AFRICAN DEVELOPMENT FUND Language : English Original : English

REPUBLIC OF NIGERIA

FADAMA DEVELOPMENT PROJECT

APPRAISAL REPORT

AGRICULTURE AND RURAL OCAR DEVELOPMENT DEPARTMENT SEPTEMBER 2003 CENTRAL WEST REGION

TABLE OF CONTENTS

PROJECT INFORMATION SHEET, CURRENCY AND MEASURES, LIST OF TABLES, LIST OF ANNEXES, LIST OF ABBREVIATIONS, BASIC DATA SHEET, PROJECT LOGICAL FRAMEWORK, AND EXECUTIVE SUMMARY (i) – (vii)

1. ORIGIN AND HISTORY OF THE PROJECT ......................................................1 2. THE AGRICULTURE AND RURAL DEVELOPMENT SECTOR .....................2 2.1 Salient Features.................................................................................................2

2.2 Agricultural and Rural Development Strategy.......................................................3 2.3 Land Tenure.......................................................................................................4 2.4 Poverty Status ...................................................................................................5 2.5 Gender Issues ....................................................................................................6 2.6 HIV/AIDS and Malaria Issues............................................................................6 2.7 Environmental Issues ..........................................................................................7

3. THE SUB-SECTORS ................................................................................................7

3.1 Irrigation............................................................................................................7 3.2 Infrastructure .....................................................................................................8 3.3 Crops and Livestock..........................................................................................9 3.4 Forestry and Fisheries ......................................................................................10 3.5 Intervention of Major Donors in the Sub-Sectors ..............................................11 3.6 Constraints and Potentials .................................................................................11 3.7 Relevant Institutions..........................................................................................12

4. THE PROGRAMME AND PROJECT .................................................................14

4.1 Programme Concept and Rationale...................................................................14 4.2 Fadama Development Project: Area and Beneficiaries.......................................16 4.3 Strategic Context..............................................................................................17 4.4 Project Objectives............................................................................................18 4.5 Project Description ..........................................................................................18 4.6 Production, Markets and Prices........................................................................24 4.7 Environmental Impact.......................................................................................25 4.8 Project Costs ...................................................................................................26 4.9 Sources of Finance and Expenditure Schedule...................................................27

5. PROJECT IMPLEMENTATION ..........................................................................29 5.1 Executing Agency............................................................................................29 5.2 Institutional Arrangements................................................................................29 5.3 Supervision and Implementation Schedule .......................................................31 5.4 Procurement Arrangements .............................................................................33 5.5 Disbursement Arrangements............................................................................36 5.6 Monitoring and Evaluation...............................................................................37 5.7 Financial Reporting and Auditing......................................................................38 5.8 Aid Co-ordination...........................................................................................38

6. PROJECT SUSTAINABILITY AND RISKS........................................................39 6.1 Recurrent Costs ....................................................................................................39 6.2 Project Sustainability.............................................................................................39 6.3 Critical Risks and Mitigating Measures...................................................................40

7. PROJECT BENEFITS ...........................................................................................41

7.1 Financial Analysis............................................................................................41 7.2 Economic Analysis ..........................................................................................42 7.3 Social Impact Analysis ....................................................................................43 7.4 Sensitivity Analysis ..........................................................................................44

8. CONCLUSIONS AND RECOMMENDATIONS ................................................44

8.1 Conclusions ....................................................................................................44 8.2 Recommendations and Conditions for Loan Approval......................................45

LIST OF TABLES AND ANNEXES

TABLES 4.1 Summary of Project Costs by Components ......................................................26 4.2 Summary of Project Costs by Category of Expenditure ....................................26 4.3 (a) Sources of Finance (Programme)......................................................................27 4.3 (b) Sources of Finance (FDP)………………………………………………..….27 4.4 Summary of Project Financing by Components and Financiers ..........................28 4.5 Summary of Expenditure Schedule by Components...........................................28 4.6 Summary of Expenditure Schedule by Sources of Finance.................................28 5.1 Summary of Procurement Arrangements...........................................................33 6.1 Summary of Project Recurrent Costs................................................................39

ANNEXES No. Of Pages

1. Map of Project States 1 2. Project Implementation Schedule 1 3. Provisional List of Goods and Services 1 4. Summary of Economic Analysis 1 5. Summary of Bank Group Operations 1 6. Organogramme 1

Documents in Volume II: 1. Project Management and Institutional Arrangements and Organogramme 12 2. Fadama Development Programme Financing by Donors and Components 1 3. Project Detailed Costs 5 4. Mixed Farming Production Models 9 5. Financial and Economic Analyses 2 6. Environmental Impact Assessment Summary 14 7. Terms of Reference for Tolls and Tax Study 4

The report was prepared by Messrs. M. M. Msuya, Principal Agricultural Economist, Mission Leader, J. Helsen, Principal Agronomist, M. Basalirwa, Senior Financial Analyst, M. Traore, Senior Environmentalist, O. Oladapo, Agricultural Economist and R-C.O. Okoro, Infrastructure Engineer, NGCO following their appraisal mission to Nigeria during 13th July-2nd August 2003. Mrs. R. Naye Ba, Gender Specialist, could not participate in the mission but reviewed the gender sections. All questions relating to the report should be addressed to the authors or Mr. S. Z. Moussa Division Manager, OCAR.2 (Extension 2143).

AFRICAN DEVELOPMENT FUND BP 323, 1002 Tunis Belvedere

Tunisia Tel: 216-71102143 Fax: 216-71102570

PROJECT INFORMATION SHEET

1. COUNTRY : Federal Republic of Nigeria

2. TITLE OF PROJECT : Fadama Development Project

3. LOCATION : Fadama are in Borno, Jigawa, Katsina, Kogi, Kwara, Plateau states

4. BORROWER : The Federal Republic of Nigeria

5. EXECUTING AGENCY: Federal Ministry of Agriculture and Rural Development Projects Coordinating Unit

P.O.Box 325, Gwagwalada, Abuja, Nigeria, Tel: (234 9) 882 1051/1033, Cell: 234 090 804 425 Fax: (234 9) 882 1033

6. PROJECT DESCRIPTION: The project has three components:

a) Capacity Building and Advisory Services; b) Community InfrastructureDevelopment; and c) Project Coordination and Management.

7. TOTAL COST : UA 25.12 million

8. ADF LOAN : UA 22.00 million

9. OTHER SOURCES OF FINANCE: Federal Government of Nigeria: UA 0.41 million State Governments : UA 2.06 million Local Governments : UA 0.43 million Beneficiaries : UA 0.22 million

10. DATE OF APPROVAL : December 2003 11. PROBABLE COMMENCEMENT DATE AND PROJECT DURATION

Commencement : June 2004 and Duration : 6 Years

12. PROCUREMENT OF GOODS, WORKS AND SERVICES Procurement of goods works and services financed by the ADF resources will be in conformity with Bank Group Rules of Procedure. Procurement of: civil works (for Water points), transport/office equipment and tools will be through National Competitive Bidding (NCB); advisory and training services (including services of NGOs and other service providers) though competition on the basis of short lists of competent candidates; and specialised training services, study tours and field research through direct contracting.

13. CONSULTANCY SERVICES REQUIRED

Long- and short-term consultancies for technical assistance from various service providers to build/strengthen the capacities of project beneficiaries, beneficiary groups and project staff will be procured in accordance with the Bank’s Rules of Procedures for the Use of Consultants.

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CURRENCY AND MEASURES (August 2003)

US$ 1 = Naira 125.5622 UA 1 = Naira 175.895 UA 1 = US$ 1.40086

Fiscal Year

1 January – 31 December

Weights and Measures

1 t (Metric tonne) = 2,200 lbs (pounds) 1 Kg (Kilogram) = 2.2 lbs 1 M (Metre) = 3.28 ft (feet)

ACRONYMS AND ABBREVIATIONS

ADP Agriculture Development Project/Programme ADPEC ADP Executive Committee CBARDP Community Based Agricultural and Rural Development Project CBO Community Based Organisations CDD Community Demand Development EIRR Economic Internal Rate of Return EPA Environmental Protection Agency ESIA Environmental and Social Impact Assessment FCA Fadama Community Association FDA Federal Department of Agriculture FDP Fadama Development Project FDRD Federal Department of Rural Development FGN Federal Government of Nigeria FMEnv Federal Ministry of Environment FMARD Federal Ministry of Agriculture and Rural Development FMF Federal Ministry of Finance FRUG Fadama Resource User Group GEF Global Environment Facility ICB International Competitive Bidding LDP Local Development Plan LGA Local Government Authority LGC Local Government Council LGFDT Local Government Fadama Development Team PCU Projects Coordination Unit M&E Monitoring and Evaluation MARD Ministry of Agriculture and Rural Development NACA National Action Committee on AIDS NFDO National Fadama Development Office NGO Non-Governmental Organisation NPC National Project Coordinator PRA Participatory Rural Appraisal SFDT State Fadama Development Team SMARD State Ministry of Agriculture and Rural Development

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FADAMA DEVELOPMENT PROJECT — NIGERIA — COMPARATIVE SOCIO-ECONOMIC INDICATORS

Year Nigeria AfricaDev’g

Countries Dev’d Countries

Basic Indicators

Area ( '000 Km²) 924 30 061 80 976 54 658

Total Population (millions) 2001 116.9 811.6 4,940.3 1,193.9

Urban Population (% of Total) 2001 43.8 38.0 40.4 76.0

Population Density (per Km²) 2001 126.6 27.0 61.0 21.9

GNI per Capita (US $) 2001 290 671 1 250 25 890

Labor Force Participation - Total (%) 2000 39.6 43.1 … …

Labor Force Participation - Female (%) 2000 28.4 33.8 … …

Gender -Related Development Index Value 2000 0.449 0.476 0.634 0.916

Human Develop. Index (Rank among 174 countries) 2000 148 n.a. n.a. n.a.

Popul. Living Below $ 1 a Day (% of Population) 2000 70.2 45.0 32.2 …

Demographic Indicators

Population Growth Rate - Total (%) 2001 2.7 2.4 1.5 0.2

Population Growth Rate - Urban (%) 2001 4.5 4.1 2.9 0.5

Population < 15 years (%) 2001 44.9 42.4 32.4 18.0

Population >= 65 years (%) 2001 3.1 3.3 5.1 14.3

Dependency Ratio (%) 2001 92.2 85.5 61.1 48.3

Sex Ratio (per 100 female) 2001 100.6 99.4 103.3 94.7

Female Population 15 -49 years (% of total population) 2001 22.6 23.6 26.9 25.4

Life Expectancy at Birth - Total (years) 2001 51.9 52.5 64.5 75.7

Life Expectancy at Birth - Female (years) 2001 52.1 53.5 66.3 79.3

Crude Birth Rate (per 1,000) 2001 39.9 37.3 23.4 10.9

Crude Death Rate (per 1,000) 2001 13.5 14.0 8.4 10.3

Infant Mortality Rate (per 1,000) 2001 80.8 79.6 57.6 8.9

Child Mortality Rate (per 1,000) 2001 133.3 116.3 79.8 10.2

Maternal Mortality Rate (per 100,000) 1998 1,000 641 491 13

Total Fertility Rate (per woman) 2001 5.5 5.1 2.8 1.6

Women Using Contraception (%) 1995 6.0 … 56.0 70.0

Health & Nutrition Indicators

Physicians (per 100,000 people) 1993 21.2 36.7 78.0 287.0

Nurses (per 100,000 people) 1989 76.1 105.8 98.0 782.0

Births attended by Trained Health Personnel (%) 1998 15.0 38.0 58.0 99.0

Access to Safe Water (% of Population) 2000 57.0 60.4 72.0 100.0

Access to Health Services (% of Population) 1999 67.0 61.7 80.0 100.0

Access to Sanitation (% of Population) 2000 63.0 60.5 44.0 100.0

Percent. of Adults (aged 15-49) Living with HIV/AIDS 2001 6.0 5.7 … …

Incidence of Tuberculosis (per 100,000) 2000 22.7 105.4 157.0 24.0

Child Immunization Against Tuberculosis (%) 2000 34.0 63.5 82.0 93.0

Child Immunization Against Measles (%) 1996 30.0 58.2 79.0 90.0

Underweight Children (% of children under 5 years) 1999 27.3 25.9 31.0 …

Daily Calorie Supply per Capita 1999 2 833 2 408 2 663 3 380

Public Expenditure on Health (as % of GDP) 1998 0.8 3.3 1.8 6.3

Education Indicators

Gross Enrolment Ratio (%)

Primary School - Total 1966 82.0 80.7 100.7 102.3

Primary School - Female 1996 74.0 73.4 94.5 101.9

Secondary School - Total 1996 34.0 29.3 50.9 99.5

Secondary School - Female 1996 31.1 25.7 45.8 100.8

Primary School Female Teaching Staff (% of Total) 1996 47.9 40.9 51.0 82.0

Adult Illiteracy Rate - Total (%) 2001 34.7 37.7 26.6 1.2

Adult Illiteracy Rate - Male (%) 2001 26.5 29.7 19.0 0.8

Adult Illiteracy Rate - Female (%) 2001 42.6 46.8 34.2 1.6

Percentage of GDP Spent on Education 1998 0.6 3.5 3.9 5.9

Environmental Indicators

Land Use (Arable Land as % of Total Land Area) 1999 31.0 6.0 9.9 11.6

Annual Rate of Deforestat ion (%) 1995 0.9 0.7 0.4 -0.2

Annual Rate of Reforestation (%) 1990 3.0 4.0 … …

Per Capita CO2 Emissions (metric tons) 1997 … 1.1 2.1 12.5

Source : Compiled by the Statistics Division from ADB databases; UNAIDS; World Bank Live Database and United Nations Population Division. Notes : n.a. Not Applicable ; … Data Not Available.

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NIGERIA: NATIONAL FADAMA DEVELOPMENT PROJECT II Project Matrix

HIERARCHY AND OBJECTIVES OBJECTIVELY VERIFIABLE INDICATORS (OVI) MEANS OF VERIFICATION ASSUMPTION & RISKS

A. SECTOR GOAL

Reduce poverty by improving the living conditions of the rural poor and to contribute to food security and increased access to rural infrastructure.

Incidence of poverty reduced from 65.6% in 1996 to less than 10% by 2010. Mid term review report, (MTR) and baseline social assessment reports.

B. PROJECT OBJECTIVE

Enhanced agricultural production, productivity and value addition for smallholders and rural entrepreneurs in the Fadama areas in six states on a sustainable basis.

Compared to Baseline data:

1. Area under improved technology and services increase by 5% for crops, 40% for livestock, 50% for fisheries, & 40% for others by PY6.

2. Crop, livestock and aquaculture productivity increase by at least 20% by PY3 and by 50% by PY6.

3. Collection, storage and preservation of marketable surpluses increase by at least 30% by PY3 and 80% by PY6.

4. Processing of project output increase by 20% by PY3 and 40% by PY6.

5. Output value addition increase by 15% by PY3 and by 70% by PY6.

BSA reports, project quarterly and annual reports, supervision reports, MTR report by the PCU, and by the ADB, Management Audit Reports.

1. Federal, state, local government and traditional authorities remain committed to the process o f decentralization and community-driven development approach.

2. Fadama resource users respond positively to project initiatives and accept requisite additional responsibilities.

C. OUTPUTS

1. Capacity Building and Advisory Services

1.1.1 Fadama Resource User Groups (FRUGs) and Fadama Community Associations (FCA) formation and strengthening campaigns successfully conducted and 80% of fadama resource users are members FRUGs associated to FCAs by PY3.

- do - 1. Supportive macroeconomic and sectoral policy environment, and incentives persist.

1.1.2 FRUGs provided technical assistance (TA) in participatory planning and 80% of FCAs adopt local development plans (LDPs) by PY3.

- do - 2. Federal, State, Local governments and traditional authorities assign requisite priority in human and budgetary resources to the project approach.

1.1.3 FRUGs provided TA for development, installation, and maintenance, of infrastructure and equipment

- do - 3. Authorities at national, state and community levels cooperate to facilitate implementation of project activities as planned.

1.1 Production planning and execution capacities: The capacity of Fadama resource users for participatory planning; project implementation, operation, and maintenance enhanced

1.1.4 At least 50% of participating FCAs successfully implementing their LDPs by PY3.

- do -

1.2.1 80% of participating FRUGs trained & assisted in formation & running Savings and Credit associations by PY3

- do - 1.2 Capacity for entrepreneurial skills: Fadama users’ capacities for enterprise development and management (including to administer funds, and to negotiate and administer co ntracts) strengthened. 1.2.2 50% of participating FRUGs successfully assisted to prepare proposals for

financing income generating activities (IGAs) and successfully assisted implement investments in their LDPs by PY3.

- do -

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HIERARCHY AND OBJECTIVES OBJECTIVELY VERIFIABLE INDICATORS (OVI) MEANS OF VERIFICATION

ASSUMPTION & RISKS

1.2.3 90% of IGAs in LDPs being successfully implemented by PY6. - do -

1.2.4 90% of enterprise development facilitators contracted by PY3 - do -

1.2.5 By PY3 80% of contractors to assist FRUGs install, manage, operate and maintain equipment contracted.

- do -

1.3.1 100% prototype models of agreed small-scale structures (bridges, culverts, drifts, drying floors, fish smoking trays, etc.) prepared by PY3

- do - 1.3 Capacity for Infrastructure Maintenance: Demand responsive technical assistance and advisory services for routine and recurrent maintenance of rural infrastructure provided to fadama resource users 1.3.2 100% of advisory services for Construction/installation, maintenance of LDP

priority infrastructure PY6. - do -

2.1.1 Roads: 30% of LDPs’ 360 km feeder roads investment priority programme for construction and rehabilitation completed by PY3 and 100% by PY6.

- do -

2.1.2 Small-scale water conveyance and other small-scale hydrological structures: Of LDPs’ priority hydrological structures including: i) potable water systems (300 boreholes, 120 tube wells, 12 springs, and 6 infiltration galleries); ii) Livestock drinking earth dams (12); and iii) flood control and aquifer monitoring structures (6 flood regulators, 24 dykes and weirs, and 750 tube wells and wash bores for aquifer monitoring) 20% completed by PY3 and 100% by PY6.

- do -

2. Community Infrastructure Development

2.1 Community infrastructure: Demand-driven small-scale infrastructure constructed, rehabilitated and functioning.

2.1.3 Produce processing and marketing infrastructure: Of LDPs’ priority community produce centres, (drying and evaporating cooling sheds) 120 sheds of each, 20% completed by PY3 and 100% by PY6.

- do -

Appropriate incentives provided to induce financial sector operators to cooperate in taking steps that would avail financial resources to smallholder fadama resource users and their FCAs.

3.1 Of the planned specialised training the National Fadama Development Office (NFDO), State Fadama Develo pment Team (SFDT) and Agricultural Development Projects (ADPs) staff accomplished by PY3 and 100% by PY6

- do -

3.2 Up to 70% of planned technical assistance to NFDO, SFDT and ADPs contracted by PY3 and 100% by PY6

- do -

3.3 At least 30% of planned NFDO, SFDT and ADP office rehabilitation and other minor civil works completed by PY3 and 100% by PY6.

- do -

3.4 70% of planned NFDO, SFDT and ADP office, transportation, & other equipment procured, installed and operational by PY3 and 100% by PY6.

- do -

3.5 Management Information System established and fully operational at NFDO, SFDT and ADP levels by PY3

- do

3.6 Consultancy services for Annual Audit of project accounts, Mid -term Review and Project completion report preparation contracted and perform the respective tasks by the end of each year, PY3 and PY6, respectively

- do -

3 . Project Co -ord ination and Management

Capacity of project coordination and management units at Federal, State, Local Government, and Community levels strengthened.

3.7 Incremental O&M expenses of NFDO, SFDT, and ADPs financed fully by PY6. - do -

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HIERARCHY AND OBJECTIVES OBJECTIVELY VERIFIABLE INDICATORS (OVI) MEANS OF VERIFICATION

ASSUMPTION & RISKS

ACTIVITIES 1. Capacity Building and Advisory services. Group mobilisation pro motional campaigns, facilitation of participatory planning, TA for community infrastructure development & equipment installation & maintenance, training on savings and credit associations. 2. Infrastructure Development Construction & rehabilitation of feeder roads, small-scale hydrological structures, produce processing and marketing infrastructure, preparation of prototype models of agreed small-scale structures. 3. Project Coordination and Management Specialised training & TA for NFDO, SFDT and ADPs and staff, office rehabilitation, transportation & other equipment, establishment of Management Information System & preparation of audit & implementation reporting.

Component Budget A. Capacity Building and Advisory services 12.92 mi B. Infrastructure Development 10.64 mi C. Project Coordination and Management 1.56 mi 25.12 mi

Quarterly Progress Reports 2. ADB Supervision mission Reports 3. Project Audit Reports

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Executive Summary Project Background: Smallholder agriculture, the dominant occupation of rural Nigerians is mainly rain-fed and characterized by low land and labour productivity. Yet, Nigeria has a potential comparative advantage in the production of a variety of fresh and processed high-value crops, especially vegetables during the dry season and livestock products (meat and milk) and fisheries products through out the year. This is because the country is endowed in underground and surface water reserves, rich pastures and favourable agro-ecological conditions in the country’s low lying planes with alluvial deposits called fadama. In the light of these potentials, the First National Fadama Development Project (Fadama I) was designed in the early 1990s to promote simple and low-cost improved irrigation technology under World Bank financing. The widespread adoption of the technologies enabled farmers to increase production, by more than 300% in some cases. Evaluation of Fadama I revealed that the full realisation of project benefits was hampered by some specific shortcomings in project design and implementation, including the lack of involvement of project clients in project planning, project was limited to crop production ignoring downstream value addition activities of marketing and processing, and ignoring of other fadama resource users. Government impressed by the achievements of Fadama I has approached the ADF and the International Development Association of the World Bank for support in expanding the achievements of fadama I in scope and size. To achieve its aims, Fadama II is designed with a focus on community-driven development with maximum participation of the stakeholders at every stage of the project cycle. This approach is in line with Government and ADF policies and development strategies for Nigeria, which emphasizes poverty reduction, private sector leadership and client participation. Purpose of the Loan: The FDP is part of a National Programme (otherwise called Fadama II by the Government and World Bank for whom the current operation is a second intervention) being co-financed with loans from the ADF (UA22 million) to cover the programme in six states, and IDA of the World Bank (UA 52.97 million) to cover 12 states. The Global Environmental Fund (GEF) grant of UA 5 million would address environmental issues in all the 18 states participating in Fadama II. Sector Goal and project Objectives: The sector goal is to reduce poverty by improving the living conditions of the rural poor and to contribute to food security and increased access to rural infrastructure. The project objective is enhanced agricultural production, productivity and value addition for smallholders and rural entrepreneurs in fadama areas on a sustainable basis. Brief description of the project’s Outputs: The project has three components: a) Capacity Building and Advisory Services; b) Community Infrastructure Development; and c) Project Coordination and Management. Project Cost: The total project cost is estimated at UA 25.12 million, of which the foreign cost is UA 13.38 million (53%) and the local cost is UA 11.74 million (47%). The ADF loan would cover 88% of the total project cost. The ADF contribution will be used to finance 99% of foreign exchange (UA 13.27 million) and 74% of local cost (UA 8.73 million). Source of Finance: the African Development Fund, the Federal Government of Nigeria, 6 State Governments, about 120 local governments and the project beneficiaries, will finance the project.

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Project implementation: The project will be implemented over a period of six years. The Federal Ministry of Agriculture and Rural Development (FMARD) will be the Executing Agency. The overall coordination of all project activities will be delegated to the National Fadama Development Office (NFDO) housed within the Projects Coordinating Unit (PCU) of FMARD. The actual implementation of project activities will be managed by the Agricultural Development Project (ADP) under the respective State Ministry of Agriculture and Rural Development. To facilitate this a State Fadama Development Team (SFDT) will be established within the ADP to be directly responsible for overseeing project activities. Conclusions and Recommendations: The proposed project is in line with the Bank’s vision and strategy for Nigeria, and falls within the national rural development strategy emphasising poverty reduction and private sector leadership in development activities. The clients have developed the project through a participatory approach thereby ensuring ownership. The successful implementation of the project will benefit a total of 720,000 people in 6 states. The project is financially and economically viable, technically feasible, socially desirable and environmentally sound. It is, therefore, recommended that an ADF loan not exceeding UA 22 million be granted to the Federal Government of Nigeria for the purpose of financing the implementation of the project as described in this report subject to the conditions specified in the Loan Agreement.

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1. ORIGIN AND HISTORY OF THE PROJECT 1.1 The proposed Fadama Development Project (FDP) is a follow-up to the successful implementation of the National Fadama Development Project (Fadama I) over 1993-1999, with support from the World Bank. Fadama is a local word for low-lying flood plains usually with easily accessible shallow groundwater. Following the widespread adoption of simple and low-cost improved irrigation technologies, farmers realised incomes increases from various crops of up to 65% for vegetables (from Naira 29,956 to 49,510), 334% for wheat (from Naira 7,456 to 32,375), and 497% for paddy rice (from Naira 7,906 to 47,200). The economic rate of return at completion was 40% compared to an estimated 24% at appraisal. These levels of benefits have been realised even though post harvest losses resulting from poor transportation infrastructure and the non-inclusion in Fadama I of processing, storage and other downstream activities, would have claimed up to 60% of project output. In addition, because of poor post harvest handling of the output it lost quality and could not fetch the best prices available in the markets. 1.2 Of the six states participating in FDP, only Jigawa was among the “Core States”, i.e. states in which Fadama I was implemented in full. Consequently, it is only in Jigawa that beneficiaries realised the full benefits of Fadama I. In the other states the project was implemented on pilot basis. As a result in these states Fadama I benefits were only partial. The beneficiaries are therefore eager for a full intervention that would enable them to realise benefits comparable to those enjoyed by beneficiaries in the core states. In the light of the foregoing the Government has sought support from the ADF and other members of the international donor community to replicate these successes in other parts of the country while at the same time addressing the constraints that prevented an even greater success of Fadama I. 1.3 Fadama I focused mainly on production but largely neglected down stream activities such as processing, preservation and conservation and rural infrastructure to ensure the efficient evacuation of farm output to markets. In addition, the project did not take into consideration other resource uses such as those for livestock and fisheries production. This resulted not only in increased conflicts between the users but also restricted benefits to only those accruing from crop production. Finally there were a number of design and implementation shortcomings (see para 4.1.4), which further limited its relative success. 1.4 Since Fadama I was completed, the Government adopted in 2001 a new Rural Development Strategy that addresses most of the earlier mentioned constraints. The new strategy is in line with the ADB strategic plan in its focus on poverty reduction, private sector promotion and participatory approaches to development. It stresses the principles of non-intervention; consistency; sustainability and greater equity in access to and benefit of resources. The strategy aims to contribute to food security and increased access to rural infrastructure facilities. Consequently, the Bank found it opportune to agree to the Government request for financing of FDP as a follow-up to Fadama I.

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1.5 The proposed FDP incorporates a shift in development strategy from public sector domination to a community-driven development (CDD) approach. Under the FDP the provision of production, marketing, processing, financial and advisory services to project clients will be private sector-led. Farmers and other stakeholders will be assisted to organize into economically sustainable Fadama Resource User Groups (FRUGs), which will participate in the design of project activities, their implementation and monitoring. Government will play the catalytic roles of providing a conducive policy and institutional environment through investments in improving relevant physical infrastructure as well as make provision for goods of a public nature. Government would also put in place an appropriate regulatory system to ensure that project clients obtain regular supplies of the right quality of inputs and technical advice and up-to-date market information; and to ensure the sustainable and equitable exploitation of Fadama resources by all resource users. 1.6 The proposed project has been prepared in a participatory manner with active involvement of the Government, donor agency teams including the World Bank, DFID and USAID and in consultation with potential beneficiaries and other stakeholders. A multi-donor (including ADB) project design and preparation mission was launched in August 2002 to discuss the draft project conception report. Following an invitation from the Federal Government of Nigeria, an ADF project preparation team visited Nigeria in August and December 2002. The ADF appraisal team visited Nigeria from 13th July to 2nd August 2003 and worked closely with the Federal, State and Local Government officials and made contacts with a WB appraisal team which was also in the country. A field visit was undertaken at this time to assess different environmental aspects of the project. This Appraisal Report is a result of the outlined multi-donor preparatory work, and of the Bank’s own preparation and appraisal missions. 2. THE AGRICULTURE AND RURAL DEVELOPMENT SECTOR 2.1 Salient Features 2.1.1 Since independence, agriculture has been the most important economic sector in terms of its contribution to the GDP, after oil. The sector contributes about 41% of the country’s GDP, employs about 65% of the total population and provides employment to about 80% of the rural population. Available statistics show that total food production increased from 54.76 million grain equivalent in 1997 to 57.70 million grain- equivalent in 2001. Agricultural growth rates increased modestly from 4.25% in 1997 to 4.5% in 1999 and 4.7% in 2001, all of which are nevertheless higher than the population growth rate of 2.7%. The challenge thus posed by the sector is to sustain this increase with a view to removing the observed food deficit. 2.1.2 Of Nigeria’s estimated 69.9 million ha of agricultural land about 39.2 million are under permanent pasture with another 2.8 million under permanent crops, leaving about 27.9 million ha for arable crops. Within the last category, it is estimated that some 25 million ha are cultivated each year implying a high cropping intensity with respect to arable land. Forestry constitutes about 26 million ha currently. Crops contributed some 27% of GDP, livestock another 3.3% and forestry and fisheries 1.5%. The only agricultural export of any significance is cocoa, which contributes less than 0.5% to the agricultural GDP.

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2.1.3 Rural Nigeria is divided into seven agro-ecological zones; i.e. semi-arid, found only in the northern region; the savannah, found in the northern and middle region; a small highland area found in the middle and southern region; a larger transition environment of savannah derived from the forest overlapping the southern and middle regions; mangroves in the Niger Delta; freshwater swamps in the Niger Delta and Lowland rain forest in the south. The agro-ecological setting and technology base, in principle, determine the production systems. 2.1.4 Two major production systems dominate: (i) the traditional production system, which is found in all parts of the country and consists of land holdings of less than 2 ha with a variety of food crops intended for consumption purposes mainly and (ii) the improved irrigation production system, which comprises the improved fadama farming, which utilises low-lying or water logged areas for crop and livestock production as well as large-scale mechanised and/or commercial irrigation farming systems. In addition, there are a number of private vegetable, horticulture and flower production schemes around larger cities covering in total an estimated 128,000 ha. 2.1.5 The total irrigation potential in Nigeria is estimated at 2.0 million ha while the area currently irrigated is less than 900,000 ha. 75% of this area is believed to be under private fadama irrigation while the remaining is under public sector management. It is estimated that about 55,000 ha of the “fadama” irrigated lands are using motorised pumps, which is a result of the World Bank supported National Fadama Phase I Project. The most important irrigated crops are rice and highly priced vegetables such as tomatoes, cabbages, okra and pumpkins. 2.1.6 Rural infrastructure, in general, was exclusively constructed and maintained by the Government without the consultation of the actual beneficiaries. The result is that many of the infrastructures are poorly maintained. With respect to the rural roads, in particular, it is estimated that about 70% of the road network in Nigeria is in poor condition and that the road density is one of the lowest in sub-Saharan Africa. At present, the rural roads network amounts to about 30% of the paved road network, which is estimated at 200,000 km. More than 90,000 km of feeder and access roads were constructed during the eighties, all of which are now virtually lost due to lack of maintenance. 2.1.7 The non-agricultural sector also plays an important role in rural livelihoods. It is estimated that it accounts for about half of rural households’ total incomes. Food-deficient households, in particular, obtain a large share of their income from non-farm activities. They are involved in micro and small-scale enterprises such as production of farm implements, agro-processing, trading, transportation and handicrafts. Women are more engaged in food processing, petty trading and services such as hairdressing. Many enterprises are linked to the agriculture sector requiring little capital or skills and rely on informal credit providers. 2.2 Agriculture and Rural Development Strategy 2.2.1 The Federal Government of Nigeria adopted a new Agricultural Policy in October 2001 to replace the one enacted in 1989. The major thrusts of this policy are: (i) Creating a conducive macro-economic environment to stimulate greater private sector investment in agriculture; (ii) Rationalising the

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roles of the different tiers of government; (iii) Re-organising the institutional framework for government intervention in the sector; (iv) Actualising and implementing integrated rural development; (v) Increased budgetary allocation to enhance production and productivity; (vi) Increasing fiscal incentives to agriculture and reviewing trade regulations; and (viii) Promoting increased use of machinery and inputs through favourable tariff policy. 2.2.2 Effective implementation of this policy has been constrained due to: (i) the predominant urban bias in the selection of projects and policy measures; (ii) a lack of community participation in the dialogue and key decisions which concern rural development; (iii) the insufficient attention accorded by the Federal Government to production development and (iv) pervasive public interference in what, in fact, should be private enterprise. Recently, however, the Government has made concerted efforts, through its decentralisation policy, in providing state and local governments with additional resources, to enable them improve service provision in production, infrastructure development and social services. 2.2.3 As indicated earlier, the Government undertook in the year 2000 the "Nigeria Rural Sector Strategy Study”, which resulted in 2001 in a new Rural Development Strategy as a means to effectively operationalise the agricultural policy. The goal of this new strategy, which is based on the principles of non-intervention; consistency; participation; sustainability and greater equity, is poverty reduction by improving the livelihood and living conditions of the rural poor. The strategy also aims at contributing to food security and increased access to rural infrastructure. In addition, the Government has prepared, with the assistance of the donor community, the Community Based Agriculture and Rural Development Programme and now the National Fadama Development Programme which are to serve as platforms for financial and technical development support to the country. 2.2.4 Because of the size of what has to be done under the programmes, the Government cannot effectively implement the programmes on its own. Financial support is required for: (a) capacity building especially at local government and community levels, (b) the development of rural infrastructures and their maintenance, (c) support to rural production, (d) special programs targeting such groups as women, youth, children and HIV/AIDS victims, and (e) organisation and mobilisation of rural communities. 2.3 Land Tenure 2.3.1 The Land Use Act of 1978 vested the control of lands on the State Governors. However, the de-facto land tenure rights follow the traditional usufruct system, which is governed by customary law. Under the customary land tenure system, the village head maintains the traditional community control of the land. Recognised family members have the customary rights to use the land once they have cleared it. The land will revert to the community only when it is left fallow for a long time and upon the death of an heirless cultivator. While relatively few registered land titles exist in rural Nigeria apart from a few commercial irrigation schemes under which holdings in the command areas have undergone cadastral surveys and demarcation in order to facilitate management of the schemes. For the most part, entitlements to land dependent on customary land rights based on the testimony of village heads. Generally these customary land rights may be defended in local courts in cases of conflicts. Although the

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Land Use Act is balanced in that it does not discriminate on the basis of gender, the defacto customary tenure system makes access to land by most women to be through their male family members. This implies that women are disadvantaged in that they cannot use land as collateral for raising development financing. Exceptions are in the northern and middle belt states where Islamic law has influenced land inheritance system and women may inherit religiously prescribed shares of their parents’ land, usually equivalent to a half of the share apportioned to male heirs. 2.3.2 Land can also be bought, leased or acquired through pledging. In fact, about 40% of farmers, use a combination of these tenure systems to improve their access to land. Transhumance herdsmen remain largely outside the existing land tenure systems and generally have no security of tenure. The consultative spirit pursued in the design of the FDP in which all stakeholders are involved and the livestock support activities planned under the project would influence tenure arrangements in favour of transhumance and sedentary herders without penalising arable farmers. The Land Tenure study commissioned by the Bank to recommend strategies for Bank Group support to land tenure issues especially in the Central and West African sub-regions sees these all inclusive consultations and dialogue as the most practical way ahead. This is in view of the current situation in which traditional land management systems dominated by land chiefs and clan lineage leaders are loosing influence while the new state institutions and related legislations are either not yet in place or are ineffective. The study calls for Bank Group increased support for such dialogues and support to the development and implementation of land legislation. 2.4 Poverty Status Nigeria ranks number 148 in the 2002 Human Development Index. Nigeria’s basic indicators place the country among the 26 poorest countries in the world. The proportion of Nigerians living below the poverty line of one dollar a day has increased dramatically during the last two decades. In the year 2000, more than 70% of Nigerians were estimated to be living below the internationally defined poverty line. In the same year, both per capita income and per capita private consumption were lower than the early 1970s. Per capita income fell from $1,600 in 1980 to $270 in 2000. Poverty in Nigeria is both state- and sector-based. Poverty is more widespread in the northern part of the country. Two northern states, Kano and Kogi, account for nearly one-third of the poorest 20 percent of the population. Almost 90 per cent of Nigeria’s poor are engaged in agriculture, while 58 per cent of the urban population is living in poverty. Past poverty reduction programmes, including the Family Economic Advancement Programme, had a marginal impact on poverty, despite large budgetary allocations. These programmes failed to achieve their objectives because of poor design. The government has a new poverty reduction plan based on lessons learnt from the past, aimed at reducing the level of poverty from 70 per cent to 35 per cent by 2010. 2.5 Gender Issues 2.5.1 Some of the major obstacles to socio-economic empowerment of the smallholders, in particular female farmers, can be attributed to comparatively less access to and control over production resources. 80% of the rural female population is engaged in the agriculture and forestry sector as unpaid

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family labour. In agriculture, they are involved in small farming activities for home consumption and for subsistence level marketing. The sector differentiates between what are called “women’s crops” such as groundnuts, cassava, vegetables, and other horticulture crops. Crops grown by male are more likely to be cash crops such as cereals, maize, and fadama crop production for marketing. Although women tend to be engaged in their own small farming, they usually contribute labour to the “men’s fields”. Furthermore, women’s access to appropriate irrigation equipment, farming tools, and inputs is limited. Therefore, production levels tend to be low and highly dependant on rain. Nevertheless, one of the features of the Nigerian agriculture sector is the high level of differentiation as to the gender division of labour in production, marketing and use of resulting income. Some of the constraints that women in Nigeria face is inadequate time to develop productive activities, initiate new activities or profit from training. They have, in general, limited access to extension, training and research, credit, health and information even though they produce the bulk of the food consumed in the household and contribute to expenditures using revenue from trading activities, and processing. 2.5.2 In 1989 the National Council on Agriculture approved the mainstreaming of women’s concerns in agricultural extension system by institutionalising the Women-in- Agriculture (WIA) programme under the ADP system. While during Fadama I period the women extension agents under WIA succeeded in extending improved technologies on crops, livestock, fisheries, processing, nutrition and agro-forestry to women beneficiaries, achievement was limited by insufficient resources (human and financial) for the programme. 2.5.3 In addition, women have less access to social capital, including education and health, and the ability to participate effectively in decision-making and are deprived of basic legal rights, including those for entering into contracts, and inheritance. For the most part decision-making especially in rural areas, both within the household and at community levels, attending meetings and performing other public functions are largely male preserves, thus further weakening women's abilities to protect their rights. Adult illiteracy amongst Nigerian adult women and men is 61% to 45%, and for 15-20 year olds it is 40% to 30%. Primary school enrolment in rural areas is 26% to 32% female to males, and 45% to 55% in urban areas. 2.6 HIV/AIDS and Malaria Issues 2.6.1 HIV prevalence was estimated at 5.8% in 2001 and AIDS has killed more than 1.7 million people and orphaned 1.5 million children. Some 2.7 million Nigerians, including 120,000 children are now living with AIDS. Malaria is endemic as well, especially in the south of the country and constitutes a high risk, especially for children under five. Nigeria’s life expectancy has, as a result, fallen to 47 years by 2004 against 53 during 1980 to 1995. As the majority of those affected are within the economically active population group, AIDS and malaria are having a devastating effect on the economy. It has been estimated that HIV/AIDS alone is responsible for a 0.5% drop in the country’s economic growth rate. In response to the AIDS pandemic, the President created the Presidential AIDS Council and the multi-sector National Action Committee on AIDS in the year 2000 (NACA, which is in the process of developing an Emergency Acton Plan and a national 4-year HIV/AIDS strategy).

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2.6.2 Malaria is also endemic and is a major risk especially for children under 5 for whom it accounts for 30% and 41% of mortality and morbidity, respectively. Government has instituted the roll back malaria programme with the hope of sensitising the population towards prevention of the disease through the elimination of the vector mosquito.

2.7 Environmental Issues Environmental concerns arise out of the potential reduction in economic, social and environmental benefits accruing to society as a result of degradation of the natural resource base. Land degradation may be due to natural hazards resulting from biological and/or physical conditions that act to predispose the resources to degradation; and direct causes resulting from unsustainable agricultural practices, deforestation and other forms of removal of natural vegetation, including overgrazing. Factors that contribute to environmental degradation include pressure on land, the tendency of small-scale farming systems to adopt low-cost methods to maximise short-term gains while causing irreparable damage in the long-term to the environment, inadequate rural infrastructure and limited environmental institutional support. Indeed as competition for the use of fadama resources between various users intensifies, the risk for degradation of the resources will increase unless specific conservation measures are taken. To address these issues measures and structures have been put in place (see para 3.9.6). 3. THE SUB-SECTORS 3.1 Irrigation 3.1.1 The total irrigation potential in Nigeria is estimated at 2.0 million ha of which less than 900,000 ha are currently under irrigation. An estimated 70% of this potential is in the north of the country and about 20% in the humid south with the balance in the highland areas of central and western Nigeria. Fadama lands, account for about 0.94 million ha of this potential irrigable land. 3.1.2 Following the oil boom in the 1970s, Government launched several large-scale irrigation schemes through the River Basin Development Authorities. The River Basins Authorities developed large dams and capital intensive water-conveying systems. About 160 dams were constructed, with an estimated total reservoir capacity of 11 billion m3 to irrigate about 725,000 ha. Most of these schemes are no longer operational due to high operating costs, poor maintenance and lack of ownership by the intended beneficiaries. The actual irrigated area under these schemes declined from 45,000 ha during 1990/91 to only 26,000 ha during 1999/2000. It is under Fadama I that small-scale irrigation was promoted and an estimated 55,000 ha of fadama lands was put under production by private smallholder farmers using low-cost motorised pumps. The most important irrigated crops are rice and highly value vegetables such as tomatoes, cabbages, okra and pumpkins, which represent about 4% of the total cultivated area.

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3.2 Infrastructure 3.2.1 Nigeria has a road network of about 112,000 km of which more than 80,000 km are categorized as either trunk A and B roads and the remainder rural earth roads. The project will be mainly concerned with access and Fadama roads which are basically elevated footpaths in the inundated Fadama valleys. Linking these paths are the access roads that may be all-weather earth or paved roads and by which farm inputs and produce are transported to the farms and market centres, respectively. 3.2.2 Rural roads are closely associated with the system of marketing of fadama outputs. Farmers collect and dry their produce in collection centres close to the fadama areas or along the roads before they transport it through access roads to the village market centres for sale to traders for onward transportation and re-sale in larger townships. Collection centres are generally ill equipped to handle, dry and store outputs, especially perishables, while village markets are often too rudimentary to effectively discharge the requisite marketing functions. Market centre consist of a simple shed and, in few cases a water point. Due to the lack of facilities for drying and shelf storage, if commodities are not sold the same day, most of it will go to waste. Sanitation structures, including those for drainage and waste disposal systems are often non-existent or are grossly inadequate. 3.2.3 The responsibility to plan and construct rural roads and markets lies with the Local Government Councils. However, their performance in these areas has been less than optimal. The inadequate attention accorded by the Local Government to the rural market infrastructure combined with bad rural roads has led to fragmented output markets and, in general, relative low commodity prices. This fragmentation also explains the observed price differentials within and between states, a situation that is further aggravated by inadequate levels of marketing information and the limited produce processing facilities. 3.2.4 Stock routes are broad corridors of tracks along which pastoralists herd their livestock during the dry season in search of fresh pastures and water. By law stock routes are to be surveyed, beaconed and gazetted. Unfortunately out of a total of 17,422 km of stock routes identified only 750 km (less than 5%) have been beaconed but even these have not been gazetted. Of the identified stock routes, 4,765 km lie in the six ADF Fadama II beneficiary states. The width of a stock route corridor is up to 50 meters although with growing encroachment, this width is diminishing down to zero in some places. As a consequence of this encroachment and narrowing stock routes, the herdsmen find themselves having to track their stocks through cropped fadama lands, destroying crops, related infrastructure and equipment resulting in serious conflicts. 3.3 Crops and Livestock 3.3.1 The average cultivated area per family in north and central Nigeria is about 1 hectare for rain fed agriculture. For most families however, this area is spread between 2 to 3 parcels of land. Under rain fed conditions, the cropping system comprises of: sorghum, millet, maize, cassava, rice, cowpeas, groundnuts and some cotton or tobacco as part of a strategy to obtain cash. As a result of unreliable rainfall, sorghum and millet are the most important food crops, while cowpeas is the main grain legume

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invariably intercropped with cereals. Groundnut cultivation increases in importance as rainfall increases, though never replacing cowpeas in the cropping system. As rainfall increases so does the range of minor crops, which include rice, sweet potatoes, and cassava. Cassava, although not prominent, is almost always present. 3.3.2 Due to poor land use management soil quality has degenerated resulting in low organic matter content, declining nutrients, fragile topsoil structure and reduced soil moisture. As a result, crop yields are relatively low ranging from 0.5 to 1 tonnes/ha for cereals, and 0.3 to 0.4 and 0.6 to 0.8 tonnes/ha for cowpeas and groundnuts, respectively. Rice under rain fed conditions reaches at most 1 tonne per ha and cassava 8 tonnes/ha. 3.3.3 Low-lying areas that are waterlogged during the rainy seasons but retain moisture during the dry season are called “fadamas”. These are the most productive land areas in northern and central Nigeria. Even without any investments for irrigation agriculture, fadama lands are used for rice and dry season crops such as roots and tubers, grains and legumes. They are also used by women farmers and groups for the cultivation of leafy vegetables and fruits. They constitute an important source of income as well as a risk mitigating mechanism in that they complement, in years of poor rainfall, subsistence food.

3.3.4 Nigeria has an estimated livestock population of 15.6 million cattle, 28.69 million sheep, 45.26 million goats, 5.25 million pigs, 118.59 million poultry, and about 1 million horses, camels and donkeys. The livestock sector is estimated to contribute between 5-6% of the country’s GDP and between 15-20% of the agricultural GDP.

3.3.5 For livestock keepers, Fadama areas have traditionally provided access to water and dry-season fodder, which is critical for the survival of their animals. Fadama lands are a critical resource for about two-thirds of the national cattle population or about 10 million heads of cattle, which produce annually about 150,000 tons of meat. Unfortunately, partly as a result of Fadama I not having given adequate attention to livestock farming, arable farming ha seriously encroached into stock routes and traditional grazing areas. The consequence has been increasing conflicts between pastoralists (especially transhumance herdsmen) and arable farmer’s. The principal factors underlying these conflicts include: (i) changing resource access rights, whereby traditional access rights to communal grazing and water resources are being obstructed by the individual tenure ship of arable farmers; (ii) inadequacy of grazing resources, as increasing crop cultivation (and increasing commercialisation of the crop-residues) and poor management of the existing grazing reserves have resulted in a significant reduction in available livestock feed resources, especially in the Northern States; (iii) the production of high value crops (tomatoes and onions), which produce almost no crop-residues for livestock feeding, and iv) the fact that the regulation that about twenty percent of the Fadama area would need to be set aside for grazing (National Agricultural Policy, 1988) has not been adhered to. This is aggravated by the declining trends in internal discipline, social cohesion, the breakdown of the authority of the traditional rulers, and increasing rent seeking by the modern and traditional authorities in managing access to resources.

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3.4 Forestry and Fisheries

3.4.1 Nigeria has four main vegetation zones patterned along rainfall, edaphic conditions, drainage and topography. These include (i) mangrove forests; (ii) humid forest zone; (iii) a sub-humid forest zone; and (iv) savannah zone in the remainder in the country. The project area is largely savannah grassland with sparse and scattered tress. Forestry is a major economic activity in the Fadama, and there are potentials for agro forestry development especially for household food security for the farmers. 3.4.2 Each type of forestry resource has production, protection and conservation functions. It is estimated that the industry employs about 75,000 workers, although about 2 million people, including temporary workers are actively employed in the informal wood-based sector. The communities in the vicinity of forests extract such forestry products as edible fruits, fodder, medicines, raffia product, fish poison and chewing sticks. Nigeria’s forests also provide critical ecological services such as watershed protection and moisture recycling. In addition, Nigeria’s forests are home to a vast number and variety of flora and fauna species and as such play an important role in conserving genetic and species diversity. 3.4.3 Nigeria has a coastline of 853 km and a continental shelf area of 46,300 km2 and an Exclusive Economic Zone covering some 210,900 km2. This area is endowed with abundance of fish and shrimp resources. The country’s annual demand for fish is estimated at 1.5 million tones. Marine production is at present about 400,000 tones, implying a deficit of some 1.1 million tones. The country also has an extensive network of rivers, lakes and lagoons that point to a large potential for aquacultural development. It is estimated that Nigeria has an aquaculture production potential of 2.5 million metric tones per annum. The annual total catch from these resources is estimated at 30,000 tones. Considering the overall national fish catch, Nigeria has a demand-supply gap of 1.07 million tones. Presently this gap is filled with imports estimated to have cost the county Naira 27 million in 2000. 3.4.4 Presently local fish production accounts for about 30% of the total supply of fish in the country. About 80% of fish production in Nigeria is produced by artisanal fishermen who are among the poorest in society. Government support in the artisanal fisheries has focused on encouraging responsible fisheries practices in order to ensure sustainability. Unfortunately the fisheries sub-sector is characterized by weaknesses, including poor policy formulation and implementation. One of the weaknesses is the placement of development priority on industrial and artisanal fisheries instead of aquaculture development. A focus on aquaculture development would apart from addressing poverty alleviation, link well with the development of other agricultural sub-sectors. 3.5 Intervention of Major Donors in the Sub-sectors 3.5.1 In an effort to support the Federal Government’s efforts to promote agriculture and rural development, the ADB and other donors have invested in both operational and policy initiatives. The World Bank and DFID have financed the development of a new Rural Development Strategy, which was adopted in 2001. In line with the new government strategy, the Bank Group Country Strategy Papers Nigeria for the periods 1999-2001 and 2002-2004 place emphasis on smallholder agricultural development and on increased beneficiary participation. Accordingly, the ADF has recently approved

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the co-financing with IFAD of the Community Based Agricultural and Rural Development Project (CBARDP) in five states of Gombe, Adamawa, Bauchi, Niger and Kaduna. The project seeks to improving the livelihoods and living conditions of rural communities with emphasis on women and other vulnerable groups. 3.5.2 In the context of the CBARDP, IFAD is supporting the project in 8 other states in Northern Nigeria. IFAD is also financing the Roots and Tuber Expansion Project in 26 states and it focuses on improving agricultural extension services, and on processing and marketing of farm produce. The UNDP is funding a natural resources management project seeking to promote sustainable agricultural, environmental and rural development in the country. UNICEF is supporting a programme providing community based nutrition services. The European Union is funding the Delta Micro-Projects Programme seeking to promote social development in the Delta region. Other relevant operations include the Ford Foundation funded Micro Credit Programme and DFID’s Jigawa Enhancement of Wetland Livelihoods. USAID is also involved in the promoting the marketing of inputs and rural enhancement projects.

3.5.3 Among the most recent initiatives to assist the Government implement this new strategy, in 2002 the ADB together with the World Bank and IFAD funded a review of agriculture sector institutions carried out by the FAO. The study, costing USD 315,000, aims at streamlining some of the institutions involved in agriculture and rural development. The study, now nearing completion, is intended to provide a common platform for donor intervention.

3.6 Constraints and Potentials

3.6.1 The expansion of the output from fadama development is constrained by such factors as weaknesses in the policy environment, inadequate or non-functioning social and physical infrastructure, and technical shortcomings. At the macroeconomic level, currency instability (depreciation of the Naira) makes investments in imported inputs very risky. Also frequent changes in government policies, particularly those relating to market interventions, are major constraining factors. Other market related shortcomings include weak contract enforcement in the country, which leads wholesalers to deal in “cash and carry” basis. Given constraints in financing, this limits farm inputs market development. Recent moves by government to liberalise inputs markets has not been accompanied with adequate mechanisms for quality control and for ensuring that the contents of inputs packages are true to the labels on them. This has led to adulteration and sale of inferior quality, out of date and expired products. Additionally, the lack people with knowledge on farm input usage at the distribution level in rural areas result in farmers not getting quality advice on how to use productivity enhancing inputs. 3.6.2 The effect of the marketing and policy constraints noted above is aggravated by poor rural infrastructure. Because of poor infrastructure and the lack of private entrepreneurs investing in farm input marketing in rural areas, dealers are largely to be found in urban areas meaning that farmers have to travel long distances to obtain inputs (seed, fertilisers, pesticides, etc.). This results in increased cost of the inputs thereby discouraging the wide spread use of these inputs. Bad infrastructure also leads to isolated rural communities and fragmented output markets which lead to low farm gate output prices, which further discourages farmers from using productivity enhancing inputs.

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3.6.3 The above-mentioned constraints for rural development are at the same time the country’s biggest opportunities. At the macro-economic level, the Government is in the process of further liberalising the economy and reducing its interventions in the market. At the local level, there is an enormous potential in empowering poor rural communities to identify their own priority needs and then implement, monitor and ascertain that their needs are being addressed effectively using government and their own resources committed to development. Other opportunities exist in strengthening local governments management and technical capacities to assume their frontline responsibilities for rural development in general and fadama development specifically. In addition, opportunities exist in reorienting service providers and managers of government funded interventions to respond to communities’ needs and in institutionalising and internalising the processes of community driven development into government policies. 3.7 Relevant Institutions 3.7.1 The Federal Ministry of Agriculture has seven technical departments namely Agriculture, Rural Development, Fisheries, Agricultural Land Resources, Agricultural Sciences, Livestock and Cooperative Development. In addition there is a specialised agency responsible for the coordination and implementation of major donor financed projects – The Projects Coordinating Unit (PCU). The departments most relevant in respect of the preparation and implementation of the Fadama II are: the PCU, and the Federal Departments of Agriculture (FDA), Rural Development (FDRD) and Livestock Department. 3.7.2 The PCU is responsible for planning, preparation, and appraising agricultural and rural development projects. It provides technical assistance to, and supervises project implementation, monitoring and evaluation, and coordinates Government interaction with national and international agencies in respect of the development, and implementation monitoring of agricultural projects. One of the strengths of the PCU is its total staff capacity of about 650 of which more than 400 are operating at the state levels through its six regional offices in Benin, Enugu, Ibadan, Bauchi, Kaduna, and Lokoja. Inadequate staff and dwindling supply of equipment and logistical support restricts the PCU in performing its duties. These constraints notwithstanding, the unit has successfully managed Fadama I and is presently managing the IFAD supported CBARDP. 3.7.3 The functions and responsibilities of FDA include the development of policies and programmes for the crops sub-sector, advising on policy matters as well as for identifying, designing and implementing programmes and projects of a national nature and scope directly or through State implementing agencies. It is also responsible for promoting productivity through research and development into technological advances, promoting home economics and nutrition, and of ensuring gender-balance and women programmes in agriculture. The Livestock department has responsibility for developing and coordinating polices and activities on the development of Livestock. 3.7.4 According to the Nigerian constitution responsibility of implementing agricultural programmes lies with the states. At the levels of the States, agricultural development work centres on the Agricultural

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Development Projects or Programmes (ADPs). ADPs have evolved from the 1990s when they were World Bank financed integrated rural development projects to being State institutions responsible for all agricultural development operations at the level of States. In each state the highest policy making organ is the ADP Executive Committee (ADPEC) headed by the State ADP Chief Executive (usually called Programme Manager or Managing Director). ADPs have sub-programmes headed by Directors. Below this level, the organisation structure of the ADPs is not uniform across States. In some ADPs Fadama activities constitute an independent sub-programme while in others they are under the engineering sub-programme. Although organisational structure varies between states, ADP activities generally cover crop, livestock, fisheries, socio-economic research and group mobilisation. 3.7.5 Other relevant agencies in the Implementation of Fadama II are the Ministries of Water Resources and of the Environment. The ministry’s departments for irrigation and drainage, and for water quality and monitoring are most relevant for Fadama II. The Federal Ministry of Environment (FMEnv) was created in 1999 to ensure that various projects/programmes undertaken in the country take into account likely environmental implications and mainstream the requisite mitigation measures to counter any adverse implications. 3.7.6 The rural financial market in Nigeria consists of formal banks, community banks, credit unions, non-governmental organizations, self-help groups and private lenders. With regard to the formal banks, the Nigeria Agriculture Cooperative and Rural Development bank is the largest commercial bank providing rural credit. Its branch network covers all the local governments in the country. It provides both individual and group loans with the minimum loan amount of Naira 1,000 and Naira 25,000 respectively. It charges market interest rates and has a recovery rate of 87%. Inadequate funding relative to their mandates, bureaucratic processes, unsustainably low interest rates (partly due to subsidised credit) and low (or no) savings mobilisation are also important limiting factors. 3.7.7 The informal financial institutions which comprise largely of NGOs and various micro-finance institutions mobilize savings and deposits from their clients, from which loans are made at commercial rates, which currently range between 25 – 32%. These institutions use mainly group lending methodology but also provide individual loans to their clients. The average loan sizes are Naira 30,000 and Naira 800, respectively. They have, on average a recovery rate of 98%, which is very satisfactory according to micro finance “best practices.” While easily accessible to the rural communities since they are rural based, the capacity of these institutions to provide sufficient credit to the clients is limited by their capital base. 3.7.8 Community-based Organisations (CBOs), including Fadama User Associations formed under Fadama I were, promoted by the ADPs to facilitate the delivery of extension messages and agricultural inputs. Self-initiated groups of women and men with common interests are also common. Typically membership of groups in fadama areas average 20 people. Although informal in nature these CBOs work well and are for the most part sustainable and represent the future hope for sustainable rural development.

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3.7.9 A wide range of NGOs exist in Nigeria. Some have limited scope and outreach because of limited human and financial resources, while others do have nationwide coverage and are regularly audited. They include international, national or local organisations. Among international NGOs present in Nigeria are CARE International, OXFAM International, World Vision International (Nigeria), ACTIONAID, the Centre for Development and Population Activities, and Sasakawa Global 2000. Nation-wide NGOs include Savannah Conservation Nigeria, Miyetti Allah, Nigerian Integrated Rural Accelerated Development Organisation, and Development Exchange Centre. NGOs are involved in a wide range of activities including agricultural and rural development, natural resources management, and related capacity building activities. Several of these have developed specific curricula on a number of topics that are extremely relevant to the CDD approach and have or can mobilise the requisite staff to undertake training and other service provision. 4. THE PROGRAMME AND PROJECT 4.1 Programme Concept and Rationale 4.1.1 The proposed Fadama Development Project (FDP) is part of the Second National Fadama Development Programme (Fadama II), in which Government has invited various donors to participate. The programme consists of various activities including those in infrastructure development, irrigation, capacity building, advisory services, and environmental protection and awareness. The programme foresees activities in at least 18 States (with a possibility of other states following mid-term review of the project), 12 (see Annex 1) of which will be supported by the World Bank and 6 (see para 4.1.2) by the ADF with additional support from the Global Environmental Fund (GEF) addressing environmental issues in all the 18 states. The total cost of the programme is UA 114.24 million of which ADF contributes a loan of UA 22 million, IDA a loan of UA 52.97 million, and GEF a grant of about UA 5 million (Table 4.3 a). The GEF intervention is specifically targeted at monitoring the critical issues of ground and surface water quality and quantity, land degradation and quality, biodiversity and wetlands. Further details of the programme financing are provided in Volume II. 4.1.2 The programme has built on the experiences of the National Fadama Development Project (Fadama I), which was implemented from 1993 to 1999 with World Bank assistance. Fadama I was implemented in the seven “Core States” of Bauchi, Gombe, Jigawa, Kano, Kebbi, Sokoto and Zamfara. All the other states participated as “facilitating state”, i.e. states in which Fadama I activities were introduced on pilot basis. FDP which has been designed to replicate and improve on the practices that contributed to the noted achievements, is to cover five of the non-core Fadama I states, i.e. Borno, Katsina, Korgi, Kwara, and Plateau, and one of the Fadama I core states, Jigawa. These states have been selected on the basis of selected on the basis of a comprehensive set of criteria of: (i) a written proposed action plan for both upstream and down stream post-harvest activities, (ii) a written commitment for regular payment of counterpart funds deducted at source (at the Ministry of Finance), (iii) evidence of viable and active Fadama Resource User Groups or other economic groups, (iv) evidence of the existence of conflict management committees, (v) completion of a detailed assessment of existing fadama infrastructure, and (vi) a record of Fadama I loan recovery rate of at least 75%.

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4.1.3 One of the major successes of Fadama I was the adoption by farmers of simple, low-cost improved irrigation technologies comprising motorised pumps and tube wells, which in turn led to increased incomes and a general improvement in social and economic well being of the participating communities. In addition to replicating the improvements and successes of Fadama I, the programme is designed to correct design shortcomings of its predecessor, including paying attention to downstream activities such as marketing, processing and infrastructure development, some of which were neglected in the earlier project. Fadama II will also ensure the rectification of other shortcoming of Fadama I, including ensuring the participation of all stakeholders, i.e. federal, state and local governments as well as of the ultimate participating fadama users. The design of Fadama II also takes into account lessons drawn from the Bank Group’s past interventions in Nigeria’s agriculture that focused on large-scale, capital intensive agro-industrial investments. The performance of these investments was undermined by such factors as poor management (both of operations and resources), and the lack of beneficiary sense of ownership and commitment. Fadama II therefore focuses on smallholder operators.

4.1.4 The design of Fadama II has incorporated a paradigm shift from the traditional public sector dominated/supply-led development approaches of the past to a private sector-led, demand-driven strategy. Fadama II will adopt a Community Driven Development (CDD) approach. Under this approach various fadama resource users, including crop farmers, pastoralists, fisher men and women, and on- and off-farm entrepreneurs, operating through their respective fadama user groups (FRUGs) and their apex bodies, Fadama Community Associations (FCAs), would reach consensus on how to use the common resources for their mutual advantage. Through this process, communities would decide on which advisory services and infrastructures they need to enable them attain development goals they set for themselves based on their own efforts. The consensus so reached would be articulated in Local Development Plans (LDPs) drawn up at the level of the Fadama Community Associations (see para 4.5.2 for description of LDP).

4.1.5 By ensuring the active participation by all stakeholders in the identification of their development needs, and in planning and designing project strategies and activities towards meeting the identified needs the programme design would be addressing the factors that limited the performance of Fadama I. An integral part of the programme will be provision of support to up- and down-stream activities aimed at streamlining input and output marketing, including ensuring efficient transportation of inputs and outputs, processing, storage (conservation and/or preservation), thereby ensuring maximum value addition and return to beneficiary efforts. The programme will also put in place mechanisms for ensuring the harmonious use of fadama resources by all resource users thereby forestalling and/or resolving resource use conflicts. In addition, it will support the development of on- and off-farm income generating activities that are beneficial, especially to the youth, women, and other vulnerable members of the communities.

4.1.6 Government has demonstrated both by taking appropriate policy measures and financing its commitment to the implementation of this project that is geared to improving the well being of the poor. The new Rural Development Strategy specifies poverty alleviation and improved food security, as primary goals to be achieved primarily through increased involvement of the beneficiaries and increased role of the private sector are good demonstration of its policy stance. It is note worthy that the Government spent about one year to carefully select the states meeting a set of stringent eligibility criteria

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for participation in the project. These included securing written undertakings from the states to make the requisite budgetary allocations for financing the project. This together with its agreeing to devolve responsibility for both the design and implementation of the project to state and local governments and rural communities, further demonstrate Government commitment to ensuring the project’s success. Financially, Government commitment (at all levels) is further demonstrated by its undertaking to fund about 50% of the total Fadama II estimated costs. 4.2 Fadama Development Project: Area and Beneficiaries 4.2.1 As noted in para 4.1.1, of the 18 Fadama II states, the ADF intervention is to cover six states. These states were selected based on their fulfilling the criteria outlined in para 4.1.2. The land suitable for fadama farming in the project area has been estimated at 950,000 ha. Out of this, 12,350 ha or 1.3% have been developed under Fadama I. Under FDP an additional 80,000 ha or 8.4% have been earmarked for development. The project promotes development in agriculture, livestock and aquaculture, as well as developments in such other areas as hunting, beekeeping, wildlife conservation, and down stream activities, including processing and marketing. Directly, the project will benefit at least 120,000 farm families. Of these, 50% would be engaged in crop production, 25% in livestock rearing, 15% for fisheries, and 10% in other areas. The total number of direct beneficiaries targeted by the project is estimated at 720,000 persons.

4.2.2 Following the involvement of some of the potential beneficiaries in Fadama I, many have knowledge of the potentials for increased incomes emanating from fadama development. However, they are also aware of, and are concerned with, the constraints that restricted the benefits of Fadama I, including poor infrastructure and the lack of attention given to down stream activities. The potential beneficiaries will be encouraged that these constraints are being addressed under FDP. This is because the potential beneficiaries obtain their livelihood mainly from agriculture and other non-farm activities and often use the fadama lands as a means of diversifying production, augmenting incomes, and reducing food security risks especially during years of poor rainfall. Productivity under rain fed conditions is very low. For instance, yields of rain-fed cereals and cowpeas are about 0.5 t/ha while under fadama conditions productivity would increase to between one and two tonnes/ha for rice, 10 to 15 tonnes for onions, and 5 tonnes/ha for tomatoes. As a result, net farm incomes would increase from Naira 35,000 under rain fed conditions to at least Naira 80,000. This does not take into consideration the revenue obtained through other uses such as livestock production and aquaculture.

4.2.3 Many farm families in the project area are organised in Fadama Resource User Groups (FRUGs), which are registered and operate accounts in commercial banks. This reflects their readiness to work together to advance their common economic goals. There are, at present, more than 1,000 FRUGs registered. Most of them were created during the 90’s by the ADPs to facilitate the supply of agricultural inputs and equipment. Other groups such as those dealing with livestock, women groups, etc, however, have come up spontaneously, as a means of organising to defend group interests. The project envisages building on this existing system of group formation in the area. New FRUGs, be they of crop farmers, women engaged in agro-processing or fish curing, hunters, pastoralists, fishermen and women, collectors of non-timber forestry products, etc. will all be encouraged and supported to better

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organise and appoint chairpersons, secretaries, treasurers and financial secretaries. They will be encouraged/supported to register officially and open bank accounts.

4.3 Strategic Context

4.3.1 The proposed project is consistent with the Government's Rural Development Strategy, which is reflected in the Interim Poverty Strategy Paper and seeks to bring about poverty reduction and enhanced food security through sustainable agriculture and rural development. According to this strategy, these objectives would be pursued through: (a) promotion of rural farm and non-farm productive activities; (b) human resource development; (c) enhancement of rural infrastructure - physical, economic and social, and their maintenance by beneficiary communities; (d) special programmes for target groups, such as women, youth and children; and (e) organization and mobilization of rural communities.

4.3.2 The project is also in line with ADB’s operational strategies as outlined in the Bank Group Strategic Plan for 2003-07, the Bank Group Policy on Agriculture and Rural Development, and the Rural Water Supply Initiative. These strategic documents place emphasis on poverty reduction based on interventions seeking to improve productivity, economic growth and empowerment of the poor to benefit equitably from such growth on a sustainable basis. The project is also in line with the Bank’s Country Strategy Paper for Nigeria, which, in line with Government priorities, places the Bank’s operational focus and resource allocation during 2003-05 on agriculture and rural development, human capital formation and infrastructure development. Also in line with Bank and Government stated policy objectives, the project promotes the full participation of the private sector in development activities, good governance, and capacity building in the relevant financial institutions and business enterprises. 4.3.3 In line with these strategic priorities, potentials and capacities, the project will contribute to poverty reduction in the rural areas by: (a) financing investments in human and physical capital; (b) enhancing the institutional capacity of government, local administrations, private sector and communities to deliver agricultural advisory services; (c) supporting increased access of project participants to financial services from the private sector; and (d) promoting sound conservation and integrated ecosystem management. As emphasised in chapter 1, several factors point to the appropriateness and urgency of the proposed investments. The fact that appropriate policy framework is on the ground, the continuing deterioration of existing infrastructure, and the growing risks of conflicts between various fadama resource users, for instance.

4.4 Project Objectives

4.4.1 The sector goal is to reduce poverty by improving the living conditions of the rural poor and to contribute to food security and increased access to rural infrastructure.

4.4.2 Specifically, the project will enhance agricultural production, productivity and value addition for smallholders and rural entrepreneurs in the Fadama areas of six states on a sustainable basis.

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4.5 Project Description

4.5.1 The proposed project will have three components: (a) Capacity Building and Advisory Services, (b) Community Infrastructure Development and (c) Project Management and Co-ordination. The major outputs of the project will be: i) the enhanced capacity of resource users for participatory planning, project implementation, operation and maintenance; ii) strengthened capacities for enterprise development and management; iii) construct and maintain rural infrastructures including rural roads, irrigation infrastructure, sanitation, agro-processing and marketing facilities; iv) establish demand-driven technical assistance and advisory services to resource users, and v) strengthened capacities of project coordination and management units at federal, state and local government levels.

4.5.2 As noted in para 4.1.5 the design and implementation of FDP is participatory whereby potential beneficiary groups are assisted by facilitators to collectively identify and prioritise their development and production needs and to design strategies for meeting the needs. Together the needs and strategies are summarised in Local Development Plans (LDPs) at the level of FDAs. A typical LDPs comprises: (i) an agreed list of priority public infrastructure sub-projects that are technically and economically feasible, environmentally sustainable, consistent with existing development plans of local and state government authorities, and that will contribute towards raising the productivity and incomes of all fadama user groups; (ii) a list of priority advisory needs; (iii) agreed mechanisms for financing the operations and maintenance of subproject investments (including levying user fees where appropriate); (iv) a plan for training and building the capacity of FCAs in financial management, community-based procurement, social and environmental impact screening of subprojects, and other aspects of organization and management of the associations; and (v) a gender and poverty reduction plan; and (iv) an agreed mechanism to manage and resolve conflicts, especially concerning fadama usufruct rights (rights to use without owning).

(A): Capacity Building and Advisory Services i) Capacity Building of Government Institutions 4.5.3 A Local Government Fadama Development Team (LGFDT) will be created in each participating Local Government Area. This Team will comprise of three appointees from the following units of the respective local governments: Rural Development Unit; Planning, Monitoring, and Evaluation Unit; and Cell Extension Agent from the ADP. Members of the Team will be among the first recipients of training of trainers. Subject of training will include participatory planning and implementation tools for community-driven development activities, including rural infrastructure and monitoring and evaluation. The recipients of this training will constitute a pool of trainers to be contracted as facilitators in participatory planning. There function will be to enabling the FRUGs identify and prioritise community development needs, investment opportunities, prepare proposals for investments and for advisory services as well as consolidate these into Community Development Plans (CDPs).

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4.5.4 Service providers including NGOs thus trained and experienced in Community-Driven Development (CDD) will be contracted to train about 480 field staff of Local Government Councils (LGCs). They will serve as facilitators and assist beneficiaries in the process of community-driven development. Once the CDPs are finalized they will be submitted to the respective LGCs for approval. 4.5.5 A State Fadama Development Team (SFDT) will be created within each participating ADP. The Team will provide support to FRUGs and FCAs on the implementation process of the activities in the approved plans. The support provided will be in those areas in which ADPs have comparative advantage, such as design, feasibility and budgeting of infrastructure works; extension services on crop and livestock production; and relevant environmental screening. For other services, the SFDT will help identify the specialist Government of private sector institutions (individuals, firms, or NGOs) who are better qualified in providing theses services and link them up to the FRUGs for possible contracting for such services under project support. Such services would include information on prices and commodity markets; establishment of a small-scale enterprise; the running of savings and credit associations; improving production / market chains; sanitation quality control; and HIV/AIDS issues. In-service training for about 42 ADP staff in CDD approaches will be conducted. The Agricultural and Rural Management Training Institute (ARMTI) and the Centre for Management and Development (CMD), who have the requisite training experience in Nigeria, will be contracted for this training. 4.5.6 At the Federal level, the Government, with support from the World Bank, has established National Fadama Development Office (NFDO). The project will strengthen this office by appointment of one Senior M&E Specialist and an Accountant to ensure that the ADF project interests are fully taken into account. These two staff will be attached to the NFDO and will receive training in project management and in Bank Group procedures in procurement and disbursement to coordinate FDP operations in the six ADF funded states. The project will also finance the training of other NFDO staff in ADF procedures and meet operational expenses for all NFDO officers in respect of their activities relating to the ADF funded states. To strengthen the capacity of PCU staff training and other capacity building support would be provided to pubic institutions under the advisory services component. Specific training will be arranged for all NFDO and SFDT staff to familiarise them with ADF operation modalities and procedures. 4.5.7 Further, the project will finance about 120 promotional campaigns, one per LGA, which will be coordinated by the NFDO and SFDTs. These campaigns aim at sensitising stakeholders at community level on the objectives, methodologies, and activities of the project. In addition, the project will finance six initiation workshops, one per state, for state and community leaders in which stakeholders will be informed about the objectives and activities of the project as well as their respective responsibilities and duties. 4.5.8 A provision is made under FDP for the contracting, by the NFDO, an auditing firm to carry out the annual auditing of ADF project in all the ADF participating states. To sensitise relevant senior Federal, State and Local Government officials on the project concept, operational modalities and responsibilities expected of these officials, the project will fund a sensitisation workshop at the start of

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project implementation. The project will also fund during PY1 a Baseline study for the six ADF states that will provide benchmark data for project monitoring implementation monitoring. 4.5.9 In order to implement the above-mentioned activities and realize their outputs, provision is made under the project for the training equipment, operational training costs, participatory rural appraisals and planning workshops, preparation resource user proposals and the preparation of the LDPs. Provision is also made under the project for office equipment and operation expenses for the LGFDT. The project will also provide mobility in terms of motorcycles to allow regular monitoring and evaluation. At the state level, the project will meet the incremental costs incurred by ADPs in implementing project activities which ADPs have comparative advantage.

ii) Advisory Services Facilitation

4.5.10 There is a growing number of private organisations such as NGOs, producer organisations, research institutions and private entrepreneurs who, in the project area, are involved in service provision to communities and groups. These services may range from advice for small-scale enterprise development, to marketing information, access to and use of credit and farm inputs, among others. The project will promote this new trend towards a more pluralistic system of service provision by encouraging gradually the use of these non-public service providers. 4.5.11 Services which resource user groups often request and which will be financed by the project include those oriented towards: (a) Production Diversification and Quality Improvement: including new crops and/or cropping combinations with higher yield potential; alternative practices and soil fertility management; integrated and biological pest / disease management; farm tools and practices to increase labour productivity; post-harvest handling of produce and primary processing; among others. (b) Conflict Resolution and Environmental Awareness: such as those relating to transhumance and the implementation of environmental mitigation measures. With respect to transhumance, workshops and training will be conducted with project support for relevant units of local governments and communities. This will facilitate the constitution of viable groups of collective owners and users of fadama resources. (c) Improving Access to and returns from use of Farm Inputs: The project will provide for training, support advisory services, and the provision of market information to inputs suppliers and users. This, in combination with the improvement in infrastructure (see Component B) would enhance access to such inputs by producers and marketing of produce. (d) Enterprise Management Support: such as in areas of primary processing of produce; grading and packaging; promotion of group marketing; establishment of price and market information systems; community storage facilities; and services on farm and enterprise management skills. The project will also support traders and businesses ventures in the fadama areas in such skills as bookkeeping and stocks management. 4.5.12 As implied in paragraph 4.5.10, advisory services of a public nature will be contracted out to specialist public institutions. Services of a private nature, on the other hand, will be contracted to NGOs, individual consultants and/or firms. In any case, the SFDT will screen requests for advice, determine the most appropriate category of service providers and prepare with the requesting community/FRUGs the Terms of Reference and contractual arrangements if necessary. Criteria for the

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selection of facilitators are specified in Volume II. Payment to the facilitators will be made only after FCAs are satisfied that services have been delivered in accordance with the terms of the contract. This will ensure that service providers are responsive and accountable to the end-users of advisory services.

(B): Infrastructure Development

4.5.13 Under this component, the project would assist in increasing the number and quality of demand-driven rural infrastructures such as small-scale irrigation and livestock development systems, feeder and access roads, community storage and marketing infrastructure as well as social and rural infrastructures that fadama resource users may name as priorities and agree to implement, operate and maintain by themselves. The project will also assist in building the capacity of the communities in managing and maintaining these rural infrastructures. The project would finance, in principle, only those structures, which are considered public goods such as: i) Access and Fadama Roads 4.5.14 The project will finance the design works and construction of about 180 km rural roads with cross drainage systems and rehabilitate an additional 180 km. The selection of these roads will be based on: (i) the participation of the community in the selection, prioritisation, cost-sharing and signing of a Memorandum of Understanding (MoU) with the SFDT stipulating community commitment to the routine and regular maintenance of the infrastructure; (ii) the vetting of construction designs by qualified local consultants to ascertain technical appropriateness, and environmental friendliness iii) commitment by concerned LG and State Authorities to include the cost of periodic maintenance of the concerned roads in their budgeted programme of regular road maintenance. This will be a loan condition. 4.5.15 Road maintenance is assured through: (i) Routine Manual Maintenance, undertaken by communities on a day- to- day basis; (ii) Recurrent Maintenance, which is done twice a year, before and after the rains and which is like wise the responsibility of the communities and (iii) Periodic Maintenance, which entails a heavy machine-based maintenance carried out three to four years after the initial construction/rehabilitation road works and which is, the responsibility of the Local Governments. Modalities for routine and regular maintenance by the communities will be stipulated in the Local Development Plan. The project will finance about 600 sets of small hand tools such as hand hammers, shovels, diggers, wheel barrows, head pans, watering cans, cutlasses and rakes, for maintenance and capacity building purposes. The project will also finance any request for training in the context of regular and recurrent maintenance. For LGC periodic maintenance, the project will seek written commitments from the concerned LGC that this would be included in their LG programme. The Government has recently set up a Roads Maintenance Agency with a Naira 10 billion budget for 2003 and charged it with maintenance of roads. In addition, State and LG authorities have various road tolls, taxes and user charges as a means of raising funds for the maintenance of essential infrastructure.

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ii) Stock Routes and Grazing Reserves 4.5.16 As explained in paragraph 3.2.4, stock routes are ordinary tracks used by pastoralists and livestock. The project will finance, on a demonstration basis, the surveying, demarcation (beaconing) and gazetting of at least one stock route per state to be selected on the basis of severity of conflicts and readiness of the concerned communities to cooperate in this regard. Priority, initially will be give to the state of Katsina that has already in place a committee on resource user conflict management committee. Specifically, the project will finance the establishment resting points at intervals of 100 km; construction of watering points (18), veterinary clinics, grazing grounds and supplementary feed storage facilities. 4.5.17 Further more, to minimise the risk of conflicts between arable farmers and pastoralists, the project will finance, on a demonstration basis, at least 18 grazing reserves along stock routes, three per state. It will also finance the rehabilitation of about 3,000 ha of existing grazing reserves. The rehabilitation works will include demarcation (beaconing) and gazetting of the reserves and provision of 10 watering points (one per 300 ha of grazing reserve), with placement of the watering points depending on the hydro-geological conditions in the area.

iii) Hydraulic Structures

4.5.18 To increase the availability of potable water, the project will finance 300 boreholes (two per LGA), 120 tube wells (one per LGA) and construct and/or rehabilitate 12 springs and 6 infiltration galleries for domestic water supply purposes. Simple hand pumps for the boreholes and wells and water quality control testing kits will be provided. The project will also finance the rehabilitation of spillways and the embankment of 12 existing small earthen dams, which are used as drinking points for livestock as well as for some crop production. A study will be undertaken to determine the extent of the works required.

4.5.19 Additional support will be provided for the rehabilitation of at least 6 flood regulators and 24 dykes and weirs. Once completed, the maintenance of these works will, in principle, be the responsibility of the concerned local governments. As a prerequisite for expenditure of project funds, the concerned local governments would have to make a written undertaking to ensure the maintenance of the structures. The project would fund in total about 750 tube wells and wash bores for monitoring the potential environmental impact of groundwater abstraction for fadama development. This is in addition to the GEF intervention (see para 4.1.1) which addresses the issues of ground and surface water monitoring. These structures will represent the mandatory 5% of the number of tube wells and wash bores, likely to be constructed and or rehabilitated for agriculture development. Pumps and accessories will also be financed. As is the case for the other hydraulic structures, maintenance of these infrastructures will be the responsibility of the local governments.

iv) Storage Infrastructure and Produce Marketing

4.5.20 Marketing is organised on a resource user group basis, whereby farmers collect and dry their produce before transporting it to rural markets. The problem with the distribution chain is 3031that often there are no collection centres in the fadama areas or that the roads are in such a state of disrepair that

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the produce cannot be collected and transported. Many of these centres are not equipped to store produce even for a few days. Consequently, some, especially the perishables are spoilt before their marketing. To overcome some of these constraints, the project will finance the construction of 120 collection centres and drying sheds. It will also finance the construction of 120 evaporating cooling sheds complete with watering points and overhead tanks in the rural townships. Provision will also be made for the drainage, sanitation and waste disposal systems. These public structures will be owned by the local governments, which, as a requirement for project funding, will have to agree to levy user charges in order to raise funds for maintenance of the infrastructure.

(C): Project Coordination and Management

4.5.21 To facilitate project supervision and monitoring, the project will support the PCU and the NFDO (ADF supported staff) and SFDT and LGFT offices with computer/office equipment. The contracts for the supply of all of this equipment will be made centrally by the NFDO. In addition, the project will finance field visits and project monitoring expenses of the NFDO staff (including the non-ADF supported when monitoring the ADF project areas) and meet the operation and maintenance expenses of equipment provided under project financing. Also, to facilitate project supervision and monitoring, the project will fund two 4-WD double cabin pick-ups for NFDO and a similar pick-up for each SFDT, and 10 motorcycles per state and meet the cost of operation and maintenance of the vehicle. The motorcycles would be issued to project field staff on ownership basis. The project will provide the requisite finances to enable the project M&E specialist establish, as part of the project’s capacity building efforts, the establishment of a Management Information System to keep track of project implementation progress. The M&E Specialist will also be provided with support to establish a competent fadama market information system that will furnish up to date information for fadama inputs and outputs on a regular basis. 4.6 Production, Markets and Prices 4.6.1 Production: As a result of Fadama I beneficiaries realised enhanced productivity and incomes. In the light of these achievements, as indicated in the project description (section 4.5) FDP is focusing on: i) capacity building and advisory services, ii) public infrastructure development, and iii) down stream activities. This focus will: a) increase beneficiaries’ knowledge on how to enhance productivity, b) open up production areas to suppliers of inputs and to produce traders to purchase project outputs for re-sale in distant higher price markets, c) lowering cost of trading in both inputs and outputs thereby increasing profitability of project investments, d) increase beneficiary incomes and ability to purchase more inputs thereby further stimulating productivity, and e) enable beneficiaries to invest in equipment and other facilities for processing and conserving project outputs thereby enhancing quality and value addition.

4.6.2 While in respect of crops, project support would focus on providing beneficiaries with advisory services geared to promoting high value vegetables and cereals, it is expected that productivity of rain-fed crops would also be positively affected by the intensified advisory services leading to increased productivity and improved handling of crops. It is projected that at full development the project would result in incremental production of: 3,716 tons of maize per year, 207 tons of sorghum, 207 tons of

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millet, 19,000 tons of cassava, 876 tonnes of cowpeas, 485 tonnes of paddy rice, and 324 tonnes of groundnuts all during the rainy season. Of the potential vegetable crops that would be grown during the dry season (fadama conditions) it has been shown that a combination of tomatoes, and onions and pepper gives the best returns for the northern states (Borno, Jigawa and Katsina) while that of pumpkins, amaranthus and okra have the best returns for the mid-belt states. At full development the project would result in enhance production by 37,000 tons of tomatoes, 7,257 tons of okra, 6,066 tons of pumpkins, 7,280 tons of amaranthus, and 14,599 tons of onions. 4.6.3 In addition, it is expected that 25% of income of fadama resource users would arise from livestock production and 15% from fisheries activities and the remaining 10% from other activities including downstream activities. On the basis of the assumed production models, at full development the participating resource users would realise incremental production of 354,000 goats, 135,000 sheep and 108,000 cattle. They would also realise incremental fish catch amounting to about 25,200 tons of hetro-clarias and 3,600 tons of tilapia. 4.6.4 Markets: Most of the demand for cereals is for human food and livestock feeds industries. Maize and sorghum are used in food-processing industry for brewing, malting, flour and confectionery and livestock feeds where demand remains largely unmet. National supply-demand projections for cereals indicate large deficits over the project period so that incremental production from Fadama II would find a ready market within the country. Similarly, the demand for Fadama produced fruits and vegetables is in excess of supplies even though gluts occur in the production areas during peak production seasons as a result of poor infrastructure and other structural constraints characterising the marketing system that affect the Fadama areas in particular. The Nigerian market demand for livestock and fish products is largely unsatisfied. The project’s outputs will therefore find ready domestic markets as long as they are evacuated from areas of production to markets. This data demonstrates opportunities existing for producers to increase their returns from project output both from increased production, but also from added value resulting. Value addition would result from improved infrastructure and market information system that would facilitate the efficient evacuation of produce to higher price markets. Similarly, project investments in facilitating post-harvest activities such as produce storage, quality control, processing and packaging. 4.6.5 Prices: The present state of the market for fadama outputs is highly segmented, being characterised by wide price variations between different regions of the country. For instance, prices differentials between various regions range between Naira 38-65 per kg of tomatoes, Naira 35 to 45 per kg of onions, and Naira 32 to 142 per kg of pepper. There are also clear differences between rural and urban prices ranging from 6% to 60%. There are also big fluctuations in prices over time between different months of the year for various crops. For instance, monthly prices for shelled groundnuts fluctuated from N36,000/t to N57,000/t, for cowpeas from N35,000/t to N43,000. Among vegetables prices fluctuate from N 23,000/t to N 42,000/t for tomatoes, N 30,000/t to N 61,000/t for sweet pepper, N 91,000/t to N 142,000/t for chilli pepper, and N 30,000/t to N 61,000/t for onions.

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4.7 Environmental Impact 4.7.1 The Project has been classified as Category I for environmental assessment purposes and accordingly a comprehensive Environmental and Social Impact Assessment (ESIA) has been conducted by the Government to: a) identify potential environmental and social impacts of project activities on the fadamas; and b) to formulate necessary mitigation measures for inclusion in the design and implementation of the project. The Fund has reviewed the ESIA and found it to be satisfactory. Apart from the ESIA report, an Environmental and Social Management Plan, a Pest Management Plan, and different thematic annexes. A summary of the ESIA report has been distributed to Board Members as Board document No.: ADF/BD/IF/2003/99 of 5 August 2003 (English) and 24 September 2003 (French). 4.7.2 Environmental benefits derived from the project will include: improved water and natural resource management, protection of natural habitats, steps to be taken under the project to address the problem of fadama resource use conflicts, and several social and economic benefits to the beneficiary communities and the nation. 4.7.3 Fadama development may adversely affect the biophysical and social environment including loss of forest resources as a result of local deforestation and subsequent disruption of the fragile fadama ecosystem. The traditional practices of bush fires, land clearing and cultivation, and use of fertilizer and other agro-chemicals would also have negative impact on the fadama ecosystem. Soil erosion and subsequent sediment loading may be caused by cultivation of riverbanks, steep slopes and improperly designed irrigation and drainage canals. Negligence of the ecological implications during irrigation could lead to disturbances such as loss of biodiversity, salination, reduction of surface and groundwater resources, loss of productive land, and loss of water to other existing and potential users. Poor choice of drilling locations, poor development of wells and improper maintenance can result in low well yields and drying up of wells. Pesticide use may cause soil and water contamination, modification of aquatic habitat, and may result in adverse health consequences on downstream users. Nutrient loading of surface water resources may result from inconsiderate chemical fertilizer use. Successful project activities may also exacerbate conflicts between farmers and pastoralists seeking grazing areas, stock routes and watering points. There is also potential risk of conflicts between farmers and such other users as urban developers, local industries (e.g. brick making) who are encroaching on fadama land in certain areas. 4.8 Project Costs 4.8.1 The total project cost, excluding taxes and duties but including physical and price contingencies is estimated to be Naira 4.42 billion (UA 25.12 million at July 2003 exchange rates). Of this, the foreign exchange costs are estimated to be UA 13.38 million or 53% and local costs to be UA 11.74 million or 47%. The estimated costs for the project components and for various expenditure categories are given below in Tables 4.1 and 4.2.

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Table 4.1: Summary of Project Costs by Components Naira '000 UA '000

Component Local Foreign Total Local Foreign Total % FE

1. Capacity Building & Adv. Servs 1,263,930.00 909,820.00 2,173,750.00 7,185.70 5,172.52 12,358.22 42

2. Infrastructure Development 504,183.76 1,200,865.04 1,705,048.80 2,866.39 6,827.17 9,693.56 70

3. Project Management 184,626.00 76,561.50 261,187.50 1,049.64 435.27 1,484.91 29

Total Base cost 1,952,739.76 2,187,246.54 4,139,986.30 11,101.73 12,434.96 23,536.69 53

Physical Contingences 16,200.00 64,800.00 81,000.00 92.10 368.40 460.50 80

Price Contingences 94,990.43 102,047.29 197,037.72 540.04 580.16 1,120.20 52

Total Project Cost 2,063,930.19 2,354,093.83 4,418,024.02 11,733.87 13,383.52 25,117.39 53

Table 4.2: Summary of Project Costs by Category of Expenditure

Naira '000 UA '000 Project Category Local Foreign Total Local Foreign Total % of FE

1. Works 507,738.39 1,303,800.00 1,811,538.39 2,886.60 7,412.38 10,298.98 72%

2. Goods 155,131.20 386,734.55 541,865.75 881.95 2,198.67 3,080.62 71%

3. Services 623,880.00 511,965.00 1,135,845.00 3,546.89 2,910.62 6,457.51 45%

4. Operating Cost 777,180.60 151,594.28 928,774.88 4,418.43 861.85 5,280.28 16%

TOTAL PROJECT COST 2,063,930.19 2,354,093.83 4,418,024.02 11,733.87 13,383.52 25,117.39 53%

4.8.2 The project costs are estimated at the July 2003 exchange rates and prices in Nigeria. Prices of imported goods were obtained in Naira and converted to UA. Costs of civil works are based on estimated costs of comparable on-going works. A physical contingency rate of 10% has been applied to the cost of civil works and goods. A price contingency rate of 2.5% the current international index of traded goods, has been applied for foreign goods while a rate of 12% has been applied to locally sourced goods in the light of the projected local inflation rate over the project implementation period. 4.9 Sources of Finance and Expenditure Schedule 4.9.1 The programme will be financed with loans of UA 22 million from the ADF representing 19%, IDA UA 52.97 million representing 46% and a grant from GEF of UA 5 million representing 4% of total programme cost and contribution from different arms of Government amounting to UA28.56 million or 25%, while the beneficiaries would contribute UA 5.71 million or 5% of total programme cost (Table 4.3 a).

Table 4.3 (a): Sources of Finance (Programme) Source of Financing Naira (billion) UA (million) % of Total ADF 3.87 22.00 19

IDA 9.32 52.97 46

GEF 0.88 5.00 04

Government 5.02 28.56 25

Communities 1.00 5.71 05

TOTAL 20.09 114.24 100

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Table 4.3 (b): Sources of Finance (FDP) Naira '000 UA '000 Source of Financing Local Foreign Total Local Foreign Total % of Total

ADF 1,536,305.19 2,333,384.83 3,869,690.02 8,735.22 13,265.78 22,000.00 88

FGN 52,920.00 19,953.00 72,873.00 300.86 113.44 414.30 2

State Governments 361,305.00 756.00 362,061.00 2,054.09 4.30 2,058.39 8

Local Governments 75,600.00 0.00 75,600.00 429.80 0.00 429.80 2

Communities 37,800.00 0.00 37,800.00 214.90 0.00 214.90 1

TOTAL 2,063,930.19 2,354,093.83 4,418,024.02 11,733.87 13,383.52 25,117.39 100

4.9.2 The FDP will be financed with a loan from the ADF and contributions from the Federal Government, Governments of the participating States, and from project beneficiaries. As shown in Table 4.3 (b) ADF financing is estimated to be UA 22 million, representing 88% of total project cost. The ADF contribution will finance UA 13.27 million or 99% of foreign exchange costs and UA 8.73 million or 74% of local costs. ADF funding of local costs will include the cost of civil works, consultancy and NGO services for supporting beneficiaries’ sustainable income generating activities, for capacity building (including staff and beneficiary training and sensitisation). The contribution from the Government is estimated at UA 2.90 million or 12% of project costs. This contribution will cover staff salaries, part of travel expenses for the staff involved in project implementation, and operation and maintenance of vehicles and equipment as well as general operating costs of the project co-ordination office. Project beneficiaries will contribute labour for, among other things, infrastructure maintenance, and construction of produce storage facilities, land clearing and taking care of their crops. Beneficiaries’ contribution is estimated at UA0.22 million or 1% of total project cost.

Table 4.4: Summary of Project Financing by Category and Financier

FINANCIER UA'000 Project Category ADF FGN S. Govts LGovts Commties Total

1. Works 10,298.98 0.00 0.00 0.00 0.00 10,298.98

2. Goods 3,001.57 79.05 0.00 0.00 0.00 3,080.62

3. Services 6,457.51 0.00 0.00 0.00 0.00 6,457.51

4. Operating Cost 2,241.94 335.25 2,058.39 429.80 214.90 5,280.28

TOTAL PROJECT COST 22,000.00 414.30 2,058.39 429.80 214.90 25,117.39

4.9.3 The project funds will be disbursed by components following the Expenditure Schedule provided in Tables 4.5 and 4.6 below.

Table 4.5: Summary Expenditure Schedule by Component UA '000

Component 2004 2005 2006 2007 2008 2009 TOTAL

1. Capacity Building and Adv. Servs 2,426.18 2,739.05 2,762.92 2,629.79 1,287.27 1,072.85 12,918.06

2. Infrastructure Development 1,345.55 3,656.77 4,370.96 1,140.14 118.20 10.75 10,642.37

3. Project Coordination 314.47 254.78 254.78 299.78 223.74 209.41 1,556.96

Total cost 4,086.20 6,650.60 7,388.66 4,069.71 1,629.21 1,293.01 25,117.39

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Table 4.6: Summary Expenditure Schedule by Source of Financing

UA '000 Source of Finance 2004 2005 2006 2007 2008 2009 TOTAL

ADF 3,600.83 6,107.97 6,899.77 3,554.46 1,032.86 804.11 22,000.00FGN 108.58 55.87 55.88 82.23 55.87 55.87 414.30State Governments 305.16 350.65 350.63 350.65 350.65 350.65 2,058.39Local Governments 71.63 71.63 71.65 71.63 71.63 71.63 429.80Communities 0.00 64.47 10.73 10.75 118.20 10.75 214.90TOTAL 4,086.20 6,650.60 7,388.66 4,069.71 1,629.21 1,293.01 25,117.39

5. PROJECT IMPLEMENTATION 5.1 Executing Agency Fadama II will be implemented by existing institutions with the Federal Ministry of Agriculture and Rural Development (FMARD) serving as the Executing Agency and having the overall responsibility for seeing to the implementation of the project. The Project Coordination Unit (PCU) of FMARD would be responsible for the overall coordination of project activities in all the 18 participating states (see paragraph 3.9.2). As explained in paragraph 3.9.2 PCU has performed well in monitoring the implementation of Fadama I and numerous other projects in the agriculture sector. With the capacity strengthening contemplated under the project (see paragraph 4.5.18) and the measures outlined below for strengthening both the Federal and State organs, these agencies would be able to adequately perform their respective responsibilities under this project. 5.2 Institutional Arrangements 5.2.1 To facilitate the performance of its functions, the PCU will be strengthened by the setting up of a National Fadama Development Office (NFDO) at the PCU (paragraph 4.5.31) with IDA financing. NFDO would be made up of: i) the National Project Coordinator (NPC), ii) Monitoring and Evaluation (M&E) Specialist, iii) Procurement Specialist, iv) Project Accountant, and v) Community Development Specialist. NFDO will provide administrative and quality control of the project at the national level especially as regards procurement, disbursement, project accounting and progress reporting (consolidating periodic progress reports, annual operating plans and the like), establishment of a management information system, project supervision, monitoring and evaluation, and project audits. As the NFDO staff would be responsible for coordinating the activities of both the ADF and IDA supported projects, funds would be budgeted under FDP for NFDO activities relating to monitoring the implementation of FDP. I addition, FDP will provide funds for the training of NFDO staff on ADF procedures and practices. An M&E officer and a second accountant, to be funded by the ADF, would be attached to the NFDO and charged with responsibility for monitoring the implementation of the project and keeping watch over project accounts in the ADF funded states. 5.2.2 The responsibility for the day-to-day implementation of project activities in each participating state would lie with the respective Agricultural Development Project (ADP) under the State Ministry of Agriculture and Rural Development (SMARD). A State Fadama Development Team (SFDT) would be

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created within the ADP. The SFDT will be an autonomous unit responsible for the general coordination of the technical and financial aspects of the project. SFDT will comprise: i) the State Project Coordinator, ii) a specialist in Community Development with experience in gender issues, iii) an Infrastructure expert with proven procurement experience, iv) an Advisory Services officer, v) an Environmental expert, vi) a Monitoring and Evaluation specialist, and vii) a Financial Management officer. The SMARD will appoint the State Project Coordinator with qualifications and experience acceptable to the Fund. The functions of SFDT include preparation of project annual work plans and budgets for submission to the SFDC and NFDO, promote and disseminate the project in all its dimensions to all fadama areas, provide technical assistance for training of trainers in participatory planning and in LDP preparation, process approved community sub-projects and transfer the requisite resources to FCAs, ensure environmental compliance of sub-projects, prepare and submit project accounts and contract on competitive basis independent auditors to carry out annual audit of the accounts, carry out or contract project performance and impact assessments. At the level of local governments, project activities would be monitored by the Local Government Fadama Development Team (LGFDT), made up of three civil servants of the Local Government, i.e. an appointee of the Local Government Planning, Monitoring and Evaluation Unit; the Local Government Community Development Officer; and one Agricultural Extension Officer selected competitively from among the LGFDT Agricultural Extension Officers assigned to the local government area by the ADP. The Desk would be responsible for compiling LDPs received from the FCAs before conveying them to the LFDC for consideration and approval. 5.2.3 To ensure sustainability, existing institutions will, to the extent possible, be used for the oversight of project activities (see Organogramme at Annex 6). At the Federal level the Federal Agricultural Development Project Committee (FADPEC), which is responsible for reviewing and approving agricultural programmes and budgets and for providing guidelines to all donor assisted projects, would serve as the project’s Steering Committee. FADPEC is chaired by the Minister, FMARD with the Permanent Secretary, and FMARD as Alternate Chairman. For purposes of FDP the other members of the Committee would be: the Heads of eight of the most directly concerned technical departments and specialised agencies; representative of the FMARD legal unit; Head of the PCU who will serve as the Committee Secretary; the State Commissioners of Agriculture of the participating states; two representatives of the private sector (one representing producers and one representing traders); and two representatives of women fadama users (one representing women producers and the other representing women down stream operators). This would be the principal policy making body for the project. The Committee would meet half yearly. To facilitate the work of FADPEC, the FMARD will establish the National Fadama Technical Committee as a sub-committee of the FADPEC to be chaired by the PCU and would serve as the technical advisory body for the NFDO. Other members would be heads of the relevant departments of FMARD, Federal Ministry of Environment (FMenv) and Federal Ministry of Water Resources, and co-ordinators of relevant Government and donor projects, e.g. Special Programme for Food Security, Community Based Agriculture and Rural Development Project. The NFTC would meet quarterly or on demand. The Project Coordinator will serve as the Committee Secretary.

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5.2.4 At the level of states, the existing Agricultural Development Project Executive Committee (ADPEC) will be responsible for: i) providing policy directions, ii) approval of project work plans and budgets, iii) approving contracts of over four million Naira (contracts of less amounts would be approved by the State Project Coordinator). The Committee membership would be: State Governor (Chairperson); State Commissioner for Agriculture (Alternate Chairperson); State Commissioners for works, finance, and justice; and the Secretary to the State Government; CEO of the State Rural Development Authority; Chairperson of the State Farmers’ Organisation; Representative of Fadama Women Groups; Permanent Secretary to the State ministry responsible for agriculture; State Directors responsible for Agriculture, Natural Resources, Rural Development, and Environment; two representatives of participating Local Governments rotated annually; the State Fadama Project Coordinator; the Regional Head of PCU; and the ADP Programme Manager who would serve as Committee Secretary. The ADPEC would meet quarterly. Also at the state level a State Fadama Development Committee (SFDC) would be set up to be responsible for reviewing and approving sub-project and specific investment proposals, review SFDT Annual Work Plans and budgets, review and approve annual physical and financial plans and implementation reports, ensure sub-sectoral linkages to avoid overlaps and duplications. Membership of the Committee would be appointed from the following: Permanent Secretary, State Ministry of Agriculture (Chairperson), State Fadama Project Coordinator (Secretary), State heads of environment, water resources and the state directors of technical departments of the State ministries of agriculture, natural resources and rural development, Field Projects Monitoring Office of FMARD, representatives of civil society, and of the private sector. Membership not to exceed 12 and public sector representation should not be more than 50%. The Committee would meet quarterly. 5.2.5 At the level of the local government, Local Government Fadama Development Committees would be set up with responsibility for: i) reviewing and recommending sub-projects proposed by communities for financing, ii) harmonising the sub-projects/proposals within the local government area plans to avoid duplication and ensure that Fadama users’ priorities are fully reflected in the LDPs, iii) to ensure synergy and judicious use of project resources, and iv) monitor community mobilisation efforts. The Committee membership would include, Chairperson of Local Government Council (Chairperson), a chosen Traditional or Community Leader (Alternate Chairperson), Head of the Local Government Fadama Development Team (Secretary), LG Head of Agriculture, Secretary to the Local Government, Supervisory Councillors for Agriculture, for works, a traditional leader, Chairperson of farmers’ groups, Chairperson of relevant community based organisations, Representative of Fadama Women Groups, and the Zonal ADP Manager. The Committee would meet quarterly or more frequently as required. 5.3 Supervision and Implementation Schedule 5.3.1 Supervision by the Borrower: The PCU/NFDO will be responsible for ensuring the regular monitoring of all project activities, including those contracted to various service providers (private or public), contractors, consultants, private entrepreneurs, and NGOs. It will report to the FADPEC on half-yearly basis on all aspects of project implementation and management. PCU/NFDO will contract independent institutions to collect and analyse project implementation data in collaboration with SFDTs. At the levels of states, the overall responsibility for the day-to-day supervision of project activities will

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lie with the SFDT. This including works undertaken by the various FRUGs, FCAs, private and public service providers, and various contractors for works and studies/reviews. They will report on the financial and technical progress of project activities on a quarterly basis. SFDTs will prepare work plans and budgets based on consolidated LDPs submitted by the LGFDTs. They will submit these plans to the ADPEC on quarterly basis. Annual work plan and budget shall be submitted three months before the beginning of each year to ADF for review and approval. The ADPEC would, at their quarterly meetings, review project progress and approve annual work plans and budgets. The outputs from these analyses will be incorporated in the quarterly and annual progress reports that will be prepared by the SFDTs; following ADB formats, and submitted to the NFDO for scrutiny and approval before they are forwarded to the ADF.

5.3.2 Supervision by the Co-financiers: ADF supervision missions will be undertaken at least four times a year, twice each by ADB Headquarters staff and NGCO professional staff. To the extent possible, ADF and WB supervision missions would be synchronised and the two co-financiers would undertake, at least once a year, joint supervision. This would facilitate exchanges of experience between the donors and with the other stakeholders on achievements of various project activities, problems, constraints, and review of any changes that may be necessary to ensure better performance.

5.3.3 Implementation Schedule: The project will be implemented over a period of six years. In year one, project activities will involve the establishment of the NFDO at the Federal level, the SFDTs at the State levels; and the Local Government Fadama Development Teams at the Local Government Area level. The staff of the NFDO will be trained in project management, procurement procedures and monitoring and evaluation. SFDT and LGFDTs will be trained in the CDD process. During PY1, most of the mobilisation and sensitisation of government and community leaders and the participating communities would be carried out through the media, extension service campaigns and specific workshops. Facilitators will be contracted by the SFDT to assist beneficiaries in the establishment of Fadama Resource User Groups and such other interest groups as income generating, savings and credit scheme groups. A baseline survey will also be contracted and undertaken during this initial year of project implementation. The regular preparation of project quarterly progress and annual implementation and of financial audit reports and their submission to the Bank would begin from the outset and continue through out project implementation.

5.3.4 From year two, various FRUGs and individual fadama resource users would, with support from appropriate service providers would, be engaged in preparation of proposals for production and other income generating investments for financing from existing financial institutions. At the same time construction and rehabilitation of small-scale community infrastructure works and the provision of advisory services to various categories of project beneficiaries and clients would begin in earnest. Supervision and monitoring activities combined with stakeholders’ project implementation consultations would also begin in PY2. To facilitate monitoring reporting, autonomous agencies would be contracted to undertake periodic collection and analyses of implementation progress data the output of which would be incorporated in the quarterly and annual reports to be submitted to the Bank. Likewise, the Mid-term review planned for year 3 would be preceded by an in-depth independent review of the project implementation progress. Towards the end of project implementation (PY6) the Federal Government (PCU/NFDO) would prepare and submit to the Fund, a Project Completion Report on

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the basis of which the Fund would prepare its own PCR. A detailed Implementation schedule is provided in Annex 2. 5.4 Procurement Arrangements 5.4.1 All procurement of goods, works, and acquisition of consulting services financed by the ADF will be in accordance with the Bank’s Rules of Procedure for Procurement of Goods and Works or, as appropriate, Rules of Procedure for the Use of Consultants, using the relevant Bank Standard Bidding Documents. Procurement arrangements are summarized in Table 5.1 below.

Table 5.1: Summary of Procurement Arrangements

UA ‘000 Project Categories

ICB NCB SL Other TOTAL

1. Civil Works

1.1 Water supply/control points 4,115.10(4,115.10) 4,115.10(4,115.10)

1.2 Access Roads 5,316.80(5,316.80) 5,316.80(5,316.80)

1.3 Post harvest Centers 419.12(419.12) 419.12(419.12)

1.4 Stock routes/Grazing/Resting Points 445.90(445.90) 445.90(445.90)

2. Goods

2.1 Equipment

Office 1,767.11(1,767.11) 1,767.11(1,767.11)

Aquifer Recharge Monitoring 128.49(128.49) 128.49(128.49

2.2 Motorcycles 948.63(948.63) 948.63(948.63)

2.3 Vehicles 236.39(157.34) 236.39(157.34)

3. Services

3.1 Advisory Services 2,142.36(2,142.36) 2,142.36(2,142.36)

3.2 Training 2,852.81(2,852.81) 2,852.81(2,852.81)

3.3 Health Campaigns HIV/AIDS &Malaria 210.81(210.81) 210.81(210.81)

3.4 Annual Audit/Mid-Term Rev. 167.15(167.15) 167.15(167.15

3.5 Monitoring Services 734.24(734.24) 734.24(734.24)

3.6 Surveys/Studies 352.20(352.20) 352.20(352.20)

4. Operating Cost

4.1 Motor Vehicle & Equipment 615.20(400.30) 615.20(400.30)

4.2 Travel and Subsistence 1,101.73(1,101.73) 1,101.73(1,101.73)

4.3 Staff costs 2,082.03(0.00) 2,082.03(0.00)

4.4 Office Rent 741.41(0.00) 741.41(0.00)

4.5 Miscellaneous 739.92(739.92) 739.92(739.92)

TOTAL 25,117.39(22,000)

Figures in parenthesis represent ADF funding. 5.4.2 Works: Civil works will include: spot improvements of access roads, rehabilitation of communal post harvest collection points, rehabilitation of stock routes and resting points for livestock. Other civil works will include water points constructed for human and livestock use and aquifer recharge

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monitoring. The construction of portable water supply and water control points valued in total at UA 4.12 million (about UA 0.69 million per participating state) will be carried out under National Competitive Bidding (NCB) procedures. The UA0.69 million will be divided on average into 20 contracts to cover the 20 Local Governments per state. Likewise, spot improvements of access roads valued at UA5.32 million (about UA 0.89 million per participating state) will be procured through NCB. NCB is appropriate for these contracts because they are numerous, small, geographically scattered and will be demand driven depending on the communities’ needs. These contracts are unlikely to attract bids from outside the participating countries of the project, and, in Nigeria, there are local contractors sufficiently qualified and in numbers sufficient to ensure competitive bidding.

5.4.3 The construction of post harvest collection and storage points valued at UA0.42 million (or about UA 0.07 million per participating state); as well as the beaconing, gazetting of stoke routes and construction of livestock resting points valued at UA0.45 million (about UA0.075 million per participating state), respectively will be procured through Local Shopping (using the Bank Guidelines for Procurement under Community-Based Investment Projects). These works are geographically scattered in states and are small in size, therefore cannot attract external contactors. To enhance ownership and community participation, the communities will be involved in the construction by contributing 10% of the total cost. They will also be charged with the maintenance of these works. During project implementation, the communities will be trained in order to enable them fully participate in the procurement process. 5.4.4 Goods: Procurement of vehicles valued at UA0.24 million (or about UA0.04 million per participating state) and motorcycles UA0.95 million (about UA0.16 million per participating state), will be through International Competitive Bidding (ICB). One contract comprising of two lots one for vehicles and another for motorcycles shall be awarded). Office and aquifer recharge monitoring equipment valued at UA1.77 million and UA0.13 million respectively will be procured through National Shopping. For office equipment, seven contracts (two lots each) of about UA0.25 million will be awarded. This method of procurement is considered appropriate because the value per contract is relatively small. Also, the items are readily available, off-the-shelf goods or standard specification commodities, and there are adequate numbers of national suppliers and agents of qualified foreign suppliers in the country to ensure competitive prices. 5.4.5 Consulting Services and Training: Using the shortlist mode of procurement, service providers will be recruited to train about 480 Local Government Fadama Desk Team members who will serve as facilitators for the CDD process. Training of these team members, FCAs and FRUGs is valued at UA2.85 million (about UA0.47 million per participating state). The service providers to be contracted will be experienced in or have the capacity to mobilise resource persons with specialised knowledge in such topics as techniques for community driven development, gender issues, participatory rural appraisals and planning techniques, conflict mitigation and management, assessment of training needs, among others. 5.4.6 Annual audits of the project accounts and mid-term and final project reviews valued at a total amount of UA0.17 (about UA0.03 million per state) will all be acquired through short-listing of

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consulting firms. The short-listing mode of procurement shall be done in accordance with the Bank’s Rules of Procedure for the Use of Consultants services where the selection procedure will be based on the technical quality with price consideration. Likewise, the services for conducting campaigns against AIDS/HIV and Malaria and monitoring of the rural infrastructure valued at UA 0.21 million and UA0.73 million respectively shall be acquired through a shortlist of firms/NGOs. Where Federal Government institutions provide the services, they will be paid the incremental cost pertaining to the provision of the service and not the full cost. The conducting of baseline surveys, impact studies and the inter-state tax study valued at UA0.35 million (or UA0.21 million, UA0.03 million and UA0.11 million respectively), will be contracted through a shortlist of firms. 5.4.7 Advisory services valued at UA2.14 million (about UA0.35 million per participating state will be procured through Shortlist. The ADPs will be directly contracted to provide the services relating to agricultural production and irrigation in which they have a comparative advantage while other services like enterprise development, marketing and credit access will be acquired from private organizations and NGOs through the shortlist mode of procurement. Where the ADPs will be contracted to provide a service, they will be paid for the incremental cost accruing from the provision of that service while private organizations will be paid the full cost. 5.4.8 Operating Cost: Operating and maintenance services, including the expenses relating to the running of the project offices, running and maintenance of vehicles and equipment, and travel expenses for staff on project monitoring, as well as travel expenses, valued at UA2.24 million (about UA0.37 million per participating state) will be procured through existing Government procedures acceptable to ADF. 5.4.9 National Procedures and Regulations: Nigeria’s national procurement laws and regulations have been reviewed and determined to be acceptable. 5.4.10 The Executing Agency: The PCU will be responsible for the procurement of goods, works, consulting services and training services. It will prepare and process all the procurement documents. Their resources, capacity, expertise and experience are adequate to carry out the above procurement. Consequently, there is staff that is adequately experienced in preparing procurement documents, processing them and in handling procurement issues and are familiar with ADF Rules of Procedure for the Procurement of Goods, Works and Services. The recruitment of the additional project staff, in particular the Accountant, will place emphasis on some one with experience in handling ADF financial matters, including procurement and disbursement issues. In view of the large number of contracts involved in this project, especially at the Local Government and community levels, the services of the two procurement officers recruited at the NGCO would be used to provide additional support for this project. In the course of project implementation, this experience would be strengthened with periodic training provided by the Bank. 5.4.11 General procurement Notice: The text of a General Procurement Notice (GPN) will be prepared by the Government and reviewed during loan negotiations and will be issued for publication in the Development Business, upon Board approval of the Loan Proposal.

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5.4.12 Review Procedures: The following documents are subject to review and approval by the ADF before promulgation: a) Special Procurement Notice; b) Tender Documents and Requests for proposals for consultants; c) Tender Evaluation Reports or Reports on Evaluation of Consultants’ proposals, including recommendations for contract award; d) Draft contracts if these have been amended from the draft included in the tender documents. 5.5 Disbursement Arrangements 5.5.1 The Federal Ministry of Finance (FMOF) of the Government of Nigeria will sign the loan agreement with the Bank Group. It will also sign subsidiary loan agreements with the participating States. This will be a loan condition precedent to first disbursement. 5.5.2 The Special Account and the Direct Payment methods will be used. The NFDO of the PCU will open and maintain an interest bearing Special Account in foreign currency and one Local Currency Account at the CBN. This will be a loan condition precedent to first disbursement. The Special Account will be used to deposit the loan resources while the Local Currency Account will receive the contributions from the Federal Government of Nigeria. The ADF will replenish the Special Account after the PCU/NFDO has provided sufficient justification for the use of at least 50% of the previous deposit. The opening of the Special and the Local Currency Accounts will be a condition precedent to first disbursement. 5.5.3 At State level two local currency accounts will be opened at a bank acceptable to the Fund. The first account will receive ADF loan proceeds transferred from the Special Account based on the approved annual work plan and budget for respective states. The second account will receive State Government counterpart funding delivered bi-annually in advance to meet the respective Government’s share of the project’s cost. The opening of the local accounts by the SFDTs will be a loan condition precedent to first disbursement. 5.5.4 The initial request for disbursement of ADF funds into the project Special Account, covering a period of four to six months, would be submitted to the Bank for approval. This request would be based on the annual work programme and budget approved by the Fund and the amount would not exceed a quarter of the resources allocated for this disbursement method. Subsequent disbursements would be subject to adequate justification of the utilisation of the preceding disbursement. Other project disbursements would follow the procedures agreed during loan negotiations. Government contribution to the project costs would be deposited in the respective Accounts on a quarterly basis. This will be a condition of the loan. 5.5.5 Disbursements to FCAs for specific community development works will be made twice a year following the approval by the Fund of annual work plans and budgets. There will be annual external audits to provide information against which decisions to continue or suspend disbursement to particular FCAs will be based.

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5.6 Monitoring and Evaluation 5.6.1 Monitoring and Evaluation (M&E) will form an integral part of management tools to effectively assess progress of project activities, identify critical implementation constraints, and assess project impact and to evaluate new opportunities. Monitoring and Evaluation activities will include a) continuous monitoring against criteria and benchmarks that will be established by a base line survey to be undertaken at the start of project implementation; b) mid-term evaluation to be conducted during the third year of project implementation preceded by an in-depth assessment of implementation progress by an independent consultant; and c) project completion report to be prepared during the last year of project implementation.

5.6.2 Continuous Monitoring: SFDTs will have the overall responsibility for ensuring the continuous monitoring of and reporting on project activities in each state. Each SFDT will carry out with support from the PCU the necessary baseline surveys, which will serve as a benchmark for mid-term review and impact assessment at project completion. Staff of the State and Local Government Fadama Development Teams will be trained in M&E after which they will engage in gender disaggregated data collection and analysis. They will prepare reports on a monthly basis, which will be submitted the NFDO. These reports will be synthesised and consolidated before submitting them to the ADF and the Federal Ministry of Finance. They will be submitted not later than three months after the end of the reporting period. On a biannual basis, SFDT would prepare a project impact assessment comparing project performance with baseline data. These reports would also be submitted to the NFDO for compilation and submission to the Fund.

5.6.3 The NFDO will conduct its own monitoring and evaluation visits and report regularly to FADPEC and the Fund on the implementation progress of various project activities. The NFDO will collaborate with the National Action Committee on AIDS (NACA), the multi-sector body responsible for co-ordinating the response to the epidemic, to monitor and report regularly on the impact of the project on AIDS and related issues. The NFDO will collaborate also with the Federal Environment Protection Agency to report on environmental issues in the project area.

5.6.4 Mid-term review: At the end of the third year of project implementation, a joint Mid-term Review will be carried out by the co-financiers of the project (FGN, ADB and WB) to assess: i) compliance with project loan conditions, ii) completion progress relative to planned targets, and iii) performance of participating states and local governments. This review will form the basis for review of the project in terms of size and design to facilitate improved performance during the remaining implementation period. To facilitate this review, NFDO will contract consultants to prepare, using in part the outputs of the monitoring data and analyses mentioned above, a detailed progress report analysing all implementation issues and results, including agreed performance indicators, since project effectiveness.

5.6.5 Project Completion Report: Within three months before the end of the project implementation period, the PCU/NFDO will prepare, following ADB format, the Borrower’s Project Completion Report and submit it to the Bank. This report will form the basis of the Bank’s version of the Project Completion Report entailing verification of the information in the Borrower’s PCR, and recommendation

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of measures necessary to ensure sustainability of project benefits and draw lessons for future interventions. Both the Mid-term and Borrower’s Completion reports will be submitted for scrutiny and approval by the FADPEC before they are forwarded to the ADB.

5.7 Financial Reporting and Auditing

5.7.1 The Projects Coordinating Unit and the ADPs currently keep their accounts in accordance with the Generally Accepted Accounting Principals. The PCU has a fully computerized accounting system based on historical accounting which tracks transaction right from data entry to presentation of final accounts and financial reports. The system is capable of producing monthly, quarterly and annual financial reports on time. The system has inbuilt approval controls designed to ensure accountability. The system was found acceptable to the Fund, but, for the purpose of maintaining ADF activity related financial records and tracking of the ADF resources on regular and timely basis, the Project will finance the recruitment of a senior accountant (see para 5.2.1) to strengthen performance of these tasks. The PCU and the ADPs will develop and submit annual work plans and operating budgets to the FADPEC and ADPEC respectively for approval.

5.7.2 PCU and the ADPs will be responsible for preparing and submitting quarterly financial reports to the ADF. An independent external auditor appointed through competitive bidding will audit the Project accounts, including project special accounts, annually. Annual audit reports and accompanying financial statements will be submitted no later than six months following the closure of each financial year of the project to the ADF. Regular supervision missions will verify the submitted audited accounts.

5.8 Aid Co-ordination

5.8.1 At the macro-level, donor co-ordination is carried out under the joint chairmanship of UNDP and the National Planning Commission. Generally external assistance to Nigeria is co-ordinated by the Ministry of Finance and the National Planning Commission with close collaboration of the Central Bank of Nigeria. All external borrowing is done by the Federal Government, which after contracting the loans or grants passes the funds to state governments for project implementation. The national constitution forbids states from contracting foreign loans. Donor co-ordination with agencies implementing specific projects is carried out between the concerned donor(s), the Federal and State line ministries concerned. In case of projects involving several states, several states would be involved in the co-ordination effort, and this often proves problematic as individual states have different budgetary priorities and project implementation moves at different speed in different states. State contributions by deduction at source is partly aimed at reducing this risk.

5.8.2 The Agriculture and Rural Development Consultative Group (ARDCG) has the role of reviewing progress of donor-assisted programmes in the context of poverty alleviation. The ARDCG meets once a year under the chairmanship of Minister, FMARD, with members from FMARD, Federal Ministry of Finance (FMF), donor agencies, and it is proposed that private sector interest should be involved.

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6. PROJECT SUSTAINABILITY AND RISKS 6.1 Recurrent Costs The total recurrent costs (Table 6.1) are estimated at UA5.28 million (about UA0.88 million per participating state). Of this amount the ADF will pay UA2.24 million (about UA0.44 million per participating state) while the Federal, State and Local Governments will pay UA3.04 million (about UA0.51 million per participating state). The ADF contribution will mostly be used to pay for the cost of project monitoring related travel and daily subsistence allowances and for the maintenance of equipment. The Government contribution will meet the cost of staff salaries, office rent and other recurrent expenditures. The operation and maintenance of the physical infrastructure such as the rural access roads (except for the periodic maintenance see para 4.5.18), stock routes, resting points and marketing and water supply infrastructures will be the responsibility of the communities. The recurrent costs will easily be met from the Government budget as most of these represent salaries and rent, which are already being paid by the local and state governments. Consequently, even after the end of the project financing phase the government should be able to meet the recurrent expenditure of project investments.

Table 6.1 Summary Project Recurrent Costs (UA ‘000)

Source of Finance 2004 2005 2006 2007 2008 2009 Total

ADF 525.00 442.00 424.00 388.00 244.00 218.00 2,241.00

Counterpart 320.00 445.00 494.00 525.00 608.00 647.00 3,039.00

Total 845.00 887.00 918.00 913.00 852.00 865.00 5,280.00

6.2 Project Sustainability 6.2.1 The proposed project has been designed in a participatory and consultative manner. Actual and potential resource users have participated in the consultative process undertaken by the Bank Group, the World Bank and Government Officials at various stages of the preparation process. The design is such that advisory services, to be financed by the Bank, will emanate from participatory assessments and planning workshops at beneficiary level. The project will encourage this service provision requested by the resource user groups to be undertaken by the private sector and will finance the necessary training to make this possible. As far as production is concerned, the technologies proposed are well accepted and will be complemented with investments in downstream processing and marketing. The construction and rehabilitation of rural infrastructure works such as roads, market centres and storage facilities will ensure that the communities concerned will improve their incomes and be enabled to meet maintenance cost of their investments beyond project financing. The project will train communities on how to maintain these works and provide simple equipment for recurrent maintenance. The periodic maintenance of rural roads however, will be ensured by the Local Governments with the assistance of the Roads Maintenance Agency.

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6.2.2 Project preparation and appraisal involved extensive field visits to consult with potential beneficiaries, local government and traditional leaders. The design of the project was spear headed by national experts from the relevant federal and state ministries/agencies in close consultation with members of the international donor community and members of the fadama resource user groups. During the appraisal, the ADB team visited institutions expected to be involved in project activities, including commercial banks and the Central Bank of Nigeria. This process has helped ensure that the concerns, views and experiences of all stakeholders have been taken into account. The project will ensure that all project beneficiaries would be involved in decision-making by providing the necessary capacity building in group dynamics and participatory planning and development by strengthening the capacity of the FRUGs.

6.3 Critical Risks and Mitigating Measures

6.3.1 For the most part, underground water in the fadama areas is close to the surface. The development of irrigation based on the use of ground water, however, entails some risk of over-exploitation and early depletion of the aquiver. This in turn would lead to land subsidence and encrustation of the soil. To mitigate these risks, the project would finance the construction, equipping and maintenance of wells for monitoring the water level and water balance. These would be checked regularly and measures would be taken to limit water extraction and ensuring aquifer recharge. Furthermore, water extraction points would be spaced sufficiently far apart to minimise the risk of over exploitation. While these measures would provide a reasonable level of assurance against long-term damage to the water resources thus ensuring sustainability, one cannot rule out or adequately control the risk of drought that cannot be predicted with certainty.

6.3.2 The project design has incorporated measures to ensure collective and harmonious planning and implementation of activities of interest to the various fadama resource users thereby forestalling conflicts between different resource users. Thus, for instance, to avoid conflicts between crop and livestock farmers the Project will finance, on pilot basis, the surveying, demarcation, and gazetting of some stock routes; development of grazing reserves and provision of grazing corridors and livestock watering points along stock routes. While these measures may reasonably attenuate risks of conflicts between local crop and livestock farmers, the risk would remain in respect of relations with transhumance pastoralists from neighbouring countries who would not have been party to the consultative process engaged in the project design. The project is also investing in fisheries development and encouraging apiculture and agro-forestry development and the respective resource users would be party to the consultative process of decision making during project implementation. However, some of the actors are migrants from other countries, states and communities who would not be party to the consultations.

6.3.3 Fadama development especially through surface irrigation may deprive downstream communities of their water rights. To militate against this risk, the project will ensure regular monitoring of the water levels and on the basis of the findings determine the level of water extraction upstream and/or when to make releases of compensatory flows. Government has notified also all riparian states of the outcome of the Environmental/social Impact Assessment. All the countries have responded giving their no-objection.

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6.3.4 This project is designed to work under a decentralised system of government, with the bulk of responsibility given to the beneficiary communities, local and state governments. This is a new approach for Nigeria. There is therefore the risk attached to whether the system is going to work. It is expected that the close monitoring and proposed framework of regular consultations between the various levels of government and the financing agencies will notice any problems and address any concerns before they dislodge the project. 6.3.5 The privatisation of functions hitherto handled by government agencies and personnel pose a challenge as the success will depend on the very public civil servants who stand to loose from the change. The project seeks to support capable civil servants, especially field staff, into becoming service providers in their own rights. This is expected to be an incentive for them to support success of the project’s drive. 6.3.6 The movement of produce along Nigerian roads and especially across Local Government and State boundaries is impeded by numerous barriers, official and unofficial road tolls and taxes. Apart from disrupting the smooth movement of project outputs to markets, the tolls and taxes raise the cost of trading in project outputs thus risking jeopardising project returns and long-term sustainability of project benefits. There is the risk that Government may not succeed in removing a large proportion of these impediments thus making beneficiaries unable to maximise gains from project. In an effort to eliminate these impediments or minimise their adverse effects, the project will finance a study to catalogue these impediments and recommend strategies for their containment or elimination. 7. PROJECT BENEFITS 7.1 Financial Analysis 7.1.1 To estimate the benefits accruing to project beneficiaries from participating in the project two sets of farm models were drawn - one set for the northern states of Borno, Jigawa and Katsina and the other for the mid-belt states of Kogi, Plateau and Kwara. The models were based on a typical mixed crop smallholder farming system. The models assume that a typical farmer would operate in a one ha plot during the rainy season and half a ha plot of fadama land during the dry season, making a total of 1.5 ha per annum. For the northern states, three crop mixes of tomatoes, eggplants, pepper, rice and okra were tried in the fadama. The net returns ranged from Naira 47,790 to Naira 119,460 for the half ha of fadama land. Three rain-fed crop mixes of maize, sorghum, millet, cassava and cowpeas were also tried, yielding net returns of between Naira 28,095 and Naira 32,000 per ha. For the mid-belt states three sets of fadama crop mixes of Irish potatoes, cabbage, carrots, onions, and tomatoes yielded net returns ranging from Naira 55,950 to Naira 150,250 per half ha fadama plots. Three rain-fed crop mixes of maize, rice, cassava, cowpeas and groundnuts tried yielded net returns of between Naira 27,745 and Naira 78,575 per ha. A second variation of fadama crop mixes comprising pumpkins, pepper, amaranthus, onions and okra tried for the mid-belt states yielded net returns ranging from Naira 76,480 to Naira 159,590 per half ha. In both the northern and mid-belt states the crop mixes giving the highest net returns were retained for financial and economic analyses.

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7.1.2 It is assumed that non-participating farm families would also be growing some crops in the fadama during the dry season but their output would be low, say about 25% of the realised by participating farmers. It is also expected that participating farmers because of improved farming practices learned through their exposure to better techniques from the advisory services under the project, would realise increased yields in their rain-fed crops. An increase of about 15% is assumed. In addition, as pointed out in para 4.7.3 participating farming families would earn 25% and 15% of their incomes from livestock and fisheries enterprises, respectively and 10% from other activities. On the basis of production models developed for these operations, the average participating family would realise incremental incomes of Naira 11,380 from livestock and Naira 1,560 per year from livestock and fisheries activities, respectively. 7.1.3 Adding up these income flows, the typical participating farmer in the northern states would at full development of the project be expected to realise incremental income of Naira 40,685 per ha while that in the mid-belt would realise Naira 38,287 per ha per year. Prices used to calculate outputs and inputs were obtained during project preparation in January 2003 and updated during project appraisal in July 2003. They are expressed in constant July 2003 Naira. The aggregate financial benefits from crop production and processing when computed against the investment costs for the proposed project activities generate a FIRR of 26%. Detailed description of farm models and tables for estimating financial returns to investment are provided in Volume II. 7.2 Economic Analysis

Economic analysis has been carried out to evaluate the project economic viability and its impact on the national economy by comparing the economic benefits with and without the project. The quantitative analysis based on direct costs and benefits using the models described in 7.1 above result in Economic Rate of Return of 28%. Detailed analysis of the models and tables for estimating the EIRR are provided in Volume II of the report. The principal assumptions made in this analysis are summarized below:

• A 25-year discount period; • The two farm models (one for fadama and one for rain-fed production) retained for use in the

final economic analysis were selected from 9 fadama models and 6 rain-fed models with varying crop mixes and areas per crop as summarised in section 7.1 and detailed in Volume II of the report.

• About 50% of the income of the 120,000 farming families participation in the project will accrue from engaging in arable farming activities, 25% from livestock production, 15% from fisheries activities and 10% from other activities, including agro-processing and marketing.

• The economic output prices are converted from international market prices, which are based on the World Bank commodity price projections, or actual border prices in the country adjusted by transportation and port charges. Products for which no international prices or border prices are available, the economic prices are assumed to be the same as financial prices. The economic prices of tradable inputs are converted from international market prices.

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7.3 Social Impact Analysis 7.3.1 The project will provide technical assistance and advisory services in the areas of enterprise development, financial sourcing and management to FRUGs and individual fadama resource users thereby helping them to increase the productivity of their current activities as well as initiate new on- and off-farm income generating activities. To facilitate this, a total of 522 ADP and Local Government field staff would be trained in CDD approaches and will in turn train an estimated 12,000 resource users in various skills. This would enhance beneficiaries' participation in decision making and in ensuring that their interests are well reflected in project investments thereby enhancing their gains from project investments. Inadequate economic infrastructure has hitherto undermined profitability of fadama enterprises hampering the supply of inputs and evacuation of output. It is estimated that post harvest losses are as high as 60% for vegetables and fruits and over 20% for cereals that in the absence of proper storage succumb to rats and other rodents. The success in these activities would ensure increased beneficiary returns.

7.3.2 The infrastructure support development component of the project seeks to address these problems. Some 180 km of rural roads would be constructed and 180 km rehabilitated. To facilitate maintenance of these roads, 600 sets of simple hand tools and equipment would be supplied to the beneficiary communities. The resulting improvement in communication would facilitate beneficiaries’ access to social and other services, reduce drudgery in transporting essentials such as fire wood and water and transporting goods to and from markets.

7.3.3 The project will construct a total of 750 inspection boreholes to facilitate control of the aquifer thereby ensuring sustainability of the supply and quality of water resources. It will also invest in improved social infrastructure, including wells for drinking water, construction of toilets, drainage and improved waste disposal systems at community markets, thereby improving health standards, reduction water-bone diseases and lower morbidity rates and improved labour productivity and improved benefits from beneficiaries’ economic activities. To these ends, a total of 300 bore holes and 120 tube wells would be constructed, and 12 springs and 6 infiltration galleries would be rehabilitated.

7.3.4 The all-inclusive participatory approach adopted under the project will minimise the characteristic intra-community conflicts between fadama resource users. To help attenuate the perennial conflicts between arable farmers and herdsmen, the project will install 12 livestock resting points each with complete with watering points, veterinary clinics, grazing grounds and supplementary feeding stores. It will also develop 18 grazing reserves with 10 related watering points. There will also be provisions for other users, including fishing communities, hunters and gatherers, groups engaged in produce processing and marketing. The net effect will be harmonious community relations and synergistic prosperity of all resource user groups. The project will be of particular benefits to women fadama resource users in that: i) through the capacity building, advisory services, and opportunity to participate on equal basis with men, the project will improve their level of organisation and hence augment their bargaining position in the typically rural male dominated communities; ii) improve the productivity and profitability of their enterprises, especially downstream fadama activities in which women dominate; iii) improve their awareness in respect of the prevention of HIV/AIDS, malaria and other epidemics.

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7.3.5 The project intervention will lead to increased crop yields by up to 50%. All in all it is estimated that at full development the project would result in the following increases in annual output: 37,000 tons of tomatoes, 7,257 tons of okra, 6,066 tons of pumpkins, 7,280 tons of amaranthus, and 14,599 tons of onions. Annual output is also projected to increase for cereals including maize by 3,716 tons, sorghum and millet by 207 tons each, cassava by 19,000 tons, cowpeas by 876 tonnes, paddy rice by 485 tonnes, and groundnuts by 324 tonnes. Overall returns per ha would more than treble from a without project of about Naira 51,000 to about Naira 160,000 in the mid-belt and from Naira 32,400 to about Naira 119,500 in the northern areas. Downstream activities of marketing, processing, and storage would provide additional value addition to participants’ incomes. It has been shown that prices of various fadama products differ by between by 20% to 95% between different zones in the country and by 23% to 100% between one harvest to the next. This implies that through a well-managed marketing strategy project beneficiaries could enhance their with-project incomes by over 50% above the fore going levels. The project will also improve security of tenure and provide opportunities, not hitherto available, for livestock keepers, fishermen and women, and other fadama entrepreneurs. In total, an estimated 120,000 families of fadama resource users would benefit from the project. 7.4 Sensitivity Analysis 7.4.1 Project revenues could fluctuate as a result of changes in input costs, output prices or yields of project outputs. Returns could also be affected by adverse weather conditions and conflicts between resource users, especially between crop farmers and pastorasts. Analysis comparing the sensitivity of the EIRR to changes in costs and revenues indicated that returns are more sensitive to changes in costs than to revenues. The sensitivity analysis results are summarised below:

Assumption EIRR i) At the assumed level of revenues and costs: 28% ii) Revenues decline by 10%: 21% iii) Costs increase by 10%: 24% iv) Revenue decline by 10% and costs increase by 10%: 16% v) Two years delay in implementation: 14%

7.4.2 The assumptions for both prices and output are conservative relative to prevailing market prices and potential yields. The expected uptake of downstream activities and success in ensuring cordial relationship between various fadama resource users will ensure stability of returns in an upward direction thus contributing to the long-term viability of the project.

8. CONCLUSIONS AND RECOMMENDATIONS

8.1 Conclusions

8.1.1 The analysis demonstrates that the successful implementation of this project would significantly improve the well being of participating fadama resource users on a sustainable basis. It has been shown that in the long-term participating fadama resource users would realise financial returns on their investment of up to 35%. This is more than twice the opportunity cost of the invested funds.

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8.1.2 The analysis has shown that participating farmers would realise increased incomes as a result of producing crops both during the rainy season and during the dry season in the fadama. Project interventions would also lead to increased productivity, both for the rain-fed and fadama production. As noted in section 4.6 at full development the project would result in the following increases in annual output: 37,000 tons of tomatoes, 7,257 tons of okra, 6,066 tons of pumpkins, 7,280 tons of amaranthus, and 14,599 tons of onions. Apart from these typical fadama crops grown mostly during the dry season, the project will also lead to increases in rain-fed agriculture (see para 4.6.3 for explanation). Output increases are projected to be: 3,716 tons of maize, 207 tons of sorghum, 207 tons of millet, 19,000 tons of cassava, 876 tonnes of cowpeas, 485 tonnes of paddy rice, and 324 tonnes of groundnuts. The analysis indicates that all in all returns per ha would more than treble from a without project (i.e. rain-fed and low level fadama production) of about Naira 51,000 to about Naira 160,000 in the mid-belt and from Naira 32,400 to about Naira 119,500 in the northern areas. At the same time downstream activities of marketing, processing, and storage would significantly add value to the output thus further enhancing participants’ incomes. Studies indicate that prices of various fadama products differ by between 20% and 95% (average 50%) between different zones in the country. They also differ by 23% to 100% (average 70%) between one harvest to the next. This implies that through a well managed marketing strategy project beneficiaries could enhance their with project incomes by over 50% above the fore going levels. 8.2 Recommendations and Conditions for Loan Approval It is recommended that a loan not exceeding UA 24 million from the ADF be granted to the Federal Government of Nigeria for the purpose of implementing the project as described in this report subject to the conditions specified in the loan Agreement. (A) Conditions Precedent to Entry into Force of the Loan Agreement The entry into force of the Loan Agreement shall be subject to the fulfilment by the Borrower of the provisions of Sections 5.01 of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank. (B) Conditions precedent to First Disbursement The obligations of the Fund to make first disbursement of the Loan and grant shall be subject to the entry into force of the Loan Agreement and the submission by the Borrower of evidence, acceptable to the Bank, that the following conditions have been fulfilled: The Borrower shall have submitted to the Fund evidentiary documentation to the satisfaction of the Fund attesting to the:

i) Signing of a Subsidiary Loan Agreement between the Federal Government and each of the participating states: Borno, Jigawa, Katsina, Kogi, Kwara and Plateau (para 5.5.1);

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ii) Opening of a Special Account in convertible currency at the Central Bank of Nigeria

(CBN) into which the proceeds of the loan will be deposited as required (para 5.5.2); iii) Opening of a local currency account in the CBN into which the Federal Ministry of Finance

would deposit, on a quarterly basis, the Federal contributions towards project costs (para 5.5.4);

iv) For each participating state opening of two local currency accounts at a bank acceptable to

the Fund. The first account is for depositing ADF loan funds transferred quarterly from the Special Account (see iii above) based on Fund approved annual work plans and budgets. The second account is for depositing on a biannual basis the respective State contributions to the project. This will be done by the Federal Ministry of Finance through deduction at source (para 5.5.3);

v) Designation of the Federal Agricultural Development Projects Executing Committee

(FADPEC) as the project Steering Committee and designating its members, i.e. i) Minister, FMARD as Chairperson; ii) Permanent Secretary, FMARD as Alternate Chairperson, iii) Director, PCU as Secretary. Members of the Committee will be all the eight directors of FMARD; the State Commissioners of Agriculture for the participating states; two representatives of the private sector (one representing producers and one representing traders); and two representatives of women fadama users (one representing women producers and the other representing women down stream operators) (para 5.2.3);

vi) For each of the participating States establish the ADPEC to oversee project implementation

and nominate its members comprising: i) State Governor as Chairperson; ii) State Commissioner for Agriculture as Alternate Chairperson; iii) State Fadama Project Coordinator as Secretary. Other members of the Committee are: iv) State Commissioners responsible for works, finance, and justice; iv) the Secretary to the State Government, v) CEO of the State Rural Development Authority; vi) Chairperson of the State Farmers’ Organisation; vii) a Representative of Fadama Women Groups; viii) Permanent Secretary to the State Ministry of Agriculture, ix) the State Directors responsible for Agriculture, Natural Resources, Rural Development, Environment; x) two representatives of participating Local Governments and xi) the Regional Head of PCU;

vii) For each participating Local Government establish a Local Fadama Development

Committee and designate its members comprising: i) the Chairperson of the Local Government Council as Committee Chairperson; ii) a chosen Community or Traditional leader as Alternate Chairperson; iii) Head of the Local Government Fadama Development Team as Committee Secretary. The other members of the Committee will be appointed from the following subject to the total number not exceeding 12: the Zonal ADP Manager, Head of the Department of Agriculture, Secretary to the Local Government, Councillor for Agriculture, Councillor for works, Traditional leaders, Chairpersons of farmers’ groups,

46

Chairpersons of relevant community based organisations, Representatives of Fadama Women Groups; and

viii) Signing of a Memorandum of Understanding between each participating state and each

participating Local Government Authority stipulating commitment by LGA and State Authorities to include the cost of periodic maintenance of the roads constructed or rehabilitated under the project in their budgeted programme of regular road maintenance. (para 4.5.14)

ix) Commitment of IDA to finance Fadama II.

(C). Undertakings The Government shall have submitted to the Fund a written undertaking to:

(i) continue the on-going policies to liberalise the economy in order to ensure the success of the project.

(ii) Include in the maintenance programme of the respective Local Governments the periodic maintenance of the access roads rehabilitated and constructed under this Project both during implementation and after completion of the Project (paragraph 4.5.15).

Annex 1 NIGERIA

FADAMA DEVELOPMENT PROJECT Project States

ADB Funded States: Borno, Jigawa, Katsina, Kogi, Kwara and Plateau. World Bank Funded States: Adamawa, Bauchi, the Federal Capital Territory (FCT), Gombe, Imo, Kaduna,

Kebbi, Lagos, Niger, Ogun, Oyo and Taraba

Annex 2

Tentative Implementation Schedule

Activity Beginning End Responsibility Board Approval Effectiveness of Loan Approval Launching Mission Contracting Participatory Planning Facilitators Training of Trainers for Participatory Planning

Aug 2003 Aug 2004

Dec 2003 April 2004 June 2004 Dec 2004 Dec 2004

ADF FGN ADF

PCU/NFDO PCU/NFDO

Capacity Building and Advisory Services Project Awareness Workshop for State Leaders Project Awareness Campaign for Potential Clients Training for communities in Participatory Planning Participatory identification of FRUGs Participatory Assessment of FRUGs’ development priorities Facilitation of Local Development Plans Contracting Health Awareness Facilitator Health Awareness Campaigns Contracting Credit & Saving Facilitators Training in Savings & Credit for LG/ADP staff Training in Savings and Credit Schemes for FRUG Contracting Enterprise Development Facilitator Training Enterprise Development & Management Skills Preparation of training materials Beneficiary Field Tours to other Fadama areas Market information System development and publicity Interstate, regional & international market opportunity study Resource Use Conflict Management Strategies Development Resource Use conflict avoidance Workshops Capacity Building in O&M infrastructure development

Sep 2004 Sep 2004 Oct 2004 Jan 2005 Jan 2005 Jun 2005 Jan 2005 Apr 2005 Jan 2005 Apr 2005 Jan 2006 Jan 2005 Apr 2005 July 2005 Jan 2005 Jan 2006 Jul 2006

Jan 2005 Aug 2005 Jan 2005

Dec 2004 Dec 2004 Dec 2004 Dec 2005 Dec 2005 Jun 2006 Mar 2005 Dec 2005 Mar 2005 Dec 2005 Dec 2009 Mar 2005 Dec 2005 Aug 2005 Dec 2009 Jun 2006 Dec 2006 July 2005 Dec 2009 Dec 2009

SFDT/Facilitators SFDT/Facilitators

Facilitator Facilitator Facilitator Facilitator

PCU/NFDO Facilitator

PCU/NFDO Facilitator ADP/LGC

PCU/NFDO Facilitator

NFDO/Facilitator NFDO/TA NFDO/TA

NFDO/Facilitator NFDO/TA

SFDT SFDT

Community Infrastructure Development Community Infrastructure Needs, Prioritisation & design EIA for Rural Road construction Construction of Feeder & Fadama roads O&M of Feeder and Fadama roads EIA for Hydrological structures Construction of hydrological structures O&M of Hydrological structures Marketing and Processing Activities O&M for Marketing/Processing Equipment

Jan 2005 Jan 2005 Jun 2005 Jul 2005 Jan 2005 Jan 2005 Jul 2005 Jul 2005 Jan 2005

Dec 2005

Mar 2005 Dec 2009 Dec 2009 Mar 2008 Dec 2005 Dec 2009 Dec 2009 Dec 2008

SFDT

SEPA/SFDT CBO/SFDT

CBO/LG ADP/TST

SEPA/SFDT CBO/LG

CBO/SFDT CBO/LG

Project Management and Coordination Baseline Study Report Preparation of detailed work plan for the Project Preparation bids Technical Assistant Recruitment of Technical Assistant Annual monitoring data collection & analyses Contract: Midterm Review Contract: Project completion report Contract: Annual Audit of project accounts Contract independent bi-annual project management audits

May 2004 Aug 2004 Jan 2005

April 2005 Jan 2005

July 2007 June 2009

Jan 2010 April 2005

Aug 2004 Dec 2004 Mar 2005 Jun 2005 Dec 2009 Sep 2007

Aug 2009 March 2010

April 2009

NFDO/PCU NFDO/PCU NFDO/PCU NFDO/PCU TA/NFDO TA/NFDO TA/NFDO TA/NFDO TA/NFDO

Annex 3

FADAMA DEVELOPMENT PROJECT PROVISIONAL LIST OF GOODS AND SERVICES

PROJECT CATEGORTY UA ‘000

1. Works

1.1. Water supply/Control points 4,115.10

1.2 Access Roads 5,316.80

1.3 Post Harvest Centres 419.12

1.4 Stock routes/Grazing/Resting Points 445.90

Sub-total 10,296.92

2. Goods

2.1. Equipment

Office Equipment 1,767.11

Aquifer Recharge Monitoring Equipment 128.49

2.2. Vehicles 157.34

2.3. Motor cycles 948.63

Sub-total 3,001.57

3. Services

3.1. Advisory Services 2,142.36

3.2. Training 2,852.81

3.3 Health Campaigns (AIDS/HIV and Malaria 210.80

3.4 Annual Audit/Midterm Review 167.15

3.4 Monitoring Services 734.24

3.5 Surveys/Studies 352.20

Sub-total 6,459.56

4. Operating Cost

4.1. Operations and Maintenance 400.30

4.2. Travel and Daily Subsistence 1,101.72

4.3. Staff costs 0.00

4.4. Office Rent 0.00

4.5. Other Recurrent Costs 739.92

Sub-total 2,241.94

TOTAL PROJECT COST 22,000.00

Annex 4 FADAMA DEVELOPMENT PROJECT

Summary of Economic Analysis

Discount Discounted

Rev/Ha. Invest Cost/Ha Net Flows Factor Cash Flows

Year NAIRA Cost NAIRA NAIRA 12% NAIRA

1 0.00 24,000.00 16,000.00 -40,000.00 1.00 -16,000.00

2 27,800.00 28,000.00 7,757.50 -7,957.50 0.89 -7,082.18

3 38,500.00 36,800.00 15,515.00 -13,815.00 0.80 -11,052.00

4 112,500.00 40,500.00 67,725.00 4,275.00 0.71 3,035.25

5 112,500.00 34,400.00 67,725.00 10,375.00 0.64 6,640.00

6 112,500.00 29,890.00 67,725.00 14,885.00 0.56 8,335.60

7 112,500.00 67,725.00 44,775.00 0.51 22,835.25

8 112,500.00 67,725.00 44,775.00 0.45 20,148.75

9 112,500.00 67,725.00 44,775.00 0.40 17,910.00

10 112,500.00 67,725.00 44,775.00 0.36 16,119.00

11 112,500.00 67,725.00 44,775.00 0.32 14,328.00

12 112,500.00 67,725.00 44,775.00 0.29 12,984.75

13 112,500.00 67,725.00 44,775.00 0.26 11,641.50

14 112,500.00 67,725.00 44,775.00 0.23 10,298.25

15 112,500.00 67,725.00 44,775.00 0.20 8,955.00

16 112,500.00 67,725.00 44,775.00 0.18 8,059.50

17 112,500.00 67,725.00 44,775.00 0.16 7,164.00

18 112,500.00 67,725.00 44,775.00 0.14 6,268.50

19 112,500.00 67,725.00 44,775.00 0.13 5,820.75

20 112,500.00 50,000.00 67,725.00 -5,225.00 0.12 -627.00

21 112,500.00 67,725.00 44,775.00 0.10 4,477.50

22 112,500.00 67,725.00 44,775.00 0.09 4,029.75

23 112,500.00 67,725.00 44,775.00 0.08 3,582.00

24 112,500.00 67,725.00 44,775.00 0.07 3,134.25

25 112,500.00 67,725.00 44,775.00 0.06 2,686.50

Net Present Value 126159

EIRR 28%

Annex 5 FADAMA DEVELOPMENT PROJECT

SUMMARY OF BANK GROUP OPERATIONS

Project/Study

Am

ount

A

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ved

(UA

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%

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Rem

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1 NACB Line of Credit I (ADB) 73.00 28/09/86 23/10/87 08/02/92 71.96 98.50 30/06/82 Completed 2. Forestry Development (ADB) 69.55 28/10/86 23/10/87 08/12/88 43.12 62.4 31/12/00 Completed 4. Sugar Expansion I (ADB) 1.42 2/03/71 24/03/72 1/12/88 1.42 100 31/12/00 Completed 5. Bacita Sugar Expansion II ADB) 67.48 21/11/89 21/10/90 05/03/91 60.28 89.3 31/12/03 On-going 6. Rivers State Rice Irrigation Study (TAF) 1.38 25/02/91 12/04/91 03/05/91 1.34 97.1 30/06/96 Completed 7. Middle Rima Study (TAF) 1.72 21/05/91 19/12/91 18/08/92 1.66. 87.0 31/12/00 Completed 8. Savannah Sugar Rehabilitation (ADB) 45.80 23/09/91 20/06/94 19/12/94 45.65 95.5 31/12/00 Completed (ADF) 6.45 23/09/91 11/04/92 19/12/92 6.40 99.2 31/07/97 Completed 9. Agro-Climat. & Ecol. Zones Study (TAF) 0.78 23/03/92 09/11/92 16/08/93 0.78 100.0 31/12/97 Completed 10.Institutional Strengthen to NACB (ADF) 4.61 21/04/92 10/09/92 03/10/93 3.08 66.8 31/12/95 Completed 11. NACB Line of Credit II (ADB) 100.0 18/12/90 07/11/91 08/12/88 99.82 99.82 30/06/95 Completed 12. Forestry Resources Study (ADF) 2.72 10/10/93 13/05/94 19/01/96 2.71 100.0 30/06/99 Completed 13. Akwa Ibom Agric. Study (ADF) 1.42 28/08/91 08/05/92 20/10/92 1.33 94.0 N/A Completed

Total Agriculture 376.51 339.55 90.2

INDUSTRY 1. NIDB Line of Credit (ADB) 80.00 23/03/89 30/05/89 29/09/89 69.64 87.1 31/09/99 Completed 2. NBCI Line of Credit (ADB) 40.00 23/09/86 05/04/87 22/09/87 40.00 100.0 31/12/94 Completed 3. NERFUND-SMEs (ADB) 100.00 29/01/91 07/11/91 26/09/92 100.00 100.0 31/12/95 Completed

Total Industry 220.00 209.64 95.3

TRANSPORT SECTOR 1. Enugu Airport Reconstruction (ADB) 3.40 26/01/72 24/03/72 31/12/72 3.40 100.0 30/09/78 Completed 2. Calabar Airport Reconstruction (ADB) 4.75 27/06/74 11/06/74 31/12/74 4.75 100.0 31/12/79 Completed

Total Transport 8.15 8.15 100.0

PUBLIC UTILITIES 1. Edo/Delta States Water Supply (TAF) 2.41 06/12/90 18/01/91 06/03/91 2.27 94.3 31/12/97 Completed (ADB) 78.74 06/12/90 18/01/91 06/03/91 78.74 100 31/12/95 2. Ibadan Emergen. Water Supply I (ADB) 26.00 23/12/86 04/05/87 28/10/87 15.82 76.0 30/16/96 Completed 3. Ibadan Water Supply II (ADB) 74.14 05/02/91 19/12/91 09/06/92 70.02 86.2 31/12/02 On-going (TAF) 3.21 05/02/91 19/12/91 09/06/92 3.17 96.1 31/12/02 4. Plateau State Water Supply (ADB) 90.17 05/02/91 19/12/91 07/03/92 89.12 98.0 31/12/02 Completed (ADF) 3.83 05/02/91 19/12/91 07/03/92 3.56 73.5 31/12/02 5. First Multi -State Water Supply (ADB) 119.10 02/10/92 29/06/94 11/01/95 80.3 70.10 31/12/03 On-going (ADF) 14.92 02/10/92 29/06/94 11/01/95 8.2 54.9 31/12/03 6. Anambra/Enugu States Infrastr.(ADB) 81.70 21/04/89 21/04/91 21/12/95 61.04 74.7 31/12/01 Closed 7. Bauchi State Water Supp. Project (ADB) 44.95 18/10/88 30/05/89 27/11/90 4.95 100 25/10/94 Completed 8. Niger State Water Supply (ADB) 61.69 17/04/90 27/11/90 14/03/91 61.68 100.0 31/12/97 Completed (TAF) 1.96 17/04/90 27/11/90 14/03/91 1.96 100.0 31/12/97

Total Public Utilities 602.82 480.83 79.7

Project/Study

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SOCIAL SECTOR 1. Bauchi State Health (ADF) 22.57 16/01/90 07/04/90 17/12/90 22.54 100.0 31/12/99 Completed 2. Kwara/Kogi/Niger Sta. He’th Proj. (ADF) 13.08 18/12/90 07/11/91 25/02/94 11.9 91.01 30/09/03 On-Going 3. Health Services Rehab. Project (ADF) 55.26 29/10/92 12/05/93 17/09/93 48.16 87.15 30/09/03 On-Going 4. Health Systems Development (ADF) 34.74 11/09/02 15/10/02 Not yet

Effective

Total Social Sector 125.65 77.94 62.03

MULTI -SECTOR 1.Export Stimulation Loan 180 26/06/87 30/05/8 27/08/8 180 100 N/A Completed 2 Community -based Poverty Red. Project 20 03/11/00 02/02/01 11/09/02 0.104 0.52 31/12/07 On-going 3. Instit. Sup’t for Cap. Build. & govern’ce 4 02/11/00 02/02/01 9/10/02 - 31/12/04 On-going

Total Multi-Sector 204 180 88.2

Total On-going Operations 332.54 66.2

Total Completed Operations 1204.46 98.6

Total Cumulative Portfolio less Cancelled Operations

1537.13 82.6

Cumulative Disbursements 1296.11

FADAMA DEVELOPMENT PROJECT ORGANISATION CHART

Annex 6

State Fadama Development

Committee (SFDC)

Federal Agricultural Development Program

National Fadama Technical Committee

(NFTC)

Federal Ministry of Agriculture & Rural Development

Projects Coordinating Unit (PCU)

National Fadama Development Team

Agricultural Development Program Executive Committee (ADPEC)

State Ministry of Agriculture & Rural Development

Agricultural Development Program (ADP)

State Fadama Development Team

Local Government Fadama Development Committee

(LGFDC)

Local Government

Local Government Fadama Development Team (LGFDT)

Fadama Community Associations (FCAs)

Fadama Resource User Groups

Facilitators

Service Providers

Federal

State

Local Government

Fadama Communities

OVERSIGHT IMPLEMENTATION

Annexe

CONFIDENTIAL

AFRICAN DEVELOPMENT FUND ADF/BD/WP/2003/156/Corr.11 December 2003Prepared by : OCAROriginal : English

Probable Date of Board Presentation :10 December 2003

FOR CONSIDERATION

MEMORANDUM

TO: THE BOARD OF DIRECTORS

FROM: Cheikh I. FALLSecretary General

SUBJECT: NIGERIA : PROPOSAL FOR AN ADF LOAN OF UA 22 MILLION TOFINANCE THE FADAMA DEVELOPMENT PROJECT

CORRIGENDUM*

Please find attached, a corrigendum relating to the Appraisal Report on theabove-mentioned project.

Attach.:

Cc : The President

*Questions on this document should be referred to :Mr. C. R. SPENCER Director OCAR Ext. 2036Mr. S. Z. MOUSSA Division Manager OCAR.2 Ext. 2143Mr. M. M. MSUYA Principal Agricultural Economist OCAR.2 Ext. 2584Mr. J. A. HELSEN Principal Agronomist OCAR.2 Ext. 2570Mr. M. BASALIRWA Senior Financial Analyst OCAR.2 Ext. 2701

SCCD : W.A. A.

NIGERIAFADAMA DEVELOPMETN PROPECT

CORRIGENDUM

1. Page 30, paragraph 5.2.4, first sentence should be reworded and broken down into twosentences to read as follows: “At the level of states, the existing AgriculturalDevelopment Project Executive Committee (ADPEC) will be responsible for: i)providing policy directions, ii) approval of project work plans and budgets, iii)approving contracts and expenditure of less than UA 20,000 (Naira 3.5 million).Expenditures of less that UA 3,000 (Naira 500,000) would be approved by the StateProject Coordinator.

2. Page 32, Table 5.1, the procurement for vehicles and motorcycles will now be byNational Competitive Bidding (NCB) because the number of vehicles is small and thereexist in Nigeria many reputable representatives of international manufacturers anddistributors of the desired vehicles and motorcycles. Consequently, the respectiveexpenditure figures should be moved to the NCB column. In addition, the foot note,“"Other includes: International and National Shopping, Force Account, DirectPurchase and Community Participation methods of procurement” should be addedbelow the table.

3. Page 44, Conditions precedent to First Disbursement:

a) Condition (B), i), will read as follows: “Signing of Subsidiary LoanAgreement between the Federal Government and at least two of the participatingStates: Borno, Jigawa, Katsina, Kogi, Kwara and Plateau. Those states that have notsigned loan agreements will not receive loans until they sign. This is becauseexperience has shown that different states satisfy conditions at varying speeds.Allowing disbursement to begin when at least two states have signed will avoid holdingup project implementation in states that satisfy conditions early.

b) In condition (B), iii), replace the term CBN with “a bank acceptable to theFund”.

c) Condition (B), v), should read as follows: “Designation of the FederalAgricultural Development Projects Executing Committee (FADPEC) as steeringcommittee …, … Members of the committee will be all the eight directors of FMARD;two State Commissioners of Agriculture from among the participating states; onerepresentative each from the Directorate of Lands, Federal Ministry of WaterResources; the Federal Ministry of Finance; and the Federal Ministry ofEnvironment”.

d) In condition (B), vi), should read as follows: “For each participating States …,(iii) State ADP Programme Manager/Managing Director as secretary. Othermembers of the Committee are: iv) State Commissioners responsible for works, andfinance, v) the Secretary of the State Government, ...”

e) In condition (B), ix), replace “Fadama II” with “Second National FadamaDevelopment Project”.