Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No.: 17980

IMPLEMENTATION COMPLETION REPORT

FEDERAL REPUBLIC OF NIGERIALAGOS STATE WATER SUPPLY PROJECT

(Loan 2985-UNI)

May 21, 1998

Water and Urban 2Africa Region ,

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit = Naira (N)

US$1 = 4.56 (1988)= 7.38 (1989)= 8.06 (1990)= W10.46 (1991)= 17.26 (1992)= 23.46 (1993)= 21.94 (1994)= 71.75 (1995)

81.49 (1996)= 82.20 (1997)

Fiscal YearJanuary to December

WEIGHTS AND MEASURES

I meter (m) - 3.28 feet (ft)1 cubic meter (m3) = 264.2 US gallons or 220

imperial gallons1 kilometer (kin) = 0.62 miles (mi)1 liter per capita = 0.26 US gallons per capita

ABBREVIATIONS AND ACRONYMS

CIDA Canadian International Development AgencyEIB European Investment BankLASG Lagos State GovernmentLSWC Lagos State Water CorporationMLD million liters per dayNWRP National Water Rehabilitation ProjectNWWI Northwest Water InternationalPCU Planning Control UnitPTF Petroleum Trust FundSAR Staff Appraisal Reportu-f-w Unaccounted for waterUNDP United Nations Development ProgramWTP Willingness to pay

Vice President: Jean-Louis SarbibCountry Director: Yaw AnsuSector Manager: Letitia A. ObengCluster Leader: David Henley

FOR OFFICIAL USE ONLY

Table of Contents

Preface

Evaluation Summary

PART I PROJECT IMPLEMENTATION ASSESSMENT

A. Background ......................... 1B. Statement/Evaluation of Objectives ......................... 1C. Achievement of Project Objectives ......................... 4D. Major Factors Affecting the Project ......................... 7E. Project Sustainability ......................... 9F. Bank Performance ......................... 9G. Borrower Performance ........................ 10H. Assessment of Outcome ........................ 10-. Future Operations ......................... 11J. Key Lessons Learned ......................... 11

PART I1 STATISTICAL TABLES

Table 1. Summary of AssessmentsTable 2. Related Loans and CreditsTable 3. Project TimetableTable 4. Loan Disbursements: Cumulative Estimated and ActualTable 5. Studies Included in ProjectTable 6A. Project CostsTable 6B. Project FinancingTable 7. Economic Costs and BenefitsTable 8. Status of Legal CovenantsTable 9. Bank Resources: Staff InputsTable 10. Bank Resources: MissionsTable 11. Financial & Operating IndicatorsTable 12. Targeted and Achieved OutputsTable 13. Implementation Schedule

Appendices: A. Mission's Aide MemoireB. Borrower Contribution to ICRC. Map

Tlus document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

IMPLEMENTATION COMPLETION REPORTFEDERAL REPUBLIC OF NIGERIA

LAGOS STATE WATER SUPPLY PROJECT (LN 2985-UNI)

Preface

This is the Implementation Completion Report (ICR) for the Lagos State Water SupplyProject of the Republic of Nigeria, for which Loan 2985-UNI in the amount of US$173,200,000was approved on March 31, 1989. The Loan was made to the Republic of Nigeria. Cofinancingfor the project was to be provided by the European Investment Bank (EIB), the Government ofCanada (CIDA), United Nations Development Program (UNDP), and French Commercial Banks,but the EIB withdrew its participation in 1992.

The loan's original closing date was March 31, 1996, but was extended twice to itseventual closing date of December 31, 1997. Final disbursement took place on May 13, 1998.The loan was fully disbursed.

The ICR was prepared by Eleanor Warner (Fin. Analyst) Water & Urban 2, EugeneOkongwu (San. Engr) Resident Mission, and Kavita Sethi (Economist - Consultant) and reviewedat a meeting dated May 19, 1998 chaired by Mr. Yaw Ansu, Country Director for Nigeria. Thebeneficiary and implementing agency, Lagos State Water Corporation, contributed to thepreparation of the ICR by commenting on the Bank's draft and preparing an evaluation which isattached in Appendix B.

Preparation of this ICR began during the Bank's February 1998 supervision/completionmission led by Mr. David Henley. The ICR is based on material in the project file and oninformation provided by the LSWC. Comments were also received from staff involved at differentstages of the project; these comments have been incorporated in the ICR.

IMPLEMENTATION COMPLETION REPORTFEDERAL REPUBLIC OF NIGERIA

LAGOS STATE WATER SUPPLY PROJECT (LN 2985-UNI)

Evaluation Summary

Introduction

i. The Government of Nigeria in early 1980 requested the Bank's assistance to help leverageinvestments then planned by French commercial banks and formulate a water sector developmentstrategy for Lagos State. The Lagos State Water Supply Project was conceived as the first of athree-phased 15-year expansion program to address the existing institutional inadequacies and tomeet the demands of a rapidly growing population. This was the first World Bank loan to developthe Lagos water supply sector. Prior to this there were 3 other loans for development of largeurban water schemes in other states of Nigeria.

Project Objectives

ii. The project objectives were to: (a) increase population access to public water supplies bydoubling production capacity and more than doubling the number of direct connections; (b)eliminate recurrent subvention from the Lagos State Government (LASG) to Lagos State WaterCorporation (LSWC) for recurrent expenditures; and (c) strengthen LSWC including itsmanagement, operations and maintenance, training facilities and programs, manpowerdevelopment, accountability, economic efficiency, financial performance and future viability.

iii. The design of components to meet these objectives was adequate, consisting of: expansionof water production facilities at Adiyan; transmission and distribution system; provision ofinstallation materials and meters for new service connections; rehabilitation of existing waterproduction facilities (Ishasi & mini water works); improvement of administrative infrastructure;and institutional support.

iv. Evaluation of Objectives and Risks: The physical objectives of the project were justifiedgiven the huge backlog of investments in urban water supply. One of the major risks identified atappraisal was the inability of LSWC to oversee the satisfactory implementation and managementof the project, and heavy emphasis was placed on improving the corporation in four key functionalareas. However, it turned out that too many initiatives were programmed to take placesimultaneously which taxed the capacity of an institution in change and delayed the attainment ofthe project's goals within the stated timeframe. This was also complicated by LASG defaulting onits covenants to grant full autonomy to LSWC and to support an economic tariff.

v. Financial Objecives: The project was to lead to the reduction of recurrent subventionand indirecdy improve public expenditure policies. Gradual targets were set to allow LSWC tocover cash operating expenses and the greater of depreciation or debt servicing with the overall aimto allow it to achieve an improved rate or return on its net assets employed. LSWC has not beenable to cover its cash operating expenses from water sales in any of its 8 years of projectimplementation (paras 10 & 11). Recurrent subventions continued throughout the life of theproject. This has been due partly to a weak tariff and delays in implementing commercialmanagement improvements. The project was unable to meet its financial objectives because theywere too ambitious to be attained within the timeframe of the project.

vii. Economic Objectives: The project was to increase the economic efficiency of waterprovision by LSWC. Improvement in economic efficiency included implementation of an economictariff, cost effective production of water via improved maintenance and reduced water leakages,increase in total supply through additional production facilities and reduction in physical losses,and enhanced economic benefits through increased distribution to areas with the greatest waterscarcity. The limited revision of tariffs, the unexpectedly low capacity utilisation and relativelyhigh levels of u-f-w have caused an attrition in the projected economic benefits.

Implementation Experience and Results

viii. Achkvement of Objectives: The project's physical objectives were partially achieved.Prior to the project, production capacity was 301.5 MLD (in 1985) with actual production of 216MLD. Existing distribution had 1,200 km of secondary and tertiary pipelines, estimated 83,000connections (of which 8,000 was industrial), and 2,800 standpipes; and served about 2 millionpeople. The project set out to more than double production capacity (621 MLD) and achieved thattarget (though some four mini water works are not functional because of unmet rehabilitationneeds). The distribution system planned under the project was 1157 km of secondary and tertiarypipelines, 110,000 connections, and 420 standpipes. Due to funding constraint, only 640 km ofsecondary and tertiary pipelines were provided, with about 25,000 to 30,000 new connections and380 standpipes. Population with access has increased to about 3.1 million. It is thus apparentthat while actual production has doubled, the distribution system did not increase in commensuratemanner, partly due to EIB's cancellation (para 26). Service through standpipes is uncertain (dueto poor record-keeping) but may have increased from 420,000 to about 1 million people (378standpipes were provided under the project and level of service has increased at the existing 2,800standpipes).

ix. Achievement of the financial objectives was fair. While the objective of increasing watersupply was partially met, delays in strengthening institutional capacity due largely to the scale ofsupport needed, weak tariff policy, inadequate cash generation, weak billing and collection, andunplanned changes in management made it difficult to achieve the objective of making the sectorfinancially viable.

x. Achievement of the economic objectives was limited. The partial realisation of theproject's physical and financial goals limited the project's economic benefits. The decline in realtariffs over time, relatively high leakage, unexpected, low capacity utilisation, and slow increase inthe number of connections and population coverage caused unit costs of production to be higherthan targeted, and did not allow the projected increase in the delivery of water with associatedeconomic benefits.

Assessment of Project's Success and Sustainability

xi. A reasonable volume of water has been introduced into the system with the completion andrehabilitation of substantial production facilities. However, there remains substantial deficiency inthe distribution network which ultimately affects coverage and sustainability.

xii. Institutionally, the administrative infrastructure has been strengthened, including erectionof a new headquarters building, 5 zonal and 4 area offices. Vehicles, operating equipment andsome spare parts have been purchased and delivered though with considerable delay. Althoughlimited quantities of consumer meters were procured under the project, installation proceeded veryslowly and did not meet SAR expectations. LSWC has improved in technical expertise,

managerial and commercial, financial and accounting areas. The foundation has been laid, albeitdelayed, largely because the starting base was grossly weak. LSWC must now build upon it.

ximi. LSWC's ability to build upon the project's foundation depends upon its commitment topersevere with the improvements it has commenced and to pursue its proposed sector restructuringto introduce private participation (para 44).

Summary of Key Lessons Learned

xiv. Pressures to come up with estimates at the time of project appraisal on indicators such asunaccounted-for-water (u-f-w), number of existing connections etc lead to the creation of weakdatabases from which to forecast expectations. The result is a wide gap between forecast andactual outcome (para 41).

xv. Expectations for project startup should be carefully made in line with an implementingagency's prior experience with Bank projects (para 42).

xvi. Very weak institutions should be assisted incrementally with projects that are modest indesign and objectives. In this context, twinning could provide an important contribution toinstitutional development. However, in order to achieve sustained results, a more radical approachis needed such as private sector participation in operations (para 45).

xvii. Close attention needs to be given to consumer connections and customer management inproject design (para 45, v) to ensure adequate cash flows.

xviii. The question of continuity in leadership and management of water authorities needs to beaddressed at the state and federal levels.

IMPLEMENTATION COMPLETION REPORTFEDERAL REPUBLIC OF NIGERIA

LAGOS STATE WATER SUPPLY PROJECT (LN 2985-UNI)

PART I: PROJECT IMPLEMENTATION ASSESSMENT

A. BACKGROUND

1. The project period (1989-1997) witnessed numerous policy and political changes thatinfluenced the implementation context. Nigeria made a conscious but incomplete attempt atstuctural adjustment during 1986-1993. By 1991, however, slippages in fiscal discipline andpublic resource management led to withdrawal of Bank and IMF adjustment support. Large fiscaldeficits were recorded and economic growth stagnated. GNP per capita declined from US$1,180in 1980 to US$260 in 1995. Income inequality increased and- 34% of the population was classifiedas poor. Basic social indicators now place Nigeria among the 20 poorest countries worldwide.Real wages of public employee, including employees of LSWC, decreased approximately by afactor of 10 (1986-1997). Inflation which peaked at 72.9% in 1995 averaged 38% annually(1987-97). The ratio of wages of LSWC employees to those of comparable positions in the privatesector is about 1:25. This has contributed to institutional decline in Nigeria's public and parastatalagencies.

2. The Bank's assistance was sought in early 1980 to help leverage investments which werebeing considered by French commercial banks. A sector development strategy was formulated andthe Lagos State Water Supply Project evolved therefrom as the first of a three-phased 15-yearexpansion program to address institutional inadequacies and to meet the demands of a rapidlygrowing population. Estimates of Lagos' population today are 7.5 million with a 3% growth rate.

3. In addition to this project, the Bank has funded new water supply systems in state capitalsand technical assistance for project planning and institutional strengthening, including four majorurban water supply projects, three of which, Kaduna (Ln 171 1-UNI, approved 1979), Anambra(Ln 2036-UNI, 1981), Bomno (Ln 2528-UNI, 1985) have been completed and one, Kaduna andKatsina, (Cr 2372, 1993) is under execution. The Bank also approved the National WaterRehabilitation Project (NWRP, Ln 3322-UNI, 1991) which is providing limited funds (up toUS$S10 million) to each state for urgently needed rehabilitation and equipment. The NWRP is alsohelping to upgrade state water agencies through institutional strengthening and training.

B. STATEMENT/EVALUATION OF OBJECTIVES

Statement of Project Objectives

4. The project's objectives as outlined in the Staff Appraisal Report (SAR) were to:(a) increase populaton access to public water supplies (doubling of production

capacity and primary, secondary and tertary distribution network and more thandoubling the number of direct connections;

(b) eliminate recurrent subvention support from LASG and thus, indirectly, improvepublic expenditure policies;

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(c) strengten the executing agency, LSWC, including divisional operations, trainingfacilities and programs, manpower management and accountability;

(d) improve the administrative efficiency of LSWC's operations and maintenance(adminitrave infrastucture and support services including offices, depots,workshops, stores, vehicles, spare parts, rehabilitation of existing assets); and

(e) improve the economic efficiency, financial performance and future viability ofLSWC (cost-reflecting tariff policy, metering, billing and collection procedures,new accomting systems).

Statement of Project Components

5. The project was designed to be the first phase of a three-phased 15-year expansionprogram consisting of the following components:

(a) Expansion of Water Supply Facilities(i) An intake structure on the Ogun River at Akure, raw water pumping

station and 8.2 km of 1,600 mm diameter raw water main to a320,000m3/d treatement plant to be constructed at Adiyan forflocculation, clarification, aeration, rapid sand filtration, disinfection,ueated water pumping, transmission and storage at Oke-Aro reservoir(100,000 m3) and standby generators;

(b) Transmission and Distribution System(i) Laying of approximately 65.5 km of steel pipes and fittings varying in

diameter from 2,000 mm to 800 mm from Adiyan waterworks to andwithin metropolitan Lagos; and supply and laying of additional 14 km ofpipeline of the same range of sizes to improve access in the northern partof the city;

(ii) Supply and laying of approximately 280 km of secondary pipeline rangingin sizes from 800 to 300 mm and 877 km of tertiary pipes of diametersmaller than 300 mmn together with valves and fittings; and

(iii) Provision and installation of materials for approximately 110,000 newservice connections, together with 75,000 meters (consumer as well asproduction and zonal) and 420 additional public standposts.

(c) Rehabilitation of Existing Systems(i) Rehabilitation works, including the anti-salinity weir on the Ogun River to

eliminate salt water intrusion; the Ishasi waterworks; several miniwaterworks to bring them up to design output; rehabilitation of about 94kn of pipelines including replacements for defective valves and hydrants,and other spare parts and materials appropriate for improving theperformance of LSWC's facilities.

(d) Administrative Infrastructure(i) Expansion, improvement and/or rehabilitation of offices, workshops,

depot and stores facilities and housing for operating personnel;(ii) Provision of vehicles and mobile plant and workshop, distribution system,

communications and training equipment and tools; and

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(iii) Provision and installation of data processing equipment.

(e) Institutional Support(i) Consultant services (940 man-months) for a hydraulic analysis of the

Lagos Metropolitan Area distribution system; for detailed design ofprimary, secondary and tertiary systems and supervision of constructionof Adiyan treatment plant and of the laying of primary, secondary andtertiary mains and new service connections;

(ii) A twinning arrangement (282 man-months) in the areas of projectmanagement, accounting, billing & collection, computing and dataprocessing, decentralization and O&M;

(iii) Development of traininig programs, overseas secondment of LSWC stafffor training in key areas of activity and 60 man-months of training expertsupport,

(iv) Support for semi-annual Implementation Planning/Review Workshops;(v) Studies of groundwater potential and usage and development of

appropriate sanitation technologies to cope with increased accessto public water supplies; and

(vi) An organization and management study of LSWC.

Relevant Loan Covenants

6. The project's objectives were reinforced by financial covenants requiring it to produce foreach year total revenues sufficient to cover the following proportion of cash operating expenses:1989 - 50%; 1990 - 75%; 1991 - 100%. From 1992 onward, the LSWC was required to financefrom its revenues the sum of cash operating expenses and the greater of annual debt service ordepreciation: 1992 - 60%; 1993 - 75%; 1994 - 90%; and 1995 - 100%. Several other covenantsntended to underpin the project's objectives related to timely counterpart fund flows, increasedautonomy of LSWC, timely submission of audits and assignment of staff to twinning partners.

Evaluation of Project Objectives and Covenants

7. The project's objectives were clear and consistent with the underlying goal to developLSWC over a 15-year period. The major problem with the project's objectives which made itdifficult for the project to attain them is that they were too ambitious to be achieved in a singleproject. The financial objectives were unrealistic given the very weak database on production andconsumption and the low level of operating efficiency. Secondly, the timeframe for achievingfinancial viability is generally linked with physical progress. All of the previous water supplyprojects in Nigeria experienced startup delays, but the SAR did not appear to consider the impactof a possible start-up delay in setting the timeframe for reaching financial viability.

8. The principal risk of the project was fairly well identified in the SAR as being LSWC'slack of autonomy to oversee the project to its satisfactory implementation, including its inability toimplement a full economic, cost-reflecting tariff policy. Measures were mentioned in the SAR tomitigate this risk. The autonomy was not granted, and a cost-reflecting tariff was not effectivelyimplemented. In retrospect, while a full economic tariff policy is desirable, the SAR was notrealistic in its expectations that this should be achieved within the timeframe of the project as thiswould have required frequent sizeable tariff increases irrespective of the standard of service. Thiswas complicated by the fact that customer enumeration was non-existent; technical and logistical

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issues related to full metering were not resolved; only a very limited number of customers werebilled and on a flat rate basis; staff were inexperienced in commercial billing and collectionprocedures; and the population of Lagos expected to receive free water. The SAR also did notprovide for customer awareness programs combined with regular support from the state governorsfor a rational tariff policy.

9. Revenue generation covenants are adequate for most utilities, but they need to be tailoredto individual circumstances. In the case of LSWC, a cash generation covenant would have been amore relevant indicator of liquidity and ability to meet cash obligations. While the revenuecovenant was met from 1993 onward, there was no cash to meet expenses because of continuedweaknesses in customer management (para. 10 below), which is a reflection of the weak design ofthis covenant.

C. ACHIEVEMENT OF PROJECT OBJECTIVES

10. Financial Objectives: LSWC was expected to generate sufficient earnings to eliminateoperating subventions, meet all operating costs and the greater of debt service or depreciation.This was intended to be achieved gradually according to the table below. While the data suggeststhat LSWC achieved its objectives from 1993 onward, it masks fundamental problems. There is adisconnect between LSWC's published revenue figures and its customer registers. Prior to 1995,due to poor management of customer databases, bills were produced and delivered withoutexpectation of collection. Revenue figures were grossly overstated while at the same timeoperating expenses were understated to fit expected cash flows. Actual collections averaged about20% of billings annually. The result is that LSWC remains dependent upon government recurrentand debt service subvention.

ActualRevenues as a % of Collections as

% of Revenue'Year Cash Oper. Exp. Cash Oper. Exp. +

Debt ServiceProjected Actual Projected Actual

1989 50% n.a. 0% n.a. n.a.1990 75% 11% 0% n.a. n.a.1991 100% 41% 0% n.a. n.a.1992 100% 81% 60% 35% n.a.1993 100%/o 114% 75% 46% 42%1994 100% 99% 90% 61% 13%1995 100% 98% 100%/o 79% 140/%2

l Collection data ecludes government billing and collection. The State Government (LASG) follows anon-standard approach to providing recurrent subvention to LSWC. It was reported that the billedamount is supposed to equal consumption by state agencies; LASG in tun procures chemicals on LSWC'sbehalf. This method is neither transparent, nor does it support LSWC's attempt at efficient management.

2 Co11cions started an upward trend after 1995 to 22% and 30% in 1996 and 1997 respectively, as aresult of the untiring work of LSWC staff under a new Commercial Manager.

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11. The financial goals of the project could have been more modest given the very weakstarting point of LSWC which then operated as a State Government department subject to civilservice rules and regulations. Its experience in direct billing was very limited. There was theprevailing sentiment of the Lagos population that water was free, and no attempt was explicitlymade in the SAR to address the need for continuous customer education. At appraisal, only about10% of production was billed based on a negotiated flat rate charges to about 800 majorconsumers (out of a potential of 83,000 direct consumer connections estimated at the time).Financial viability would have required sizeable annual tariff increases, a full metering program inconjunction with a comprehensive and well maintained customer register. Even though substantialincreases were granted in 1986, 1988 and again in 1995, it was unrealistic to expect that theseincreases could have led to improved cash generation while water supply continued to beintermittent, metering was spotty3, and commercial management (customer enumeration, billing andcollection) was very weak, highly centralized and not customer oriented.

12. The project was however able to accomplish the following in partial fulfillment of itsfinancial and commercial objectives: project records have been well kept and audited annually;accounting records are now partly computerized; accounting staff have received traming thoughLSWC continues to lose trained staff to the pnvate sector where salaries are up to 25 timesgreater, which makes it difficult to sustain improvements in accounting; LSWC has made progressin rationalizing its revenue base; revenue collection is decentralized through banks with satisfactorycontrols; a pilot metering program formed the basis for a tariff study. Assets were revalued in1995; an asset register is in place.

13. The commercial department was streamlined to help it focus on its objectives. As a result,bills are being produced quarterly and delivered on time to live customers. Customer concernscould now be attended to on a timely basis with the splitting of the Commercial department intoSales and Customer Services Divisions and establishment of area and zonal offices. A CreditManagement Section has been created to focus on the collection of large accounts. A firm hasbeen subcontracted for revenue collection. Training is continuous. LSWC is now on the righttrack but still has a long way to reach standard accounting and commercial management practicesand hence financial viability.

14. A twinning arrangement was implemented with Northwest Water International (NWWI)which helped to bring about positive improvements in management, finance and accounting,commercial management and operations. NWWI was engaged in October 1993, almost three yearslater than anticipated due largely to delays in LWSC's bureaucratic decision-taking. Their TORmentioned 365 manmonths, but the actual contract was curtailed to about 240 manmonths forbudgetary reasons. NWWI terminated in December 1997, though the major thrust of their workwas concluded about end-1996. NWWI-LSWC relationship was productive; the support ofNWWI inspired improvements; and the opportunity for LSWC staff to visit the NWWIheadquarters in the UK boosted morale and staff productivity. However, the improvementsbrought about by the twinning arrangement proved not to be fully sustainable, and in hindsight, itmight have been better to introduce more sustainable incentives which the private sector couldprovide.

3 Though metering was given a boost just prior to loan effectiveness, and deliberate efforts were made toinstall about 100 meters per month, the lack of a meter workshop, inadequate spare parts, technicalproblems with water operators and faulty record-keeping made it difficult to maintain the meterinstallation momnentum.

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15. The econonic objectives have been partially met. The economic gains of the project aretied to achieving the physical and financial goals. Additional water has been introduced into thesystem. Implementation of the leakage detection program has helped to reduce physical losses andillegal connections (thus providing additional water to consumers), though the predeterminedtargets have not been achieved. Demand for water far exceeds the available supply. Using thevalue of water as determined by a recent Willingness to Pay study,4 the ex post ERR for theproject has been calculated at 10%, which compares well with the SAR estimate of 13%. Thesensitivity analysis indicates the range to be 7 to 10% due largely to the continued scarcity of waterwhich has driven up its value.

16. The physical objectives have been partially achieved. Tables 12 and 13 show physicaltargets against actual and the planned and actual implementation time for key activities. Thecontracts for expansion of the water works (Adiyan) and the laying of additional primary trunkmains which were awarded in 1982 and 19835 respectively were executed satisfactorily, but withsignificant cost overruns arising from cost escalation, contractors' claims and additional works.These were financed from the French commercial banks. The timely completion of these contractsin mid-1991 enabled LSWC to increase daily supply to Lagos metropolis by about 280,000 -/day.The prnmary trunk mains have eased the water supply distribution constraint with consequentincrease in supply pressures. However, due to finding constraints, a vital trunk main (Trunk MainE) for supply to Victoria Island was not executed. Victoria Island therefore remains handicappedeven after the subsequent improvement in its distribution.

17. For the design, management and operation of the distribution system, Lagos was dividedinto 21 Planning Control Units (PCUs) while additional 5 PCUs were identified in the surroundingareas. The total network length was curtailed to 800 km of secondary and tertiary pipelines, andconnections were reduced to 72,000 in order to stay within the SAR budget. Bid prices eventuallyturned out lower than estimated, but only 640 km of pipelines were executed (three major contractpackages) due partly to the cancellation of the loan from the European Investment Bank (see para.26 below).

18. Partly as a result of the reduction in the new distribution system, the target for houseconnections was not met. A total of 42,000 connections were done under the project, many ofwhich were replacement of existing long service connections. The connections were providedunder the distribution contracts up to the property lines; and final connections were made toconsumer premises by LSWC after payment of a lumpsum fee of N 5,000 by the consumer. Fewconsumers have so far met this requirement and less than 50% of the connections have beenfinalized.

19. Existing connections as recorded at SAR (1985) were 83,000 (75,000 domestic and 8,000industrial). Water supply coverage through connections was 38% of 1985 population. On thebasis of the 1991 census figures and the masterplan studies under the project, the 1985 population

4 Urban Servioces Improvement: A Willingness to Pay Study. December 1997. Stoveland Consult forMinistry of Environment and Physical Planning, Lagos.

5 While the contracts were awarded in 1982 and 1983 the funds were not immediately available duelargely to political uncertainties. Nigeria's creditworthiness was a serious issue between 1983 and 1986until the structna adjustment program was initiated in 1986. The involvement of the World Bankencuraged the French commercial banks to conclude the Loan Agreement with LASG.

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has been re-est d at 4.7 million (against SAR estimate of 6.3 million), of which 1.8 millionwere served through direct connections. Presently, with about 30,000 new connections, additionalpopulation served by the project through connections is only about 600,000. Metering ofconnections also fetl short of SAR expectations - only about 5,400 meters installed compared with65,000 (SAR estimate).

20. Rehabilitation of the existing transmission and distribution systems and house connectionswere not implemented as envisaged in the SAR. A rehabilitation needs study of the existingdistribution system in four PCUs was undertaken from September 1993 to June 1996. The scopeof works included investigation of existing pipelines, reservoirs and the remodelling of Lagosdistribution system. Due to funding constraint and evaluation of priorities at the time of the study,some of the key recommendations were not implemented.

21. Rehabilitation of the Ishasi water works was completed satisfactorily and production atdesign capacity (18 MLD) is now feasible. Rehabilitation of three of the seven mini water workswas undertaken under another project.(NWRP). The four mini waterworks (capacity 43,200MLD) not yet rehabilitated were not operational in 1997, an indication of the state of thesewaterworks. Production from Iju waterworks (the second largest) declined from 74% of capacityin 1985 to 38% in 1993, and 17% in 1994. Its rehabilitation was consequently undertaken underthe project at a cost of $24 million (excluding engineering services). With the completion of a newanti salinity weir on the Ogun river (1996) all source works based on this river (Adiyan and Iju)now operate without risk of saline water intrusion.

22. There was steady decline in capacity utilization at the water works (Adiyan, Iju, Ishasi andthe seven minis) from 79% in 1985 to 57% in 1997. If account is taken of expected increase inproduction at Iju in early 1998, overall capacity utilization may be as low as 66%. Such low levelof capacity utilization is unacceptable, and action should be taken to set it up to at least 80%. Asagreed in the operational plan, LSWC should take early action on the repair of standby generatorsat Adiyan, supply of spare parts for maintenance, and retaining of an external workshop formaintenance of heavy duty equipment. Further training of maintenance staff is required especiallyas relevant training of such staff was omitted under some of the source works contracts.

23. The objective of improving the administrative efficiency of LSWC through the provisionand rehabilitation of administrative infiastructure and equipment has been partially met.Headquarters staff have been relocated into a new building. Adequate accommodation has beenprovided for about 70% of the Area Offices and 30% of the zonal offices to facilitateimplementation of LSWC's decentralization policy. Vehicles, equipment and tools were suppliedand have facilitated operations.

24. Unaccounted-for-water (u-f-w) due to physical losses was estimated at 60% of supply in apilot study carried out on the distribution system, much higher than the SAR estimate of 30% (para42). Up to 60% of the leaks occurred in service connection pipes due to poor quality of theconnection materials, long lengths and poor workmanship. The use of special equipment for leaklocation was not a priority as many leaks were visible. Consequently, the project's focus onpassive leak detection methods to prune down the high level of loss in the system was appropriatein the short term. These procedures were easy to implement and have now been institutionalized.LSWC estimates that physical losses (including illegal connections) have been reduced to 35%, butthe achievement needs to be confinned through another detailed pilot area study. To achieve theobjective of reducing this figure to 25% of production, replacement of all old consumer connectons

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would be required and further efforts to locate illegal connections. District meters (procured underthe project) should also be instaled and the leak detection and repair campaign intensified.

25. Preventive maintenance was initiated in two of the water works (Adiyan and Ishasi).Though the program is stil functional, corective maintenance is delayed due to lack of spareparts. Flow metering and chlorinating equipment, and one ofthe standby power generating sets atthe Adiyan waterworks now requires rehabilitation due partly to the perilous state of the regularpower supply in the country. Maintenance of heavy duty and special equipment would have beenmore effective and efficient if done through outsourcing.

D. MAJOR FACTORS AFFECTING THE PROJECT

26. Factors Not Subject to Govermnent Control: Cancellation of EIB Loan ($47.4 m). Thecancellation of the EIB loan in early 1992 had considerable impact on the targeted outputs as wellas on the realization of project objectives. The EIB loan was intended to finance one of the fourdistribution contracts (about 200 kIn) and the design and construction of the anti salinity weir. Byearly 1992, the distribution contract had not been awarded, and appointment of a consultant for thedesign of the anti salinity weir was just finalized. However, EB felt that delays in project startupwould result in its components not being completed by the original Loan Closing Date ofSeptember 1993 and was concerned with the lack of progress in establishing LSWC on soundfinancial and commercial footing. It therefore cancelled. The EIB components being very criticalto the project were subsequently financed by reallocation from the IBRD loan, but overall projectoutputs were curtailed. It is quite conceivable that EIB would not have cancelled if the Borrowerhad been able to progress as originally planned.

27. Factors Subject to Government Control: Delays in Contract Implementation and Inmortand Port Clearance. Completion of several contracts were delayed by 150 to 200% of the intendedcompletion periods due partly to the following factors: (i) the time required for revalidation of DutyExemption Certificates following changes of key government officials; (ii) cumbersome proceduresfor clearance of goods from the ports; and (iii) changes in pre-shipment inspection agents resultingin delays in the issuance of the Import Duty Report. A few contractors exhibited lack ofunderstanding of the procedures for opening and confirning Letters of Credit. Due to the abovedifficulties the assumption that imported pipes and materials for the distribution contracts could bedelivered to site within 6 months of start of contract was not realized. The political unrest in mid-1994 (folowing the annulled Presidential election of 1993) delayed implementation of two of themajor contracts.

28. Scarcity of Bitumen. Bitumen was required by the contractors on distribution systemcontracts for the re-istatement of roads damaged during pipeline construction. Bitumen wasproduced locally at one of the four refineries in Nigeria (Kaduna Refinery) and sold at a subsidizedand controlled price. Bitumen became unavailable when the Kaduna Refinery was damaged in afire incident and thereafter supply was rationed which made it difficult for the contractors tocomplete roadworks under their contracts. LASG Direct Labor Group with better access tobitumnu supply has recently taken over the outstanding roadworks under all contracts, and theexercise is still ongoing.

29. Factors Subject to Implementing Agency Control: Start-up Delay. There was a closingdelay of 21 months due mainly to delayed start-up. The fulfillment of the conditions ofeffectiveness took longer tian planned (13 months) after Loan signature on March 31, 1989. The

9

design of the distribution system (which commenced prior to loan approval, financed mainly by agrant from CIDA), was completed in May 1991 (18 months after the SAR expectation). Also, thefirst of four contract packages for distribution system expansion was awarded in January 1993 dueto delay in the preparation of the bidding documents and protracted discussion over the packagingofthe supply and works components ofthe contracts. From 1990 to 1991, LSWC was unable tokeep to agreed action plan for project implementation and, in late 1991, monthly meetings betweenLSWC management and Bank officials were introduced to assist in keeping implementation oncourse. LSWC's inexperience in Bank's procurement procedures and in projects financed bymultilateral institutions as well as inefficient and centralized management were largely responsiblefor the start-up delays. The pace of implementation improved in 1992 after management changesinLSWC.

E. PROJECT SUSTAINABILITY

30. This project was planned as the first of a three-phased expansion program to meet presentand future demand. The other phases of the program under which production capacity would haveincreased again in 1995 and 2000 did not commence. Water distribution which is presentlyskeletal in some PCUs was expected to be extended during subsequent stages of the expansionprogram. Several other PCUs have no distribution system. To be sustainable, continuedexpansion of the distribution network, including replacement of old leaking connections, is urgentlyrequired.

31. The standard of technical operation in LSWC has improved with support from NWWI(para. 14). U-f-w has been reduced from about 60% to probably 35 to 40% of production.However, a lower level of leakage may not be achieved and sustained until older consumerconnections are replaced with more durable pipes; district meters installed; and more intensiveprogram of leak detection and repair embarked upon. Implementation of these measures isdependent on the availability of resources in the recurrent budget. Additionally, preventivemaintenance programs initiated in some of the key water works need to be continued, but thisdepends again on the revenue generation capacity of the LSWC.

32. Metering of consumers is not yet extensive and should be expanded to facilitate thereduction of administrative losses. A large number of standpipes has been installed, andprivatization of the standpipes is now being piloted. Privatization of all standpipes needs to beaccelerated to reduce administrative losses, and ensure care and maintenance of the facilities.

33. To summarize, sustainability of the project under current operating conditions in unlikely.It would be very difficult for LSWC in its present operating environment to internally generateenough cash in the short to medium term to cover its operations and maintenance, let alone providefor depreciation based on revalued assets and contribute to its expansion. Salary levels which areless than 10% of salaries earned by comparator utilities in francophone West African countries area major disincentive to staff productivity. Major transformation in LSWC's operating environmentis mandatory. Sustainability is probable if timely steps are taken to privatize operations, wherefeasible, and to continue the second and third phases of the 15-year investment program envisagedin the SAR.

10

F. BANK'S PERFORMANCE

34. At appraisal, the Bank's assessment of LSWC's ability to achieve financial viabilitywithin the timeframe of the project was unrealistic, underestimating the difficulties involved inimplementing major change within a very fragile institutional context. Additional analysis mighthave led to recommending a gradual timebound set of measures, possibly with some degree ofconditionality. The Bank's assumption that huge annual tariff increases to meet financialobjectives could be effectively met, was thwarted by the poor quality of the service provided andthe weak billing and collection systems.

35. Regarding supervision, the Bank's performance was satisfactory; the composition ofsupervision teams, the mix of skills seemed to be adequate. There was continuity in Bank'ssupervision staff which helped to foster trust and willingness on the part of LSWC to, at times,take very difficult decisions within a very challenging operating context. In hindsight, the Bankcould have established new formal financial targets at the time of EIB cancellation (para 26) whenthe physical components were restructured. This was not done, but the supervision team rated theproject against very modest incremental annual targets. The project was thus rated as satisfactorydue to LSWC's proactivity in attaining the revised targets for revenue generation and other areasof operations. Some improvements were made, but they appeared to have ceased towards the endof the project; although further actions were being considered, their effectiveness has not beendemonstrated.

G. BORROWER'S PERFORMANCE

36. Performance of the Borrower is rated unsatisfactory for the following reasons: (i)unplanned changes in LASG senior officials made it difficult to foster consistent policy dialogue;(ii) lack of commitment to the project's objectives; (iii) failure to maintain LSWC's autonomy inaccordance with the LSWC edict and as covenanted, which basically strangled LSWC's ability tooperate as a business (i.e. set and achieve financial and performance targets), including its abilityto improve employment incentives (para. 33). LASG could have assisted the project if it had heldLSWC management responsible for some agreed annual operational performance targets and setup a mechanism for monitoring performance and taking action on the basis of its findings.

37. Performance of LSWC, the executing agency has been rated fairly satisfactory.Management of the project in its early stage was difficult. With the change in General Manager(who remained with the project for 4 years), and continued guidance and dialogue with Bankmissions, LSWC was able to focus on introducing many of the required changes in a systematicway. It made effective use of the twinning arrangement in the areas of engineering, commercial,finance and accounting. The corporation has been transformed from being a highly centralized,bureaucratic organization to one that is restructured and decentralized with a corporate focus andresponsiveness to its customers. LSWC's operating standards have been upgraded, but there ismuch room for improvement.

H. ASSESSMENT OF PROJECT'S OUTCOME

38. The project's outcome is rated unsatisfactory. The project's physical objectives called formore than doubling of production capacity to serve additional population. Capacity was doubledfrom 301,500 ̀3/day in 1985 to 621,500 3/day in 1998, but capacity utilization at the various

11

production works is currently low (57-66%) which reduces the population with effective coverage.In addition, the distribution did not increase commensurate with production. Metering ofconsumers is unsatisfactory. Service through standpipes was expected to increase, but standpipecoverage is uncertain due to poor record-keeping. The project's financial objectives requiredLASG to eliminate recurrent subvention support to LSWC as the latter improved its commercialmanagement and revenue generation. Cash generation has improved, but is very far from SARexpectation, thus LASG recurrent subvention could not be eliminated. The project was alsointended to improve the economic efficiency of water provision through implementation of aneconomic tariff, cost effective production of water via improved maintenance, increase in totalsupply through additional production facilities and reduction in physical losses, and enhancedeconomic benefits through increased distribution to areas with the greatest water scarcity. Theunexpectedly low capacity utilization and relatively high leakage levels have caused an attrition inthe projected economic benefits.

39. From another perspective, LSWC would have been in a far worse position without thisproject from a financial, commercial and technical point of view. The project was instrumental ineffectively channelling technical expertise into the corporation through the twinning arrangementwith NWWI. This had the beneficial effect of (a) exposing staff to state-of-the-art techniques inwater supply management; (b) raising expectations of their own potential at LSWC. Even thoughphase II of the investment program, of which this project was a part, did not commence asenvisaged at appraisal, capacity has been strengthened within the institution and preparations arewell advanced for future development of the sector with private participation. LSWC would nothave been able to take this initiative without the exposure provided by the project.

1. FUTURE OPERATION

40. A plan for the project's future operation has been prepared and attached to the AideMemoire of the Completion mission. The plan includes appropriate technical, financial,commercial and institutional arrangements to ensure effective project operation.

J. KEY LESSONS LEARNED

Important Findings of Project Implementation Experience

41. Pressures to come up with estimates, at the time of project appraisal, on indicators such asu-f-w, number of existing connections, number of billed consumers etc lead to weak bases fromwhich to forecast expectations; the result is a wide gap between forecast and actual outcome.Forecasts which are continually updated during implementation are a much more useful measure ofdevelopment impact.

42. Expectations for project startup should be carefully examined in line with an implementingagency's prior experience with Bank projects (particularly with procurement rules), priorexperience of similar agencies within a given country, and the types of management system on theground i.e. whether highly centralized and lethargic or effectively decentralized which might formthe basis for more realistic expectations. Realistic startup dates could then be applied.

43. During implementation, many consumers were unable to make the initial lumpsum depositfor household connections and this delayed the take-up rate. The connection policy should beestablished upfront, requirements should be assessed realistically and issues dealt with accordingly.

12

Sustainability

44. Though an improved water supply has been provided with relative improvement minstitutional and operational capacity, many weaknesses continue within LSWC which would limitits ability to sustain project investments. Sustainability is therefore unlikely. Significant resourcesare required for continuation of the commercial and financial management improvements, furtherexpansion, continuation of the u-f-w reduction and metering programs, as well as for themaintenance of the facilities provided. LSWC's cash flows cannot sustain even the requiredrecurrent expenditures. These constraints are difficult to address permanently within LSWC'sexisting operating environment of continued subvention, politicization of tariff approval, very lowstaff salaries, and unplanned staff changes at the senior management level. LSWC and senior statemanagement have recognized the constraints, and have agreed to seek private sector participationfor further investments and operations. LSWC is fairly advanced in preparing bid documents forprivatizing two of its systems (Lekli and Ikeja). Additionally, a contract has been signed forpreparation of a coherent set of recommendations for the development of the sector in its entiretyutilizing the private sector to as great an extent as possible. These are encouraging initiatives.

Lessons for Future Projects in the Sector

45. The main lessons learned from this operation are as follows:

(a) Transformation of a public corporation into a financially viable one is a verygradual process which cannot be achieved in one project unless major reforminvolving private participation occurs. The barriers to success include civilservice culture, uncompetitive salaries, inexperienced management, andgovernment's unwillingness to grant autonomy.

(b) The timeframe envisioned for a project's institutional goals must be realisticallymatched with existing capacity. LSWC's development plan was probably tooshort or the plan itself was too ambitious. A number of initiatives wereprogrammed to take place simultaneously which taxed the capacity of aninstitution in change. Nevertheless, institutional development was a keyconcern, and the overall institutional measures planned were individually sound.

(c) The twinning arrangement made some progress and was probably a necessarybridging mechanism given LSWC's very weak capacity at appraisal, but twinningalone cannot achieve sustainable results, particularly with respect to staffmotivation and productivity.

(d) Financial covenants need to be tailored to specific agency conditions. The factthat the revenue covenant was complied with in some years even though theoutcome is unsatisfactory reflects on the poor design of the covenant (paras. 9 &10).

(e) Close attention needs to be given to consumer connections and customermanagement in project design and implementation. Replacement of most of theexisting poor quality consumer connections in Lagos was probably a more costeffective approach to u-f-w reduction especially physical losses (of which about

13

60% was lost through consumer cormections). Such new connections could havebeen designed to facilitate identification of connections with overdue accounts. Inthis way, technical operations and revenue generation could have been effectivelylinked.

14

PART II: Statistical Tables

Table 1: Summary of AssessmentsTable 2: Related Bank Loans/CreditsTable 3: Project TimetableTable 4: Loan Disbursements: Cumulative Estimated and ActualTable 5: Studies Included in ProjectTable 6A: Project CostsTable 6B: Project FinancingTable 7: Economic Costs and BenefitsTable 8: Status of Legal CovenantsTable 9: Bank Resources: Staff InputsTable 10: Bank Resources: MissionsTable 11: Financial & Operating IndicatorsTable 12: Targeted and Achieved OutputsTable 13: Implementation Schedule

15

Table 1: Summary of Assessments

A. Achievement of Objectives Substantialtial ial Negligible Not applicable

Macro Policies

Sector Policies E0 0Financial Objectives [J [ J 0

Institutional Development 0 [3 0

Physical Objectives 0 ( (J JPoverty Reduction E] E 0 Gender Issues [J [ [ Other Social Objectives l [ ]Environmental Objectives n o E 0Public Sector Management [ [ (3 0

Private Sector Development [ 5 Q 0Other (specify) 5 5 Q E

(Continued)B. Project Sustainability Likely Unlikely Uncertain

(/) (V) (1)

C. Bank Performance satisfactory Satisfactory Deficient(/) (/1) (1)

Identification o 0 ElPreparation Assistance 0 0 0

Appraisal E E 0Supervision E 0 E

D. Borrower Performance satisfactory Satisfactory Deficient(/) (/) (/)

Preparation E 0 EImplementation El E 0Covenant Compliance E E 0Operation (if applicable) E E

E. Assessment of Outcome satisfactory Satisfactory Unsatisfactory unsatisfactory

El) El/ 0/ El/

16

Table 2: Related Bank Loans/Credits

Loan/credit title Purpose Year of Statusl |~~~~~~~~~~ ~~~ approval |

Preceding operadons

Ln. 2528-UNI (i) Provide adequate and reliable supplies of safewater to Maiduguri from the Alau Dam and

Borno State Water Supply Reservoir 1985 closed 6/30/95Project

(ii) strengthen BSWB to ensure orderly futuredevelopment and expansion of the State's watersupply program and its efficient operation and help ittowards financial viability, and

(iii) provide the basis for an effective sanitationprogram in Maiduguri through the proposed studies.

Ln. 1711-UNI Improve the supply of drinking water in the city ofKaduna by increasing quantity, improving quality and

Kaduna Water Supply elimmate shortages caused by production constaints 1979 closed 12/3188Project to reach at least 85% of the population and provide all

connected consumers with uninterrupted supply ofsafe water.

Ln. 2036-UNI Enhance living conditions in Anamnbra State byAnambra Water Supply improving water supply, solid waste collection andAnambra Water Supply disposal, urban infrastructure and health education. 1981 closed 7/31/91Project Establish autonomous institutions with the necessary

human and financial resources to provide water andsanitation on a fiancially sustainable basis.

Ln. 2620-'UNI inprove solid waste disposal, improve storm drainagefor high density residential and industrial areas of

Lagos Solid Waste MerpltnLgs1985 closed 9/30/93Management Project Metropolitan Lagos

FoUowing operations

Ln. 3322-UNI Provide limited funds to each state for urgentlyNat'lReha. Proneeded rehabilitation works and equipment. Assist

Nat'l Rehab. Project institutional strengthening by improving workshop 1991 Closig dateand laboratory facilities, billing and collection, 6/30/99manpower audit and training needs analysis,providing vehicles for maintenance.

Cr. 2372-UlN Improve both the quantity and reliability of waterState Water I Project supply to the more important towns in the two states, 1992 Closing date

help in commercializing the water boards. 9/30/99

Cr. 2517-UNI Reduce flooding of dwellings, business and tmnsportLagos Drainage and corridors, reduce deterioration of roads, elimination of

Lagos Drainage and unsightly accumulations of garbage in drains and 1993 Closng dateSanitation Project reduce health hazards due to flooding by sewage. 6/30/98

17

Table 3: Project Timetable

Steps in Project Cycle Date Planned Date Actual/Latest Estimate

Identification (Executive Project Summary) 6/1979

Preparation _ 5/21/1984

Appraisal 5/1986 5/1986

Negotiations _ 11/18-21/1986

Board Presentation 7/28/1988

Signing 3/31/1989

Effectiveness 9/30/1989 4/20/1990

Project Completion 8/30/1995 6/30/98

Loan Closing 3/31/1996 12/31/1997

Table 4: Loan Disbursements: Cumulative Estimated and Actual

................. E. . .... E........ -. ......... . ... ........ ... ... . .......... ....................Appra llnimae Aua ctaipecn

1989 23.40 -0.00 0.01990 51.20 2.08 4.01991 74.60 3.68 4.91992 100.60 6.02 6.01993 129.10 20.03 15.51994 154.30 =64.72 41.91995 169.10 110.68 65.51996 173.20 140.94 81.41997 173.20 152.67 88.11998 173.20 173.20 100.0

18

Table 5: Studies Included in Project

Purpose as DefinedStudy at Appraisal/Redefined Status Impact of Study

1. Hydrological Studies of Lagos To assess ground water potential in Lagos Completed hnproved management of ground water resources; provided dataState for the review of the water supply development master plan

2. Owuru River Source Study N/A Completed Infonnation obtained on additional resources to support theexpansion program

3. Otta Ikosi WTP Study and N/A Completed -ditto-Design

4. Osun River Source Study N/A Completed -ditto-. The preparation of a concession arrangement for parts ofthe south east of Lagos was based on the findings in the study.

5. Adiyan Phase 11 (Design of N/A Completed used in the revision of the water supply master pla and insecond phase water production planning for the expansion works. Ready for implementationexpasion) when fmancing identified.

6. Review of Water Supply N/A Completed updated cost estimates and phasing options.Development Master Plan

7. Privatization of PCU-6 (Ikeja) - N/A Completed Privatization options are still being developed. Study findingsFeasibility of PSP in the will assist in preparation of request for proposals.management of the distributionsystem

8. Water Pollution Control Study A sanitation study was proposed to develop Completed Lead to preparation of phased program and designs for seweragestrategy for dealing with increased waste water in priority areas, under separate financing.problems in the dry season resulting from theproject

9. Organization and Management To outline and improve organization and Completed LSWC was reorganized according to recommendations in theStudy management structure for LSWC including study report.

decentralization of management.

10. Hydraulic Analysis of To outline water supply development options for Completed Provided framework for the phasing of the water supplyDistribution System LSWC expansion, and the design of the trniks, secondary and tertiary

mains.

19

Table 6A: Project Costs

______________________________ Amraisal Estinate (US$M) Actual/Latest Estimate(US5M)SIN Item Local Forei n Total Local Foreign Total

1. Water Suo&lv Ezpansion

) AMivan Water Works 9.8 131.1 140.9 35.3 117.7 153.0

) Pri,marvMain-Contract4 9.3 62.8 72.1 39.6 84.2 123.8

C) Add'l Primarv Mains 1-5 12.0 13.5 4.8 13.5 18.3

2 Rehabilitation Works _ _

A).. BPrimarv/Secondarv/TetiarvPines 451 26.2 30.7 0 0 0

b) House Connections 0.8 4.4 5.2 0 0 0

|c _ Mini WaterWork, 0.1 0.6 0.7 0 0 0

Anti-Salinit Weir 0.5 5.4 5.9 5.1 4.3 9.4

e) Ishasi 1.5 0.1 1.6 1.1 3.8 4.9

j) Offices Workshopg Stores 3.1 3.8 6.9 8.2 4.2 12.4

b) Onerational Vehicles, and Plant .7 1.7 2.4 0.3 5.2 5.5

gj Metr(Production Distribution 04 7.5 7.9 0 1.2 1.2

d) 0._ 0

4. Istitutional Suonoit

a) O&M Studies 0.2 0.6 0.8 0 1.0 1.0

b) llydraulic Analysis of Distribution 0.3 0.4 0.7 0 0.5 0.5

c) Detailed Design of Secondarv and 1.1 3.2 4.3 0.4 4.0 4.4

dt. Detailed Design of Add'l Primar= 0.1 0.2 0.3 0 0.1 0.1

ej Constr./Snm (f) Secondar & Tertiar 1.5 7.8 9.3 6.5 21.7 28.2

fL Technical Assistance 0.8 4.0 4.8 1.5 6.0 7.5

LI) Other Studies 0.3 0.7 1.0 2.8 10.2 13.0

h) t Trainina 0.1 17 0 0.2 0 02

5 Proiect Preparation Fund 1.7 1.7

TOTAL 49.8 411.6 461.4 124.9 351.8 475.7

2(b) House Connections - Actuals included in l(d).4(h) Training - Actuals included in 4(f)

20

Table 6B: Financing Arrangements

Financier SAR Estimates (April 1988) | Actual CostsLocal Foreign Total Local Foreign TotalCosts Costs Cost ___ Costs Costs Cost %

LASG 23.8 48.8 72.6 15 12.8 25.9 38.7 10Commercial 164.8 164.8 36 164.8 164.8 43Banks (French) _ _ _UNDP 0.0 0.6 0.6 0.6 0.6CIDA 0.0 3.2 3.2 1 3.2 3.2 1EIB 4.7 42.7 47.4 10IBRD 20.2 153.0 173.2 38 20.2 153.0 173.3 46Total 48.7 413.1 461.8 33.0 347.5 380.5

21

Table 7: Economic Costs and Benefits

Assumptions for ERR Recalculations

1. Incremental capacity under the project is the sum of the capacity built within the projectplus the capacity attributed to plant rehabilitation under the project. Total incremental capacity isassumed to come on-line in 1998.

2. From 1998 onwards, production is rated at 80% of capacity, assuming repairs are made togenerators at Adiyan (para 22)..

3. Physical losses remain constant at 25%.

4. Incremental O&M is proportional to incremental production until 1997. O&M projectionsfor 1998 and beyond are based on the fixed costs of production (wages, repair, maintenance,administration), and unit variable costs are based on actual expenditures for 1996.

5. Incremental consumption is valued at the weighted average WTP of different consumers.6

80% of consumers have a WTP of N 41/m3 with 20% having a WTP of N 150/m3.

6. Investment costs include both foreign and local components. Local costs are estimated at15% of foreign costs.

7. All Naira values are expressed in constant 1987 prices, using the CPI (base = 1987), andconverted to US dollars at the 1987 official exchange rate.

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999-2026

System capacity (Mm3) 128.00 128.00 128.00 166.00 166.00 166.00 166.00 166.00 166.00 166.00 245.00 245.

fincreentl capac-ty (M3) 117.00 117.00 117.00 117.00 117.00 117.00 117.00 147.00 147.

Wate produced (Mn3) 66.70 66.70 66.70 92.00 143.60 140.40 113.60 120.60 136.90 139.90 196.00 196.

1ncremental water produced 0.00, 0.00 0.00 67.50 93.60 93.60 93.60 93.60 93.60 93.60 117.60 117.6

Avap water lost I

Value of iner. water(1987P,M US S) _ 34.41 47.72 47.72 47.72 47.72 47.72 47.72 59.96 59.96

knc.O&M (1987P, M USS) 4.62 11.90 8.71 12.83 14.64 9.55 9.96 11.51 11.51

Capital investent (1987P, M USS) 63.89 64.24 63.23 61.66 2.25 13.50 41.54 39.44 26.84 10.79 18.90_~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

rotal cost(1987P, M USS) 69.19 69.19 71.58 75.65 14.59 24.82 64.22 67.49 44.34 23.44 35.11 11.51

eBenefits -69.19 -69.19 -71.58 -41.24 33.13 22.90 -16.50 -19.77 3.38 24.28 24.85 48.4

~~~~~~~~IR. .. _0°/.O -_- __ _ _ __ _

6 Based on the findings of a su*dy entitled Urban Services Improvement: Willingness to Pay Study,December 1997.

22

Tuabb : Stats of Iegal Covenants

.. ..... ,..... .... ..... ... .. - .... .. ..... ... ............... ..... . ..,, .................. .......................... ................... - gr .... ...... .... .............. .... .... .... ............ .......

........................ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ......... .......... .....................................

3.01(a) 5 C Enable LSWC and Lagos to Ikere Gorge Dam comipletedperfbnn obligations to assure raw water

availability to LSWC3.01(b) 3 C 06130/1990 Relend funds to LASG under Ageement signed 22 August

- -- -------- First Subsidiary Loan 1989.

. ............... .............. . y ............... .. N ............................... ................................. ..........................

2.01 3 C Cau LSWC to cay out the Curently only m inorarrf s.project and to provide finds,

___ ~~~~~~~~~~~facilities, etc.

2.02 3 C 06/30/1989 Relend proceeds to LSWC In complianceunder Second Subsidiary LoanAV-emett

2.05(i) 5 C 01/31/1987 prepare plan for increased Autonomny has varied withautonomy of LSWC. changing state govermnents -

currently little autonomy.2.05(ii) 5 CP Carry out above plan as per Currently LSWC has little

tinetable to be agreed with autononyBanuL

2.06(a) 2 C Agree with Bank annually: (i) LSWC finance continuallyTariflE, (ii) Subvention + Debt discussed with BankService Support to LSWC

2.06(b) 4 C Pay quarterly in advance: (i) No current arrears.counterpart funds; (ii)subvention + debt support.

2.07 5 C Review annuaHly with Bank OKand LSWC the organizationstaffing and training plans ofLSWC.

.. .. .. .. .. . ... ........... ..I . .. .. .. .. ............ . ... .. . ... . .. . . .. . . . . .. . . . . ... ...... .........::: , . .. . . .... .......T ... : . . ... . .

2.01(a) 2 CP Provide funds, facilities, etc.; Partial com epliacinclude. tariff action.

2.02(b) 5 C Maintain Project Unit with_ _ _Engi [Engineeg Diredorate.

2.02(c) 5 c Assign staffto wodcwithconsultants and contractos

2.01(d) 5 C LSWCto discuss OKorganization, staffing andtaining plan with Bank andLASG.

2.03 4 C Establish and mataincountpart fund atcommercial bank

2.05 5 C LSWCtopaform obligationsunder second Sub-Loan

_ ____ A gree mpee_ _ _

3.01 5 C Adequate staffing

3.04 5 CP 2% of persmonnel budgetfor Condrained by inadequaetraining recurrent expenes. cash flows

3.05 5 C Recurrent expenes: (i) submitconunerimal development plan

23

.... anmt Sadie. Covenant ..r ,ent ,,~ginid hvi,ad , eseripi. . '.. ........

. . ... . ... . .. ,., .. , , ,.,, , .. j w ...... .... .... ...... fiS .... ....................... .... .. . . .. ... ... .. . .. ... . ... . . . ., . . . . . . . . . .. .... .. . .. ... . ... .. . .. .. . ... ..type jati. Izlfi)Immst Mlillmett cevc~~~~~~~~~~~~~~~~~~~~~~~~~~~....... .........

..... ~~~~~~~~~~~~............ ............. ..... ......................................... ........ ..... .................. .... . ............... ...... . ....................... ....... .......... ............

3.05(ii) 5 C (ii) implement plan in acclw.

3.06 5 C 02/28/1987 (i) Prepar inecrnal scheme ofdelegation in LSWC

3.06(ii) 5 C (ii) implement iternal scheme Internal delegation has variedof delegations per agreed with changing autonomy oftimetable. LSWC depending on state

administration.

4.01(a) 1 CP 12/31/1929 Mainain adequate accountsand records.

4.01(b) 1 CD Prepare and submit auditedamwa account.

4.02 1 CD SOEs/Special Account recordsand audits

4.03(a) 2 NC For FY91 generate revenues =100% of cash operatingexpenses.

4.03(b) 2 NC For FY95 generate revenues Curently revenue exceedsequal to cash operating cash operating expenses.expenses plus 100% of However, collection averneddepreciation or debt service, only 22% during the periodwhichever is higher. 1994 to 1997. ISWC is

workingto improve billingand collection to a satisfactoryleveL

4.03(c) 2 C Review budget and fuLperformance with Bank for

______ ____ ____ _____ _achieving targets.

4.04 2 C Submit Cap. Inv. Prog. before_ Ifinalrzation.

4.05 2 C Net revenues to be 1.5 times No known new debLdebt service.

Covenant types:

1. = Accounts/audits 8. = Indigenous people2. = Financial performancrevenue generation from 9. = Monitoring, review, and reporting

beneficiaries 10. = Project implementation not covered by categories 1-93. = Flow and utilization of project fiunds 11. = Sectoral or cross-sectoral budgetary or other resource4. = Countapart fiuxding allocation5. = Management aspects ofthe project or executing 12. = Sectoral or cross-secora policy/ regulatory/institutional

agency action6. = Environmental covenants 13. = Other7. = Involuntary resettlement

S. Present Status:

C = covenant complied withCD = complied with after delayCP = complied with partiallyNC = not complied with

24

Table 9: Bank Resources: Staff Inputs

Planned Revised ActualStage of Project Cycle PaeRidAu

Weeks US$ Weeks US$ Staff US$(000) (000) Weeks (000)

Preparation to Appraisal NA NA NA NA 112.8 131.6

Appraisal-Board NA NA NA NA 70.3 153.8

Negotiations through Board Approval NA NA NA NA 29.9 57.1

Supervision 62.7 109.0 51.0 99.6 192.2 378.0

Completion 14.0 18.4 14.0 18.4 14.0 18.4

TOTAL 76.7 127.4 65.0 118.0 419.2 738.9

Source:MIS

25

Table 10: Bank Resources: Missions

Number Sp_cied Impnetation DevelopmentStage of Montht of Days in Staff Skills Status Objectives Types of

Projed Cycle Year Persons Field Repened_ Problems

Preearalion 6/79L.... 3 C _

Idification j8 4 F 36E __ __3__ 4 36 _A

P.on 6184 6 39 FA SE TS C

Prenartion 2 6 25 FASER OAPpra-on 518 5 15 FADDC.SEK OA

prearaion j9185 2 12 rDDC SEPaisal ~~11 05 4 _ 49 AE OA, C

Preqparaion JL~ j ____1186 2 10 FA_SE

Prenahation .218L.....~26 2 _ 27 TS C

____ _ 3/86 5 30 DDC SE, FA, C

isal ~~~5/86 4 66 DGSE. FA- C_

Pre-Neaoion 710/86 4 28 SP FA PS

Subeomion 1 7/99 2 7 UE* FA 2 AM CM F. P.

Suerdision 2 10/89 2 14 PFA SSE 2 1 AM. CM. F

Sunpvision 3 Li90 2 6 SSE 1 AM, M P VF

Supervion 4 I _ 8SEI PW. CM. F

SuND5ision 5 10190 2 7 PSE, PFA _ 2 AM. M PW. CM. CF

Sunerviuion 6 r3191 1 9 T9 TPET 3_3_ FSM. P.CM

Sunvison 7 7 l9 1 4 |_PSE7 P. F. CM

t &neran 8 _=I,9l r 3 T 2 T SE, SE, 00 No Form 590

Suervisio 9 129 2*1 SE, FAP

&si0dm 10 3 2. * ' SSE, FA,SFA P

Supavision 11 6/92 1 Limited upervision mission - no_____________ ____________ ~~~~~~~~~~~~Form 590

Supervision 12 9/92 4 20 SSE,CSECE, 3 3 AM,C,C, F, CFCFA

Suevision 13 11192 1 Limited Supervision Mission - no_____________ ____________ ~~~~~~~~~Form 590

Supervis.on 4 3/93 3 SSE, SE, PS

Supervison 15 6193 2 SSE,FA

Supervision 17 9/93 2 4 SSE, SE 2 2 CM, F

Supervision l8 11/93 4 SSE, SE. C 2 2 CM C, F(Eup), C (PA)

Subeavion 19 3/94 I SSE No Form 590

Sunuv3nion 20 6/94 3 21 SSE, SE, POO 2_ 2

Supervision21 11/94 6 SSE, C (4 C No Form 590(SE). SPA, SE,

Sunervision 22 2/95 _ _ SSE = AF. CF

_upevis 23 6195 3 8 SSE, A, SE S S

SuionM 24 9/95 3 7SSE, FA, SE S F CM

Supervision 25 2/96 2 4 SSE,FA S S F, CM

SunerVqWion 26 9196 3 7 SSE, FA, SE S S AM

Surervi:ion 27 6197 1 6 SSE S S

Comdetion 2198 4 5 SSE, SE, PA, EC S

26

Specialization: Tvoes of Problems:

C = Consultant AF = Availability ofFundsDDC = Dqxuy Division Chief AM . Agency ManagmentEC = Economist C Covenant ComplianceFA = Fiancial Analyst CF = Counterpat FundsOA = Operations Assistant CM Commercial Management00 = Operations Officer F = FinancialPFA = Principal Finial Analyst M = Prc ManagementPS = Proueme Specialist P Physica WofksPSE = Private Sector Engineer PW= ProcurementSE = Sanitay EngineerSSE = Sr. Sanitary EngineerTS Traning SpecialistUE = Urban Engineer

27

Table 11: Financial and Operational Indicators

1990 1991 1992 1993 1994 1995 1996Population (million) 5.7 5.9 6.2 6.4 6.7 7.0 7.3% Served 20% 300Yo 30% 30% 32% 33% 35%No. of Systems 16 17 17 17 17 17 17Functioning Systems 15 17 16 16 16 15 15System Capacity (Mm3) 128 245 245 245 245 245 245WaterProduced (Mm3) 66.7 92.0 143.6 140.4 113.6 120.6 136.9Water Sold (Mm3) 26.7 36.8 57.4 70.2 59.1 66.3 82.1Unaccounted for Water (%) \1 60% 60% 60% 50% 48% 45% 40%Average Tariff \2 0.61 0.72 4.04 3.20 7.20 17.57 17.06Connection Fee \3 n.a. n.a. n.a. n.a. n.a. 5,000 5,000No. of Service Connections \4 n.a. n.a. n.a. 69,124 70,474 97,186 100,000No. of Metered Connections \5 n.a. n.a. n.a. n.a. n.a. n.a. 4,000No. of Standpipes \6

Billings (Naira OOOs) \7, \8- domestic - 204 76,272 - 172,566 522,716 635,614- industrial/commercial 8,736 22,097 115,242 - 183,411 549,704 669,715- govermnent - federal - - - - 34,246 57,827 53,375

- state (direct) - - - - - - 3,995- local 7,417 4,160 40,633 - 35,212 35,213 38,342

Total govemnment 7,417 4,160 40,633 - 69,458 93,040 95,712Total Billings 16,153 26,461 232,147 224,467 425,435 1,165,460 1,401,041Other revenue 5,721 2,756 10,225 166,932 210,209 153,595 34,049Total revenue 21,874 29,217 242,372 391,399 635,644 1,319,055 1,435,090Otier state (indirect) \9 50,199 29,946 152,229 140,960 80,982 312,116 582,970

Coledions (Naira OOs)- domestic n.a. n.a. n.a. 13,830 17,449 38,361 96,701- commercial n.a. n.a. n.a. 20,452 14,781 49,410 118,190- government - federal n.a. n.a. n.a. 120,214 7,582 47,917 38,582

- state n.a. n.a. n.a. 12 86 - -

- local n.a. n.a. n.a. 3,300 25,119 19,497 41,575- connections n.a. n.a. n.a. 3,898 - 4,070 15,589- miscellaneous n.a. n.a. n.a. 3,340 17,561 23,224 7,247

Total Collections n.a n.a. n.a. 165,047 82,578 182,478 317,884State Indirect 29,946 152,229 140,960 80,982 312,116 582,970

Salaries/Benefits 9,595 12,597 18,059 32,588 37,419 56,196 56,097Purchase of Raw Water - - - 1,500 2,097 5,296Power/Fuel - paid by State 22,689 1,070 25,405 25,855 4,392 - 42,000

- paid by Corp - 15,082 - 8,380 43,703 90,991 69,697- Total 22,689 16,152 25,405 34,235 48,095 90,991 111,697

Chemicals - paid by State 47,237 29,946 113,017 115,448 60,982 208,116 364,926- paid by Corp - 1,918 - - 109,827 67,321 32,943-Total 47,237 31,864 113,017 115,448 170,809 275,437 397,869

Repairs & Maintenance 6,433 1,268 2,690 12,065 7,655 33,400 53,913Spare Parts - 1,453 2,825 4,032 1,631 21,046

Administration 2,055 2,047 3,542 4,869 19,683 79,980 83,137Miscellaneous 111,731 243 1,147 1,636 17,153 16,121Bad debt prov. 5,767 132,217 138,425 338,153 770,317 579,971Total Expenses 199,740 71,391 298,902 343,298 642,098 1,345,585 1,287,980

28

1990 1991 1992 1993 1994 1995 1996

Income before depreciation (177,866) (42,174) (56,530) 48,101 (6,454) (26,530) 147,110Depreciation \10 11,086 11,902 117,955 130,403 128,031 192,500 196,497

Interest 406 10,593 186,916 180,211 264,116 140,915 488,186

Forex Losses 323,160 66,165 98,213 202,695 - - -

Net Income (512,518) (130,834) (459,614) (465,208) (398,601) (359,945) (537,573)

Total Costlm3 produced 8.01 1.74 4.89 6.10 9.10 13.92 14.41Total Costlm3 billed 20.03 4.35 12.22 12.20 17.51 25.31 24.02Avg Ratelm3 produced 0.24 0.29 1.62 1.60 3.75 9.66 10.23

Avg Ratelm3 billed 0.61 0.72 4.04 3.20 7.20 17.57 17.06

Assets

Cash 1,576 1,319 23,438 55,002 30,511 63,709 368,820Accounts Receivable 12,986 25,468 48,120 159,659 132,921 470,812 658,173S-t Investments

Inventory 9,416 13,143 41,739 63,362 61,939 163,559 328,022Total Current Assets 23,978 39,930 113,297 278,023 225,371 698,080 1,355,015

Work-in-Progress 2,030,026 4,315,668 620,913 1,325,191 1,169,198 4,090,666 6,302,881

Net Fixed Assets 206,922 207,004 4,363,879 4,478,804 5,701,278 5,388,106 5,252,362

Total Assets 2,260,926 4,562,602 5,098,089 6,082,018 7,095,847 10,176,852 12,910,258

Liabilities

Bank Overdrafts 1,980 11,444 7,764 636 2,245 - -

Accounts Payable 120,811 108,707 452,609 68,908 77,904 171,880 252,975

Total Current Liabilities 122,791 120,151 460,373 69,544 80,149 171,880 252,975L-T Loans 1,776,447 3,971,779 4,189,281 3,880,706 4,310,338 6,941,656 7,821,412

Total Liabilities 1,899,238 4,091,930 4,649,654 3,950,250 4,390,487 7,113,536 8,074,387

Equity

NetIncome (512,518) (130,834) (459,614) (465,208) (398,601) (359,945) (537,573)

Grants (local) 347,971 435,435 476,085 517,479 605,553 638,042 605,553

Grants (foreign) 222,622 222,622 222,622 222,622 232,368 232,368 232,368

Accumulated Fund (26,284) (488,603) (588,468) (895,377) (1,212,715) (1,530,401) (1,211,437)

Revaluation Reserve 184,023 306,431 532,456 797,791 797,791 797,791 797,791

Construction Fund 95,675 95,675 113,125 1,813,501 2,599,982 2,973,345 4,366,199

Total Equity 311,489 440,726 296,206 1,990,808 2,624,378 2,751,200 4,252,901Total Liab & Equity 2,210,727 4,532,656 4,945,860 5,941,058 7,014,865 9,864,736 12,327,288

Efficiency IndicatorsWorking Ratio 9.13 2.44 1.23 0.88 1.01 1.02 0.90Operating Ratio 9.64 2.85 1.72 1.21 1.21 1.17 1.03ARlCollection Period (months) 7.1 10.5 2.4 4.9 2.5 4.3 5.5 #OperCostlm3 wtr prod. 2.99 0.78 2.08 2.45 5.65 11.16 9.41

Liquidity IndicatorsCurrent Ratio 0.20 0.33 0.25 4.00 2.81 4.06 5.36

QuickRatio 0.12 0.22 0.16 3.09 2.04 3.11 4.06

29

1990 1991 1992 1993 1994 1995 1996Leverage Indicators

Debt Ratio 0.84 0.90 0.91 0.65 0.62 0.70 0.63

Debt Equity Ratio 6.10 9.28 15.70 1.98 1.67 2.59 1.90

No. of Staff 1,400 1,420 1,472 1,686 1,767 1,657 1,699

Production per staff (m3/yr) 47,643 64,761 97,554 83,274 64,290 72,782 80,577

No ofstaffperOOO connect. n.a. n.a. n.a. 24.4 25.1 17.0 17.0

Tariff Structure - Flat rate \1 1

Domestic I n.a. n.a. n.a. 720 800 1,200 1,200Domestic 1I na. n.a. n.a. 40 100 250 250Domestic m n.a. na. na. 100 400 400 400Domestic IV n.a. n.a. n.a. 5 20 50 50Commerciallndustril n.a. n.a. n.a- 130 390 500 500Hospitals n.a n.a. n.a. 70 210 300 300Public Institutions n.a. n.a. n.a. 70 140 250 250Water Vendors/Car Wash n.a. n.a. n.a. 500 500 5,000 5,000Florists n.a. n.a. n.a. 500 500 2,500 2,500

Metered Consumptionlm3Ind/Commercial n.a. n.a. n.a. 22 22 82 82Domestic n.a. n.a. n.a. 5.5 5.5 41 41

)1 U-f-w includes physical losses & iega connection. The losses stemming firn poor commercial mgt are not captured.Figures for yeas 1990 to 1993 bas on ngiing estmates; figures for 1994 onward based on pilot surveys.

82 The effed of\1 above is to depreps the average tariff.N3 is is the sandard mmum connection fee.)4 Derved from the number of bil issue both 9i rae and metered.)S Mdeer nmange was almost non-existent prior to 1996.)6A Atndpipe policy needs to be articulated; LSWCs records do not show the no. of standpipes it owns conpared with the no. owned by local govts.,7 Accounting records did not allow for a proper classification of billing prior to 1994.NB Computeized billing artued in 1991, but difficulties occurred which peaked in 1993; a new system was introduced in 1994 and is still in use.N9 Recurrent subvention from the IASG comes in the form of chemical purchas.\10 Assest revaluation was completed in 1995 and revised figures for F.A and depreciation included in 1995 accounts (esfimated and later adjusted).11I The tariffs (basically a series of f3at rates) prior to 1993 were much lower, were not well applied and records not well kept

SOURCE: LSWC folowing 18 months of data collection (periodic) and a meetingwith senior management of LSWC and the ICR mission.

30

Table 12: Targeted and Achieved Outputs

1. Water Supply Expansion

a) Adiyan water works (intake and raw water punping station, 8.2 to construct and supply and as planned no delay, completed in mid-1991km raw water main, 320,000 m3/day treatment plant, transfer installpumping station, 100,000 m3 storage reservoirs, workshops, stores,administration building, and staff accommodation.b) 65.5 km primary trunk mains to install 57 installed trunk main E for supply to Victoria

Island omitted due to fundingconstraint and cost overruns

c) 14 kn additional primary trunk mains to supply and install as plannedd) 1157 km secondary and tertiary pipelines to supply and install 640 km supplied and installede) 110,000 house connections to supply and install 42,000 house connectionsf) 75,000 consumer and bulk meters to supply and install 5,400 meters installed some district meters have been

received at the portg) 420 stnies to install 378 standpipes installed l

2. Rehabilitationa) 94 km of pipes (48 km primary, 31.9 km secondary, and 14.1 km to rehabilitate and reinforce not implemented some existing tertiary pipes in twotertiary and some house connections) PCUs were replacedb) Anti salinity weir rehabilitate new weir constructedc) Ishasi water works rehabilitate completed more extensively rehabilitated than

envisagedd) several mini water works rehabilitate not implemented but 3 minis rehabilitated under NWRPe) Iju water works N/A complete rehabilitation

undertaken3. Administrative Infrastructure

a) 660 n2 new offices at LSWC headquarters construct 1,296 m2 of new headquartersbuilding completed andequipped

b) Area and Zonal offices N/A 3,583 m2area and zonal officescompleted and furnished

c) Technical center at Ilupeju construct not implementedd) 115 new vehicles supply 78 new vehicles suppliede) Rehabilitate 85 vehicles rehabilitate not implementedf) Mobile plant, workshop, communication and training equipment supply completed, including in use

motorcycles, back hoe, loaders,mobile crane, wheeled

31

excavators, etc. l

g) Data processing equipment for billing and collection, and supply and provide training hardware suppliedaccountingh) Tools and spares supply completedi) Accommodation for operating personnel construct provided under works contract5. Institutional Support

a) 940 manmonths for hydraulic analysis, design and supervision to be carried out during project as plannedimplementation

b) 282-manmonths of technical support for project management, to be implemented early in the completed but commencementoperation and maintenance, commercial mranagement, data project delayed to late 1993processing and information technology, financial management, andpersonnel managementc) implement comprehensive scheme of in-house and overseas to be carried out during project completed but conmmencenenttraining delayedd) 12 mm institutional development workshops to be carried out during project as plannede) Two studies (ground water and sanitation) to be carried out during project as planned 6 more studies undertakenf) O&M study of LSWC to be implemented early m the as plannedL_______ _______ ________ _______ _______ ________ _______ projec _______________ ___________ _ __e_t

32

Table 13: Implementation Schedule

No. Project Components Commencement Completion (month/year)(month/year)

SAR Actual SAR Actual_____ ____ ____ ____ Estunate Estumate _ _ _ _

1. Adiyan Water Worksa) Supervision Oct. 1988 Oct. 1998 Dec. 1990 May 1991b3 Consutuction Jan. 1988 Oct. 1988 Dec. 1990 May 19912. Primary Trunk Mainsa) Construction Apr. 1988 Oct. 1988 Sept. 1990 Jun. 1991b) Supervision - Oct. 1988 Jun. 19913. Additional Primary Trunk

a)_Design Jan. 1988 Jun. 1990 Sept. 1988 May 1991b)_Construction Apr. 1989 Aug. 1992 Jun. 1990 Aug 1994

c) Supervision Oct. 1989 Aug. 1992 Jun. 1990 Aug. 19944. Secondary/Tertiaiy Pipes and

lHouse Conetons_a) | Design | Jun. 1987 Dec. 1988 Sept. 1989 May 1991

b) Construction Apr. 1989 Sept. 1994Contract 5 Aug. 1993 Dec. 1997Contract 6 Jan. 1993 Dec. 1995Contract 8 Jan. 1994 Dec. 1997

L c) Supervision Feb. 1990 Feb. 1993 Sept. 1994 Dec. 19975. Technical Assistance (Twinning) Jan. 1988 Oct. 1993 Jun. 1991 Mar. 19976. Administrative Infiasucture _ _ __

a) Design and Supersion Jun. 1988 Aug. 1992 Mar. 1989 Dec. 1997b) Construction Feb. 1989 Nov. 1993 Mar. 1990 Dec. 1997

_ _7. Training _ Mar. 1988 Oct. 1993 Dec. 1990 Jan. 19978. HRehabilitationl la) _Ishasi LN/A Jun. 1994 N/A Dec. 1995b) Anti Salinity Weir N/A N/A

Design and Supervision Sept. 1992 May 1996Construction Apr. 1994 May 1996

c) Mini Water Works N/A N/A N/A N/Ad) Iju Intake Works N/A Feb. 1994 N/A Jun. 1996e) Iju Water Works N/A Mar. 96 N/A Dec. 1997

Distribution System N/A Sept. 1994 N/A Dec. 1995

FEDERAL REPUBLIC OF NIGERIALAGOS WATER SUPPLY PROJECT (LN 2985-UNI)

WORLD BANK MISSION AIDE MEMOIRE: FEBRUARY 1998

1. A World Bank mission visited Lagos State February 6 to 16, 1998 to conduct animplementation completion mission of the Lagos Water Supply Project (Ln 2985) which closedon December 31, 1997. The mission consisted of David Henley (Team Leader), Eleanor Warner(Financial Analyst), Eugene Okongwu (Sanitary Engineer), and Kavita Sethi (Consultant -Economist). This Aide Memoire summarizes the mission's observations of the project status andagreements reached. The mission wishes to express its appreciation to the General Manager,Engr. 0. Kamson, and staff of the Lagos State Water Corporation (LSWC) for their assistanceand cooperation.

Implementation Completion Report (ICR)

2. At the end of each Bank-financed operation, an ICR is prepared. The mission commencedpreparation of the ICR and advised the LSWC on its requirement to prepare an evaluationreflecting LSWC's views. The mission explained that LSWC's ICR should not exceed 10 pages,should include a summary and be sent to the Bank by end-April 1998 for inclusion in the finaljoint ICR document to be presented to the World Bank's Board of Directors by June 30, 1998.

3. A two-day implementation completion workshop was convened by the LSWC providing aforum for all stakeholders to share their views on the project. The level of interaction of allparticipants was impressive as was the level of awareness of senior LSWC staff on theimportance of adequate cash flows to sustain the project's benefits. An outcome of theworkshop is the decision to have all of the department heads prepare Action Plans formaintaining LSWC's assets. The mission recommended that these Action Plans should focus ontime-bound plans to fully operationalize all of the project's investments over the next 12 months,including detailed maintenance procedures matched by adequate cash flow. A 5-year financialplan will be prepared reflecting appropriate levels of expenses matched by a tariff that covers thefull operating costs as a first step. This will include commercial targets on metering, householdconnections, reduction of unaccounted-for water. Collection efficiency will be monitored toensure that the cash is available when needed.

Achievement of Project's Objectives

4. New production facilities with a capacity of 315,000 cubic meters per day were providedunder the project as expected at appraisal. In addition production facilities with a capacity of222,000 cubic meters per day were rehabilitated, more than the 18,000 cubic meters per dayanticipated at appraisal. The need for additional rehabilitation became evident at a mid termreview in 1992.

5. An estimated 1,157 km of additional secondary and tertiary distribution network was to beprovided however due to the withdrawal of the EIB from the project in 1992, and high priority ofadditional rehabilitation needs, the funds were not sufficient to complete the additionaldistribution system; about 640 km of additional distribution network was provided. The result isthat instead of doubling the number of connections (110,000 estimated at appraisal) 42,000 was

achieved; thus the expectation that the population access would increase to 6.5m was notfulfilled.

6. Less than 50% of the connections have been finalized because of consumer reluctance to paythe connection fee of N 5,000. The mission recommended that LSWC urgently review itsconnection policy to reduce the lump sum payment with provision for payment of the lump sumby installments. LSWC agreed to conduct a consumer education program to encourageconnection and to allow payment by installment. This will ensure that water is effectively soldand project benefits materialize.

7. Though considerable efforts and achievements have been made in reducing unaccounted forwater (physical losses), there is a need to intensify leak detection and repairs in order to achievefurther reduction. This could involve drawing a program for replacement of existing galvanizediron service pipes which have been shown to account for 60% of the physical losses in Lagoswith medium density polyethylene pipes over a five-year period.

8. At appraisal the mini water works with a total design capacity of 80,000 m3/day wereproducing at 60% of total design capacity however after rehabilitation financed under the NWRP,the current operating level is only 10%. Power supply is largely responsible for this, and there isa need for LSWC to investigate the options and rectify the situation as soon as possible.

9. Preventive maintenance system is now operational in two out of the three major water works.This program should be extended as soon as possible. More importantly, the LSWC shouldarrange for regular supply of spares and budget enough resources to keep the preventivemaintenance program functional.

10. The LSWC still has a data management problem. Operating information is being collected atvarious production centers. However this information does not appear to be summarized in anappropriate format and channeled to the appropriate management level to be used as amanagement tool. The mission recommends that priority be given to the preparation andimplementation of an effective MIS system.

11. Meters (zonal) have been procured to monitor consumption in particular areas, but not yetdelivered from the ports. A program should be drawn up and the responsible department heldaccountable for bringing it to completion. These meters should be used along with pressuresurveys to monitor the level of leakage in various zones of the distribution system.

12. Based on limited information available, chemical consumption at the various treatment plantsappeared to be very high and should be reduced. The LSWC should pay attention to monitoringprocedures both at the treatment plant and on stock management at headquarters. It may benecessary to install pH sensors in key water treatment plants to routinely monitor the parametersaffecting chemical usage.

13. There are still various outstanding issues in the Iju intake works contract completed in 1996(snag list); a program should be agreed with the contractor for the completion of items in the snaglist in the next three months to ensure that operation of the facility is not hampered by defects inthe installed plant.

14. The project was to lead to the reduction of recurrent subvention and indirectly improve publicexpenditure policies. LSWC has yet to cover its cash operating expenses from water salesbecause of a low average tariff, and delays in implementing improvements to commercialmanagement procedures. Consequently Government subvention (recurrent and debt service)continued throughout the life of the project. At current total level of expenditure, the projectfacilities are not sustainable

15. Institutionally, the administrative infrastructure has been strengthened including erection offully equipped new headquarters building and 5 zonal and 4 area offices. Vehicles, operatingequipment and some spare parts have been purchased and delivered although with considerabledelay. Although only limited quantities of consumer meters were procured under the project,installation is proceeding very slowly, and the pace needs to be increased to meet appraisaltargets. LSWC has improved in technical expertise, managerial and commercial, financial andaccounting areas with the support of twinning partners, North West Water International (NWWI).The foundation has been laid, albeit delayed largely because the starting base was very weak.LSWC must now build upon it. It has a very long way to go; its revenue is far below potentialbecause of a weak tariff policy; collection procedures need to be further strengthened. It mustcontinue to improve on its leakage (administrative and physical); to increase metering; and topursue programs for improvements in maintenance, accounting, budgeting, financialmanagement, commercial management, and staff development. The challenge lies in preparingvarious departmental plans and holding the department heads accountable for achieving them.The successful implementation of the departmental programs will depend in part on the level ofmotivation and commitment of the staff; there is therefore a need for upward review of thesalaries of the staff tied however to improvements in revenue generation.

Summary of Assessments

16. In summary, although a reasonable volume of water has been introduced into the system withthe completion or rehabilitation of substantial production facilities, there remains deficiency inthe distribution network which ultimately affects coverage. Despite considerable efforts atupgrading commercial procedures the financial objectives of the project have not been met. Thishas been partly due to delays in providing logistical support, the late appointment of the twinningpartners, and delays in recruiting a commercial manager. LSWC financial performance has beenassessed as less than satisfactory overall when compared to projections at appraisal.

The Way Forward

17. The LSWC needs to quickly consolidate the project's achievements and move to the nextstage in its development. Estimates of capital outlays to meet demand through year 2020 rangebetween US$1.8 and 2.5 billion. It is unlikely that donor funds would materialize in light ofincreased competition for these funds; LSWC's internally generated revenue would not besufficient; alternatives for private sector participation needs to be aggressively sought with thepossibility of World Bank guarantee against specified risks. LSWC's own evaluation is thatinternal revenue generation must be improved, private sector participation must be promoted, andadditional financing needs top be identified to continue the expansion of the distribution system,including financing of the shortfall in distribution compared to expectation at appraisal.

Next Steps

18. It was agreed that the Bank would forward a copy of its draft ICR to LSWC for review andcomments no later than March 31, 1998. LSWC has agreed to forward its own final evaluationreport on the project together with comments on the Bank's draft ICR within a month of receiptof the draft ICR. The Bank will also make available the draft ICR to the other cofinanciers(UNDP and CIDA) for their comments. The final ICR incorporating LSWC's own evaluationwill be produced in June 1998 as mentioned in par. 2 above.

Lagos Water Supply Project (Ln.2985-UNI)Operation Plan

A. Project Finalization

Advise Bank of all final contract values LSWC March 15, 1998

Complete LSWC section of the ICR LSWC April 30, 1998

Final disbursement request received in Washington LSWC April 30, 1998

Correct defects in the M&E works at Ogun Intake and Ishasi LSWC, Contractor May 31, 1998standby power supply

Complete installation of consumer meters and district meters LSWC December 31, 1998received under the project

B. Engineering Operations

Continue current program of leak detection and repair to LSWC February 28, 1998cover all 17 zones at least annually.

Prepare strategy and action plan for the installation of LSWC April 30, 1998additional service connections and water meter.

Prepare a program for the replacement of existing galvanized LSWC April 30, 1998iron service connections with polyethylene pipes

Finalize arrangements for local supply of essential spare LSWC May 31, 1998parts for the PMP program

Rehabilitate water production meters at Adiyan water works LSWC May 31, 1998and Ogun intake works

Review connection policy and finalize all connections LSWC June 30, 1998established under the Project

Improve the operating efficiency of the mini water works LSWC September 30, 1998

Extend preventive maintenance program (PMP) to all major LSWC December 31, 1998water production works including use of extemal workshopsfor planned maintenance of some major equipment

C. Commercial Operations

Appoint self financed consultants for arrears reduction and LSWC February 28, 1998revenue collection for twelve month period.

Appoint head of Information Technology Department and LSWC March 31, 1998commence disengagement fro the existing computer bureau,using existing hardware.

Prepare two year metering program by the commercial LSWC March 31, 1998department to install and repair meters.

Prepare departmental five-year action plans indicating LSWC May 31, 1998expenditure and tariff requirements.

Operationalize meter repair workshop. LSWC May 31, 1998

Appoint consultant under NWRP to strengthen customer LSWC June 30, 1998enumeration.

Prepare and implement new tariff policy and update LSWC June 30, 1998annually.

D. Accounting Functions

Commence regular quarterly update and maintenance of LSWC March 31, 1998fixed assets register.

Obtain accounting software and computerize accounts in line LSWC March 31, 1998with establishment of IT department.

Produce regular timely annual audits. LSWC April 30, 1998

E. Manpower Development

Maintain regular in house training program focusing LSWC March 31, 1998particularly on accounting, commercial, and technicaloperations.

F. Planning and Development:

Obtain Ministry of Finance agreement for Bank support for LSWC March 15, 1998the Lekki project.

Commence consultant studies of options for packaging LSWC March 31, 1998current operations and future developments for private sectorparticipation.

Establish Lagos State (LASG) stakeholders committee for LSWC/LASG March 31, 1998Lekki project.

Lagos Stakeholders Committee (LSC) meet Federal Ministry LSC April 30, 1998of Water Resources to present proposal.

Federal Coordinating Committee to review proposal. FMWR May 31, 1998

Finalize Request for Proposal document for Lekki and the LSWC June 30, 1998Islands water supply concession and initiate bidding process.

FEDERAL REPUMSIC OF NIGERIALAGOS WATER SUPPI,Y PROJECT LN2985UNIMMPEION PLETION REPORT

1.0 INTRODUCTION

1.1 Lagos State is the smallest but most densely populated in the Federal Republic of Nigeria, witha 1991 official population estimate of 6.0 million. Metropolitan Lagos accounted for about90% of the State population. The high population of the metropolis was brought about as aresult of immigration and natural growth rate.

1.2 Due to high population, the demand for potable water supply in Lagos metropolis by faroutstrip the available supply and in effect the existing facilities cannot keep pace withrequirement. This is in terms of the production and distribution. In this regard Lagos StateGovernment took a bold step to initiate a solution to the potable water requirement ofmetropolitan Lagos by effecting studies to be carried out and accompanying projects packaged,for implementation in phases. This population explosion placed tremendous pressure on theprovision of water supply to the inhabitants. Due to this enormous demand for water supplyLagos State Government established Lagos State Water Corporation (LSWC) with an edict in1980 entrusting her with the state wide responsibility to provide potable water supply to theinhabitants.

1.3 The outcome of the project package revealed that the estimated investment cost for theimplementation by far outweigh her resources hence the need to invite mutilated fundingagencies for assistance. Lagos State Government through Federal Government of Nigeriaobtained the assistance of the World Bank (IBRD) as well as other donor agencies for theprosecution of Lagos Water Supply Expansion Project.

2.0 PROJECT OBJECTIVES

2.1 The original objectives of the project were to:

(a) increase population access to public water supplies (doubling of production capacity)laying of primary, secondary and tertiary distribution network and house connections);

(b) Eliminate recurrent subvention support from LASG and thus, indirectly, improvepublic expenditure policies;

(c) strengthen the executing agency LSWC, including divisional operations, trainingfacilities and programmes, manpower management and accountability;

(d) Improve the administrative efficiency of LSWC's operations and maintenance(administrative infrastructure and support services including offices, depots,workshops, stores, vehicles, spare parts, rehabilitation of existing assets);

(e) and improve the economic efficiency, financial performance and future viability of

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LSWC (Cost recovery tariff policy, metering, billing and collection procedures andnew accounting systems)

2.2 PROJECT COMPONENTS

The project consists of the following components:-(a) Expansion of Water Supply facilities: This involves the construction of an Intake

structure on the Ogun River at Akute, raw water pumping station and 7.6km of1600mm diameter raw water main to a 320,000m3/day treatment plant located atAdiyan Waterworks and covers flocculation, clarification, aeration, rapid sandfiltration, disinfection, treated water pumping, transmission and storage at Oke Aroreservoir (00,000nm3) and standby generators.

(b) Transmission and Distribution system:-(i) Laying of approximately 65.5km of existing steel and ductile iron pipes and fittings of

sizes ranging from 2000mm diameter to 800mm diameter from Adiyan Waterworks toand within Metropolitan Lagos.

(ii) Supply and Laying of additional 14km of pipeline of diameters 1200mm and 800mm indiameter to improve access to potable water supply in the north-eastem part of Lagosmetropolis

(iii) Supply and Laying of approximately 280km of Secondary pipeline ranging in sizesfrom 800mm to 300mm in diameter and 877km of tertiary pipes of diameter smallerthan 300mm with valves and fittings; and

(iv) Provision and installation of materials for approximately 110,000 service connectionstogether with 75,000 water meters and 420 additional public standposts.

(c) Rehabilitation of Existing Systems: this involves rehabilitation works including theanti-salinity Weir on the Ogun river to eliminate salt water intrusion, the IshasiWaterworks, several mini waterworks to bring them up to design output; rehabilitationof about 94km of pipelines including replacements of defective valves and hydrantsand other spare parts and materials appropriate for improving the performance ofLSWC's facilities

(d) Administrative Infrastructure:(i) Expansion, improvement and/or rehabilitation of offices, workshops, depot and stores

facilities and housing for operating personnel;(ii) Provision of vehicles, mobile plant and workshop, distribution system,

communications and training equipment and tools.(iii) Provision and installation of data processing equipment.

(e} Institutional Support(i) Consultancy Services for a hydraulic analysis of the Lagos Metropolitan distribution

system, for the detailed design of primary, secondary and tertiary systems andsupervision of construction of Adiyan treatment plant and of the laying of primary,secondary and tertiary mains and new service connections.

(ii) Technical Support Services for project Management, accounting, billing and collection,computing and data processing, decentralization and operation and maintenance;

(iii) Development of training programme, training consultancy, overseas secondment ofLSWC staff for training in key areas of activity and involvement of training expert

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support.(vi) Implementation of Semi-annual Planning and Review Workshops;(v) Studies of ground water potential and usage and development of appropriate sanitation

technologies to cope with increased public water supplies.(vi) An organization and management study of LSWC.

3.0 ACHIEVEMENT OF OBJECTIVES

The overall achievement of the project has been broken into two segments viz. Physicalachievements and others.

3.1 PHYSICAL ACHIEVEMENT: The overall project achievement are as listed below.

(a) Expansion of Water Supply Facilities:A 320,000m3/day (70mgd) treatment plant with all required facilities was constructedand commissioned out of the Trench Syndicated LoanResult: The project was 100% achieved.

(b) Transmission and Distributions systems:(i) Laying of 54km out of 65.5km of steel pipes and fittings ranging from

2000mm to 800mm diameter. Rehabilitation of 6km of Ductile Iron pipes ofdiameter 24 inch and fittings under Eko Bridge was implemented.

(ii) Laying of 14.4km of pipes having diameter 1200mm to 600mm accomplished.(iii) Supply and Laying of Secondary Ductile Iron pipes and fittings of diameter

800mm to 300mm and 596km of Tertiary Ductile Iron pipes and fittings ofdiameter 300mm and below.

(iv) Installation of Polyethylene pipes and fittings for 40,000 serviceconnections as well as 377 public standpost were implemented 4,200 watermeters were procured and installed.

From the foregoing the overall physical achievement is estimated at about 55%

(c) Rehabilitation of Existing system:(i) Construction of and entirely new Anti-salinity weir was carried out.(ii) 6Nos. Mini Waterworks were rehabilitated under National Water

Rehabilitation Project.(iii) Rehabilitation of Ishasi Waterworks and its Intake works was completed.(iv) Re - lining of 55km of old secondary mains having sizes 24" and 28".

Result: Overall achievement is about 120%.

(d) Administrative Infrastructure(i) Construction of a befitting Headquarters building with floor area of 1,296m2 in

5 floors;(ii) Construction of 9no. Area / Zonal offices(iii) Provision of 85 Nos. utility vehicles, mobile plants, as well as provision of

tools and equipment.(iv) Provision and Installation of data processing equipment

Result: Component accomplished - 120%

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(e) Institutional SupportThe identified studies were fully carried out. Assistance of Consultant was utilized inall aspect of supervisions. Twinning Arrangement local and overseas training for staffdevelopment were accomplished.

Result: Component 100% achieved

3.2 CONSTRAINTS

i) The overall physical achievement could not be fully realised as a result of thewithdrawal of EIB loan of $47.4 million from the total loan package.

ii) Late effectiveness of the loan as a result of- High rate of staff turn-over- Political Instability and others.

3.3 OTHER ACHEVEMENTS

The project implementation contributed immensely in the manpower development of theCorporation. The professional skill, were adequately tasked and developed.Secondment of staff of other department of the Corporation to assist on project implementationhas gone a long way in skill acquisition and development of the affected staff.The establishment and development of the Commercial department charged with theresponsibility of revenue generations have made a steady progress in their operation.

4.0 MILITATING FACTORS AGAINST FULL PROJECT REALISATION

The following factors have directly or indirectly affected smooth implementation of theproject.(i) Instability of the value of Naira against other International currencies like Dollar,

pound sterling etc.,

(ii) Frequent Changes in government policies

(iii) Political unrest.

(i) INSTABILITY OF NAIRA VALUEOver 2000% depreciation of the value of Naira during the life of the project hasresulted in cost overrun in most cases. This has also led to the inability of LASG toprovide counterpart fund. It would have resulted in the cancellation of the project ifnot for the timely intervention of the PTF.

(ii) GOVERNMENT POLICIESPhysical and monetary policies that had effect on the project were introduced atrandom by FGN e.g. Appointment, cancellation, re-appointment of InspectionAgencies, introduction of IDR, VAT, removal of Duty Exemption etc. All these haveeffect on project implementation and completion as well as costs.

(iii) POLMCAL UNRESTPolitical instability arising from the aborted transition to Civil Rule has considerable

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effect on project implementation. Works were frequently disrupted as a result of riot,demonstration and mob actions. These had resulted in the extension of Projectcompletion time and reduced level of accomplishment

5.0 FACTOR THAT ASSISTED THE PROJECT

As at the time the release of counterpart fund from Lagos State Government was on a decline,the Petroleum (Special) Trust Fund (PTF) (a financing body set up by FGN) took over theaspect of the Counterpart Funding as well as part funding of Iju waterworks. The PTFcontributed immensely to the completion of the project.

6.0 OPERATIONAL EXPERIENCE6.1 The potable water production facilities that were implemented under the Lagos Water

Supply Project include:-(a) The construction of Adiyan waterworks with a design capacity of 320MLD

(70MGD);(b) The Rehabilitation of the existing Iju waterworks to produce 204MLD (45MGD), and(c) The rehabilitation of Ishashi Waterworks to produce 18MLD (4MGD).

6.2 Sequel to the commissioning of the water treatment plant and the raw water pumping station atAdiyan, the plant ran quite steadily for sometimes as the required applicable water treatmentchemicals were used. The use of lime which contained high impurities later constituted a majorproblem as the dozing pipelines became clogged.

6.3 Copper sulphate was rarely used in the treatment process, which caused high formation ofalgae. This was later controlled to ensure a high performing water treatment process.

6.4 The water treatment plant was designed to use polyelectrolyte for accelerated flocs.formation in the clarifiers. Though this was used right from the test running day andsubsequently after commissioning, the high cost of the chemical, its unavailabilitylocally, affected its continuous use in the long run.

6.5 While normal design capacity of the treatment plant is 320MLD (70MGD) this was neverachieved due to losses in the system. The highest production figure achieved to date is about68MGD. This has been an almost steady figure since the plant was commissioned except fordays when there were power outages and diesel oil for running the standby generator sets werenot readily available.

6.6 In all, the plant has performed well as adequately trained technical staff were attached rightfrom the pre-commissioning days. The maintenance of the installed plant and equipment byLSWC's Engineers and technical staff is commendable except for maintenance of the 3.8MVAGenerating set at the raw water pumping station, which broke down due to the use of wronggrade of Engine oil for its service.

6.7 Before its rehabilitation, Ishashi waterworks could only produce less than fifty percent of itsdesigned capacity. Among the objectives of its rehabilitation is the up-grading of the processfacility, with the use of programmable logic control (PLC). This is to allow for reduction in thehuman element of its operation. This was duly achieved and the plant sometimes producesslightly more than 100% of its design capacity of 4MGD.

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6.8 Again lack of use of appropriate low impurity type lime contributed to the initial problems ofchemical mixing, piping and injecting into the raw water. The piping system for the lime had tobe modified accordingly.

6.9 Other problems identified was in the assembly of the internal piping for the sand filters. Thesewere subsequently corrected to ensure smooth running of the treatment process.

6.10 Though certain spare parts were being used up, additional items were procured to ensure thesustainability of the plant.

6.11 There were problems with one of the installed 750KVA Perkins generators as it could not carryadequate load while in use. This was rectified.

6.12 Adequately trained manpower have been provided for the operation and maintenance of thetreatment plant right from the period of test-running, commissioning and handing over. Thishave ensured adequate and reliable performance of the treatment plant till date.

7.0 SUSTAINABILITYLagos Water Supply Expansion Programme has transformed Lagos State Water Corporationinto a major utility concern.

7.1 The status are as detailed below:* Water supply facilities has been increased to 630,000mn3/day (140mgd) installed capacity.* Transmission mains stand at 180 kilometers.* Distribution mains is about 2,000km, while consumer connections has increased to 110,000

and standpost to 3,200Nos.* Office accommodation has been substantially increased while a large number of mobile

plants, trucks, seldom cars have been added to the fleet of vehicles.* The labour force has been substantially increased in accordance with need.

7.2 These special developments have placed enormous responsibilities on the Corporation andthereby require basic sustenance strategies. The continuous sustenance of these facilities havebeen divided into segments.* The water treatment plants require chemical and spare parts while the standby generators

need fuel and lubricants. The chemical which are stocked and are replenished regularly areprocured at an average amount of =N=60million monthly. Lagos State Governmentprovides the bulk of this money in lieu of water bill for government offices.

* The spare parts required are funded from the internally generated revenue. Thisrequirement is usually in the neighbourhood of N10.Om per month while the materials forthe repairs of network are constantly procured also from Internal revenue.

7.3 From the above analysis a minimum monthly revenue of =N=80.Omillion will be required forsustenance. However, the average generation is about =N=50.Omillion. The continuouscontribution by LASG on chemical procurement augment the expenditure. There has been aprogressive improvement which gives an indication of positive growth and eventual attainmentof the initial goal of =N=80 to =N=100 million monthly as internally generated revenue.

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8.0 DESIGN FOR PHASE II WATER SUPPLYThe concept of the Lagos Water Supply Expansion Programme was originally developed in1975 when the firm of Messrs. GKW consult of Germany was commissioned to prepare amaster plan for water supply to Lagos Metropolis up to the year 2005 AD. This was laterupdated in which the emphasis was on the prioritization of projects to be implemented underexternal financing. In the course of implementation of the expansion projects, these outlinedstudies were carried out.

* The studies on future water supply requirement for Lagos State as well as the review of theMaster plan r i to the year 2020 AD.

* Design of A, 'yan Waterworks phase II with capacity of 320MLD(7OMgd) with provision forAdiyan Waterworks phase III having capacity of 320MLD (70mgd).

* Design of Otta-Ikosi Water Works with capacity of 220MLD (44mgd).* Design of Secondary and Tertiary Distribution network and service connections for the

balance of the areas/street in Lagos metropolis e.g. Contract 7 and balance of executed contractpackages.

* Study of the groundwater potentials of Lagos State.* Design for Primary mains extension to service Ikorodu town.

These above studies have prepared ground for the future expansion programme that will take care ofpart of the ultimate Lagos State Water Supply requirement.

9.0 LAGOS STATE WATER SUPPLY EXPANSION PROJECT DEFICIENCESOBSERVED

9.1 The contract implementation completion time particularly on the supply and laying aspect ofthe projects are not realistic. The time allocated for supply i.e. 6 months was unrealistic.

9.2 The application of the fluctuation formula depleted greatly the available project fund. Thefactors usually obtained with the use of the formula are far more than the inflation factorswithin the country. A provision for each material being treated individually will be morefinancially prudent and beneficial rather than the use of a basket of materials as obtained in theformula.

9.3 The early financing of most equipment, electrical, mechanical, instrumentation to beincorporated into the works will reduce the effect of application of fluctuation and overallproject cost although this front loading concept is often frowned at by IBRD.

9.4 The Bonds submitted particularly by overseas companies are usually difficult to call orrenewed especially when there is need for this. The Banks or the Issuing houses should beforced to operate in collaboration with a locally recognised financial institution as provided bythe local laws.

9.5 The overall quality of supervision is above average on all the projects, although the consultantsalways would insist in using expatriate personnel at the expense of development of localexpertise.

10.0 COMMENT ON BANK PERFORMANCE/STAFF

The project witnessed three task managers during its life. The third Task manager Mr. DavidA. Henley stayed longest and really implemented the project. We wish to commend and reallyascribe the success of the project to his effort. While he is very firm on issues he exhibited alot of understanding and provided the much required guide on the project. He is a total successon this project.

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MAP SECTI

BR A20020

NIGERIA

LAGOS WATER SUPPLY PROJECT (JOWATERWORKS

EXISTING AND PROPOSED WASTEWATER TREATMENT FACILITIES 0 ISAGA RESERYOfR

AND STORMWATER DRAINAGE

Existng Primr-y Network

Existing Secondory Network

Built-up Arems with Existig Service EGE

O Overhead Tanks E4

* Mini Waterworks I

Planning Control Unit Boundonies *

Built -p Areas without service, to be includedin Stage (~990)

UnderProposed Construction Existing

A 6i A A Sewage Treatment Systems

X - - Channels and Conduits

International Boundaries

MILES *ISASI WATERWORXS

U 2 4 6 E ix\ / r / \

6

KILOMETERS

>'-.a so e 's *ww\C;nAn \

_ \ _

BENIN )g Tt 2bU

1 ~ ~~~~~ R-, IA

CA.EROOS

SEPTEMBER 1986