Document ofThe World Bank

Report No: 23934-UNI

PROJECT APPRAISAL DOCUMENT

ONA

PROPOSED CREDIT

IN THE AMOUNT OF SDR 76.3 MILLION(US$101.0 MILLION EQUIVALENT)

TO THE

REPUBLIC OF NIGERIA

FOR A

UNIVERSAL BASIC EDUCATION PROJECT

August 15, 2002

Human Development mCountry Department 12Africa Regional Office

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CURRENCY EQUIVALENTS

(Exchange Rate Effective July 2002)

Currency Unit = NairaI Naira = US$.0083

US$1 = 120 Naira

FISCAL YEARJanuary - December

ABBREVIATIONS AND ACRONYMS

CAS Country Assistance StrategyCPAR Country Procurement Assessment ReportDflD Department for International DevelopmentEMIS Education Management Information SystemEFA Education Fast Track ActivitiesESA Education Sector AnalysisFARAH Financial Accounting, Reporting and Auditing HandbookFGN Federal Government of NigeriaFMAP Financial Management Action PlanFMOE Federal Ministry of EducationFR Financial RegulationsGER Gross Enrollment RatioGDP Gross Domestic ProductHEAP HIV/AIDS Emergency Action PlanICT Information and Communications TechnologyLGA Local Government AuthorityLGEA Local Government Education AuthorityMAP Multicountry Aids ProgramNACA National Action Committee on AIDSNCE National Certificate of EducationNPCU National Project Coordinating UnitNETCOM National Steering ConmmitteeNIEPA National Institute for Education Planning and AdministrationNERDC Nigeria Educational Research and Development CouncilPAS Project Accounting SectionPAU Project Accounting UnitPCU Project Coordinating UnitPEP Primary Education ProjectPFMU Project Financial Management UnitPIU Project Implementation UnitSA Special AccountSAG State Accountant-GeneralSMC School Management CommitteeSMOE State Ministry of EducationSOE Statement of ExpenditureSPEB State Primary Education BoardUBE Universal Basic Education

UNESCO United Nations Educational, Scientific and Cultural OrganizationUNICEF United Nations Children's FundUSAID U.S. Agency for International Development

Vice President: Callisto MadavoCountry Director: Mark Tomlinson

Sector Manager: Arvil Van AdamsTask Team Leader/Task Manager: Brigitte Duces

NIGERIAUNIVERSAL BASIC EDUCATION PROJECT

CONTENTS

A. Project Development Objective Page

1. Project development objective 22. Key performance indicators 2

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 32. Main sector issues and Government strategy 33. Sector issues to be addressed by the project and strategic choices 7

C. Project Description Summary

1. Project components 112. Key policy and institutional reforns supported by the project 143. Benefits and target population 144. Institutional and implementation arrangements 14

D. Project Rationale

1. Project alternatives considered and reasons for rejection 172. Major related projects financed by the Bank and other development agencies 183. Lessons learned and reflected in the project design 184. Indications of borrower-conmmitrnent and ownership 195. Value added of Bank support in this project 19

E. Summary Project Analysis

1. Economic 202. Financial 203. Technical 214. Institutional 215. Environmental 226. Social 237. Safeguard Policies 24

F. Sustainability and Risks

1. Sustainability 252. Critical risks 253. Possible controversial aspects 26

G. Main Credit Conditions

1. Effectiveness Condition 262. Other 27

H. Readiness for Implementation 28

L. Compliance with Bank Policies 28

Annexes

Annex 1: Project Design Summary 29Annex 2: Detailed Project Description 31Annex 3: Estimated Project Costs 35Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary 36Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 45Annex 6: (A) Procurement Arrangements 46

(B) Financial Management and Disbursement Arrangements 55Annex 7: Project Processing Schedule 65Annex 8: Documents in the Project File 67Annex 9: Statement of Loans and Credits 69Annex 10: Country at a Glance 71

MAP(S)IBRD 31230

NIGERIAUniversal Basic Education Project

Project Appraisal DocumentAfrica Regional Office

AFTH3

Date: August 15, 2002 Team Leader: Brigitte DucesSector Manager/Director: Arvil Van Adams Sector(s): General education sector (34%), SecondaryCountry Manager/Director: Mark D. Tornlinson education (33%), Primary education (33%)Project ID: P071494 Theme(s): Education for all (P), Other humanLending Instrument: Specific Investment Loan (SIL) development (S)

Project:Financing Data.,[ Loan [X1 Credit [ Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others:Amount (US$m): 101.0

Proposed Terms (IDA): Standard CreditGrace period (years): 10 Years to maturity: 35

Service charge: 0.75%Financing Plan.(US$m). Source Local Foreign TotalBORROWER 13.00 0.00 13.00IDA 64.00 37.00 101.00UK: BRITISH DEPARTMENT FOR INTERNATIONAL 9.20 5.80 15.00DEVELOPMENT (DFID)

Total: 86.20 42.80 129.00

Borrower: FEDERAL REPUBLIC OF NIGERIAResponsible agency: MINISTRY OF EDUCATIONFederal Ministry of Education (FMOE),National Project Coordination Unit (NPCU)Address: Abuja, NigeriaContact Person: NPCU Coordinator, Mrs. M.O. OlorunfunmiTel: 09 5230089-90 Fax: 09 5239741 Email:

Estimated Disbursements (-,Bank FY11S$m):' - SFY,- la2900 3,4' 7 l~--E @teS.,,lrs ,Ri2tOo5 'llz, ,-,20,l, -lll -2007 - 2008

Annual 36.80 33.00 20.00 5.60 4.30 1.30Cumulative 36.80 69.80 89.80 95.40 99.70 101.00

Project implementation period: 5 yearsExpected effectiveness date: [2/31/2002 Expected closing date: 06/30/2008

COa PAD WFn R._ M 0

A. Project Development Objective

1. Project development objective: (see Annex 1)

The project would support Government of Nigeria's plans to implement a program to achieveuniversal basic education (UBE). The objective of the Bank's support would be to increase thecapacity of states and local governments to manage and implement the UBE program effectivelyand efficiently. The goals are to assist states and local governments to establish and manageschools with local participation and to build capacity in critical skills such as budgeting,participatory planning, financial management, procurement, and project implementation.

2. Key performance indicators: (see Annex 1)

INDICATOR TARGETSDevelopment Objective IndicatorsImproved quality of state plans Review of state plans taking less time to review

with fewer iterationsIncrease in parental involvement and community ach participating local government has at leastparticipation in schools and in education 20 demonstrable incidences of parental and

community involvement in its schools per yearIncrease in admission rates to Class 1 in primary Admission rates increase by at least 20% over theschool's roject period, provided admission is below 100%

inthe stateIncrease in completion rates in primary school Completion rates increase by at least 10%,

provided the rate is below 90% in the stateDecrease in the gender gap in schooling Where there is discrepancy in gender enrollment,

a target of 50/50 admission into Class 1 isachieved by the end of the project.

Increase in transition rate from primary to Transition rate increases by at least 20% duringsecondary schools the project period, provided junior secondary

school investments are part of the project in that

Output IndicatorsIncrease in the number of school places and of School places increase by at least 20% by the endschools in good physical condition of the projectDecrease in pupil-teacher ratio Where pupil-teacher ration is above 40:1, the ratio

decreases to 40:1 by the end of the projectIncrease in the number of qualified teachers At least 20% of the teachers currently unqualified,

reach minimum qualification by the end of theproject

Acceptable implementation of state plans, At least 70% of the plans are implemented eachaccording to the greatest needs. yearAdherence to schedules in planning Each year, implementation is no more than 20%

behind schedule

B. Strategic Context

1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)Document number: 22208-UNI Date of latest CAS discussion: 2002/06/06

The Joint Interim Strategy Update for Nigeria states the major role for the Bank to help theNigerians build their capacity to manage their own resources effectively. This proposedframework rests on three pillars: (i) improve economic-govemance; (ii) create the conditions forrapid private sector-led, poverty-reducing growth, particularly in the non-oil economy; and (iii)empower local communities to play an active role in their own development. Bank assistance forUniversal Basic Education will be concemed with helping to improve the performance andaccountability of federal and state governments; and with strengthening communities and localgovemments in implementing their development programs.

2. Main sector issues and Government strategy:

Major Issues

The situation for Basic Education in Nigeria currently requires major improvements. Itcan be characterized as follows:

A General Deterioration of the System - The education system has deteriorated very much overthe last ten years. The enormous gains (and public investments) in education which began in thesouthem regions in the mid 1950's and in the north in the 1970's and which produced nearuniversalization of primary schooling in large parts of the country have been seriouslyundermined in the last decade. Physical conditions in the public schools have worsened. Manyschools are no longer operational or operate with much fewer classrooms than needed; most arewithout furniture or teaching materials. For example, Ondo state reports of the 11,041classrooms, 8,346 are in bad condition and unusable. Bomo state reports 2,808 of its 4,016classrooms needing rehabilitation. Teachers have lost much of the post-independenceenthusiasm, dedication and devotion to nation building. Although the provision of teachersseems to be adequate on average, there are very large and overcrowded schools in urban areas,and there is a wide range of pupil/teacher ratios across the country. The ratio varies from 1: 105for Bayelsa, to 1:39 for Katsina and 1:31 for Niger state.

A Decline in Gross Enrolment Ratio - Primary Education enrollment figures for 1998 (latestyear of reliable data), show about 16 million children in school, as compared to 13.8 million for1991. This represents, however, a decline in Gross Enrollment Rate from 84.2% to 80.8 %, andrepresents wide variations between states, with a low of 38% for Zamfara and 48% for Deltastates, while the GER in some states is well above 100% (Osun, Oyo and Akwa-Ibom). Thenumber of schools, now at about 40,876, represents an average school size of 383 pupils perschool, with an average of ten teachers each; not an ungenerous situation overall.

The Impact on the Poor - The poor have born the greatest impact of the deteriorating situation.Because of the failure of the public school system, where few schools are operating adequatelyand where the quality of instruction is generally poor, parents are turning to private schools. Butthe costs of private education are high and this education is available only to children whose

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parents can afford it. For example, during the 2001 school year, primary school teachers were onstrike for seven months until their arrears in salary increases were paid. Parents with the means.and with concern for their children's education increasingly transferred their children to privateschools, while those who could not afford this, went without schooling. Schools in poor andrural areas are also physically in the worst conditions and with the least instructional materials.

Limited Access to educationforgirls in some parts of the country - Across the country, girlsenrollment was 45% in 1998, with wide disparities between the states. Enrollment of girls wasnear equal in Oyo and Osun, while only 18% of the girls go to school in Zamfara, 23% in Sokoto,and 34% in Katsina. For many Moslem parents, there is resistance to sending their girls toreceive a secular education, and the location and physical conditions of schools often do not helpto overcome these concerns. There are, however, some state initiatives to address this trend.Some states (for example, Kano) have started "girl center" programs where girls are given a basiceducation, while several of the northern, largely Islamic states are improving the quality of thekoranic schools, attended by many girls and which are currently not part of the formal system.

This poor situation can be largely ascribed to the following issues:

Institutional and Organizational Weaknesses. The basic education sector, and individualorganizations within it, are weak because of the following factors: (a) The division of labor inthe sector is inefficient. Major functions are duplicated, fragmented, or inappropriately placedamong the three tiers of government, especially in the management of primary education. Whilethere is primary education responsibility in the federal ministry of education and in the stateministries, the Universal Basic Education Program (UBE) and the State Primary EducationBoards (SPEBs) in each state also have responsibilities for primary education. The recentSupreme Court ruling, more firmly placing basic education responsibilities with the states maybring greater clarity in roles and responsibilities. (b) The sector lacks a clear, detailed andshared direction. This refers both to vision and to strategies. Parliament has declared a vision of'free, compulsory, universal basic education for all', and the federal ministry of education hasproduced a more detailed draft statement of vision based on this declaration, at the national level;but the vision is accompanied only by bits and pieces of strategy, and not by an integrated,holistic national strategy. Moreover, the vision, as well as the elements of strategy that do exist,have not been effectively disseminated and are not fully shared by all. Beyond an acquaintancewith the general statement, there is little knowledge and understanding at state and local levels ofwhere education is heading, and how it will get there. It is not clear that there is consensusregarding girls education and the content of education. Recently, however, the minister hasestablished and Education-for-All Secretariat, that is embarking on an ambitious program ofsensitization and more systematic planning at the state level. (c) The sector seems to be bloatedwith people in non-teaching positions, and the ratio of non-teaching to teaching staff is ratherhigh. In addition, many people are not fully utilized, and many are inefficient even when utilized.Inefficiency results not only from a low level of skill, but also from lack of incentives and poormonitoring and control. (d) The sector suffers from poor administration and management, notonly because managers and administrators lack basic skills, but also because the environment inwhich they have to do their work is often deprived of even basic material resources, such asoffice space, energy, office equipment, telephones, filing cabinets, vehicles, etc. (e) One of thekey functions of management is to plan. However, managers and planners at all levels have

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difficulties in planning not only because they lack planning skills, but also because muchinformation is lacking, and because the information that is available is highly unreliable. TheFMOE, the SMOEs, the SPEBs lack the necessary data to produce good projections. Most statesare unclear on key questions, such as the number of children who are out of school and who needto be accommodated. The action plans they produce remain largely general enrollment drivesand UBE campaigns, and they do not reflect appropriate thinking on how the supply of schoolsand teachers would cope with any possible increase.

Low Quality of Basic Education. Public schools, which the majority of Nigeria's childrenattend, do not deliver adequate levels of teaching or learning outcomes. An achievement study,carried out in 1996 by the Federal Ministry of Education with support of UNICEF and UNESCO,shows that nationwide, students in primary Grade 4 in public schools on average respondedcorrectly to 25 percent of items in the literacy test and 32 percent in the numeracy test. The verylow scores in literacy (and indeed in the other subjects) may be largely a result of the very poorimplementation of language policies and the use of English only in the tests. The languagepolicy states that teaching and learning in the first three years of primary education is to becarried out in one of the three major languages (Hausa, Yoruba, Igbo) with transition to Englishmedium in upper primary beginning in class 4. Teachers however are inadequately trained tostructure learning effectively in a bilingual environment, and texts and materials to support theuse of Nigerian languages are inadequate. Lack of teaching materials generally and the poorphysical environment are not conducive to good teaching and learning. Teachers are trainedpoorly and inadequately in the colleges of education, with an inappropriate curriculum forpreparing primary school teachers that is largely geared towards producing subject teachers, evenfor primary schools. While teachers had been highly underpaid, with the resulting low morale,teacher salaries at all levels were increased substantially (up by 200 percent) during the past year,making the teaching profession a more attractive one.

Poor teacher management Teachers and teaching have low status in Nigeria, especiallyprimary school teachers. This has arisen as the result of declining conditions of service,extremely poor working environments and lack of incentives and reward systems to improveperformance. Recent large salary increases and alignmnent of teachers' salaries with that of otherpublic servants should help to redress some aspects of low teacher morale. But to regain theconfidence of parents and communities, there will need to be better school performance andhigher learning achievements of students. There are dedicated teachers working under severelyconstrained conditions but for teacher and school's performance to improve there are severalparallel sets of issues to be addressed. These have to do with improving the physical aspects ofthe working environment (adequate and safe space, furniture, blackboards, books and materials),deploying qualified teachers more efficiently and making teacher education and trainingprograms much more relevant to the learning needs of students. Primary school management isat a low point with considerable confusion over who is responsible for which aspects of teachersmanagement under the current federal, state and local government arrangements. Localgovernments are responsible for primary schools but have few if any resources to support schoolsother than through deployment practices and school supervision. Resources for regularin-service teacher training and professional support activities are provided at the state level butare extremely limited and come mostly from donor sources. The result is that most teachers have

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not participated in any in-service training since they graduated from their initial teacher trainingcourse and the majority of teachers participating in certificate upgrading programs are paying fortheir own participation in distance education or part time courses at colleges of education.

Government Strategy

The new president, elected in 1999, is highly committed to the education system. He hasstrongly reaffirmed the vision of universal basic education for all and initiated the introduction ofthe UBE Bill into Parliament. The Nigerian Government now has a universal, 9-year basiceducation policy, and the target date for its achievement is 2015. The government hassubstantially increased capital expenditure allocations to the education budget (US $ 100 millionannually over the last three years), and has embarked on a massive national program to achieveUBE.

At the national level, the government's strategy for dealing with the issues listed above andachieving UBE is clear, though not complete. Its strategy to deal with the issue of access is to: (a)rehabilitate the current stock of schools and to build new schools and/or classrooms wherenecessary; (b) design special programs targeting girls and hard-to-reach groups (such as childrenin fishermen and nomadic communities); (c) decrease the ratio of pupils to teacher in the schools;and (d) form strong partnerships with local governments and communities. Its strategy toimprove the quality of education is to: (a) expand early childhood care and education; (b)improve teacher training; (c) ensure the provision of teaching/learning materials; and (d) provideother forms of teacher support.

In some areas, a clear strategy from the federal government is lacking. An important examplerelates to the supply of teachers. From the UBE capital budget allocation, a substantial amounthas been allocated to upgrading existing teachers to the required qualifications. But, planning inthe country's teacher training colleges on how to ensure for an adequate supply of suitably trainednew teachers, is currently nonexistent. Another example has to do with the impact of currentconditions on the poor. The government has no specific strategy for this, other than to payparticular attention to rural schools and ethnic minorities when it implements the generalstrategies for improving access and quality. In the area of institutional capacity too thegovernment does not have yet any strategy, among others, because it has not yet fully analyzedissues in this area. Only now it is analyzing the capacity of the education sector in the context ofthe Education Sector Analysis (ESA), and the institutional weaknesses are beginning to receiveattention. To its credit, though, it may be stated that the government is fully aware thatinstitutional and organizational weaknesses exist and has added capacity building to its list of keyobjectives.

The federal government's strategies are general. In most of the areas indicated above they needto be, because it is up to each and every state to select specific ways and means for achieving thenational objectives in its own education system, based on its particular conditions. But most ofthe states have not yet developed the more specific strategies to deal with the issues of access,quality, equity and capacity. During the last year, some states, mainly those seeking to receivesupport through this project, have started to develop their strategies, and a number now have atleast some of the key elements in place. These elements fit well into the national strategy.

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All states emphasize the rehabilitation and construction of classrooms and are alreadyimplementing building programs with federal and state funds. Many have made action plans forincreasing enrollments, and some are targeting girls in particular. In many states, especially in theSouth East and increasingly in the North, an important element of the strategy is to developpartnerships with local governments and communities. In the Southwestern states, where theemphasis is on quality, an important element of the strategy is to decrease the pupil/teacher ratiosand ensure sufficient teaching materials are in place. These states have also decided to developspecial programs to address hard-to-reach groups, such as the delta fishermen. In the Southeastand South-South, where most children are in school, but completion rates are low (averagingfrom 63% for South-South, to 77% for Southeast), a strategies being followed are to make schoolgenerally more attractive, by giving them more resources and, where the completion rate for boysis lower than for girls, to target boys especially. During the last several years, the Banksupported Primary Education Projects (PEP 1 and PEP 2), have introduced highly successfulself-help programs, with grants provided to schools and communities to assist in renovating andimproving primary schools.

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

At the state level:Three important strategic choices, that influence the sector issues to be addressed in this project,were made: (a) to focus predominantly, though not only, on the states, (b) to let the states selectthe issues that will be addressed by them, and (c) despite this freedom of selection, to require alfstates to address the issue of institutional capacity.

The decision to focus predominantly on the states is based on the desire to help them regain theirproper role in basic education, to enhance decentralization, and to avoid the duplication andwaste that exist currently with the parallel policy implementation structure. The rationale thathas supported the federal government's substantial role in basic education so far has been that thestates lack capacity to manage it. Focusing on the states, and requiring them to address capacityissues (which is the third strategic choice), will help resolve this issue. The predominant focuson the states will not exclude some important activities at the federal level, and the project has acomponent to cover such activities. However, these activities will be confined to the key areasthat are supposed to be exclusively or predominantly in the domain of the federal government,according to the 1999 constitution. Thus, the project will support the further development ofENDS all the way up to the federal level, and will help strengthen the capacity of federalinstitutions that are charged with analysis and the production of policy and strategy alternatives.

The decision to let the states select the issues that will be addressed by them is based on recentexperience with the implementation of UBE. During the last two years, all UBE activities weremanaged to a large extent at the federal-level. These activities have not been very successful,because of the wide disparity of problems, and the increasing autonomy of the states and localgovernments. Letting the states select the issues, and thus making the project a part of eachState's UBE plan, will ensure that state priorities are followed and will increase the involvementand commitment at this level. Moreover, the project will contribute to the states' very capacity todevelop their UBE plans. There is no risk that the states will select issues that are considered tobe irrelevant to the national vision, or that are not within current priorities; there is also no risk

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that they will overemphasize some of the relevant issues at the expense of the others. The projectrequires them to select the issues from a given menu and they cannot allocate more than a certainpercentage of the funds to the area of construction and rehabilitation that is usually the easiest,the first and the largest to be addressed.

The decision to require all states to select institutional capacity is a measure to ensure thatmatters of capacity are addressed, because capacity is the biggest weakness and because it is anoverarching issue influencing everything else. Being a complex and difficult matter, capacitytends to be reduced to training, or left aside altogether. Weaknesses resulting from poor divisionof labor, inadequate vision and strategies and poor management are usually not selected forattention. Thus, the requirement to include capacity building activities in the state programs is anattempt to generate some action in these areas.

The main goal of the Bank's assistance will be to assist states in preparing solid and realisticstrategies for the implementation of UBE, using different sources of funds, and working inalliance with local governments and communities. The process of planning and implementationfor UBE would be more decentralized, with technical assistance provided. Some major policieswould need to be put in place, to ensure sustainable success of UBE: issues of costs andfinancing; issues related to teacher development and qualifications; and a streamlining of theinstitutional structure for basic education.

At the country level:Overall for the education system, the project would begin to address several policy sector issuesthat are key to resolving the current situation on a national level, either through activities,increased sector dialogue, or preparation for future investments:

* Costs andfinancing ofprimary schools and cost recovery. To achieve UBE, substantialadditional public funds will be needed. Education in Nigeria, in general, is underfundedcompared to other Sub-Saharan African countries, with substantial costs being incurredby households to allow their children to go to school. To make UBE a reality will requirea review of the current cost and financing picture for primary education, to lighten theburden, especially to poor parents. While it is important for parents and communities tobe involved in the education of their children, at the same time, the goals should be toensure that parents' share of carrying the costs of education does not increase. Theself-help program for school renovation and rehabilitation currently relies heavily onparent involvement, and requires community contributions, largely in kind or in labor. Itis planned to continue this approach in the UBE project,while at the same time assistingwith the provisions of textbooks and other school inputs that otherwise would fall onparents to provide.

* Teacher numbers and teacher quality. The National Education Policy, 1977 (revised1981) set the National Certificate of Education (NCE) as the minimum teachingqualification for primary school and junior secondary school teachers. This is athree-year program taken at a college of education after completing secondary school year12. Target dates to achieve the NCE as standard for all teachers have been revised onsubsequent occasions but it has not yet been achieved universally. Currently, over 40

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percent of primary school teachers do not meet this standard and those who are qualifiedare unevenly distributed across and within states. Northern states generally have lowernumbers of teachers holding the NCE and within states the distribution across LocalGovernment Education Authorities of teachers having an NCE is also likely to be uneven.Teachers in urban areas and larger towns are more likely to be better qualified than thosein the more rural parts of the state.

Students entering the NCE program are choosing subjects that will leave their optionsopen for careers other than teaching. Consequently there is a gross shortage of subjectspecialists in core curriculum areas at the junior secondary level and the numbers ofstudents selecting primary school teaching are in the minority. The outcome is a shortageof mathematics and science teachers in junior secondary schools and an equally smallproportion of NCE student teachers taking those subjects. For example, in one state withhigh education indicators, it is estimated that secondary schools currently have only abouthalf the numbers of subject specialists required for mathematics, integrated science,physics, social studies, geography, fine arts, music, business studies, commerce andaccounting.

It is also the case that many NCE holders teaching in primary schools did not specialize inprimary education studies when undertaking their course. One College of Educationcurrently has only 4 NCE students enrolled in the primary education studies program.From recent classroom research it appears that many NCE holders teaching in primaryschools have few pedagogical skills to teach literacy and numeracy to young children, tooperate effectively in a bilingual teaching and learning context, or to manage teaching andlearning in multi-grade situations common to small rural schools.

These examples are illustrative of the broader issues of teacher quality and teacher supplyand deployment that need to be addressed in UBE planning. Because the NCE is athree-year program and the output of appropriately qualified students from secondaryschools is low, Government will need to consider implementing proactive programs nowto encourage more students to take the mathematics, science and technology strands insecondary school and encourage more of them to enter teacher education. It will alsoneed to consider strategies to accelerate access to NCE upgrading courses, and to provideincentives for more student teachers to prepare specifically for primary school teaching.Otherwise, the pool of prospective teachers for these levels and these subjects will remaincompletely inadequate for a quality UBE program. However, even without the increaseddemand expected of UBE, the distribution of adequate numbers of appropriately qualifiedteachers for primary and junior secondary education is an issue right now.

* Teacher education and training, professional support and performance monitoring.Whilst efforts have been made in recent years to encourage teachers to upgrade theirqualifications to NCE level and to provide the incentives for them to do so, there is littleother opportunity for teacher professional development through school based professionalsupport systems or local in-service workshops and training programs. Recurrentin-service training for teachers is not widely or regularly available, largely due to budgetconstraints and lack of incentives for participation. Teacher development at the schooland school cluster level is at the core of improving teaching and learning in classrooms,and for most teachers needs to be the main source of professional development. A

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number of pilot projects are exploring whole school development approaches, andteacher-led networks at the school cluster level. These could well be extended further toprovide greater opportunities for teachers to share what they know best, for schools towork towards achieving specific achievement goals and for supervision and performancemonitoring to be more closely linked through partnerships for school improvement.

A number of flexible and alternative schooling arrangements are in place or are beingpiloted to meet the needs of school-age children and young adolescents who may not haveready access to regular schools or who have dropped out before completing the basiccycle. Teachers for these groups of children need special skills in language and literacy,open learning styles and flexible scheduling. Programs are being developed by theNomadic Education Board and there are special programs for teachers in qur'anic andislamiya schools that offer the national curriculum. The Federal College at Yola, forexample, is offering the Grade II training course to teachers for nomadic communities andUNICEF is supporting non-formal education training programs and curriculum forqur'anic schools.

(a) Within the context of state programs for UBE, the project will give priority toschool and teacher development through inservice training and mentoring programs atthe school and cluster levels complemented by local demand driven teacherworkshops and in-service training. The focus will be on the links between languageof instruction, learning and literacy and would need to be supported by availability ofappropriate teaching and learning materials. Emphasis will also be given to managingteaching and learning in multi-grade situations in small rural schools (this includesmost nomadic schools and many qur'anic schools). Support will be provided forteachers upgrading their qualifications at state colleges of education or throughdistance education programs. At the federal level, and in order that the NCE forprimary school teachers leads to satisfactory outcomes, the project will supportcurriculum revision of the NCE upgrading programs so that it better recognizesteachers own experience and better reflects the needs of teaching and learning inschools they work in. As additional support for this, colleges of education staff whoare working in primary education will be offered opportunities for staff developmentand training in areas of the primary school curriculum.(b) At the federal level, in conjunction with government's education sector analysis,the project would support a review of teacher education and training of secondaryschool teachers (with a focus on junior secondary teachers), and an analysis of teachersupply and demand for secondary schools (with an emphasis on junior secondaryschools).(c) At the federal level, in conjunction with government's education sector analysisand further Bank sector work on institutional and financial issues in education, theproject would support additional work on resolving teacher management issuesespecially in the primary education subsector.

* Textbooks, reading books, and other instructional materials. Aside from textbookssupplied under the First Bank-financed Primary Education Project (PEP 1); andsupplementary readers, supplied under the Second Primary Education Project (PEP II),little or no books have been distributed to the schools in recent years. Although many of

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these books can still be found in the schools, it is fair to say that there is a large shortageof materials throughout the schools. The emphasis in the UBE project is on awhole-school approach; with the project providing for school materials, if states requestthis in their proposals. If no financing is requested, the state plans have to clearly statehow books will be provided. Long-term it will be desirable to develop a policy of regularprovision of school books, as part of the recurrent costs of running a school, and on thesame basis as the provision of the teacher, and finding low-cost ways of providing thesebooks.

* School Construction and Rehabilitation. The deteriorated condition of most schools inNigeria is one of the most urgent issues to address; and with the greatest priority. It is,therefore, planned that up to 60% of the project funds would be allocated to schoolconstruction and renovation. The needs on this area are so great, that low-costalternatives are needed in order to make progress in a reasonable amount of time. TheUBE project would provide most of the financing for school construction andrehabilitation through self-help grants to communities, as was piloted under PEP I andfurther implemented to all states under PEP II.

Several major donors have renewed their interest and commitment to the country's development,and are committing their support for basic education. The Bank is working together withUNICEF, UNESCO, DFID, and USAID on a coherent strategy and set of priorities for support toUniversal Basic Education. This work is being done within the context of government'semphasis and the donors' support for the ESA. Several elements of the preparation work forUBE support will also feed directly into the ESA work.

C. Project Description Summary

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

Over the long-term, Bank support for UBE would be available to all states in the country, if theyare interested. Because the approach taken here, however, is new and has not been tried before inNigeria, initially. up to sixteen states had been invited to participate in this project. It is theintention to use the lessons learned from engagement with this initial set of states for scaling upfurther within each state and to all 36 states in future Bank operations.

Of this initial group, sixteen states that are ready with their proposals and are still interested toparticipate will be included in the project. These states are: Borno, Taraba, Katsina, Kaduna,Jigawa, Niger, Plateau, Benue, Lagos, Oyo, Rivers, Bayelsa, Ebonyi, Ekiti, Enugu and Imo.Invited states who have indicated their interest, and are eligible to participate and implement theproject, have been able to fulfill the following conditions:

* institutional capacity assessed; core capacity for project implementation in place; andwillingness to achieve other capacity strengthening activities as part of the Bank support;

* financial capacity and financial structure in place, including the financing mechanism forfunds to be distributed to communities;

* State Governor has submitted a written notification of his commitment to the objectives andterms of the project;

* preparation of a satisfactory proposal from each state, presenting the UBE strategies for thestate, with a priority for the underserved areas of low enrollments.

In each state, project activities will be carried out in six local governments during the first twoyears of the project, these local governments to be selected based on identified needs for UBE,and as stated in the proposal. If a state would like to expand the activities to other localgovernments during the remaining project years, they can do so, provided implementationperformance has been satisfactory during the first two years.

There are two components in the project:

Component 1: State Programs for the Implementation of Universal Basic Education. Duringproject preparation, each participating state has prepared an overall UBE plan for the next fiveyears, based on an analysis of data and existing conditions, and developing detailed strategies forachieving UBE. States have prepared and submitted annual proposals for Bank financing of upto US $ 5 million per state for the five-year period, reflecting the requirements as stated in theoverall plan, and within the context of other sources of funding available to the state. Bankassistance can be requested for: (i) institutional strengthening, including support for EMISdevelopment; (ii) increasing the quality of schools, including upgrading of physicalinfrastructure, teacher support and teaching materials; and (iii) increasing access, especiallythrough incentives schemes and strengthening community schools.

For the sixteen states, the project will provide assistance for a total of eight operations in eachstate. These include the following (this is compulsory):

Strengthening the organizational, managerial and operational capacity of states andLGA's.Support for EMIS development.Project management and monitoring and evaluation of the project.

In addition, each state will need to select a maximum of five operations from the following list,providing a balance, to achieve a whole-school approach and reflecting the priority areas towardsachieving UBE in the state:

A. Physical Infrastructure (a maximum of 60% of thefunds requestedfor thefiveoperations)

Renovation or reconstruction of existing schools, including construction of additionalclassrooms 'and toilet facilities; following the procedures set in the self-help model forcommunities under PEP II.

* Construction of new schools, under the management of communitiesSchool furniture

B. Teacher SupportTeacher training programs to upgrade existing teachers to the required specificationsTeacher training programs to support teachers with ongoing professional support

* Incentive schemes for teachers in remote areasC. Teaching Materials

Establishment of school libraries, including the purchase of library books andsupplementary readers and the training of teacher librariansTextbooks and instructional materials.

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D. Measures to Increase Access* Programs for strengthening community (such as Koranic and islamiyah) schools* Incentive schemes for disadvantaged groups, such as girl enrollment, boy enrollment,

including support for alternative schools (market schools, girl centers, etc.).

Component 2: Federal Program Management and Monitoring, Policy Development, andSystems Support. Activities at the federal level to support UBE will be financed. The mainresponsibility for implementing the Government's UBE program is at the state and local (LGA)level, and most of the support provided through the project will targets these levels. However,effective implementation of the program will also require considerable strengthening of thecapacity of key federal institutions charged with policy development and with training ofeducation planners, managers and policy makers at all levels of the education system.

A total credit amount of US 21 million is allocated for this component. The project will providecapacity development activities in the following areas:

* Interaction between HIV/AIDS and education.* Institutional Strengthening of NIEPA.* Collection, analyzing and publishing education statistics.* Education sector policy development.* Support for EFA activities* Capacity building of Federal Agencies* Project management and monitoring of implementation* Reform of the Inspectorate

Indicative of Bank- % ofComponet., Coits, - t financing Bank-

~ .. !-. ,-- J :1L;; ;., + . 1 , (US$M) 9 T,otal (US$M) flnrni ngUBE State Action Plans 100.30 77.8 80.00 79.2UBE Federal Program Management 28.70 22.2 21.00 20.8

Total Project Costs 129.00 100.0 101.00 100.0Total Financing Required 129.00 100.0 101.00 100.0

Complementing the project, DFID will provide parallel financing for a package of TechnicalAssistance inputs to support the implementation of UBE in the sixteen states. This support willbe for Technical Assistance as follows: one long-term national (i.e. Nigerian) consultant to eachof the sixteen states, together with short-term consultancy, training courses and study visits (for atotal of about US $ 100,000 per year per state). In addition, it is suggested that DFID mightprovide five internationally recruited specialists to assist with project management andmonitoring and evaluation at the federal level, FME (with EDB/EMIS, and with HIV/AIDS), andNIEPA (with training in planning, including ICT training and modeling the impact of AIDS),complementing Component 2. This Technical Assistance package will all be recruited andmanaged by a consultancy firm or managing agency, and monitored by a DFID EducationAdviser based in the World Bank Country Office. The primary purpose of this support is toenhance the capacity of Federal government agencies and of state governments for the planningand management of UBE.

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

1. Development and implementation of state and local government planning processes,based on local conditions and reflecting needs of communities and local governments.The project would support the capacity strengthening activities required for states todevelop a deliberate and coordinated planning process for UBE, rooted in the analysis ofrigorously collected data.

2. Strengthening of state and local government capacity to implement UBE, including-providing assistance for states to come up with innovative ideas for achieving UBE.

3. Priority attention given to targeted programs for girls' participation in basic education,with a monitoring system to ensure that progress is made.

4. Strong community involvement in primary education. Building on the experiences fromPEP I and PEP II with community participation, to improve the quality and physicalcondition of schools, Bank support would continue to give priority to self-help-typeprojects and investments.

3. Benefits and target population:

Benefits:* Stronger and more capable local governments and state offices for education, with better

planning and implementation capabilities.* A greater number of children who enter primary level one and go on to complete in a

primary school of decent quality.* A teaching workforce that is better equipped at ensuring that children learn in school.

Target Population:* Children of primary school age, with a focus on those that are not in school, especially

girls, and those with parents who are too poor to afford school.* Communities in participating states, with parents who are committed to bringing

education to their children.* State and local government officials in participating states.

4. Institutional and implementation arrangements:

Institutional arrangements:The three levels of government--federal, state and local government--have responsibilities forbasic education. At the federal level, the UBE program for primary education and the FederalMinistry of Education (FMOE), Directorate of Primary and Secondary Education havenational-level policy and monitoring roles. At state level, the State Primary Education Boards(SPEB) has primary education responsibility, while the State Ministry of Education isresponsible for secondary schools. Some states also have a State Secondary Education Board.Local Government Education Authorities (LGEA's) at the local government level have primaryschool responsibilities. Horizontal and vertical coordination between these offices is often aproblem, with duplicate responsibilities and poor communication between offices in some states.As part of the preparation process, institutional capacity assessments are being carried out in theparticipating states. Depending on the outcomes of these assessments, support for capacitystrengthening and institutional development would be available to states during implementation.

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Project Arrangements At the State level:

Each of the 16 states will establish a state UBE Advisory Committee for coordination of theproject in the state.

It is proposed for each state to set up a Project Coordinating Unit (PCU), as decided by theGovernor, to manage and coordinate the project's activities in the state. If the proposed projectconsists entirely of assistance for primary schools, the PCU can be established in the SPEB. Ifboth primary and secondary school assistance is requested, the Bank recommends for the PCU tobe in the SMOE, with a Project Implementation Unit (PIU) to carry out implementation in theSPEB. In this case, the PCU will to be staffed at a minimum with: project coordinator,procurement unit staffed with a procurement specialist, an accountant, and adequaterecord-keeping arrangements, and technical specialists for implementation. While the PIU willbe staffed with a project manager, procurement specialist, and technical specialists forimplementation.

In this case, these units will be responsible for:* Preparation and coordination of annual work programs and budgets, to be reviewed by

Bank* Maintaining project indicators and monitoring progress* Preparation of progress reports, twice a year for submission to the Bank* Implementation of project activities* Procurement activities under the project, according to Bank guidelines* Maintenance of project and financial records.

Project Arrangements at the Federal level:

* At the Federal level, a national steering committee (NETCOM) will be established, toprovide overall coordination and oversight.

* A federal-level National Project Coordinating Unit (NPCU) is responsible for overallcoordination of state-level implementation; for providing technical assistance with projectmanagement, financial management and procurement. The NPCU is staffed with aNational Project Coordinator, technical staff, a Procurement Officer, an accountant andan internal auditor.

Financial Management

A Project Accounting Section (PAS) will be established at the NPCU. The PAS will be headedby a professionally qualified Project Accountant who will be supported by appropriately qualifiedstaff. Initially, each participating state will establish a Project Accounting Unit in the PCU(PAU/PCU) to be headed by a professional qualified accountant. It is expected that the staff andfunctions of the PAU/PCU subsequently will transfer to the State Project Financial ManagementUnit (PFMU), which will be established in the State Ministry of Finance or other locationsatisfactory to the Bank under the new funds flow arrangements for Nigeria. The PFMU will beresponsible for managing the financial affairs of Bank-assisted projects in the state, including

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UBE. The PFMU will manage all special accounts of all IDA projects. In effect, the PFMU willbe a state financing platform for IDA projects. In the interim, i.e. while the PFMU's are beingcreated, the PAS at NPCU will be responsible for managing a joint Special Account of the States.Specifically, the PAS and PAU (or PFMUs) will, amongst other things, be responsible forpreparing budgets, monthly reports, quarterly financial monitoring reports, annual financialStatements and progress reports respectively for the Federal and State Components. PAS andPAUs (or PFMUs) will also be responsible for ensuring compliance with the financialmanagement requirements of the Bank and the government, including forwarding the quarterlyfinancial monitoring reports and annual financial statements to IDA.

At NPCU, a qualified internal auditor will be appointed to perform mtemal audit activities forthe project. Similarly, at the State level project activities will be reviewed and subjected tointernal audit by the PFMU's Internal Audit Section. Regular internal audit reports will besubmitted to project coordinators/officers, responsible ministries and the Ministry of Finance forthe State.

At the community level, a School Management Committee (SMC) will be established for eachparticipating school. The SMC will include a treasurer and a financial secretary. It will beresponsible for managing the financial affairs of the community self-help projects. Itsresponsibilities will include preparing the community self-help proposal for each school, seekingthe PCU's approval for the proposal, requesting funds from the PCU, maintaining appropriatedocumentation of all financial transactions, preparing and forwarding appropriate returns to thePCU and regularly rendering to community members the accounts of funds received andexpenditures incurred.

When the credit becomes effective, the project will use the transaction-based disbursementprocedures (i.e. direct payment, reimbursement, and special commitments) described in theWorld Bank Disbursement Handbook. If the borrower requests conversion to report-baseddisbursements during project implementation, a review will be undertaken by the Task Team todetermine if the project is eligible.

With respect to banking arrangements and funds flow, IDA will disburse the credit throughSpecial accounts (SAs) consisting (a) one SA for the federal component; (b) one SA for eachState that has established its PFMU in a form and substance satisfactory to the association, and(c) one joint SA for all the States that have not yet established their PFMUs - the joint States SAwill be managed by NPCU on behalf of the States. The participating States that have establishedtheir PFMUs and NPCU will each maintain a SA in US Dollars to which the initial deposit andreplenishments from IDA will be lodged. Additionally, the participating States and NPCU willeach maintain (a) a Current (Draw-down) Account in Naira to which draw-downs from theSpecial Account will be credited once or twice per month in respect of incurred eligibleexpenditures; and (b) a Current (Project) Account in Naira to which Counterpart Funds will bedeposited.

NPCU and the participating States will each prepare and submit to IDA Audited ProjectFinancial Statements within six months after year end. By Credit Effectiveness, NPCU and

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PFMUs will each appoint relevantly qualified external auditors on Terms of Referenceacceptable to the Bank. The auditors will audit the project accounts and financial statements inaccordance with International Standards on Auditing (ISAs). The audit reports will includeopinion paragraphs on the Audited Project Financial Statements, and the accuracy and proprietyof expenditures made under the SOE procedures and the extent to which these can be relied uponas a basis for loan disbursements. Regarding each Special Account, the auditor will also beexpected to form an opinion on the degree of compliance with IDA procedures and the balance atthe year-end for each individual special account.

The overall conclusion of the financial management assessments is that, provided the conditionsoutlined in Section G. 1 are met by the NPCU, and the States prior to credit effectiveness, theBank's financial management requirements will be satisfied.

D. Project Rationale

1. Project alternatives considered and reasons for rejection:

A national level project, with all states included. Previous World Bank support for primaryeducation has been provided at the Federal level with the National Primary EducationCommission. Primary education management, however, is largely the responsibility of states andlocal governments; and with the return of democracy, there is an increased awareness andreconfirmation of states and local governments' roles and responsibilities. The Bank wouldprovide support to UBE as a national program to all states who are interested and requireassistance in its implementation. Because of the size of the country, where a new approach isimplemented, it is proposed to start with supporting six local governments each in 16 states, to bescaled up to all local governments in all states over time. A mechanism for the sharing ofinformation and lessons learned from this approach would need to be established in the NPCU.A programmatic approach. The overall direction for Bank engagement in Nigeria needs to betowards program lending, to be able to manage an effective level of assistance. Severalconditions are not in place at this time: (i) insufficient capacity in states, including insufficientcapacity for financial management and accountability; (ii) lack of good economic analysis,analysis of the expenditure program and capacity assessments; (iii) a budget system does notwork efficiently; (iv) the need for reliable performance indicators and extensive monitoring; and(v)inadequate social statistics (e.g., enrollment figures). These conditions need strengthening asa priority in the near future, while continuing project-type support to a limited number of statesand LGA's for a while longer and until there is greater confidence in the sturdiness of theinstitutions.

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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)Implementaton Development

Bank-financed Progress (IP) Objective (DO)Primary Education Second Primary Education U U

ProjectMulti-sectoral lIlV/AIDS Action Plan liV/AIDS Emergency Project S SCommunity Development Local Empowerment and

Enviromnental ManagementProject (in preparation)

Poverty targeting through community Community Poverty Fund S SfundsCormmunity Development Community Based Urban S S

DevelopmentOther development agenciesUSAID Support for Education Sector

AnalysisDfID Program of state and local

govermnent strengthening forUBE

UNICEF Child-Friendly SchoolInitiative

IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)

3. Lessons learned and reflected in the project design:

Working with states and local governments will require a different model ofproject design andengagement between the borrower and the Bank Basic education is the responsibility of statesand local governments. Implementation of the program will, therefore, need to be at those levels.With 36 states and 774 local governments, there is likely to be wide variation in capacity and incommitment to achieving UBE. Local conditions are also very different in different areas of thecountry and the needs for improvement are varying. Bank support will need to be flexible,adaptive to local conditions, and addressing capacity needs where they are required. States willbe able to come into the program of Bank support, depending on when they are ready, and will beable to request capacity strengthening support, if they want.

Involvement ofparents and communities are essential in achieving UBE. Previous projects inprimary education have piloted a "self-help" approach to rehabilitation and improvements ofprimary schools, where parents and communities use small amounts of funds and contribute theirown labor or other resources. This approach has been very successful and would be implementedon a larger scale in this project for all school renovation and rehabilitation programs.

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Achieving quality improvements requires a substantial amount of time and are hard toimplement During the previous primary education project, gains in quality improvement werenegligible. These were largely implemented at the federal level, and handed down to the statesand local governments. Because of the wide variations in capabilities and existing conditions inbasic education, their effectiveness was not good. In the proposed project, a substantial amountof attention will be given to developing the best mechanisms to improve the quality of the schoolsystem.

Importance of capacity building issues. A project's major contribution should be to assistgovernment to carry out its responsibilities more effectively and more efficiently, with its ownresources. These capacity building inputs are an essential element in the project design.Expenditure reviews, showing equitable and sustainable use of resources, and monitoring ofoutcomes would be used as indicators of increased capacity.

4. Indications of borrower commitment and ownership:

With the return of democracy, the president and government have made the Universal BasicEducation program a cornerstone of development. Substantial government resources areallocated to the implementation and achievement of UBE, with approximately 10 billion Nairaallocated from the capital budget, both in FY 2000 and in FY 2001.

After years of neglect, states, communities and parents are anxious to have schools workingagain, and to improve the quality of the education of their children. A number of states and stategovernors have made the implementation of UBE one of their primary goals. They arecontributing with substantial state funds to rehabilitation and construction of schools, and arecommitted to improving working conditions for teachers. IDA support would be demand-drivenand to participate, states would have made a-deliberate decision, including taking on theresponsibility of counterpart funds and credit repayment.

The donor community strongly supports the UBE drive, with major donors providing funds forthe implementation of the program. Through a strong donor coordinating network, agreementshave been made on technical and geographic areas of support, to ensure complementarity and areasonable distribution of resources.

5. Value added of Bank support in this project:

Bank support would bring the technical expertise and assistance for improved planning andbudgeting for UBE at state and local government levels.While other donors are also providingassistance in this area (most notably DfID and USAID), Bank involvement would provideadditional incentives for increasing capacity and developing these management and planningskills. The Bank's role in coordinating the network of donors for education sector analysis willassist further in bringing a coherent framework for UBE.

Although substantial government resources are being allocated to the UBE program, thisrepresents only a portion of what is needed. Similarly, other donors are providing support tobasic education, but this is still fairly limited. To make UBE a success, two elements need to bein place, both of which would benefit from Bank support. First, setting-up of a cadre of trained

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and reliable people who will be able to develop sound UBE plans and be able to implement them.Second, communities need to be mobilized and empowered to improve their schools withappropriate inputs of funds.

The percentage of Bank support for UBE, in relation to overall government spending at federal,state and local government levels is not known. Each participating state would, during thepreparation process, identify all of the sources of funds that are to be allocated to UBE, to form acomplete picture and to determine sustainability of the programs. The Bank would beinstrumental in setting up this process.

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

1. Economic (see Annex 4):C( Cost benefit NPV=US$ million; ERR = % (see Annex 4)0 Cost effectivenessC Other (specify)

The economic analysis will focus on three issues.

1. There is a severe lack of reliable education budget and expenditure information forNigeria. Attempting to fill this gap will be a priority within the economic analysis for theproject. This will also include investigation of levels and causes of differences in unit costsacross states and local governments.

2. The demand for schooling is constrained partly by the cost to households. Again, there isminimal information on the current levels and distributions of private/household expenditureson education in Nigeria nor of the impact which private costs place on the demand. Both ofthese issues will be investigated.

3. The expansion of the basic education sub system is anticipated to be an important means ofreducing poverty. Currently there is only minimal knowledge of the distribution ofeducational attainment across social and economic groups. Analysis of the recent NationalFamily Health Survey for Nigeria will allow some investigation of this.

2. Financial (see Annex 4 and Annex 5):NPV=US$ million; FRR = % (see Annex 4)Financial flows for education expenditures have become complex and inefficient, largely as aresult of the re-centralization of basic education under the military governments. State and localgovernment resources for basic education currently are financed from their allocation out of thefederation account, and are determined by each state and local government. Teacher salaries arepaid from the local government share, but "withheld at source" at the federal level, with paymentissued directly through the state to the teachers, and decisions on salary levels made at the federaland state level. While school construction is the responsibility of the local government, schoolconstruction contracts are also made at state and even at federal levels. State expenditure reviewswould need to be a undertaken, and appropriate policy changes would need to be initiated, toimprove the performance of the system and the more effective use of resources.

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3. Technical:

* A better teacher professional support system needs to be developed, linking more stronglywith and using more effectively the school inspectorate. During PEP n, several modelshave been developed and tested in a number of states, involving a small number ofschools and colleges of education. These have proven to be very effective, low-cost andmuch appreciated by teachers and education officials. It is planned that states wouldbring to scale many of these innovative approaches.

* Minimum standards for school construction need to be established that are responsive tolocal conditions, and that can be implemented easily and cheaply at the community level.A technical manual is in preparation under the PEP II project, which will be ready to beused for implementation in UBE.

* A selection, procurement financing and distribution system for school books needs to bedeveloped, where the books address the needs of the schools, the system is as costeffective as possible, and with as little wastage as possible. Books need to be evaluatedwith regard to relevance to the curriculum, quality of content and manufacture andappropriateness of language.

* Continuous work needs to go on with the EMIS. While the system is being set up underPEP I, it will need major further support at state and local government levels. All statesare required to include some financing for further EMIS development. In addition, somefunds will be available at the federal level.

4. Institutional:Institutional capacity strengthening will be a major component of this project, especially forstates and local govenmments. Basic education, constitutionally, is a concurrent responsibility,which means at federal, state, and local government levels. Currently, the capacity and thebudgets at the lower levels has been seriously eroded; the project would assist in redressing this.In addition, the Supreme Court has recently ruled regarding the responsibilities for basiceducation, including decisions and payments of teachers, which will further require capacitybuilding at state and local governent levels.

4.1 Executing agencies:

Execution of most of the activities will be carried out at the state level by the state educationauthorities. Capacity is limited; and state knowledge of Bank procedures in most of these officesis nonexistent. In addition, these states will need to be able to assist local government authoritieswith their part in the implementation. There will be an issue of phasing of local governments andof additional states, and of the capacity at the federal level to assist and give technical support tothe states.

4.2 Project management:

Management of the activities would be in the hands of the state. It is unlikely that the existingstaff and resources will be sufficient to address the needs, and the issue of capacitystrengthening--through technical assistance, additional staffing, and/or training-- will need to beaddressed. Institutional capacity assessments are being carried out as part of project preparation,that will provide input in what would be required.

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4.3 Procurement issues:

Much of the procurement will be for basic education inputs (school construction andrehabilitation, teacher training and teaching materials). Each participating state and localgovernment will need to determine its own inputs and procurement will need to be largely atstate and local government level. For the most part, this will not allow combining procurementinto large packages and acceptable procurement methods will need to be put in place toaccommodate this. Procurement capacity assessments will be carried out for each state and willneed to be acceptable before a state can participate in the project.

4.4 Financial management issues:

The Country Financial Accountability Assessment (CFAA) for Nigeria revealed that the systemsfor planning, budgeting, monitoring and controlling public resources have deteriorated to a levelthat they do 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. At the project level, themajor financial management issues are: (a) participating States have not yet created PFMUs orPAU, and acceptable financial management systems are not yet in place; (b) staff to be deployedto PFMUs or PAU may not have previous knowledge of Bank procedures or experience in

managing IDA funds, and (c) participating States will transfer some funds to the localcommunities for some project activities but adequate financial management capacity does notexist at local community level.

The financial management arrangements at the project level will be designed to address theabove issues. The arrangements will ensure that funds are used for the purpose intended, andfacilitate compliance with IDA fiduciary requirements. At the NPCU and PAUs (or PFMUs), thefinancial management arrangements will be developed in accordance with a FinancialManagement Action Plan (FMAP) described in Annex 6B. The salient features of the FMAPinclude (i) identification and deployment of professionally qualified and experienced projectaccountants; (ii) preparation of a Financial Procedures Manual; (iii) implementation of acomputerized financial management system; (iv) the appointment extemal auditors in accordancewith TORs acceptable to IDA; and (v) the deployment of appropriately qualified internal auditorsby the SAGs of participating States, and the appointment of appropriately qualified internalauditor by the NPCU. Also, training will be provided to the staff of NPCU and PAUs (orPFMUs) in financial management, disbursement and procurement procedures applicable toBank-financed projects.

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 project implementation, and based on annual workprograms, states can request Bankfinancing support for construction of new school buildings and renovation of existing schools,including construction of VIP toilets and provision of water in the school. Locations for theconstruction and renovation would be agreed on, on an annual basis, based on presentedworkplans for the following year.

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Only new school construction (additional classrooms) on existing school sites will be carried outwith World Bank financing, thereby not resulting in any need for new land acquisition. As asafeguard for involuntary resettlement from existing school land, a resettlement policyframework will be developed as a condition for effectiveness. The resettlement policy willdescribe the procedures to be followed in cases of land use, -- legally or illegally -- of existingschool land or school buildings.

New classroom construction will be carried out through contracts or directly by communities.All school renovation will be carried out by communities, under a self-help scheme, as iscurrently in use in the Second Primary Education Project (PEP II), and as governed by theSelf-help Manual. For the provision of water in the school, this will be done with boreholes andno additional land will need to be acquired for supplying water.

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

Each state would establish an environmental desk officer in the Project Coordinating Unit, whowill review all plans for new school construction and renovation. A checklist of issues to bereviewed and checked for each site would be filled out by the desk officer, to ensure thatenvironmental concerns are addressed. The environmental checklist will be filled out in eachstate to assess the potential impacts of school construction, provision of water supplies andsanitation facilities as proposed in the annual workplan. If mitigating measures are required, astriggered by the checklist, a simple environmental assessment will be carried out for thatlocation.

5.3 For Category A and B projects, timeline and status of EA:Date of receipt of final draft: 7/15/2002

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? Describemechanisms of consultation that were used and which groups were consulted?

A significant element of the project is the community-driven development approach. Proposalsfor upgrading education by communities will be evaluated and financed, if acceptable. Schoolrenovation will be carried out under the community self-help scheme. New school constructionwill include community involvement on the need for additional school buildings in theircommunities.

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?

The project management staff at state and federal levels will include a review of theenvironmental analysis in their regular progress reports to the Bank, based on the inputs providedby the environmental desk officers.

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

Key social issues are:

* Access equality with regard to gender and the poor. In the northern states, a significantnumber of girls are not enrolled in school, while there is underenrollment of boys in the

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Southeast. Incentives programs, targeted at these groups would be a main feature of theproject, including close monitoring on progress made.

* Targeting of hard-to-reach groups. Many out-of-school children are in hard-to-reach groupsand areas, too sparsely populated for a school to be within walking distance and with somecommunities, where the value of education is not always accepted by the parents. Stateprograms would need to provide an assessment of the incidence of these situations in theirstate and the proposed interventions for addressing them.

* Community schools and koranic education. Large numbers of children, especially girls in thenorthem states, are in islamiyah and koranic schools, which currently provide limited seculareducation, lack trained teachers, and are short of teaching materials. Some states are makingefforts to further integrate these schools into the state education system, by providingadditional training to its teachers, and keeping track of the number of children in theseschools. The project would support these programs, if states are interested.

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

A significant element of the project is the community-driven development approach. Proposalsfor upgrading education by communities will be evaluated and financed, if acceptable.

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

Civil society will participate in the proposal evaluation process and the implementation ofactivities.

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

During the project, each state will provide an annual workprogram and plan of activities for thenext year. Evaluation criteria for the plans will include indicators to ensure that attention is givento social development outcomes.

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

Project performance indicators include gender indicators.

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

' ~ S i <P6licyv 1 > 1's~ r.+ ',' ' ApplicabilityEnvironmental Assessment (OP 4.01, BP 4.01, GP 4.01) * Yes (9 NoNatural Habitats (OP 4.04, BP 4.04, GP 4.04) (_U Yes S NoForestry (OP 4.36, GP 4.36) (_) Yes * NoPest Management (OP 4.09) ( Yes * NoCultural Property (OPN 11.03) (9 Yes * NoIndigenous Peoples (OD 4.20) 7.) Yes * NoInvoluntary Resettlement (OP/BP 4.12) * Yes (U NoSafety of Dams (OP 4.37, BP 4.37) (9 Yes S NoProjects in International Waters (OP 7.50, BP 7.50, GP 7.50) (9) Yes * NoProjects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)* () Yes * No

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

An Environmental Framework paper has been prepared, approved by the Bank, and disclosed incountry at the Bank's Public Information Center, which is accessible to NGO's and otherinterested stakeholders. As a safeguard for involuntary resettlement from existing school land, aresettlement policy framework will be developed as a condition for effectiveness.

F. Sustainability and Risks

1. Sustainability:

Nigeria has embarked on a ten-year program to implement UBE, of which Bank supportrepresents a modest addition to the overall program. For the country as a whole, and for eachstate, the intention of this upgrading is that it will remain in place for the future. Long-termmaintenance of the program and its sustainability, therefore, must be key features of theimplementation process.

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 ObjectiveTeacher training programs are unable to S A thorough review of the teacher trainingproduce sufficient numbers of teachers of programs is being carried out as part ofhigh quality preparation.State and LGA officials lack capacity to M Substantial training and assistance duringdevelop sound plans preparation, and into implementation.School quality fails to improve S Sufficient attention needs to be given to

teaching materials and teacher training, inaddition to school construction

Number of states in the project (16) M Sufficient supervision budget will be required,makes it difficult to supervise and with a task team largely in the field.monitor properlyFrom Components to OutputsStates are unable to implement plans and S Training and technical assistance, including thehave a sound financial management TA package from DFID, will assist in capacitysystem strenghtening.IDA project inputs are small, and overall S Continuous policy discussions and EFAfunds are inadequate to achieve program support will be required from allsubstantial improvements in basic donors.educationInsufficient knowledge and experience H The project will focus on training of allwith IDA's procurement procedures will procurement staff and a comprehensive chaptercause substantial delays in project of the Project Implementation Manual onimplementation and incrases risk of procurement will clearly define procurementmisprocurement procedures applicable to the project. In

addition, intensive procurement supervisionand reviews of the first two contracts for eachtype of procurement by each implementingagency regardless of the threshold will helpproject agencies to comply with procurement

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guidelines in a timely manner.Financial management risk arising from H The financial management action planweak financial management capacity at described in Annex 6B will be implemented;the federal, state and local and appropriate external auditing arrangements willcommnunity levels, and a generally poor be in place; the Project Financial Managementfinancial accountability environment Staff will be accountable to project

beneficiaries and PCU; and adequatesupervision by Bank Financial Managementstaff. Additionally, the Bank is working withthe Government to establish PFMU in eachState. By establishing PFMUs, robust andsustainable financial management architecturefor IDA-assisted projects will be in place at thestate level.

Overall Risk Rating S

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

3. Possible Controversial Aspects:

G. Main Credit Conditions

1. Effectiveness Condition

(a) Subsidiary Agreements have been executed between the Borrower and at least threeParticipating States;

(b) the three Participating States have established their respective Project Coordination Unitwith a project coordinator, an accountant, and a procurement officer, with qualifications andexperience satisfactory to the Association, and financial management arrangements for suchStates are satisfactory to the Association;

(c) the NPCU and the three Participating States have adopted Financial Procedures and ProjectImplementation Manuals, including a chapter on procurement, in form and substance satisfactoryto the Association;

(d) the Borrower, through FMOE, has appointed an independent auditor, including provision foraudits of the Federal and States Special Accounts, on terms and conditions, including terms ofreference, satisfactory to the Association;

(e) the Borrower has adopted the Resettlement Policy Framework satisfactory to theAssociation;

(f) the three Participating States have furnished satisfactory plans for universal basic education,proposals for financing by the Association, detailed first-year workplans, procurement plans andbudgets; and

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(g) FMOE and the three Participating States have opened Project Accounts and depositedtherein the initial deposits of US$250,000 equivalent and US$100,000 equivalent respectively.

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

(a) NETCOM shall meet at least once every quarter and its membership shall include the FMOEor his representative as chairman, and representatives of FMOE, UBE, Participating States, andparticipating Federal agencies;

(b) NPCU shall (i) prepare for the Project monthly and quarterly financial reports in form andsubstance satisfactory to the Association; and (ii) thereafter furnish said reports to theAssociation;

(c) Deposit into each Project Account, on a quarterly basis, the amount required to replenishsaid Project Account up to the Borrower's and Participating State's contribution to the costs of theProject;

(d) No later than October 20 in each year, furnish to the Association for review and comments adraft annual work program and training program and supporting budget for the succeedingcalendar year for the Federal Government and each Participating State;

(e) No later than November 30 in each year: (i) review with the Association the documentsreferred to in paragraph 2. (d) above; (ii) identify implementation issues and propose appropriatesolutions; and (iii) update Project timetables and performance indicators;

(f) No later than March 31 in each year, furnish to the Association for its comments and finalapproval the work program and budgets referred to in paragraph 2. (d) above;

(g) Establish by December 15, 2002, or such later as the Association may agree, and thereaftermaintain an effective monitoring and evaluation system;

(h) By February 15 of each year, furnish the NETCOM with progress reports on the discharge ofits functions under the project, the Financial Monitoring Reports for the preceding four quarters,and other documents relating to the progress of each Participating State;

(i) By March 15 of each year, furnish to the Association information referred to in paragraph 2(h) above, together with the comments of the NETCOM thereon;

(j) On or about May 30 in each year, to prepare, under terms of reference satisfactory to theAssociation and to furnish to the Association, a report integrating the results of the monitoringand evaluation activities performed, on the progress achieved during the period preceding thedate of said report and setting out the measures recommended to ensure the efficient carrying outof the Project and the achievement of the objectives thereof during the period following suchdate;

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(k) By June 30, 2005, or such later as the Association shall request, to review with theAssociation the report referred to in paragraph 2 (j) above, and thereafter, take all measuresrequired to ensure the efficient completion of the Project and the achievement of the objectivesthereof, based on the conclusions and recommendations of the said report and the Association'sviews on the matter.

H. Readiness for Implementation

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

[1 1. b) Not applicable.

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

O 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):

The Project Implementation Manual, including its adoption, is a condition of effectiveness. Themanual, including the procurement chapter, is in preparation.

1. Compliance with Bank Policies

1 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.

Arvil Vani--mus Mark .tomnlinson CdSectorManager/Director Country Manager/Director

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Annex 1: Project Design SummaryNIGERIA: Universal Basic Education Project

Key Performance -. :-,Data Collection StrategyHierarchy of.ObJectivest1v'i Indicators . _._,,_--:_ Critical Assumptions

Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission)Governance: strengthening Improved.quality of state Annual review of state plansgovernmenfs capacity to plans, taking less time to and state budgetsprovide services review with fewer iterations

Basic education expendituresof at least 50% of the overalleducation budget (federal,state, and local government)allocated to basic education

Community-driven Increase in parental Project progress reportsdevelopment: empowering involvement and communitycommunities to address their participation in schools and inown development priorities education, with at least 20

demonstrable incidences ineach local government peryear

Project Development Outcome / Impact Project reports: (from Objective to Goal)Objective: Indicators:To raise primary school Increase in admission rates to Annual school data statistics States, LGA's andattendance and completion Class I in primary schools by communities are committed torates, with a priority given to at least 20% over the project the goals of UBEthe poorest areas. period

Increase in completion rates in Annual school data statistics The school system is able toprimary school of at least 20% improve the quality of

educationDecrease in the gender gap in Annual school data statisticsschooling, with a target of50/50 admisssion into Class Iby the end of the project.Increase in transition rate from Annual school data statisticsprimary to secondary schoolsby at least 20% during theproject period.

9o

Hl, rarchy ' "i ;- -. Key Performance. | -Data-Collection Strategy |'Hrierah f'Obetis ,-.|,., "Indlcatorsj"_ - ' _|_.'_,_- _ |_'Critical Aisumptions

Output from each Output Indicators: Project reports: (from Outputs to Objective)Component:A school system that is able to Increase in the number of Project Progress reports Sufficient capital budgetprovide quality schooling in school places and of schools in available for schoolthe state good physical condition by at construction.

least 20% by the end of theproject

Decrease in pupil-teacher ratio Annual school data statistics Commitment by states andto 40:1 by the end of the local governments toproject providing sufficient basic

education budget.Increase in the number of Project progress reports; Teacher training programs arequalified teachers by at least annual school data statistics able to produce sufficient20% by the end of the project number of teachers of high

qualityAbility for state and local Implementation of at least Project supervision reports; State and LGA officials havegovemments to develop state 70% of the plans each year, project progress reports capacity to develop soundand LGA plans for the according to the greatest plans and maintain schedulesimplementation of UJBE needs.

Adherence to schedules, so Project progress reportsimplementation is no morethan 20% behind schedule

Project Components I Inputs: (budget for each Project reports: (from Components toSub-components: component) Outputs)State Programs for UBE US $ 100.3 million States are unable to implement

plans and have a soundfinancial management system

Capacity strengthening for US $ 28.7 millionUBE system

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Annex 2: Detailed Project DescriptionNIGERIA: Universal Basic Education Project

By Component:

Project Component 1 - US$100.30 millionComponent 1: State Programs for the Implementation of Universal Basic EducationThe project supports Government of Nigeria's plans to implement universal basic education(UBE). The objectives of the project are to raise the primary school completion and transitionrates, with a priority given to the poorest areas. To achieve these objectives, the project supportsactivities:

* To increase access and school participation for girls and boys.* To improve teaching and learning, especially the acquisition of basic literacy and

numeracy.To strengthen school management through community participation.

* To build capacity at federal, state and local government institutions to provide qualityeducation.

A decentralized approach is followed for this project, with support provided directly to states andlocal governments to carry out their implementation of UBE, according to the policies andstrategies as set for the country as a whole and addressing the priority needs of the schools in thatstate. Support would be for primary and junior secondary schools, secular and islamiyah.

The reasons for the decentralized approach are the following:* A state and local government based project will contribute to overall capacity

strengthening of these levels, resulting in greater ability for all future developmentactivities.This capacity strengthening is essential because the implementation of UBE is theconcurrent constitutional responsibility of the federal, states and local governments.

* Achieving the UBE goals will require for each state to develop its plans, targeted to itsown needs and to have full commitment to the goals. This commitment is an essentialelement in bringing UBE further than if driven only from the federal level, and will befostered if states have full ownership and control over their plans and resources.

Up to sixteen states are eligible for a maximum budget of US $ 5,000,000 (credit amount) each,over a five-year period. For all 16 states, the project will provide assistance for a total of eightoperations. These would include the following (this is compulsory);

Strengthening the organizational, managerial and operational capacity of states andLGA's.Support for EMIS development.Project management and monitoring and evaluation of the project.

In addition, each state has selected a maximum of five operations from the following list,providing a balance, to achieve a whole-school approach and reflecting the priority areas towardsachieving UBE in the state:

A. Physical Infrastructure (a maximum of 60% of the funds requestedfor the fiveoperations)

Renovation or reconstruction of existing schools, including construction of additional

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classrooms and toilet facilities; following the procedures set in the self-help model forcommunities under PEP II.Construction of new schools, under the management of communitiesSchool furniture

B. Teacher SupportTeacher training programs to upgrade existing teachers to the required specificationsTeacher training programs to support teachers with ongoing professional supportIncentive schemes for teachers in remote areas

C. Teaching MaterialsEstablishment of school libraries, including the purchase of library books andsupplementary readers and the training of teacher librariansTextbooks and instructional materials

D. Measures to Increase AccessPrograms for strengthening community (such as koranic and islamiyah) schoolsIncentive schemes for disadvantaged groups, such as girl enrollment, boy enrollment,including support for altemative schools (market schools, girl centers, etc.).

To prepare for the project, states prepared an overall proposal for Bank financing, within theframework of a state plan for the implementation of UBE. Each year, states are preparingannual work plans, proposing the activities for financing for the coming year, according tothe agreements as presented in the initial proposal. States are starting out with support to 6Local Governments (LGA's) during the first two years of the project. If implementationprogress is satisfactory, they can expand the project to other LGA's in the later years of theproject, and to continue into any follow-on project.

At the time of Negotiations, ten states were declared ready to participate in the project(Bayelsa, Benue, Borno, Kaduna, Katsina, Imo, Oyo, Lagos, Niger, and Taraba). A state isconsidered as ready, defined as:

I. The state has passed the financial management and procurement capacity assessments(to be carried out by Bank staff).

2. The state has made the decisions on the institutional arrangements, i.e., placement ofthe PCU's.

3. The state has a fully completed state plan for UBE and a Bank-financing proposal,acceptable to the Bank.

4. The state has prepared a detailed first-year workplan, with a procurement plan andbudget, including identified responsibilities for activities.

5. The state Governor has provided a written statement of commitment to the project.

The remaining states (Ebonyi, Ekiti, Enugu, Jigawa, Plateau, and Rivers) continue with thepreparation process, with disbursements of the funds to those states at the time they fulfill thefollowing conditions:

1. The state has passed the financial and procurement capacity assessments.2. The state has established the PCU (and PIU, if applicable)3. The state has a fully completed state plan for UBE and a Bank-financing proposal,

acceptable to the Bank.4. The state has prepared a detailed first-year workplan, procurement plan and budget,

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including identifying responsibilities for activities.5. The state has adopted the Project Implementation Manual and the Financial

Procedures Manual..6. The state has opened project accounts and deposited initial amounts equivalent to six

months of counterpart funding requirements.

For a state to have its own Special Account, the following conditions apply:

A Project Financial Management Unit (PFMU) established in the Office of theAccountant-General by each participating State in form and substance satisfactory to theAssociation, and appropriately qualified staff deployed to the Unit.

Conditions for additional states will be reviewed until December 31, 2002. If, at that time,some states are still not ready, they will be dropped from the project, and their fundsreallocated to the well-performing states.

Project Component 2 - US$28.70 millionComponent 2: Federal Program Management and Monitoring, Policy Development, andSystems Support Activities at the federal level to support UBE will be financed. The mainresponsibility for implementing the Government's UBE program is at the state and local (LGA)level, and most of the support provided through the project will target these levels. However,effective implementation of the program will also require considerable strengthening of thecapacity of key federal institutions charged with policy development and with training ofeducation planners, managers and policy makers at all levels of the education system.

A total credit amount of US 21 million will be allocated for this component. The project willsupport capacity development activities in eight areas:

1. Interaction between HIVIAIDS and education. The project supports three areas:

a) Strengthen the capacity of the education system to prevent HIVIAIDS.To support the implementation of the national HIV/AIDS Emergency Action Plan (HEAP) in theeducation sector, FME, through NERDC, has developed a 'National Sexuality EducationCurriculum'. The Bank will support the next step in this process which is to translate thiscurriculum into a set of practical interventions and materials in different subjects and gradelevels throughout the school system.

The Bank will support strengthening of the capacity of the staff of the HIV/AIDS programimplementation units in the Federal Ministry of Education and in other relevant agencies,especially in the preparation of action plans and funding proposals, including the preparation ofthe 2002/2003 action plan for immediate activities in line with HEAP. The activities on this planwill be mainly funded under the MAP credit through the NACA.

(b) Establish capacity to assess the impact of HIV/AIDS on the education systemTraining workshops have already been carried out with planners from five states to increase theirawareness and understanding of AIDS issues and to assess the future impact on pupil enrolmentand teacher numbers, using the Ed-SIDA model. Under the UBE project, the work is extended toembrace education planners from other states. NIEPA will become the base for future trainingworkshops using this approach, and has the necessary residential and computer facilities. Thecapacity of NIEPA in ICT skills is strengthened through the project in order to enable NIEPA

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staff to deliver this training without the need for frequent visits by international consultants.

(c) Develop alternative options for providing basic education to AIDS orphansAlthough the number of children who are orphaned as a result of AIDS is not yet a big problemin Nigeria, the fact must be faced that there is a growing population of such children and it isbetter to begin early to make plans for their care and education. This sub-component will helpestablish.

* a knowledge base on good practice and programs for ensuring basic education for AIDSorphans

* a mechanism for ensuring financial support for education programs for orphans (e.g. fromMAP, government, donors and private sources)

* a capacity for monitoring and evaluating the implementation and outcomes of suchprograms

2. Institutional Strengthening of NIEPA. Support will be given to strengthen NIEPA'scapacity to develop and deliver basic training programs for education planners and policymakers, including in methods to analyze the impact of HIV/AIDS.

3. Collection, analyzing and publishing education statistics. During PEP II, substantial supporthas been provided in re-establishing a baseline of education statistics for Nigeria, includingtraining of staff, establishing the systems, and procurement of equipment. Further requirementsfor the EliS, including support for data analysis and capacity strengthening in the disseminationand use of education data will be provided.

4. Education sector policy development. The project will provide support for the managementof the ESA working groups and host institutions, as well as the ESA Secretariat and fordeveloping stronger linkages between states and the federal level; and will support prioritydiagnostic studies, as are identified to be important for policy work. Support will also beprovided for longer-term investment studies and strategic planning for the sector.

5. Education forAUlAction Program. The project will provide for the preparation of the EFAAction Plans and the management of the Secretariat and the Forum, including holding theForums at state and national levels. It will also provide for training of state and national levelofficials and civil society participants in the relevant skills to carry out the Action Plan.

6. Project Management and Monitoring of Implementation. At the federal level, the NationalProject Coordinating Unit Unit will be responsible for coordinating and supervising projectimplementation in the participating states. The project will support the management of theseactivities.

7. Capacity Strengthening of Federal Agencies. Training and technical assistance will also beprovided to several agencies, including the National Commission of the Colleges of Educationand the Directorate for Planning, Research and Statistics,to enable them to carry out theirresponsibilities for the achievement of UBE.

8. Reform of the Inspectorate. The project will provide funds to assist in developing new rolesand responsibilities for the Inspectorate.

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Annex 3: Estimated Project CostsNIGERIA: Universal Basic Education Project

,; -- . , - --I, , -x -.-- -- ' Local - -Foreign, Total,; ,; ProJect Cost By Component;t. US $mirillion, US $million

State Action Plans 61.20 32.40 93.60Federal Program Management 18.10 9.10 27.20Total Baseline Cost 79.30 41.50 120.80

Physical Contingencies 0.00 0.00 0.00Prce Contingencies 6.90 1.30 8.20

Total Project Costs' 86.20 42.80 129.00Total Financing Required 86.20 .42.80 129.00

C -,, -Lo=cal'' ' .Forelgn - Total,,.- ProjectECost.By Cate'go'ry~ ' -'~; t ., -'US- $milliorn lUS $million- US $rnillion

Works 26.90 10.40 37.30Goods 6.00 25.70 31.70Training 17.30 1.10 18.40Consultant Services 12.50 5.50 18.00Grants 18.10 0.00 18.10Operating Costs 5.40 0.10 5.50

Total Project Costs1 86.20 42.80 129.00Total Financing Required 86.20 42.80 129.00

Identifiable taxes and duties are 3.2 (US$m) and the total project cost, net of taxes. is 125.8 (US$m). Therefore, the project cost sharing ratio is 80.29% of total project cost net of taxes.

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Annex 4: Cost Effectiveness Analysis Summary

NIGERIA: Universal Basic Education Project

I. Educational Status of the Population

Educational attainment

The literacy rate for 1998 has been estimated to be 54 percent, with 61 percent for males and 46percent for females. Federal Office of Statistics data imply that the rates have not increased overthe decade.

The most recent assessment of the educational experiences and attainment of the population isavailable for 1999 from the National Demographic and Health Survey. The results can also becompared to those from the Survey undertaken in 1990. A comparison would suggest thatliteracy rates should have been increasing. The surveys record the percentage of males andfemales, by rural and urban location and in various regions of the country, who had ever attendedschool and the median years of education. There are large gender differences (in 1999, 74 and 62percent) and rural/urban differences (80 and 62 percent) but in both years the greatest differenceswere regional, between northern and southern regions of the country (Table 1). Roughly, in 1999around 90 percent of men in the south of all ages had attended school while in the north the sharewas around 50 percent. For women, the shares were around 80 and 35 percent respectively.

Table 1: Percentage of the Population Even Attended School and Median Yearsof schooling by Gender, Location, Region. 1990 and 1999 (percent)

1990 National Urban Rural NE NW SE SW Central

Ever attendedMale 56.7 77.6 48.8 34.5 27.2 73.2 82.2Female 41.8 63.7 34.8 18.0 13.8 56.9 70.3

Median yearsMale 1.2 6.1 0.9 0.7 0.7 3.6 6.0Female 0.8 3.0 0.7 0.6 0.6 1.0 3.6

1,999.0

Ever attendedMale 73.9 86.1 68.8 49.9 48.4 90.9 87.1 74.9Female 62.0 74.6 56.7 36.0 35.4 81.2 77.2 59.0

Median yearsMale 4.7 6.0 3.1 0.0 0.0 5.3 5.8 4.8Female 1.7 5.1 0.1 0.0 0.0 4.8 5.3 1.0Source: Nigeria: National Demographic and Health Survey 1990 and 1991

The data in Table 1 overemphasize the recent increases in levels of attainment. The 1999 Surveydisaggregates the groups of males and females with no schooling by age group. Table 2 presentspart of the findings. This implies that in the last fifteen years the percentage of males with noschooling fell only from 18.5 percent to 13.2 percent; though for females the spread appears to

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have been faster. Almost 60 percent of males aged 55-59 years had had some schooling. Thiswould have been received in the late 1950s.

Table 2: Population Having No Schooling bySelected Age Group. Male and Female (percent)

Age group Male Female

15-19 13.2 25.720-24 12.6 32.425-29 15.6 43.930-34 18.5 52.5

Source: NDHS 1999

Current school enrolment rates

Overall, 56.7 percent of the 6-10 year olds, 67.1 percent of 11-15 year olds and 60.9 percent ofall 6-15 year olds are enrolled in school. The urban and rural rates for the whole age group arearound 73 and 56 percent respectively. These differences are greater than those between malesand females (Table 3). These figures provide a background for considerations of both universalprimary and basic education. Across the country as a whole, a maximum of roughly two thirds ofchildren are enrolled in primary schooling.

Table 3: Percent of Specific Age Groups Currently Enrolled in School bySex and Residence. 1999

Age group Male FemaleUrban Rural Total Urban Rural Total

6-10 72.6 53.4 58.5 68.8 49.5 54.911-15 77.2 65.2 68.8 75.5 60.1 64.96-15 74.8 58.4 63.0 71.5 53.3 58.6

Source: NDHS 1999

HI. Basic Education and Income Poverty

A necessary, though not sufficient, requirement for reducing poverty in Nigeria is an increase inthe productive assets of the poor. Almost by definition, the poor have few assets of land orphysical capital. Public efforts to provide these widely and in a sustainable way have rarely beensuccessful. However, governments have proved capable of delivering widely another form ofcapital, human capital, including crucially literacy as the foundation for the development of manyproductive skills. Analyses of poverty in Nigeria have been limited in recent years and the mostrecent comprehensive attempt is based on the 1992 Household Consumer Survey.

Poverty is pervasive in Nigeria. The proportion of the population living on less than one U.S.dollar a day is at least 50 percent and was estimated at 66 percent in 1996. The relationshipsbetween poverty and the educational level of the household head are very strong in both rural andurban areas. A lack of education results in a high probability of being poor and it appears to bethe lack of any schooling which is crucial (Table 4). The incidence of poverty falls more with the

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acquisition of a primary schooling (11 percentage points), than with the further acquisition ofhigher levels of education (5.6 and 0.1 percentage points respectively).

Table 4: Incidence of poverty by education of household head1992 (percent)

Total Urban Rural

No education 39.5 37.8 40.0Primary 28.5 28.2 28.9Secondary 22.9 21.4 25.7Post Secondary 22.8 23.5 21.5Source: Nigeria: Poverty In the Midst of Plenty. 1996. Table 2.7

The association between extreme poverty and education is even stronger. Of those householdsdefined as being extremely poor, 72 percent of the household heads had received no education,18 percent a primary education, 7 percent secondary and 3 percent post secondary.

Studies on economic growth, income inequality and poverty for Nigeria, such as that byAigbokhan for 1986 to 1997, indicate that while there was positive economic growth throughoutthe period, poverty and inequality worsened. The 'trickle down' effect of growth was not evident.Economic growth which does not derive from increases in labor productivity in sectors where thepoor work will not decrease poverty in itself. In particular, labor productivity in agriculture andrelated rural and urban activities needs to increase. Many studies in other countries haveindicated that this can results from a spread of education. This is more likely to occur once athreshold of educational coverage across communities has been crossed and new behaviorswidely accepted. Earlier studies have estimated such a threshold as an average of 4-5 years ofschooling. The 1999 Demographic and Health Survey has estimated the median years ofeducation in rural Nigeria for men at 3.1 years and for all women at 1.7 years. An expansion ofthe coverage of basic education is required to accelerate the economic retums.

M. Analysis of Alternatives

No project

The implications of there being no Bank-supported project in basic education would be twofold.First, the direct outcomes which would flow from the project would not occur and second, therewould likely be a reduced focus on UBE as a whole. One consequence of both of these would bethat educational coverage would not expand as quickly, or as effectively. Some of theimplications of this can be estimated by comparing the behavior and consequences of those whohave had no schooling with those who have completed a primary and/or secondary education.The strong association between education and incidence of income poverty was described in theprevious section. Here, the relationships with aspects of family health and nutrition are described.Each of these has economic consequences.

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Fertility

The total fertility rate vanes by level of education. While the rate in Nigeria (as elsewhere inAfrica) declines as the level of education increases by less than is the case in low incomecountries in other parts of the world, the decline is still significant. The total fertility rate forwomen with no education was 6. 1, for those with a primary education, 5.6 and for secondaryschool leavers 4.9. Part of this decline will result from greater knowledge of moderncontraceptives among more educated women. Of those women with no education, 41 percent hadno knowledge compared to 78 percent of women with a primary schooling. For men the figureswere 56 and 81 percent respectively. Particularly among the younger age group, the 'ideal'number of children is much lower among those with some education. Among the 20-24 year agegroup, the ideal number is 7.8 children among those with no education, falling to 5.6 for thosewith primary schooling and to 4.8 for those with secondary.

Infant and child mortality

Levels of infant and child mortality are very strongly related to the education of mothers.The under-5 mortality rate is reduced by 35/1000 for primary schooled mothers and by a further26/1000 for those with a secondary schooling (Table 5). Most of the reductions occur through afall in child mortality, whose causes are more likely to influenced by mothers' behavior than isthe case for infant mortality. For mothers with no education, the child mortality rate is higherthan that for infant mortality. One cause of child mortality is the lack of vaccinations. Theseagain vary by mothers education. One example is tetanus toxoid. Twenty four percent ofchildren whose mothers had no education received two doses or more, and 54 and 71 percent ofthose with a primary and secondary schooled mother respectively.

Table 5: Levels of Infant and Child Mortality by Mothers Educatlon(per 1000 Ive births)

Infant Child Under 5 Mortality

No Education 76.9 86.6 156.8Primary 71.2 54.5 121.8Secondary 59.0 39.3 95.9Higher 40.5. 13.0 53.0Soume: NDHS 1999

In addition to reducing the suffering of children and parents, reduced levels of under 5 mortalitywill have a variety of economic benefits.

Child nutritional satusAnother cause of child death but also of physical and mental stunting is malnutrition. Again,levels of malnutrition are closely associated with mothers education (Table 6).

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Table 6: WeIght-for-age Measures of Child NutritionalStatus of Mothers Education (percent)

below 3 SD below 2 SDNo Education 17.8 36.3Primary 6.8 23.9Secondary 5.8 19.5Source: DNHS 1999

There are very large reductions in the proportions of children whose weight-for-age is two andthree times below the median for those children whose mothers have a primary schooling.Nutritional well being in childhood has been shown to high large economic benefits. It affectsperformance in school as well as physical and mental capacity in later life.

The relationships between education and health seeking behavior and outcomes described abovedepend on changed behavior, often resulting from increased information which comes frombeing literate.

A primary education project only

Since not all Nigerian children yet attend primary school, the argument might be made that theproject should focus only on inputs affecting this cycle. One reason for not restricting allexpenditures to this cycle is that the Federal Government's explicit intention is to promote theuniversalization of basic education and a program and administrative structure is being createdwith this focus. Another reason is that Nigerian parents and children do not regard primaryschooling as terminal and for several years a majority of primary school leavers have transited tosecondary education. For males in the age group 45-49 years and below, of those with someschooling, a majority have had beyond primary. For example, among 20-24 year olds, while 18.5percent had a primary schooling as their highest level, 62.2 percent had either a secondary orhigher qualification. The same pattern is evident for females for the age group 35-39 years andbelow. For the 20-24 years age group, 19.3 percent completed primary schooling as their highestgrade while 46.5 percent had completed the secondary cycle or above. In this case, whileproviding the facilities for, and encouraging, all children to enroll in primary school is a priority,there are also strong educational and economic benefits from strengthening the whole of the basicschooling cycle.

Less civil works

Up to 60 percent of the allocation remaining for each state, once obligatory items have beenfinanced, can be spent on civil works and furniture. The percentage is high partly because noteacher salaries are included in the project. It is also high because of the needs. In theConsultations with the Poor exercise conducted in 1999, a ranking of major problems was madeby eight groups of poor people in eight locations. In a list of 33 problems, a lack of potable waterwas named most often followed closely by a lack of education, followed by roads and healthservices, and electricity. More detailed questions indicated that 'poor school facilities' were moreimportant than either 'teacher strikes' or 'no money for school'.

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The physical facilities of schools, as seen by preparation missions, and as documented are poor.An example of the latter is the needs assessment across 34 small communities in 17 districts ofYobe State, prepared in 1999. In each community there was one school, apart from one wherethere were two. The conditions of classrooms were documented in 24 schools. Out of 148classrooms, a total of 90 were reported to be in a very poor condition: In 16 of the 34 schools,there was reported to be no furniture and in almost all there is a comment of no instructionalmaterials. The physical and teaching - learning conditions of primary schools are very poor ingeneral.

A series of consultations with stakeholders in 54 primary schools in eighteen local governmentareas across Nigeria in 1997 provides a more comprehensive picture of (among many otherthings) physical facilities in schools. The results were published in Hard Lessons: PrimarySchools, Community and Social Capital in Nigeria. Primary schools tend to large in Nigeria,even in rural areas. The average school had 20 classes but only 12 classrooms. This was dealtwith through multiple classes in one room, classes taught outside, and double shifting.Classrooms were reported to be not only insufficient but also in a poor and frequently deplorablestate of repair. In the sample of rural schools only three percent of classrooms were reported to bein good condition, 36 percent fair and 61 percent in a poor condition. Similarly, 'the situationregarding school furniture and teaching materials was likewise distressing'.

An NPEC survey in 1995 estimated that the cost of required renovations and new classroomswould be equivalent to three times the total annual budget (including salaries) for primaryeducation.

IV. Cost-effectiveness

Analysis of the efficiency and cost effectiveness of primary education in Nigeria suffers fromproblems of data, particularly regarding enrolments. However, attempts have been made tocalculate completion rates for the primary cycle from 1990 to 1996 (Table 7).

Table 7: Primary Cycle Completion Rates. Boys and Girls1990 to 1996. (percent)

1990 1991 1992 1993 1994 1995 1996

Boys 60.3 60.6 70.9 71.5 76.8 68.3 64.5Girls 57.0 58.7 69.5 74.4 71.7 70.6 64.6

Source: Federal Ministry of Education, Nigeria Country Report, EFA 2000 Assessment

Similarly, completion rates for the junior secondary cycle were also calculated. These are higherwith rates between 80 and 88 percent. Linking the primary and junior secondary cycles are thetransition rates. Over the past decade these have averaged between 44 and 53 percent. With aprimary completion rate of 65 percent, a transition rate of 50 percent and a junior secondarycompletion rate of 85 percent, the average chances of a child who enrolls in primary class Icompleting the basic education cycle are 28 percent.

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While around 35 percent of those initially enrolled in primary schools do not complete, thosewho remain appear to be learning significantly less than is required. The results of theUNICEF/UNESCOIFGN program in 1997 to monitor the learning achievement of primary pupilsare disappointing. Across the entire sample the mean scores were 25.1 percent literacy, 32.2percent numeracy and 32.6 percent life skills. The scores for rural pupils were up to threepercentage points below the average. Scores in the private schools were a little higher but stilllow: 40.8, 43.1 and 43.1 percent respectively.

Both the school completion and learning achievement data indicate that schools currently are notperforming efficiently or effectively. Large reductions in both the cost per graduate and per valueadded unit of learning achievement are possible if the system improves. The most imnportant, andexpensive input into the teaching-learning process - teachers - tend to be available and thenational teacher: pupil ratio is 1:34. Additional investments in physical facilities, instructionalmaterials, in-service training and system management could lead to large gains.

V. Fiscal Impact and Financial Sustainability

The structure of education financing in Nigeria is extremely complex. All three tiers ofgovernment are involved and as the number of states and local governments has increased so hasthe difficulty in understanding the levels, distributions and sources of education expenditure. Insummary, the local governments are responsible for around 90 percent of recurrent expenditureson primary schooling; the states for the vast majority of secondary schooling plus stateinstitutions of tertiary education and some contribution to primary schooling; and the Federalgovernment mainly for most of the universities and for other federal tertiary institutions. Stategovernments are probably the main source of funding but since there is no requirement on themto report budgetary information to the Federal government, no reporting occurs and hence thereare no credible aggregations of expenditures.

This lack of basic data results in there being no acceptable measures of education expenditure asa share of total government expenditure (covering all three tiers) or of GDP. Similarly, there is noestimate of the division of public expenditures across primary, secondary and tertiary education.Educational expenditures in Nigeria cannot be described over time or compared with those forother countries.

As part of project preparation, attempts were made to partially fill this data gap by focusing indetail on the levels, sources and patterns of expenditure in ten states for 1998, which was thefinal year of military rule and the most recent year for which actual expenditures might beobtained. Assuming that this block of ten states is typical of the country, public expenditure oneducation was equivalent to around 2.4 percent of GDP and 16.5 percent of total governmentexpenditure. Of these expenditures, the states were responsible for around 40 percent, the Federalgovernment for 35 percent and local governments for 25 percent. Expenditures were sharedroughly equally between the three levels of education.

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These expenditure measures in general, and for primary education in particular, do not comparewell with those in other African countries where education expenditures averaged 4.1 percent ofGDP and 18.4 percent of public expenditure and primary schooling was allocated 51 percent ofthe total.

Since 1998 teacher salaries at all levels of the system have increased dramatically by over 500percent resulting in increased shares of expenditures for education and within that particularly forprimary education. While these do not reflect increases in the quantity or quality of realeducational resources, at least in the short term, it does shift the focus from one of generalunderfunding to those of the increased imbalance between salary and non salary items andfinancial sustainability given the current modalities for funding each of the three tiers ofgovernment.

Fiscal impact

The total cost of the project is US$129.0 million. Of this, US$ 100 million is for activities in 16states at a rate of US$6.3 million per state. Each participating state govermment is required tofund 12 percent of the total. The total annual requirement from the 16 participating states will beabout US$2.6 million a year. In 2001, the expenditures on primary teacher salaries fundedthrough the local governments in these states totaled N(53) billion, equivalent to US$(440)million, and the -state governments allocated an additional N (5) billion to their SPEBs. Inaddition, state governments have been providing additional funds on an ad hoc basis forclassroom construction in past years. For the group of states as a whole, the financial additionrequired by the project will be equivalent to X percent of all expenditures on primary educationand to Y percent of that made by the state governments. Since expenditures on primary educationare only around Z percent of total state government expenditures on education, the requiredadditional expenditure will be around R percent of current total state education expenditure. Assuch the fiscal impact of the project will be minimal.

Financial sustainabtlity

The recurring cost items of the project are relatively small. No teacher salaries are to be fundedand 60 percent of the state expenditures are for classroom construction and furniture. It isanticipated that the costs of the activities to be sustained will be below the annual contributionsto be made by governments over the life of the project.

Of much greater importance is the financial sustainability of the primary education sub systemitself. Over the past thirty years there have been many attempts to stabilize the funding ofprimary education, and many periods when the systems have failed, teachers have not been paid,fees have been implemented, and teacher strikes have followed. Currently the local governmentsfund 85-90 percent of all expenditures, including all teacher salaries, through deductions fromtheir allocations from the Federation Account. This system has given the sub sector somestability. However, very large increases in teachers' salaries in the past four years (over 500percent) have resulted in rising shares of their total allocations being deducted at source. This isin spite of large increases in the total allocations. In some cases, particularly in educationally

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advanced local governments, this is resulting in so-called 'zero allocations', an inability to fundany other activities and the possibility of teachers not being paid. This system of financing resultsin an unbuilt bias against the hiring of additional teachers. The Federal Government is currentlyconsidering a new system of revenue allocation between the three tiers of government whichwould also, be accompanied by deducting a first charge share of the Federation Account forprimary teacher salaries and other programs of skill acquisition. This would decrease the pressureon local government finances but would not remove the uncertainties resulting from largevariations in the size of Account. During the period of the project, the Bank will provideassistance to the Federal Government to help design a financing system for primary schoolingbest suited to the country's federal character.

Summary of benefits and costs:

Main Assumptions:

Cost-effectiveness indicators:

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Annex 5: Financial SummaryNIGERIA: Universal Basic Education Project

Years Ending2003-2007

K!-Aim?pLEMENTAONPENIOD-:. - .

Year I1 Year 2 ffYear 3 Year 4 1Year 5 Year 6 Year 7Total Financing Required

ProJect CostsInvestment Costs 52.1 39.8 18.5 6.8 6.4 0.0 0.0Recurrent Costs 1 .S 1.4 1.1 0.8 0.6 0.0 0.0

Total Project Costs 53.6 41.2 19.6 7.6 7.0 0.0 0.0Total Financing 53.6 41.2 19.6 7.6 7.0 0.0 0.0

FinancingIBRDIIDA 42.9 34.0 15.3 4.5 4.3 0.0 0.0Govemment 6.5 3.4 1.7 0.8 0.6 0.0 0.0

Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Co-financlers 0.0 0.0 0.0 0.0 0.0 0.0 0.0User FeeslBeneflclarles 0.0 0.0 0.0 0.0 0.0 0.0 0.0DflD 4.2 3.8 2.6 2.3 2.1 0.0 0.0Total Project Financing 53.6 41.2 19.6 7.6 7.0 0.0 0.0

Main assumptions:

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Annex 6(A): Procurement ArrangementsNIGERIA: Universal Basic Education Project

Procurement

General

1. The procurement system in Nigeria is in the process of being reformed both at the Federal,State and Local Governments levels. The government Procurement Reform program wasfashioned in line with the recommendations of the year 2000 Nigeria Country ProcurementAssessment Report. All the three tiers of governments are operating under the FinancialRegulations (FR), which are essentially an internal set of rules for economic controls of theFederal, States and Local governments administrations. The Country Procurement AssessmentReport (CPAR) identified major weaknesses in the procurement polices and practices in Nigeriaand made appropriate short-term, medium-term and long-term recommendations. Based on theshort-term recommendations of the 2000 Nigeria CPAR, procurement procedures section of theFR at the Federal government level, was revised on June 27, 2001, to ensure clarity andtransparency by incorporating details of the various procurement methods and their applicationsfor goods, works and services among others. For now, this revision applied to the Federalcomponent of the project as the states are yet to adopt these changes. However, it is envisagedthat the States and Local governments will adopt (as usual) the revised FR. To make thispossible, the Federal Government is making arrangements to disseminate the findings andrecommendations of the CPAR at State and LGAs Levels. The ineffective Federal andDepartmental Tender Boards have been abolished while the Ministerial Tender Boards has beenstrengthen with powers to approve contract awards. Also Procurement Reform Implementationunit (PRIU) and Steering Committee that would initiate and supervise initial implementation ofreforms has been established at the Federal government level. The reforms have five mainfeatures:

* Enactment of a new procurement law based on the UNCITRAL (United Nations Commissionon International Trade Law) model law, which is designed to assist governments inreforming and modernizing their laws on procurement procedures;

* Establishment of a public procurement oversight body, the Public Procurement Commission(PCC), independent of the Tender boards with responsibility for the efficiency andeffectiveness of the procurement function across the public sector;

* 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 Departmental Tender Boards and strengthening MinisterialTender Boards by vesting them with powers to approve contract awards; and

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

Until 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 risk for doing business in Nigeria will be high. Consequently, the procurement riskfor 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 accordancewith the appropriate IDA Guidelines (Guidelines: Procurement under IBRD Loans and IDACredits, January 1995 and as revised in January and August 1996, September 1997, and January1999; and Guidelines: Selection and Employment of Consultants by World Bank Borrowers,January 1997 and as revised in September 1997, January 1999, and May 2002). Procurementcarried out under the Self-help construction program will be in accordance with paragraph 3.15of the Guidelines (Community Participation in Procurement) and with the Bank's Guidelines forSimplified Procurement and Disbursementfor Community-Based Investments (February 1998).To the extent practicable Bank's standard bidding documents for works and goods, includingIDA Standard Bidding Document for the Procurement of Textbooks, December 2001 (TrialEdition), and Standard Requests for Proposals for consultants as well as all standard evaluationforms 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 (inthe form satisfactory to IDA), for use for all National Competitive Bidding (NCB) procurementpackages under the project. However, NCB procedures will ensure that (i) bids will beadvertised in national newspapers with wide circulation; (ii) the bid document clearly explainsthe bid evaluation and award criteria; (iii) bidders are given adequate response time (minimumfour weeks) to prepare and submit bids; (iv) bids will be awarded to the lowest evaluated bidderand not arbitrarily; (v) eligible bidders, including foreign bidders, will not be precluded fromparticipating; and (vi) no domestic preference margins are applicable to domestic manufacturersor suppliers.

Advertising

3. A General Procurement Notice (GPN) is mandatory and will be published in the UNDevelopment Business as well as in the Development Gateway system and in a nationalnewspaper as provided under the Guidelines. The GPN will be updated on a yearly basis andwill show all outstanding International Competitive Bidding (ICB) for goods contracts and allIntemational consulting services. In addition, a Specific Procurement Notice (SPN) is requiredfor all goods and works to be procured under ICB and Expressions of Interest (EOI) for allconsulting services with a value in excess of US$100,000. All NCB procurement packages forgoods and works will be advertised in the national dailies. The related bidding documents forgoods and works will not be release, and the short list for consultant services will not be preparedbefore eight weeks after the GPN has been published. Sufficient time will be allowed to obtainthe bidding documents.

Procurement Capacity Assessment

4. A formal assessment of the capacity of the national and state-level Ministry of Education hasbeen conducted in accordance with Procurement Services Policy Group (OCSPR) guidelinesdated August 11, 1998. The assessment outlined the main issues and recommendations and is inthe project files. NPCU, PCU and PIU will be established and staffed with technicalprofessionals among which shall be a Procurement Officer. A formal assessment of the capacityof these units will be conducted before credit effectiveness. From the CPAR conducted in year2000, generally, the existing procurement policies and practices are based on the FederalGovernment Financial Regulations and State Financial Regulations derives from the FGN

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Financial Regulations. The methods used by both the Federal and State governments inadministering their government funded procurement packages in most cases need muchimprovement in order to ensure economy and transparency. For instance, there is generally a lackof appropriate procurement planning leading, in most cases, to uneconomic procurement. Noneof the State Coordinating Units participated in the ongoing PEP II. Therefore, key procurementcapacity strengthening measures prior to project start-up and during project implementation arecritical to ensure economic, efficient and transparent ways in carrying out fiduciary functions. Tofacilitate proper implementation of the project at the State and Federal levels, the followingaction plan was agreed with the Borrower:

(a) Federal level will establish the National Project Coordinating Unit (NPCU), including theappointment of technical professionals among which shall be an experienced ProcurementSpecialist/Officer by negotiations;

(b) States levels will establish their PCUs (Project Coordinating Units) headed by a ProjectManager, including the appointment of technical professionals among which shall be anexperienced Procurement Officer by credit effectiveness;

(c) The NPCU will prepare a detailed first year procurement plan to be discussed at negotiationsand finalized before effectiveness;

(d) At the State level, the PCUs will prepare a detailed first year procurement plan to bediscussed and finalized before effectiveness;

(e) A draft Project Implementation Manual (PIM), including a comprehensive chapter onProcurement will be developed for review and adopted by the Federal and State levels beforecredit effectiveness;

(f) PCU staff will attend procurement courses at recognized training institutes or procurementworkshops organized by the Bank and contract management workshop not later than threemonths after effectiveness;

(g) PCUs and or PlUs at both federal and State levels will hold meetings with the BusinessCommunities in their environment after the adoption of the PIM not later than six months aftereffectiveness:

5. One of the major problems in project implementation in Nigeria is the change of staffmid-stream. During negotiations, assurances will be sought from the Borrower that staff whowill have received training under the project will not be changed except for reasons to bemutually agreed between the Government and IDA.

Procurement Planning

6. The detailed procurement plans will be updated yearly, sent to IDA for clearance not laterthan three months before the end of each fiscal year. A project launch workshop will beorganized before effectiveness to familiarize the PCUs and other institutions involved in theexecution of the project with Bank procedures. The workshop will cover procurement policy andprocedures and their applications to the procurement arrangement planned for projectimplementation. The UBE Program hire the services of a consultant to assist in the preparation of

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the Project Implementation Manual, including a comprehensive procurement chapter, a draft ofwhich should be submitted to IDA for review and approval. Agreement will be reached duringnegotiations that such manual will be adopted by both the Federal and the State levels as acondition of effectiveness.

Procurement Implementation Arrangements

7. At the Federal level, a National Project Coordinating Unit (NCPU) has been established,staffed by a National Project Coordinator, Accountant, Internal Auditor, and ProcurementOfficer. The NCPU will be responsible for the overall coordination of the procurement activitiesfor the Project. It will also implement the procurement activities for Component 2 (FederalComponent). The Federal Ministry of Education (FMOE) will be responsible for the technicalimplementation of the Federal component. At the State level, Project Coordination Units(PCUs), headed by a Project Coordinator, will be established by effectiveness at the StateMinistry of Education (SMOE). The PCUs will be staffed by technical specialists and aprocurement officer. The PCUs will be responsible for the implementation of procurementactivities under Component 1 of the Project (States Component) according to areas ofinterventions in the state plan. PCUs with weak procurement capacity will recruit, using acompetitive process, a procurement consultant. The Procurement consultant will be contractedusing a performance-based contract approach aimed at establishing an efficient procurementsystem in the unit while transferring his/her knowledge to relevant PCUs staff in Bank'sprocurement procedures.

Procurement Methods

Civil Works (US$37.3 million)

8. Civil works include the construction and rehabilitation of classrooms and toilet facilities.The civil works contracts under the states component of the project would be small, scatteredgeographically, labor intensive and spread over time. They would not lend themselves togrouping and therefore will not attract foreign bidders. The total cost for works estimated at lessthan US$500,000 per contract up to an aggregate of US$27.1 million equivalent will be carriedout by the States PCUs under National Competitive Bidding (NCB) procedures acceptable toIDA. Small works estimated to cost less than $50,000 equivalent, up to an aggregate amount notto exceed $9.0 million will be procured under lump-sum, fixed-price contracts awarded on thebasis of quotations obtained from three qualified domestic contractors invited in writing to bid.The invitation shall include a detailed description of the works, including basic specifications,the required completion date, a basic form of agreement, and relevant drawings where applicable.A sufficient bid submission period will be allowed and the bids will be opened in public. Beforethe first bidding package by each state is solicited, the draft solicitation letter and other relevantdocument to be used, will be reviewed and cleared by IDA. The award shall be made to thelowest evaluated responsive contractor who has appropriate experience and resources tosuccessfully complete the contract. In cases where the quantity of work cannot be defined inadvance, where the works are too scattered to attract private contractors, and in cases ofemergency, and where works must be carried out without disrupting ongoing operations, forceaccount procedures can be used. The total aggregate value of such force account shall not exceedUS$1.2 million.

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Goods (US$31.7 million)

9. The project will finance items such as office equipment, computers and accessories,communication equipment, instructional materials and textbooks, vehicles and low-cost andlow-maintenance boats. To the extent possible and practicable, goods and equipment to bepurchased by NPCU and the States will be grouped into bid packages to take advantage of bulkpurchase. Each contract estimated to cost the equivalent of US$150,000 or more will be procuredunder ICB procedures using IDA Standard Bidding Documents. Each contract for goodsestimated to cost less than US$150,000 up to an aggregate of US$9.1 million equivalent will beprocured through National Competitive Bidding (NCB) using procedures acceptable to IDA.Procurement for readily available off-the-shelf goods that cannot be grouped or standardspecification commodities for individual contracts of less than US$30,000, up to an aggregate ofUS$ 1.0 million equivalent will be procured using shopping procedures as detailed in paragraph3.5 and 3.6 of the Guidelines. Procurement of goods and hiring of facilities for training purposes,such as workshops, will also be carried out using Bank shopping procedures. In cases whereonly one supplier exists and in cases of emergency for individual contracts of less thanUS$30,000 equivalent up to an aggregate amount not to exceed US$1.2 million, these may beprocured using direct contracting procedures as detailed in paragraph 3.7 of the Guidelines. Alldirect contracting will be subject to IDA's prior review.

1. To ensure that these limits are observed, each quarterly progress report of the project willinclude a table setting out the number and value (in US$ equivalent) of contracts issued throughLocal, International Shopping, NCB, Direct Contracting, and Force Account, during the quarteras well as the cumulative total value (in US$ equivalent) of contract under each of these twoprocedures from the date of the project start-up.

Consulting Services ($18.0 million)

12. These services include conducting studies, technical assistance and support of projectexecution. As a rule, consultant services will be procured though Ouality and Cost BasedSelection (QCBS) methodology. All consultancy assignments estimated to cost US$100,000 ormore will be procured through QCBS and will be advertised in the UN Development Businessand Development Gateway and in at least two national newspapers. In addition, the scope of theservice may be advertised in an international newspaper or magazine seeking "expressions ofinterest." In the case of assignments estimated to cost less than US$200,000, the assignment maybe advertised nationally and the shortlist may be made up entirely of national consultants inaccordance with section 2.7 of the Consultant Guidelines (i.e., that at least three qualifiednational firms are available in the country and foreign consultants who wish to participate are notexcluded from consideration). Consultant services estimated to cost less than the equivalent ofUS$100,000 may be contracted by comparing the qualifications of consultants, who haveexpressed an interest in the job or who have been identified. Consultants for assignments of astandard routine nature such as audits and engineering design of simple works, may be selectedon the basis of Least-Cost method. All consulting services of individual consultants will beprocured under individual contracts in accordance with the provisions of paragraphs 5.1 to 5.3 ofthe Guidelines. Services for capacity strengthening may be selected on the basis ofSingle-Source method, but with IDA's prior agreement.

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Training ($18.4 million)

13. At the beginning of each year, each PCU will submit to IDA their proposed staffdevelopment plans for that twelve month period. The plans would indicate the persons or groupsto be trained, the type of training to be provided, the level of competency that each participantwould be expected to achieve through this training, the provider or location of the training, andits estimated cost. Some training would take place in-country, either at registered traininginstitutions or by contracting national, regional or international experts to provide specializedtraining in each state and at Federal level. In addition, PCU Project Manager will be trained inorder to assist their unit to develop the necessary annual training plans. Training and workshopswill be carried out on the basis of approved annual programs, to be review by IDA. All trainingcontracts costing US$15,000 equivalent or more per contract, will be let competitively, usingConsultants Qualifications method of selection.

Grants (US$18.1 million)

14. The project will finance self-help construction sub-projects based on the approach initiatedunder PEP II. These sub-projects will be funded by grants with 20 percent communitycounterpart, in kind or cash. A technical manual to assist communities in construction andrehabilitation of schools under this scheme is being developed under the PEP II and will form thebasis for self-help construction under this Project. The manual will contain a special chapterdescribing the procurement and disbursement procedures and providing tools in accordance withthose found in the Bank's Guidelinesfor Simplified Procurement and Disbursement forCommunity-Based Investments (February 1998), Ex-post reviews of random sub-projects, underthe Self-help approach, will be conducted periodically by the Bank and independent technicalaudits.

IDA Prior Review

15. Table B provides the prior review thresholds. Each contract for works estimated to costUS$500,000 equivalent or more and for goods estimated to cost US$1 50,000 equivalent or morewill be subject to IDA prior review as per paragraph 2 of appendix I of the Guidelines. The firsttwo National Competitive Bidding packages for works and goods of each state shall be subject toIDA prior review. All direct contracting for goods and force account for works will be subject toIDA prior review. Other contracts will be subject to post review in accordance with paragraph 4of Appendix I of the Guidelines. All consulting contracts costing US$100,000 equivalent ormore for firms and US$50,000 and more for individuals will be subject to IDA prior review. Allsingle-source selection of consultants and terms of reference for consulting services will besubject to IDA prior review. Any exceptional extensions to non-prior review contracts raisingtheir values to levels equivalent or above the prior review thresholds will be subject to IDAclearance. All training contracts costing US$15,000 equivalent or more per contract, will besubject to IDA prior review. Any other contracts below the value of the prior review thresholdswill be subject to post review in accordance with paragraph 4 of Appendix I of the Guidelines.

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Procurement methods (Table A)

Table A: Project Costs by Procurement Arrangements Method 1/(US$ million equivalent)

Expenditure Category ICB NCB Other N.B.F. Total Cost1. Works 27.1 10.2 37.3

(21.6) (8.3) (29.9)

2. Goods 19.1 9.1 2.2 1.3 31.7(19.1) (8.6) (2.1) (29.8)

3. Training 15.3 3.1 18.4_______ _______ ______ _ ______ (15.3) (15.3)

4. Consultants Services 7.8 10.2 18.0__________ _________ _ _____ ___(7.0) (7.0)

5. GrantsSelf-help sub-projects 18.1 18.1

(18.1) (18.1)

6. Operating Costs 2.0 3.5 5.5(1.0) (1.0)

Total 19.1 36.2 55.6 18.1 129.01 (19.1) (30.2) (51.7) (101.0)

1/ Figures in parenthesis are the amounts to be financed by the IDA Credit. All costs include contingencies. Totalsmay not add up due to roundings.2/ Includes works and goods to be procured through international or national shopping, direct contracting or forceaccounts, consulting services, services of contracted staff of project management offices, training, technicalassistance services and other incremental operating costs related to managing the project.

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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$) Method (US$ millions)1. Works Less thanUS$500,000 NCB I st 2 contracts in each

state, then post review($16.0 m)

Less than US$50,000 Lump-sum, fixed price on the Post reviewbasis of 3 quotations

AllLess than $30,000 Force Account ($1.2 m)

2. Goods US$150,000 and above ICB All($19.1 m)

Less than US$150,000 NCB 1st 2 contracts in eachstate and Federal levels,then post review($5.0 m)

Less than US$30,000 Shopping Post review

Less than US$30,000 Direct contracting All($1.2 m)

3. Services US$100,000 and above QCBS All($5.0 m)

Less than US$100,000 QCBS Post review(firms) (national firms)

Less than US$100,000 CQ Post review

US$50,000 and above IC All(individual) ($0.2 m)

Below US$50,000 IC Post review(individual)

3. Training US$15,000 and above CQ All($8.0 m)

4. Grants: Self-help n/a Community Participation Post reviewsubprojectsTotal value of US$56.0 millioncontracts subject toprior review:

Frequency of procurement supervision missions proposed: One every 4 months (includes special procurementsupervision for post-review/audits)

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ICB - Intemational Competitive Bidding; NCB - National Competitive Bidding; QCBS - Quality and Cost BasedSelection: CQ - Selection Based on Consultants' Qualifications; IC - Individual Consultant.

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

Overall Procurement Risk Assessment

High

Frequency of procurement supervision missions proposed: One every 4 months (includes specialprocurement supervision for post-review/audits)ICB - International Competitive Bidding; NCB - National Competitive Bidding; QCBS - Quality and Cost

Based Selection: CQ - Selection Based on Consultants' Qualifications; IC - Individual Consultant.

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Annex 6(B) Financial Management and Disbursement ArrangementsNIGERIA: Universal Basic Education Project

Financial Mana2ement

1. Summary of the Financial Management Assessment

A. GENERAL

Objectives of the Project Financial Management (FM) Systems

1. The objective of the Financial Management systems is to support the implementing unitsin deploying project resources to produce the required outputs and with attention to economy,efficiency and effectiveness. Specifically, the FM systems will be capable of producingtimely, understandable, relevant and reliable financial information that will enable theimplementing units to plan, coordinate, monitor and appraise the Project's overall progresstowards the achievement of its objectives, as well as ensuring that funds provided will beused for the purposes intended.Implementing Entities

2. The NPCU Ministry of Education will be responsible for overall coordination ofstate-level project implementation and this responsibility will be delegated to NPCU. NPCUwill provide technical assistance to the States with respect to project management, financialmanagement, and procurement. At the State level, the PCUs to will be established in SMOEor SPEB and will be responsible for project implementation.

3. Initially, each participating state will establish a Project Accounting Unit in the PCU(PAU/PCU) to be headed by a professional qualified accountant. It is expected that the staffand functions of the PAU/PCU subsequently will transfer to the State Project FinancialManagement Unit (PFMU), which will be established in the State Ministry of Finance oranother location satisfactory to the Bank under the new funds flow arrangements for Nigeria.The PFMU will be responsible for managing the financial affairs of Bank-assisted projects inthe state, including UJBE. The PFMU will manage all special accounts of all IDA projects. Ineffect, the PFMU will be a state financing platform for IDA projects. In the interim, i.e. whilethe PFMUs are being created, the PAS at NPCU will be responsible for managing a jointSpecial Account for the States.Within NPCU, a Project Accounting Section (PAS) will beestablished. The section will be headed by a professionally qualified Project Accountant whowill be supported by appropriately qualified staff. The PAS will be responsible for theday-to-day management of the credit at the Federal level. In each participating State, aProject Financial Management Unit (PFMU) will be established in the Office of the StateAccountant General. The PFMU will be responsible for managing the financial affairs ofBank-assisted projects in the State, including UBE.

4. Specifically, the PAS (or PFMUs) will, amongst other things, be responsible forpreparing budgets, monthly reports, quarterly financial monitoring reports, annual financialStatements and progress reports respectively for the Federal and State components. PAS andPAUs (or PFMUs)and PFMU will also be responsible for ensuring compliance with thefinancial management requirements of the Bank and the government, including forwardingthe quarterly financial monitoring reports and annual financial statements to IDA.

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5. All accounts personnel will be given training, as appropriate, in Bank procedures,computer applications and soft skills.

B. RISK ANALYSIS

Inherent Risks

6. The Country Financial Accountability Assessment (CFAA) for Nigeria concluded that therisk of waste, diversion and misuse of funds is high, and therefore the Bank needs to buildexplicit risk minimization actions into all its Nigerian operations while the Governmentmakes necessary efforts to improve financial accountability along the lines outlined in thereport. As the CFAA recommendations on financial accountability reforms have not beenimplemented, the Country Risk is assessed as high.

Control Risks

7. The overall project risk from a financial management perspective is considered high. Tomitigate the risk, the financial management arrangements will include the features describedin Section C.

Strength and Weakness

8. Strength: A condition for the opening of a Special Account for the project in each At theState level, is the establishment of a PFMU in the State Ministry of Finance to handle thefinancial management functions of the all IDA-assisted projects in the State. project will behandled by a PFMU situated in the OAGS under a new funds flow arrangement for Nigeria.The unit will be staffed with relevantly qualified staff. The Bank is assisting in thecomputerization of the financial management systems of the unit and training of staff insystems and Bank procedures. At the Federal level, the project implementing coordinationunits are is located outside in the front office of the line Ministerministries, in units whereappropriate financial management units can be easily established without bureaucraticbottlenecks.9. Weakness: Many of the staff who will operate the financial management's arrangementsat the NPCU and and PAUs (or PFMUs) PFMU may not have experience in managing IDAcredit. To address the weakness, accounting, internal audit and other relevant project staffwill be given appropriate training in Bank financial management, disbursement andprocurement requirements and procedures.

C. FINANCIAL MANAGEMENT ARRANGEMENTSFinancial Procedures Manuals (FPM)

10. Under the new funds flow arrangement for Bank-financed projects, a standard financialmanagement procedures manual will be used for all projects at the state level for use by thePFMU and will document details of the procedures. The manual will be adopted by thePFMUs in all participating States. While the PFMUs are being established in the States, aFinancial Procedures Manual (FPM) to be used for the implementation of UBE will bedeveloped by FME and adopted by the States. When the PFMUs have been established in theStates, the Financial Procedures Manual of the UBE will become an addendum to their robustsystems and procedures. The FPMs will include, inter alia: institutional arrangements; chart

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of accounts; basis of accounting adopted; planning and budgeting, including cash-flowmanagement; procurement procedures for goods, works and services; disbursements; bankingactivities; staff, wages and salaries; fixed assets register; financial reporting, auditing; legalcovenants; and records management. Besides, at the State level a memorandum ofunderstanding detailing the service standard for each activity (including the timing andquality of service) will be prepared and signed between the implementing entity and thePFMU. Additionally, NPCU will hire a Financial Management Consultant (FMC) to prepare(i) a FPMs to be used for the federal component; and (ii) an addendum to the aforementionedstandard FMP for UBE which will be adopted by all the participating States. The addendumwill address the peculiarities of UBE and be used in conjunction with the standard FPM.

Funds Flow and Banking Arrangements

11. The overall project funding will consist of IDA Credit and Counterpart Funds. IDA willdisburse the credit through Special accounts (SAs) consisting (a) one SA for the federalcomponent; (b) one SA for each State that has established its PFMU in the manner describedin paragraph 3, and (c) one common SA for all the States that have not yet established theirPFMUs which will be managed by NPCU. The creation establishment of a PFMU by eachparticipating State in the manner described above is a condition for the use of one SpecialAccount per State. Until such a time as a State would have created its PFMU, funds will bedisbursed through the States' common SA which will be managed by the NPCU.

12. NPCU and the participating States that have established their PFMUs will each maintainthe following accounts:

(i) A SA in US Dollars to which the initial deposit and replenishments from IDAwill be lodged.(ii) A Current (Draw-down) Account in Naira with bank X to which draw-downsfrom the Special Account will be credited once or twice per month in respect ofincurred eligible expenditures. Following the immediate payments in respect of thoseeligible expenditures, the balance on this account should be zero.(iii) A Current (Project) Account in Naira with bank X to which Counterpart Fundswill be deposited.

States that have not established PFMUs will each maintain the following accounts:

(i) A Current (Draw-down) Account in Naira with bank X to which draw-downsfrom the States' common Special Account will be credited once or twice per month inrespect of incurred eligible expenditures. Following the immediate payments inrespect of those eligible expenditures, the balance on this account should be zero.

(ii) A Current (Project) Account in Naira with bank X to which Counterpart Fundswill be deposited.

13. Also, they will each maintain an IDA Ledger Loan Account (Washington) in USDollars/Naira/SDR to keep track of draw downs from IDA credit. The account will show (a)deposits made into Bank X by IDA, (b) direct payments by IDA, and (c) opening and closing

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balances.

14. All bank accounts will be reconciled with bank Statements on a monthly basis by thePAS/NPCU and PAUs (or PFMUs)and the PFMUs. The bank reconciliation statements willbe reviewed by designated officials, and identified differences will be expeditiouslyinvestigated.

15. The PAS/NPCU and PFMUs will be responsible for preparing and submitting to theWorld Bank consolidated applications for withdrawal, as appropriate. Appropriate proceduresand controls, which will be documented in the FPM, will be instituted to ensuredisbursements and flow of funds are carried out in an efficient and effective manner.

16. The PAS/NPCU and PFMUs will maintain a cumulative record of draw-downs from theCredit that will be reconciled monthly with the Disbursement Summary provided by theBank. Prior to the creation of PFMUs, the PCU/PAU will maintain a cumulative record ofdraw-downs from the common States SA.

17. Detailed banking arrangements, including control procedures over all bank transactions(e.g. cheque signatories, transfers, etc.), will be documented in the FPMs.

Planning and Budgeting

18. Cash Budget preparation will follow the Federal Government and participating States'procedures. Additionally, financial projections or forecasts for the life of the project(analyzed by year) will be prepared. On an annual basis, the Project Accountant in PAS (inconsultation with key members of the implementing unit) will prepare the cash budget for thecoming period based on the work program. The cash budget should include the figures for theyear, analyzed by quarter. The cash budget for each quarter will reflect the detailedspecifications for project activities, schedules (including procurement plan), and expenditureon project activities scheduled respectively for the quarter. (Guidance on the preparation ofbudgets is available in the Bank publication entitled "Financial Monitoring Reports:Guidelines to Borrowers".) The annual cash budget will be sent to the TTL at least twomonths before the beginning of the project fiscal year.

19. Detailed procedures for planning and budgeting will be documented in the FPMs.

Fixed Assets and Contracts Registers

20. At the PAS, a Fixed Assets Register will be prepared, regularly updated and checked.A Contracts Register will also be maintained in respect of all contracts with consultants andsuppliers. The PAS will prepare Contract Status Reports quarterly. Control procedures overfixed assets and contracts with consultants and suppliers/vendors for States and federal levelswill be documented in the Financial Procedures Manual.

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Information Systems

21. The FME will hire a FMC mentioned in paragraph 16 will, among other things,to selectand install a computerized accounting package or a spreadsheet template to be used byNPCU, and train staff in the use of the software in compliance with the FPM. Under thestandard funds flow arrangements for Nigeria States implementing Bank IDA-financedprojects, the computerized systems will be developed and installed in the PFMUs will becomputerized and PFMU staff will be given relevant training.

Financial Reporting and Monitoring

22. Monthly, quarterly and annual reports will be prepared (as outlined in paragraphs 22, 23and 24) for the purpose of monitoring project implementation. The reports will be submittedto theproject coordinators, project implementing units government and IDA. In compliancewith government reporting requirements, Monthly Returns will be made to the Federal andState Accountants General, for incorporation in the Government's accounts, as described inthe FPM.

23. Monthly: On a monthly basis, the PAS (or PFMUs) will prepare and submit thefollowing reports to the project managerscoordinators:

* A Bank Reconciliation Statement for each bank account;* Monthly Statement of cash position for project funds from all sources, taking intoconsideration significant reconciling items;* A monthly Statement of expenditure classified by project components, disbursementcategories, and comparison with budgets, or a variance analysis; and* Statement of Sources and Uses offunds (by Credit Category/ Activity showing IDAand Counterpart Funds separately);

24. Quarterly: The following financial monitoring reports will be prepared by the PFMUson a quarterly basis and submitted to IDA and the project managers coordinators:

* Financial Reports which include a Statement showing for the period andcumulatively (project life or year to date) inflows by sources and outflows by mainexpenditure classifications; beginning and ending cash balances of the project; andsupporting schedules comparing actual and planned expenditures. The reports willalso include cash forecast for the next two quarters.* Physical Progress Reports which include narrative information and outputindicators (agreed during project preparation) linking financial information withphysical progress, and highlight issues that require attention.* Procurement Reports, which provide information on the procurement of goods,work, and related services, and the selection of consultants, and on compliance withagreed procurement methods. The reports will compare procurement performanceagainst the plan agreed at negotiations or subsequently updated, and highlight keyprocurement issues such as staffing and building Borrower capacity.

SOE Withdrawal Schedule listing individual withdrawal applications relating to

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disbursements by the SOE Method, by reference number, date and arnount. Each PAU (orPFMU) will submit a copy of the quarterly project financial monitoring reports to the StateUBE Advisory Committee. Also, it will forward a copy of the reports to the NPCU forconsolidation. The NPCU will submit consolidated quarterly reports to NETCOM.

25. Annually: The annual project financial Statements, which will be prepared by thePFMUs will include the following:

* A Statement of Sources and Uses of funds (by Credit Category/by Activity showingIDA and Counterpart Funds separately);* Statement of Cash Position for Project Funds from all sources;* Statements reconciling the balances on the various bank accounts (including IDASpecial Account) to the bank balances shown on the Statement of Sources and Uses offunds;* SOE Withdrawal Schedules listing individual withdrawal applications relating todisbursements by the SOE Method, by reference number, date and amount;* Notes to the Financial Statements. Each PFMU will submit a copy of the projectfinancial statements to the State UBE Advisory Committee. Also, it will forward a copyto the NPCU for consolidation. The NPCU will submit consolidated financial statementsto NETCOM.

26. Indicative formats for the reports are outlined in two Bank publications: (a) FinancialMonitoring Reports: Guidelines to Borrowers-quarterly FMRs, and (b) Financial Accounting,Reporting and Auditing Handbook (FARAH) - monthly and annual reports.

Accounting Policies and Procedures

27. IDA and Counterpart Funds will be accounted for by the Project on a cash basis. Thiswill be augmented with appropriate records and procedures to track commitments and tosafeguard assets. Also, accounting records will be maintained in dual currencies (i.e. Nairaand $).

28. The Chart of Accounts will facilitate the preparation of relevant monthly, quarterly andannual financial Statements, including information on the following:

Total project expendituresTotal financial contribution from each financierTotal expenditure on each project component/activity, andAnalysis of that total expenditure into civil works, various categories of goods,

training, consultants and other procurement and disbursement categories.

29. Annual financial Statements will be prepared in accordance with IntemationalAccounting Standards (IASs).

30. All accounting and control procedures will be documented in the FPM, a livingdocument that will be regularly updated by the Project Accountants.

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D. NEXT STEPS

3 1. The following activities should be completed on or before Credit Effectiveness.

ACTIVITIES RESPONSIBILITY1. Establish a state Project Financial Management Unit (PFMU) in the States/FMEState Ministry of Finance or other location satisfactory to the Bank, anddeploy staff to the Unit. Appoint/Assign relevantly qualified Accountantsand support staff to perform the project financial management functions2. Assign relevantly qualified Internal Auditors to review the activities, States/FMErecords and accounts of the PFMUproject at the Federal and State Level3. Hire a FMC to: (a) prepare the standard FPM for the PFMUUBE; (b) States/FMEselect/install a computerized FMS for NCPU; and (c) train staff. in theoperation of the system.4. Hire a FMC to: (a) prepare the FPM for NPCU (b) select/install a NPCUcomputerized FMS; (c) train staff in the operation of the system; and (d) Statesprepare a UBE addendum to the standard FPM for the StatesAdopt theFPM developed by FME.5. Agreement with FMF to enable IDA channel the credit directly to the States and FMOFSA of States that have created their PFMUs' SAs6. Finalize arrangements for Counterpart Funding. States and FME7. Dollar SA opened by NPCU and the States that have created their States and FMEPFMUs, ; Current (Project) Account in Naira, Current (Draw-down)Account in Naira and Naira Counterpart Fund Accounts opened by NPCUand the States. ; and IDA advised of authorized banksignatories/specimen signatures.

8. External auditors appointed for the project on approved TORs. States and FME9. Initial capacity building in Bank procedures and computer applications States and FMEcompleted.

Supervision Plan

32. Supervision activities will include: review of quarterly FMRs; review of annual auditedfinancial Statements and management letter as well as timely follow up of issues arising;annual SOE review; participation in project supervision missions as appropriate; andupdating the financial management rating in the Project Status Report (PSR).

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Conclusion

33. Subject to the activities listed in paragraph 31 being performed satisfactorily prior tocredit effectiveness, the Bank's financial management requirements will be satisfied.

2. Audit Arrangements

Internal Audit

34. At NPCU, a qualified internal auditor will be appointed to perform internal auditactivities for the project. Similarly, at the State level, project activities, records and accountswill be reviewed and subjected to internal audit by appropriately qualified Internal Auditorsdeployed from the line Ministry or by the Inspectorate Unit of the OAGS, in the case ofStates that have established their PFM{Us. Regular internal audit reports will be submitted toproject coordinators/officers, the State Ministry of Education and the Accountant General forthe State.

External Audit

35. IDA Agreement will require the submission of Consolidated Audited Project FinancialStatements for the project to IDA within six months after year-end. Samples of audit reportsare included in Annex XXI, Financial Accounting Reporting and Auditing Handbook(FARAH) of the World Bank.

36. NPCU and PFMUs will each appoint relevantly qualified extemal auditors on Terms ofReference acceptable to the Bank. The TORs of the external auditor appointed by NPCUwill include the audit of States that have not yet established their PFMUs.

37. Besides expressing an opinion on the Project Financial Statements in accordance withInternational Standards on Auditing (ISAs), the auditors will be required to include a separateopinion paragraph on the accuracy and propriety of expenditures made under the SOEprocedures and the extent to which these can be relied upon as a basis for loan disbursements.Regarding each Special Account, the auditors will also be expected to form an opinion on thedegree of compliance with IDA procedures and the balance at the year-end for each specialaccount.

38. In addition to the audit report, the extemal auditors will be expected to prepareManagement Letters giving observations and comments, and providing recommendations forimprovements in accounting records, systems, controls and compliance with financialcovenants in the IDA agreement.

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3. Disbursement Arrangements

Allocation of credit proceeds (Table C)

Table C: Allocation of Credit Proceeds

Expenditure Category Amount In US$mIlIlIon Financing Percentage1. Civil Works: 27.9 80%2. Goods: 100% of foreign expenditures;

a) Federal 3.5 90% of local expendituresb) States 24.3

3. Training: 100%a) Federal 12.1b) States 2.2

4. Consulting Services: 90%a) Federal 4.3b) States 2.7

5. Grants for Self-help sub-projects 18.1 100% of amount disbursed6. Operating Costs: 50%

a) Federal 0.1b) States 0.8

7. Unallocated 5.0

Total 101.0

Use of statements of expenditures (SOEs):

39. All application for the withdrawal of proceeds from the credit will be fully documented,except for: (i) contracts with an estimated value of less than US$150,000 for goods; (ii)contracts with an estimated value of less than US$500,000 for works packages; (iii) contractswith an estimated value of less than US$100,000 for consulting firms, and less than US$50,000for individual consultants; (iv) community sub-projects; (v) training, study tours, and incrementaloperating costs which may be claimed on the basis of certified Statements of Expenditures(SOEs). Documentation supporting all expenditures claimed against SOEs will be retained byNPCU and PFMU, and will be available for review when requested by IDA supervision missionsand project auditors. All disbursements are subject to the conditions of the Development CreditAgreement and the procedures defined in the Disbursement Letter.

Special account:40. To facilitate disbursements for eligible expenditures for goods and services under theFederal component, the NPCU will open a special account, which will be managed andadministered by the NPCU, in a commercial bank to cover part of IDA's share of eligibleexpenditures. Authorized allocation of the special account would be US$ 1.0 million coveringan estimated 4 months of eligible expenditures financed by IDA. Similarly, each State that hasestablished its PFMU would open a special account with an authorized allocation of US$0.25million to cover part of IDA's share of eligible expenditures. Also, for States that have not yetestablished their PFMUs the NPCU will open a States common SA with an authorized

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allocation of US$4.0 million to cover part of IDA's share of eligible expenditures in theseStates. NPCU and PFMUs will be responsible for submitting monthly replenishmentapplications with appropriate supporting documents for expenditures. To the extent possible,all of IDA's share of expenditures should be paid through the special account.

41. The Special Account will be replenished through the submission of WithdrawalApplications on a monthly basis and will include reconciled bank statements and otherdocuments as my be required until such time as the borrower may choose to convert toreport-based disbursement. All disbursements will be channeled through SA and in lieu of SA,the borrower may choose to pre-fmance project expenditure and seek reimbursement fromIDA.

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Annex 7: Project Processing ScheduleNIGERIA: Universal Basic Education Project

Project'Sched,ulep ,-.", ........ , ',,,1 : ,, ,;, ," ,,, .,Planned ActualTime taken to prepare the project (months) 20 20First Bank mission (Identification) 02/10/2001 02/10/2001Appraisal mission departure 04/01/2002 07/29/2002Negotations 07/01/2002 08/07/2002Planned Date of Effectiveness 12/31/2002

Prepared by:

The Ministry of Education, Universal Basic Education Commission and State preparation teams,with members of State Ministries of Education and State Primary Education Boards.

Preparation assistance:

A grant of US$ 254,600 was received from the Norwegian Trust Fund (TF 0201432) and wasused by the Task Team to contract consultant services to undertake the following preparationactivities: (i) Analysis of the institutional capacity and recommendations for institutionaldevelopment for six states; (ii) Analysis of Teacher Development issues; (iii) Study on theimpact of HIV/AIDS on the education system.

A PHRD grant of US $ 725,000 was also received. This grant was used to: (i) provide technicalassistance for the states to prepare the project; (ii) carry out the institutional capacity assessmentsin 10 states; (iii) provide the environmental analysis for the project; and (iv) provide technicalassistance to the federal level in coordinating the state project preparation activities.

A Quality Enhancement Review (QER) was carried for the project on 17 December, 2001.Members of the panel were the following: Marlaine Lockheed (chair and manager, WBIES),Robert Prouty (HDNED), Robin Horn (LCSHE) and Michael Drabble (HDNED).

Bank staff who worked on the project Included:

Name SpecialityBrigitte Duces Lead Education Specialist, Task Team LeaderKaren Alexandra Hudes Senior CounselJames Keith Hinchliffe Lead EconomistWilliam B. Marke Lead Financial Management SpecialistRogati Kayani Lead Procurement SpecialistEdward Olowo-Okere Senior Financial Management SpecialistAnthony Hegarty Lead Financial Management SpecialistOlatunde Adekola Senior Education SpecialistAdenike Mustafa Financial Management SpecialistBayo Awosernusi Procurement SpecialistDonald Taylor Education Specialist

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Eli Orbach Institutional Specialist (Consultant)Johanne Angers Operations OfficerYetunde Holloway Education Specialist (Consultant)Audrey Aarons Education Specialist (Consultant)Philip Cohen Book Specialist (Consultant)John Jordan Construction Specialist (Consultant)Kamla Pariadhaven Program AssistantSerge Theunynck Peer ReviewerEdward Heneveld Peer ReviewerPaud Murphy Peer ReviewerScott E. Guggenheim Peer ReviewerBirger Fredriksen Lead Advisor, Education, Africa Region

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Annex 8: Documents in the Project File*NIGERIA: Universal Basic Education Project

A. Project Implementation Plan

Universal Basic Education State Plan, 2002-2007, for Bayelsa StateUniversal Basic Education State Plan, 2002-2007, for Benue StateUniversal Basic Education State Plan, 2002-2007, for Borno StateUniversal Basic Education State Plan, 2002-2007, for Ebonyi StateUniversal Basic Education State Plan, 2002-2007, for Ekiti StateUniversal Basic Education State Plan, 2002-2007, for Enugu StateUniversal Basic Education State Plan, 2002-2007, for Imo StateUniversal Basic Education State Plan, 2002-2007, for Kaduna StateUniversal Basic Education State Plan, 2002-2007, for Katsina StateUniversal Basic Education State Plan, 2002-2007, for Lagos StateUniversal Basic Education State Plan, 2002-2007, for Niger StateUniversal Basic Education State Plan 2002-2007, for Oyo StateUniversal Basic Education State Plan, 2002-2007, for Plateau StateUniversal Basic Education State Plan, 2002-2007, for Rivers StateUniversal Basic Education State Plan, 2002-2007, for Taraba State

B. Bank Staff Assessments

Aide-Memoire of Identification Mission (February 10 to March 3, 2001)Aide-Memoire of Preparation Mission (September 11 to October 26, 2001)Aide-Memoire of Pre-appraisal mission (January 29 to February 22, 2002)Aide-Memoire of Appraisal mission (July 29 to July 30, 2002)

C. Other

Nigeria: Universal Basic Education Project (UBEP), DFID, 23 July 2002

Report on Capacity of the Education Sector in Oyo State Education Sector by Prof. TitilayoHassan (April 2002)

Report on Capacity of the Education Sector in Kano State by Adeyemo A. Aderinto (April 2002)

Report on Capacity of the Education Sector in Katsina State by Adeyemo A. Aderinto (I st draft,July 2002)

Report on Capacity of the Education Sector in Niger State by Prof. M.J. Shuaibu (April 2002)

Report on Capacity of the Education Sector in Plateau State by Prof. M.J.Shuaibu (1 st draft, July2002)

Report on Capacity of the Education Sector in Bomo State by D.O. Durosaro (April 2002)

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Report on Capacity of the Education Sector in Taraba State by D.O. Durosaro (1 st draft, July2002)

Report on Capacity of the Education Sector in Imo State of Nigeria for Implementing the UBEProgramme by Prof. Uka Ezenwe and Dr. Ephraim. Oluchukwu (December 2001)

Report on Capacity of the Education Sector in Bayelsa State, Nigeria by Prof. Eric Arubayi(April 2002)

Report on Capacity of the Education Sector: Federal Ministry of Education, National PrimaryEducation Commission, FCT Education Department, FCT Primary Education Board, and LocalEducation Authorities in FCT by Prof. Ben E. Aigbokhan (April 2002)

Report on Capacity of the Education Sector in Kaduna State, by Prof. Ben E. Aigbokhan (1 stdraft, July 2002)

Report on Capacity of the Eduation Sector in Ebonyi State, by Dr. Emphraim E. Oluchukwu (1stdraft, July 2002)

Report on Capacity of the Education Sector in Rivers State, by Dr. Ojedele (1st draft, July 2002)

Report on Capacity of the Education Sector in Lagos State (lst draft, July 2002)

Analysis of Public Expenditure on Education in Benue State by Prof. A. Akpa (October 2001)

Education for All (EFA) in Nigeria - Country Report on EFA since Dakar and National Plan ofAction, Federal Republic of Nigeria (August 2001).

*Including electronic files

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Annex 9: Statement of Loans and Credits

NIGERIA: Universal Basic Education Project09-Aug-2002

Difference between expectedand actual

Original Amount In US$ Millions disbursements

Project ID FY Purpose IBRD IDA Cancel. Undisb. Orig Frm RevdP072018 2002 NIgeria:Transnission Developntn Project 0.00 100.00 0.00 104.55 6.74 0.00

P070291 2002 HIlVAIDS Response Proed 0.00 90.30 0.00 92.96 10.12 0.00

P070290 2002 HeaM Systems 0.00 127.01 0.00 134.92 0.00 0.00

P069901 2002 Cofmuinity Based Urban Developrrent 0.00 110.00 0.00 116.51 0.00 0.00

P069086 2001 ComnunityBaseddPovertyReduclon 0.00 60.00 0.00 56.95 6.43 1.10

P070293 2001 NGPRIVATIZATIONSUPPORTPROJECT 0.00 114.29 0.00 117.43 12.69 0.00

P064008 2000 SMALLTOWNSWATER 0.00 5.00 0.00 3.69 .1.07 0.00

P065301 2000 ECON.MGiMT.CAP.BLDG. 0.00 20.00 0.00 12.25 1.16 0.00

P066571 2000 SECONDPRIMARYEDUCATION PROJECT 0.00 55.00 0.00 4960 49.77 0.00

Total: 0.00 681.60 0.00 688.67 85.85 1.10

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NIGERIASTATEMENT OF IFC's

Held and Disbursed PortfolioJun 30 - 2002

In Millions US Dollars

Committed DisbursedIFC IFC

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic

1998 AEF Ansbby 0.10 0.00 0.00 0.00 0.10 0.00 0.00 0.001996/98 AEF Bailey Bridg 0.32 0.00 0.00 0.00 0.32 0.00 0.00 0.001996 AEF Courdeau 0.07 0.00 0.00 0.00 0.07 0.00 0.00 0.001997 AEF Ekesons 0.10 0.00 0.00 0.00 0.10 0.00 0.00 0.001999 AEF Global Fabri 0.32 0.00 0.00 0.00 0.32 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 0.29 0.19 0.00 0.00 0.29 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 1.07 0.00 0.00 0.00 1.07 0.00 0.00 0.002000 AEF Oha Motors 0.84 0.00 0.00 0.00 0.84 0.00 0.00 0.001997 AEF Radmed 0.25 0.00 0.00 0.00 0.25 0.00 0.00 0.002001 AEF SafetyCenter 0.50 0.00 0.00 0.00 0.00 0.00 0.00 0.001997 AEF Telipoint 0.08 0.00 0.00 0.00 0.08 0.00 0.00 0.001995 AEF Vinfesen 1.00 0.00 0.00 0.00 1.00 0.00 0.00 0.001994 AbujaIntl 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 3.75 0.00 0.002000 Citibank (Nig) 39.20 0.00 0.00 0.00 9.20 0.00 0.00 0.002001 Delta Contractor 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.002000 Diamond Bank 0.00 0.00 18.00 0.00 0.00 0.00 18.00 0.002000 FSB 4.50 0.00 18.00 0.00 0.00 0.00 18.00 0.001992 FSDH 0.00 0.86 0.00 0.00 0.00 0.86 0.00 0.002000 GTB 20.00 0.00 0.00 0.00 5.00 0.00 0.00 0.002000 IBTC 20.00 0.00 0.00 0.00 20.00 0.00 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 0.00 0.00 0.00 0.00 0.00 0.002001 UBA 30.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Portfolio: 136.69 9.63 36.12 0.00 41.69 5.88 36.12 0.00

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic2000 AEF SafetyCenter 0.00 0.00 0.08 0.002002 MTNN 75.00 0.00 25.00 0.002002 NTEF- SCB 20.00 0.00 0.00 0.002001 FCMB 10.00 0.00 0.00 0.002001 Novotel Hotel 2.50 1.50 0.00 0.002001 Citibank/IFC IV 30.00 0.00 0.00 0.002002 NTEF - ANZ 10.00 0.00 0.00 0.00

Total Pending Cotmitment: 147.50 1.50 25.08 0.00

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Annex 10: Country at a GlanceNIGERIA: Universal Basic Education Project

Sub-POVERTY and SOCIAL Saharan Low-

Nigaria Africa Income Development diamond'2000Population, mid-year (millions) 126.9 659 2.459 Life expectancyGNI per capita (Atlas method, US$) 260 480 420GNI (Atlas method, US$ billions) 32.7 313 1,030

Average annual growth, 1994-00

Po._lation (X) 2.7 2.6 1.9Labor force (%) 2.7 2.6 2.4 GNI G<rar

per primaryMost recent estimate (latest year avaIlablb, 1994-00) capita N 0 enrollmentPoverty I% of population below nationalpoverty line)Urban population (IX oftotalpopulatlon) 44 34 32Life expectancy at birth (years) 47 47 59Infant mortality (per 1,000 live births) 83 92 77Child malnutrition (X of children under S) .. .. Access to Improved water sourceAccess to an Improved water source (X of populetion) 57 55 76Illiteracy (IX of population age 15+) 36 38 38Gross primary enrollment (% of school-age population) 98 78 96 Nigeria

Male 109 85 102 Low-income groupFemale 87 71 86

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1980 1990 1999 2000Economic ratios'

GDP (US$ billions) 64.2 28.5 34.8 41.1Gross domestic Investment/GDP .. 14.7 23.4 22.7Exports of goods and services/GDP 29.4 43.4 38.9 52.3 TradeGross domestic savings/GDP 31.4 29.4 19.1 34.0Gross national savIngs/GDP 26.1 19.4 13.9 27.6

Current account balance/GDP 6.7 5.4 -9,5 4.9 Domestic Ie nInterest payments/GDP 0.8 7.5 5.7 5.0 savings InvestmentTotal debt/GDP 13.9 117.5 84.4 77.7Total debt service/exports 4.1 23.3 31.5 15.5Present value of debt/GDP .. .. 82.1Present value of debtUexports .. .. 217.2

Indebtedness1980-90 199040 1999 2000 200044

(average annual growth)GDP 1.6 2.4 1.1 3.8 3.1 NlgerlaGDP per capita -1.4 4.4 -1.4 1.3 0.8 Low-income groupExports of goods and services -0.3 4.2 -12.4 -1.6

STRUCTURE ot the ECONOMY1980 1990 1999 2000 Growth of Investment and GDP (%)

(% of GOP) soAgriculture 20.6 32.7 36.8 29.5Indus"t. 45.8 41.4 38.2 46.0 *.

Manufacturing 8.4 5.5 4.9 4.1 2sServices 33.8 25.9 28.2 24.5 o

Private consumption 66.5 55.5 67.4 45.4 -s0 - 1 as go 0oGeneral govemment consumption 12.1 15.1 13.4 20.5 OI C GDP/mports of goods and services 19.2 28.8 41.1 41.0

1980-90 199040 1999 2000 1Growth of exports and Imports (%)(average annual growth)Agriculture 3.3 3.5 5.2 5.2 20 .Industry -1.1 1.0 -2.5 6.7 is0

Manufacturing 0.7 1.2 2.1 4.9Services ~~~~ ~~~~ ~~~~3.7 2.8 2.3 -03 oo{ g 6 r, \ 9 o

Private consumption -2.6 -3.7 1.5 -16.0Services 3.7 2~~ ~ ~~~~ ~~~~ ~ ~~.83 2. -.3

General govemment consumption -3.5 5.6 47.7 86.2 50

Gross domestic Investment 4.5 8.3 42.1 39.7 - Exports ImportImports ot goods and services -13.6 4.8 14.9 16.0

Note: 2000 data are preliminary estimasts.

* The diamonds show tour key lndicatorn 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 FINANCE

Domestic prices 1980 1990 1999 2000 lnflatlon (%)

(% change) o.Consumer prices 10.0 7.4 6.6 6.9 e _Implicit GDP deflator 12.4 7.2 12.3 25.4 40

Government fIlnance 20(% of GDP, (ncdudes currenLt gi2nts) o 3 4 '.Currentrevenue *- 21.6 30.7 40.1 -20 9 U 97 98 r 0

Curmnt budget baance 13.6 3.6 11.1 24.0 GDP deflator eCPOverall surpius/deficit .. .. -7.5 2.2

TRADEi19ds 1990 1999 20E0 Export and Impott levels (USS mill.)

(US$ mi/SorlsJTotal exports (fob) 25,950 13.914 11,927 20.441 s,0ro

Fuel 24,942 13,508 11,393 19,550Uquefled natural gas 322 623Manufactures 70 27 30 1s00*

Total imports (clf) 19,999 7,827 11.658 13,696 , __

Food 3,161 644 1,516 1,758 6Fuel and energy 340 54 152 178 .Capital goods .. o

04 Ui Ue 97 U9 U UoExport prlre index (1995-100) 208 13Ei 94 180 0 5 9 7 e e 0

Import price Index (1995=100) 66 84 93 95 Expor *twportTerms o trade (1995=100) 309 164 101 169

BALANCE of PAYMENTS19ti0 1il90 1999 2000 Currant account balance to GOP (%)

(US$ 11,1lllonsJ

Exports of goods and services 27,006 14,083 12,871 21.409 15.

Imports of goods and servIces 17,648 9,341 14,339 16,789 1.Resource balance 9.358 4,742 -1,468 4.620

5-Net income 4,472 -3,288 -,487 -4,341Net current transfers -876 74 1,645 1,724 0

Current account balance 4,310 1,527 -3,290 2,003 4*

Financing Items (net) 235 571 1,624 1,956 -1DChanges In net reserves 4,545 -2.098 1.886 -3,959 -15-

Memo:Resetves Incduding gold (US$ milons) 10,268 3,863 5,441 9,400Conversion rate (DEC, hocaDUSS) 0.8 9.2 92.3 101.7

EXTERNAL DEBT and RESOURCE FLOWS1980 1990 1999 2000

(US$ minllons) Compoaltion of 2000 debt (USS mill.)Total debt outstanding and dbumsed 8,921 33,441 29,358 31,935

IRD 517 3,284 1,989 1,625 A 1,S25IDA 38 38 624 644 G:6,515 8:644

Total debt service 1,151 3,334 4,140 3,365 D: 3,019IBRD 69 484 443 376IDA 1 1 7 9

Composition of nat resource flowsOffidal grants 3 125 0 0Olfldcal creditors 77 -132 -275 -291 F: 5,599Private creditors 1,434 -120 -146 -199Foreignndirectinvesiment .. 602 1,473 1,374 -- E: 14,532Portfolio equity 0 0 2 0

Worid Bank programCommitments 286 688 0 140 A -IBRD E- BilateralDisbursements 63 391 119 86 B -IDA D- Other rmuwlateml F -PrivatePrincipal repayments 25 242 307 277 C- IMF G -Short-termNetfiows 38 149 -189 -191Interest payments 45 243 142 108Net transfers -7 -94 -31 -299

AFTM4 917/01

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Report No.: 23934 UNIType: PAD