Document of The World Bank FOR OFFICIAL USE ONLY Report No. 38237-NG PROJECT PAPER ON A PROPOSED ADDITIONAL FINANCING CREDIT IN THE AMOUNT OF SDR 33.60 M I L L I O N (US$50.0 MILLION EQUIVALENT) TO THE FEDERAL REPUBLIC OF NIGERIA FOR THE LAGOS URBAN TRANSPORT PROJECT March 14,2007 Transport Sector Country Department 12 Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document o f The World Bank
FOR OFFICIAL USE ONLY
Report No. 38237-NG
PROJECT PAPER
ON A
PROPOSED ADDITIONAL FINANCING CREDIT
IN THE AMOUNT OF
SDR 33.60 MILLION (US$50.0 MILLION EQUIVALENT)
TO THE
FEDERAL REPUBLIC OF NIGERIA
FOR THE
LAGOS URBAN TRANSPORT PROJECT
March 14,2007
Transport Sector Country Department 12 Africa Regional Office
This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS (Exchange Rate Effective February 15,2007)
CPS CPAR DCA DfID EL4 ESMF EOP ERGP ERR FGN FM FMR IDA IDF IEC IMF LASG LGA LAMATA LASEEDS LSFC LUTP MTR MVA NEEDS NEITI PRSP SEEDS TMU TSM
Currency Unit = Nigerian Naira 1 Nigerian Naira = US$0.0077
1 US$ = SDR0.69
FISCAL YEAR January 1 - December 3 1
ABBREVIATIONS AND ACRONYMS
Country Partnership Strategy Country Procurement Assessment Review Development Credit Agreement Department for International Development Environmental Impact Assessment Environmental and Social Management Framework End o f Project Economic Reform and Governance Project Economic Rate o f Reform Federal Government o f Nigeria Financial Management Financial Monitoring Report International Development Association Institutional Development Fund Information, Education and Communication International Monetary Fund Lagos State Government Local Government Area Lagos Metropolitan Area Transport Authority Lagos State Economic Empowerment and Development Strategy Lagos State Ferry Corporation Lagos Urban Transport Project Mid-Term Review Motor Vehicle Administration National Economic Empowerment and Development Strategy Nigeria Extractive Industries Transparency Initiative Poverty Reduction Strategy Paper State Economic Empowerment and Development Strategy Traffic Management Unit Traffic Management Systems
Acting Vice President: Hartwig Schafer Country Director: Hafez Ghanem
Sector Manager: Sanjivi Rajasingham Task Team Leader: Ajay Kumar
.. 11
NIGERIA
LAGOS URBAN TRANSPORT PROJECT
ADDITIONAL FINANCING
TABLE OF CONTENTS OF THE PROJECT PAPER
1 . Project Paper Data Sheet ....................................................................................................... iv
Benefits And Risks .............................................................................................................. 10
Financial Terms and Conditions for the Additional Financing ............................................ 11
... 111
FEDERAL REPUBLIC OF NIGERIA
PROJECT PAPER FOR A PROPOSED ADDITIONAL FINANCING TO THE FEDERAL REPUBLIC OF NIGERIA FOR THE
LAGOS URBAN TRANSPORT PROJECT (CR. 3720)
Borrower: Government o f Nigeria Responsible agency: Lagos Metropolitan Area Transport Authority (LAMATA)
oYes xNo
Revised project development objectives/outcomes [If applicable] Additional financing activities fall within the original project development objectives
Does the scaled-up or restructured project trigger any new safeguard policies? NO If so, click here to indicate which one(s) [selection box like the one in the new ISR]
[ 3 Loan [X 3 Credit [ ] Grant For Loans/Credits/Grants:
For Additional Financing
Total Bank financing (US$m): 50.00 Proposed terms: Standard IDA Credit terms
1. This Project Paper seeks the approval o f the Executive Directors to provide additional financing in an amount of US$50.0 million to Federal Republic of Nigeria to support the Lagos Urban Transport Project (LUTP) (Project No. P074963, Cr 37200).
2. The proposed additional financing would largely finance costs associated with completion of the original project activities resulting from unanticipated cost overrun. The cost o f road works has increased by over 60 percent since appraisal in 2002 due to: (a) increase in price of diesel from N2l/liter to N85/liter ((US$0.18 to US$0.66 equivalent) and o f premium motor fuel from N22 to N65/liter (US$O.19 to US$0.50 equivalent); and (b) the value o f Naira against the dollar depreciated from N117 in 2002 to N128 in 2006. These two factors have led to an increase in the price of basic construction materials like cement, sand, stone, bitumen, fuel and also an increase in equipment and labor costs.
3. The condition of the road network has also fast deteriorated due a to two year delay between design and implementation, requiring additional works to keep it in a maintainable condition. As a result of the cost overrun, the project will not be able to meet i t s development objectives without additional financing. Table 1 provides a summary of the key development objectives/ outcome targets to be realized with and without additional financing.
4. The additional financing would also scale up the bus services enhancement component, which i s critical to attaining the project development objective of improving efficiency of the public transport network. The specific focus of additional financing would be to implement a pilot bus franchise scheme along Iyana Ipaja-Ikotun/Igando corridor. I t i s envisaged that infrastructure such as bus shelters, lay-byes, street lights, traffic lights and other infrastructure necessary for bus franchise operation, including terminal rehabilitation would be provided on the pilot bus route. This would result in passenger transport services being provided on the corridor by high-capacity buses operating under exclusive franchise designed and regulated by Lagos Metropolitan Area Transport Authority (LAMATA).
5. Overall, about 85 percent of the additional financing would support filling the financing gap and the remaining 15 percent would scale-up the original project to create a favorable environment for important additional bus services. The implementation arrangements remain the same as in the original Credit. The closing date i s being extended by one year, from June 30, 2008 to June 30,2009.
6. Over the past three years, the project has succeeded in contributing to increased awareness in the need for traffic management, transparency and discipline in procurement processes and involving the users in decision making processes. LAMATA has started, for the f i rst time in the country, the design and execution of maintenance work with'participation of the private sector through awarding contracts to the local consultants and contractors. Experience has shown that the output of maintenance works through contracts i s more efficient, cost effective and better in quality compared with the traditional methods of using force accounts procedures. The Lagos Urban Transport Project i s now widely recognized by the Government, participating communities and development partners as an efficient and high-performing initiative that has significantly contributed to the city's poverty reduction goals. Notable are the improving accessibility in low-income areas, involving communities in identification of priority programs and improving sector management.
1
Table 1: K e y Performance Indicator$
SN PDO/Outcome Baseline September Expected Target Expected Target Indicator 2006 (w/out additional (with additional
financing) financing)
1.
2.
3.
I (minutes) 5. I Av. Pilot bus route
Time spent by poor households on travel (minutes/person/day) Money spent by poor households as a share o f income
Contribution from user $5m (2008) charges into the Transport Fund at EOP Transport Promotion
Number o f jetties 0 0 2 4 improvedconstructed for small boats Privatization (or sale) o f Completed LSFC completed First ferry concession Completed operation Jetties passenger per 6100 6700 7200 day
N o change Savings o f at least 20% or more
N o change Reduced
about 15% on pilot
10 min 4 min
60 min 40 min
2
3. Background for Additional Financing
7. The development objective o f the Lagos Urban Transport Project (LUTP) i s to: (a) improve the management of the Lagos Metropolitan transport sector; (b) enhance the public transport road network in an environmentally, socially and financially sustainable manner; (c) enhance bus services; (d) promote water and non-motorized transport; and (e) prepare future phases of the program. The Credit for US$lOO million was approved on November 21, 2002, became effective on October 30, 2003. The original closing date was scheduled for June 30, 2008.
8. The project was restructured in June 2005, with a focus on:
a) reallocating the Credit, essentially re-directing allocation for maintenance works on Federal roads onto State roads;
b) canceling the dated covenant related to the direct transfer of user charges to the Transport Fund and to keep it as a performance indicator to allow for enough flexibility for implementation of this reform;
c) postponing the contractual requirement for Lagos State Government (LASG) to pay annually US$7million equivalent, from i ts budget and/or from user charges, to the Transport Fund, to start in the year 2004; and
d) modifying the key performance indicators to better take into account the reality o f the project in view of the proposed restructuring.
9. A further request for additional restructuring was approved in August 2005 by the Bank with the objective to apply new financing parameters to the remaining expenditures under the project.
10. was approved by the Country Director.
There was no change in the project development objectives. The Project restructuring
IMPLEMENTATION PERFORMANCE:
11. After a slow start and less than satisfactory performance, supervision ratings have been satisfactory both for Development Objectives and Implementation Progress. Key implementation outcomes are the following:
Increase in disbursement ratio. The total amount disbursed has increased from US$2 1 million in July 2005, to US$43 million in April, 2006, to US$7 1.2 million as of January 2007. An additional US$25.6 million i s committed, much of it for phase I1 road works which are expected to be disbursed in the next three months. The total available uncommitted amount i s about US$3.2 million.
Institutional capacity. Significant progress has been made by LAMATA towards becoming an efficient institution over the past two years. Strategic plans are being prepared, road maintenance and rehabilitation works are being supervised efficiently, monitoring studies are being conducted and transport needs of metropolitan Lagos are being addressed in a comprehensive fashion, taking account of inter-modal complementarity. The operationalization of the LAMATA Act has received new impetus and activities are now being pursued as agreed in the action plans. The studies to support institutionalization o f the LAMATA have come up with key recommendations and providing the basis to amend the LAMATA law.
3
Public transport network eflciency. A bus franchise regulation has been signed into law by the Governor of Lagos State, which operationalizes the franchise power vested in LAMATA. This is the first step towards organizing and disciplining the private sector bus supply market. LAMATA expects to implement franchise arrangements on a pilot corridor by June 2007. To achieve this, major corridors would be franchised to private sector operators using high capacity buses. The small buses (danfos) would however continue to provide services on feeder routes only. The new regulated regime would provide standardization in services, reliability and the needed sanity and control in the public transport system within metropolitan Lagos. The Lagos State Government through its LUTP implementing agency, LAMATA, would provide the necessary infrastructure facilities for smooth operations of public transport on the corridors. These include roads, lay-byes and bus shelters, terminals, depots etc. Government would also provide enforcement (traffic management) and legal environment that would enable effective franchise operations on the corridor. The private sector would operate the buses as well as provide funds and financing for procurement of buses to be operated under the franchise scheme. On the whole, it i s envisaged that operators would provide services under franchise agreements with agreed service standards, bus specifications and other issues that differentiate the regulated regime from the existing fragmented public transport situation in the Lagos metropolis.
Financial sustainability. Cost recovery initiatives on increased user charges have commenced as agreed during project restructuring. Discussions are on-going with the Joint Tax Board to raise user charges. In the meantime, counterpart funding of additional US$7 million has been approved by the State Government and included in the 2007 State budget. This would make up for the delayed increase in transport user charges.
The revised DCA requires that Lagos State Government provides a total of US15 million as counterpart funds and transport funds during project implementation. At the end of the project, a further payment of US$5 million should be paid for road maintenance works. As of December 2006, a total o f US$16.98 million (Naira 2.2 billion) have been made available to LAMATA, which exceeds the initial commitments.
Satisfactory progress on road network eflciency improvement component. a) Road works: The underlying objective of this component i s to enhance efficiency o f the road network through carrying out proper maintenance of good/fair roads, rehabilitation of poor roads, and improving traffic management on selected road junctions. LAMATA i s responsible for routine maintenance on the whole road network, whereas the recurrent maintenance, periodic maintenance, rehabilitation, and traffic management improvements are carried out only on state roads and local roads. The civil works program i s progressing well and has been classified into three phases. The Phase I, which includes 3.4 km of road rehabilitation, 28 km o f periodic maintenance at a total cost of US$17.2m has been completed and the quality of works in general i s satisfactory. The Phase 11, which includes 22 km of rehabilitation, 13 km of periodic maintenance in a contract amount of US$41.92mY and the works have been completed. The Phase I11 program i s currently under design stage and would be financed by the proposed additional financing; b) Traflc Management Works: Minor repairs on 17 road junctions have been substantially completed. The design i s ready for additional 16 junctions and in process of being contracted; and c) Other Activities Relating to Civi l Works. A GIS system has been set up for al l roads in Lagos; and LAMATA i s now capable of producing its own maps; LAMATA i s in the process of setting up a Pavement Management System, which i s a computerized modern tool for the management of road networks.
4
0
0
4.
12.
Completion of baseline survey analysis and putting in place a M&E framework. The base line performance monitoring indicators have been finalized and are being monitored on an annual basis.
Satisfactory progress on the on-going studies. A number of studies (traffic management, bus regulatory reform studies, poverty impact study, studies to develop the future program) are currently being conducted. The studies on reform of Motor Vehicle Administration (MVA) and the Transport Ministry are completed and available for broader dissemination.
Justification for Additional Financing
As suggested earlier, additional financing would allow completion of the original project activities. The cost of road works has increased by over 60 percent since appraisal in 2002 which has led to an increase in the price o f basic construction materials like cement, sand, stone, bitumen, fue l and also an increase in equipment and labor costs. About 15 percent o f the proposed additional financing would support scale up of the bus services enhancement component,
13. LAMATA has been able to provide an overall vision and a strategic planning basis to address long neglected transport needs of the metropolis and coordinate activities of different executing agencies. Over the past three years, LAMATA has emerged as a strong planning authority, winning the support o f Government and the public. There i s a need to complete the originally planned activities to set LAMATA on a firm basis and establish an irrevocable path to sustained reforms in the Lagos transport system. In absence of the additional financing, and inability o f the project to complete the planned activities, the planned reform momentum would be lost and sustainability of the development outcomes would be in jeopardy.
a) Suitability of additional $financing: The additional financing would strengthen the policy, regulatory and institutional basis of LAMATA for the management and financing of the transport system. O f particular focus will be the completion of road network efficiency improvement and bus service enhancement components. In absence of additional financing, the maintenance and rehabilitation of the declared road network would not meet the agreed targets. A total of 33 junctions would be improved as compared to the agreed target of 42 junctions; Traffic Management Unit (TMU) would be set up in only one Local Government Area (LGA) as compared to a target of four TMUs. Most importantly, the public transport services enhancement component would not have the desired impact. In the absence of additional financing, it would not be possible to improve traffic design of the pilot corridor (Iyana-Ipaja corridor) and construct facilities (terminal, depot, bus shelters, lay-byes) to demonstrate effectiveness of the planned pilot bus franchising scheme.
b) Processing and supervision: The economic return for the components to be financed as part of additional financing has been recomputed, to account for cost overruns, and estimated to be economically justified. As the components to be financed are part of the original project activities, there are reduced transaction costs for the borrower to proceed with the additional financing as compared to preparing a new project. The implementing agency has demonstrated capacity to manage the additional financing. The credit i s being implemented in compliance with the covenants. The Financial Statements for the year ending December 3 1 , 2005 have been audited by independent auditors. The audits reports were received on time and were unqualified. Performance of procurement activities i s satisfactory. The last procurement review in June 2006
5
concluded that processes and procedures are properly observed, procurement plans are well adhered to and procurement fi les are adequately maintained.
c) The proposed activities do not trigger any new safeguard policies or change the environmental or safeguards category of the project: As part of Project preparation, an Environmental and Social Management Framework (ESMF) was prepared following the Bank’s environmental and social safeguard procedures, to guide the execution of sub-projects identified during implementation. Furthermore, contracts’ clauses and specifications for c iv i l works ensured compliance with national applicable regulations on environmental and social protection. The procedures laid out in the Framework wil l carry on for the execution of sub-projects funded through the requested financing. There are no unresolved fiduciary, environmental, social or safeguards problem on the project.
5. Proposed Changes
14. components:
Project description: The additional financing would support the following three
a) Road network eflciency improvement. This component would finance: i) periodic maintenance on about 26 km of the main road network (detailed designs are under preparation); ii) rehabilitation and improvement of about 25 additional junctions and establishment of 3 TMUs; and iii) implementation of Traffic Systems Management (TSM) measures along the pilot bus franchise corridor to improve the traffic flow;
b) Bus services enhancement, This component would finance: i) bus terminals at the end of each route; ii) bus lay-byes along the line of each route; iii) priority TSM measures on the route; and iv) bus depot and garages, for the parking and maintenance o f the bus fleet; and
c) Water transport promotion. This component contributes to modal diversity within an integrated urban transport system by promoting the enhanced provision and use of water transport. It would include: i) development and implementation of a detailed plan strategic plan for improving the use of waterways o f metropolitan Lagos for transport services; and ii) rehabilitation and upgrading of two additional jetties for small boats.
15. 100 percent of expenditures to be financed, as indicated in Table 2.
Project costs andfinancingplan: The estimated additional cost i s US$50.0 million, with
6
Table 2: Additional FinancinP Plan
Component
Road network efficiency
Indicative Bank YO of Bank Costs ($ M financing financing
38.8 38.8 77.6 ($M)
improvement* Bus services enhancement ** Water transport promotion Total additional financing
9.3 9.3 18.6 1.9 1.9 3.8
50.0 50.0 100.0
improvement* Bus services enhancement ** Water transport promotion Total additional financing
Note: * This financing i s required to increase the road overlays from 42 km to 68 km, which was agreed as part o f project restructuring. * * Of the total amount for bus services enhancement component, an estimated US$7.0 million would be utilized for scaling up this component, which would increase the length o f bus-km franchise network from 10,000 to 15,000
9.3 9.3 18.6 1.9 1.9 3.8
50.0 50.0 100.0
16. Implementation schedule: The implementation arrangements, and operations processes remain the same as in the original credit. The closing date i s proposed to be extended by a year from June 30,2008 to June 30,2009.
Total financing reauired
17. Safeguard implementation: LAMATA prepared and disclosed an Environmental Impact Assessment (EM) including social assessment and a Resettlement Policy Framework (RPF) as part o f i t s safeguards instruments, during the LUTP project preparation. Both the E M and the RPF was cleared by the Bank and the Federal Ministry of Environment and disclosed in country and at Infoshop. In line with the RPF, one Resettlement Action Plan (RAP) has been prepared. The RAP for investments along the Iyana Ipaja-IkotudIgando bus corridor has been prepared and was disclosed in country on December 4, 2006 after Bank clearance. The same safeguards policy and instruments which are in place, will apply to the additional financing.
50.0 50.0
18. Financial management: The 2005 external audit report identified two issues: (1) Payroll and fixed asset system are not fully computerized; and (2 ) back log of withholding taxes have not been paid. During the supervision, it was confirmed that proposals have been submitted and procurementhtallation of Payroll software was completed in November 2006. The procurement of Fixed Assets software has been completed, a contract has been signed and implementation has commenced. With respect to withholding tax, payments have commenced and a total o f Naira 89,738,592.00 has been paid. Subsequent, payments will be made with each deduction.
Total financing reauired
19. submitted and reviewed. Al l F M issues noted have been properly addressed.
The project uses a report-based disbursement. The December 2006 FMR has been
I 50.0 I 50.0 I
20. As observed earlier, the Government has met its counterpart funding requirements to date. The counterpart funds are used in respect of operating costs for LAMATA. With respect to the transport Fund, the Lagos State House of Assembly has passed the Motor Vehicle Administration (MVA) Bi l l in January 2007 and 50 percent of revenue generated by the MVA i s expected to be transferred to LAMATA as Transport Funds.
21. satisfactory. The FM risk rating i s modest.
Based on the last F M supervision carried out in February 2007, the FM i s assessed as
7
Table 3: Proiect FM Risk Monitor
Record Keeping
Internal Audit
Financial Reporting & Monitoring
System
Information System
Budgeting
=F Staffing
S
S
S
S
S
Internal Control S
Funds & User Transport Funds
Submission WA
7 Arrangement
7 Letter Issues
Timely Management Corrective Actions
FM Covenant
S
NIA
C O M M E N T S
The staffing arrangements are adequate for handling of the project’s financial matters. The FM unit has 7 staff, 4 of them are qualified. This i s sufficient for handling FM issues.
The Project uses the Financial Procedures Manual, duties are properly segregated to ensure adequacy of internal controls.
Record keepinglfiling system i s adequate.
The Internal Auditor carries out relevant checks of transactions and other assignments, and reports every month to the Managing Director.
Financial reports, procurement reports and physical progress reports are prepared every quarter. The project has moved to report-based disbursements. The format used i s proper and well prepared. FMRs are prepared timely.
Budgets are prepared yearly, they are further analyzed quarterly. Financial Monitoring Reports are prepared which indicates variances and explains reasons for them.
The Project uses the Sun System Accounting Software to process i t s transactions. This has assisted in moving the project to report-based disbursement. The contracts for the computerization of the payroll and fixed asset have been finalized.
Counterpart funding has been provided by the Lagos State Government. The revised DCA requires that a total of U S $ l 5 million be provided through project life for both Counterpart and transport funds. As of December 2006, a total of US$16.98 million has been paid. With respect to the transport Fund, the Lagos State House o f Assembly has passed the Motor Vehicle Administration (MVA) Bi l l in January 2007. 50 percent of revenue generated by the MVA i s expected to be transferred to LAMATA as Transport Funds.
55 WAS have been submitted to date. This totals $71.2 million. The project has moved to a report-based disbursement since Sept 2006. WAS will therefore follow al l FMRs sent to the Bank at quarter end
The Project has a good relationship with i t s Bankers. No charges are incurred, but interest income i s earned on their bank balances.
The Audit Report for the year ended December 3 1,2005 was timely submitted.
The audit opinion was unqualified and satisfactory.
Management letter noted that N103.6 million WHT was not remitted and payroll and FA done manually and need to be computerized. This i s already been addressed by management. Management responds to F M issues in supervision reports, FMR and Audit review in a timely manner
I Overall FM Rating: satisfactory. FM risk rating: Modest.
HS- Highly Satisfactory; S- satisfactory; MS- Moderately Satisfactory; MU- Moderately Unsatisfactory; U-Unsatisfactory; and N/A- Not Applicable
22. Procurement: Generally, the procurement management function o f the project has continued to be satisfactory. The Procurement Unit o f LAMATA i s adequately staffed with qualified and experienced Procurement Specialists and appropriate tools. The implementation o f
8
civ i l work contracts i s going as per the work program, and payment for work done i s effected in a timely manner. Contract supervision i s enhanced with support of experienced engineering Consultants. The procurement related activities of the other categories of the project are also progressing satisfactory. The Procurement Plan for the uncommitted funds for US$3.2 million has been approved by the Bank while the procurement plan for the additional financing has been prepared. Implementation i s progressing satisfactorily. There i s no experience of interference in the project procurement process. Therefore the procurement risk of the project i s assessed as "moderate".
6. Consistency with Nigeria Country Partnership Strategy
23. The Bank Group and Department for International Development (DflD) have prepared a joint Country Partnership Strategy (CPS) which was approved by the Executive Board on June 28,2005. The World Bank Group's work in the country i s currently being guided by the CPS and the Government's Poverty Reduction Strategy-National Economic Empowerment and Development Strategy (NEEDS). NEEDS i s based on three pillars: a) empowering people and improving social service delivery; b) fostering economic growth, in particular in the non-oil private sector; and c) enhancing the effectiveness and efficiency of government, while improving governance. NEEDS highlights the need to: (i) maintain sound macroeconomic policies; (ii) strengthen the basis for private sector growth; and (iii) improve transparency and accountability of the public sector. Lagos has been selected as one o f the initial five lead states of the CPS based on the Government-led SEEDS benchmarking process.
24. The additional financing i s for original project activities that are strategically aligned with al l three pillars of the NEEDS: a) on empowering people and improving social service, the project components were identified based on broad consultation, involving users and community residents. The project would continue to support development of an information, education, and communication strategy not only to guide the involvement of transport users and beneficiary communities in the planning and implementation of project elements, but also for use as a monitoring and evaluation tool to provide feedback on the project's impact; b) on fostering economic growth, the project has a strong focus on developing an enabling environment for increased private sector participation in the sector, improving delivery of services, thereby enhancing city growth, competitiveness and bankability; and c) on improving governance, a key element of additional financing i s to strengthen LAMATA, to coordinate sector wide management and decision making systems, increase budgetary accountability and improve sector planning and programming capacity.
7. Economic Analysis
25. Most of the project activities included in the additional financing are in the original project activities, which were appraised during preparation. The economic analysis was redone using revised and updated costs. Economic analysis of the additional activities to support the bus services enhancement component was also conducted.
(a) Road network efficiency improvement: The originally appraised road maintenance and rehabilitation program was prioritized based on economic justification and divided into three phases. The prioritized phase 1 and phase 2 road works are already under construction. In question i s the third phase road works, for which a detailed design i s available. The investment program i s for periodic maintenance of about 50 km and rehabilitation of about 2.0 km of the road network. The economic analysis was conducted using the revised cost estimates but the same assumptions on discount rate, vehicle operating cost and time savings. The Economic Rate of Reform (ERR) i s lower than estimated during appraisal but s t i l l with a benefit/cost ratio of
9
greater than 1.0 (ranges between 30 percent and 35 percent as compared to above 50 percent during appraisal).
(b) Bus services enhancement: Economic analysis was conducted for the proposed investments on the pilot bus franchise corridor (bus depot and maintenance workshop, traffic system management interventions, bus terminals, bus lay-byes and pedestrian sidewalks). The total financial cost i s estimated at about $1 0.0 million (including traffic management and intersection improvements along the pilot corridor). The key benefits included in the analysis are: (1) extension o f the useful vehicle l i fe from 6 years to 10 years; (2) reduction in maintenance cost; (3) increase in availability and reliability, saving capital expenditure progressively over the term o f the franchise; (4) reduction in bus running time o f about 10 percent; and (5) increase in general traffic speed o f about 10 percent. In addition, other socio-economic benefits resulting from pedestrian safety, passenger security and comfort were not quantified and not included in the analysis. The economic rate of return i s estimated between 28 percent and 37 percent, which i s much above the assumed discount rate of 12 percent.
(c) Water transport promotion: No economic analysis was undertaken for this component principally because i t s ‘physical’ elements contain interventions that are relatively small scale in nature, spread over a number ofjetties and have a high impact on productivity of services.
8.
26.
9.
27.
Expected Outcomes
The following are the expected outcomes as indicated in detail in Table 1.
42 junctions improved
15,000 bus-km franchised per day Reduction in travel time and cost by poor households compared to baseline 700,000 person days o f labor created 25 km of road rehabilitated; 68km overlay placed
4 jett ies improved/constructed for small boats
Benefits And Risks
The risks associated with this additional financing remain unchanged from those already identified in the original Project Appraisal Document (Report No. 25020-UNI) dated October 25, 2002. The mitigation measures introduced to address key risks are:
(a) InsufJicient counterpart funding: The revised Development Credit Agreement (DCA) requires that Lagos State Government provides a total of US$15 million as counterpart funds and transport funds during project implementation. As of December 2006, a total of US$16.98 million (Naira 2.2 billion) have been made available to LAMATA, which exceeds the init ial commitments. In addition, the Lagos State House of Assembly has passed the Bill for providing establishment of Motor Vehicle Administration Agency. As part of the proposed changes, about 50 percent of all revenues collected by the Agency would be paid into the Transport Fund, managed by LAMATA.
(b) Bus regulatory reforms: A bus franchise regulation has been signed into law by the Governor of Lagos State in July 2005, which operationalizes the franchise power vested in LAMATA. This i s the first step towards organizing and disciplining the private sector bus supply market.
The procurement management function of the project has continued to be satisfactory. The procurement process with i t s competitive bidding requirements, among other factors, has ensured greater efficiency in terms of delivery
(c) Procurement risks:
10
o f road works at relatively lower cost per km compared to output from other Ministries and Agencies. Other factors resulting in this cost-effectiveness of LAMATA contracts include: i) regularity o f payment, which reduces built-in costs of funds; ii) professional culture within the organization; iii) efficient monitoring and management of contracts; and iv) str ict penalty for non-performance.
(d) Financial Management Risks: The FMR for the quarter ending December 2006 has been submitted. The overall FM Rating i s satisfactory and the FM risk rating i s modest. The project moved to report based disbursement in the last quarter.
10. Financial Terms and Conditions for the Additional Financing
28. Standard IDA Credit terms apply to the additional financing. The financial management and disbursement arrangements for LUTP will be equally applicable for the additional financing. The Borrower has confirmed that it would submit the audited entity and project financial statements for the year ending December 3 1,2006 by June 30, 2007.
11
Attachment 1
Category
1. Civ i l Works
2. Goods
3, Consultant services
4. Unallocated
Total Of which IDA
LAGOS URBAN TRANSPORT PROJECT
Procurement Method
International National Other N.1.F Total Competitive Competitive Methods Bidding $ Bidding $ $ $
25,000,000 17,700,000 0 0 42,700,00(
300,000 400,000 300,000 1,000,00(
5,700,000 0 5,700,00(
6 0 0 , 0 0 ( 600,000
25,300,000 18,100,000 6,600,000 0 50,000,00(
ADDITIONAL FINANCING
PROCUREMENT ARRANGEMENTS (in US$ million equivalent)
