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Document of The World Bank
FOR OFFICIAL USE ONLY
Report No 48580-NG
PROJECT PAPER
ON A
PROPOSED ADDITIONAL FINANCING
IN THE AMOUNT OF
SDR 50.5 MILLION (US$80 MILLION EQUIVALENT)
TO THE
FEDERAL REPUBLIC OF NIGERIA
FOR
THE NATIONAL URBAN WATER SECTOR REFORM PROJECT
June 3, 2010
Water and Urban Country Department AFCW2 Africa Region
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS (Exchange Rate Effective September 30, 2009)
Currency Unit = Naira US$1 = Naira 151 US$1 = 0.6311 SDR
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AAP Africa Action Plan AfDB African Development Bank APL Adaptable Program Loan EIRR Economic Internal Rate of Return ERR Economic Rate of Return ESMF Environmental and Social Management Framework ESIA Environmental and Social Impact Assessment FPIU Federal Project Implementing Unit FMoF Federal Ministry of Finance FMAWR Federal Ministry of Agriculture and Water Resources IRR Internal Rate of Return MDG Millennium Development Goal NPV Net Present Value PFMU Project Financial Management Unit PIM Project Implementation Manual PPP Public Private Partnership SPIU State Project Implementation Unit SWA State Water Agency SWRA State Water Regulatory Agency UFW Unaccounted for Water WIMAG Water Investment Mobilization and Application Guidelines
Vice President: Obiageli Katryn Ezekwesili Country Director: Onno Ruhl
Sector Director Inger Andersen Sector Manager: Junaid Kamal Ahmad
Task Team Leader: Hassan Madu Kida
iii
FEDERAL REPUBLIC OF NIGERIA
ADDITIONAL FINANCING FOR NATIONAL URBAN WATER SECTOR REFORM PROJECT
TABLE OF CONTENTS
PROJECT PAPER DATA SHEET IV
I. Introduction ..............................................................................................................1
II. Background and Rationale for Additional Credit ....................................................1
III. Proposed Changes ....................................................................................................4
IV. Consistency With Country Partnership Strategy (CPS)...........................................7
V. Economic Analysis ..................................................................................................7
VI. Expected Outcomes .................................................................................................7
VII. Benefits And Risks ..................................................................................................8
VIII. Financial Terms And Conditions For The Additional Credit ..................................8
ANNEX 1: Results Framework and Monitoring ............................................................9
ANNEX 2: Risk Monitoring and Mitigation Matrix ....................................................13
iv
NIGERIA
ADDITIONAL FINANCING FOR NATIONAL URBAN WATER SECTOR REFORM PROJECT
PROJECT PAPER DATA SHEET
Date: June 3, 2010 Country: Federal Republic of Nigeria Project Name: First National Urban Water Sector Reform Project Additional Credit Project ID: P115565 Parent Project ID P071075
Team Leader: Hassan Madu Kida Sector Manager: Junaid Kamal Ahmad Country Director: Onno Ruhl Environmental Category: B – Partial Assessment
Borrower: Federal Republic of Nigeria Responsible agency: Federal Ministry Agriculture and Water Resources, Abuja
Private Mail Bag, 159, Garki Abuja, Nigeria Tel: 234 (09) 2342205; Fax: 234 (09) 2342895
Revised estimated disbursements (Bank FY/US$m) FY 05 06 07 08 09 10 11 12 13 Annual 5.0 6.0 12.0 25.0 40.0 60.0 35.0 12.0 5.0 Cumulative 5.0 11.0 23.0 48.0 88.0 120.0 150.0 190 200 Current closing date: September 30, 2010 Revised closing date: September 30, 2012 Does the restructured or scaled-up project require any exceptions from Bank policies? Have these been approved by Bank management? Is approval for any policy exception sought from the Board?
NO N/A NO
Revised project development objectives/outcomes Development objectives remain the same as those for the original credit, which are as follows: To improve reliability and financial viability of selected urban water utilities and increase access to piped water networks in selected urban areas. Does the scaled-up or restructured project trigger any new safeguard policies? No
For Additional Credit [ ] Loan [X] Credit [ ] Grant For Loans/Credits/Grants:
Total IDA financing SDR 50.5 million (US$80 million equivalent) Proposed terms: IDA terms repayable over 40 years with 10 years grace period.
Financing Plan (Additional Financing US$.) Source Local Foreign Total
Borrower IBRD/IDA Others Total
4.0 16.0 00.0 20.0
00.0 64.0 00.0 64.0
4.0 80.0 00.0 84.0
Financing Plan (Original Plus Additional Financing US$.) Source Local Foreign Total
Borrower IBRD/IDA Others Total
10.0 52.0 00.0 62.0
00.0 148.0 00.0
148.0
10.0 200.0 00.0
210.0
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I. INTRODUCTION 1. This Project Paper seeks the approval of the Executive Directors to provide additional credit in the amount of US$80 million (SDR 50.5 million) to the Federal Republic of Nigeria for the National Urban Water Sector Reform Project, Cr.39240. 2. The proposed additional credit would help cover the costs associated with the financing gap caused by the global increase in unit price of pipes, electromechanical and electrical equipment and by the unexpected increase in the rehabilitation works due to the greater than anticipated level of deterioration of existing assets. The proposed additional credit would also support increased provision of household and bulk water meters, to improve cost recovery and the efficiency of State Water Utilities.
3. The proposed additional credit for an unanticipated cost overrun will enable the project to meet its original Development Objectives of: i) improving reliability and financial viability of selected urban water utilities; and ii) increasing access to piped water supply in selected urban areas in Kaduna, Ogun, and Enugu States. There are no changes to the Project Development Objectives or the project scope and design. The original closing date of September 2010 will require an extension of 24 months to complete some of the activities to be funded by this additional credit. Parallel financing is expected from the French Development Agency, to cover further network expansion and rehabilitations for the three states.
II. BACKGROUND AND RATIONALE FOR ADDITIONAL CREDIT Nigerian Urban Water Sector Challenge 4. Background
The Government’s strategy for Urban Water Supply, embedded in each State Economic Empowerment Development Strategy (SEEDs), identifies the increase in the access to potable water as a key to achieving health outcomes and sustained poverty reduction. The water supply system in Nigeria suffers from systemic problems, associated with the poor maintenance of water and waste water networks, limited institutional capacity, weak financial performance of water supply and sanitation utilities and grossly inadequate power supply that has resulted in intermittent water services and damage to electromechanical equipment. According to the Africa Infrastructure Sector Diagnostic Study (AICD), water coverage in urban areas in Nigeria has reached 52 percent. Access to water services in both rural and urban Nigeria is about 47 percent and the level of connections is comparatively low. The existing and functional facilities operate at less than 30 percent of their capacity due to the lack of maintenance. 5. Project Status
To address the systemic issues in the urban water sector, the National Urban Water Sector Reform Project (P071075) in the amount of SDR 81.7 million (US$120
2
million) was approved on May 17, 2004. The project, which became effective in December 2004, focuses on rehabilitation of treatment facilities, extension and rehabilitation of distribution networks, re-activating inactive connections, increasing the number of household connections and stand posts, updating the customer database and full metering to manage demand and reduce non-revenue water supply. Support is also provided for the structuring of Public Private Partnerships (PPP) and capacity building/strengthening for investment planning, linking investments to cost recovery and ensuring the financial sustainability of the urban water sector.
6. The project is focused at the utility level, and therefore the implementation is managed by the States. Participation in the project was open to up to three states, on a competitive basis, in order to have sufficient funds to accomplish effective rehabilitation and network expansion. The participating states are Kaduna, Ogun and Enugu States. Kano was originally selected, but did not sign the subsidiary loan agreement as a result of the state’s current debt profile. With the exclusion of Kano state, Enugu was selected. The rehabilitation program under the project (about $75 million of the credit) experienced delays due to weak procurement capacity at inception. Accordingly, the implementation progress and the achievement of the Development Objectives was rated Moderately Satisfactory. Significant progress has been achieved since then, and the project is now performing satisfactorily. Contracts for the rehabilitation of water treatment plants and network distribution in all 13 beneficiary towns are almost completed with 80% of the credit disbursed. (see table below). Compliance with fiduciary, environmental and social safeguards has been satisfactory
Table 1: Disbursement Figures as of March 30, 2010
Allocated
(XDR) Disbursed
(XDR) Undisbursed
(XDR) Works 53,106,527.00 38,093,303.78 15,013,223.22 Goods 11,993,622.00 10,663,151.60 1,330,470.40 Consultancy 11,201,265.00 10,099,206.74 1,102,058.26 Training 2,597,810.00 2,278,260.76 319,549.24 Operating Cost 1,538,030.00 1,119,778.19 418,251.81 Total 80,437,254.00 62,253,701.07 18,183,552.93
7. The progress towards achieving the project’s objectives, was slowed down by procurement delays, as a result of initial lack of capacity in some of the states and delays in getting approvals from the government but this has significantly improved implementation is now progressing well. This improvement has resulted in the completion, testing and the commissioning of some of the treatment rehabilitation works and the network distribution systems Water delivery to end users increased by 10 percent in Kaduna, 8 percent in Ogun, and 5 percent in Enugu. Revenue collection efficiency has increased from 40 percent to 65 percent in all three states. Coverage of Operation
3
and Maintenance (O&M) cost in all three states increased on average up to 50 percent of revenue compared to 40 percent at the beginning of the project.
8. Progress has been made towards engaging the private sector in the water supply systems operation, notably in Kaduna State. The State has signed a management contract for the operation of all the four treatment plants in the cities of Kaduna and Zaria, and progress is also being made in the management of the distribution network and revenue collection in Kaduna City. In Enugu State, one contract has been signed for supply and installation of household meters in Enugu town. In Ogun State, partnership with the Ugandan Waters is in place, and progress has been made towards signing of contracts with staff for performance related management of individual schemes, which are competitively bid for among staff. The capacity building program under the project is also deemed satisfactory.
9. The Policy Reform and Institutional Development component is on track. Water Supply Investment Mobilization and Application Guidelines (WIMAG) have been prepared and are being adopted as an element of the National Water Policy. A survey has been carried out on the National Low income strategy in the participating states and those under the Second National Urban Water Sector Reform Project (Cr. 4086-UNI). The results were discussed at a national workshop and the recommendation made is currently being implemented in the states. Also, the review of the National Water Policy has been completed and is about to be enacted by the National Assembly. The states are getting the laws and policies approved and passed by their respective state assemblies and thereafter the State Water Regulatory Authority will be established.
Rationale for Additional Funding 10. The proposed additional IDA credit of SDR 50.5 million (US$80 million equivalent) is in accordance with OP/BP 13.20, seeking to close the financing gap which emerged due to sharp cost overruns under the parent project. The unanticipated global increase in unit price of pipes and electromechanical and electrical equipment, coupled with the progressive deterioration of equipment and infrastructure due to the lack of scheduled maintenance and poor quality of power supply, sharply increased the cost of rehabilitation. Additionally, the cost of chemicals and spare parts which are necessary to keep the treatment plants running (at least at 50 percent production) was also higher than estimated because of the delays in the award of the rehabilitation works. 11. At first, efforts were made to address the project cost overrun through reallocation. However it became apparent that additional funds would be needed to complete the project activities. The additional credit will help meet the financing gap for the network expansion and to complete the rehabilitation works. Additionally, it will cover the cost of consultancy services for the supervision of the network expansion works as well as the completion of the Public Private Partnerships activities. The proposed additional credit will also fund the increased provision of household meters in the three participating states. With more household connections taking place, macro and micro metering will be required to improve revenue collection. This will increase the number
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of house connections from 70,000 to 150,000 and thereby improve revenue performance. The overall estimated cost overrun is US$84 million. III. PROPOSED CHANGES 12. The project scope and Development Objective remain unchanged. A. Cost Overrun
13. The proposed additional credit will support activities under Components 1 and 2 of the project:
a) Rehabilitation and network expansion (US$73.5 million): This component will include: (i) the completion of the rehabilitation activities (US$16.8 million); (ii) the completion of the network expansion activities (US$31.5 million); (iii) procurement of household and bulk meters (US$21 million); and (iv) supervision consultancy for the network expansion work which is yet to be awarded (US$4.2 million). Public Private Partnership (US$10.5 million). This component will finance the engagement of Private operators for the cities of Kaduna, Zaria, Abeokuta Nsukka and Enugu. It will also cover operating costs and project management.
14. The tentative cost estimates and indicative financing plan for the project components is shown in the table below:
Table 2: Estimated Project Cost and Indicative Financing Plan (in US$ million) Component Total cost
(US$M) IDA
(US$M) Government
(US$M) IDA
percent of total
a) Rehabilitation and network expansion
73.5
70.0
3.5
95%
b) PPP 10.5 10.0 0.5 95% Total 84.0 80.0 4.0 95% B. Government Counterpart Contribution
15. The Government counterpart contribution will be approximately 5 percent of the project cost of US$84 million, as was agreed under amendment of the Financing Agreement for IDA Credit 3924-UNI dated June 29, 2006 which changed disbursement percentage of eligible expenditures category to an overall 5 percent for each category. The 5 percent will be provided by each participating state as will be indicated under the subsidiary agreement. The additional financing will cover 95 percent of the project cost.
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C. Disbursement
16. The following table specifies the categories of Eligible Expenditures that may be financed under the proceeds of the financing, the allocations of the amounts of the financing to each category, and the percentage of expenditures to be financed for Eligible Expenditures in each category. Disbursement procedures used for the original project will continue to be used for the additional credit.
Table 3: Disbursements
Category Amount of the Credit Allocated (expressed
in SDR Million) a) Works 29.0 c) Goods 12.6 d) Consultants’ Services 8.9
TOTAL AMOUNT 50.5
Table 4: The Total IDA Allocation Inclusive of the Additional Financing in USD
DCA
Category Original
DCA Add.
Allocation Finance
Total IDA
Add. Finance for State
FMWR Kad Ogun Enugu
Works 70.5 46.0 116.5 0.0 23.0 20.0 3.0
Goods 22.0 20.0 42.0 0.0 9.2 10.0 0.8
Consultancy 16.0 4.0 20.0 0.0 2.0 1.5 0.5
Project Mgt 4.5 9.2 13.7 0.0 4.1 4.1 1.0
Training 3.1 0.0 3.1 0.0 0.0 0.0 0.0
Operating Cost
2.0 0.8 2.8 0.0 0.3 0.3 0.2
PPF 1.5 0.0 1.5 0.0 0.0 0.0 0.0
Unallocated 0.4 0.0 0.4 0.0 0.0 0.0 0.0
Total 120.0 80.0 200.0 0.0 38.6 35.9 5.5
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Other changes 17. Other complementary changes are presented below.
Description Complementary Changes 1. Project management
– Institutional Arrangements
Implementation will be based on the existing arrangements, except for one change. The Federal Project Implementing Unit (FPIU) will not participate in the additional credit as the current amount allocated under P071075 is enough to cover all activities to be carried out by the Federal Ministry.
2. Project Cost Costs comprise the additional credit of US$80 million and counterpart funds of US$4 million.
3. Environmental and Safeguard Issues
The current Project Environmental Category (B) would not change under the additional credit. The safeguards compliance of the project is satisfactory.
4. Financing Plan An IDA credit of SDR50.5 million (US$80 million equivalent) and Government of Nigeria counterpart financing of US$4 million.
5. Financial management
No changes in the financial management from the original project. As workload from the additional credit increases, additional professionally qualified Project Accountants and Internal Auditors may be seconded by the Offices of the State Accountants-General for the duration of the project.
6. Disbursement Arrangements
No changes in the main disbursement arrangements, except that all advances under the original project must be fully accounted for before advances can be drawn under the additional credit. This will be indicated in the Disbursement Letter. Statements of expenditures would be used for all expenditures under contracts below the Association’s prior review limits. The proceeds of the additional credit will be allocated to states based on the request made and outstanding services not covered. Ceilings for advances to individual states will be for a minimal amount initially, and this amount will be varied during implementation based on continued satisfactory performance of each state on project implementation, including on financial management aspects, and approved work plans. The initial allocation and corresponding ceilings, along with subsequent changes, will be documented in the Disbursement Letter to be issued for this operation. Actual utilization of the allocation by each state will be monitored by the task team.
7. Procurement The general procurement arrangement would be the same as the arrangement under the National Urban Water Reform Project. However, the updated World Bank’s “Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004, revised October 2006; will apply to all goods and works contracts financed under the additional credit. Similarly, procurement of consultant services will be governed by the "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, revised October 2006 and the provision stipulated in the Financing Agreement. .
8. Closing Date Extension of closing date from September 30, 2010 to September 30, 2012.
9. Implementation The proposed program will be implemented over a 24 month period.
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Schedule 10. Effectiveness of
additional credit The signing of an amendment to the Subsidiary Credit Agreements to reflect the additional credit and revised repayment terms will be a condition of effectiveness.
IV. CONSISTENCY WITH COUNTRY PARTNERSHIP STRATEGY (CPS) 18. The additional credit is fully consistent with the objectives of the Country Partnership Strategy for 2010-2013, in particular, the goal of increasing access to critical physical infrastructure including the improved access to urban water supply. Through the project and proposed additional credit, about 5 million urban populations will have access to water supply by the end of the project in 2012, thus also contributing to improved health outcomes and poverty reduction. V. ECONOMIC ANALYSIS 19. The expected additional costs of the project will affect the original economic/financial impact of the project, though not significantly. The original economic benefit stream will be enhanced through an increase in water production resulting from: (i) improved billing performance resulting from increases in the number of household provided with water meters, (ii) reduction in commercial losses, and (iii) the reduction in technical losses due to replacement of aging pipes. This will have the effect of offsetting the increase in economic costs, thus leaving the net economic benefit largely intact. The original economic analysis included an EIRR sensitivity analysis for a 21% cost increase of the works, which indicated that even at that level of increase the resultant EIRRs for the participating states would be the same, with improvements in water production. From the above scenario the analysis assumes that the economic (cost-benefit) analysis is marginally affected from the original one.
VI. EXPECTED OUTCOMES 20. The expected project outcomes remain unchanged. These are: (i) improved reliability and financial viability of selected urban water utilities, and (ii) increased access to piped water networks in selected urban areas. 21. The expected outputs from the project are: (i) 13 existing urban water systems restored to 90% of their rated capacities; (ii) at least 50,000 new household water connections provided; (iii) at least one management contract implemented; (iv) at least a 20 percent increase in billing from a base line of 30% and increase in collection efficiency by 20% with base line of 40%; (v) at least a 20 percent increase in water availability to end users with initial start up of 60 percent; (vi) 100 percent of operations and maintenance (O&M) costs collected from revenues by project end; (vii) state water regulatory authorities established where possible; (viii) update and further establishment of the national water policy; and (ix) preparation and implementation of the National Low Income Water Strategy. The project’s monitoring framework is shown in Annex I.
8
VII. BENEFITS AND RISKS 22. The overall risk rating is now modest as against the original assessment at appraisal. Mitigation measures remain unchanged. Procurement and financial management reviews carried out as a part of the mid-term review and during a recent mission confirm that procurement and financial management has improved and there are no irregularities in procurement and financial management, and the systems in place are adequate for project implementation. The project will continue to adopt the same rigorous approach to financial management and procurement as in the past. 23. Benefits have not changed from the original project. The main quantifiable benefits include: (i) increased volume of water delivered through existing and extended networks, (ii) increased number of active connections by 50,000, and (iii) increase in cost recovery from 40 percent to 90 percent. VIII. FINANCIAL TERMS AND CONDITIONS FOR THE ADDITIONAL CREDIT 24. Terms for lending are the same as per the original credit. The additional credit is expected to be provided as a credit on standard IDA terms, with a maturity of 40 years.
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ANNEX 1: RESULTS FRAMEWORK AND MONITORING
NIGERIA: National Urban Water sector Reform Project Additional Financing Results Framework
PDO Project Outcome Indicators Use of Project Outcome Information Original Proposed Original Proposed Original Proposed Improve reliability and financial viability of selected urban water utilities.
No change (a) Increase in water delivered through existing and extended networks.
(b) Improvement in cost recovery.
No change At Mid-term review and ICR to judge progress made
Same
Increase access to piped water supply in selected urban areas.
No change (c) Increase in number of household connections.
c) Number of people in urban areas provided with access to Improved Water Sources under the project(Number)
In assessing Project’s impact on Nigeria achieving Millennium Development Goal for increased access to safe water supplies.
Same
New d) Number of direct project beneficiaries (percentage of which female)
NA In assessing Project’s impact on Nigeria achieving Millennium Development Goal for increased access to safe water supplies.
Intermediate Outcomes Intermediate Outcome Indicators Use of Intermediate Outcome Monitoring
Original Proposed Original Proposed Original Proposed Component One: Rehabilitation and Network Expansion.
No change Component One: (a) Number of existing water
supply networks rehabilitated to installed capacity
(b) Number of new household water connections
(a) no change (b) Piped household water
connections that are benefiting from rehabilitation works undertaken by the project
(c) New piped household water connections that are resulting from the project intervention.
-In the PMUs’ quarterly and annual progress reports. -In the MTR and ICR.
Same
10
Component Two: Public-Private Partnership Development.
No change Component Two: (a) Number of PPP contracts initiated (b) Additional states ready to enter into PPP contracts at Project Closing
No change -As pilots for PPP contracts for urban water systems in other Nigerian States. -As examples for PPP contracts supported by the World Bank in other countries.
Same
Component Three: Capacity Building and Project Management.
No change Component Three: a) Increase in billing and
collection efficiency in all 3 SWA.
b) Increase in water availability to end users in all 3 SWA.
c) O&M coverage from revenues in all 3 SWA.
No change No change No change (d) Number of water utilities that the project is supporting
- In PMU quarterly and annual progress reports. -In the MTR and ICR.
Same
Component Four: Policy Reform and Institutional Development.
No change Component Four: (a) State Water Regulatory Agencies established -3. (b) National Water Policy completed. (c) Establishment of national strategy to increase low income household connections.
No change -As pilots for regulators for urban other Nigerian States. -As examples for establishing regulators in other countries.
Same
11
Arrangements for Monitoring Results
Project Outcome Indicators Baseline Original Project Start
(2004) Progress to date
(March 2010) Target Values
Data Collection
and Reporting
2011 2012 Frequency and Reports
Data Collection Instruments
Responsibility for Data Collection
Current
PDO Outcome Indicators
(a) Increase in water delivered through existing and extended networks.
250M3/year 400M3/year
700 760 Annually PMU Progress, Utility Audit report
World Bank, PMU, External Auditors
(b) Improvement in cost recovery. 0 NGN70M in cash flow
95 120 Annually PMU Progress, Utility Audit report
World Bank, PMU, External Auditors
(c) Number of people in urban areas provided with access to Improved Water Sources under the project
0 3,800,000 4,500,000 5,000,000 Annually PMU Progress, Utility Audit report
World Bank, PMU, External Auditors
(d) Number of direct project beneficiaries (percentage of which female)
0 3,800,000 4,500,000 5,000,000 (48%)
Annually PMU Progress, Utility Audit report
World Bank, PMU, External Auditors
Intermediate Outcome Indicators
Current
Component One: (a) Number of existing water supply
networks rehabilitated to installed capacity
0 2 11 13 Quarterly, Annually, MTR and Project End
Civil Works Contracts, PMU Progress Report
World Bank PMU
(b) Piped household water connections that are benefiting from rehabilitation works undertaken by the project
(c) New piped household water connections that are resulting from the project intervention.
0 155,000 15,000
220000
35,000
250000
50,000
Quarterly, Annually, MTR and Project End
Civil Works Contracts, PMU Progress Report
World Bank PMU
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Component Two: (a) Number of PPP contracts initiated
3 4 5 Quarterly, Annually, MTR and Project End
Signed PPP Contracts
World Bank PMUs
(b) Additional states ready to enter into PPP contracts at Project Closing
2 Quarterly, Annually, MTR and Project End
Signed PPP Contracts
World Bank PMUs
Component Three: (a) Increase in billing and collection efficiency in all 3 SWA.
25%
77% 79% 80% Quarterly, Annually, MTR and Project End
PMU progress reports
World Bank PMUs
(b) Increase in water availability to end users in all 3 SWA.
30% 45% 50% 80% Quarterly, Annually, MTR and Project End
PMU progress reports
World Bank PMUs
(c) O&M coverage from revenues in all 3 SWA.
20% 55% 80% 100% Quarterly, Annually, MTR and Project End
PMU progress reports
World Bank PMUs
Component Four: (a) State Water Regulatory Agencies established.
0 1 3 Quarterly, Annually, MTR and Project End
PMU progress reports
World Bank PMUs
(b) National Water Policy completed. Draft policy available
Policy enacted Policy implemented
Quarterly, Annually, MTR and Project End
PMU progress reports
World Bank PMUs
(c) Establishment of national strategy to increase low income household connections.
National strategy completed
NA NA Quarterly, Annually, MTR and Project End
PMU progress reports
World Bank PMUs
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ANNEX 2: RISK MONITORING AND MITIGATION MATRIX
Risk Rating at Appraisal
Risk Mitigation Measure Agreed at Appraisal
Progress Over the Last 5 Years
Current Rating
To Project Development Objectives
State Governments do not raise tariffs sufficiently to sustain investments and maintain adequate cash flow in the SWAs.
Substantial Performance Contracts with private sector operators which are dependent on a minimum cash flow.
Establishment of state water regulatory agency early on in Project implementation.
State Water Policy and Water Law developed. This will give the SWAs to able to regulate the tariff structure as and when required. This will build in confidence for the private operator to perform effectively.
The Water Policy and Law have not signed by the Governments the States the Regulatory Agency are yet to be established.
Moderate
Constraints in electricity availability make full utilization of restored or new investments impossible
Substantial Engineering approach that recognizes this reality in Nigeria and provide for sufficient standby electricity sources
Standby generators have been provided, SWAs have agreed with PHCN to provide more energy and some states have gone to establish IPP like the LPFO in Ogun now under installation to serve the Major six treatment plants located in the state.
Moderate
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To Component Results
Not all PPP contracts are implemented because the private sector perceives Nigeria as too risky.
Moderate Introductory PPPs, i.e management contracts. Careful and simple contracts design and, if there is no PPP contract, clearly stipulated public sector efficiency standards in order to access funds for infrastructure expansion.
Simple designed Management contracts have been developed and implemented in Kaduna, while Performance improvement Contracts have been developed and under implemented in Ogun.
Moderate
Civil Works are severally delayed or not completed because of problems with procurement or financial management
Moderate PIU training, use of State Project Financial Management Units, and a project design that has few contracts.
PIU training as well as basic understanding on the procurement and financial management by Government Officials has improved. Delays in processing contracts, payments, and auditing has improved substantially as well as project management.
Moderate
Project Financial Management Risk for not put in place proper institutional frame work to management and operate the project implementation properly.
Moderate Use of PFMUs in each state, adequate supervision by Bank FMS, and external audits.
Regular supervision by Bank FMS has improved financial management with prompt delivery of PFM and audits reports
Moderate
Overall Risk Rating Substantial Moderate
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