmentLending Instrument: Specific Investment Loan (SIL) Theme(s): Urban

Poverty Targeted Intervention: N

Project Financing Data[ 1 Loan [pq Credit [I Grant [1 Guarantee [ Other:

For Loans/CreditslOthers:Amount (US$m): 110.00

Proposed Terms (IDA): Standard CreditGrace period (years): 10 Years to maturity: 40Commitment fee: Standard IDA Service charge: 0.75%Financing Plan (US$m): Source Local Foreign TotalBORROWER 27.48 0.04 27.52IDA 83.97 26.03 110.00Total: 111.45 26.07 137.52

Borrower: FEDERAL MINISTRY OF FINANCEResponsible agency: STATE GOVERNMENTS

1. Akwa Ibom State:Mr. Ephraim S. Udo, Project Coordinator CBUDP, Uyo LG Secretariat, P.M.B. 1005, Wellington Bassey Way, UyoPhone: 234 - 085 - 203968; Fax: 234 - 085 - 203109

2.Bauchi State:Mr. Salisu S. Mohammed, Project Coordinator CBUDP, Bauchi State Development Board,, P.M.B. 0086, Bauchi.Phone: 234 - 077- 542980/759 /752

3. Ebonyi State:Mr. Gabriel Emerike, Project Coordinator CBUDP, Area Engineer's Office, Ministry of Works and Transport, Abakaliki.Phone: 234 - 043 - 20993

4. Edo State:Mr. T.E. Ulinfoh, Project Coordinator CBUDP, Office of the Secretary, State Govenmment, Govemor s Office, Benin CityPhone: 234 - 052 - 251396

5. Jigawa State:M.H. Barde Jahun, Project Coordinator CBUDP, Director of Town Planning, Land and Survey, Dutse CapitalDevelopment Authority, Block 13 & 18, Old Secretariat, Dutse, Jigawa StatePhone: 234 - 064- 721 107, 721 485, 721 323.

6. Nassarawa State:

Mr A. S. Muhammad, Project Coordinator CBUDP, Nassarawa State Liaison Office, Kwame Nkrumah Crescent,Asokoro, AbujaPhone: 234 - 09 - 3140294; Fax: 234 - 09 - 3148454

7. Ogun State:Mrs. T. A. Adebari, Project Coordinator CBUDP, Ministry of Works and Housing, IbaraAbeokuta.Phone: 234 - 039 - 243557

8. The six additional States joining the project's second phase are: Abia, Adamawa, Kaduna, Ondo, Rivers and Sokoto.

Other Agency(ies):Federal Ministry of Finance

Address: Central Business Area, AbujaContact Person: Mrs. B. A. Fafowora, Deputy Director, Multilateral Institutions Department,Tel: 234 - 09 - 2346962 Fax: Email:Federal Ministry of Works and HousingAddress: Urban and Regional Development Division, Headquarters, Mabushi, AbujaContact Person: Mr. R. 0. Adebayo, Deputy Director, Urban & Regional DevelopmentTel: 234 - 09 - 5211632 Fax: Email:

Estimated Disbursements ( Bank FY/US$m):FY 2002 2003 2004 2005 2006 2007 2008

Annual 11.35 29.13 24.77 25.31 17.52 18.04 11.39Cumulative 11.35 40.48 65.25 90.56 108.08 126.12 137.51

Project implementation period: 2002 - 2009Expected effectiveness date: 09/15/2002 Expected closing date: 06/30/2009

OCM PAD F- m Rd. 2W

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A. Project Development Objective

1. Project development objective: (see Annex 1)

The development objectives of this project are:'* to establish partnerships between communities and their Local Govemments (LGs) so that

subproject proposals are developed jointly by them;* to deliver basic municipal services in poor urban settlements; and* to demonstrate viable approaches to infrastructure development and service delivery that enable

LGs to move away from a culture of total financial dependency for infrastructure investment andeven recurrent expenditures for infrastructure operation and maintenance (O&M).The project will demonstrate inclusive and replicable approaches for the sustainable delivery of

basic municipal services in poor unserviced or underserviced settlements. Consistent with thecommunity-based decision-making approach to urban development that has characterized IntemationalDevelopment Association (IDA) supported projects in poor urban areas for over three decades, the projectwill facilitate partnerships between poor urban communities, LG and State Govemments (SGs), fordecision-making related to on-site public expenditures in settlements, thereby fostering good govemance.

This project will be implemented in two phases. The seven States participating in Phase I areAkwa-Ibom, Bauchi, Ebonyi, Edo, Jigawa, Nassarawa and Ogun. The six additional States that willparticipate in Phase II, Abia, Adamawa, Kaduna, Ondo, Rivers and Sokoto, were selected on the basis ofcriteria agreed during the negotiations (geopolitical balance, size of urban population, degree of urbanpoverty, capacity to borrow and meet counterpart funding requirements, and completed audits fromprevious IDA credits).

2. Key performance indicators: (see Annex 1)

Progress in achieving the objectives of the project will be evaluated on the basis of the followingperformance indicators:* improved living conditions in project sites, measured by higher beneficiary satisfaction levels for

select services in targeted areas than those recorded in baseline studies;* improved quality of life, as measured by time savings and reduced incidence of flooding in targeted

areas than recorded in baseline studies;* ownership of investments by LGs and communities, measured by the percentage of assets

constructed/rehabilitated under the project that are adequately maintained one year after completion(annual technical audit reports); and

* improved management capacity of the project LGs will be judged by a 5 percent increase perannum in real terms using the Consumer Price Index (CPI) deflator, in LG own source revenues,over 1999 baseline.

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)Document number: 20309 Date of latest CAS discussion: May 18, 2000

The Nigeria Joint Interim Strategy Update (JISU), dated June 14, 2001, is designed to structureIDA assistance to Nigeria through three strategic pillars: govemance, community-driven development andprivate sector-led growth. This project is consistent with all three:* the community-based approach to urban development will improve govemance by aligning public

expenditures with community demand, and the sharing of information will lead to greater

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transparency and accountability;* out-sourcing operations to the private sector, for example operations and management of markets,

lorry parks, public toilets, public water stand pipes, and so forth, as well as the out-sourcing ofcivil works to private contractors, will contribute to private sector development and also make theexecution of public works more efficient than through direct labor.

2. Main sector issues and Government strategy:

The main urban issues in Nigeria are discussed below:

(i) Rapid urbanization, increasing urban poverty, and social unrest in cities: Nigeria is urbanizingat 5.5 percent a year, and is expected to cross the 50 percent urbanization mark by 2007. Major andmedium cities are growing at rates between 10- 15 percent and 7- 1 0 percent per annum, respectively.Urban poverty in Nigeria has increased from 17 percent in 1980 to 58 percent in 1996, and the contributionof the severity of urban poverty to national poverty has increased from 22 percent to 48 percent between1985-96. Unemployment, under employment, violence and crime rates are high, giving rise to increasinginsecurity in Nigerian cities. At the same time, the relative contribution of the urban economy to Nigeria'sGross Domestic Product (GDP) is higher compared to the rural economy. About 60 percent of the GDP isgenerated in urban areas with about 40 percent of the population, indicating the relative difference inproductivity.

(ii) Infrastructure deficiencies, especially in low-income neighborhoods, due to inadequateinvestment in newfacilities and negligible maintenance of existingfacilities: The impacts ofinfrastructure deficiencies are much worse in low-income settlements, exacerbating poverty due to a lack ofaccess to basic municipal services. Negligible periodic and routine maintenance of existing infrastructurehas rendered most cities ill-equipped to provide for the basic needs of a majority of their present, much lesstheir projected population. Most Nigerian cities are characterized by a breakdown of infrastructure andservice delivery. This is largely due to inadequate budgetary allocations for maintenance, inefficient O&Mthrough the public sector, and maintenance is the first budget item to be deleted when revenues do notmatch budget forecasts, because fixed expenses, such as salaries and wages, get priority.

(iii) Poor utilization of existing resources: Typically, decisions on new capital investments in Nigeriaare not subject to the systematic application of screening criteria, such as cost-effectiveness, financial,economic and social returns on investment, affordability and actual demand. There exists, therefore, notechnical mechanism to guide prioritization.

(iv) Inadequatefiscal decentralization leading to an unacceptable level of dependency on Federalresourceflows to maintain and increase recurrent and capital expenditures: The high dependency putsLGs at risk from reduced resources when Federal finances are impacted adversely by external economicand political factors, especially the price of oil. Unpredictability of Federal resources makes financialplanning difficult, while dependency engenders LG inefficiency and lack of management effort.

(v) Inadequate access by LGs tofinancingfor infrastructure investments: LGs are notcreditworthy for purposes of securing reliable financing mechanisms to be able to plan and undertakecapital investments. LGs are dependant on Federal transfers to finance development. Their internallygenerated revenues are inadequate to finance the recurrent expenditures needed to maintain existing assets.

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(vi) Inadequate technical and management capacity at both State and LG levels, coupled with poorurban information systems: LGs do not have the technical, managerial or financial resources to plan andmanage growth in their areas, and urban information systems are poor. There is a general lack of trainedand experienced personnel and the large number of LGs in Nigeria has meant that the few trainedprofessional staff are spread thinly across many States and LGs.

The Government's strategy:Federal Government of Nigeria's (FGN) National Urban Development Policy of 1997 aims to

improve the living standards of the Nigerian people, by facilitating adequate, efficient and functionalservice delivery This is to be achieved by providing infrastructure developed to design standards thatmake urban facilities and amenities more affordable, through investments in a package of basic servicesto upgrade poor urban settlements.

3. Sector issues to be addressed by the project and strategic choices:

Fiscal decentralization is a major issue and has been acknowledged in FGN's National UrbanDevelopment Policy document of 1997. It is beyond the scope of this project to significantly address thisissue. The project only attempts to make a small contribution by helping LGs to improve their internalrevenue mobilization and thus improve operations and maintenance of project related infiastructure andimprove financial management. Except for fiscal decentralization, the project will assist FGN to addressall of the above issues, which are of significant importance for urban development in Nigeria: infrastructuredeficiencies in low-income neighborhoods, inadequate resources for investment, poor utilization ofresources, and capacity issues at both State and LG levels. Experience from community-based urbanprojects shows that significant improvements in the lives of the poor can be brought about through smallper capita investments in basic services and infrastructure, subject to the systematic application ofscreening criteria: cost-effectiveness; financial, economic and social returns on investment; affordability;and actual economic demand. Adequate political will to respond to the priorities of the poor is the singlelargest constraint to improving the lives of the poor. For example, in Indonesia, the kampungimprovement program (KIP) started out as a unique effort by the Jakarta City Council based on Jakarta'sown policy priorities - to support improvements in basic infrastructure in low income areas. It was alreadya successful government program prior to Bank involvement By the end of the 1980s, KIP had scaled-upto cover almost all of the 300 LGs in Indonesia - Bank support accounted for approximately one-fourth ofthe coverage i.e. 13,000 hectares and 4.7 million people. With political commitment by SGs and LGs,appropriate technical solutions within budget constraints can be successfully implemented, based on thecommunity selecting options they are willing to help pay for and maintain. Of strategic importance, is theneed for a change in the behavior and processes for decision-making over public expenditures, both capitaland recurrent, so that capital investments in any sector take into account realistic and affordableexpenditure requirements over the design life of the capital investment in that sector. The project aims tofacilitate demand-led and participatory decision-making with respect to investments in infrastructuredevelopment and service provision, linked to expenditure requirements for recurrent expenditures for O&Mwith respect to economic infiastructure, and for supplies and salaries, and so forth, with respect to socialinfrastructure.

C. Project Description Summary

1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed costbreakdown):

The Project will finance the following components:(i) Upgrading of basic municipal infrastructure in select settlements in seven cities of seven

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States - Phase 1;(ii) Upgrading Fund (referred to in the Development Credit Agreement as "Subprojects") to

finance basic municipal infrastructure in select settlements in cities of 13 States - Phase II;(iii) Capacity building and training, one city development strategy, and knowledge sharing

networks;(iv) Implementation support for the Project Implementation Units (PIU) and the Federal Project

Coordination Unit (FPCU);(v) HIV/AIDS awareness campaign on project sites; and(vi) A Project Preparation Facility (PPF).

States in Phase I will implement subprojects already prepared, based on pre-allocatedfunds. Phase II is designed to enable all 13 States to implement eligible subprojects on ademand-driven basis, with in-built incentives to reward performance and integrate lessons learned.The seven Phase I States will become eligible for participation in Phase II as soon as they haveimplemented 20 percent of physical works of their first subprojects. The six additional States inPhase II will become eligible for participation as soon as they meet the eligibility criteria listed inAnnex 2: Detailed Project Description. All States will develop viable proposals up to theprelininary engineering stage with their own resources guided by the procedures in the ProjectImplementation Manual (PIM).

(i) Upgrading or delivery of basic municipal infrastructure: Based on needs and priorityassessments undertaken by Phase I States during project preparation, this component will financeintegrated packages of multisectoral investments developed within budget constraints, to provide orrehabilitate basic municipal infrastructure and services necessary to improve the living conditions ofpeople in the selected settlements. The sectors include water supply, roads, footpaths, drainage,power reticulation, private and public sanitation facilities, solid waste management, street lighting,slaughterhouses, markets, recreational facilities, schools, and clinics. SGs, LGs and communitieswill contribute 20 percent of the cost of investments as counterpart contributions, with respectiveshares of each to be determined by the States. The amount of counterpart contributions is based onpast experience in the region and Nigeria, and was agreed upon with the Borrower, during the earlystages of project preparation. IDA will finance the remaining 80 percent of the physical investmentcosts.

To ensure sustainable service delivery, SGs and LGs have been encouraged to: (i) adopttechnical standards for infrastructure that result in affordable recurrent expenditures for O&M; (ii)invest the bulk of the available resources for on-site infrastructure within the selected community;(iii) make sectoral investments in a manner that is consistent with other programs in the sector,particularly with respect to user charges and fees, taking into account sectoral best practice; (iv)prepare and implement Revenue Improvement Action Plans (RIAPs) and improve financialmanagement procedures that would generate additional intemal resources for recurrent expenditure;and (v) establish O&M funds to ensure adequate maintenance of the improved infrastructure toensure its sustainability for its design life.

(ii) Upgrading Fund: An Upgrading Fund will support subproject proposals in Phase II. TheFund will be accessible to all 13 States when they meet eligibility criteria, listed in Annex 2:Detailed Project Description. A basic criterion is development of a State urban poverty table, toguide selection of LG areas for Phase II, as well as to target future urban poverty interventions andscale up upgrading activities. With guidance from the FPCU and IDA, States will identify andcomplete preparation of their approved subproject proposals up to the preliminary engineering stage

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with their own funds. Thereafter, they will be eligible to access the Upgrading Fund for detailedengineering and subsequent implementation of their subprojects.

(iii) Capacity building and training, City Development Strategy (CDS) and knowledgesharing networks: Capacity building is supported by information sharing to facilitateempowerment of communities and civil society to demand better services from government. Theproject will initially finance project-related training to build capacity through the acquisition ofskills to enable each participant to competently perform her/his duties in support of the project'sdevelopment objectives. Thereafter, the project will build capacity in SG and LG agencies and civilsociety through systematic information sharing coupled with demand-driven training activities.Prior to project effectiveness, training for PIU staff will focus on basic computer applications,project management, procurement, project financial management system, civil works contractmanagement, participatory and community-based planning techniques, and auditing. The targetgroup for training will then be expanded to include staff from participating SGs, LGs, andCommunity Technical Committees (CTCs), and training content will be broadened to include:financial management; budgeting; monitoring and review; internal and external audit procedures;management practices and effective leadership; monitoring and evaluation; monitoring and qualitycontrol of civil works; infrastructure planning for sustainability; O&M planning; revenueimprovement; environmental management and planning, and any other relevant training identifiedby the States.

The project will also finance quantitative and qualitative analytic work and stakeholderconsultations in the city of Karu to develop a City Development Strategy (details in Annex 2:Detailed Project Description). This will demonstrate how an urban LG can prepare and implementa strategy for: (a) enhanced economic growth and poverty reduction, based on consultations with itsresidents, including both the formal and the informal private sector; (b) the adoption of equitableand efficient land-use planning techniques; and (c) the establishment of a systematic mechanism forengagement between the government and non-government sectors.

In addition, funds will be made available to the PIUs to share knowledge, and establish andmaintain a knowledge-sharing network, to:* enable both face-to-face and electronic exchange and dissemination of information and experiences

on urban upgrading and project-related activities;* stimulate competition for resources between States by enabling them to keep track of other States'

progress under the project in both phases.

(iv) Implementation support, and Monitoring and Evaluation (M&E): Basic officeequipment and facilities would be provided to assist in the establishment of PIUs in all States oncethe first subproject has been approved, as well as support for impact evaluations for all subprojects.IDA will also finance 90 percent of the operational cost of the PIUs, excluding the cost of staffsalaries (refer to detailed cost tables in Annex 3: Estimated Project Costs). In addition, supportwill be provided to the FPCU and to the Federal Ministry for Works and Housing (FMWH) toenable them to meet their responsibilities to screen subproject proposals, consolidate and monitorproject activities, and facilitate an external impact evaluation of the project prior to its closing.

(v) HIVWAIDS awareness campaign: The project will support the development and executionof an appropriate AIDS Education Information and Communication Campaign in the project areas.This campaign will be conducted within the framework of activities determined by the NationalAction Committee on AIDS (NACA) and the State Action Committee on AIDS (SACA). The

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campaign will be implemented on construction sites, in project-supported schools and clinics, andalong the solid waste collection, transport and disposal network.

(vi) Project Preparadon Facility (PPF): A PPF (referred to in the Development CreditAgreement as Project Preparation Advance) of US$2 million was made available by IDA to theFGN to enable project preparation in the seven Phase I States. This will be reimbursed fromproject funds when the project becomes effective.

Indicative Bank- % ofComponent Sector 'Costs . % of financing Bank-,

- . .. ,,.(USSM) . Total (US$M) financingRehabilitation or delivery of basic Other Urban 39.20 28.5 31.54 28.7municipal infrastructure DevelopmentUpgrading Fund 79.52 57.8 64.27 58.4Capacity Building and Training 4.70 3.4 4.23 3.8Implementation Support and M&E 11.88 8.6 7.77 7.1HIV/AIDS awareness Campaign 0.21 0.2 0.19 0.2Project Preparation Facility 2.00 1.5 2.00 1.8

Total Project Costs 137.51 100.0 110.00 100.0

Total Financing Required 137.51 100.0 110.00 100.0

2. Key policy and institutional reforms supported by the project:

Since affordability, replicability and sustainability are key areas of focus, the project supportspolicy reforms with respect to existing technical planning standards for infrastructure. To enhancetransparency and accountability of government activities, and to orient govemments towards enhancingbeneficiary satisfaction, the project requires systematic sharing of all project-related information,participatory planning and decision-making over the utilization of project resources. The projectencourages States to establish PIUs that include LG staff and "mentor" them to help build their capacityand play their key role as the level of govenmment closest to the communities. RIAPs will be pursued byLGs to generate additional intemal resources of revenue and reduce their dependency on Federal transfers.To introduce performance-based management practices, the project will reward better performing States byallowing them access to additional funds for subprojects. SGs are encouraged to recognize theperformance of their PIU staff and integrate appropriate incentives for performing civil servants with theirmanagement practices. The following agreements were reached during Appraisal:

* Agreement between IDA and the seven Phase I SGs to review and revise their existing technicalplanning standards, to meet the basic needs of poor communities in a sustainable way.

* Agreement with IDA for seven SGs and LGs to systematically and transparently share all projectrelated information with communities through their representatives, in an appropriate, effective andagreed communication format, and in a timely fashion.

* Written confirmation that PIUs have been established and key staff are in place, and will beretained during the implementation of the project.

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3. Benefits and target population:

Unserviced urban communities: As an intervention designed to alleviate poor living conditions, theproject will provide social, economic and environmental benefits to the urban poor in selected settlements.Access to basic services in these cornmunities will result in tangible benefits, such as time savings,improved health and security, enhanced mobility, and reduced flooding. Investments will be largelyconfined to needs within such settlements; for example, almost 90 percent of the investments in Phase I arefor on-site infrastructure and services, covering about 46 percent of the population in seven cities.Intangible benefits to the selected communities will accrue as project activities empower residents bymobilizing, organizing and training them to partner with local governments to effect community upgrading.

Indirect beneficiaries in proiect cities: To the extent the project brings about improvementsin trunk infrastructure to support investments within selected settlements, some indirect benefits willaccrue to residents of cities that are outside the project areas, for example, improved vehicularcirculation due to better roads, and reduced flooding due to improvements in drainage. Impacts ofimproved governance will also accrue to the people in these cities as their SGs and LGs improvetheir management capacity under the project.

Private sector: The project will contribute to the development of the local consulting andcontracting industry through the contracting out of construction and maintenance of works.

LGs: LGs will benefit from capacity building activities that will enhance their ability todevelop participatory planning techniques, improve access to information systems, enhance resourcemobilization and improve the management of their finances, and strengthen their technical andmanagerial capacity. This should, in the future, assist LGs in maldng informed investment choicesthat are well targeted and lead to better use of resources. Increased internal resource generation willenable LGs to move away from a heavy dependence on transfers from higher levels of govenmment,to more flexibility in the choice, sequencing, and technical standards of investments to meet thedemands of their electorate.

SGs: SGs will benefit from training in modem management techniques, budgeting andaccounting, infrastructure planning, infrastructure O&M, and private sector contracting that willimprove their administrative and management capacities. With the tools they will develop underthis project, SGs will be able to prioritize urban poverty interventions and better target theirresources for urban poverty alleviation. With the project-supported information-based capacitybuilding activities, they will be able to develop urban policy guidelines for their LGs. They willalso be able to support capacity building and financing mechanisms for additional urban LGs andtheir communities, by requiring their sectoral agencies to develop and implement poverty focusedinterventions, or maximizing impact by adjusting existing poverty programs in their State, based onthe learning from this project.

4. Institutional and implementation arrangements:

Implementation period: FY2002-2009

Institutional arrangements

Federal Project Coordination Unit (FPCU): A project coordinating unit will be established at theFederal level. Chaired by the FMWHIs Deputy Director for Urban and Regional Development, the FPCUwill be located in FMWH and will consist of four representatives from the FMWH and two from the

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Federal Ministry of Finance (FMF). These six officers will be designated by their respective Ministries forthe duration of the project, and will not be changed without first infonring IDA. The FPCU will have theoverall responsibility for coordinating project execution. Specifically, the unit will be responsible for: (i)providing timely technical support to State PIUs; (ii) consolidating and disseminating all quarterly andannual reports; (iii) monitoring progress of project activities through participation in IDA supervisionmissions; (iv) screening subproject proposals in accordance with a check-list, to ensure that Phase IIeligibility criteria have been met; (v) maintaining a knowledge network (initially located in the Bank'sNigeria Country Office); and (vi) conducting an impact assessment before project closing.

FMWH's role will be to guide, facilitate and oversee project activities in order to proactively helpSGs avoid and resolve problems in a timely manner so that the project's objectives can be achieved. As theFederal agency responsible for urban development in Nigeria, it will manage the web-based knowledgeinterface established by the project once it is transferred from IDA to FGN, and will organize biannualinter-state meetings for PIU staff to exchange experiences with each other and with other local urbanpoverty champions to enhance their capacity to expand upgrading initiatives. These exchanges will provideFMWH with the knowledge to evaluate policies that affect urban development in Nigeria. Since FMWHstaff has received training in infrastructure project M&E under previous Bank-supported projects, it willhave the primary responsibility to monitor project activities through periodic site visits. FMWH staff willassist IDA supervision missions by providing a detailed report on site visits indicating implementationprogress, issues, decisions taken and lessons learned along with recommendations to integrate the findingsin future upgrading activities. The staffs capacity for M&E will be further strengthened through tailored,on-the-job training programs delivered in Nigeria. In Phase II of the project, when upgrading activities arescaled up, FMWH will be responsible for screening subprojects to ensure they meet the eligibility criteria,in accordance with the check-list included in the PIM.

FMF, in addition to participating in the FPCU, will have the responsibility of assisting SGs inpreparing the PIMs, designing project financial management systems, and assisting LGs in formulatingtheir RIAPs.

State Level Project Steering Committees (PSCs): A PSC will be established in each State, to provideoverall policy guidance for urban development. It will be responsible for formulating overarchingdirectives and making key decisions during the course of the project, especially to ensure complimentarycross-sectoral improvements to achieve efficiency gains from the joint production of multiple services in thesame location. The PSC will also provide a forum for discussing implementation progress and sharingexperience.

Chaired by the State's Commissioner of Works or the State Govemor's designate, the PSC willmeet quarterly, and include, inter alia, the Coordinator of the PIU, representatives from the State Ministriesof Finance, Planning/ Statistics/ Budget, Transport, Environment, Information, Water Corporation,Department of Health, Department of Education, Attomey General's Office, a representative from theDepartment of Local Govemment, traditional leaders, representatives from civil society, as well asrepresentatives of participating LGs and the Head of the Community Technical Committee (CTC). All lineministries that will inherit investments financed by the multisectoral subproject will be represented on thePSC to ensure approval, ownership and coordination of the subproject with overall sectoral plans for theState. All appropriate sectoral ministries will evaluate the subprojects, budget for recurrent expenditures intheir annual budgets to ensure that O&M of economic infrastructure investments is adequately funded fromState and LG budgets, and recurrent expenditure necessary for social infrastructure, such as schools andclinics, is adequate to meet staffing and the cost of supplies.

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PSCs will also promote and monitor the delivery of an effective project information campaign to bedelivered by the PlUs. This will ensure that project-related infonnation flows to the communities in atimely and effective way through communication channels most accessible by the beneficiary community,as outlined in the PIM. They will also support the execution of the HIV/AIDS awareness campaign onrelevant project sites.

State Level Project Implementation Units (PIUs): The PIUs, as the technical secretariat for the PSCs,will have the prime responsibility for ensuring day-to-day implementation of project activities through theprocurement of consultants and contractors. PIU core staff will consist of: (i) a project coordinator; (ii) anaccountant to head the Project Accounting Section (PAS); (iii) an intemal auditor; (iv) an engineer; (v) aprocurement officer; (vi) a community development officer from the participating LG; and (vii) a humanresources development officer (HRDO). PIUs will be responsible for guiding, promoting, facilitating,monitoring, evaluating and reporting project activities. States have been encouraged to include LG staff ascore members of the PlUs to help build capacity at the LG level. With support from PlUs, LGs mayengage the services of NGOs, where their community development departments lack capacity, to facilitatepartnerships among LGs and poor communities in developing viable joint upgrading subproject proposals,particularly for those communities that are not among the initial group in the Phase I States.

PlUs will manage all project funds, including disbursements, accounting, auditing and financialreporting. They will be responsible for procurement and contract management, management of thecapacity building components, assisting LGs with implementation of their RLPs and strengthening of theirfinancial management systems, and for ensuring delivery of the HIV/AIDS awareness campaign. PIUs willbe responsible for informing LG community development officers and CTCs of the time and placefortechnical evaluations andfor the opening of bidsfor contracts so that the Head of the CTC can attend ifdesired. It is expected that the bulk of the civil works, including supervision by consultants, will be carriedout by the private sector.

PIUs will also be responsible for documenting and disseminating lessons learned in their quarterlyreports to FPCU and IDA throughout the project cycle, and for sharing these with other PIUs and urbanpoverty champions every six months at inter-state meetings as part of the knowledge sharing network. Oneyear after implementation of each subproject, PlUs will carry out a quantitative and qualitative impactassessment and develop policy recommendations for PSCs for scaling-up upgrading to other areas,especially with respect to planning methodologies that enable the development of appropriate technicalstandards for infrastructure. In addition, PlUs will ensure that the CTC is kept well informed of all projectactivities to enable community monitoring, and that they receive updated copies of the PIM.

Community Technical Committees (CTCs): During project preparation, communities were encouragedto establish a representative group that includes professionals who are either members of the community orliving near the community (for details, refer to Section E: Summary Analysis: Social Issues). Thisrepresentative group, of no less than three members and including at least one woman, will form the CTCin each community. In cities in which more than one settlement has been selected for project participation,the CTC must include representatives from each settlement or community.

CTCs have a critical role to play in meeting the project's development objectives. They workclosely with the PIU to inform residents of the project objectives, criteria and technical standards, mobilizeand organize their community's participation, and facilitate, with the PIU, the definition of the finalsubproject proposals. All subproject proposals will be cosigned by the CTC. The Head of the CTC willhave the mandate to participate as an observer in the technical evaluation of bids for contracts to ensuretransparency, and, as a member of the PSC, will be part of the process for ratifying contract award

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decisions made by the PlUs. CTCs will liaise with PIUs on a routine basis to get regular updates onproject progress through their LG community development officer who will be a core staff member of thePIU, and will be responsible for ensuring that project-related infornation is shared with the community(refer to section on Project Monitoring further in the document). In the event of any grievance that theCTC is unable to resolve at the PSC level, it will request IDA and FPCU intervention to avoidimplementation delays.

Procurement and disbursement

Procurement of works, goods and services would be the responsibility of each State's PSC. Suchresponsibility will be delegated to the States' PlUs. Signed advance copies of all evaluation reports will beforwarded by the PIUs to the PSCs and IDA simultaneously. However, prior to issuance of IDA's noobjection for award of contract, the PSC will have the mandate to only ratify (not approve) allproject-related procurement decisions. This ratification will be done within five working days after receiptof recommendations from the PIUs to the PSCs, in the absence of which, decisions will be consideredratified. To ensure transparency and to serve as a learning tool, the Head of the CTC, or designate, willparticipate as an observer in the evaluation process, and as a member of the PSC during the process ofratification. The PSC will ensure compliance with a procurement checklist included in the PIM.

Arrangements for selecting and funding proposals from the Upgrading Fund in Phase II, aredetailed in the PIM prepared by FMF consultants in consultation with the PIUs. All procurement relatedactivities shall be subject to the same conditions as applicable in Phase I.

Financial management arrangements

A Federal Project Accounting Section (FPAS) will be established by the FMF and located in theFPCU. The FPAS will be headed by a professionally qualified project accountant and supported byappropriately qualified staff. The FPAS will be responsible for preparing (i) progress reports on aquarterly basis, and (ii) ensuring that the project's financial management arrangements are acceptable tothe Government and IDA.

Within each PIU, a PAS will be established. This PAS, headed by a professionally qualifiedproject accountant and supported by appropriately qualified staff will be responsible for preparing activityplans, budgets and quarterly progress reports and forwarding them to the FPCU and IDA. FPCU and thePlUs will each appoint internal auditors who will carry out their functions in accordance with the TORincluded in the PIM.

Project activities will be reviewed by Internal Audit Departments (LADs) of the FMF andparticipating States. LADs will periodically review SOEs, physically verify purchases and carry out otherrelevant functions.

By Credit Effectiveness, the project will not be ready for report-based disbursements. Thusinitially, transaction-based disbursement procedures (i.e. direct payment, reimbursement, and specialcommitments) as described in the World Bank Disbursement Handbook, will be followed. However,during project implementation, when the borrower requests conversion to report-based disbursements, IDAwill undertake a review to determine the project's eligibility.

With respect to banking arrangements and funds flow, the overall project funding will consist ofthe IDA Credit and counterpart funds. IDA will disburse the credit through the respective Special

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Accounts (SAs) of the seven Phase I States, and through the Federal Special Account. IDA will sign aCredit Agreement with FMF, and FMF will sign subsidiary agreements for on-lending Credit proceeds withthe States.

The following accounts will be maintained by the FPCU: (i) a Special Account in US Dollars towhich initial deposits and replenishment from IDA will be lodged; and (ii) a Current Account in Naira towhich drawdowns from the SA will be credited for eligible expenditures. Following the immediatepayments of eligible expenditures, the balance on this account should be zero.

The following accounts will be maintained by each PIU: (i) a Special Account in US Dollars towhich the initial deposit and replenishments from IDA will be lodged; (ii) a Current Account in Naira towhich drawdowns from the Special Account will be credited once or twice per month with respect toeligible expenditures incurred. Following the immediate payments of eligible expenditures, the balance onthis account should be zero; (iii) a Project Current Account in Naira to which counterpart funds will bedeposited; (iv) a Current Account in Naira into which O&M funds from the State will be deposited; (v) aCurrent Account in Naira into which O&M funds from participating LGs will be deposited; and (vi) aCurrent Account in Naira to which the interest income on SAs will be deposited.

Additionally, the FPCU and PIUs will each maintain an IDA Ledger Loan Account (Washington)in US Dollars/Naira/SDR to keep track of drawdowns from the IDA credit. The account will show (a)deposits made into SAs by IDA; (b) direct payments by IDA; and (c) opening and closing balances.

The FPCU and PlUs will each prepare and submit to IDA audited project financial statementswithin six months after year end. By Credit Effectiveness, qualified extemal auditors will be appointed bythe FMF and participating States, in accordance with TOR acceptable to IDA. Audit reports will includeopinion paragraphs on audited project financial statements, the accuracy and propriety of expendituresmade under SOE procedures, including the extent to which these can be relied upon as a basis for loandisbursements, and the Special Account Reconciliation Statement in accordance with InternationalStandards on Auditing (ISAs).

The overall conclusion of the financial management assessment is that, provided the conditionsoutlined in section G: Main Loan Conditions of this document are met by the FMF and the States prior toCredit Effectiveness, the Bank's financial management requirements would be satisfied.

Project Monitoring

During implementation, the FPCU will consolidate quarterly and annual reports, review annualperformance audits and the overall financial status of the project, and participate in the project's Mid-TermReview in August - September, 2005. Additionally, it will coordinate with the Bank's Country Office toresolve any community grievances under the project, referred to it by the CTC, when the CTC is unable toget satisfactory action at the State level despite its membership in the PSC, to avoid implementation delays.

PIUs will operate and maintain an effective monitoring and evaluation system that will ensure thecapture, analysis and flow of the information needed to track performance of project interventions. Thiswill serve as a decision-making tool for project managers and policymakers. It will consist of performancemonitoring, which will track progress of activities against planned targets, including financial, physicalinputs and outputs, information dissemination, timeliness and efficiency of works. This information will begathered and analyzed by PIUs, using key procurement and disbursement progress indicators (included inthe PIM) in formats agreed upon with IDA. Monthly activity reports with simple tables of targets and

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achievements and remarks for explaining deviations will be produced, and will include inputs from LGcommunity development officers and CTCs. Every quarter, these will be consolidated by the PIUs intoquarterly progress reports, and submitted to the FPCU, PSCs, LG community development officers,CTCs, and IDA. These reports will also be posted on the electronic interface that will be part of theknowledge sharing network under this project to ensure sharing of progress by FPCU. Communitydevelopment officers, together with CTCs will be responsible for ensuring continuous communication withthe communities during the project cycle to keep them abreast of developments. They will also beresponsible for soliciting feedback from the communities and communicating this to the PIUs to ensure thatproblems are addressed in a timely and effective manner. CTCs and community development officers willensure that quarterly reports are posted or displayed in at least two prominent and appropriatelyselected public places in respective project areas, within three days of receipt of the reports from the PIU. Public places will be selected to ensure that both men and women of the community can have access tothe inforrnation. This will be part of the continuous monitoring throughout the project's life.

Regular Bank supervision missions (at least twice a year) will also monitor project progress. Inaddition, annual reviews as well as a mid-term review in August-September 2005, will be carried outjointly by the Bank, the Borrower, and all stakeholders. IDA Procurement supervision missions, includingspecial procurement supervision for post-review/audits, will take place once every quarter.

Impact Evaluations

PIUs will undertake impact evaluations of subprojects in their States one year after completion ofphysical works. This will include a quantitative assessment to assess changes in the baseline informationrecorded by the PIUs during subproject preparation, as well as qualitative assessments that will includefeedback from CTCs, and focus group discussions with members of the community.

Prior to project closure, FMWH will engage external evaluators to carry out an impact assessmentof the project, in accordance with TORs acceptable to IDA, to provide input into the project'sImplementation Completion Report (ICR).

D. Project Rationale

1. Project alternatives considered and reasons for rejection:

The project was first conceived as an Adaptable Program Loan (APL) to facilitate a progranmmaticapproach to community-based urban development that could become a model for the country, which otherdonors could support. This was deemed necessary to address the vast resource needs in Nigerian cities andthe objectives of FGN's Urban Development Policy to develop a scaled-up finance mechanism to improveaccess to urban infrastructure and services. However, this alternative was rejected because APLs do notallow for the speed at which the democratically elected Government of Nigeria wishes to proceed.Consequently, a traditional project design was adapted to enable FGN to rapidly make investments in poorurban neighborhoods, learn lessons and test a mechanism for scaling up. The project was thereforedesigned to be implemented in two phases, a first phase for implementation of subprojects prepared duringproject preparation, and a second phase in which the States would competitively access project funds toimplement additional approved subprojects, based on the experience gained in the first phase.

Since the project is based, inter alia, on the concepts of replicability and knowledge-sharing, it wasdecided to expand the number of States participating in the second phase to thirteen. Six additional States,chosen on the basis of urbanization, rates of urban poverty and geopolitical balance, will participate in the

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second phase along with and benefitting from the experience of the first phase States. If this provessuccessful, the approach could subsequently be utilized in the remaining States.

2. Major related projects financed by the Bank and/or other development agencies (completed,ongoing and planned).

Latest SupervisionSector Issue Project (PSR) Ratings

(Bank-financed projects only)Implementation Development

Bank-financed Progress (IP) Objective (DO)

Establish mechanism for financing Infrastructure Development U Uurban infrastructure development; and Fund Project (Ln. 2925);assist States to improve their financial completedmanagement, resource mobilization andurban infrastructure investmentplanning and programming capabilities.

(i) Assist Lagos to function effectively Lagos Drainage and Sanitation S Sas an economic center; (ii) improve Project (Cr. 2517); completedstorm-water drainage; (iii) prepareplans, feasibility studies and designs forupgrading urban services andimproving human waste and wastewater disposal; and (iv) assist instrengthening Lagos State WasteManagement Authority.

(i) Strengthen State and local Oyo State Urban Project (Ln. S Sgovernment level institutions 2719; Cr. 3238); completedresponsible for urban management andservices; (ii) improve urban planning,investment programming, budgetingand coordination; (iii) introduceappropriate cost recovery mechanismsand mobilize financial resources atState and local government levels; and(iv) remove constraints toimprovements in urban infrastructureand services in major urban areas ofOyo State. Other development agenciesIP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

3. Lessons learned and reflected in the project design:

This project's design builds lessons from urban upgrading for the sustainable delivery of economicand social infrastructure and services to the urban poor. Key lessons from over three decades ofinternational experience with community-based urban projects are:* political commitment to improving the lives of the urban poor is a necessary but not sufficient

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condition for operations to be effective and on a scale to make a significant impact;* a programmatic approach, as opposed to a traditional project approach, is needed to scale up

activities;* governments can afford to improve the lives of the urban poor by providing basic services,

provided appropriate and affordable standards for infrastructure are developed and adopted;* the poor are willing to pay for infrastructure investments and services that are reliable, affordable

and respond to their needs, and must be enabled to contribute towards improvements to take jointownership of interventions with the LGs;

* project designs should be simple;* capacity building activities are essential for both communities and local governments;* meaningful community participation that empowers people to make informed contributions to

decision-making is critical;* city-wide infrastructure networks will require improvements to ensure the flow of services to

upgrading sites;* improving the physical environment in poor communities provides a soundfoundation for

additional actions and programs to deal with other social services and economic problems facingthe community; and

* upgrading projects are less likely to succeed if implemented by a single central government or stategovemnment agency, because success depends on the implementation and coordination capacity ofthe one agency, and it is more likely to fail. Experience highlights that implementation should beled by LGs and linked to other stakeholders, such as NGOs, private service providers,communities, and other service agencies.

The Bank has supported community-based urban interventions through its urban projects inNigeria, between 1978-99. The key lessons from these projects, highlighted by FMWH during projectpreparation workshops with Phase I States are: ownership by commnunities is critical and best ensuredthrough community involvement and fostered through strong partnerships between LGs and communities;appropriate standards and continuous monitoring are critical for the success of such projects.

Lessons learned by IDA highlight the need to ensure effective implementation arrangements thatminimize political interference and overcome bureaucratic delays over contract award and paymentauthorization. They also highlight the need to develop appropriate design standards for infrastructure thatare workable, sustainable and replicable to enable scaling-up and mainstreaming of interventions in poorurban communities to become an integral part of a local government's development program. This includesassessing which service options local governments can realistically offer, the recurrent costs and humanresources associated with them, and the revenue needed to make them viable in the long term. Govenmmentagencies need to re-think the purpose of technical standards; and if they do not lead to effective,manageable infrastructure, then they should be changed.

These lessons have been taken into consideration in the design of this project.

4. Indications of borrower commitment and ownership:

Newly elected SGs and LGs in Nigeria are eager to move forward rapidly and demonstrate sometangible impact in their constituencies before the end of their four-year term. Even before projectpreparation, the seven Phase I States took the initiative of identifying cities and settlements suitable forcommunity-based initiatives. They undertook all project preparation up to the preliminary engineeringstage, including infonnation campaigns and baseline surveys, with their own resources, and with technicalguidance from IDA.

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5. Value added of Bank support in this project:

Given IDA's experience in urban development, including community-based urban development, thisproject will enable FGN to develop an approach to infrastructure provision that promotes demand-led andparticipatory planning techniques for public expenditures on infrastructure within budget constraints,especially in poor urban neighborhoods, thereby promoting better utilization of resources. It will also assistStates in developing long-term, realistic and workable financing strategies for scaling-up upgradinginterventions in their cities in the future, and help FMWH draw lessons for urban policy work in Nigeria.Bank experience with knowledge transfer will support the development of a web facility to promotelearning, knowledge-sharing and transparency.

E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)

1. Economic (see Annex 4):O Cost benefit NPV=US$ million; ERR = % (see Annex 4)O Cost effectiveness* Other (specify)

The project aims to test a community-based decision-making framework for multisectoralinfrastructure and service delivery, and to demonstrate that such a framework is an economically,financially and socially viable approach for infrastructure provision, provided infrastructure standards areappropriate and respond to budget constraints. Summary results of the economic analysis to validate theframework are:

(i) Cost-benefit analysis for a typical water subproject* A typical water supply investment in the community yields an ERR of 26 percent and a

NPV of US$0.14 million.* A sensitivity analysis, with the capital cost increased by 25 percent and the revenue

decreased by 25 percent, yields an ERR of 15 percent indicating a robust result.

(ii) Cost-effectiveness analysisfor the road sector investmentsTo gauge the efficiency of resource allocations, a cost-effectiveness index was used, based on the

assumption that only people within a half kilometer walking distance from the road benefit from theinvesttnent. This index is therefore highly dependent on the density of the population in the community, andthe resulting values of the index range between Ni,240 per person for a footpath to N93,735 per person fora trunk road. The results indicate that lower technical standards for road construction and higher densitycommunities lead to more cost-effective investment. Higher standard roads are justified in thesecommunities only on the grounds of network connectivity and access to public transport.

(iii) An assessment of the social benefitsMost of the illnesses in the selected communities are infectious diseases that are exacerbated by the

degraded physical living conditions in the settlements. Household members suffered loss of working andschool days due to illnesses. It is estimated that a reduction in loss of working days of two days perhousehold due to improved environmental conditions created by the project can result in a savings of aboutUS$8.93 per household, and savings in medical expenses of US$10.13 per household. Total annualsavings per household per year would amount to US$19.06. The benefit to cost ratio of householdinvestment of US$20 dollars, over the design life of the infrastructure of 20 years is equivalent to 2.8(US$19.06 x 20 years) / $(20 x 8) per household = 2.38.

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Economic viability of Investments* Over the estimated life of the project of 20 years, the economic benefit to cost ratio of the

investments in Phase I would be 4.5, indicating that the investment is economically justifiable{(US$3.0 per room per month x 12 months x 20 years) / (US$20 per capita x 8 persons perhousehold) = 4.5}.

* Even if 25 percent only of the households benefited, the benefit to cost ratio would be greater than1, indicating overall justification of the project.

RisksThe quality and credibility of the partnerships between government agencies and beneficiary

communities will determine the extent to which investment packages have responded to the needs andpriorities of the communities. To mitigate against the risk of superficial partnerships and themarginalization of communities, the project has established a PSC at the State level, which includesrepresentation from the CTC. The CTC is also mandated to have a representative observe evaluations ofcontract bids in PIUs, and receive quarterly progress reports from the LG community development officerwho is a core staff member of the PRU. Furthermore, the project will train the community developmentofficer and the CTC in participatory planning, community sensitization and basic bookkeeping, to ensurecommunities fulfill their responsibilities under this project.

2. Financial (see Annex 4 and Annex 5):NPV=US$ million; FRR = % (see Annex 4)

SGs, LGs and communities will contribute 20 percent towards capital costs of infrastructureinvestments. LGs will deposit their contribution on a quarterly basis for recurrent expenditures in separateO&M accounts, and develop mechanisms for collection of the community's O&M share. An investmentcap of US$20,000 per hectare, regardless of density, will guide the choice of investments, and therefore, thestandards to which infrastructure will be developed.

Fiscal Impact:

The proportion of capital expenditure for the project at the Federal level would be about 1.5percent of the FY00 Federal Budget transfer to Phase I States for the peak disbursement year, whichindicates that the project would not have a significant impact at the macroeconomic level.

The proportion of capital expenditure for the project at the State level would be about 4.5 percentof the FY99 expenditures of Phase I States for the peak disbursement year, which indicates that the projectwould not create excessive demands on reallocation of budgets and State management structures.

On the other hand, in addition to expected economic and social benefits, the project is likely to havea significant positive impact on the property tax base of the LGs due to expected appreciation in propertyvalues. This appreciation in values would enhance the overall revenue base of participating LGs, therebyincreasing the sustainability of benefits attained under the project. The project will support LGs in thepreparation and implementation of RLAPs, in the computerization of their billing and collection systems andin the strengthening of financial management. This should lead to significant improvement in own sourcerevenue generation for the LGs, and assist them in setting aside funds for O&M to ensure the sustainabilityof project supported investments.

Furthermore, the project will stimulate local economic development, which in turn would generatetax revenues from income and other taxes. These additional revenues would improve the States' capacity tofinance other development programs.

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3. Technical:The main technical issue to be addressed in the project is the development and adoption of

appropriate planning standards for infrastructure, including developing innovative planning techniques thatavoid involuntary resettlement. The project will address the issue of O&M requirements for infrastructure,so that technical standards that guide infrastructure development take into consideration the technical,financial and managerial capacity of the organization that will have the responsibility for maintaining theinfrastructure and meeting recurrent expenditures. Consistency with other sector programs, particularlywith respect to user charges, fees and sectoral best practices, is yet another factor that will guide thedevelopment of technical standards. All these factors will be taken into account by the SGs.

4. Institutional:Performance related to govemance in Nigeria has historically been weak. Designing appropriate

institutional arrangements, and strengthening the capacity of each participating institution to fulfill its roleand responsibilities will be necessary to ensure effective implementation of the project.

Institutional responsibilities between the PIUs and the PSCs have been clearly delineated tosafeguard against political interference during implementation and ensure workable coordinationarrangements that avoid bureaucratic procurement and payment delays. Representation from beneficiarycommunities, civil society and LGs at the PSC level has been put in place as a check to avoid poorgovemance that can lead to delays. Institutional arrangements have been made to ensure systematicsharing of all project-related information.

Distribution of responsibilities under this project is in keeping with the decentralization that isunderway in Nigeria, with distinct roles for different levels of government in urban development and servicedelivery. The capacity building component has been designed not only to ensure adequate projectimplementation capacity in the PIUs, but also to facilitate the empowerment of conimunities, civil society,SG and LG staff by providing information, concepts, experiences and tools of this project, to inspirebehavior change and professionalism. The project will therefore support activities to build the capacity ofother staff in LGs and SGs to perform their mandated functions. LGs have an important role to play inmanaging service delivery within budget constraints for their constituents, and the project is designed tostrengthen the capacity of participating LGs to enhance their revenue bases while learning to deliverservices in a more sustainable and cost-effective way.

4.1 Executing agencies:

The executing agencies are the SGs, with the project implementation units consisting of State andLG staff.

4.2 Project management:

The responsibility for managing the project in each State lies with respective SGs. Implementationunits will be staffed with LG and SG staff to build the capacity of LGs.

Key staff from the PIUs have been trained in procurement and financial management. Anassessment of training needs for all project staff, including nominated members of the community, will bedone by the HRDOs in the PIUs. HRDOs will prepare annual training plans to enable all responsibleparties to meet their obligations under this project. To build professional management capacity in thePIUs, the Heads of the PlUs will receive training in the basic principles of management, communication,fundamental managerial functions concepts and practices, organizational behavior and office management.

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4.3 Procurement issues:

The most recent Country Procurement Assessment Report (CPAR) is dated June 30, 2000. Based onthe recommendation of the CPAR, Nigeria is currently implementing a Procurement Reform that willenhance the quality of existing procurement policies and practices.

A formal assessment of the capacity of the participating States' PIUs for the first phase of theproject has been carried out according to Procurement Services Policy Group (OCSPR) guidelines, datedAugust 11, 1998. The assessment outlines the main issues and recommendations and is in the project files.

Based on recommendations for PlUs to perform procurement coordination responsibilities, anappropriate action plan was agreed with the Borrower for implementation before effectiveness, including (i)establishment of PIUs in Phase I States; (ii) preparation of Procurement Manuals as an annex to the PIM;and (iii) appointment of a Procurement Officer as a member of each PIU. The Procurement Plan wasagreed at Negotiations. Aggressive training of PIU staff on procurement and disbursement procedures, andcontract management was undertaken by IDA specialists before April 30, 2002, and a proper procurementfiling system established.

Generally, existing procurement policies and practices in all PIUs are based on the States'Financial Regulations as well as store regulations derived from the Federal Government FinancialRegulations. In keeping with the spirit of proposed reforns, procurement decisions will be taken by thePIUs in accordance with IDA Guidelines.

Procurement of works, goods and services will be the responsibility of each State Project SteeringCommittee. Such responsibility shall be delegated to the States' Project Implementation Units. Signedcopies of all evaluation reports will be forwarded to the PSC and IDA, simultaneously. However, prior toissuance of IDA's no objection for award of contract, the PSC will have the mandate to only ratify (notapprove) all project-related procurement decisions. This ratification will be done within five working daysafter receipt of recommendations from the PIUs to the PSCs, in the absence of which, decisions will beconsidered ratified. To ensure transparency and serve as a learning tool, the Head of the CTC, or his/herdesignate, will participate as an observer in the evaluation process.

As part of capacity building activities under the project, the PIU staff have attended a ProcurementWorkshop organized by IDA. Before project effectiveness, an orientation workshop will be organized byIDA, at which IDA procurement and disbursement procedures will be covered in detail.

Arrangements for selecting and funding proposals from the Upgrading Fund in Phase II aredetailed in the PIM, which includes Procurement Manuals as an annex, and all procurement activities inPhase II shall be subject to those conditions applicable to similar transactions in Phase I.

4.4 Financial management issues:

The major financial management issues are: (a) Financial Management Systems are manual; (b)Fixed Assets and Contracts Registers are not properly maintained; (c) PIUs have no experience inmanaging IDA funds; and (d) weak administrative capacity, which could weaken intemal control systemsand delay implementation.

The Country Financial Accountability Assessment (CFAA) for Nigeria revealed that the systemsfor planning, budgeting, monitoring and controlling public resources have deteriorated to a level that theydo not provide any reasonable assurance that funds are used for the purpose intended. The risk of waste,diversion and misuse of funds was assessed as high.

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The PIUs' financial management arrangements are designed to address the above issues, ensurethat funds are used for the purpose intended, and facilitate compliance with IDA fiduciary requirements.The financial management arrangements will be developed in accordance with a Financial ManagementAction Plan (FMAP - a copy is in the Project Files). The salient features of the FMAP include (i)appointment of PSCs; (ii) identification and deployment of qualified and experienced accounting andauditing personnel in the PIUs; (iii) preparation of a Financial Management Manual; (iv) provision offinancial management support to the PIUs; (v) training PIU staff in financial management procedures; (vi)implementation of a computerized financial management system; and (vii) the appointment of internal andexternal auditors in accordance with TORs acceptable to IDA.

It is to be noted that the last project in the urban sector, the Infrastructure Development Fundproject, closed in 1997. Audited financial statements for the project were submitted late. Three States(Yobe, Enugu and Plateau) have not yet submitted the audited financial statements for 1996 and 1997. Alist of old outstanding final audit reports in the sector were included in the schedule sent to the OperationsPolicy and Country Services Department by the Africa Region for deletion from the ARCS. It is expectedthat this authorization will soon be issued. Additionally, any State that has outstanding audited financialstatements for previous IDA/Bank supported projects, will not be eligible to participate in this project.

5. Environmental: Environmental Category: B (Partial Assessment)5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (includingconsultation and disclosure) and the significant issues and their treatment emerging from this analysis.

During preparation, preliminary Environmental Impact Assessment (EIAs) were undertakenin-house by each of the States when they prepared their preliminary engineering reports for pre-appraisal,based on TORs provided by IDA. Final draft ELAs were prepared by consultants undertaking detailedengineering, and were reviewed by the Bank's Environment and Social Safeguards Unit (ESSU).Comments from the ESSU specialist were incorporated into final EIA reports, and the final EIAs disclosedin Nigeria on January 7, 2002, in all the PlUs, and the Federal offices of FMWH and the EnvironmentalProtection Agency. Furthermore, an environmental specialist from the Bank, travelled to project sitesduring Appraisal, and confirmed that: (i) there were no resettlement or land acquisition issues; and (ii)beneficiary communities were highly mobilized and well informed about the project and were eager forimplementation to cormmence.

5.2 What are the main features of the EMP and are they adequate?

Institutional arrangements for developing and handling EMPs have been developed at two levels:first, at the level of the PIU for each State; and secondly, at the State level Environmental Agency. Thecapacity to implement the EMPs in the States is varied. A needs assessment to enhance the capacity ofeach of the agencies in all States is included in the EIA from each State, and the project will supporttraining to build the necessary capacity. The project will support no investments requiring resettlement.

5.3 For Category A and B projects, timeline and status of EA:Date of receipt of final draft: October 25, 2001

Final ELAs were disclosed in Nigeria on January 7, 2002, as stated above.5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EAreport on the environmental impacts and proposed environment management plan? Describe mechanismsof consultation that were used and which groups were consulted?

The final EIA reports were prepared by consultants undertaking detailed engineering for theproposed subprojects. During preparation of the EIAs, the consultants held meetings with relevant Stateagencies responsible for environmental protection and public health. These agencies are in turn training

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community representatives in mitigation measures to ensure that project investments are sustainable. OtherEMP recommendations have been incorporated by the PIUs in their work plans and specifications forsubproject investments.

5.5 What mechanisms have been established to monitor and evaluate the impact of the project on theenvironment? Do the indicators reflect the objectives and results of the EMP?

Each participating community has established maintenance and repair committees to monitoractivities on a regular basis. These are being trained to build the necessary technical skills, and theresponsibility for overall compliance monitoring rests with the State PIUs. Periodic meetings with LGs andcommunities will be undertaken by the State Environmental Protection and Waste Management Agencies.

6. Social:6.1 Summarize key social issues relevant to the project objectives, and specify the project's socialdevelopment outcomes.

One of the main goals of this project is to improve the capacity of communities and their localgovernments to develop community-based, demand-led project proposals in partnership. The project isexpected to have a positive environmental and social impact in the settlements selected for upgrading, as itwill provide better access to basic services and create a healthier environment that will lead to welfare gainsfor beneficiaries. Special attention has been, and will be paid to ensure that decision-making is inclusive ofbeneficiaries, especially women. During preparation, IDA missions held meetings with beneficiaries thatincluded women and representatives of women's organizations. As noted earlier, CTCs, one member ofwhich must be a woman from the community, have a critical role to play in this project, not just in thedesign, but also during implementation and monitoring.

All activities are either upgrading of existing infrastructure or construction that will occur onpublicly owned and vacant land. On-site visits by the Bank's Environmental Specialist have confirmed thatthere will be no involuntary resettlement. No Resettlement Action Plan or Resettlement Framework iswarranted, as the project will notfinance any subprojects that involve resettlement, or any subprojectthat has land acquisition issues.

6.2 Participatory Approach: How are key stakeholders participating in the project?

Transparent information sharing, participatory decision-making, and empowerment of beneficiarycommunities to negotiate interventions in their communities with the government, is at the core of thisproject's design. Special attention was paid to ensure that decision-making at the LG level was inclusive ofthe beneficiaries and their traditional leaders. Other important stakeholders in the project are theparticipating LGs and SGs.

The participatory process during project preparation of the first phase has been marked bydifferent degrees of participation at different stages of project design--information sharing with IDAthrough workshops, presentations, written materials, informal meetings with members of the community,formal meetings with traditional leaders, where key design principles and concepts about the project wereshared; consultations with SGs, LGs, CBOs and representative members of the community; and finally,collaborative efforts of SGs, LGs and civil society in carrying out necessary surveys for needs andpriorities assessments, and actually negotiating and finalizing the composition of integrated multisectoralsubproject proposals. Some States took the initiative of actively engaging the CBOs and NGOs in theircommunity, and these groups participated in all field visits and discussions with government officials aswell as during IDA missions. A community development specialist was part of the IDA pre-appraisalmission to provide feedback on the level and depth of engagement of prime beneficiaries.

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All documentation related to the project, including a draft of the project concept document, hasbeen shared with the FMWH, FMF, SGs, LGs, and civil society organizations that have been involved inthe design process. All decisions related to the project's design, its components and implementationarrangements, have been taken in consultation and collaboration with community representatives, SGs,LGs and Federal agencies.

6.3 How does the project involve consultations or collaboration with NGOs or other civil societyorganizations?

During preparation, the IDA mission met traditional leaders of the communities in all States toinform them about the project, and sought inputs for project preparation. The mission held meetings withinthe settlements to explain the project concepts and seek the communities' reactions and advice onappropriate modalities for community involvement during the project cycle. These meetings were very wellattended, by the target group, city elite and traditional leaders. In cities where the proposals include theupgrading of infrastructure in market areas, IDA met with well-organized groups of market women andvendors, and received inputs on how they should be involved in the project. In some cities, NGOs havebecome an integral part of the technical team that is preparing the project. An NGO participated in IDA'sidentification mission to elicit feedback from the communities in all States, and informed IDA of the leveland quality of interaction between the communities and the project staff, and proposed measures forstrengthening this interface. The NGO's conclusion was that communities were highly mobilized.

6.4 What institutional arrangements have been provided to ensure the project achieves its socialdevelopment outcomes?

The management structure for this project is designed to ensure that the project achieves its socialdevelopment objectives: partnerships among government agencies and communities, and beneficiarycommunities empowered to partner with their government in development activities. Communityrepresentatives and LGs are members of the PSC in each State, which will have the overall responsibilityfor making key decisions during the course of this project, including monitoring and evaluation. The PSCalso includes as its members, civil society representatives, and traditional leaders.

6.5 How will the project monitor performance in terms of social development outcomes?

The project will monitor performance in terms of social development outcomes through regularsupervision missions and through the knowledge network that will bring together participating States andCTC members twice a year. To ensure that social impacts of the subprojects are quantifiable andmeasurable, baseline information on beneficiaries' access, satisfaction, and unit costs for different serviceshas been collected. The project monitoring system will provide quarterly reports on output progress. Oneyear after completion of works, each PIU will undertake an impact evaluation in project areas to gauge thedevelopment impact of subproject activities. To assess the impact of the overall project, FMWH willengage external evaluators to undertake an impact evaluation prior to the closing of the project in allparticipating States.

To improve institutional performance, the project is designed to ensure continued effectiveengagement of beneficiary communities throughout implementation, as part of continuous participatorymonitoring, information sharing, and joint problem solving between project managers and the beneficiarycommunities. CTCs, through the LG community development officer, will receive quarterly monitoringreports. It will be the responsibility of the CTCs to disseminate information in these reports, andcommunicate issues or problems to the PIUs. If problems are not resolved at the PIU level, CTCs can taketheir grievances to the PSC, which has representation from the CTC. The PSC shall meet promptly to takecorrective actions. In the event there are serious issues that the CTC is unable to resolve through itsmembership in the PSC, it can approach the FPCU and IDA. The project will also put in place an

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interactive electronic progress monitoring database for the project that will be accessible to the Nigerianpublic.

7. Safeguard Policies:7.1 Do any of the following safeguard policies apply to the project?

Policy ApplicabilityEnvironmental Assessment (OP 4.01, BP 4.01, GP 4.01) 0 Yes 0 NoNatural Habitats (OP 4.04, BP 4.04, GP 4.04) 0 Yes * NoForestry (OP 4.36, GP 4.36) 0 Yes * NoPest Management (OP 4.09) 0 Yes * NoCultural Property (OPN 11.03) 0 Yes * NoIndigenous Peoples (OD 4.20) 0 Yes * NoInvoluntary Resettlement (OP/BP 4.12) 0 Yes * NoSafety of Dams (OP 4.37, BP 4.37) 0 Yes 0 NoProjects in International Waters (OP 7.50, BP 7.50, GP 7.50) 0 Yes * NoProjects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)* 0 Yes 0 No

7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies.

Compliance with IDA's safeguard policies is an explicit requirement in the EIAs for the project andare included in the TOR for detailed engineering.

F. Sustainability and Risks

1. Sustainability:

Sustainability of investments made by the project will depend on (i) ownership of the choice ofinvestments by communities, SGs and LGs; (ii) availability of resources for O&M (including makinginvestment choices and choosing technical standards in consideration of their costs and institutionalstructures for O&M); and (iii) the management capacity at the SG, LG or community levels formaintaining or ensuring maintenance of investments that will belong to them. Involvement of communitiesand their LGs is an integral part of project design. SGs, LGs and identified conmmunities will contribute 20percent to overall investment costs, and establish O&M accounts into which LGs will deposit a percentageof their revenues on a monthly basis, for recurrent expenditure and developing mechanisms for collectingthe community's share of O&M. Functioning O&M arrangements will be a performance indicatorforStates and cities to receive continued supportfor additional subprojects.

2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1):

Risk Risk Rating Risk Mitigation MeasureFrom Outputs to ObjectiveO&M Funds are not used for designated H Annual O&M plans will be prepared andpurpose. submitted to IDA for review.SGs and LGs will not be willing to share H Agreement for systematic and transparentproject budgets and activities with the sharing of infornation between SGs, LGs andpublic as part of their commitment to their constituents was an Appraisal condition.imnproved governance.SGs and LGs do not remain committed to M Agreements between IDA, and SGs and LGs todeveloping appropriate and flexible revise technical infrastructure standards was antechnical standards for service delivery. Appraisal condition.

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SGs and LGs will be unable to meet their H Ability to meet State/local counterpart fundscounterpart funding requirements for and O&M financing requirements is a selectionPhase II and O&M responsibilities due to criteria for States and settlements to participatea reduction in the Federation Account, and in the project. As Phase II funds are accessed onhence resource transfers from Federal to a competitive basis, only those States/LGs thatState and LG levels, resulting from a fall can meet the counterpart and O&M fundingin oil prices. requirements will be selected. The project also

features a local revenue improvementcomponent that should offset reliance on centraltransfers. Subprojects are designed to astandard that has feasible and appropriate O&Mrequirements.

From Components to OutputsSGs and LGs counterpart funds are not H Standing Payment Orders (SPO) to taketimely. allocations directly from States' allocations of

the federation account. Impact of SPOs will beevaluated during implementation throughfinancial audits of SG and LG accounts toassess impacts on their budgets.

PIUs do not get sufficient autonomy to H Implementation arrangements have been clearlyoperate efficiently. defined at project preparation stage and

incorporated in PIM.SGs are not supportive of building LG H Agreements to include LG staff in PIUs was ancapacity to undertake project activities by Appraisal condition.including LG staff in the PlUs

Overall Risk RatingH

Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk)

3. Possible Controversial Aspects:

To avoid implementation delays resulting from delays in the award of contracts, therecommendations of the PlUsfor the award of contracts will be ratified by the PSC within five workingdays by the PSCs. The seven Phase I States agreed to this as a condition for Negotiations.

G. Main Loan Conditions

1. Effectiveness Conditions

* Adoption of the Project Implementation Manual by FGN in form and substance satisfactory toIDA.

* Subsidiary agreements have been executed between FMF and (at least) three participating States.* Three participating States have opened Special Accounts, Project Accounts for counterpart funds,

and have deposited three months of counterpart funding requirements.* A computerized financial management system, including a Project Financial management Manual,

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satisfactory to IDA in form and substance, will be installed in Phase I States.* Project Accountants and Internal Auditors in place in the three Project States.* Legal opinion on the DCA provided by the Borrower.* External Auditors appointed by the three Project States and FMF.* Appointment of Revenue Improvement Teams in LGs for the seven States.

2. Other [classify according to covenant types used in the Legal Agreements.]

Negotiations* Availability of draft Project Implementation Manual.* Availability of draft Report of the Project Financial Management Manual.* Agreement between IDA, FMF, and States that staff that have received training under the project

would not be redeployed from the PIUs without prior clearance from IDA.* Agreement with the seven Phase I States to delegate power to award contracts under this project to

PIUs, with PSC's having the power to ratify the award within five working days.* Agreement with FMF to enable IDA to channel the credit to the additional six States when they

begin participating in Phase II of this project* Agreement between the IDA and FMF that in all States, the selection of staff for PIUs in Phase II

States will be done competitively, and that staff will not be redeployed from the PIUs without priorclearance from IDA.

Board Presentation* Availability of General Procurement Notice.* Availability of Procurement Plans.* Current audits of all agencies involved in ongoing projects in sector.

Disbursement* FMF and IDA infonned of authorized bank signatories with specimen signatures.* For each participating State: a subsidiary agreement has been executed between the Borrower and

the State, an independent auditor has been appointed, a project account has been opened and anamount equivalent to three months of counterpart funding requirements has been deposited intothis project account.

* Preparation and submission of all outstanding audited financial statements in the sector.

Other* Submit by October 31 each year to IDA an annual work program and training program and

supporting budget for the succeeding year by each participating State and by the FederalGovernment.

* Select subprojects in accordance with the procedures and eligibility criteria in the ProjectImplementation Manual; no Subproject will be approved if it would involve involuntaryresettlement or land acquisition issues.

* Carry out the Environmental Management Plans, and establish environmental impact assessmentprocedures for design and implementation of subprojects.

* Carry out mid-tenn review by August-September, 2005.* Agreement between the Federal Project Coordination Unit and IDA that staff will not be

redeployed from the FPCU before IDA is informed of such redeployment.* Agreement to allocate the necessary funds, i.e. 10 percent of the operating costs of the PIUs from

their annual budgets.

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* Counterpart fund contributions reflected in each SG's annual budgets, and the agreed annualamounts paid into the Project Accounts by June 30 of each year.

Appraisal.The following were conditions for Appraisal that were met:* Completed draft of final detailed engineering reports for the first phase of the project from all

States.* Draft PIP submitted to IDA.* Agreed plan for the preparation of audited SG and LG accounts.* Finalized financial accounting and management procedures with design of project accounting

system.* Draft report for the management information system integrated with the financial accounting,

management procedures and the project accounting system available at Appraisal.* Appointmnent of a Human Resource Development Officer in each State.* PSCs in all seven States established with membership, functions and responsibilities satisfactory to

IDA.* Establishment of PIUs in all States.* Agreement with FMF to enable IDA to channel the credit directly to the seven States through

Special Accounts.* Agreement between IDA, SGs and LGs to revise their existing technical planning standards, and to

develop flexible and appropriate technical standards for infrastructure within project areas.

H. Readiness for Implementation

1 1. a) The engineering design documents for the first year's activities are complete and ready for the startof project implementation.

[ 1. b) Not applicable.

2. The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.

1 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.

] 4. The following items are lacking and are discussed under loan conditions (Section G):

1. Compliance with Bank Policies

Z 1. This project complies with all applicable Bank policies.O 2. The following exceptions to Bank policies are recommended for approval. The project complies with

all other applicable Bank policies.

Alison C. N. Cave Letitia A. Obeng Mark D. TomlinsonTeam Leader Sector Manager/Director Country Manager/Director

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Annex 1: Project Design SummaryNIGERIA: Community Based Urban Development

Key Performance Data Collection StrategyHierarchy of Objectives Indicators Critical Assumptions

Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission)Direct support for Better service coverage and FMWH will retain the Democratic system ofcommunity-based initiatives. improved living conditions in services of an extemal agency govemance prevails throughas stated in the Interim CAS project sites as measured by to repeat the baseline survey the duration of the project andNote. the findings of quantitative undertaken at start of the FGN, SGs and LGs maintain

and qualitative assessments of project, and substantiate commitment to povertythe beneficiaries in project quantitative findings from this reduction.sites, one year after with findings from qualitativecompletion of works, methods, one year afterundertaken by an independent completion of works on everyextemal agency. project site.

Project Development Outcome I Impact Project reports: (from Objective to Goal)Objective: Indicators:Establish partnerships The partnerships result in the PIU and FPCU Reports / FGN, SGs and LGs maintainbetween communities and bulk of project proceeds being Supervision. commitment to goodtheir Local Govermments invested on-site. govemance through(LGs) so that sub-project participatory planning.proposals are developedjointly by them.Deliver basic urban services 1. Reduced time spent of PIU Impact Assessments one SGs and LGs facilitate thein poor urban settlements. water collection and lower year after completion of works functioning of the inclusive

unit costs. / FPCU Reports, Supervision. and transparent management2. Reduced incidence of structure of the project.flooding.3. Increased use of publictransport.4. Higher satisfaction levelsfor services delivered: water,roads, drainage, solid wastemanagement.

Demonstrate viable Increase in own source PIU and FPCU Reports / Increased transfers fromapproaches to infrastructure revenue generation by 5% per Supervision. Federal to State and LGdevelopment and service annum in real terms for LGs. levels.delivery that enable LGs tomove away from a culture oftotal financial dependency forinfrastructure investment andeven recurrent infrastructureoperation and maintenance(O&M) expenditures.

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Key Performance Data Collection StrategyHierarchy of Objectives Indicators Critical Assumptions

Output from each Output Indicators: Project reports: (from Outputs to Objective)Component:Infrastructure upgrading as Agreed investments in Phase I PIU and FPCU Reports / SGs and LGs have a realisticagreed for seven States. completed within two and a Supervision, Technical understanding of the budget

half years of effectiveness. Audits. constraints they face and arecommitted to showing resultson the ground during theirelected terms.

Infrastructure upgrading as At least 90% of the PIU and FPCU Reports / SGs and LGs have a realisticagreed during implementation Upgrading Fund is committed Supervision, Technical understanding of the budgetfor thirteen States. for subprojects. Audits.. constraints they face and are

committed to showing resultsInvestments agreed upon on the ground during theircompleted by end of year 5. elected terms.

Decentralized functioning At least 80% of annual PIU and FPCU Reports / There is demand from SGstraining mechanism for training plans implemented Supervision and LGs for training, andtraining urban LGs in Nigeria by each State. motivation for staff to improve

At least 80% of training their performance on the jobsimpact assessments are assigned to them.positive on quality, and atleast 75% participantsindicate skill utilization oneyear after training.

Greater awareness about Delivery of planned PIU Reports/ Supervision PIUs are able to coordinateAIDS. campaigns on all project sites, effectively with the Health and

one year before project Information agencies atclosing. Federal and State levels.

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Key Performance Data Collection $trategyHierarchy of Objectives Indicators . Critical Assumptions

Project Components / Inputs: (budget for each Project reports: (from Components toSub-components: component) Outputs)Upgrading or provision of US$39.20 million PIU Reports / Supervision There is a realisticbasic municipal appreciation of budgetinfrastructure. constraints, and commitment

to improving the lives of themaximum number of poor.

Upgrading Fund US$79.33 million PIU Reports / Supervision Phase II States want toparticipate in this project.and remain committed toimproving the lives of peopleliving without access to basicservices.

Training for Capacity US$4.70 million PIU Reports / Supervision, SG and LGs remainbuilding and knowledge Financial audits. committed to improvingnetwork. governance, efficiency and

performance.Implementation support, & US$11.88 million PIU & PSC Reports / FGN, SGs and LGs have aM&E. Supervision, FMWH M&E commitment to use project

reports. resources judiciouslyHIV/AIDS Awareness US$0.21 million PIU & PSC Reports/ HIV is recognized as a

Supervision reports significant public health issueby the SGs, and there is awillingness to raise publicawareness.

PPF US$2.0 million

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Annex 2: Detailed Project Description

NIGERIA: Community Based Urban Development

The project, covering thirteen States in Nigeria, will support integrated infrastructure upgradingsubprojects in poor urban settlements, that are developed in partnership by SGs, LGs and communities,thereby initiating a culture of beneficiary community participation in urban infrastructure development.The project will catalyze public sector agencies to focus on "appropriate" standards and sustainabilityissues. By introducing altemative options for O&M that involve actors other than the public sector, it willdemonstrate to SGs and LGs the potential for improving the lives in poor communities in urban areasthrough a "comprehensive upgrading" approach with an investment of about US$20,000 per hectare. Theproject will introduce incentives for rewarding performance by making SGs, LGs and communities competefor project funds.

This project will be implemented in two phases, both phases consisting of investments and capacitybuilding. Seven States, Akwa Ibom, Bauchi, Edo, Ebonyi, Jigawa, Nassarawa and Ogun, will participatein the project's first phase. The six additional States that will participate in Phase II, Abia, Adamawa,Kaduna, Ondo, Rivers and Sokoto, were selected on the basis of criteria agreed during the negotiations@eopolitical balance, size of urban population, degree of urban poverty, capacity to borrow andmeet counterpart funding requirements, and lack of outstanding audits from previous IDAcredits). This second phase consists of an Upgrading Fund that all States can access. Twenty percent ofthe cost of physical investments financed by the Upgrading Fund, will be financed by the States inconjunction with their LGs and communities, as their counterpart contribution.

Phase I of the project will consist of implementation of approved subprojects prepared by the sevenStates with pre-allocated funds. During this time, any of the additional six States can access the UpgradingFund for approved subprojects which meet the eligibility criteria (Appendix A), provided they havecompleted preparation of the subproject up to the preliminary engineering stage with their own resources.The Upgrading Fund will support detailed engineering designs and the implementation of subprojects.

Any of the first seven States, upon completion of 20 percent of the physical works of their firstsubproject under Phase I, and upon meeting eligibility criteria, may access funds from the Upgrading Fundfor their second subproject. Thereafter, each State will continue to prepare and implement subprojects on afirst come first served basis until project funds are fully committed.

By Component:

Project Component I - US$39.20 millionUpgrading/delivery of basic municipal infrastructure

This component will support economic and social infrastructure improvements for about 1.6million people in seven cities in seven States. Based on quantitative and qualitative assessments conductedby these States (with guidance from IDA), and in consultation with LGs and beneficiary communities, theStates developed subprojects that were a priority for the communities.

Investments to be undertaken in each of the seven States in Phase I are listed below:* Uyo City in Akwa Tbom State: US$5.89 million will be invested in water supply, and access roads.* Bauchi City in Bauchi State: US$6.22 million will be invested in access roads, footpaths, trunk

drains, clinics, schools, and security lighting.* Abakaliki City in Ebonyi State: US$6.24 million will be invested in water supply, access roads,

footpaths, solid waste management facilities, trunk drains, public toilets, clinics, schools, bus

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stops, recreation facilities, markets, and security lighting.* Benin City in Edo State: US$5.58 million will be invested in water supply, access roads,

footpaths, solid waste management facilities, public toilets, clinics, schools, and security lighting.* Hadejia City in Jigawa State: US$3.70 million will be invested in water supply, reclamation of

ponds, flood control, footpaths, solid waste management facilities, public toilets, clinics, market,abattoir, schools and security lighting.

* Karu LG in Nassarawa State: US$6.01 million will be invested in water supply, access roads, solidwaste management facilities, public toilets, abattoirs and a land fill.

* Abeokuta City in Ogun State: US$5.55 million will be invested in water supply, access roads,footpaths, drains, solid waste management facilities, public toilets, clinics, schools and securitylighting.

Project Component 2 - US$79.52 millionUpgrading Fund: An Upgrading Fund will be accessed by 13 States in Phase II.

Before proposals can be prepared, each SG will select a city and the poorest community, based ontechnical and eligibility criteria outlined in Appendix A. Each SG will designate staff for the establishmentof a PIU. The PIU will then undertake an information campaign in the selected community. The campaignwill enlighten the community about the project's concepts, eligibility criteria for accessing funds,methodology for preparing proposals, counterpart funds and O&M requirements. The PIU communitydevelopment officer will facilitate the formation of a CTC in the community, which will thereafter becomethe key partner to work with PIU staff for the preparation of subprojects.

Each PIU will undertake a needs and priorities assessment of the community and prepare asubproject proposal in accordance with the methodology and guidance provided in the PIM. Theseproposals, once agreed upon by the PSC, will be sent to the FPCU for ratification and transmitted to IDAfor clearance. PIUs can then access project funds for detailed engineering, and submit these engineeringreports to FPCU and IDA. The FPCU, in accordance with the check list provided in the PIM, will satisfythemselves that all criteria on the check list have been met, and inform IDA, so that IDA can give clearancefor implementation of the subproject. Once 20 percent of physical works of the on-going subproject arecompleted, each State can access funds for an additional subproject until the Upgrading Fund is fullycommitted.

Project Component 3 - USS 4.70 millionCapacity Building and Training, CDS & knowledge sharing network:

Objective of the training: The objective of the training component is to build capacity through acquisitionof skills to enable each participant to competently perform her/his duties in support of the project'sdevelopment objectives. Training for capacity-building will be provided to PIU staff, participating LGsand SGs, and CTCs.

Progressive content of training: Core courses for PIU to be provided in the first year of projectimplementation, and core courses for SGs, LGs, and CTCs to be delivered in the second year of projecteffectiveness, as well as detailed guidelines for the design and delivery of training are included in the PIM.

Prior to project effectiveness, training for Phase I PIU staff will focus on basic computerapplications, project management, procurement, project financial management system, civil works contractmanagement, participatory and community-based planning techniques, and auditing. Thereafter, the targetgroup for training will include staff from participating SGs, LGs, and CTCs, and the content of trainingwill be expanded to include: financial management; budgeting; monitoring and review; internal and external

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audit procedures; management practices and effective leadership; monitoring and evaluation; monitoringand quality control of civil works; infrastructure planning for sustainability; operations and maintenanceplanning; revenue improvement, environmental management and planning and any other types of training,that will be identified by the States. As the project proceeds, training beyond the core courses will beprovided in response to requests.

Training arrangements: In the first year of project implementation, PIUs will use the training consultantservices of the Outreach Department of the National Water Resources Institute (OD/NWRI) in Kaduna, asthe capacity to deliver and manage training was instituted under a previous IDA-supported project. Its roleas the exclusive training provider will be assessed during the first year of project effectiveness with a viewto possibly transferring its capacity and methodology to another institution with experience in training SGand LG staff.

Each PIU will be pre-allocated project funds to purchase training. The HRDO in each PIU willprocess all requests for training, and manage, facilitate, and coordinate the delivery of training withinher/his state. Proactively, HRDOs will consult routinely and systematically with all PIU, SG, LG, andCTC staff and undertake a needs assessment training tied to specific training objectives derived from therespective staffs job description. After prioritizing the needs, the HRDO will develop an annual trainingplan, in consultation with the training consultant, within the annual budget allocated for each PIU, and seekIDA approval for the training plan. Once approved, the PIU Coordinator will contract the trainingconsultant for the delivery of the courses. The PIU Coordinator will be responsible for supervision of thecontract, and ensure training contractors are paid within 10 days of obtaining No Objection from IDA,including funds for design, delivery, and quality control as appropriate. Impact assessments of the trainingwill be undertaken by the HRDO in accordance with guidance provided in the PIM.

Modes of training: Training to build capacity will primarily be provided by outreach courses andworkshops, within the participants' workplaces and in a central location, so that training can respond to thecontext of the workplace. Institution-based training, or the delivery of training offered by national traininginstitutions, will only be provided after quality and relevance has been assessed. However, attendance atparticular courses offered by national or regional training institutes will be considered where appropriate,as agreed and approved by IDA. Requests for work attachments within Nigeria will be also consideredwhere they are deemed to be appropriate. Training outside of Nigeria will not be funded.

City Development StrategyThe project will also finance consultations in Karu LG in Nassarawa State, to develop a City

Development Strategy. The objective of the CDS will be to: (i) facilitate an informed understanding of thecity's opportunities and constraints among its citizens with respect to formal and informal sector economiccontributions and employment; (ii) establish a sustainable consultative mechanism among the LG, SG andthe private sector to interact on physical planning and policy issues, especially with respect to economicgrowth and poverty reduction; and (iii) develop participatory processes to facilitate land-use planning witha view to improving livability in Karu so that the development can be orderly yet responsive to marketneeds. The output would be (i) a development plan for prioritized investments that have a broad base ofsupport; and (ii) a strengthened planning and economic development office with the capacity and mandateto systematically liaise with the private sector.

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Knowledge NetworkFunds will be made available to the PIUs to establish and maintain a knowledge-sharing network

to:* enable both face-to-face and electronic exchange and dissemination of information and experiences

on urban upgrading and project-related activities;* bring about efficiencies by catalyzing electronic approval processes, monitoring and evaluation and

reducing paper work; and* stimulate competition for resources between States by enabling them to keep track of other States'

progress in designing and implementing subprojects under the project in both phases.

Biannual meetings among PIU staff, practitioners and resource persons will be held to exchangeexperiences and draw lessons. The electronic interface will consist of an interactive web page with links toan intemal as well as external database. The objective of the intemal database design would be to collectall project-related information in one place, initiate a culture of public information sharing, and facilitatemonitoring and the drawing of lessons. This intemal database will house information on the project fromall the States, progress on each component by State, award of contracts information, and an electronic chatgroup among stakeholders involved in the project. It will also contain standardized forms for requesting"no objection" from IDA for various activities. The external database would provide live links to otherupgrading and city development strategy databases. Initially, this will be established in the World Bank'sCountry Office, with a view to transferring it to the FPCU, whose responsibility would be to keep itupdated.

Project Component 4 - US$11.88 millionImplementation Support, & M&E

* PIUs in thirteen States (US$5.50 million)In addition to financial management support to the PlUs, the basic equipment and facilities would

be provided to assist in the establishment of the PIUs, subject to the proper allocation of PIU officeaccommodation and appointment of key PIU staff, by the State / LGs. Details of this support are in Annex3: Estimatedproject Costs: Detailed Cost Table.

* FPCU US$0.5254Support will be provided to FMF and FMWH to enable them to coordinate, supervise and monitor

project activities, consolidate reports from thirteen States, develop the TOR for an impact evaluation beforeproject closing, contract the services of a consultant, and develop appropriate policy guidelines forproviding access to basic municipal services for poor urban populations in Nigeria. Details of this supportare in Annex 3: Estimated project Costs: Detailed Cost Table.

FMWH US$0.450 millionFMF US$ 0.0754 million

Project Component 5 - US$0.21 millionHIVIAIDS awareness campaign:

The project will support the development and execution of an appropriate AIDS EducationInformation and Communication Campaign in the project areas. This campaign will be conducted withinthe framework of the National Action Committee on AIDS (NACA) and the State Action Committee onAIDS (SACA). The campaign will be implemented on construction sites, in project schools and clinics,and among staff handling solid waste. Details are included in Annex 3: Estimated project Costs: DetailedCost Table.

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Project Component 6 - US$2.00 millionProject Preparation Facility (PPF)

A PPF of US$2.0 million was made available to the FGN, as advance funds from the project, toenable project preparation. This will be reimbursed from project funds when the Project becomes effective.

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Annex 2: Appendix A

Eligibility criteriafor States to partcipate in the project(i) Auditors must have been appointed for the audit of SG and LG accounts for the past year, or a

plan for updating and auditing accounts in arrears, must be submitted.(ii) Appointed core PIU staff: Project Director, a trained and experienced financial officer

(accountant), an internal auditor, an engineer, a procurement officer trained in IDA procurementguidelines, a community development officer from the selected LG, and a human resourcesdevelopment officer.

(iii) Demonstrated financial ability to meet counterpart fund contributions.

Eligible sectors of investmentThe project will finance a basic municipal package of investments proposed jointly by SGs, LGs

and communities to bring about improvements inside the settlements of poor urban communities. Eligiblesectors of investment include water supply, roads, footpaths, drainage, sanitation facilities, solid wastemanagement, security lighting, slaughterhouses, markets, schools, clinics and recreational facilities.

Selection criteria for cities(i) The city selected by the State should have the largest population and/or commercial

concentration in the State, and the highest population density in the State. Usually thesecities would be the capital cities in the State.

(ii) An urban poverty table of the State indicating that the largest and the poorest community inan urban local govemment has been selected.

Selection criteriafor urban settlements or communitiesThe State will select one settlement which meets the following criteria:

(i) The settlement lacks basic municipal services, and people in the area live underenvironmentally degraded conditions.

(ii) The settlement has a population density of not less than 200 people per hectare.(iii) The settlement should be able to lend itself to upgrading without any involuntary

resettlement or land issues.

Criteriafor investment proposals(i) The cost of the subproject must not exceed US$20,000 per hectare.(ii) Total cost of a subproject proposal must not exceed US$5 million, with the bulk of the

proceeds earmarked for on-site infrastructure.(iii) Proposals must be comprehensive in nature requiring investments in multiple sectors at the

same location, so as to bring about discernible impact and improvements in the quality oflife of the selected communities or neighborhoods.

(iv) The proposal should demonstrate how technical standards and service levels have beenadapted to be appropriate to the context of poor urban communities (for example, reductionfrom the prescribed road width standards, roads with single-sided drains, appropriateinclusion of footpaths, development of water supply systems in response to appropriatelevels of daily consumption as opposed to prescribed per capita levels, etc).(v) Subprojectproposals must not involve resettlement.

Criteriafor technical standards of infrastructure in afl sectors of investmentTechnical standards for investments in all sectors should be appropriate for sustainability, i.e. least

cost, with affordable O&M costs, and appropriate management structures.

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Counterpart contributionsSGs, LGs and communities will contribute 20 percent of the cost of investments as

counterpart contributions, with respective shares of contributions from each entity in differentsectors to be agreed by the parties.

O&MFundsfor project investmentsSGs and LGs will deposit a percentage of their revenues into O&M accounts established at

both levels. These percentages will represent maintenance charges for project investments,computed on the basis of O&M responsibilities for economic infrastructure (3.5 percent) orrecurrent expenditure responsibilities for staff and supplies in the case of social infrastructureappropriately included in their budgets. LGs will also develop mechanisms for the collection of thecommunity's share of O&M. The O&M account will remain operative for the life of the project.The O&M fund will make payments towards materials needed for O&M, and maintenancecontracts negotiated with the private sector. The fund will not be used for salaries for State or LGmaintenance staff. Account signatories would be State representatives for the State O&M account,and a LG representative and a community representative for the LG O&M account.

Based on the above criteria, States will complete subprojects preliminary engineeringreports at their own cost. More detailed guidance is available in the PIM.

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Annex 3: Estimated Project CostsNIGERIA: Community Based Urban Development

Local Foreign TotalProject Cost By Component: . US $million US $million US $million

1st Phase Upgrading 27.49 6.87 34.362nd Phase Upgrading Fund 51.90 12.94 64.84Training and Capacity Building 4.21 0.00 4.21Implementation Support 10.32 0.35 10.67HIV/AIDS Awareness 0.20 0.00 0.20PPF Refinancing 0.00 2.00 2.00Total Baseline Cost 94.12 22.16 116.28Physical Contingencies 6.94 1.73 8.67Price Contingencies 10.37 2.17 12.54

Total Project Costs 111.43 26.06 137.49Total Financing Required 111.43 26.06 137.49

- . . . 4 -_- . . . .-- Local Foreign TotalProJect Cost By Category -: . US $million US $million US $million

Works 84.27 21.02 105.29Consultant Services 11.91 1.60 13.51Training 4.71 0.00 4.71Goods and Equipment 4.68 1.44 6.12Operating Cost 5.86 0.00 5.86PPF Refinancing 0.00 2.00 2.00

Total Project Costs 111.43 26.06 137.49Total Financing Required 111.43 26.06 137.49

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Expenditures by Financiers (US!_____ _____ _____ _____ ____Other Accounts

COMPONENTS Base Costs -Total -costs Fin. Rule Proc. Method IDA Total Total Gov.

1. Investment Costs by State (basic infrastructure)A. Akwa lbom

1. Oku CommunityOku Water Supply 427,432.0 492,367.9 IDA ( 80%) NCB 393,894.3 98,473.6Oku Road Type I (secondary) 990,357.0 1,140,813.0 IDA ( 80%) ICB 912,650.4 228,162.6Oku Road Type 2 (TertiaTy) 547,26,0 630,361.1 IDA (80%) ICFS 504,288.9 126,072.2

Subtotal Oku Community 1,965,015.0 2,263,542.0 1,810,833.6 452,708.42. Oku/lblaku Comnmunity

Oku/lbiaku Itam Road Type I (secondary) 1,250,535.0 1,440,517.5 IDA (80%) ICR 1,152,414.0 288,103.5Oku/Ibiaku Itam Road Type 2 (tertiary) 1,011,647.0 1,165,337.4 IDA ( 80% ) ICB 932,269.9 233,067.5Okuftbiaku 11aM Water SUPPlY 642,936.0 740,611.5 IDA (80%) NCB 592,489.2 148,122.3

Subtotal Oku/lblaku Community 2,905,118.0 3,346,466.3 2,677,173.1 669,293.33. Supervision of works 268,000.0 280,649.8 IDA ( 90% ) CON 252,584.9 28,065.0

Subtotal Akwa lbom 5,138,133.0 5,890,658.1 4,740,591.5 1,150,066.6B. Bauchsi State -Baucbi City

I. Hardo Ward CommunitySecondary Road Sm wide 2 coat 134.304.0 154,707.6 IDA ( 80% ) NCB 123,766.1 30,941.5Secondary Road 3-4mn wide 65,942.0 75,960.0 IDA ( 80% ) NCB 60,768.0 15,192.0Secondary Road 2.50m wide 108,103.0 124,526.1 IDA (80%) NCB 99,620.9 24,905.2Trunk Drainage.- Rehabilitation fIlels Drainage 432,478.0 49,8. IDA ( 80%) NCB 39,4. 99,636.

Subtotal Hardo Ward Community 740,827.0 853,374.2 682,699.3 170,674.82. Dawaki Ward Community

Secondary Road Sm wide 2 coat 139,212.0 160,361.2 IDA (80%) NCB 128,289.0 32,072.2Secondary Road 3.4m wide 213,496.0 245,930.5 IDA (80%) NCB 196,744.4 49,186.1Secondary Road 2.50niwide 219,264.0 252,574.8 IDA (80%) NCB 202,059.8 50,515.0Trunik Drainage -Rehab Doya Drainage 1,197,455.0 1,379,373.5 IDA ( 80% ) ICB 1,103,498.8 275,874.7Education -Rebab 3 blocks 59,949.0 69,056.5 IDA ( 80% ) NCB 55,245.2 13,811.3Health -Rehab M aternity building 135,204.0 15,4. IDA ( 80% ) NCB 124,595.5 31,148.9

Subtotal Dawaki Ward Commnunity 1,964,580.0 2,263,040.9 1,810,432.7 452,608.23. Majidadl A and B Community

Secondary Road 5m wide 2 coat 597,614.0 6883,404.1 IDA (80%) ICB 550,723.3 137,680.8Secondary Road 3-4m wide 268,940.0 309,797.6 IDA ( 80% ) ICB 247,838.1 61,959.SSecondary Road 2.50m wide 1,151,882.0 1,326,877.0 IDA (80%) ICB 1,061,501.6 265,375.4Education -Adamu Jumba PriMar SChool 121,173.0 139,581.7 IDA ( 80% ) NCB 111,665.4 27,916.3Education -Kofar Dumni Primnary School 91,419.0 105,307.5 IDA(80%) NCR 84,246.0 21,061.5Health - Bakaro Town Maternity Clinic 127,551.0 146,928.7 IDA ( 80% ) NCB 117,542.9 29,385.7Health -Ujngwan Mahaukata Dispenasary 85,034.0 97,952.4 IDA ( 80% ) NCB 7836. 1959

Subtotal Majidadi A and B Community 2,443,613.0 2,814,849.0 2,251,879.2 562,969894. Supervision of works 274,000.0 286,933.0 IDA (90%) CON 258,239.7 28,693.3

Subtotal Bauchi State - Bauchi City 5,423,020.0 6,218,197.1 5,003,251.0 1,214,946.1C. Ebonyl State -Abakallkd City

1. Abakpsa CommunityTrunk Roads 6.0rnwide .907klas 207,315.0 238,810.5 IDA (80%) ICB 191,048.4 47,762.1Secondary Roads 5.Osnwide (9.438 kms) 1,333,521.0 1,536,110.8 IDA(80%) ICB 1,228,888.6 307,222.2Footpaths 2.Om wide 3.3 kms 156,260.0 179,999.2 IDA(80%) ICR 143,999.3 35,999.8Solid Waste -4 collection points. 4 bins & I disposal truck 93,722.0 107,960.3 IDA (80%) NCB 86,368.3 21,592.1Trunk Drainage I100Gm reinforced concrete channel 296,334.0 341,353.3 IDA ( 80% ) [CB 273,082.7 68,270.7Schools -Construct (1) and Rchba(2) Classrooms 76,865.0 88,542.4 IDA(80%) NCB 70,833.9 17,708.5Construction of Healtls Care Center 80,293.0 92,491.2 IDA (80%) NCB 73,993.0 18,498.2Watter Supply -Laying I lOnmmpressure pipe/fittings 130,695.0 150,550.3 IDA(80%) NCB 120,440.2 30,110.1Preparation of Recreation Park 7,887.0 9,085.2 IDA ( 80% ) NCB 7,268.2 1,817.0Market/Abanoir Rehab. 74,212.0 85,486.4 IDA (80%) NCB 68,389.1 17,097.3Street lighting (poles, lamps, cables) 6 kaos 230,306.0 265,294.3 IDA (80%) NCB 212,235.4 53,058.9Construction of bus shelters (2) 7,1. 9,,122.1 IDA ( 80%) NCR 7,297.6 1,824.4

Subtotal Abakpa Community 2,695,329.0 3,104,806.0 2,483,844.8 620,961.22. Kplrikplrl Community

Trunk Roads 6.0 wide 2 cost sidewalk & drain 3.26 knas 745,147.0 858,350.4 IDA (80%) ICB 686,680.4 171,670.1Secondary Roads 5.Gm wide 2 coat dressed with drain 5.763 kms 814,270.0 937,974.7 IDA ( 80% ) 1CB 750,379.7 187,594.9Solid Waste -2collection points, 2bins & I disposal truck 87,550.0 100,850.7 IDA (80%) NCR 80,680.5 20,170.1Schools -Construct (3) and Rebab(2) Clasarooms 187,881.0 216,424.1 IDA (80%) NCR 173,139.2 43,284.8Water Supply -Laying I 10mm pressure pipe/fittings 5 knas 163,369.0 188,188.2 IDA ( 80% ) NCR 150,550.5 37,637.6Preparation of ReCreation Park 7,887.0 9,085.2 IDA (80%) NCR 7,268.2 1,817.0Market-Public Toilet(l) and firefighting equipment 49,352.0 56,849.6 IDA ( 80% ) NCR 45,479.7 11,369.9Street lighting (poles, lamps, cables) 2 boa 76,769.0 88,431.8 IDA ( 80% ) NCR 70,745.5 17,686.4Construction of bus shelters (3) 11,879.0 13,683.7 IDA (80%) NCR 10,946.9 2,736.7

Subtotal KpirikpIrl Community 2,144.104.0 2.469.838.3 1.975.870.7 493,96773. Azuiyiokwu Community

Secondary Roads 1.I148 kTms(5.Om wide 2coats) 162,204.0 186,846.2 IDA (80% ) NCR 149,477.0 37,369.2Footpaths 1.7 kms (2.Om interlocking concrete) 80,497.0 92,726.2 IDA ( 80% ) NCR 74,180.9 18,545.2Schools -Construct (I)and Rehab(2) Classrooms 89,354.0 102,928.7 IDA(80%) NCR 82,343.0 20.585.7

Subtotal Azuiyiokwu Community 332,055.0 382,501.1 306,000.9 76,500.24. Supervision of works 270,000.0 282,744.2 IDA (90%) CON 254,469.8 28,74.

Subtotal Ebonyi State -Abakalki City 5,441,488.0 6,239,889.7 5,020,186.2 1,219,703.5

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D. Edo State -Benins CityI. Aduwawa Comonunity

Roads (5.Om wide 40mm 6.29km)/Drains (.9x.5m)/Footpaths 50mm pri 1,343,109.0 1,547,155.4 IDA ( 80%) ICB 1,237,724.3 309,43 1.1Water Supply (construct 2 boreholes, pumps, generators/chlorination st 355,804.0 409,858.1 IDA (80%) NCB 327,886.5 81,971.6Schools - Construct(2) and Rehab (3) Classroom blocks 156,482.0 180,254.9 IDA ( 80%) NCB 144,203.9 36,051.0Street lighting (poles/lamps/cables) install 2 transformoers 134,306.0 154,709.9 IDA ( 80%) NCB 123,767.9 30,942.0Construct I Health Care Center 40,689.0 46,870.5 IDA (80%) NCB 37,496.4 9,374.1Sanitation - Construct 2 Public Toilets 33,675.0 38,790.9 IDA (80%) NCB 3 1,032.8 7,758.2Solid Waste -Provision of 10 bins & I disposal truck 58,117.0 60,860.2 IDA (80%) NCR 4 _8 12,172.0

Subtotal Aduwawa Community 2.122,182.0 2.438,499.9 1,950,799.9 487,700.02. New Benin Community

Roads, Drains and Footpaths 1,072,332.0 1,235,241.7 IDA ( 80% ) ICB 988,193.4 247,048.3Water Supply 336,190.0 387,264.3 IDA ( 80% ) NCB 309,811.4 77,452.9Street lighting 202,882.0 233,704.0 IDA (890% ) NCB 186,963.2 46,740.8Construct I Health Care Center 40,689.0 46,870.5 IDA ( 80% ) NCB 37,496.4 9,374.1Sanitation - Construct 2 Public Toilets 33,675.0 38,790.9 IDA (80%) NCB 31,032.8 7,758.2Solid Waste -Provision of 10 bins & I disposal truck 62490 6,6. ID A (80%) NCB 5229. 13,207

Subtotal New Benin Community 1,748,187.0 2,007,236.7 1,605,789.4 401.447.33. Ogbe Quarters Comimunsity

Roads, Drains and Footpaths 432,689.0 498,423.5 IDA (80%) NCB 398,738.8 99,684.7Water Supply 247,353.0 284,93 1.1 IDA ( 80% ) NCB 227,944.9 56,986.2Street lighting 68,271.0 78,642.8 IDA ( 80% ) NCB 62,914.2 15,728.6Solid Waste - Provision of8g bins & I disposal truck 62,419.0 65,365.2 IDA ( 80% ) NCR 52,292.2 13.073.0

Subtotal Ogbe Quarters Community 810,732.0 927,362.7 741,890.1I 185,472.54. Supervision of works 20,0. 211,534.6 IDA (90%) CON 19,8. 2115.

Subtotal Edo State -Benin City 4,883,191.0 5,584,633.9 4,488,860.6 1,095,773.3E. Jlgawa State -Hadejla City

I. Chadi ComimunityAccess roads/Footpath 2.5m-3m wide interlocking tiles 209,362.0 241,168.5 IDA (80%) ICB 192,934.8 48,233.7Drainage 83,639.0 96,345.5 ID A (80%) ICR 77,076.4 19,269.1Rehabilitation 10 blocks of classrooms/ltoilet block 165.089.0 190,169.5 IDA (80%) NCR 152,135.6 38,033.9Rteclamationoof 3 old borrow pits 275.307.0 317,131.9 IDA(80%) NCR 253,705.5 63,426.4Security Lighting rehabilitation 18.568.0 21,388.9 IDA (80%) NCR 17.11 1.1 4,277.8Solid Waste -provide 30 collection bins/I disposal truck 65,941.0 69,053.5 IDA ( 80% ) is 55,242.8 13,810.7Solid Waste -prepare I landfill site 30,160.0 34,741.9 IDA (80%) NCR 27,793.5 6,948.4Water Supply - Headworks (pumps/generator/other accessories 153,961.0 177,350.9 IDA ( 80% ) NCR 141,880.7 35,470.2Water Supply -rehabilitate pipe network 16,275.0 1874 ID A (80% ) NCB 14,998.0 3,749.5

Subtotal Chadl Community 1,018,302.0 1,166,098.1 932,878.5 233,219.62. Gandun Bindingoms Community

Access roads/Footpath 2.5m-3m wide interlocking tiles 209,362.0 241,168.5 IDA (80%) ICB 192,934.8 48,233.7Drainage 83,639.0 96,345.5 IDA (80%) ICB 77,076.4 19,269.1Clinics -construct I primsary health care center 80,779.0 93,051.0 IDA ( 80% ) NCR 74,440.8 18,610.2Abattoir -construct I with facilities 122,369.0 140,959.4 IDA (80%) NCR 112,767.5 28,191.9Schools -construct I classroom block, administration/toilet 137,597.0 158,500.9 IDA (80%) NCR 126,800.7 31.700.2Water Supply -Headworks (pumpsigenerator/other accessories 76,981.0 88,676.0 IDA (80%) NCR 70,940.8 17,735.2Sanitation -construct I public toilet 41,281.0 47,552.4 IDA (80%) NCR 38,042.0 9,510.5Security Lighting - Rehab streetlights (cables/lighting kiosks/lamp fittin 18,568.0 21I 388.9 IDA (80%) NCR 17,111.1 4,277.8Solid Waste -30 provide collection bins/I disposal truck 65,941.0 69,053.5 IDA ( 80%) is 55,242.8 13,810.7

Subtotal Gandan Bindingoma Comasunity 836,517.0 956,696.1 765,356.9 191,339.23. Yayari Community

Access roads/Footpath 2.5m-3m wide interlocking tiles 209,362.0 241,168.5 IDA (80%) ICB 192,934.8 48,233.7Drainage 83,639.0 96,345.5 IDA (80%) ICB 77,076.4 19,269.1Clinics -construct I primary healthcarcecenter 80,779.0 93,051.0 IDA (80%) NCB 74,440.8 18,610.2Water Supply - Headwoeks (pumps/ge.erator/other accessories 216,879.0 349,827.5 IDA ( 80% ) NCB 199,862.0 49,965.5Water Supply -rehabilitate pipe network 16,275.0 t8,747.5 IDA (80%) NCB 14,998.0 3,749.5Schools/Abdulkadir. Buhari, Agumau. Garko Islamiyya 275,194.0 317,001.7 IDA (80%) NCR 253,601.4 63,400.3Reconstruct flood control embankament 149,567.0 172,289.4 IDA ( 80%) NCB 137,831.5 34,457.9Security Lighting -Rehab streetlights (cables/lighting kiosks/lamp fittin 18,568.0 21,388.9 IDA ( 80%) NCR 17,111.1 4,277.8Solid Waste -provide 30 collection bins/I disposal trtsck 65,941.0 69,053.5 IDA (80%) is 55,242.8 13,810.7Sumps and Pumping stations 21,755.0 25,060.0 IDA ( 80% ) NCR 20,048.0 5,012.0Construct I modern fish Market/water, toilets 82,704.0 95,268.5 IDA (80%) NCO 76,214.8 19,053.7

Subtotal Yayarl Commnunity 1.220,663.0 1,399,202.0 1.119.361.6 2--79,840.44. Supervision of works 171,000.0 179,071

3 ID A (90%) CON t6t16. 17,907.1Subtotal Jlgawa State -Hadejila City 3,246,482.0 3,701,067.5 2,978,761.1 722,306.4

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E. Jigawa State -Hadejia City1. Chsadi Community

AcceSS roads/Footpath 2 Sm-3m wide interlocking tiles 209,362 0 241,168.5 IDA (80%) ICB 192,934.8 48.233 7Drainage 83,639.0 96,345.5 IDA (80%) ICB 77,076 4 19.269.1Rehabilitation 10 blocks of classrooms/ltoilet block 165,089 0 190,169.5 IDA (90%) NCB 152,135.6 38,033 9Reclamation of3 old borrow pits 275,307.0 317,131.9 fDA (80%) NCB 253,705.5 63,426.4Se...rity Lighting rehabilitation 18,568 0 21.388 9 IDA (80%) NCB 17,111 I 4.277 8Solid Waste -provide 30 collection bins/I disposal trsck 65,941.0 69,053.5 IDA (80%) is 55,242 8 13,810.7Solid Waste -prepare I landfill site 30,160 0 34.741 9 IDA ( 80%) NCB 27,793.5 6,948 4Water SUPPlY -H4eadworks (pumnps/generator/other accessories 153,961.0 177,350 9 IDA ( 80%) NCB 141,88D 7 35,470.2Waler Supy-rehabilitate pienetwork 16,,275.0 1874 IDA (80%) NCB 14,998.0 3,749.5

Subtotal Chadi Community 1,018,302.0 1,166,098 I 932,878.5 233,219.62. Gandun Bindingoma Cammsunity

ACCeSS roads/Footpath 2.5ms-3ms wide interlocking tiles 209,362.0 241.168.5 IDA ( 80%) ICB 192,934.8 48,233.7Drainage 83,939.0 96.345.5 IDA ( 80%) ICB 77,076 4 19,269 1Clinics -construct I primary health care center 80,779.0 93.051 0 IDA (80% ) NCB 74,440 8 18,610 2Abattoir -construct I with facilities 122,369.0 140,959.4 IDA (80%) NCB 112,767.5 28,191.9Schools -construct I classroom block, administration/toilet 137,597.0 158,500.9 IDA (80% ) NCB 126,800 7 31,700.2Waler Supply -Hfeadworks (pumpslgenerator/other accessories 76,981.0 88,676.0 IDA ( 80% ) NCR 70,940.8 17,735.2Sanitation -construct I public toilet 41,281.0 47,352.4 IDA (80% ) NCR 38,042.0 9,310.5Security Lighting -Rehab streetlights (cables/lighting kiosks/lamp rtitin 18,568.0 21,388.9 IDA (80%) NCR 17,1 11.1 4,277.8Solid Waste-SO0 provide collection bins/I disposal truck 65,941.0 6905. IDA (80%) is 5524. 13,,,,,,,,0..7A..

Subtotal Gandun Bindingoma Community 836,517.0 956,696.1 765,3 56.9 191,339.23. Yayarl Community

Access roads/Footpath 2.5m-3m wide interlocking tiles 209,362.0 241,168.5 IDA (80%) ICB 192,934.8 48,233.7Drainage 83,639.0 96,345.5 IDA (80%) ICB 77,076.4 19,269.1Clinics -construct I primary health care center 80,779.0 93,051.0 IDA (80%) NCR 74,440.8 18,610.2Water Supply -Hleadworks (pumps/generator/other accessories 216,879.0 249,927.5 IDA (80% ) NCR 199,862.0 49,965.5Water Supply -rehabilitate pipe network 16,273.0 18,747.5 IDA (80%) NCR 14,998 0 3,749,5Schools/Abdulkadir. Ruhari, Agumau, Garko Islamiyya 275,194.0 317,001.7 IDA (80%) NCR 253,601 4 63,400.3Reconstruct flood control embankment 149,567.0 172,289.4 IDA (80%) NCR 137,83 1.5 34,457.9Security Lighting.- Rehab streetlights (cables/lighting kiosks/lamp fittin 18,568.0 21,388 9 IDA (80%) NCB 17,111J.) 4,277.8Solid Waste -provide 30 collection bins/I disposal truck 65,941.0 69,053 5 IDA (80% ) is 55,242.8 13,810.7Sumps and Pumping stations 21,753.0 25,060 0 IDA (80%) NCR 20,048.0 5,012.0Construct I modem fish M arket/water. toilets 82,704.0 9526. IDA (80% ) NCR 76 214.8 1,5

Subtotal Yayari Community 1,220,663.0 1,399,202.0 .1,119,361.6 279,840.44. Sapervision ofwoeks 171,000.0 17922~,071- IDA (90%) CON 16,6. 1790.

Subtotal Jigawa State -Htadejia City 3,246,482.0 3,701,067.5 2,978,761.1 722,306.4F1. Nassarawa State.- Karu LG

1. Mararaba CommunitySecondary roado 6.3m wide 1.5km/3m wide 13.85 km 1,757,891.0 2,024,951.5 IDA (80%) ICB 1.619.961.2 404,990.3Water Supply -headwoTks/5 boreholes is selected locations 186,616.0 214,966.9 IDA (80%) NCB 171,973.5 42,993.4Abattoir -construct I /treatment facilities. toilet & office 223,593.0 259,865.3 IDA (80%) NCR 207,892.2 51,973.1Sanitation -construct 2 public toilets with water supply 51,074.0 58,833.2 IDA (80% ) NCR 47,066.6 11,766.6Solid Waste -provide 14 refuse receptacles 46,778.0 48,986 0 IDA (80%) is 39,188.8 9,797.2Solid Waste -construct landfill site/fence, workshop, office & road 224,009.0 258,040.7 IDA (80%) NCR 206,432.5 51,608.1Solid Waste -provide I bulldozer 236,161.0 247,308.0 IDA (80%) is 197,846.4 49,461.6Solid Waste - provide I wheel loader 251,563.0 263,437.0 IDA (80% is1 210,749.6 32,687.4Solid Waste -provide 3 tippers 369,643.0 387,090.3 IDA (80%) Is 309,672.4 77,418.1Solid Waste -provide I disposal vehicle 26,786.0 28,050.3 IDA (80%) Is 22,440.3 5,610.1Solid Waste -provide I water pump 6,696.0 7,012.1 IDA (80%) is 3,609.6 1,402.4Solid Waste -spare parts for equipment 98,214.0 10,4. IDA(80% ) is 82,,,I279.8 20,570.0

Subtotal Mararabs CommunIty 3,481,024.0 3,901.391 2 3,121,112.9 780,278.22. Kara Community

Roads and Drains 6.3mn wide 3.5km/3m wide 6.15km 1,346.730.0 1,551,326.5 IDA (80%) 1CR 1,241,061.2 310,265.3Water Supply -headworks/5 boreholes is selected locations 186,616.0 214,966.9 IDA (80%) NCR 171,973.5 42,993.4Sanitation -construct I public toilet with waler supply 23,537.0 29,416.6 IDA (80%) NCR 23,333.3 3,883.3Solid Waste - provide 9 refuae receptacles 30,071.0 31.490.4 IDA (80%) is 2519 6,298.1

Subtotal Ksrn Community 1.588,954.0 1,827,200.4 1,461,760.3 365,440.13. Supervision of works 273.000.0 285!,885.8 IDA(90% ) CON 257,, 297223 2858

Subtotal Nassarawca State - Karu LG 5,342,978.0 6,014,477.4 4,840,870.8 1,174.306.9G. Ogun State -Abeokuta City

I. ljeun/Ago-Oku/Enrube CommunityRoads and Drainage 3m wide asphaltic cone, pavement/side drain 5.3kt 1,381,431.0 1,591,299.3 IDA (80%) ICR 1,273,039.5 318,259.9Footpaths I.Sm wide interlocking blocks I km 34,529.0 39,774.7 IDA (80%) ICB 31,819.7 7,954.9Schools -Methodist Primary. Lisabi I&2, Salvation Arny 493,919.0 368,955.6 IDA (80%) NCR 455,164.5 113,791.1Clinic -construct I primary health care center 40,756.0 46,947.7 IDA (80%) NCB 37,358.2 9,389.5Sanitation -construct 2 toilets with showers 45,092.0 51,942.4 IDA (80%) NCR 41,553.9 10,388.5Solid Waste -provide 2 disposal vehicles/20 wheel barrows 223,929.0 234,498.6 IDA (80% is1 187,598.9 46,899.7Street Lighting -provide 2 transformers/poles & cables 150,154.0 172,965.5 IDA (80%) NCR 138,372.4 34,593.1Water Supply -extend piped network/45 standpipes &t hydrants 3.84 kr 10,8. 12,7. IDA (80%) NCR 9637. 24,094.3

Subtotal Ijeun/Ago-Oku(Enrube Community 2,474,393.0 2,826,855.3 2,261,484.2 563,371.12. Owu-Gbagura Communilty

Roads and Drainage 5m wide asphaltic cone, pavement/tide drain 1km 532,466.0 613,358 7 IDA ( 80%) ICR 490,687.0 122,671.7Footpaths l.

8m wide interlocking blocks 3 km 103,588.0 119.325.2 IDA (80%) ICR 95,460.2 23,863.0

Schools -Holy Trinity, Ansar-Uld-deen 1&2. Abeokats N. LG 206,380.0 237,733 4 IDA (80% ) NCB 190,186.8 47,546.7Clinic -constrct I primary health care center 46,285.0 33,316.7 IDA (80% ) NCR 42,633.3 10,663.3Sanitation -construct 2 toilets with showers 53,031.0 61,087.5 IDA (80%) NCR 48,870.0 12,217.5Solid Waste -provide 3 disposal vehicles/IS wheel harrows 226,474.0 237,163.8 IDA (80%) Is 189,731 0 47,432.8Strect Lighting -providc 2 transformers/poles & cables. 2 kiosks 171,398 0 197,436.9 IDA (80%) NCR 157,949.6 39,487.4Water Supply -ext. piped network/const. booster station 3 tanks/retaini 81,9. 939,501.0 IDA (80% ) NCR 75,0. 187,900.2

Subtotal Owu-Gbagurs Community 2,155,217.0 2,458,923.3 1,967,138.6 491,784 73 Supervision of works 25,0. 26,8. IDA (90%) CON 23,9. 26.598.9

Subtatal Ogun State -Abeoauta City 4.883,610.0 5.551.767.6 4,468.013.0 1.083.754.6Total 34,358,812.0 39.200,691.3 38 539,833.8 7,668 857.5

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Expenditures by Financiers (USSOther Accounts

Base Cost Total costs Fin. Rule Proc. Method Total IDA Total Gov.

2. Upgrading Fund

Upgrading fund 56,160,000.0 69,896,687.3 IDA (80%) 55.956.149.8 13,940,537.4Detailed Engineering & Works Spn 5,600,000.0 6,208,577.9 IDA ( 90% ) CON 5,587.720.1 620,857.8

Goods and Equipment- 2nd Group Statcs 3.080,000.0 3.414.717.8 IDA ( 80% ) 2,731,774.3 682.943.6Total 64,840.n0n0 n 79.519.983.0 64.275.644.2 15,244.338.8

Breakdown of Totals Incl. Cont. (USS) Expenditures by Financiers (USS)

Base costs Total costs Fin. Rule Proc. Method IDA total Gov. Total

3. Training

A. PlUs/LGs/CTCs for lst Group StatesAkwa ibom 301,000.0 334,428.2 IDA(90%) CON 300,985.3 33,442.8Bauchi 301,000.0 334,428.2 IDA ( 90% ) CON 300,985.3 33,442.8Ebonyi 301,000.0 334,428.2 IDA( 90%) CON 300,985.3 33,442.8Edo 301,000.0 334,428.2 IDA (90%) CON 300,985.3 33,442.8Jigawa 301,000.0 334,428.2 IDA (90%) CON 300,985.3 33,442.8Nasarawa 301,000.0 334,428.2 IDA (90%) CON 300,985.3 33,442.8Ogun 301,000.0 334,428.2 IDA (90%) CON 300,985.3 33,442.8

Subtotal Training PlUs/LGstCTCs for Ist Group States 2,107,000.0 2,340,997.1 2,106,897.4 234,099.7B. PIUs/LGs/CTCs for 2nd Group States

Abia 344,000.0 387,710.9 IDA(90%) CON 348,947.3 38,771.1Adamawa 344,000.0 387,710.9 IDA(90%) CON 348,947.3 38,771.1Kaduna 344,000.0 387,710.9 iDA(90%) CON 348,947.3 38,771.1Ondo 344,000.0 387,710.9 iDA(90%) CON 348,947.3 38,771.1Rivers 344,000.0 387,710.9 IDA (90%) CON 348,947.3 38,771.1Sokoto 344,000.0 387,710.9 iDA(90%) CON 348,947.3 38,771.1

Subtotal Training PIUs(LGs/CTCs for 2nd Group States 2,064,000.0 2,326,265.3 2,093,638.8 232,626.5

C. Knowledge Management 15,000.0 15,225.0 IDA (90%) CON 13,702.5 1,522.5D. City Development Strategy 20,000.0 20,300.0 IDA ( 90%) CON 18,270.0 2,030.0

Total 4,206,000.0 4,702,787.4 4,232,508.7 470,278.7

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Breakdown of Totals loci. Cont. (USS) Expenditures by Financiers (US$)Other Accounts

Base costs Total costs Fin. Rule Proc. Method Total IDA Total Gov.4. Implementation Suppoirt

A. Project Implementation Unit (PIU)Vehicles 300,000.0 310,465.2 IDA (90%) ICB 279,418.6 31,046.5Computers 112,500.0 116,424.4 IDA (90% ) LS 104,782.0 11,642.4Printers 15,000.0 15,523.3 IDA (90% ) LS 13,970.9 1,552.3Uninterrupted Power Supply Units 7,500.0 7,761.6 IDA (90%) LS 6,985.5 776.2Generators 75,000.0 77,616.3 IDA (90% ) LS 69,854.7 7,761.6Photocopiers 75,000.0 77,616.3 IDA (90%) LS 69,854.7 7,761.6Air-conditioners 22,500.0 23,284.9 IDA (90%) LS 20,956.4 2,328.5Fax machines 15,000.0 15,523.3 IDA (90% ) LS 13,970.9 1,552.3Annual External Financial & Technical Audits 3,150,000.0 3,514,958.6 IDA (90% ) LS 3,163,462.7 351,495.9Financial Management Support 750,000.0 836,894.9 IDA (90%) LS 753,205.4 83,689.52 Client Feedback surveys 450,000.0 502,136.9 IDA (90%) LS 451,923.2 50,213.7

Subtotal Project Implementation Unit 4,972,500.0 5,498,205.6 4,948,385.1 549,820.6B. Federal Ministry of Works & Housing

Consolidation of quarterly & annual reports 84,000.0 93,732.2 IDA (90%) CON 84,359.0 9,373.2Impact Evaluations 240,000.0 290,871.1 IDA (90%) CON 261,784.0 29,087.1Mid-term review 15,000.0 16,636.8 IDA (90%) CON 14,973.1 1,663.7Bi-annual Workshop with IDA review missions 8,000.0 8,926.9 IDA (90% ) CON 8,034.2 892.7Vehicles 26,000.0 26,390.0 IDA (90%) ICB 23,751.0 2,639.0Computer 5,000.0 5,075.0 IDA (90% ) LS 4,567.5 507.5UPS 1,000.0 1,015.0 IDA (90%) LS 913.5 101.5Printer 1,000.0 1,015.0 IDA (90%) LS 913.5 101.5Photocopier 5,000.0 5,075.0 IDA (90% ) LS 4,567.5 507.5Fax Machine 1000.0 1,015.0 IDA(90%) LS 913.5 101.5

Subtotal Federal Mlnistry of Works & Housing 386,000.0 449,752.0 404,776.8 44,975.2C. Federal Mlnistry of Finance

Vehicles 26,000.0 26,390.0 IDA (90%) ICa 23,751.0 2,639.0Computer 2,500.0 2,537.5 IDA ( 90% ) 2,283.8 253.8Printer 1,000.0 1,015.0 IDA (90%) CON 913.5 101.5UPS 500.0 507.5 IDA ( 90% ) ICB 456.8 50.8Photocopier 5,000.0 5,075.0 IDA (90%) LS 4,567.5 507.5Fax Machine 1,000.0 1,015.0 IDA ( 90% ) LS 913.5 101.5Annual audits 35,000.0 38,887.0 IDA (90%) LS 34,998.3 3,888.7

Subtotal Federal Ministry of Finance 71,000.0 75,427.0 67,884.3 7,542.7D. Recurrent Costs (PIU)

1. Operational & Logistical Support (Phase 1) 1,176,000.0 1,306,603.1 IDA (90%) Sole Source 1,175,942.7 130,660.32. Operational & Logistical Support (Phase 2) 1,152,000.0 1,298,380.6 IDA (90%) Sole Source 1,168,542.6 129,838.13. StaffCosta (Phase 1) 1,470,000.0 1,633,253.8 GOVT NBF - 1,633,253.84. StaffCosts (Phase 2) 1,440,000.0 1,622,975.8 GOVT NBF - 1,622,975.

Subtotal Recurrent Costs (PIU) 5,238,000.0 5,861,213.3 2,344,485.3 3,516,728.0lotal 10,667,500.0 11,884,597.9 7,765,531.5 4,119,066.4

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Expenditures by Financiers (US$Other AccountsBase Cost Total costs Fin. Rule Proc. Method Total IDA Total Gov.

5. HIV Aids

A. IstGroup IEC campaign 91,000.0 95,156.7 IPA(90%) CON 85,641.1 9,515.7B. 2nd Group IEC campaign 104,000.0 115,765.0 IDA ( 90% ) CON __1041885 11,576.5

Total 195,000.0 210,921.8 189,829.6 21,092.2

6. PPFA. PPF Refinancing 2,000,000.0 2,000,000.0 iDA (100%) 2,000.000.0

Total 2,000,000.0 2,000,000.0 2,000,000.0

Total Project Costs 116,267,312.00 137,518,981.40 110,003,347.80 27,515,633.60

Identifiable taxes and duties are 0 (US$m) and the total project cost, net of taxes, is 137.52 (US$m). Therefore, the project cost sharing ratio is 79S% of total project cost net of taxes.

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Annex 4 Economic AnalysisNIGERIA: Community Based Urban Development

The project aims to test a community-based decision-making framework for the provision anddelivery of services in multiple sectors. Furtherrnore, it expects to demonstrate that such a framework is aneconomically, financially and socially viable approach for infrastructure provision, provided infrastructurestandards are appropriate and respond to hard budget constraints.

A major benefit of the project would be the replicability of such a framework that establishespartnerships between beneficiary communities and governments, because the interactions would impact thedecision-making processes, the behavior of stakeholders, and ultimately, the quality of public expenditurein providing urban infrastructure services more broadly and beyond the project.

To validate that this community based decision-making framework leads to the identification andprioritization of economically, socially and financially viable investment interventions, the followingindicative economic analyses were conducted and are sunmmarized below:

(i) a cost-benefit analysis for a typical water subproject;(ii) a cost-effectiveness analysis for the road sector;(iii) an assessment of the social benefits; and(iv) an assessment of economic benefits.

(i) Cost-benefit analysis for a typical water subproject

Water sector investments identified by participating communities in Phase I of the project representabout 12.8 percent of the investment. A cost-benefit analysis was undertaken for a typical technical choicemade by the communities. The project investments and recurrent costs are based on 2001 prices. The costof physical contingencies is assumed to be 10 percent of base costs. The benefits are based on willingnessto pay, surplus production of water, and time savings of one to two hours per day. The current tariff of N2per 20 liters is assumed to reduce to NI per 20 liters; resulting in N300 expenditure on household waterconsumption per month. O&M costs have been included. The asset life is assurned to be 20 years.* A typical water supply investment in the community yields an ERR of 26 percent and a NPV of

US$0.14 million.* A sensitivity analysis, with the capital cost increased by 25 percent and the revenue decreased by

25 percent, yields an ERR of 15 percent indicating a robust result.

(ii) Cost-effectiveness analysis for the road sector investments

The investmnent in roads (primary, secondary and tertiary) and footpaths (identified by participatingcommunities) represent 47.5 percent of the total investment to be financed in Phase 1. The proposedupgrading of roads consists of a large number of short road sections with different design standards,averaging in most communities 0.5 km length per road section. Most of these roads are characterized bypoor surface conditions, and since they are predominantly on-site and local service roads, and not majorcollectors or trunk, data on traffic is not available. Car ownership is low in these communities as incomelevels are low. Public transport is used for home to work trips only where roads are passable. As traffic isgenerally low, the main benefit of upgrading these footpaths, roads and associated drains are to improveaccess for public transport. Therefore, undertaking a traditional cost-benefit analysis was not consideredeconomical.

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A cost-effectiveness index was used to gauge the efficiency of resource allocations. The index isbased on the assumption that only people within a half kilometer walking distance from the road, benefitfrom the investment. This index is therefore highly dependent on the density of the population in thecommunity, and the resulting values of the index range between NI,240 per person for a footpath toN93,735 per person for a trunk road. The results indicate that lower technical standards for roadconstruction and higher density communities, lead to more cost-effective investment. Higher standardroads are justified in these communities only on the grounds of network connectivity and access for publictransport.

(iii) An assessment of the social benefits

Identified infrastructure interventions are basically community/social projects, and not all socialbenefits are quantifiable. Basic services (such as water, drainage, solid waste management, sanitation,abattoirs, markets, clinics, schools) have positive benefits on the health and productivity of the community.The socioeconomic surveys undertaken during project preparation, indicate that the community sufferedfrom diarrhea, fever/convulsion, pneumonia, and malaria in the previous year. Also, between 0.1 to 3.3percent of the respondents in four of the 18 conmmunities surveyed, reported suffering from AIDS.

Most of the illnesses in these communities are infectious diseases that are exacerbated by degradedphysical living conditions in the settlements. Incidences of such diseases are higher in poorer communities.Household members suffered loss of working and school days due to illnesses. It is estimated that areduction in loss of two working days per household due to improved environmental conditions created bythe project, can result in a saving of about US$8.93 per household, and a saving in medical expenses ofUS$10.13 per household. The total annual savings per household per year would amount to US$19.06.The benefit-to-cost ratio of household investmnent of US$20.00, over the design life of the infrastructure of20 years is equivalent to 2.8 [(US$19.06 x 20 years)/$(20 x 8) per household = 2.38].* A benefit/cost ratio of 2.38* Even if the economic life of the investment is reduced to 10 years, the benefit to cost ratio is greater

than 1, indicating the project is socially justifiable.

Economic Viability of Investments

Providing basic infrastructure in participating communities would also lead to an appreciation inproperty values in the settlements. An informal survey among representatives of participating statesindicated that similar rooms, located in better serviced locations, would have higher rental values of 30 and60 percent. Given the large number of owner occupied homes with permanent structures in the settlementsselected, significant benefits can accrue to owners from an appreciation of the value of their properties. Asmany factors affect property value, a single indicator would not capture all of the benefits. Nevertheless,rent is a good proxy of benefits arising from appreciation of property value. As an indication, a 30 percentincrease in a rental value for a room that rents for US$10.00 per month would increase by US$3.00 permonth.* Over the estimated life of the project of 20 years, the economic benefit to cost ratio of the

investments in Phase I would be 4.5, indicating that the investment is economically justifiable[(US$3.00 per room per month x 12 months x 20 years)/(US$20.00 per capita x 8 persons perhousehold)= 4.5].

* Even if only 25 percent of the households benefited, the benefit-to-cost ratio would be greater than1, indicating overall justification of the project.

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Risks

The quality and credibility of the partnerships between government agencies and beneficiarycommunities will determine the extent to which investment packages have responded to the needs andpriorities of the communities. To mitigate against the risk of superficial partnerships and themarginalization of communities, the project has established a PSC at the State level, which includesrepresentation from the CTC, to provide overall policy guidance and ensure that project objectives are met.The CTC is also mandated to have a representative observe evaluations of contract bids in PIUs, andreceive quarterly progress reports from the LG's Cornmunity Development Officer, who is a core staffmember of the PIU. Furthermore, the project will train the Community Development Officer and the CTCin participatory planning, community sensitization and basic bookkeeping, to ensure communities fulfilltheir responsibilities under this project.

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Annex 5: Financial Summary

NIGERIA: Community Based Urban Development

Years Ending

IMPLEMENTATIO PERIOD

Year I I Year 2 Year 3 Year 4 | Year 5 Year 6 | Year 7Total FinancingRequired

Project CostsInvestment Costs 10.8 28.3 23.9 24.4 16.6 17.1 10.4Recurrent Costs 0.4 0.8 0.9 0.9 0.9 1.0 1.0

Total Project Costs 11.2 29.1 24.8 25.3 17.5 18.1 11.4,Total Financing 11.2 29.1 24.8 25.3 17.5 18.1 11.4

FinancingIBRD/IDA 9.3 23.4 19.8 20.2 13.9 14.3 9.0Govemment 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0Provincial 1.8 5.8 5.0 5.1 3.7 3.8 2.4

Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0User FeeslBeneficlarles 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total Project Financing 9.3 23.4 19.8 20.2 13.9 14.3 9.0

Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Main assumptions:

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Annex 6: Procurement and Disbursement ArrangementsNIGERIA: Community Based Urban Development

Procurement

General

1. The procurement system in Nigeria is in the process of being reformed both at the Federal, Stateand Local Governments levels. Overall, the reforms are expected to end up with a Procurement Law,containing the institutional arrangements for processing, oversight and approval of contracts. Thegovernment Procurement Reform program was fashioned in line with the recommendations of the year2000 Nigeria Country Procurement Assessment Report. All the three tiers of governments are operatingunder the Financial Regulations (FR), which are essentially an internal set of rules for economic controls ofthe Federal, States and Local governments administrations. The CPAR identified major weaknesses in theprocurement polices and practices in Nigeria and made appropriate short-term, medium-term and long-termrecommendations. Based on the short-term recommendations of the 2000 Nigeria CPAR, procurementprocedures section of the FR at the Federal government level, was revised on June 27, 2001, to ensureclarity and transparency by incorporating details of the various procurement methods and their applicationsfor goods, works and services among others. The ineffective Federal and Departmental Tender Boardshave been abolished while the Ministerial Tender Boards have been strengthen with powers to approvecontract awards. For now, this revision applied to the Federal component of the project as the states areyet to adopt these changes. However, it is envisaged that the States and LGs will adopt (as usual) therevised FR. To make this possible, FGN is making arrangements to disseminate the findings andrecommendations of the CPAR at State and LG levels. Also a Procurement Reform Implementation unit(PRIU) and a Steering Committee that would initiate and supervise initial implementation of reforms hasbeen established at the Federal level. The reforns have five main features:* Enactment of a new procurement law based on the UNCITRAL model law.* Establishment of a public procurement oversight body, the Public Procurement Commission

(PCC), independent of the Tender boards withresponsibility for the efficiency and effectiveness of the procurement function across the publicsector

* Revision of key areas of the Financial Regulations to make them more transparent.* Deep restructuring of Tender Boards and approval procedures for contracts. Specifically, abolish

Federal Tender Board and DepartmentalTender Boards and strengthening Ministerial Tender Boards by vesting them with powers toapprove contract awards

* Building procurement capacity in the public sector through a restoration of professionalism inprocurement and intensive training of procurement staff.

Until the government takes major steps to reform the procurement policies and practices in thecountry (which may not happen until about two years into the project implementation), procurement riskfor doing business in Nigeria will be high. Therefore, the procurement risk for the proposed project is rated"High."

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Use of Bank Guidelines

2. All goods, works and services financed under the IDA credit will be procured in accordance withthe appropriate IDA Guidelines(Guidelines: Procurement under IBRD Loans and IDA Credits, January 1995 and as revised in Januaryand August 1996, September 1997, and January 1999; and Guidelines: Selection and Employment ofConsultants by World Bank Borrowers, January 1997 and as revised in September 1997 and January1999). To the extent practicable Bank's standard bidding documents for works and goods, including IDAStandard Bidding Document for procurement of Health Sector Goods (Pharmaceuticals, Vaccines andCondoms), May 2000 version, and Standard Requests for Proposals for consultants as well as all standardevaluation forms will be used throughout project implementation. Since there are no National StandardBidding Documents, the Bank's Standard Documents for goods and works shall be adopted (in the formsatisfactory to IDA), for use, for all NCB procurement packages under the project. However, NCBprocedures will ensure that: (i) bids are advertised in national newspapers with wide circulation; (ii) the biddocument explains clearly the bid evaluation and award criteria; (iii) bidders are given adequate responsetime (minimum four weeks) to prepare and submit bids; (iv) bids are awarded to the lowest evaluatedbidder and not arbitrarily; (v) eligible bidders, including foreign bidders, will not be precluded fromparticipating; and (vi) no domestic preference margins are applicable to domestic manufacturers orsuppliers.

Advertising

3. A General Procurement Notice (GPN) is mandatory and will be published in the UN DevelopmentBusiness and in a national newspaper as provided under the Guidelines. The GPN will be updated on ayearly basis and will show all outstanding Intemational Competitive Bidding (ICB) for goods contracts andall International consulting services. In addition, a Specific Procurement Notice (SPN) is required for allgoods and works to be procured under ICB and Expressions of Interest (EOI) for all consulting serviceswith a value in excess of US$100,000. All NCB procurement packages for goods and works will beadvertised in the national dailies. The related bidding documents for goods and works will not be released,and the shortlist for consultant services will not be prepared before eight weeks after the GPN has beenpublished. Sufficient time will be allowed to obtain the bidding documents.

Procurement Capacity Assessment

4. A formal assessment of the capacity of participating states for the first phase of the proiect hasbeen conducted in according to Procurement Services Policy Group (OCSPR) guidelines, dated August 11.1998. The assessment outlines the main issues and recommendations and is in the project files. Generally,existing procurement policies and practices in all States are based on the States Financial Regulations aswell as store regulations derived from the Federal Government's Financial Regulations. The methodsengaged by the States in administering their procurement process in most cases are neither economical nortotally transparent. There is generally a lack of appropriate procurement planning leading in most cases touneconomic procurement. Even though the financial regulations specified procurement procedures (thoughnot adequate), these procedures were (in the past) not followed and there was a serious lack of transparencyin the choice of firms selected for contracts. However, all seven States in the first phase have implementedWorld Bank-assisted projects in the past, and therefore, have built some capacity in handling procurementunder Bank-fnanced projects. To facilitate project proper management during implementation, each statehave established Project Implementation Units (PIUs), staffed with qualified and experienced professionalsacceptable to IDA among which is a Procurement Officer. All the States' Project Coordinators,Procurement Officers and Finance Officers have attended Procurement Workshops organized by the Bank

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in Dec. 2000. Relevant Officials of the States PIUs will continue to participate in Bank future organizedprocurement workshops and those organized by Institutions such as Ghana Institute of Management andPublic Administration (GIMPA). This will assist these States to build the require procurement capacity.Based on the recommendations, an action plan for procurement was agreed upon and will be implementedbefore effectiveness. To facilitate proper implementation of the project at the states, the following actionplan was agreed with the Borrower:

(i) Each State PIUs will be staffed with relevant technical professionals among which shall be anexperienced Procurement Officer;

(ii) Each State PIU shall prepare a global and detailed first year procurement plan to be discussed atAppraisal and finalized during Negotiations;

(iii) FMF will prepare a comprehensive Project Implementation Manual (which will include an annexon Procurement Manual) that will be adopted by all the participating States before projecteffectiveness;

(iv) Relevant PIU Staff to attend procurement course at training Institutes such as GIMPA orprocurement workshops organized by the Bank from time to time during Implementation;

(v) Hold contract management workshop for PIU officials not later than three months aftereffectiveness;

(vi) Establish proper procurement filing system at PIUs (for PPF activities) on or before April30,2002; and

(vii) PIUs in the States to hold meetings with the Business Communities in their environment after theadoption of the Procurement Manual, not later than six months after effectiveness.

5. One of the major problems with project implementation in Nigeria is the change of staffmid-stream. During Negotiations, the Borrower agreed that staff trained under the project would not beredeployed from the PlUs without first informing IDA.

Procurement Planning

6. Although the first phase subprojects to be financed under the project have been specifically selectedand designed to meet the present infrastructure deficiencies of deprived communities in high density, lowincome settlements in major cities of seven States of the Federation, the specific subprojects to beimplemented under the second-phase of the project have yet to be defined. The procurement plan for thefirst year will be prepared based on the initial needs of each of the seven PIUs. Procurement for theproject's second phase will be indicative only, and based on a predeternined menu of activities that willguide preparation of proposals in the second phase.

7. The Borrower will prepare a Global Procurement Strategic Plan, and a detailed procurement planfor first-year activities of the first seven states. The plans were discussed and finalized during Negotiationswith the Bank. The agreed plans will be updated yearly, and sent to IDA for clearance no later than threemonths before the end of the fiscal year. A project launch workshop will be organized before effectivenessto familiarize PIUs and other institutions involved in the execution of project with Bank procedures. Theworkshop will cover procurement policy and procedures and their application to procurement arrangementsplanned for project implementation, disbursement, reporting and auditing requirements. There is noexisting procurement manual in the State PIUs. Therefore the FMF will hire the services of a consultant toassist the project prepare a comprehensive PIM (including procurement manual) acceptable to IDA, beforeeffectiveness. Agreement was reached during Negotiations that the PIM will be adopted by all the States asa condition of effectiveness.

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Procurement Implementation Arrangements

8. Procurement of Works, Goods and Services would be the responsibility of each State's PSC. Suchresponsibility shall be delegated to the States PIUs. Signed copies of all evaluation reports will also beforwarded to the PSC and IDA. However, prior to issuance of no objection for award of contract, the PSCwill have the mandate to only ratify all project-related procurement decisions. At Negotiations, assurancewas given that this ratification will be done within five working days after receipt of recommendations fromthe PIUs to the PSCs; in the absence of which, decisions will be considered ratified. To ensuretransparency and to serve as a learning tool, the head of the CTC, will participate as an observer in theevaluation process. As part of the capacity building initiative under the project, PIU staff attended a Bankorganized Procurement Workshop in December 2000. Before project effectiveness, IDA will convene anorientation workshop, which will focus, among other topics, on Bank procurement and disbursementprocedures.

Procurement Methods

A. Goods (US$6.12 million):

9. To the extent possible and practicable, goods and equipment to be purchased under the projectwould be grouped into bid packages to take advantage of bulk purchase. Each contract for goods,estimated to cost the equivalent of US$ 100,000 or more, would be procured under ICB procedures usingIDA Standard Bidding Documents. Each contract for goods, estimated to cost between US$30,000 andUS$100,000 up to an aggregate of US$0.50 million, would be procured through National CompetitiveBidding (NCB) using procedures acceptable to IDA.. Procurement for readily available off-the-shelf goodsthat cannot be grouped or standard specification commodities for individual contracts, and goods procuredby PIUs as part of approved work program for the project HIV/AIDS component of less than US$30,000,up to an aggregate of US$5.57 million, would be procured under National Shopping (NS) or InternationalShopping procedures as detailed in paragraph 3.5 and 3.6 of the "Guidelines: Procurement under IBRDLoans and IDA Credits." Procurement of goods and hiring of facilities for training purposes, such asworkshops, will also be carried out using Bank shopping procedures.

10. To ensure that these limits are observed, each quarterly progress report of the project will include atable setting out the number and value (in US$ equivalent) of contracts issued through Local, InternationalShopping and National competitive bidding during the quarter as well as the cumulative total value (in US$equivalent) of contracts under each of these two procedures from the date of the project start-up.

B. Civil Works (US$105.21):

11. Civil works contracts, mostly to rehabilitate city roads and drainage channels, clinics, schoolbuildings, construction/rehabilitation of markets, solid waste management, and provision of street lightingto some extent will be small, technically simple in nature and limited in scope. In most cases, they will notlend themselves to grouping, and therefore, may not attract foreign bidders. In any event, individual civilworks contract, estimated to cost equivalent of US$500,000 or more, will be procured under ICBprocedures using IDA Standard Bidding Documents. Each contract for civil works, estimated to cost lessthan equivalent of US$500,000, up to a total aggregate of US$ 69.30 million will be procured throughNational Competitive Bidding using procedures acceptable to IDA.

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C. Consulting Services (US$13.51 million):

12. The total value for consulting services would be US$13.51 million. The recruitment of consultingservices under this project will include technical audit, financial audit, supervision onconstruction/rehabilitation works. As a rule, consultant services will be procured through Quality and CostBased Selection (QCBS) methodology. All consultancy assignments, estimnated to cost US$100,000 ormore, will be procured through QCBS and will be advertised nationally. All Expression of Interest forconsultancy assignments, in Development Business and in at least one national newspaper of widecirculation. In addition, the scope of the service will be advertised in an intemational newspaper ormagazine seeking "expressions of interest." In the case of assignments estimated to cost less thanUS$200,000, the assignment may be advertised nationally and the shortlist may be made up entirely ofnational consultants, provided that at least three qualified national firms are available in the country andforeign consultants who wish to participate are not excluded from consideration. Consultant servicesestimated to cost less than the equivalent of US$100,000 may be contracted by comparing thequalifications of consultants who have expressed an interest in the job or who have been identified. Allconsulting services of individual consultants will be procured under individual contracts, in accordancewith the provisions of paragraphs 5.1 to 5.3 of the Guidelines. Consultants for assignments of a standardroutine nature, such as audits and engineering design of simple works, may be selected on the basis ofLeast-Cost method. In exceptional cases, Single Source Selection method will be used in accordance withthe provisions of paragraphs 3.8 to 3.11 of the Guidelines, with prior IDA agreement

D. Training, Workshops and Study Tours (US$4.71 million)

13. At the beginning of each year, each State PIU will submit their proposed staff development plans inthe form of an annual training plan for the coming year. The plans would indicate the persons or groups tobe trained, the type of training to be provided, indicative learning outcomes, the provider or location of thetraining, and its estimated cost. Some training will be facilitated by a training provider contracted by eachPIU and will take place in-country, either at registered training institutions or by contracting national,regional or international experts to provide specialized training. In addition, each HRDO will be trained inorder to assist their States in developing necessary annual training plans. Training workshops and otheragreed training will be carried out on the basis of approved annual training plans, to be reviewed by IDA.Selection of training institutions for workshops/ training should be based on a competitive process, usingthe Consultant's Qualifications Method of selection.

E. Upgrading Fund

14. An Upgrading Fund, to be accessed by Phase I States and an additional six States will financesubprojects in Phase II of the Project. States will have to meet eligibility criteria, including thedevelopment of an urban poverty table of their states, to guide selection of LG areas in Phase II, asdescribed in Annex 2: "Detailed Project Description." Arrangements for selecting and funding proposalsfrom the Fund will be detailed in the PIM that will be submitted to IDA before effectiveness. The types ofsubprojects eligible under this Fund will be described in the PIM. PIUs will be responsible for ensuringcompliance with the guidelines, as stated in the PIM. All procurement activities in Phase II shall be subjectto the same conditions applicable to similar transactions in Phase I.

IDA Prior Review:

15. Table B provides prior review thresholds. Each contract for goods, estimated to cost US$100,000

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equivalent or more, will be subject to IDA prior review, as per paragraph 2 of Appendix I of theGuidelines. For individual contracts for goods (a) with an estimate value of US$30,000 or more but notexceeding US$100,000 equivalent, will be awarded on the basis of NCB procedures; and (b) with anestimated value of less than US$30,000 will be awarded on the basis of shopping procedures, the first twocontract packages of each state shall be subject to IDA prior review. Each works package, estimated tocost US$150,000,00 equivalent or more, will be subject to IDA prior review as per paragraph 2 ofAppendix I of the Guidelines. For each works package with an estimate value of less than US$150,000 tobe awarded on the basis of NCB procedures, the first two packages of each State shall be subject to IDAprior review. Other contracts will be subject to post review, in accordance with paragraph 4 of Appendix Iof the Guidelines. All consulting contracts costing US$100,000 equivalent or more for firms andUS$50,000 and more for individuals will be subject to IDA prior review. All terms of reference forconsulting services will be subject to IDA prior review. Any exceptional extensions to non-prior reviewcontracts raising their values to levels equivalent or above the prior review thresholds will be subject toIDA clearance.

Procurement methods (Table A)

Table A: Project Costs by Procurement Arrangements(US$ million equivalent)

Procurement MethodExpenditure Category ICB NCB Other2 N.B.F. Total Cost

1. Works 35.85 69.27 0.00 0.00 105.12

(28.70) (55.42) (0.00) (0.00) (84.12)2. Goods 0.36 0.19 5.57 0.00 6.12

(0.33) (0.15) (4.49) (0.00) (4.97)3. Services 0.00 0.00 13.51 0.00 13.51

(0.00) (0.00) (12.16) (0.00) (12.16)4. Training 0.00 0.00 4.71 0.00 4.71

(0.00) (0.00) (4.24) (0.00) (4.24)5. Operating Cost 0.00 0.00 2.60 3.26 5.86

(0.00) (0.00) (2.34) (0.00) (2.34)6. PPF 0.00 0.00 2.00 0.00 2.00

(0.00) (0.00) (2.00) (0.00) (2.00)Total 36.21 69.46 28.39 3.26 137.32

(29.03) (55.57) (25.23) (0.00) (109.83)

"Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies.21Includes civil works and goods to be procured through national shopping, consulting services, services of

contracted staff of the project management office, training, technical assistance services, and incrementaloperating costs related to (i) managing the project, and (ii) re-lending project funds to local governmentunits.

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Table Al: Consultant Selection Arrangements (optional)(US$ million equivalent)

Selection MethodConsultant Services,

Expenditure Category QCBSS QBS SF6 LCS ca Other N.B.F. Total CostA. Firms 5.51 0.00 0.00 5.00 0.00 0.00 0.00 10.51

(4.41) (0.00) (0.00) (4.00) (0.00) (0.00) (0.00) (8.41)B. Individuals 0.00 0.00 0.00 0.00 3.00 0.00 0.00 3.00

(0.00) (0.00) (0.00) (0.00) (2.70) (0.00) (0.00) (2.70)

Total 5.51 0.00 0.00 5.00 3.00 0.00 0.00 13.51(4.41) (0.00) (0.00) (4.00) (2.70) (0.00) (0.00) (1 1.1 1)

1\ Including contingencies

Note: QCBS = Quality- and Cost-Based SelectionQBS = Quality-based SelectionSFB = Selection under a Fixed BudgetLCS = Least-Cost SelectionCQ = Selection Based on Consultants' QualificationsOther = Selection of individual consultants (per Section V of Consultants Guidelines),Commercial Practices, etc.N.B.F. = Not Bank-financedFigures in parenthesis are the amounts to be financed by the Bank Credit.

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Prior review thresholds (Table B)

Table B: Thresholds for Procurement Methods and Prior Review'

Contract Value Contracts Subject toThreshold Procurement Prior Review..

Expenditure Category (US$ thousands) Method (US$ millions)1. Works US$500,000 and above All All

Less than US$500,000 NCB I st two contract packagesof each State and

FMF/FMWH

2. Goods US$100,000 and above ICB All

US$30,000 - US$100,000 NCB 1st two contract packagesof each State and

Less than US$30,000 Shopping 1st contract package of

each State andFMF/FMWH

3. Services US$100,000 and above QCBS All

Below US$100,000 (firms) CQ NoneUS$50,000 and above IC All

(individual)Below US$50,000 IC None

(individual)

4. Training and Regardless of value CQ/IC AllWorkshops5. Miscellaneous6. Miscellaneous

Total value of contracts subject to prior review: US$72.64 million

Overall Procurement Risk Assessment

High

Frequency of procurement supervision missions proposed: One every 3 months (includes specialprocurement supervision for post-review/audits)In view of the high procurement risk, at least 20% of the total number of contracts below prior review

threshold will undergo Post Procurement Review (PPR) during every supervision mission.

Thresholds generally differ by country and project. Consult OD 11.04 "Review of ProcurementDocumentation" and contact the Regional Procurement Adviser for guidance.

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Disbursement

Allocation of credit proceeds (Table C)

Table C: Allocation of Credit Proceeds

Expenditure Category Amount-in US$million Financing Percentage1st Group Civil Works 25.76 802nd Group Civil Works 50.69 80

1st Group Goods & Equipment 1.59 902nd Group Goods & Equipment 2.73 90Implementation Support Goods & 0.65 90Equipment1st Group Consultant Services 1.70 90

2nd Group Consultant Services 5.70 90Implementation Support Consultant 4.80 90Services

1 st Group Training 2.20 902nd Group Training 2.08 901st Group Operating Cost 1.20 902nd Group Operating Cost 1.20 90PPF 2.00

Unallocated 7.70

Total Project Costs 110.00

Total 110.00

Totals may differ slightly due to rounding.

Use of statements of expenditures (SOEs):

All applications for the withdrawal of proceeds from the credit will be fully documented, exceptfor (i) contracts with an estimated value of US$100,000 each or less for goods; (ii) contracts with anestimated value of US$150,000 each or less for works packages; and (iii) US$100,000 each or less forconsulting firms, and US$50,000 each or less for individual consultants which may be claimed on the basisof certified Statements of Expenditures (SOEs). Documentation supporting all expenditures claimedagainst SOEs will be retained by FPCU and PlUs and will be available for review when requested by IDAsupervision missions and project auditors. All disbursements are subject to the conditions of theDevelopment Credit Agreement and the procedures defined in the Disbursement Letter.

Special account:To facilitate disbursements for eligible expenditures for works, goods and services, the FPCU will

open a special account in a commercial bank to cover part of IDA's share of eligible expenditures to bemanaged and administered by the FPCU. The initial deposit into the Federal special account would beUS$20,000 covering an estimated 4 months of eligible expenditures financed by IDA. Additionally, aspecial account would be established for each PIU with an initial deposit of US$500,000. FPCU andPIUs will be responsible for submitting monthly replenishment applications with appropriate supportingdocuments for expenditures. To the extent possible, all of IDA's share of expenditures should be paid

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through the special account.

The Special Account will be replenished through the submission of Withdrawal Applications on amonthly basis and will include reconciled bank statements and other documents as my be required untilsuch time as the borrower may choose to convert to report-based disbursement. All disbursements willbe channeled through SA and in lieu of SA, the borrower may choose to pre-fmance project expenditureand seek reimbursement from IDA.

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Annex 7: Project Processing Schedule

NIGERIA: Community Based Urban Development

Project Schedule Planned ActualTime taken to prepare the project (months)First Bank mission (identification) Appraisal mission departure 12/02/2001 12/02/2001Negotiations 01/21/2002 04/02/2002Planned Date of Effectiveness 09/30/2002

Prepared by:

Deepali Tewari

Preparation assistance:

Emestina Attafuah, Armele Vilceus, Marorie Kingston, Sophie Hans-Moevi

Bank staff who worked on the project included:

Name SpecialityCore project preparation teamAlison Cave Senior Urban Planner and Team Leader from Appraisal, AFTU2Jagdish Bahal Team Leader until Appraisal, Consultant thereafterDeepali Tewari Urban Specialist, ConsultantJonadab Metibaiye Civil Engineer, ConsultantPeter Dawes Civil Engineer, ConsultantJack Cresswell Training Specialist, ConsultantMichael Whitbread Municipal Finance Specialist, ConsultantEphrem Asebe Economist, ConsultantBayo Awosemusi Procurement Specialist, AFTQKMuraino Ogunsanya Financial Management Specialist until Pre-Appraisal, AFTQKAdenike Sherifat Mustafa Financial Management Specialist, from Appraisal, AFTQKEmestina Attafuah Progran Assistant, AFTU2Armele Vilceus Language Team Assistant, AFTU2Sophie Hans-Moevi Language Team Assistant, AFTU2Multisectoral advisory teamJohn Elder Senior Social Protection Specialist, AFTH3Brigitte Duces Lead Education Specialist, AFTH3Sunderarajan Srinivasa Gopalan Senior PHN Specialist, SASHDDavid Henley Senior Sanitary Engineer, AFTU2Quality Assurance TeamRobert Buckley Lead Economist, ECSINGeorge Gattoni Lead Urban Planner & Coordinator Urban Poverty Thematic Group

(Retired)J. Fitz Ford Lead Urban Sector Specialist, TUDUR

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Wendy Wakeman Senior Community Development Specialist, PRNGEAnthony Hegarty Senior Financial Management Specialist, AFTQKJaimne Biderman Lead Specialist, AFTQKRogati A. Kayani Senior Procurement Specialist, AFTQKEdward Olowu-Okere Senior Financial Management Specialist, AFTQKSerigne Omar Fye Senior Environmental Specialist, AFTES

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Annex 8: Documents in the Project File*NIGERIA: Community Based Urban Development

A. Project Implementation Plan

Project Implementation Manual (PIM)

B. Bank Staff Assessments

* Financial Management Assessment Report* Procurement Capacity Assessment of SGs and LGs* Financial circumstances of the State and LGs and five year projections, including tables.* Economic Analysis.

C. Other

Preliminary Engineering Reports from all seven statesReport of Social Scientist from the Pre-Appraisal Mission*Including electronic files

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Annex 9: Statement of Loans and Credits

NIGERIA: Community Based Urban Development

Difference between expectedand actual

Original Amount In US$ Millions disbursements

Project ID FY Purpose IBRD IDA Cancel. Undisb. Orig Frm Rev d

P072018 2002 Nigeria:Transmission Development Project 0.00 100.00 0.00 98.84 0.00 0.00

P070291 2002 HIVIAIDS Response ProJect 0.00 90.30 0.00 89.25 0.00 0.00

P070293 2001 NG PRIVATIZATION SUPPORT PROJECT 0.00 114.29 0.00 113.00 0.00 0.00

P069086 2001 Community Based Poverty Reducion 0.00 60.00 0.00 60.31 3.00 0.00

P066571 2000 SECOND PRIMARY EDUCATION PROJECT 0.00 55.00 0.00 49.75 28.83 0.00

P065301 2000 ECON.MGMT.CAP.BLDG. 0.00 20.00 0.00 14.37 -0.77 0.00

P064008 2000 SMALL TOWNS WATER 0.00 5.00 0.00 3.82 -0.70 0.00

Total: 0.00 444.59 0.00 429.35 30.36 0.00

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NIGERIASTATEMENT OF IFC's

Held and Disbursed PortfolioMay-2001

In Millions US Dollars

Committed DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic

1997 AEF Radmed 0.26 0.00 0.00 0.00 0.26 0.00 0.00 0.001997 AEF Telipoint 0.10 0.00 0.00 0.00 0.10 0.00 0.00 0.001995 AEF Vinfesen 1.00 0.00 0.00 0.00 1.00 0.00 0.00 0.001994 Abuja Intl 1.75 0.71 0.00 0.00 1.75 0.71 0.00 0.001964/66/89 Arewa Textiles 0.00 0.12 0.00 0.00 0.00 0.12 0.00 0.002000 CAPE FUND 0.00 7.50 0.00 0.00 0.00 2.25 0.00 0.002000 Diamond Bank 20.00 0.00 0.00 0.00 10.00 0.00 0.00 0.001992 FSDH 0.00 0.86 0.00 0.00 0.00 0.86 0.00 0.001981/85/88 Ikeja Hotel 0.00 0.25 0.00 0.00 0.00 0.25 0.00 0.001993 Tourist Co Nir 0.00 0.00 2.50 0.00 0.00 0.00 2.50 0.001998 AEF Ansbby 0.10 0.00 0.00 0.00 0.00 0.00 0.00 0.001996/98 AEF Bailey Bridg 0.68 0.00 0.00 0.00 0.68 0.00 0.00 0.001996 AEF Courdeau 0.26 0.00 0.00 0.00 0.26 0.00 0.00 0.001997 AEFEkesons 0.15 0.00 0.00 0.00 0.15 0.00 0.00 0.001994 AEF Etema 0.66 0.00 0.00 0.00 0.66 0.00 0.00 0.001999 AEF Global Fabri 0.32 0.00 0.00 0.00 0.00 0.00 0.00 0.001999 AEF Hercules 1.30 0.00 0.00 0.00 1.30 0.00 0.00 0.001999 AEF Hygeia 0.38 0.19 0.00 0.00 0.38 0.19 0.00 0.001996 AEF Mid-East 0.00 0.00 0.12 0.00 0.00 0.00 0.12 0.001997 AEF Moorhouse 1.35 0.00 0.00 0.00 1.35 0.00 0.00 0.002000 AEF Oha Motors 0.90 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Portfolio: 29.21 9.63 2.62 0.00 17.89 4.38 2.62 0.00

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic

2000 AEF Gurmeet 0.70 0.00 0.00 0.002000 AEF SafetyCenter 0.50 0.00 0.08 0.001995 AEF-NABEGU CO. 1.00 0.00 0.00 0.002000 Citibank Nigeria 40.00 0.00 0.00 0.002000 FSB 22.50 0.00 0.00 0.002000 GTB 20.00 0.00 0.00 0.002000 IBTC 20.00 0.00 0.00 0.00

Total Pending Commitment: 104.70 0.00 0.08 0.00

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Annex 10: Country at a GlanceNIGERIA: Community Based Urban Development

Sub-POVERTY and SOCIAL Saharan Low-

Nigeria Africa Income Development dlamond^1999Populaton. mid-year (millions) 123.9 642 2,417 Life expectancyGNP per capita (Atlas method, US$) 310 500 410GNP (Atlas method. US$ billions) 38.4 321 988

Average annual growth, 1993-99

Population (%) 2.8 2.6 1.9 GNPLabor force (X) 2.8 2.6 2.3 p Gross

per F_primaryMost recent estimate (latest year available, 1993-99) capita enrollment

Povertv (% of population below national poverty line) 66Urban population (X of total population) 43 34 31Life expectancy at birth (years) 53 50 60Infant mortality (per 1,000 live births) 76 92 77Child malnutrition (% of children under 5) 39 32 43 Access to safe waterAccess to Improved water source (X of population) 39 43 64Ililteracv (% of population age 15+) 37 39 39 NiGross Primary enrollment (1of school-sae population) 98 78 96 - lgere

Male 109 85 102 - Low-income groupFemale 87 71 86

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1979 1989 1998 1999Economic ratlos

GDP (USS billions) 47.3 23.8 32.2 34.1

Gross domestic Investment/GDP 22.1 17.7 28.3 24.2 TradeExports of floods and services/GDP 24.8 32.7 33.2 36.5Gross domestic savings/GDP 27.8 25.3 23.4 18.4Gross national savInss/GDP 26.4 17.0 18.6 13.0

Current account balance/GDP 3.5 -1.0 -9.7 -11.2 DomesUcInterest Pavments/GDP 0.5 6.2 4.6 5.7 Stic InvestmentTotal debVGDP 13.2 126.3 87.9 92.8 Savings Total debt service/exports 2.2 20.9 37.7 31.1Present value of debtUGDP 91.2Present value of debtlexports 261.7

Indebtedness1979-89 1989-99 1998 1999 1999-03

(average annual growth)GDP 0.2 2.7 1.8 1.0 2.5 NigerlaGNP per capita -2.7 0.4 -1.9 0.2 -0.2 Low-income groupExports of goods and services -3.6 5.1 4.9 -12.2 4.0

STRUCTURE of the ECONOMY1979 1989 1998 1999 Growth of Investment and GDP (%)

(X of GDP) soAgriculture 28.7 31.3 39.0 2.Industrv 37.8 43.2 33.3 lo I /

Manufacturina 8.8 5.3 5.4 o RServices 33.5 255 27.6 -1

Private consumption 58.3 64.3 63.0 66.7 -20General govemment consumption 13.9 10.4 13.5 14.9 - GDI C GDPImports of goods and services 19.1 25.2 38.1 42.3

1979-89 1989-99 1998 1999 Growth of exports and Imports (%)(averagoe annual growth)Agriculture 2.2 2.9 1.5 25Industry -2.7 2.0 2.9 20.-

Manufacturing 1.1 2.3 2.8 10 Services 2.3 3.5 0.1

Private consumption -1.6 -0.1 -3.1 .0 O s5 95 97 UN9 9General qovemment consumotion -4.6 1.6 24.6 10Gross domestic Investment -10.2 5.8 -7.4 17.6 15Imports of aoods and services -13.2 4.4 -2.8 18.6 Exports ImportsGross national Product 0.3 3.4 0.9 3.0

Note: 1999 data are preliminary estimates.

The diamonds show four kev Indicators In the country (in bold) compared with Its Income-group average. If data are missing, the diamond willbe Incomplete.

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Nigeria

PRICES and GOVERNMENT FINANCE1979 1989 1998 1999 Inflation (%)

Domes)c pHces(% change) 80 .

Consumer prices 11.7 50.5 10.3 6.6 60Implicit GDP deflator -5.2 1 40 -

Govemment finance 20 -(% of GDP, includes current grants) 94 es 96 97 98 9Current revenue 20.7 13.8 28.5 30.5 -20Current budget balance 12.0 -1.4 13.2 11.1 GDP deflator 0CPlOverall surplus/deficit -2.5 -7.2 -13.4 -7.4

TRADE1979 1989 1998 1999 Export and Import levels (US$ mill.)

(US$ -illions)Total exports (fob) 16,767 9,812 10.114 11,927 20.000

Crude petroleum 15,655 9,411 9,218 11,393Llqufled natural gas .. .. .. 322 1..000Manufactures .. 39 140 27

Total Imports (cif) 15,971 6,544 10,269 12,176 10,000Food 1.638 425 1,397 1,583 5o90Fuel and energy 442 46 123 158Capital goods .. .. .. .. 0

93 94 99 98 97 98 99Exportpricelndex(1995=100) 117 107 71 94Import price index (1995=100) 59 80 94 93 U Exports *ImportsTerms of trade (1995=100) 198 133 76 101

BALANCE of PAYMENTS1979 1989 1998 1999 Current account balance to GDP (%)

(US$ millions)Exports of goods and services 17.631 9,979 10,972 12,871 15Imports of goods and services 13,543 7,679 12,934 14,901 10Resource balance 4,089 2,301 -1,962 -2,030

5Net Income -2,026 -2,668 -2,669 -3,445 sNetcurrenttransfers -388 118 1,516 1,662 0 96 97

Current account balance 1,675 -249 -3,115 -3,813 -.

FInancing Items (net) 1,765 1,521 3,000 2,147 10 .Changes In net reserves -3,440 -1,272 115 1.666

Memo:Reserves Including gold (USS millions) 5,580 1,797 7,107 5,441Conversion rate (DEC, local'USP) 0.9 9.4 88.0 95.0

EXTERNAL DEBT and RESOURCE FLOWS1979 1989 1998 1999

(US$ miltions) Composition of 1999 debt (USS mill.)Total debt outstanding and disbursed 6,245 30,122 28,343 31,617

IBRD 478 2,906 2,218 1,989 A i19eIDA 38 30 564 624 G: 6,516 e: 624

Total debt service 392 2,117 4,235 4,082 t,, 0: 2.244IBRD 65 411 466 443IDA 1 1 4 7

Composition of net resource flowsOfficial grants 2 128 0 0Official crediors 59 461 -1,763 -1,994 F: 5,829Private creditors 1,234 522 -418 0Foreign direct Investment .. 2,443 1,351 1.494 E: 14,415Portfolio equity 0 0 0 0

World Bank programCommitments 182 702 0 0Disbursements 51 450 222 114 A -lORD E -BilateralPrincipal repayments 21 200 314 307 BIDA D-Othermullateral F -PrivateNetfiows 31 250 -93 -194Interest payments 45 212 156 142Net transfers -15 38 -249 -336

Development Economics 821/00

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Additional Annex 11: Financial Management ArrangementsNIGERIA: Community Based Urban Development

A. General

Objective of the Project Financial Management Systems1. The financial management (FM) arrangements for the project are aimed at ensuring efficientdisbursement of funds, and compliance with acceptable accountability standards and the Bank's reportingrequirements. The FM system will support project management to ensure economy, efficiency andeffectiveness in the delivery of outputs required to achieve desired outcomes. Specifically, the FM systemwill be capable of producing timely, relevant and reliable financial information that will enable themanagement of the project to plan, implement, monitor and appraise the project's overall progress towardsthe achievement of its objectives.

Implementing Entities

2. A Federal Project Accounting Section (FPAS) will be established at the FPCU. The FPAS will beheaded by a professionally qualified project accountant and supported by appropriately qualified staff. TheFPAS will have overall responsibility for the management of the credit. Specifically, it will be responsiblefor (a) preparing progress reports; (b) ensuring that the project financial management arrangements areacceptable to the Govenmment and IDA; and (c) consolidating progress reports and financial statements.

3. Within each PIU, a Project Accounting Section (PAS) will be established. The PAS will be headedby a professionally qualified Project Accountant and supported by appropriately qualified staff. The PASwill be responsible for preparing budgets and progress reports and forwarding them to FPCU and IDA.

B. Risk Analysis

Inherent Risks

4. The Country Financial Accountability Assessment (CFAA) revealed that the systems for planning,budgeting, monitoring and controlling public resources in Nigeria have deteriorated to a level that they donot provide any reasonable assurance that funds are used for the purpose intended. The risk of waste,diversion and misuse of funds was assessed as high. Nevertheless, the overall project risk from a financialmanagement perspective is considered moderate and various actions are in progress to mitigate these risks.The financial management arrangements for the project are designed to ensure that funds are used for thepurpose intended, timely infornation is made available for project management and government oversight,and to facilitate the project's compliance with IDA fiduciary requirements.

Control Risks

5. The overall project risk from a financial management perspective is considered moderate provided:(a) the weaknesses tabulated in paragraph 6 are satisfactorily addressed; and (b) the credit effectivenessconditions outlined in section G: Main Loan Conditions, are met.

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Strengths and Weaknesses

6. Strengths: The FMF and the FMWH, which will have overall responsibility for coordinating theproject, have played similar roles under World Bank assisted projects in the past. Thus, FMF and FMWHare familiar with World Bank procedures.Weaknesses: The table below lists the significant weaknesses and their planned resolution.

Significant Weaknesses ResolutionFinancial Management Systems are manual. Retain a FM consultant to install a computerized FMS

in the PIUs and train staff.Fixed Assets and Contracts Registers not properly Fixed Assets Register will be established.maintained. Contracts Register will be maintained.Participating States have no experience in managing Training and capacity building activities to enableBank funds. implementation according to IDA procedures has been

provided during preparation and will continue to beprovided. FMC is responsible for the training of projectaccounting staff.

Weak administrative capacity which could weaken Special tracking and auditing arrangements will be putinternal control systems and delay implementation in place.

Regular supervision by Bank staff.

7. The last project in this sector, the hnfrastructure Development Fund project, closed in 1997.Audited financial statements for the project were submitted late, and those from 3 States are stilloutstanding. These reports were included in the schedule sent to the Operations Policy and CountryServices Department by the Africa Region for deletion from the ARCS. It is expected that thisauthorization will soon be issued. As agreed at Negotiations, any State or Federal Ministry which hasoutstanding financial statement audits for previous IDA/Bank supported projects will not be able toparticipate in CBUDP.

C. Financial Management System

Funds Flow and Bankdng Arrangements

8. The overall project funding will consist of IDA Credit and counterpart funds. IDA will disbursethe credit through the Special Accounts (SAs) of participating States and the Federal SA. IDA will sign acredit agreement with FMF, and FMF will sign subsidiary agreements for on-lending credit proceeds withthe states.

9. The following accounts will be maintained by FPCU:(i) A SA in US Dollars to which the initial deposit and replenishmnents from IDA will be lodged;

(ii) A Current Account in Naira to which drawdowns from the SA will be credited once or twiceper month in respect of incurred eligible expenditures. Following the immediate payments ofeligible expenditures, the balance on this account should be zero;

(iii) A Current Account in Naira to which the interest income on SA will be deposited;(iv) A Project Current Account in Naira to which Counterpart Funds will be deposited.

The following accounts will be maintained by each PIU:

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(i) A SA in US Dollars to which the initial deposit and replenishments from IDA will be lodged;(ii) A Current Account in Naira to which drawdowns from the SAs will be credited periodically in

respect of incurred eligible expenditures. Following the immediate payments of eligibleexpenditures, the balance on this account should be zero;

(iii) A Current Account in Naira to which the interest income on SA will be deposited;(iv) A Project Current Account in Naira to which Counterpart Funds will be deposited;(v) A Current Account in Naira into which O&M funds from the state will be deposited;(vi) A Current Account in Naira into which O&M funds from participating local governments will

be deposited.

10. Additionally, FPCU and the PIUs will each maintain an IDA Ledger Loan Account (Washington)in US Dollars/Naira/SDR to keep track of drawdowns from IDA credit. The account will show (a) depositsmade by IDA, (b) direct payments by IDA, and (c) opening and closing balances.

11. All bank accounts will be reconciled with bank statements on a monthly basis by PASs in eachPIU. A copy of each bank reconciliation statement together with a copy of the relevant bank statement willbe sent monthly by PASs to the FPAS. FPAS will also reconcile its bank accounts with bank statementson a monthly basis. The FPAS Project Accountant will independently review the reconciliation statements,which will be prepared by the accounting staff in the FPAS. Identified differences will be expeditiouslyinvestigated by FPAS and the PASs in the participating States. Detailed banking arrangements, includingcontrol procedures over all bank transactions (e.g. check signatories, transfers, etc.), will be documented inthe FMM.

Disbursement Arrangements

12. By effectiveness, the Project will not be ready for report-based disbursements. Thus, initially,transaction-based disbursement procedures (as described in the World Bank Disbursement Handbook) willbe followed, i.e. direct payment, reimbursement, and special commitments. When project implementationbegins, the quarterly Financial Monitoring Reports (FMRs) produced by the project will be reviewed.Where the reports timely and adequate, and the borrower requests conversion to report-baseddisbursements, IDA will undertake a review to assess eligibility. Detailed disbursement procedures will bedocumented in the FMM.

Planning and Budgeting

13. Cash Budget preparation will follow the Federal Government and participating States' procedures.Also, financial projections for the life of the project (analyzed by year) will be prepared. Towards the endof each fiscal year of the project, the PASs will prepare the cash budget for the coming year, and the FPASwill consolidate this. The cash budget will include the figures for the year, analyzed by quarter. The cashbudget for each quarter will reflect the detailed specifications for project activities, schedules (includingprocurement plan), and expenditure on monthly and quarterly project activities. The consolidated annualcash budget will be sent to the TTL at least two months before the beginning of the project fiscal year byFMF. Detailed procedures for planning and budgeting will be documented in the FMM.

Fixed Assets and Contracts Registers

14. At the FMF and PIUs, Fixed Assets Registers will be maintained, regularly updated and checked.Contracts Registers will also be maintained for all contracts.

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Information Systems

15. A uniform computerized FMS including, an Integrated Accounting System is being designed by aFinancial Management Consultant (FMC) for use in the project by FPCU and PlUs. The FMC will alsoinstall the system, and train staff in the PASs and FPAS to use the system.

Financial Management Manual (FMM)

16. The FMC is also developing a FMM. The manual will be adopted by all implementing agencies ofthe project. The FMM will include, inter alia: institutional arrangements; chart of accounts; basis ofaccounting adopted; planning and budgeting, including cash-flow management; procurement proceduresfor goods, works and services; disbursements; banking activities; staff, wages and salaries; fixed assetsregister; financial reporting; auditing; legal covenants; and records management.

Financial Reporting and Monitoring

17. Monthly, quarterly and annual reports will be prepared, as outlined below, for monitoring projectimplementation.

Monthly: On a monthly basis, the PAS of each PIU will prepare and submit to the FPAS the followingreports:(i) a Bank Reconciliation Statement for each bank account; (ii) monthly statement of cash position forproject funds from all sources; (iii) a monthly statement of expenditure classified by project components,disbursement categories, and comparison with budgets, or a variance analysis; and (iv) Statement ofSources and Uses of Funds (by Credit Category/ Activity showing IDA and Counterpart Fundsseparately). FPAS will also prepare all the aforementioned reports.

Quarterly - Participating States and FPCU: The following reports will be prepared by the PASs andFPCU on a quarterly basis and submitted to IDA:(i) Financial Reports which include a statement showing for the period and cumulatively (project life or

year to date) inflows by sources and outflows by main expenditure classifications; opening and closingcash balances of the project; and supporting schedules comparing actual and planned expenditures.The reports will also include cash forecast for the following two quarters;

(ii) Physical Progress Reports which include narrative information and output indicators (agreed duringproject preparation) linking financial information with physical progress, and highlighting issues thatrequire attention;

(iii) Procurement Reports, which provide information on the procurement of goods, works, andconsultants, and on compliance with agreed procurement methods. The reports will compareprocurement performance against the plan agreed at negotiations or subsequently updated, andhighlight key procurement issues;

(iv) SOE withdrawal schedule listing individual withdrawal applications relating to disbursements by theSOE method, by reference number, date and amount; and

(v) Special account statement/reconciliation showing deposits and replenishments received, paymentssupported by withdrawal applications, interest earned on the account and the balance at the end of thereporting period.

The participating States will also forward a copy of the above reports to the FPAS for consolidation.

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Quarterly - Consolidated: Following receipt of quarterly reports from the PASs in the States, thefollowing reports will be prepared by the Project Accountant of the FPAS on a quarterly basis andsubmitted to IDA.(i) Consolidated Financial Reports which include a statement showing for the period and cumulatively

(project life or year to date), inflows by sources and outflows by main expenditure classifications;beginning and ending cash balances of the project; and supporting schedules comparing actual andplanned expenditures. The reports will also include cash forecasts for the next two quarters;

(ii) Consolidated Physical Progress Reports which include narrative information and output indicators(agreed during project preparation) linking financial information with physical progress, and highlightissues that require attention;

(iii) Consolidated Procurement Reports, which provide information on the procurement of goods, work,and related services, and the selection of consultants, as well as on compliance with agreedprocurement methods. The reports will compare procurement performance against the plan agreed atnegotiations or subsequently updated, and highlight key procurement issues.

Annualy - Consolidated by participating States and the FPCU: The annual project financialstatements, which will be prepared by FPAS and the participating States, audited by a professionallyqualified independent auditor and submitted to IDA, will include the following:(i) A Statement of Sources and Uses of Funds (by Credit Category/by Activity showing IDA and

Counterpart Funds separately);(ii) A Statement of Cash Position for Project Funds from all sources;(iii) Statements reconciling the balances on the various bank accounts (including IDA SAs) to the bank

balances shown on the Statement of Sources and Uses of funds;(iv) SOE Withdrawal Schedule listing individual withdrawal applications relating to disbursements by the

SOE Method, by reference number, date and amount; and(v) Notes to the Financial Statements

Indicative formats for the reports are outlined in two Bank publications: (a) quarterly FMRs in theFMR Guidelines, and (b) monthly and annual reports in the Financial Accounting, Reporting and AuditingHandbook (FARAH).

Accounting Policies and Procedures

18. Project accounts will be maintained on a cash basis, augmented with appropriate records andprocedures to track commitments and to safeguard assets. Accounting records will be maintained in dualcurrencies (i.e. Naira and $). The Chart of Accounts will facilitate the preparation of relevant monthly,quarterly and annual financial statements, including information on the following: (i) total projectexpenditures; (ii) total financial contribution from each financier; (iii) total expenditure on each projectcomponent/activity; and (iv) analysis of that total expenditure into civil works, various categories ofgoods, training, consultants and other procurement and disbursement categories. Annual financialstatements will be prepared in accordance with Intemational Accounting Standards (IASs). All accountingand control procedures will be documented in the FMM, a living document that will be regularly updatedby the Project Accountant.

Internal Audit

19. Project activities will be periodically reviewed by the Internal Audit Departments (IADs) of theFMF and participating States. The internal auditor in each participating state will report to the PSC andwill be responsible for evaluating the reliability of the accounting systems, data, and financial reports. The

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unit will carry out periodic reviews of project activities; ensure effectiveness of financial and accountingpolicies and procedures, as well as compliance with internal control mechanisms; review SOEs; physicallyverify purchases; and carry out other functions as stated in the TORs.

External Audit

20. IDA Agreement requires the submission of Audited Project Financial Statements for the states andFMF to IDA within six months after year-end. Samples of audit reports are included in Annex XXI,Financial Accounting Reporting and Auditing Handbook (FARAH) of the World Bank. Qualified externalauditors will be appointed by the FMF and each participating states in accordance with TORs acceptable toIDA. The TOR will cover both financial and technical audits. Besides expressing an opinion on theAudited Project Financial Statements in compliance with International Standards on Auditing (ISAs), theauditors will be required to include a separate opinion paragraph on the accuracy and propriety ofexpenditures made under the SOE procedures and the extent to which these can be relied upon as a basisfor loan disbursements. Regarding the Special Account, the auditor will also be expected to form anopinion on the degree of compliance with IDA procedures and the balance at the year-end. In addition tothe audit report, the external auditors will be expected to prepare a Management Letter giving observationsand comments, and providing recommendations for improvements in accounting records, systems, controlsand compliance with financial covenants in the IDA agreement.

D. Next Steps & Action Plan

21. The actions to be implemented on or before Credit Effectiveness are tabulated below.

Action ResponsibilityFM system installed FMF and StatesFPM developd _FMFProject Accountant appointed for FMF and participating States and support staff in FMF and StatesplaceCounterpart Funds arrangements put in place FGN, SGs, FMFDollar and Naira Counterpart Fund Accounts opened by the participating States. Participating StatesFMF and IDA advised of authorized bank signatories/specimen signaturesInitial capacity building completed e.g. Special Account, SOEs and computer skills FMF & IDAExternal auditors appointed for states and FMF on approved TORs FMF & StatesClearing audit arrears on previous IDA IDF (FMWH, Enugu, Yobe, Adamawa, FMWH, FMF, concernedPlateau) states

Supervision Plan

22. Supervision activities will include: review of quarterly FMRs; review of annual audited financialstatements and management letter as well as timely follow-up of issues that may arise; annual SOE review;and participation in project supervision missions as appropriate. The FMSs at the Country Office will playa key role in monitoring the timely implementation of the action plan.

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