Document ofThe World Bank

Report No. 20150 UNI

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR14.4 MILLION(US$20.0 MILLION EQUIVALENT)

TO THE

REPUBLIC OF NIGERIA

FOR AN

ECONOMIC MANAGEMENT CAPACITY BUILDING PROJECT

February 25, 2000

Macroeconomic 4 Division (AFTM4)Nigeria DepartmentAfrica Region

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CURRENCY EQUIVALENTS(Exchange Rate Effective October 12, 1999)

Current Unit = NairaNaira = US$0.01053US$1 = 95.00 Naira

FISCAL YEARJanuary I -- December 31

ABBREVIATIONS AND ACRONYMS

ABER Africa and Bilateral Economic Relations Department of the FMFAuGF Auditor General of the FederationASC Audit Service CommissionCBN Central Bank of NigeriaCPI Consumer Price IndexDFID Department for International Development of the United KingdomDMD Debt Management Departmnent of the CBNDRS Debtor Reporting System of the World BankEFD External Finance Department of the FMFEMCAP Economic Management Capacity ProjectEMTAP Economic Management Technical Assistance ProjectFGN Federal Govermment of NigeriaFIRS Federal Inland Revenue Service of the FMFFMF Federal Ministry of FinanceFOS Federal Office of StatisticsGDDS General Data Dissemination StandardIFEMIS Integrated Financial and Economic Management SystemMULT Multilateral Institutions Department of the FMFNPC National Planning CommissionNNPC Nigerian National Petroleum CorporationOAGF Office of the Accountant General of the Federation, FMFOAuGF Office of the Auditor General of the FederationPAC Public Accounts CommitteePBPD Plan Budget and Policy Department of the NPCPCU Policy Coordinating Unit of the FGNPEAs Project Executing AgenciesPER Public Expenditure ReviewPPF Project Preparation FacilityPRS Planning, Research and Statistics Department of the FMFPU Project UnitWBI World Bank Institute

Vice President: Jean-Louis SarbibCountry Director: Yaw AnsuSector Manager: Charles P. HumphreysTask Team Leader: Jose B. Sokol

NIGERIAECONOMIC MANAGEMENT CAPACITY BUILDING PROJECT

TABLE OF CONTENTS

Page No.FINANCING PLAN ...... .............................................................. IA. PROGRAM PURPOSE AND PROJECT DEVELOPMENT OBJECTIVE ................................................................. .I

1. Program Purpose and Program Phasing: ...................................................................... I2. Project Development Objective: ...................................................................... I3. Key Performance Indicators: ..................................................................... 2

B. STRATEGIC CONTEXT ..................................................................... 21. Sector-related Country Assistance Strategy (CAS) Goal Supported by the Project: ............. ....................22. Main Sector Issues and FGNStrategy: ..................................................................... 23. Sector Issues to be Addressed by the Project and Strategic Choices: .......................................................34. Program Description ..................................................................... 4

C. PROJECT DESCRIPTION SUMMARY .................................................................... .51. Project Components ..................................................................... 5Total ..................................................................... 91. Key Policy and Institutional Reforms Supported by the Project: ............................................................ 102. Benefits and Target Population: .................................................................... 103. Institutional and Implementation Arrangements: . ..................................................................... 0

D. PROJECT RATIONALE ..................................................................... 131. Project Alternatives Considered and Reasonsfor Rejection: .132. Major Related Projects Financed by the Bank and/or Other Development Agencies: .133. Lessons Learned and Reflected in the Project Design: .144. Indications of Borrower Commitment and Ownership: .155. Value Added of Bank Support in this Project:. 15

E: SUMMARY OF PROJECT ANALYSIS .......................... 161. Economic:..162. Financial:.163. Technical:.164. Institutional :.16

S. Social:.166. Environmental Assessment .167. Participatory Approach: .17

F. SUSTAINABILITY AND RISKS .......................... 171. Sustainability: .......................... 172. Critical Risks: .......................... 18

G. MAIN CREDIT CONDITIONS ........................... 191. Effectiveness Conditions: .......................... 192. Other: .......................... 19

H. READINESS FOR IMPLEMENTATION ............................ 19I. COMPLIANCE WITH BANK POLICIES ........................... 20

Annexes

Annex 1. Project Design SummaryAnnex 2. Detailed Project Description by ComponentsAnnex 3. Project Phases, Performance Indicators and Exit StrategiesAnnex 4. Estimated Project CostsAnnex 5. Procurement and Disbursement ArrangementsAnnex 6. Project Processing Budget and Schedule

Annex 7. Documents in Project FileAnnex 8. Statement of Loans and CreditsAnnex 9. Country at a GlanceAnnex 10. Letter of Sector Policy from the Federal Government of NigeriaAnnex 11. List of Project Executing AgenciesAnnex 12. Institutional Capacity Assessment of Participating Project Executing AgenciesAnnex 13. First Year Work ProgramAnnex 14. Financial Management Action Plan

Map

NIGERIAECONOMIC MANAGEMENT CAPACITY BUILDING PROJECT

Project Appraisal Document

AFRICA REGIONNIGERIA DEPARMENT

Date: February 25, 2000 Task Team Leader: Jose B. SokolCountry Director: Yaw Ansu Sector Manager: Charles P. HumphreysProject ID: NG-PE-65301 Sector: Public Sector ManagementLending Instrument: Sector Investment Project ' Theme: Improved Governance and Strengthening Key

Aspects of Economic Management

Project Financing Data I Loan [xl Credit [ I Guarantee I I Other (specify)

For Loans/Credits/Other:

Amount in (US$ million): 20.0 [] Multicurrency [x] Single currency (US$)Proposed terms: [ Standard Variable [x ] Fixed [ ] LIBOR-based

Grace period (years): 10Years to maturity: 35Commitment fee: 0.50%Service charge: 0.75%

US$ millionFINANCING PLAN % Local Foreign Total

Federal Government of Nigeria 10.0 4.83 -- 4.83IDA 44.0 4.81 15.19 20.00DFID 8.0 0.13 3.37 3.50EU 22.0 2.64 7.36 10.00USAID 15.0 4.15 2.65 6.80Japan PHRD Grant/WBI 1.0 0.02 0.55 0.57Total Project Cost 100.0 16.58 29.12 45.70(IDA PPF, refinanced) (1.0) (0.29) (0.31) (0.600)

Borrower: Federal Government of Nigeria (FGN)Responsible agency(ies): Federal Ministry of Finance (FMF)

Estimated disbursements FY 2000 2001 2002 2003 2004 2005

(Bank FY / US$ million) Annual 0.7 2.2 4.6 5.7 4.6 2.2

Cumulative 0.7 2.9 7.5 13.2 17.8 20.0

Project Implementation Period FYOO-FY05Expected Effectiveness Date FY00 Expected Closing Date: FY05

Implementing Agency: Multilateral Institutions Department of the FMFContact Person: Mr. Akin S. ArikaweAddress: Federal Ministry of Finance, Central Area, Abuja, NigeriaTel. 234-9-234-6940 Fax: 234-9-234-0412

A. PROGRAM PURPOSE AND PROJECT DEVELOPMENT OBJECTIVE

1. Program Purpose and Program Phasing:

The Economic Management Capacity Building Project (EMCAP) aims at assisting thedemocratically elected Federal Government of Nigeria (FGN) in strengthening key aspects ofeconomic management. EMCAP is a part of a broader, ambitious effort by the FGN to improveeconomic governance and the tools for economic management. In this regard, the FGN's Letterof Sector Policy describes its policy directions, detailing how the authorities expect to reach theirgoals of better economic governance, as well as achieve improved economic and financialmanagement. Nigeria's past economic record confirms that these goals are the key initial, but notsole, requirements for reducing poverty, reviving economic growth, and better allocatingresources.

Within the broader efforts of the FGN that address economic governance issues, EMCAP willconcentrate on certain high priority areas which require rapid resolution. These areas are: (a)improvement of the national accounts, price, social and poverty statistics in the Federal Office ofStatistics (FOS); (b) improvement and monitoring of public expenditure in the National PlanningCommission (NPC); (c) monitoring and accounting for fiscal operations in the Office of theAccountant General of the Federation (OAGF) of the Federal Ministry of Finance (FMF), in theOffice of the Auditor General of the Federation (OAuGF), and in the National and StateAssemblies; (d) support for a comprehensive (financial, operational, technical, and legal aspects)review of the petroleum sector as well as reform of key sector institutions; (e) strengthening theprocurement activities in the public sector; (f) strengthening of the policy developmentcapabilities of the government in order for it to focus on key reform policies critical for economicmanagement, including legal/judicial reforms and the use of distance learning facilities; (g)support in the design and implementation of the initial phases of an Integrated Financial andEconomic Management Information System (IFEMIS) which would institutionalize andrationalize statistical management within core financial institutions of the FGN; (h) strengtheningof the legal and judicial systems; and (i) support for a Project Unit, located in the MultilateralInstitutions Department of the FMF (MULT) to coordinate and monitor project implementation.

2. Project Development Objective:

EMCAP constitutes a first step in assisting the FGN to strengthen economic governance by: (a)fostering greater transparency and accountability in fiscal operations, (b) strengthening thesystems designed to improve the efficiency of resource use, while discouraging - via publictransparency - those elements that have deterred such efforts in the past, (c) improving thequality and timeliness of data for economic and social analyses, as well as their widedissemination, and (d) enhancing the capacity to carry out, coordinate, and monitormacroeconomic and structural policies. While EMCAP itself will focus on a relatively smallnumber of priority areas of technical assistance and capacity building in key institutions topromote good governance, it will also be used to help identify and define the overall technicalassistance and capacity building agenda. Strengthening Nigeria's economic governance willdrive the implementation of the Project. While the Project on its own is not expected to lead tofull achievement of this objective, it would serve as a springboard for reforms in the civil service,legal, judicial, procurement and tax policy areas, and in fiscal decentralization by supportingstudies in these areas.

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3. Key Performance Indicators:

The detailed indicators of the Project and component goals are found in Annex 1. Detailedindicators to measure the progress of project components are outlined in Annex 3. Annex 3 alsoincludes exit strategies for the different project components where performance expectations arenot met. Annex 12 includes the capacity assessments of project executing agencies (PEAs).

Improved economic governance would be evaluated using: (a) detailed corruption surveys; (b) theperiodicity, reliability and transparency of published data; (c) the evaluation of publicexpenditures in light of announced and agreed priorities, as well as the strengthening of soundprocurement, accounting and auditing practices on the basis of the recommendations of the jointFGN/Bank procurement and financial accountability review; and (d) the vigor and robustness ofenforcement actions involving incidents of pubiic malfeasance identified by the OAuGF.

B. STRATEGIC CONTEXT

1. Sector-related Country Assistance Strategy (CAS) Goal Supported by the Project:Document no.: IDA/R93-45 Date of latest CAS discussion: April 13, 1993.

Country Assistance Strategy (CAS). The last CAS was prepared in 1993. Preparation of a newCAS is being initiated for presentation to the Board later this year. EMCAP is consistent with theBank's assessment of the areas of priority assistance needs in capacity building and technicalassistance. Massive corruption and poor economic management have been key constraints torapid economic growth and poverty reduction as well as to international assistance to attain theseaims. In support of the FGN's efforts to lift these constraints, IDA has restarted its lendingprogram to Nigeria, initially with a proposed Small Towns Water Pilot Project, designed to testand refine the concept and sustainability of community ownership and management of watersupply and sanitation systems in small towns. This Project will be followed by two technicalassistance projects aimed at assisting the FGN make faster progress along the reform path it hasnow chosen, and with a primary education project as a follow-up to an ongoing project and as avehicle to provide advice in the design of the recently announced "Universal Basic Education"initiative.

The first of the two technical assistance projects is the EMCAP, which would help the FGN re-engage the international donor community by improving transparency, accountability and probity,as well as permit economic management and reforms to proceed based on empirical information.It addresses the most basic requirements of institution-building and improved governance. Theother project, the privatization technical assistance, would assist the FGN in privatizing largeparastatals whose poor performance has led to inadequate provision of refined fuel, power andtelecommunications services, among other services. As FGN's commitment to reform is furtherdemonstrated and transparency and economic management improve, other assistance in the areasof poverty reduction, education, her.1th and agriculture is envisaged.

2. Main Sector Issues and FGN Strategy:

After initial success in undertaking structural adjustment reforms starting in 1986, abandonmentof reform efforts in 1992 led to years of slow and stagnated growth, inflation and increasedpoverty. These developments left the economy extremely weak and highly vulnerable to theprecipitous decline in oil prices that began in late 1997 and which continued through the earlypart of 1999. Upon taking office, President Obasanjo took immediate action to reverse theexcesses of the previous administration, combat corruption, and build public confidence,

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including the retirement of key military officers, the establishment of human rights and contractreview panels, the launching of investigations into financial malfeasance, the dismissal of 3000civil servants, and presentation to the National Assembly of an anti-corruption bill. Combinedwith measures to restore fiscal discipline, including a freeze on payments on extra-budgetarycommitments, suspension of capital spending, and the cancellation of oil concessions, theObasanjo Government has given an indication that conditions may turn for the better. Thus, theserious deterioration of Nigeria's macroeconomic situation has been contained.

The FGN has achieved initial success in stabilizing the economy, economic activity continues tobe afflicted by a weak capacity for managing the economy, misplaced budget priorities,inadequate financial management information, weak institutions, long delays in the auditedaccounts of key government agencies, inadequate accounting and monitoring of publicexpenditure, as well as outdated and deficient procurement practices. In addition, statisticalinformation is weak and produced with major lags, staff are insufficiently trained, there isinsufficient focus on key economic governance issues, and corruption still has to be rooted out.The enabling environment for the integrity and performance of the public finances is very weak.The resolution of these problems is key if Nigeria is to move to a path of rapid growth andpoverty alleviation. However, a quick fix is neither envisaged nor feasible since addressing all ofthese issues will require time. The announced intentions and recent actions of the democraticallyelected government of President Olusegun Obasanjo in the areas of governance, economicmanagement and poverty alleviation, give evidence of a new beginning for Nigeria.

3. Sector Issues to be Addressed by the Project and Strategic Choices:

Since the FGN wishes to address issues of general economic governance and managementquickly, the focus of EMCAP is mostly financial, social and institutional. It is financialmismanagement and corruption that have led to poor economic performance; and it is the lack oftransparency-indeed, of basic, reliable economic and social information-that has led to asevere loss of developmental credibility. Nigeria's system of national accounts has been grosslymiscalculated because of poor trade, fiscal, and monetary data. The last printed copy of SocialStatistics in Nigeria was made in 1994 and has only recently been published. Poverty statistics donot reflect developments in the agriculture as well as the informal sectors. Accounting andauditing capabilities are also weak. Nigeria has not closed, audited or published its fiscalaccounts in four years. There are also major delays in the auditing of the accounts of theparastatals, particularly of the NNPC. Moreover, public expenditure priorities do not reflect theFGN's objective of broad-based growth and poverty alleviation. Expenditures are not efficientlyallocated to areas that help accelerate development and poverty alleviation. Project monitoring isdeficient. Adequate policies in key areas critical for good economic management - civil servicereform, fiscal federalism, reform of the legal and judicial systems, procurement, tax and tradepolicy and enabling environment for the private sector - are yet to be developed. In addition, theexisting data produced in key financial management agencies of the FGN are not reconciled andintegrated nor shared among different government departments.

Poor and, in some cases, nonexistent data have partly contributed to corruption andmismanagement. Although the problems in strengthening the data in the FGN are not uniform,EMCAP's emphasis will not only be on better data and processes to provide and disseminate suchdata, but on institution-building to ensure consistency and sustainability in its production. Basedon this strategic choice, eight distinct areas of technical assistance and capacity building havebeen identified consistent with the above focus: improvement of statistics, improvement andmonitoring of public expenditure allocations, monitoring and accounting of actual fiscaloperations, comprehensive audits in the NNPC, strengthening procurement activities, key reform

4

policies critical for economic management, an adequate information management system, and themonitoring of these activities.

A second series of strategic choices stems from the size of the ambitious effort required byNigeria. During the identification of Nigeria's technical assistance needs, it became apparent thatNigeria could usefully spend a much larger amount than can be provided by EMCAP and that thetechnical assistance required would demand a major labor and skills-intensive effort perhapsbeyond the capacity and expertise of any single external supporting agency. There is stronginterest among both multilateral and bilateral agencies to assist the FGN in addressing the issuesof governance and economic management. Thus, IDA is able to concentrate on some key areaswhere it has a comparative advantage.

In parallel, the IMF, with assistance from the UNDP and the Government of Japan, has identifiedother areas (mostly, macroeconomic monitoring, central banking, budget preparation andexecution and payments processes, as well as fiscal, monetary and balance of payments data)where it has a strong interest and will be undertaking them in a separate project. The UnitedKingdom has already begun its support, particularly in updating and improving the quality of theexternal debt data, beginning with the production of the 1992-98 external debt information, and instrengthening capacities in these areas in both Economic Affairs at the Presidency and the CentralBank of Nigeria and could widen its involvement.

There are a number of other key areas vital to address the issues of transparency, accountabilityand probity in which the FGN needs assistance. These include: tax administration, budgetarysystems in the ministries as well as expenditure priority setting in state and local governments,customs administration, and information systems in departments of the FMF. At this time theseentities do not have support from external donors. The Bank Group will continue to encourageother donors to support these areas.

4. Program Description

As noted, the proposed EMCAP Project is a first step in addressing issues of economicgovernance and management, but with a much stronger emphasis on institutional developmentand capacity building. The Project was identified in parallel with government efforts to improveeconomic governance. Within the broader efforts of the FGN that address economic governanceissues, EMCAP will concentrate on certain high priority areas which require rapid resolution: (a)improvement of the national accounts, price, social and poverty statistics in the FOS; (b)improvement and monitoring of public expenditure in the NPC; (c) monitoring and accounting offiscal operations in the OAGF, the OAuGF and the National and State Assemblies; (d) support fora comprehensive (financial, operational, technical, and legal aspects) review of the petroleumsector as well as reform of key sector institutions; (e) strengthening the procurement activities inthe public sector; (f) strengthening of the policy development capabilities of the government inorder for it to focus on key reform policies critical for economic management, includinglegal/judiciary reforms and the use of distance learning facilities; (g) support in the design andimplementation of the initial phases of an IFEMIS which would institutionalize and rationalizedata management within core financial institutions of the FGN; (h) strengthening the legal andjudicial systems; and (i) support for a Project Unit to accelerate preparation as well as to evaluateand monitor activities in the other PEAs involved in the program. An IDA Project PreparationFacility (PPF) as well as a PHRD Grant from the Government of Japan are supporting activitiesto facilitate early start up of the Project.

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C. PROJECT DESCRIPTION SUMMARY

1. Project Components

EMCAP would support and strengthen capacity building efforts and assist in good governanceand the anti-corruption stance of the government. Specifically, it will assist in eight areasdiscussed below by providing assistance in six specific types of activities: (a) local and foreigntraining; (b) on-the-job training; (c) twinning arrangements; (d) dissemination of informationthrough publications and workshops; (e) consultancy for technical assistance, and studies,including audits; and (f) equipment.

Improvement of Statistics. This component will comprise assistance to the FOS to strengthenits capacity to improve the quality of the statistical base and the timeliness of the informationneeded for economic management. It will focus specifically on national accounts, consumer priceindex (CPI), and poverty and social sector data, and will develop the capacity and secure thecommitment to bring Nigeria into full compliance with the General Data Dissemination Standard(GDDS). While determining how best to improve the national accounts and economic statistics ofNigeria, the work to be undertaken in FOS will cover the entire organization. A review of theprocess of how the new needs of its clients, such as public sector planners and private sectorinvestors, can be satisfied is reflected in the work program of FOS. This in turn will helpdetermine the priorities and budget allocation between departments of the FOS, which will guidethe management in assigning its budgetary resources to the immediate tasks. This is criticallyimportant because three separate departments of the FOS are involved in the collection,compilation and production of the relevant economic statistics.

The component would provide financing for a total of 101 person-months of local and externalassistance (2 for a management review, 63 in the area of the national accounts, 4 for pricestatistics, 2 for data processing, 15 for the social statistics, 15 for poverty monitoring), 5 person-months of training, 9 person-months of twinning arrangements, 2 person-months for workshops,improvement and publication of data, and equipment. Immediate tasks to be undertaken includeconducting an input, process and data assessment, reviewing the methodology for preparing thenational accounts, social and poverty statistics, identifying needs and preparing a detailed workprogram for the component and terms of reference for the consultants. Specifically FOS wouldbe assisted in:

(i) Economic Statistics and National Accounts: drawing-up a user specification ofoutputs required to allow effective management of the economy, with priorities indicated for thevarious outputs, audit of the flow of data from all sources into the compilation process of thenational accounts, review the coordination mechanism within the FOS to ensure that alldepartments work in a coherent manner to provide the required common statistics, improving themethodology and processing of existing survey data, strengthening the existing coordinatingmechanism with the FMF, NPC, CBN and key parastatals for exchanges of data, expediting theprocessing of data and information from existing surveys, implementing the 1993 System ofNational Accounts, developing quarterly GDP data, integrating the public sector accounts as wellas foreign transactions and balance of payments data into the national accounts, and supportingthe National Census of Industries and Businesses/Annual Economic Surveys to improve thequality of the national income accounts data.

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(ii) Consumer Price Data: revising the CPI on the 1996 National Consumer Survey,upgrading collation of retail prices, reducing the lag in producing the CPI and begin producingthe Producers Price Index, and allowing for back-dating of the series.

(iii) Poverty Monitoring: helping FOS develop poverty monitoring indicators, including aCore Welfare Indicators (CWIC) Survey, supporting work leading to better analysis of ruralpoverty and the agricultural sector through the linkage of past agricultural and consumer surveys,integrating qualitative aspects of poverty through a national survey, aiding the conceptualizationand execution of gender-related analysis from existing surveys, promoting closer attention to userneeds and improved dissemination to policy makers and to the public, and preparing the 2000-01poverty profile using the National Consumer Survey. A pilot survey, financed by the UK'sDepartment for International Development (DFID), is to be followed by a national survey in theyear 2000.

(iv) Social Statistics: conducting an assessment of social sector data, reviewingmethodology for the generation of indicators, updating and publishing the social statistics, as wellas producing the Minimum National Social Data Set.

(v) Primary Data Collection: assisting FOS in improving its field activities, including theprimary data collection by enumerators, the supervision of data collection by field staff at thestate and zonal level and the transmittal of data from the field to headquarters' offices.

Improvement and Monitoring of Public Expenditure. This component will focus onstrengthening the prioritization, allocation, and monitoring of public expenditure. It will provide23 man-months of local and external assistance to the NPC, with participation of the BudgetOffice, to lay the basis for an annual Public Expenditure Review (PER) exercise (which could beundertaken jointly with the Bank and the EU if so desired by the FGN). The PER would be tiedto the budget cycle within the context of a three-year rolling public investment program and amedium-term expenditure framework. It would address both budgetary and off-budgetexpenditures and would analyze the relationship between capital and recurrent budgets. It willalso finance publication of budgetary outcomes on an annual basis, as well as the publication ofsummary revenue and expenditure data, and the institutional strengthening in FMF throughworkshops and study tours for the training of staff.

This component will also strengthen the capacity of the NPC to monitor the execution of thepublic investment program. This aspect of NPC's responsibility will become more important asactual capital budgeting becomes better integrated with current budgeting, with maintenance ofthe medium-term rolling plan and capital program remaining in the NPC. The assistance willtake the form of 20 person-months for local consultants to develop an improved system of capitalproject supervision, 30 person-months for the training of staff, and a limited amount of office andcommunications equipment. Immediate tasks to be undertaken include the preparation of termsof reference for this work.

Monitoring and Accounting of Fiscal Operations. This component will specifically supportoversight institutions so as to promote transparency and accountability in the public sector and toimprove the dissemination of information on fiscal operations. It will provide assistance instrengthening accounting and internal auditing in the OAGF and external auditing in the OAuGF,and budget monitoring activities in the National Assembly.

The OAGF is the major office responsible for the control and management of public finance, andfor the disbursement of funds from the federal to the state and local government. It derives its

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legal authority from the Finance (Control and Management) Act 1958 and the FinancialRegulations made under that Act. In addition to the federal ministries, the extra ministerialdepartments and the off-budget accounts, this control extends to the thirty-six state governments,the federal capital territory, and some 774 local government councils. In order to carry out thesefunctions efficiently the OAGF needs a highly trained staff, modern computer and IT systems,and reliable transport and communications.

This component of the EMCAP will assist the OAGF in discharging its important statutoryfunctions, especially bringing the fiscal accounts of 1994 to 1998 up-to-date and ensuring thecompletion of the 1999 accounts (and the subsequent years) within the statutory period after theend of the fiscal year. It will also assist in the acquisition of computer equipment and in studyingthe feasibility of linking the OAGF to the headquarters of the federal ministries in Abuja and toits Federal Payments Offices (FPOs) throughout the country. Major emphasis will also be placedon training and human resource development, which has been neglected for four years or more.

The component will finance new computer equipment, and associated materials, 7 person-monthsfor the closure of the fiscal accounts, 20 person-months for studies, workshops and publications,196 person-months for the training of staff both locally and abroad, and 36 person-months oftwinning arrangements. The immediate tasks to be undertaken include closing the fiscal accountsof the past four years, the review of the 1958 Finance (Control and Management) Act; publicationof the Financial Regulations; the preparation and issue of a new Treasury Accounting Manual;assessment of training needs; and developing the work program and terms of reference forconsultants to study the feasibility of linking the OAGF and the ministries in Abuja and linkingthe OAGF to the field offices.

In the OAuGF, this component will specifically strengthen the audit function to ensure that thereis public accountability at all levels of government. Its intention is to make public accountabilitytransparent and to ensure that the audits are carried out and published on a regular and timelybasis. This component will also implement the recommendations of the joint FGN/Bank financialaccountability review as it pertains to audit practices. The component would finance 4 person-months for the review of the 1958 Audit Act and for the preparation of relevant legislation for theformation of an independent Audit Service Commission (ASC), 190 person-months for trainingof staff in the OAuGF and other government agencies, workshops, publications, and 12 person-months for twinning arrangements. Immediate tasks to be undertaken include the review of the1958 Act and the preparation of legislation to create the ASC, a feasibility study on theintroduction of the local area networks (LANs), lay-out of the training program, and examinationof the role and modalities of the Public Accounts Committee (PAC) of the National Assembly,and the layout of the work program and terms of reference for consultant services in the laterstages of the Project.

In the National and State Assemblies, this component will provide support for strengthening thelegislatures' capacity to interpret fiscal information, review budget proposals, monitorimplementation, scrutinize outcomes, and assess policies and programs. This will include theprovision of library materials and equipment, financing of workshops and study tours, andtechnical and advisory services. The feasibility of establishing a Legislative Budget and ResearchOffice will be studied. Training for Federal and State parliamentarians is also included. Thiscomponent would complement actions to be taken to strengthen the OAuGF.

Petroleum Sector Review. This component will specifically finance a comprehensive review ofthe petroleum sector covering financial, operational, technical, legal, and contractual aspects aswell as reform of key sector institutions. The review work would be carried out by qualified

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consultants. The World Bank Group would provide a high-caliber team that would work,together with its Nigerian counterparts, on preparing terms of reference, and on supervising andmanaging the review process. The joint FGN/Bank team would develop terms of reference andappointment criteria and procedures for the consultants, supervise their appointment, superviseand facilitate their work, synthesize their output and make appropriate recommendations.

Strengthening the Procurement Activities in the Public Sector. A joint FGN/Bank team willundertake a review of procurement practices of the FGN, a sample of State Governments, and asample of parastatal enterprises, and also a review of financial accountability systems (i.e., thestate of accounting and audit practices). This component will finance the launching of workshopsthat would address procurement and financial accountability issues as well as the implementationof the recommendations of the joint FGN/Bank review.

Strengthening Policy Development Capabilities. This component is aimed at enhancing policyanalysis capacity and improving the efficiency and transparency of policy design andcoordination in the FGN. To this end, financing would be provided for 252 person-months oflocal and foreign assistance (36 in the area of civil service reform, 148 for fiscal federalism,including tax policy analyses, 8 for transparency surveys and audits, 42 for trade policy and 18for other aspects of economic governance such as an investor roadmap and internet technology),as well as workshops, study tours and 7 person-months of local and external training for capacitybuilding. Equipment associated with these tasks would also be provided. A distance learningcenter to help policy makers with lessons of experience around the world would be established.Pending the selection of a home base for the implementation of the respective studies, theEMCAP Project Unit would supervise the proposed studies.

EMCAP would specifically assist the authorities in looking at overall reform issues and instudying the next generation of reform issues. In this regard, assistance would focus on thefollowing: (a) studies of civil service reform; (b) review of Nigeria's fiscal federalism andanalyses designed to improve its operation, particularly in strengthening capacity of the states andlocal governments in the area of economic and financial management. A series of studies wouldalso be undertaken to assess revenue sharing and intergovernmental fiscal relationships. In thatcontext, an analysis of tax policy (particularly petroleum taxes and the system of state and localtaxes) would also be undertaken; (c) studies, workshops, training, and study tours leading toreform of the legal and judicial systems; (d) launching and publication of transparency surveyswith a view to measuring the impact of the FGN's economic governance efforts; (e) thecommissioning of transparency audits across the FGN (the PCU would commission a body toconduct transparency audits across the FGN. This would entail going from department todepartment, starting with the major ones, assessing how transparent they are in terms of theiroperations); (f) trade policy analyses, including the structure of tariffs; (g) studies to foster anenabling environment for the private sector; and (h) institutional strengthening.

Information Management System. This component will provide support for the design andimplementation of a financial management system that will eventually link key governmentdepartments and provide them with comprehensive and integrated financial information. IFEMISwould provide timely, consistent and accurate information for the production of monthly,quarterly and yearly fiscal accounts. It would facilitate the analysis of payroll information forbudget purposes and thereby enhance budgetary control and cash flow management. It wouldalso underpin a well functioning Cabinet operation. Although it is envisaged that the IFEMIScould ultimately comprise a comprehensive database that encompasses all major public sectoragencies, work would begin initially on strengthening and integrating fiscal data within the FMF,the OAGF, the NPC and the CBN. Consultant services would be engaged (using a PHRD grant

9

from the Government of Japan) to develop a pilot design of IFEMIS that would incorporate keypublic sector entities. Altogether, a total of 37 person-months of local and foreign consultantswould be provided for the design and implementation of the system.

Table 1: EMCAP Project Cost and Financing Plan Summary (US$ million andpercent)

Comiponents iacn-TtIIDA ~~EU' PHGINUA

Improvement of stics 3.23 4.31 0.97 20.0 8.51Improvement and Monitoring of 2.12 0.42 - 0.40 7.0 2.94Public ExpenditureMonitoring and Accounting of 5.17 - 1.28 0.64 13.0 7.09Fiscal OperationsPetroleum Sector Review 3.00 - 0.53 8.0 3.53Strengthening Procurement 2.50 - - 0.44 7.0 2.94Strengthening Policy 2.00 0.57 0.17 5.25 0.87 17.0 8.86Development CapabilitiesInformation Management System 2.05 0.40 0.07 6.0 2.52Strengthening Legal and Judicial 2.00 0.84 - 0.02 6.0 2.86System s _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Support for the Project Unit 1.46 1.10 - 0.26 7.0 2.82Total Base Cost 18.25 3.23 9.29 0.57 6.53 4.20 92.0 42.07Contingencies 1.75 0.27 0.71 0.27 0.63 8.0 3.63Total 20.00 3.50 10.00 0.57 6.80 4.83 100.0 45.70

Note: Differences due to rounding The estimates for the European Union, based on the Eurocurrency, assume a Ito I relationship with the US dollar.

Strengthening the Legal and Judicial Systems. Poor economic governance and widespreadcorruption has flourished in Nigeria not only as a consequence of inadequate public accountingand auditing mechanisms, but also as a result of a wholly permissive legal system and aninefficient functioning of the judiciary. To improve economic management and foster goodgovernance, the FGN is resolved to undertake a comprehensive reform of Nigeria's legal andjudicial systems with a view to modernizing the existing legislation and improving the efficiencyof the judicial apparatus. Under the EMCAP, support would be provided to carry out preliminarydiagnostic studies which are required to assess the current constraints and the extent to whichthese impede the proper functioning of the legal and judicial systems. It is expected that theresults of these studies would lead to the formulation of a comprehensive legal and judicialreform program which would prioritize the actions needed to improve the performance of thelegal sector and provide a realistic sequencing for their implementation. Under this component,financing would be provided for 120 persons-months of local and foreign assistance for reform ofthe legal and of the judicial systems, training, workshops and study tours activities as well asurgently needed office equipment and law books. The component will be implemented primarilyby the Office of the Attorney-General of the Federation in close cooperation with the Office ofthe Chief Justice and in consultation with other key stakeholders including, inter-alia,representatives from Nigerian bar associations and law schools.

Support for the Project Unit. The Project Unit (PU) in the Multilateral Department of the FMFwill act as the Secretariat of the Project Steering Committee (PSC) for capacity building foreconomic matters and coordination issues and will prepare submissions on policy issues from thePSC to the Monetary and Fiscal Policy Committee as required. To carry out its functions the staff

10

of the PU will receive support for training in project management, credit negotiation andadministration; workshop facilitation; and procurement and disbursement techniques.

1. Key Policy and Institutional Reforms Supported by the Project:

The Project would encourage policy and institutional reforms at two levels. First, and this wouldbe the main goal of the Project, it would emphasize greater transparency and accountability infinancial management. Periodic publication of fiscal and financial data would be facilitated bythe Project. Timely and more accurate social and poverty-linked data would also be developedand disseminated. Based on this more transparent approach, accountability should be enhanced.Second, although only a start could be expected from this Project, there would be institutionbuilding. The Project would have a mid-term review in September 2002. This would be aboutthree years into the implementation of the overall program, and a similar period in office for thenew government. At that time, both the Bank and the government would review the progress ofboth the overall program and the Project based on the criteria established above (see section onperformance indicators, page I and Annex 3).

Secondly, at a micro level, the proposed Project would develop a stronger capacity for some keyinstitutions by providing appropriate technical and institutional development support. Keyexamples would be the development of the crucial IFEMIS system, a closer link between thebudget and the capital expenditure program as well as a more rational public investment program-both assisted by PERs - and a more transparent public procurement, accounting and auditingfunction.

Thirdly, the proposed Project would pave the way for a wide encompassing reform in the legalsector which could largely contribute to fostering good governance in Nigeria and strengthen thefoundations required for an expansion of the private sector as an engine of economic growth anddevelopment.

2. Benefits and Target Population:

The major benefits of the Project will be: (a) improved financial management; (b)enhancement of the FGN's capacity to implement and monitor macroeconomic and structuralpolicies, and the spill-over beneficial impact this could have on other departments of governmentat the federal level as well as the state and local governments; (c) improvement in the quality,consistency and timeliness of data for economic and social analysis; (d) greater transparency,accountability and probity in the FGN's fiscal operations; and (e) strengthened coordination ofdonor activities to the public sector.

The Project is targeted at key institutions to promote good governance in the public sector.It will address the needs and expectations of the population at large regarding the efficient use ofpublic sector resources and optimal delivery of services. It will also lay the fouildations forextending capacity building activities to other departments of the federal government as well asstate and local governments. The FGN and other stakeholders, public and private, would benefitfrom the Project. The rent-seekers and others who had in the past gained from weak economicmanagement and poor governance will be the losers.

3. Institutional and Implementation Arrangements:

Given the expected return of donor assistance to Nigeria, particularly in the area of

I1

economic governance, the overall coordination of the EMCAP and of other technical assistanceand capacity building projects in economic management will be undertaken by a SteeringCommittee chaired by the Minister of Finance. The authorities have informed the Bank that aSteering Committee for coordination of EMCAP and of all other technical assistance and capacitybuilding support in the area of economic management will be constituted. The SteeringCommittee is composed of the Minister of the NPC, the Minister for Integration and Cooperationin Africa, the Governor of the CBN, The Minister of Justice and a Representative of the SecretaryGeneral of the Federation. The Federal Ministry of Finance would serve as the Secretariat of theCommittee. Specific EMCAP coordination activities from all donor financing will be ensured bythe Project Unit in the MULT through a full time EMCAP Coordinator in the Project Unit. TheEMCAP Coordinator will be responsible for the management of the Project Unit and supervisionof Project Unit staff. The Coordinator, who has already been appointed, reports to the MULTDirector.

Project Management and Coordination. The performance of the Project Unit of the EMTAPwas reviewed during the EMCAP's project identification and was found to have fulfilledexpectations. Management of the EMCAP will be placed with the same group, currently underthe responsibility of the MULT. Staff in the Project Unit will be assigned full-time to theEMCAP. A project coordinator and a full time accountant are already in place.

As with the EMTAP, the Project Unit will play a number of crucial roles: (a) coordinating,facilitating, monitoring and evaluating performance of the other PEAs; (b) monitoring projectbudgetary allocations to the PEAs; (c) contracting a training specialist for a period of six monthsand a procurement specialist for a period of twelve months to assist the PEAS; (d) contractingexternal auditing services for EMCAP; (e) contracting external advisory assistance to help plan,organize, coordinate and monitor the work program of the Project Unit and of the PEAs; (f)organizing launch, procurement and other workshops with stakeholders for the Project; and (g)evaluating and building capacity in the PEAs to improve management and implementationcapacity for EMCAP.

The training specialist will assist the PEAs in the initial preparation of their training programs,including cost estimates, for the duration of the Project. These programs will be updated by thePEAs in the subsequent years as the need arises. The procurement consultant will assist inpreparing the procurement strategic plan for the Project, conduct on the job training forprocurement officers in the PEAs, and assist the PEAs in preparing relevant procurementdocuments.

The PEAs will have full responsibility for developing task proposals, drafting terms of reference,and for most procurement activities. For those PEAs that participated in EMTAP, sufficientcapacity has been built which will allow them to take advantage of EMCAP. Those that did notbenefit from EMTAP (National Assembly and NNPC) will receive the benefits of such anexperience through assistance from the Project Unit. The EMTAP has trained a cadre of Nigerianofficials in many government departments and agencies on World Bank procurement practices;and encouraged PEAs to shape their programs directly has proven to be important to developingstakeholder interest in the technical assistance efforts. A capacity assessment of participatingPEAs, which reviews the existing situation in terms of what currently exists in human resourcesand equipment, is included in Annex 12. The authorities have finalized the first year workprogram for each of the PEAs. These are included in Annex 13.

Project Monitoring and Evaluation. The Project Unit will monitor and evaluate the EMCAPimplementation and reform process and publish progress reports on a quarterly basis. It will also

12

step in to help PEAs that so request with assistance in implementing their components. TheProject Unit has developed an implementation manual to be used for all EMCAP donor financedactivities. The Project Unit will make available to all participating donors copies of the reportsproduced by consultants as well as those produced by donor supervision missions. Supervision ofthe Project will be carried out jointly with the Project Unit with a view to mutual learning andexchange to increase capability and develop a shared vision for the Project.

Project Account. The Project Unit will open and maintain a project account for each of thecomponents of EMCAP, with the approval of the OAGF, in an approved commercial bank. Thecounterpart contributions of the FGN will be deposited in the project account and disbursementsfor all PEAs will be made from this account. The counterpart funds should be deposited quarterlyat the beginning of each quarter. Funds in this account will be used exclusively for procurementand other authorized expenses under EMCAP.

Project Executing Agencies. The different sub-components of the EMCAP implementation andreform agenda would be implemented primarily by government institutions, particularly: (a) inthe FMF: the OAGF, PRS and MULT (as the Project Unit), (b) NPC; (c) FOS; (d) OAuGF; (e)the Ministry of Petroleum and Mineral Resources; (f) the Office of the Attorney-General of theFederation in close cooperation with the Office of the Chief Justice; and (g) the NationalAssembly. To ensure that the PEAs are sufficiently funded to successfully undertake thecomponents under EMCAP, the adequacy of their recurrent budgets was reviewed duringappraisal.

Financial Management and Auditing. The Project Unit will be responsible for ensuring thatfinancial management and reporting procedures for EMCAP are acceptable to all stakeholders.The Project Unit's financial management system will be strengthened in accordance with afinancial management action plan (FMAP; see Annex 14). The FMAP includes the establishmentof a project management committee, adequate staffing of the Project Unit with qualifiedaccountants, review and modification of the Financial Treasury accounting manual, establishmentof a fixed assets register for the capital expenditure component of the Credit as well as a contractledger, preparation of monthly, quarterly, and annual financial reports, and independentmonitoring by internal and external auditors. Given the need to train Project Unit staff in projectmonitoring report (PMR)-based disbursements as outlined in the World Bank LoanAdministration Change Initiative (LACI) handbook, existing disbursement procedures containedin the World Bank disbursement handbook will be initially followed, i.e., direct payment,reimbursement, and special commitment. A financial management review will be undertakenwithin 15 months of Credit effectiveness and if the results are satisfactory PMR-baseddisbursements would be in place within 18 months of Credit effectiveness.

Co-financing. IDA financing will amount to SDR14.4 million (about US$20.0 millionequivalent). Other donors will finance EMCAP in parallel. A number of prospective donors -DFID, EU, Government of Japan, and USAID - have expressed interest in participating inEMCAP. DFID, the EU and USAID participated in the Project's appraisal. Their foci andsupport were specifically quantified during the appraisal of the Project. Initial estimates of donorparallel financing of EMCAP, to be confirmed, are as follows: DFID US$3.5 million, EUUS$10.0 million and USAID US$6.8 million. A PHRD grant of US$0.4 million was approvedby the Government of Japan. The World Bank Institute (WBI) will undertake a transparencysurveys under the umbrella of EMCAP. Close collaboration and coordination with all donors willbe ensured through a project launch and subsequent, annual periodic review workshops as well asmid-term evaluation in September 2002.

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D. PROJECT RATIONALE

1. Project Alternatives Considered and Reasons for Rejection:

Broad vs. Focused Approach. Many successful technical assistance projects focus on only oneor two weaknesses; but this Project will have a relatively broad agenda. The choice of such abroad strategy was based on Nigeria's needs and the relative success of the prior, broad EMTAP.Nigeria's public sector has insufficient qualified staff in many critical areas such as economic andpolicy analysis, financial management and information systems. This weakness, combined withdeficiencies in planning, budgeting, and monitoring, has created a systemic problem. Thebalance of payments situation is unknown because of poor trade and debt reporting. The poortrade data have made it difficult to arrive at an independent assessment of the customs receipts,and that, in turn, has contributed to poor fiscal data. The poor fiscal and trade data are majorreasons why Nigeria's system of national accounts is so uncertain. The FGN's main goal - amajor increase in transparency and accountability to improve economic governance - can onlybe addressed by attempting to improve key data. And these can only be improved if the systemslinked to them are also improved. Finally, the chronic weakness of Nigeria's economic systemsstems from past arbitrary and corrupt decision-making; from investment project selection to taxcollection; from resource allocation to procurement. A more targeted project approach wouldprobably not be able to address sector-wide systemic weaknesses in those key institutionsresponsible for economic management and good governance. The experience provided byEMTAP shows that when a broad approach focused on the establishment of key objectives isadopted, the envisaged results can be achieved.

Large Project vs. Program. Another approach considered was coalescing the total FGNprogram into one, large World Bank project, with co-financing by other donors for thosecomponents in which they were interested or had a comparative advantage. This approach wasrejected for the present smaller programmatic approach with parallel financing, since somedonors have to follow their intemal procedures prior to engaging in new operations with the FGN.Moreover, the proposed approach (a) constitutes a first step in addressing economic governanceissues; (b) would be coordinated by a Steering Committee for all economic governance initiativeswhile using a single Project Unit for all EMCAP components, and (c) flexibly permits adjustmentby the Administration as it focuses on its relative priorities.

2. Major Related Projects Financed by the Bank and/or Other Development Agencies:

Sector issue Project LAteSt Supervision (Form 590)Ratings

.nplementation DevelopmentPrwens (IP) Objective (DO)

Bank-financedPublic Sector Management EMTAP (NG-LL64605) S SPublic Sector Management NG-IDF-TF27203 National Capacity S S

AssessmentOther donor agenciesUpdating of External Debt DFID NA NAPublic Sector Management IMF/UJNDP NA NA

P/IDO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory), NA (NotApplicable)

14

Address a Large Number of Issues of Governance vs. Springboard for Reforms.Consideration was also given to potentially addressing a large number of key governance issuesin the Project in order to achieve full success in that area. Significant preparation is needed tofully address the issue of governance in all these areas. However, this Project on its own cannotachieve full success in this aspect. Moreover, the issue of incentives will not be addressed until acivil service reform program is advanced by the FGN. EMCAP could serve as a springboard forreforms in the civil service (review of incentives) as well as in other areas such as the legal area(modernization of the existing legislation, regulations and practices which provides theframework for the operation of private sector participation in the economy), judicial area(conditions of service for judges and logistical support for courts), tax policy (taxation ofpetroleum, trade taxes, and the system of state and local taxes) and fiscal decentralization. Thus,studies to formulate further reforms in these areas have been included in the Project.

3. Lessons Learned and Reflected in the Project Design:

It has been difficult to achieve lasting, measurable results in Nigeria's public services from priortechnical assistance efforts. Regional and ethnic rivalries have, in the past, intrudedunpredictably. Frequent changes in both civilian and military governments led to shifts inpolicies and programs, often with adverse results. Recent experience with EMTAP has shownthat it is of critical importance to have an enabling institutional environment of borrowercommitment. This would entail consensus among Ministers and heads of agencies to ensuresuccessful project implementation. It is also essential to have well defined project objectivesdeveloped by involving all major stakeholders in their design and owned by the PEAs, a strongProject Unit, and active and intensive Bank supervision. In addition, during EMCAP'spreparation, lessons learned from the Bank's Operations Evaluation Department's findings,particularly with Ghana and Uganda as well as those derived from freestanding technicalassistance for institutional development in Sub-Saharan Africa, were incorporated.

Important additional lessons from EMTAP and other projects include:

(a) a medium- to long-term strategic approach to capacity building and technical assistanceis needed. This Project proposes medium- and long-term processes to particularly addressunderlying systemic constraints and necessary institutional changes to improve economicgovernance. Following-up on EMCAP's participatory project design, a project launch workshopwill be held with the participation of the heads and counterpart staff of all PEAs and otherstakeholders, including the private sector;

(b) strong discipline in the implementation process needs to be established to ensureprogress towards long-term objectives and a periodic reassessment of all significant projectelements. For this approach to work, careful planning and preparation and strong projectmanagement are needed. A main emphasis of the Project is therefore to establish a strongplanning process, up-front preparation of work programs and terms of reference, theestablishment of clear monitorable targets for performance by each PEA and a comprehensiveproject management system that is able to effectively evaluate and monitor implementationprogress. A strong, highly competent and well-staffed full-time Project Unit will be essential toundertake these tasks. PEAs will need to draw up their detailed work program for each year,specifying measurable outputs, with the work programs rolled over approximately every sixmonths during supervision. PEAs that fail to perform will be excluded from further funding;

(c) up-to-date reporting on project finances is also essential to ensuring that theimplementation process is on track. This issue will be addressed by contracting a full-time

15

accountant and requiring monthly reporting ex-post on project disbursements based on eachyear's agreed implementation program. Quarterly auditing of the project accounts will certify theeffective and efficient utilization of resources;

(d) overseas training should only be provided when there is a real need and selection oftrainees should be carefully screened. EMCAP will address this issue by engaging a specialtraining advisor to help PEAs maximize the project-related benefits of the proportionately smalloverseas training allocation in the Project. The training advisor will assist the PEAs in drawing-up their yearly training programs, based on training abroad and locally. The training advisor willalso help local training through NCEMA and other training parastatals to ensure that theserespond and are linked to the agreed annual work programs and monitorable targets. The WBIwill have an advisory role in addressing the training components;

(e) significant attention will be required to coordinate the various donor financed activities,particularly emphasizing those aspects that are critical to support the success of the FGN'seconomic program. In addition to the launch workshop, annual review workshops will beundertaken with the participation of all the program's stakeholders and the contributing donoragencies; and

(f) the results of EMCAP's activities would be made public so that all stakeholders and thepublic at large are aware of implementation progress. The launching workshop, together withother workshops, should be undertaken with the participation of other stakeholders.

4. Indications of Borrower Commitment and Ownership:

As noted earlier, the democratically-elected government has demonstrated by announcements andactions that it is fully aware of the domestic and external consensus that the FGN mustdemonstrate a major improvement in its economic governance it if is to retain any credibility withits citizens and external supporters. Moreover, since the present balance of payments conditionswill require access to official external resources if economic growth is to be accelerated, theauthorities have a strong incentive to address the issues of economic governance. Bankpreparatory missions have had strong support in project identification and preparation fromNigeria's civil service. This strong support will likely continue, since only by the provision ofaccurate and transparent information, widely disseminated, can an objective civil service expectto operate in a professional manner. To a great extent, improved economic governance willempower the most professional elements of Nigeria's civil service. A program "launch," whichwould include all the program's PEAs, stakeholders and potential donors, would provide a furtherchance for ownership to be expressed. The "launch" workshop would be scheduled followingBoard approval of the Credit.

5. Value Added of Bank Support in this Project:

The Bank, together with staff in relevant government agencies, took the lead in identifying andpreparing EMCAP. Bank staff briefed other donors extensively on the FGN's efforts tostrengthen economic governance, and have encouraged them to consider supporting EMCAPcomponents and other components in the overall government agenda. Given delays of bilateraldonors in assisting Nigeria, this Bank effort would help establish the institutional framework forthe FGN to access external support, besides helping the new government shape its own technicalassistance priorities. The project "launch" should also benefit new officials and potential donors.The Bank's experience with economic management projects should also assist the Nigerian effortto strengthen economic management; it has already affected the conceptual design of the different

16

components of the program. The proposed design also reflects specific lessons from EMTAP.Particularly, the integrated approach is based on clear roles, mandates and operational objectives,and the building of strong stakeholder commitment during project preparation.

E: SUMMARY OF PROJECT ANALYSIS

1. Economic:

[ ] Economic Analysis (not applicable)

The Project will strengthen economic governance, through increased transparency, accountabilityand probity in public sector financial operations. This should not only improve economicmanagement directly, it should increase the domestic and external credibility of the FGN as adevelopment agent, increasing the resources available to the nation. It will also lead to increasedcoordination in public sector financial management and redirection of spending priorities in thedirection of human capital development and poverty alleviation, which in turn will lead toincreased private sector confidence, increased private investment and, thus, more rapid andbroad-based growth.

2. Financial:

The Project is expected to have a strong, positive medium-term fiscal impact. Improved fiscalmanagement coordination will lead to savings in government operations. Enhanced credibilityshould lead to a considerable increase in fiscal receipts.

3. Technical:

The proposed project design which aims at building capacity and processes in Nigeria's keyinstitutions of good governance corresponds to public sector management standards developed insimilar projects in other parts of the world. The design also reflects the FGN objectives ofmodernizing the public sector in order to provide better and more efficient services. Institutionalcapacity assessments have been undertaken.

4. Institutional:

The capacity to manage a comprehensive program and the ability to integrate the added capacityinto day-to-day operations are of crucial importance for the success of the Project. The presenceof the Steering Committee would greatly improve institutional coordination and accountability.

5. Social:

The Project will restore the credibility of the government in public administration and provisionof social and economic data, which in turn would facilitate adoption of programs that willaddress public needs.

6. Environmental Assessment:

Environmental Category []A ] B [x] C

The Project has been rated as environmental category C, with no adverse environmental impact.

17

Table 2: Levels of Stakeholder Participation

Stakehoiders and Benericiaries Preparation Impleinentation OperationOffice of the Presidency, Cabinet COL COL COLMinistries, Departments, Agencies CON/COL COL COLPublic Managers CON/COL COL COLPublic Servants is CON/COL CON/COLPrivate Sector CON CON CON/COLParliament CON/COL CON/COL CON/COLSociety is IS IS/CONOther Donors ISiCON/COL IS/CON/COL IS/CON/COL

COL: Collaboration: CON: Consultation; IS: Information Sharing

7. Participatory Approach:

The project design reflects the need to build internal and external support for the different sub-components of the program to strengthen economic management. Lessons learned from EMTAPindicate that poor ownership and weak involvement of stakeholders adversely affect theachievement of results. Key stakeholders have been involved at every stage in the formulation ofthe EMCAP. Project funds will support a wide range of stakeholder activities (e.g., workshopsand publications). Table 2 below provides an overview of the stakeholders and the level of theirinvolvement. During project preparation, all key elements of the program were discussed withvarious stakeholders. The input that was provided has been built into the Project.

F. SUSTAINABILITY AND RISKS

1. Sustainability:

Critical factors for the sustainability of project benefits are:

Degree of FGN Commitment During Implementation of its Economic Program. Thecontinued commitment of the FGN to improved economic governance-increased transparency,honesty, and accountability-will be crucial to the project's success.

Building Enduring Ownership and Support. It is crucial to maintain a participatory approachinvolving all relevant stakeholders during and beyond implementation of the capacity buildingprogram. It will also be crucial for Nigerian citizens to develop a stronger demand for transparentand accountable economic management. Comprehensive institutional and systemic changes,which are part of the program's agenda, will only be effective if they are widely publicized,accepted and integrated into day-to-day operations. The FGN must therefore continue toeffectively build ownership and internal/external support for the different sub-components of thecapacity building program after completion of the Project. At an institutional level, mechanismsfor internal feedback and opportunities for process innovation need to be established to increasemotivation and to provide upward feedback to management.

18

2. Critical Risks:

Political comnmitment for implementation H Continued high-level dialogue with FGN to maintain itsof the program is not maintained commitment. If commitment lags, mid-term pause allows

deferral of further support

Stakeholders and public sector agencies are M Build mternal and external support for capacity building;not responsive to the program, they do not ensure stakeholder participation during project design andsufficiently support it implementation. Specify performance indicators relevant to

development objectives, outputs, outcomes, and impacts foreach relevant sub-component as well as measuring tools

Capacity (managerial, staff) to implement M Build into the program a substantial amount of training,a comprehensive capacity building and coaching and technical assistance. Introduce the anmual worktechnical assistance program is not program to serve as a combination planning, implementationadequate and monitoring tool. WBI will advise in training.The implementation of financial M Continued dialogue to stress the importance of the IFEMISmanagement reforms (particularly the and PER in strengthening fmancial management; donor linkIFEMIS and PER) does not progress as to well-prepared projects; expanded monitoring andexpected evaluation; Bank's commitrnent to provide substantial

budget resources to project supervisionNew systems do not adequately address the H Extensive stakeholder participation during project design andneeds of the public sector environment, implementation. Comprehensive training to use new systems.and are thus not sufficiently used Steering Committee coordinationTurnover of key personnel substantially H Review of incentives based on recommendations of civilharms/delays the implementation process service studies. Minimize the movement of officers involved

in economic management (current practice is for officials tobe moved on a two-year cycle). Increase and extend training.

RiskRatings: H (High Risk), S (Substantial Risk), M (Aodest Risk), N (Negligible or Low Risk)

The Project is a risky one. Prior efforts at improving economic governance in Nigeria haveshown mixed success. Government priorities and policies can and do change. Petroleum pricescould rise substantially and remain at relatively high levels, thus diminishing the incentive tofollow transparent policies. Even with a continued political will, implementation may beaffected, in particular because of continuous turnover of key personnel and insufficientcommitment to implement a comprehensive program in the OAuGF. The design of the Projectreflects this overall risk assessment: there are a number of high priority areas in the Project whoseimplementation will test the FGN's commitment and growing capacity. Their successfulimplementation would pave the way for the implementation of key aspects of other components,thus reducing later risk. The systemic nature of the Project will make overall evaluation ofprogress towards improved economic governance easier to measure. Thus, if, in spite of a strongeffort, the commitment to reform lags, the mid-term review of the Project would allow bothparties to note the lag and defer further technical assistance until agreement is reached on aresolution of these issues. Donor assistance to be attracted should reinforce the dialoguesupporting reform. EMCAP supervision missions will particularly focus on monitoring the risksof the Project.

19

Possible Controversial Aspects:

.... ... .......... . .... a ~ a r

Major incidents of corruption occur, are G H Breadth of program and donor support; clearhighly publicized, but little action is taken by understanding on key project goal - improvedappropriate authorities economic governance; mid-term review.

Type of Risk. S (Social); E (Ecological); P (Pollution); G (Governance); M (Management Capacity); 0 (Other).Risk Ratings: H (High Risk), S (Substantial Risk), M (ModestRisk), N (Negligible or Low Risk)

G. MAIN CREDIT CONDITIONS

1. Effectiveness Conditions:

To ensure prompt implementation of the Project, all prerequisite actions have been completed,including (a) the appointment of a short-term training specialist and a short-term procurementspecialist in the Project Unit; and (b) preparation of the project implementation plan/manual; (c)issuance of a Letter of Sector Policy; and (d) appointment of independent auditors.

2. Other:

(a) Adequate staffing and logistical support of the Project Unit and of thePEAs to ensureeffective project implementation and monitoring will be constantly reviewed by supervisionmissions; (b) opening of project account and deposit therein of initial amount equivalent toUS$250,000; (c) adequate staffing and logistical support of the Project Unit and of thePEAs toensure effective project implementation and monitoring will be constantly reviewed bysupervision missions; (d) maintain policies and procedures adequate to enable it to monitor andevaluate on an ongoing basis, in accordance with the indicators set forth in Annex 1, the carryingout of the Project and the achievement of the objectives thereof; (e) prepare, under terms ofreference satisfactory to the Association, and furnish to the Association each year, a reportintegrating the results of the monitoring and evaluation activities performed pursuant to section(f) above, on the progress achieve in the carrying out of the Project during the period precedingthe date of said report and setting out the measures recommended to ensure the efficient carryingout of the Project during and the achievement of the objectives thereof during the periodfollowing such date; (g) review with the Association, every year, the report referred to in section(e) above, and thereafter, take all measures required to ensure the efficient completion of theProject and the achievement of the objectives thereof, based on the conclusions andrecommendations of the said report and the Associations view on the matter; (h) carry out withthe Association, no later than September 30, 2002, a mid-term review of the progress made incarrying out the Project; and (i) carry out, no later than one month after the completion of themid-tern review referred to in section (h) above, the recommendations of said review, as agreedupon with the Association and as set out in an action plan satisfactory to the Association..

H. READINESS FOR LIMPLEMENTATION

[x ] l(a) The documents for the first year's activities are complete and ready for the start ofproject implementation.

[xl 2.(b) Not applicable.

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L. COMPLIANCE WITH BANK POLICIES

[xl 1. This Project complies with all applicable Bank policies.

[ ] 2. The following exceptions to Bank policies are recommended for approval. The Projectcomplies with all other applicable Bank policies.

[xl 3. The Project Implementation Plan has been appraised and found to be realistic andsatisfactory.

[1 ]4. The following items are lacking and are discussed under Credit conditions (section G):

Jose B. SokolTeam Leader

[signature]Charles P. HumphreysSector Manager

Yaw AnsuCountry Director

Annex 1Page 1 of 2

Annex 1: Project Design Summary

Nigeria: Economic Management Capacity Building Project

. ;g g>. <. g > , ........................................ ,g ............ > ,, ,, , e . ... .. . . .. ....ota 2'B Bo ........................... ...... . . ... ....... ... ...... .. .. ............. c. .... - ;

CAS under preparation with the Improved economic Mid-term review of Government would undertakedemocratically-elected governance: (a) detailed EMCAP by September systemic attack against prior non-government. Country team and corruption surveys; (b) 2002. transparent procedures; that aNigerian President, however, periodicity, transparency and stronger constituency for honestyhave stressed goal of major reliability of published fiscal and accountability will be fosteredimprovement in economic data; (c) evaluation of public in the country.governance. expenditures as well as

strengthening of soundprocurement, accounting andauditing practices; and (d)vigor and robustness ofenforcement actions involvingcorruption incidents.

Government's overall program Actual and perceived Two transparency surveys; Govenmment commitment-would produce improved improvement in transparency quarterly and annual ownership remains strong;economic govemance and and accountability; greatly reports from PEAs and implementation not deterred byimproved tools (especially data) improved economic data Project Unit; Country too frequent staff transfers; otherfor economic management. published periodically; Economic Memoranda; donors support program

stronger capacity to undertake supervision and Resident components in a timely, effectivepolicy analysis. Mission reports, and mid- manner.

term evaluation.

Improve fiscal infornation and Have first phase IFEMIS in Quarterly Project Unit Continued strong governmentmanagement. place and publish data. reports; receipt of commitment to goal of project;Evaluation of public Solid economic justification publications from Project aggressive support from Projectexpenditures in light of for capital projects. Unit; supervision and Unit to PEAs; ownership of sub-announced and agreed priorities, Publication of timely Resident Mission reports. components by PEAs;particularly in improving capital economic, social and poverty supplementary budget resourcesproject choice, financing and data. as required by PEAs.implementation. Publication of candid OAuGFImprove policy analysis and audits; penalties for majorcoordination in govenunent. violators.Update and publish better social Completion of joint reviews.and poverty statistics.Increase accountability forpublic malfeasance.Review of petroleum sector.

Annex 1Page 2 of 2

Component ~~~~~~~~~~~~~...........

0_ ...................... - ............... j ...................... j..... . .............. ,2>

government; improved policy strategy approved. Project Unit; supervision analytical work.studies for government by PCU. reports; policy documentsImproved public expenditures, Budget has only capital PERs; quarterly Project Collaborative association betweenparticularly capital project projects approved by NPC; Unit reports. NPC and Budget Office; PERs wellchoice; link between NPC PERs. done; government resists furtherproject approval, and capital and "prestige projects."recunent budget formulation.Development and use of first Annual publication of Supervision and Resident IFEMIS can be assembled timely,phase of IFEMIS; publication of budget; annual and quarterly Mission reports; quarterly mostly from preexisting systems;budget (and outturn) data. publication of budget reports of Project Unit. government supports transparency

revisions and outcomes; effort.inclusion of all expenditureand receipts in publications,if not formal budget.

Publication of updated and Quarterly publication of Periodic Project Unit FOS priorities change to reflectimproved national income relevant economic indicators; reports; Country new demands for economicaccounts and associated annual publication of Economic Memoranda; statistics; FOS staff can workeconomic statistics, social and national income accounts; supervision reports; and. quickly to finalize survey data andpoverty statistics. updated Minimum Social assessments by main users publish them; donor assistance

Data Set published by end- in government. Annual provided in a timely manner.2001; 2000-2001 poverty publication of poverty andprofile published by mid- social statistics.2002; poverty monitoringindicators developed; andhousehold survey dataarchived and publishedperiodically.

Timely audits of government Audited fiscal accounts for Project Unit reports; Auditor General will have politicalministries and departments. 1999 produced by 2000; supervision reports; mid- support in producing candid reports;

subsequent fiscal audits term project evaluation. fiscal accounts are closed in a timelyproduced in similar manner, manner, first phase of IFEMIScandid audits with clear operational by end-2001.conclusions. Penalties formajor violators and action bythe Executive Branch toremedy deficiencies in controlsystems reported by theOAuGF.

Training courses for civil Satisfactory completion of PEA reports to Project Govemment departments will freeservants and public economic number of courses for Unit; supervision reports. staff and managers to attend courses.managers. officials in the training

program.Improved execution of Reduced amount of problem NPC reports; supervision Improved training and exposure ofextemally financed projects. projects as ranked by missions. NPC staff is useful.

creditors.Timely and effective Project ranked as satisfactory; Project Unit reports; Staffrng of Project Unit will beimplementation of EMCAP. no delay in project audits; supervision reports. satisfactory; strong government

satisfactory quarterly and commitment to project; goodannual reports from Project relations between Project Unit andUnit. PEAs.

Annex 2Page 1 of 18

Annex 2: Detailed Project Description by Components

Nigeria: Economic Management Capacity Building Project

Introduction

After initial success in undertaking structural adjustment reforms starting in 1986, abandonment of reformefforts in 1992 led to years of slow and stagnated growth, inflation and increased poverty. Thesedevelopments left the economy weak and highly vulnerable to the precipitous decline in oil prices thatbegan in late 1997 and which continued through early 1999.

Though the FGN achieved initial success in stabilizing the economy during the late 1990s, economicactivity continues to be undermined by a weak capacity for managing the economy, misplaced budgetpriorities, inadequate financial management information, weak institutions, large delays in the auditedaccounts of key government agencies, inadequate accounting and monitoring of public expenditure,outdated and deficient procurement practices, not readily available and weak statistical informationproduced with major lags, insufficiently trained staff, insufficient focus on key economic governanceissues, and corruption. The enabling environment for the integrity and performance of the public financesis very weak. The resolution of these problems is key if Nigeria is to move to a rapid path of growth andpoverty alleviation. However, a quick fix is neither envisaged nor feasible since addressing all of theseissues will require time. The announced intentions and recent actions of the democratically electedgovemment of President Olusegun Obasanjo in the areas of govemance, economic management andpoverty alleviation, give evidence of a new beginning for Nigeria.

Sector Issues to be Addressed by the Project and Strategic Choices:

Since the FGN wishes to address issues of general economic governance and management quickly, thefocus of EMCAP is mostly financial, social and institutional. It is financial mismanagement andcorruption that have led to poor economic performance; and it is the lack of transparency-indeed, ofbasic, reliable economic and social information-that has led to a severe loss of developmentalcredibility. Nigeria's system of national accounts has been grossly miscalculated because of poor trade,fiscal, and monetary data. Recent social statistics data is not readily available. Poverty statistics do notreflect developments in agriculture as well as the informal sectors. Accounting and auditing capabilitiesare also weak. Nigeria has not closed, audited or published its fiscal accounts in four years. There arealso major delays in the auditing of the accounts of the parastatals, particularly of the NNPC. Moreover,public expenditure priorities do not reflect the FGN's objective of broad-based growth and povertyalleviation. Expenditures are not efficiently allocated to areas that help accelerate development andpoverty alleviation. Project monitoring is deficient. Adequate policies in key areas critical for goodeconomic management - civil service reform, fiscal federalism, reform of the legal and judicial systems,procurement and tax policy - are yet to be developed. In addition, the existing data produced in keyfinancial management agencies of the FGN are not reconciled, integrated nor shared among differentgovernment departments.

Poor and, in some cases, nonexistent data have partly contributed to corruption and mismanagement.Although the problems in strengthening the data in the FGN are not uniform, EMCAP's emphasis will notonly be on better data and processes to provide and disseminate such data, but on institution-building toensure consistency and sustainability in its production. Based on this strategic choice, eight distinct areasof technical assistance and capacity building have been identified consistent with the above focus:improvement of statistics, improving and monitoring of public expenditure, monitoring and accounting of

Annex 2Page 2 of 18

fiscal operations, comprehensive audits and reforms in the NNPC, strengthening the procurementactivities in the public sector, key reform policies critical for economic management, an adequateinformation management system, and the monitoring of these activities.

A second series of strategic choice stems from the size of the ambitious effort required by Nigeria.During the identification of Nigeria's technical assistance needs, it became apparent that Nigeria couldusefilly spend a much larger amount than can be provided by EMCAP and that the technical assistancerequired would demand a major labor and skills-intensive effort perhaps beyond the capacity andexpertise of any single external supporting agency. Fortunately, there is strong interest among bothmultilateral and bilateral agencies to assist the FGN in addressing the issues of governance and economicmanagement. Thus, the Bank is able to concentrate on some key areas where it has a comparativeadvantage.

In parallel, the IMF, with assistance from the UNDP and the Government of Japan, has identified otherareas (mostly, macroeconomic monitoring, central banking, budget preparation and execution andpayments processes, as well as fiscal, monetary and balance of payments data) where it has a stronginterest and will be undertaking them in a separate project that is expected to commence in 1999. TheUnited Kingdom has already begun its support, particularly in updating and improving the quality of theexternal debt data, beginning with the production of the 1992-98 external debt information, and instrengthening capacities in these areas in both the FMF and the Central Bank of Nigeria.

There are a number of other key areas vital to address the issues of transparency, accountability andprobity in which the FGN needs assistance. These include: tax administration, budgetary systems in theministries as well as expenditure priority setting in state and local govemnments, customs administration,and development of information systems in the CBN and other departments of the FMF. Other donorssuch as the Department for International Development of the United Kingdom (DFID), European Union(EU), African Development Bank (AfDB), the United States Agency for International Development(USAID) and Switzerland, with whom we have been discussing these issues, are expected to providesupport in the above mentioned areas.

Program Description:

The proposed EMCAP Project is an essential step in addressing issues of economic governance andmanagement, but with a much stronger emphasis on institutional development and capacity building. TheProject was identified in parallel with government efforts to improve economic governance. Within thebroader efforts of the FGN that address economic governance issues, EMCAP will concentrate on certainhigh priority areas which require rapid resolution: (a) improvement of the national accounts, price, socialand poverty statistics in the FOS; (b) improvement and monitoring of public expenditure in the NPC; (c)monitoring and accounting of fiscal operations in the OAGF, in the OAuGF, and the National Assembly(including training for Federal and State parliamentarians); (d) support comprehensive (financial,operational, technical, and legal aspects) audits and reform in the NNPC; (e) strengthening theprocurement activities in the public sector; (f) strengthening of the policy development capabilities of thegovernment in order for it to focus on key reform policies critical for economic management, includingthe use of distance learning facilities; (g) supporting the design and implementation of the initial phases ofan IFEMIS which would institutionalize and rationalize statistical management within core financialinstitutions of the government; and (h) support for a Project Unit to accelerate preparation as well as tomonitor activities in the other agencies and departments involved in the program. An IDA ProjectPreparation Facility (PPF) is supporting project preparation activities, as well as a PHRD Grant from theGovernment of Japan.

Annex 2Page 3 of 18

Project Description

EMCAP would support and strengthen capacity building efforts in the above eight areas discussed belowby providing assistance in six specific types of activities: (a) local and foreign training; (b) on-the-jobtraining; (c) twinning arrangements; (d) publication and dissemination, direct publications andworkshops; (e) consultancy for technical assistance and studies, including audits; and (f) equipment.

Main Cost ComponentsEMCAP Cost Estimates (US$ million)

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Improvement of Statistics _ 3.23 4.31 0.97 8.51Statistical management 0.08 -- - 0.08Economic statistics 3.00 0.85 3.85Price statistics 0.15 -- -- 0.15Social statistics -- 1.06 0.02 1.08Poverty statistics 0.85 0.10 0.95Field services 2.40 -- 2.40

Improvement and 2.12 0.42 0.40 2.94Monitoring of Expenditure

PER 0.83_ 0.42 0.16 1.41Monitoring of the PIP 1.29 --- -- 0.24 1.53

Monitoring and Accounting 5.17 1.28 0.64 7.09of Fiscal Operations

OAGF 1.84_ -- 0.32 2.16OAuGF 1.83 0.28 0.32 2.43National/State Assemblies 1.50 1.00 -- 2.50

Review of Petroleum Sector 3.00 -- 0.53 3.53Strengthening Procurement 2.50 -- -- -- 0.44 2.94Strengthening Policy 2.00 0.17 0.57 5.25 0.87 8.86Development Capabilities

Civil service reform 0.50 -- -- -- 0.01 0.51Fiscal federalism: capacity -- 0.57 -- 0.01 0.58building assessmentFiscal federalism: tax policy 0.50 -- 1.34 0.01 1.85and revenue sharingLegislative capacity building -- 0.50 0.01 0.51Private sector development -- 1.40 0.01 1.41Corruption survey 0.17 0.22 0.01 0.40Transparency audits -- 0.15 0.01 0.16Trade policy 0.39 -- 0.39Training 0.45 -- 0.45At a Distance Learning 1.00 -- -- 0.80 0.80 2.60

IFEMIS -- 0.40 2.05 - 0.07 2.52Strengthening Legal and 2.00 -- 0.84 0.02 2.86Judicial SystemsProject Unit 1.46 -- -- 1.10 _ 0.26 2.82Total Baseline Costs 18.25 0.57 3.23 9.29 6.53 4.20 42.07Contingencies 1.75 -- 0.27 0.71 0.27 0.63 3.63Total Project Costs 20.00 0.57 3.50 10.00 6.80 4.83 45.70

Note: Differences due to rounding.

Annex 2Page 4 of 18

EMCAP's total cost has been estimated to be around US$45.7 million, to be implemented over a periodof five years. Donor parallel financing would be as follows: the UK's DFID US$3.5 million, the EUUS$10.0 million, IDA US$20.0 million, the Government of Japan US$0.4 million, and USAID US$6.8million.

Improvement of Statistics

The statistics component will strengthen capacity in the management, collection, preparation, analysis andtimely dissemination of statistical data produced by the FOS. It aims at assisting the FOS to strengthen itscapacity to improve the quality of the statistical base necessary for economic management, specificallythe national accounts, consumer price data, external trade, poverty and social sectors statistics, to developcapacity and secure the commitment needed to bring Nigeria into full compliance with the GDDSrequirements as developed by the IMF.

The component would provide financing for a total of 101 person-months of local and external assistance(2 for a management review, 63 in the area of the national accounts, 4 for price statistics, 2 for dataprocessing, 15 for the social statistics, 15 for poverty monitoring), 5 person-months of training, 9 person-months of twinning arrangements, 2 person-months for workshops, improvement and publication of data,and equipment. Immediate tasks to be undertaken include conducting an input, process and dataassessment, reviewing the methodology for preparing the national accounts, social and poverty statistics,identifying needs and preparing a detailed work program for the component and terms of reference for theconsultants.

Project support for the economic statistics sub-component will be provided in two phases. Thepreparatory phase will assist FOS design a comprehensive work program for the improvement ofeconomic and social statistics. The implementation phase will reflect the findings of the initial phase, andwill be carried out with a view to: (a) improving the quality of the statistical base and the timeliness of theinformation needed for economic management; (b) securing commitment and developing capacity tobring Nigeria into full compliance with the GDDS; and (c) regular publication of the improved dataseries.

Preparation of firm estimates of the cost of this component will be determined by the findings andrecommendations of the short-term consultancy. The estimates provided at this stage are therefore subjectto change in the light of such findings and recommendations.

Economic Statistics and National Income Accounts. Implementation phase:

Consultants: will review the current situation and make recommendations to (a) establish a set ofpriorities in the FOS reflecting the priorities set by users for timely high-quality statistics; (b) strengthenthe collection system for data feeding into the national accounts; (c) expedite the transmission andprocessing of collected data; (d) strengthen the collection system for data provided by other governmentdepartments and parastatal agencies; (e) establish a system for the timely production of reliable quarterlyGDP output and expenditure estimates; (f) introduce key concepts of the 1993 Survey of NationalAccounts with particular reference to the GDP output and expenditure estimates; and (g) improve theuser-friendliness of the publications.

Training: a significant proportion of training will be destined for internal training of support staff tohandle automated systems.

Annex 2Page 5 of 18

Equipment: this will comprise computers, some of which should be portable, printers, transport to link thelocations in Lagos, to allow more field trips, and to speed up the delivery of results from the enumerationareas to the central processing points.

Consumer Price Data. The official monthly consumer price index (CPI) based on a survey of rural andurban consumer prices is produced with about one month's lag (down from eight to nine weeks delayearlier and up to six months delay a few years ago). However, consumption weights used are still basedon the 1985/86 National Consumer Survey and, in the past, a full sample of the survey data has not beenutilized in constructing the CPI data owing to lack of capacity to process large amounts of data. The FOSalso collects some data on producer prices, but these statistics are not comprehensive and no producerprice index is compiled. As a consequence, some sectoral GDP deflators are not based on producerprices, but on consumer price sub-indices and somead hoc assumptions. The cost data for the oil GDPdeflator are based on observed data of the early 1990s, extrapolated for subsequent years, Theexpenditure deflators also suffer from similar methodological shortcomings.

This component consists of: (a) financing of short-term external and local consultants to help upgradecollection of retail prices; (b) reducing the lag in producing the CPI; (c) producing the Producers PriceIndex; (d) training of FOS staff locally and abroad; and (e) providing vehicles and equipment.

Social Statistics. "Social Statistics in Nigeria" is a major publication of FOS intended to provide data forthe computation of indicators to permit the public to monitor and measure the fruits of economic growthand social development. In particular, such indicators if available, would allow reasoned judgments to bemade concerning the outcomes of major policy initiatives such as the initiation or the abandonment ofeconomic reform programs. The inputs into this publication are the results of the household andexpenditure surveys, and the administrative records of FGN agencies and parastatals. Because ofdeficiencies in administrative records and weaknesses in the processing of the household and expendituresurveys, the last printed copy of "Social Statistics in Nigeria" is for 1994 and has only recently beenpublished. The years 1995-1998 exist only as file copies.

The social sectors statistics component will concentrate on the following tasks: (a) assessing the socialsectors data; (b) reviewing the methodology for generating social indicators; (c) updating the publicationof the backlog; and (d) producing a minimum social data set (MSDS). Support will be provided throughtechnical assistance, training, workshops, twinning arrangements and equipment. The component willfinance 15 person-months of international consultancy to assess the quality and relevance of existingsocial data and collection method, to review the methodology used for the generation of such socialindicators, and to provide training in these aspects, 10 person-months of external training, and 6 person-months for twinning arrangements.

Poverty Monitoring. With World Bank assistance FOS has carried out poverty analysis, creatingpoverty profiles for 1986, 1992 and 1996 that were used as inputs to a joint FGN/Bank PovertyAssessment. Subject to considerable uncertainty because of data problems, the profiles indicate thatpoverty decreased between 1986 and 1992, but has increased again by 1996. Although FOS' capacity forpoverty data analysis has improved, more needs to be done for it to be able to track poverty and socialconditions in the timely manner needed to thrust poverty reduction to the center of policy making inNigeria.

The poverty monitoring component will: (a) develop poverty monitoring indicators, including a CoreWelfare Indicators Survey (CWIC); (b) support work leading to rural poverty and agricultural sectoranalysis through the linkage of past agricultural and consumer surveys; (c) integrate qualitative aspects ofpoverty through a national survey; (d) conduct gender-related analyses from existing surveys; (e) promote

Annex 2Page 6 of 18

closer attention to user needs and improved data dissemination to policy makers and to the public; and (f)prepare the 2000-01 poverty profile using the National Consumer Survey. Support will be providedthrough technical assistance, training, workshops and equipment.

In terms of technical assistance, a 5 person-months international consultancy will help develop povertymonitoring indicators as well as assisting in the preparation and testing of the CWIC, a 4 person-monthslocal consultancy will help link agricultural surveys with the national consumer surveys in order toproduce a rural poverty report and to test and analyze a revised questionnaire on a small sample, a 5person-months international consultancy will help integrate qualitative aspects of poverty analysis, testthe instruments before a national survey on qualitative aspects is undertaken by the FOS, and a 1 person-month local consultancy will conduct gender analysis from existing surveys and train FOS staff in thisarea.

Training will be undertaken as part of the consultancy responsibilities in the areas of developingindicators, new questionnaires integrating qualitative aspects as well as gender aspects, on the improvedNCS questionnaire to take into account linkage variables from the agricultural survey, and on the 2000-01NCS.

In terms of equipment, financing will be available for the equipment for the CWIC as well as computersand vehicles for developing the 2000-01 NCS poverty profile.

In order to ensure that survey data collected by enumerators in the field is reliable and speedily sent up toFOS headquarters for processing, financing will be provided for small field equipment for enumeratorsand transport for field supervisory staff at the state and zonal level. FOS will also be provided withadditional electricity generating equipment. The review of requirements in this area will be undertakenby an international consultant in cognizance of facilities provided under the economics statistics andnational income accounts sub-component.

Improvement and Monitoring of Public Expenditure

This component will focus on the prioritization and monitoring of public expenditure. There would betwo sub-components to this part of the Project. First, the capacity of NPC to monitor execution of the PIPwould be strengthened. Second, assistance would be provided to enable NPC to undertake periodic PERsin collaboration with other government agencies such as the Budget Office of the FMF and the lineMinistries.

Public Expenditure Review. This sub-component will provide local and external assistance to thePBPD to help begin an annual PER exercise in conjunction with the Budget Office. If the government sodesires, the Bank and the EU could also participate in the PER as required. Both capital and recurrentexpenditures would be addressed and the PER would encompass both budgetary and off-budgetaryaccounts. Institutional strengthening would be provided through staff training. In addition, the annualpublication of budget outcomes as well as summary revenue and expenditure data would be financed.

The FGN/World Bank Federal Public Expenditure Review published in March 1996 reported that "Thebudget process has effectively collapsed between 1991 and 1993. The lack of commitment overexpenditure controls has made the budget ineffective as a tool for economic stabilization or development.Government policies addressing the desired level of spending in total, in a specific ministry, or in aspecific sector were totally ineffective given the lack of adequate controls, checks and balances, andaccountability. Immediate and sustained corrective actions are required for effective fiscal managementand for the provision of essential government services to Nigeria's population."

Annex 2Page 7 of 18

The financial management system in Nigeria originally included a small corps of funds (consolidatedrevenue account, etc.) that are coterminous with the budget coverage, a warrant system, a system ofrecording on a cash basis and a prominent role for the FMF. There have been a number of developmentsaffecting the budgeting functions including: the use of off-budget "dedicated accounts" and extra-budgetary expenditures; the lack of control of expenditure through budget warrants and relatedprocedures; the lack of information on actual expenditure for earlier budgets; the over use of committeesto make decisions; and the lack of current information on the budget. Some of these have increased thesuspicion of corruption in government circles. The above aspects have been recognized, in general, bythe authorities and efforts have been initiated, effective from the 1995 fiscal year, to reverse some of thetrends, including the closing of the dedicated accounts in 1995.

Because the PBPD has a key role in the national plan and in the budget process it is an appropriate placeto locate the function of PER. Hitherto, the Bank has undertaken public expenditure reviews from time totime in the course of its country economic work. EMCAP would provide capacity building to the FGN toundertake this task on its own account. To that end, training and consultant services would be financedas follows.

A consultant would be contracted to develop a PER work program with PBPD. Six one-week workshopswould be held in Abuja to familiarize key staff from NPC, FMF and line ministries with the objectivesand the modalities of a PER. It is anticipated that participating staff would number about 140 in total.Resource persons at the workshop would include Bank staff and staff from the EU as well as specialistsfrom universities and other training institutions.

Study tours for senior staff would be organized to other African countries which have experience inconducting public expenditure reviews. It is anticipated that a total of 20 senior staff from the NPC andthe FMF may be included in these study tours.

A further 20 senior professional staff from the NPC and the FMF would receive training from the WBI orby attachment to operational units in the Bank that are currently engaged in public expenditure reviews.

In the course of specific PERs, the first of which is planned for early 2001, consultant services would befinanced to provide specialized expertise where needed. The second PER would be undertaken in early2002. Both the Bank and the EU would finance and participate in the PER exercise.

Monitoring of the Public Investment Program. The capacity of the NPC to monitor the execution ofthe PIP would be strengthened by this component. Project monitoring will become even more importantin future years as capital budgeting becomes more closely integrated with the budgeting of recurrentexpenditures. Assistance will be provided with local and external consultant services to develop andimprove the system of capital project supervision and to redefine its relationship to the three-year rollingPIP, particularly with regard to an exit strategy for capital monitoring. Financing would also be providedfor staff training and for office, communications and transport equipment. Immediate tasks to beundertaken include terms of reference for consultant services.

The NPC is an important arm of the FGN involved in the budgetary, planning and economicpolicymaking process. It is comprised of eight functional departments. These include: MacroeconomicAnalysis (MAD); Plans, Budget and Projects (PBD); Research and Policy Analysis (RPAD); SocialServices; International Cooperation; Infrastructure and Public Utilities; Environment and RegionalDevelopment; and Agriculture and Industry Departments. The NPC has responsibility for preparing theRolling Plan, from which the capital investment budget is based, developing national economic policies,developing and monitoring FGN's capital investment budget, and, along with the Budget Office in theFMF, preparing a comprehensive annual budget for the FGN. The NPC contributes to FGN's objectives

Annex 2Page 8 of 18

of reducing poverty through active participation at the grass roots level. The NPC is at the center of theplanning and budgetary process allocating resources in order to achieve the objectives of rapid growthand poverty alleviation.

The NPC has a computerized data base system for controlling and monitoring the capital planning andexpenditure contained within the Federal Budget. The NPC does not have any control over projectsfinanced by the Special Petroleum Trust Fund (PTF) nor of other off-budgetary accounts. The system iscapable of forecasting the recurring annual revenue impact of each project for inclusion in the annualrevenue budgets and is able to monitor the progress of donor assisted projects as well as those that arenationally funded. Despite the apparent nature of the system, it is unable to control the inclusion ofprojects advanced from the three-year rolling plan to the annual capital budget or the amounts available tofinance them. It also has not developed an exit strategy for projects out of the system. Consequently, thecapital budget is regularly overstated, schemes are started without the necessary available money andwarrants are rarely released to cover the full estimated expenditure.

The problems that the lack of control over the Capital Budget causes to the financial structure of thecountry are a situation that requires EMCAP assistance. This component would support the carrying-outof a comprehensive review of the execution of projects in the medium-term-rolling plan and the long-termcapital program. This would rationalize priorities against more realistic forecasts of available finance,taking into account the current expenditure priorities that need to be included in the budget. Each schemewould be reviewed and the cost and social benefits reconsidered in accordance with revised governmentsocial and fiscal policies. Contained within this exercise will be a review of the present data base systemto assess whether it requires enhancement, particularly to develop information systems within lineministries permitting them to track expenditures. Preferably, schemes that are currently under theumbrella of the PTF and other non-budgetary accounts will be included in the review.

The project-monitoring sub-component of EMCAP would provide a package of equipment, training andconsultant services to enhance project monitoring and integrate it more effectively into the overallplanning and budgeting process. The specific elements within that overall package are as follows.

With the objective of capacity building, external training would be provided for 20 senior staff drawnfrom PBPD and other departments within NPC that contribute to project monitoring. The areas oftraining would be (a) project analysis and evaluation, both ex-ante and ex-post; (b) project monitoring,and (c) data management. In view of the heavy workload that limits the ability of PBPD to release staff,this training would be spread over a three-year period.

To facilitate the process of project monitoring by providing access to project sites throughout Nigeria, atotal of ten vehicles would be financed.

To eliminate manual data processing and to enable all project infornation to be processed electronically,computers and other associated office equipment would be financed and access would be made availableto the Internet. At the same time, LAN would proceed in coordination with the IFEMIS initiative.

To further enhance the capacity of PBPD in project monitoring, local consultant services would beprovided for three purposes: (a) a total of 3 person-months to identify and recommend appropriatesoftware for project analysis and to train staff in the use of that software; (b) a total of 3 person-months toreview the linkage between project monitoring, the budget process and the national three-year rolling planand to make recommendations for strengthening that linkage. In particular, this consultant wouldrecommend an exit strategy for project monitoring; and (c) a total of 18 person-months over a three-yearperiod to supplement NPC staff with specialized technical skills where these are required to monitorprojects in the field.

Annex 2Page 9 of 18

Monitoring and Accounting of Fiscal Operations

Accounting. This component will support activities designed to improve the capacity of the OAGF tocarry out its statutory functions as defined in the Finance (Control and Management) Act, 1958 and theFinancial Regulations made under that Act. The simultaneous strengthening of the OAGF and the effortto improve capacity in the OAuGF are clear indications of the commitrnent of the FGN to fiscaltransparency and accountability, and demonstrate a strong desire to arrest the misallocation of resourcesand eliminate waste in the public sector.

The OAGF is the major office responsible for the control and management of public funds at all levelsfrom the federal to the local government. In addition to funding the federal ministries, and the extraministerial departments, this responsibility extends to the thirty-six state governments, the Federal CapitalTerritory (FCT), and some 774 local government councils nationwide. The head offices of the OAGF andof all ministries are located in Abuja. The AGF has a Federal Pay Office (FPO) in the capital of 30 statesand has undertaken to add six more FPOs in the newly created states by the end of 1999 to cater to thefinancial transactions of the FGN, the federal ministries and extra ministerial departments in each of thethirty-six states. All spending requests come to a central system in the OAGF from which disbursementsare made in accordance with budgetary appropriations in the case of ministries and extra ministerialdepartments, parastatals, agencies and government owned companies and corporations. The OAGF alsofunds the states and local governments every month from Federation Account or on the basis of theformula governing the transfer of funds from the federal to the state and local governments. The annualaccounts of the FGN have not been collated, prepared and audited since 1994. The immediate aim of theOAGF is to rectify this and return to the situation prior to 1993 when the accounts were prepared andpresented for auditing within the statutory time period.

In order to discharge its responsibilities and carry out its functions efficiently the OAGF needs highlytrained and highly motivated accounting staff, modern computer and IT systems, and reliable transportand communications systems. The OAGF also needs to publish up to date Financial Rules andRegulations and provide all accounting staff with a revised Government Accounting Manual. Themanagement of a department such as the OAGF, with offices throughout the country, also requires asupport team of highly skilled management professionals, especially in the area of human resourcedevelopment.

In the OAGF, this component of the Project will: (a) assist in developing capacity to achieve consistencyin accounting and controls and in the observation of best practice across the departments of the FGN, andto implement the recommendations of the joint FGN/Bank review of financial accountability systems; (b)review public procurement practices and introduce new procedures in line with the recommendations ofthe joint FGN/Bank procurement review; (c) review OAGF's organizational structure and its functionalrelationship with the ministries and agencies of government in order to improve the existing informationflows; (d) bring the fiscal accounts of 1994 to 1998 up-to-date and ensure the completion of the 1999accounts within the statutory period after the end of the fiscal year; (e) create the capacity to routinelyprepare and publish the accounts within the statutory requirement of six months after the close of thefinancial year to which they relate; (f) analyze the requirements and recommend the introduction ofsystems to improve accounting and reporting, information management, and the timely analysis anddissemination of data; (g) provide computer equipment and software for the operation of a modern networked accounting office; and (h) review and update the 1958 legislation.

In supporting capacity development emphasis will be placed on the training of staff at all levels, includingbasic training for junior staff and a program of continuing professional education for senior staff in boththe audit and accounting functions of the OAGF. The immediate tasks to be undertaken include closing

Annex 2.Page 10 of 18

the fiscal accounts of the past four years, the review of the 195 8 Finance (Control and Management) Act;publication of the Financial Regulations (to come into effect in August, 1999); the preparation and issueof a new Treasury Accounting Manual; assessment of training needs; and developing the work programand terms of reference for consultants to study the feasibility of linking the OAGF and the ministries inAbuja and linking the OAGF to the FPOs.

Auditing. This component will specifically strengthen the audit function to ensure that there is publicaccountability at all levels of government. The purpose is to make public accountability transparent andensure that the audit is carried out without let or hindrance from any source. Implementation of thisactivity will demonstrate the commitment of the FGN to tackling the problem of corruption by ensuringthat the OAuGF establishes a reputation such that the integrity and professionalism of its staff and qualityof their investigations become a deterrent to financial malfeasance in the public sector in addition to beinga reliabre means of detection.

The provisions of such a system are already contained within the existing legislation. The Constitution ofthe Federal Republic of Nigeria (Promulgation) Act, 1999 No. 24, Sections 85 to 87, provides for theappointment of an Auditor General responsible for auditing the public accounts of the Federation. The1999 legislation reinforces and extends the powers conferred on the Auditor General by earlier acts, inparticular the Audit Act of 1958, which provides detailed requirements for conducting Federal Audits.The provisions of the 1958 Act have become outdated and need revising to incorporate the techniques andrequirements of modem auditing, to strengthen the information gathering powers of the Auditor Generaland to take account of the changes in the legislative and institutional arrangements for publicadministration in Nigeria since 1958.

Despite the operational difficulties faced by the OAuGF (lack of funding, insufficient transport, andpoorly located and equipped office accommodation) there is an increasing understanding of the auditingneeds of the country and a strong will to address the situation. However, the strength of audit is limitedby the system within which it operates and the material, as well as full FGN support at all levels ofgovemment is essential to successfully perform the audit function. The OAuGF has addressed the matterof updating audit and internal control standards through the publication, jointly with the Auditors Generalof the States, of "Public Sector Auditing Standards" (PSAS) in 1997 and the "Public Sector InternalControls Standard" (PSICS) in 1998. The PSAS covers many of the modem techniques of auditing andprovides a basis for developing a strong and modem audit function while the PSICS provides guidance onintemal controls for govemment operations. However, implementation of the PSAS or the PSICS isbeyond the resources currently available to the OAuGF.

Recent changes have reintroduced the system whereby intemal auditors are deployed in ministries andextra-ministerial departments by, and are responsible to, the OAGF. As a result, all ministries and extra-ministerial departments now have an internal audit unit charged with advising the accounting officerwhether the financial control systems are adequate and are being observed. When problems such asfraud, loss of funds, or improper accounting are detected, the intemal auditor may issue a report to theaccounting officer with copies to the OAGF and the OAuGF. Staff from the OAuGF is also deployed toministries and report to the OAuGF.

The decline in the enforcement of accounting and auditing standards has been aided by the lack of afunctioning PAC and there is undue delay in the audit of the annual financial statement of the FGN. Thisis because of the non-submission of schedules to the financial statements by the OAGF to the OAuGF andbecause of the serious deficiency in reporting of government transactions as evidenced by the failure torelease the Statement of Assets and Liabilities of the FGN since 1993. A lack of operationalindependence in the recruitment, development and retention of staff also hamper the audit function. Theestablishment of an independent ASC could overcome this. (Similar Commissions have already been

Annex 2Page 11 of 18

established in the Judiciary and the Police.) Auditing the accounts of state and local governments is theresponsibility of their respective Auditors General and the problems at these levels of governments aresimilar to those in the FGN.

The ASC would be responsible for recruitment, training and promotion of staff of the OAuGF; it wouldalso set levels of remuneration and would have powers to take disciplinary action against staff in casesreferred to it by the Auditor General. The day to day management of the OAuGF will continue to be theresponsibility of the Auditor General, and the professional staff of the Department.

The FGN, under the Constitution of the Federal Republic of Nigeria (Promulgation) Act, 1999 No.24,Section 85 (5) has established a PAC as an essential watchdog over the public spending activities ofgovernment ministries and departments. The PAC, drawn from members of the Senate and the House ofRepresentatives, has wide constitutional powers to examine books and documents and procure verbal andwritten evidence in support of its investigations. The consultants will be required to advise on whether ornot the functions of the PAC should include reviewing and laying the budget of the OAuGF before theNational Assembly for approval, in order to reduce the dependency of the OAuGF on the FMF.

Technical assistance would finance the following activities in a preparatory phase: (a) review of the 1958Audit Act; (b) preparation of relevant legislation for the fonnation of the ASC; (c) the feasibility ofcreating LANs for the regional offices of the OAuGF; (d) layout of the training programs to be followedin local training courses conducted by visiting trainers as well as by national institutions such as NCEMA,and in external training of the staff of the OAuGF; and (e) organization of workshops for generatingawareness of the role of the PAC and the importance and value of infonnation and statistics in promotingtransparency, accountability and probity. While these activities of the OAuGF and other economicinstitutions will improve the capacity to unearth malfeasance, enforcement of punishment for corruptionwill also depend on the policies of the Parliament, the Judiciary and the public prosecutors.

The preparatory phase will contain three person-months of consulting services to improve the auditingcapability of the OAuGF. This consultancy will play the lead role in drafting the necessary legislation,and determining support and training for the new initiatives. It would therefore include (a), (b) and (c) ofthe preceding paragraph, and the layout of the training program. It is during this first three-month periodthat the more specific tasks of the assistance in the auditing would be undertaken. Continuation of thisconsultancy would constitute Phase I.

Phase I, from which the terms of reference for Phase II will be drawn, will be for a period of about nineperson-months over the life of the Project.

Phase II will include: (a) 190 person-months of local (180 person-months) and overseas (10 person-months) training of the staff of the OAuGF in specialized courses and through posting to other nationalauditing services; (b) the publication of priority non-periodic reports and manuals; (c) the purchase ofselected office and communications equipment; (d) the identification of the weaknesses in auditing in thestates, and the provision of support to and training of staff of the Auditors General of the states and localgovernments; and (e) the reintroduction of twinning arrangements (12 person-months) with auditinginstitutions and PACs or equivalent oversight institutions abroad.

Assistance to the National and State Assemblies. The hiatus of over twenty years of military rule hasleft the National and State legislatures with little or no institutional experience in fullfilling itsconstitutional role of examining policy and program proposals of the executive and evaluatingperformnance. A structure of standing committees has been recreated in the National Assembly, but thelegislators who comprise them are mostly new to the task. Support will be provided to strengthen theNational as well as State legislatures' capacity to interpret fiscal information, review budget proposals,

Annex 2Page 12 of 18

monitor implementation, scrutinize outcomes, and assess policies and programs. This will include theprovision of library materials and equipment, and the financing of workshops and study tours, as well astechnical advisory services, particularly with respect to budget making and monitoring processes. Thefeasibility of establishing a Legislative Budget and Research Office at the National Assembly will bestudied. As a first step, a rapid assessment of needs will be carried out in both the National and StateAssemblies to enable an initial assessing of a work program and of supporting resources to be provided.This component complements actions taken under EMCAP to strengthen the OAuGF.

Petroleum Sector Review

This component will specifically finance a comprehensive review of the petroleum sector coveringfinancial, operational, technical, legal, and contractual aspects as well as reform of key sector institutions.The review work would be carried out by appropriately qualified consultants. The World Bank Groupwould provide a high-caliber team that would work, together with its Nigerian counterparts, on preparingterms of reference, and on supervising and managing the review process. The joint FGN/Bank teamwould develop terms of reference and appointment criteria and procedures for the consultants, supervisetheir appointment, supervise and facilitate their work, synthesize their output and make appropriaterecommendations.

The key areas of focus will include: (a) finance and accounts; (b) investment framework; (c)environmental and social; (d) operations; (e) technical; and (f) synthesis.

In the finance and accounts area the component will document and review industry cash flow cycles,review financial strategies and planning procedures, review financial controls and accountability withinkey accounting systems, review effectiveness of internal and extemal audit functions, assess adequacy ofinformation technology support, and incorporate results of on-going value for money audits.

In the investment framework area the component will: (i) develop an overview of the following aspects ofthe investment framework and make a comparative analysis of appropriate international benchmarks onpetroleum laws and regulations, procedures for the award of acreage, petroleum fiscal arrangements,MOU, PSC, Sole Risk Contracts, JOA and other contract arrangements, impact of contractual and fiscalarrangements on local content and technology transfer, crude oil pricing and sales arrangements, gasfiscal and downstream regulatory arrangements, and products pricing, imports, specifications and otherregulatory arrangements; (ii) undertake reviews of DPR and NAPIMIS including funding, reporting andauthority, institutional capacity and effectiveness of monitoring function; (iii) review, in the case of theMinistry of Petroleum Resources, its role in sector policy development, the sector strategy andinstitutional capacity; and (iv) review, in the case of independent producers, the segment overview, fiscalarrangements and external monitoring.

In the environmental and social area the component will: (i) based on a review of completed and ongoingwork, evaluate the impact of petroleum operations on land, river and sea water pollution, distribution ofeconomic benefits, government and company performance in addressing environmental and social issues,and the impact of security concerns on operations and investments; (ii) review the market for andavailability of petroleum products and develop recommendations for improving access; and (iii)coordinate closely with other ongoing activities and develop recommendations for the mitigation of anyadverse impacts.

In the operations area the component will: (i) establish and review key performance indicators for NNPCand its subsidiaries and benchmark against international comparators; (ii) review capitalization andmanpower requirements of NNPC subsidiaries; (iii) establish and review key performance indicators forjoint venture operations and independent producers and benchmark against international comparators; (iv)

Annex 2Page 13 0 f18

review procedures for reconciling JV partners' work programs to overall sector strategy, developingappropriate budgets for the individual work programs, processing and scrutinizing the subsequent cashcalls and allocating funds for the payment of cash calls, and review lifting procedures.

In the technical area the component will: (i) develop a consolidated reserve picture for the country basedon a review and harmonization of existing data from the joint venture companies, NNPC and othersources; (ii) evaluate the consolidated producibility of the various producers; and (iii) undertake technicalreview of refineries, pipelines and other downstream assets especially as regards value, maintenancepractices and the condition of physical assets.

In the synthesis area, the component will, based on the foregoing reviews, make recommendations forimprovements in industry efficiency, fiscal revenues, protection of the public interest and attraction ofcapital.

Strengthening the Procurement Activities in the Public Sector

A joint FGN/Bank team has been undertaking a review of procurement practices of the FGN (CountryProcurement Assessment Review [CPARI), a sample of State Governments, and a sample of parastatalenterprises, and also a review of financial accountability systems (Country Financial AccountabilityAssessment [CFAA], i.e., the state of accounting and audit practices). This component will finance thelaunching of workshops that would address procurement and financial accountability issues as well as theimplementation of the recommendations of the joint FGN/Bank findings.

Strengthening Policy Development Capabilities

The new administration has been discussing the possibility of establishing a policy coordination unitwithin the President's Office to coordinate economic policies. In the meantime, the EMCAP Project Unitwould initially manage and supervise the proposed studies envisaged under this project component andthen pass them on to the respective units in the FGN in due course. EMCAP would specifically assist theauthorities in looking at overall reform issues and in studying the next generation of reform issues.

Macroeconomic policy and institutional reform is high on the agenda of the recently elected govemmentof Nigeria. To that end, new procedures for policy analysis and review will need to be introduced that areconsistent with democratic principles. The government has indicated its intention to establish a policycoordination function within the presidency itself and, when the institutional structure of the policycoordination function crystallizes, EMCAP would be able to provide finance for (a) training staff ineconomic analysis and management both locally and abroad, (b) bringing in local long-term consultantsfrom national universities and institutions such as the Nigeria Institute of Social and Economic Research(NISER), NCEMA, the Centre for Management and Development (CMD), Audit, Revenue and TreasuryTraining School (ARTS) as well as extemal experts for short-term advice and on-the-job training; and (c)providing key items of office and communications equipment that are required to accomplish identifiedtasks in the work program.

The FGN accords the highest priority to anti-corruption efforts. Improving govemance is an integral partof capacity building. Indeed, it is the emphasis on good governance that differentiates the current focuson capacity building from past ones. Essentially, the capacity building-govemance link means integratinglessons of good govemance with government training programs. Given the vast and urgent needs oftraining and capacity building, the FGN is keen to install a distance leaming facility in a Nigerianinstitution that will facilitate the delivery of broad-based learning programs. The facility would helpdeliver the exchange of lessons of experience from around the world on issues ranging from anti-corruption to financial reforms. The basic facility would comprise a videoconferencing studio and a

Annex 2Page 14 of 18

classroom with computers. The facility would have the capability to hold classes for 30-50 participantswith two-way instructions with other distance learning sites in Africa and other parts of the world. Theinitial investment cost of a center is estimated at about US$ 1.0 million. The annual operating cost wouldamount to about US$0.4 million. The WBI is currently setting up a Global Distance Learning Networkwith seven sites in Africa and several others around the world. Nigeria is keen to become part of thisnetwork by establishing a Distance Learning Center in the country.

EMCAP would also finance a number of studies that are urgently required to get a program of policy andinstitutional reform on track. Where possible, parallel finance has been assembled on a grant basis fromother bilateral and multilateral donors. IDA finance would be provided for the remainder. Specificdetails of the proposed studies are inidicated below.

Fiscal federalism would also be studied with a grant from the EU and recommendations would be made tostrengthen the capacity of state and local governments to respond effectively to local needs. Tax policies,including revenue sharing between federal and state governments would be studied with grant financefrom USAID and with the credit from IDA. This study would focus on the policy aspects of revenuesharing and make recommendations to improve the effectiveness of the system.

Tax and trade policies would be studied with grant finance from USAID with the objective ofrationalizing the trade regime and assisting the government to prepare a new tariff structure as requiredfor the year 2001. An "Investor Roadmap" would be drawn up with a grant from USAID. It wouldidentify impediments faced by investors who seek to establish enterprises in Nigeria and it would identifycritical policy areas where change is needed for Nigeria to be competitive in attracting domestic andforeign investment. Internet connectivity would be studied with a grant from USAID to identifyconstraints that may impede Internet use in Nigeria. It would complement the proposed integratedfinancial and economic management information system (IFEMIS) by identifying cost-effective solutionsfor Internet interconnectivity. A transparency audit would be financed with a grant from USAID toidentify measures for enhancing transparency, accountability and probity in the public administration.

Corruption surveys would also be introduced by the WBI to measure public perceptions of transparencyin governance and the survey results would be published from time to time.

In 1994 the FGN set up a Review Panel to, among other things, examire and properly define the role ofthe civil service in the executive arm of the FGN and to evaluate how well this role has been performed.The Panel reported in June of 1995 when theMain Report of the Review Panel on Civil Service Reformswas submitted but since then very little progress was made. The impetus for reform of the civil servicehas been revived with the transition to democracy and the separation of the position of the Head of theCivil Service from that of the Secretary to the Government. With the transition the reform of the civilservice is even more urgent because of its critically important role in policy design and implementationand in the promotion of probity and transparency in the affairs of state. A meaningful program of reformin the civil service would cover such areas as management practices and techniques, human resourcemanagement and development, measures to reintegrate the service into a coherent body following theperiod when an officer's career choices were limited to a single ministry or department, pension reforms,records management and the preparation of a civil service procedures manual.

Immediate actions in civil service reform to be supported witi IDA resources are a study leading topension reforms and records management. The public service pension system is in urgent need of reform,both to increase the morale and motivation within service as well as to avert fiscal imbalances whichcould emerge if the contingent liability of the FGN for civil service pensions is not placed on a soundfinancial basis. In addition to addressing the second-generation fiscal reforms, review of the pensionsystem could also have a beneficial impact on capital markets development. As a corollary to pensions

Annex 2Page 15 of 18

reform the study will also recommend management systems to ensure accessible and accurate personnelrecords. Any improvements in these areas would also be easily transferable to state and localgovernments and to state-owned enterprises.

In parallel to these studies, workshops would be organized, training would be provided and twinningarrangements would be put in place between selected Nigerian institutions and similar institutions in othercountries to facilitate a transfer of experience in key areas of public policy. Specifically, USAID wouldprovide grant assistance for workshops in economic governance.

Training for local research and training institutions would be provided to better enable them to trainpublic sector staff in economic analysis, and financial accounting. Twinning arrangements would bedesigned to expose a range of public officials and parliamentarians to ways in which their counterparts inother countries conduct financial oversight. In particular, staff from the OAGF and the OAuGF wouldgain direct experience of best practice in other countries.

Information Management System

This component would focus on the design and implementation of the initial phases of an IntegratedFinancial and Economic Management Information System (IFEMIS) that would enhance the ability ofcore financial institutions in the public sector in matters of policy formulation and execution.

The Planning, Research and Statistics Department (PRS) is one of ten departments within the FMF. Itsfunctions include research into policy issues of concern to the Ministry as well as the management ofinformation resources on fiscal matters. It produces the annual report of the FMF and acts as a planningsecretariat for the development plans of the FMF itself Information management is central to thefunctions of PRS and it has long harbored ambitions to expand its system of financial statistics to abroader clientele both within the FMF and beyond to other government institutions.

IFEMIS fits well into the functions of PRS, which is eager to accept the challenge of implementing abroader integrated system of financial information. Under EMCAP, the design phase of IFEMIS wouldbe financed by a PHRD grant and system implementation would be financed with grant funds from theEuropean Union. IFEMIS would build upon the data bank already operational within PRS that isdesigned to serve the needs of FMF. The present system would be upgraded first by introducing a localarea network within the FMF and then by extending the system to provide accurate and timelyinformation throughout all government financial institutions starting with the OAGF and the CBN. It isexpected that IFEMIS would facilitate the transfer of information between departments and contribute toa well functioning Cabinet operation by providing up to date information on payroll and other expenditureinformation. Budgetary control would be enhanced by producing accurate monthly and yearly accountsand cash flow forecasts.

Financial management in Nigeria has commonly been opaque and obscured by a multiplicity of off-budget funds and by accounting practices that underestimate the actual size of public revenue andexpenditure. An integrated system of financial and economic information management would provide thetools for unraveling the tangled web and pave the way for greater transparency, accountability andprobity.

The most acute need is for timely and accurate fiscal and other economic information. Currently,information is sketchy and produced months or even years behind time. Information may also beinaccurate because it is assembled from unreliable sources or based on estimates. Established datasystems have often broken down, thereby preventing information from being furnished when legally

Annex 2Page 16 of 18

required. Faced with these many problems, the FMF has now determined to become an "encyclopedia offinancial management information".

The IFEMIS component of EMCAP would be structured as follows,

A short term consultant would be engaged to formulate terms of reference for the design of the IFEMISand to supervise the design phase. The short term consultant would start by reviewing existing datacollection, processing, analysis and dissemination facilities in those government institutions which arekey producers and users of economic and financial data. These would include the PRS, OAGF, OAuGF,CBN, PBPD and the FOS. The consultant would form a general appreciation of the desired outputs of aninformation system for each producer and user of data and assess the adequacy of existing hardware andsoftware facilities against these needs. The consultant would indicate a prioritization of institutionsaccording to their importance in the production and dissemination of data for financial analysis.

The output of this short-term consultancy would be the detailed terms of reference for two studies: oneterms of reference for a design study for hardware requirements and one terms of reference for a designstudy for software requirements, both aiming at the setting-up of an integrated information system thatcould be used by all key government institutions involved in the production and dissemination ofeconomic and financial information. Since the EU would be financing the implementation phase of theIFEMIS, the EU would participate in the process of selecting the short-term consultant. Bankprocurement guidelines would be followed. Upon review and acceptance of both terms of reference bythe FGN, the World Bank and the EU, the consultant would assist the FGN in preparing two short lists ofinternational and local firms to be invited to tender for these studies; he/she would also assist the FGN inevaluating tender bids. The short lists and the outcomes of tender evaluations would need to be approvedby the World Bank and the EU. The short-term consultant would remain available to supervise thecarrying out of the design phase of IFEMIS. In total the short-term consultant would provide 30 days ofconsultancy for the preparation of the terms of reference and assistance in bid evaluation and 14 days permonth over the two months of the design phase. The short-term consultant would be financed with PHRDgrant funds; the terms of reference for this short-term consultancy, the short list of invitedfirms/individuals and the outcome of the tender evaluation would have to be submitted by the FGN to theWorld Bank and the EU for review and approval.

A second phase would entail carrying out the studies for hardware and software design aiming at settingup local area networks within key government institutions and at linking information systems across theseinstitutions through a wide area network. Both studies would take account of hardware and systemsalready in place such as to build upon existing facilities, of the desired outputs of a new system and of thevolume of data to be handled. The studies would start by designing local area network informationsystems for the OAGF, the OAuGF and the PRS of the FMF where pressing needs exist for the immediateupgrading of existing facilities. The studies would then deal with the remaining institutions in order of theprioritization identified by the short-term consultant.

The output of the hardware design study would include the technical specifications of hardwarerequirements for each institution in terms of computer and networking equipment, the requirements forpower supply upgrading in order to support expanded computing facilities, the requirements for internetconnectivity and the requirements for inter-building connections. The two latter issues would bediscussed with NITEL (Nigerian Telecommunications Company) which has, hitherto, a monopoly overthe Nigerian telecommunications system. In particular, the possibility of independently installingdedicated optical fiber cables for inter-office communication would be explored. In addition to thespecifications of hardware requirements, the study report would also present a time-phasedimplementation plan and cost estimates of hardware requirements and of engineering works to beundertaken; it would propose a short list of international and local hardware suppliers and identify

Annex 2Page 17 of 18

possible firms who could undertake the engineering works. This hardware design study would befinanced with PHRD grant funds.

The design study for software requirements would endeavor to build upon existing systems such as toexpand and enlarge them where required. It would pay particular attention to the methods used for datacollection and data entry: where required, the consultants would recommend improvements. The studywould have two main outputs. Firstly, it would provide the specifications of software requirements whichwould include both the software required for data collection, processing, organization and analysis withineach institution and the software required for the analysis of aggregated data from different institutions.The consultants would assess the technical specifications against existing off-the-shelf software packagesand against tailored software used for similar purposes in other countries (in particular for the collectionand dissemination of budgetary data). For the PRS of the FMF in particular, recommendations would bemade for improvements in the collection of budget data, the monitoring of budget spending, reporting,and budgetary control. The consultants would provide a cost estimate of the implementation phase,including: the cost of recommended software packages and/or of the tailoring of existing software and theconsultant's cost for software deployment.

Second, the consultants would assess the training needs of staff involved in the use of the integratedinformation system. It is envisaged that within each institution, there would be one staff memberfunctioning as a help desk for IFEMIS and one person functioning as a network systems engineer. Bothshould receive appropriate training under the Project. In addition all users of the system should be trainedin general computer skills and in the recommended software. The consultant would assess training needsand give a preliminary indication of appropriate local and international training courses and their costs.The software design study would be financed with PHRD grant funds.

A third phase would entail the implementation of IFEMIS in the various institutions according to thepriorities defined by the short-term consultant in Phase 1. A full and comprehensive implementation ofIFEMIS would be an open-ended process that would need to accommodate the changing and growingneeds of the FGN over time. Such an endeavor is clearly beyond the scope of EMCAP. However,EMCAP would finance an extension of IFEMIS over a three year period to the core financial andplanning institutions. Eventually, all govenmment financial institutions would participate in the systemthat would also assemble economic information and performance indicators from all line ministries. Theelectronic conveyance of inter- and intra-ministerial mail would be incorporated within the system.

The implementation phase of integrating the FGN's financial management systems would thus beundertaken in three stages. First, a local area network would be implemented within the OAGF and theOAuGF components supported by IDA as soon as the design for immediate upgrading of facilitiesexisting in these institutions has been completed. Second, a pilot implementation of IFEMIS would belaunched across three institutions. Notwithstanding the prioritization of institutions identified by the shortterm consultant, these might include the PRS of the FMF, the Research and Foreign OperationsDepartments of the CBN and the PBP of the NPC. The IFEMIS implementation would include both theimplementation of local area networks in three institutions and the linking of these institutions by widearea networks. The implementation of IFEMIS in the three pilot institutions would be accompanied by thetraining of staff according to the training needs identified during the software design phase. Short extemaland local courses for key staff and on-the-job training by extemal consultants would be provided over aperiod of three years. Project supervision would be provided by an external consultant who would beavailable about three months a year for the supervision and monitoring of IFEMIS implementation; theproject manager would in particular take the responsibility for preparing tendering dossiers, assisting theFGN with bid evaluations and organizing the timely intervention of the various parties involved inhardware and software installation and engineering works. This stage would be financed with grant fundsfrom the EU.

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After one year of operation, the functioning of IFEMIS would be reviewed by external consultants fundedwith grant funds from the EU; a third implementation phase could extend the system to other financialand data management institutions such as the OAGF, the OAuGF, FOS and the Economic AdvisoryOffice in the Presidency, if the medium-term review at end 2002 indicates satisfactory progress.

Strengthening the Legal and Judicial Systems

Poor economic governance and widespread corruption has flourished in Nigeria not only as aconsequence of inadequate public accounting and auditing mechanisms, but also as a result of a whollypermissive legal system and an inefficient functioning of the judiciary. To improve economicmanagement and foster good governance, the FGN is resolved to undertake a comprehensive reform ofthe legal and judicial system with a view to modernizing its laws and improving the efficiency of thejudicial apparatus. Under the EMCAP, support would be provided to carry out preliminary diagnosticstudies which are required to assess the current constraints and the extent to which they impede a properfunctioning of Nigeria's legal and judicial systems. It is expected that the results of these studies wouldlead to the formulation of a comprehensive legal and judicial reform program which would prioritize theactions needed to improve the performance of the legal sector and provide a realistic sequencing for theirimplementation. Under the legal and judicial systems component, IDA and EU financing would beprovided for 120 persons-months of local and extemal consultants, training, workshops and study toursactivities as well as urgently needed office equipment and law books. The component will beimplemented primarily by the Office of the Attorney-General of the Federation in close cooperation withthe Office of the Chief Justice and in consultation with other key stakeholders including, inter-alia,representatives from Nigerian bar associations and law schools.

Support for the Project Unit

As a result of staff changes the Project Unit has been depleted of trained staff and is inadequatelyequipped to administer projects. The EMCAP will therefore provide support for staff training, forcomputer and office equipment and for two vehicles for the PU. The PU has to rebuild its cadre of trainedstaff and ensure that there are at least two staff members from each project execution agency who are alsotrained in project management. This component will also support training for staff of the PU in loannegotiation and administration; workshop facilitation; and procurement and disbursement procedures.

The PU will play a number of crucial roles to ensure the effective implementation of the Project. The PUwill (a) coordinate, evaluate, and monitor performance of the other PEAs; (b) monitor budgetaryallocations to the PEAs under the Project; (c) contract a full time accountant, a training specialist for sixperson-months, and a procurement specialist for a total of 12 person-months to assist the PEAs; (d)contract external auditing services for EMCAP; (e) contract external advisory assistance to help plan,organize, coordinate and monitor the work program of the PU and of the PEAs; (f) organize and launchworkshops with stakeholders for the Project; and (g) evaluate and build capacity in the PEAs to improvemanagement and implementation capacity for EMCAP. PU staff has been actively involved in EMCAP'sappraisal and will be involved in supervision of the Project.

To ensure that the Project starts on a sound footing the PU has been strengthened with the appointment ofan accountant and two assistants. Training has also been provided in negotiation and administration. Inaddition the PU has also secured the services of an external and a local procurement advisor. Thiscomponent will provide 158 person-months of training for the staff of the PU and the PEAs.

Annex 3Page 1 of 3

Annex 3: Project Phases, Performance Indicators, and Exit Strategies

Nigeria: Economic Management Capacity Project

,. . , . ..... .... ........... ..... -,........, =:,.,..; ia AN d C , .

Federal Ministry of Finance Preparation of detailed work programs; Completing studies, training, and systems;(for total project) closure and dissemination of partly- wide dissemination of greatly improved data;

assembled data, developing IFEMiS strengthening of key institutions involved insystem, and putting in place able Project economic governance. By end of phase, bothUnit, strengthening government economic governance and managementprocurement, and undertaking audits of improved in a sustainableNNPC. By end- 2002, perception and sense.actual economic governance would havegreatly improved.

Triggers Review of progress in meeting project Standard World Bank due diligence clauses.objectives on September 2002, based on:(a) corruption surveys, (b) periodicity,transparency and reliability of publisheddata, (c) evaluation of public expendituresin light of announced and agreed priorities,as well as the strengthening of soundprocurement, accounting; and auditingpractices; (d) the vigor and robustness ofenforcement actions involving incidents ofpublic malfeasance identified by OAuGF.

Exit Strategy Lack of progress of the project, as judged Standard World Bank remedies.by the above four criteria, would requirecanceling the uncommitted amounts.

Policy Studies Unit Preparation of detailed work program Carry out fiscal federalism, civil service, legal,(including TORs) for follow-up activities. judiciaL tax policy studies/analyses, and

publication of transparency surveys.

Triggers Completion of TORs by consultant by Completion of studies by mid-2003.mid-2001. Contracts signed for detailed

-............... -work program by end-2001.

Exit Strategy Cancellation or transfer of credit allocation Credit allocation for non-contracted tasksat end-2002. reassigned to other units; inadequate staffng

could lead to cancellation or reassignment ofwhole component.

National Planning Completion of TORs to strengthen the Strengthen project supervision and staffCommission capacity to monitor execution of the PIP; training; shift priorities toward strongly justified

publication of 2000 budget; quarterly projects and poverty-linked programs; quarterlyfiscal publications begun. fiscal publications continued; integrate capital

and recurrent budgets.

Triggers Complete first three project supervision Conduct annual PERs.reports. Complete first PER.

:.........Exit Strategy If the above task is not completed by end- Cancellation of component funds. Inclusion in

2003, reallocate funds or cancel them. FGN' s expenditure program of anyunjustified,___._ ________________________ _________________________________________ major "prestige" project.

Annex 3Page 2 of 3

Nvelopmeift Ojcie bto'rprtM n itd mu.tAtvt

PRS Greater fiscal transparency through Use system and training to produce consistentdevelopment of IFEMIS. and integrated financial management data.

. ..Triggers Publication of fiscal data for 1995-99; Inclusion of all receipts in IFEMIS system........ IFEMIS used for 2003 budget

..................

.........

..................Exit Strategy Deferral of action until 2003 if delay from .Reassignment of component resources;

. ~~~~~~~~technical causes; component cancellation cancellation if second trigger not met.. ~~~~~~~~if triggers not met by end-2003.

......,... ...

FOS Review of the process of how the new After training and institution building, periodicneeds of users will be reflected in the work publication of improved quality social dataprogram and how this will affect the linked to poverty.priorities and budget allocations betweenFOS departments.

WRMMO Triggers mplementation of recommendation of Periodic production and publication of National

.. ~~~~~~consultant' s report; publication of income accounts and Minimum National Social' household surveys for 1991-1994 and Data Set; publication of 2000-2001 poverty

.,.,.,, . B ~~~subsequent years; development of detailed profiles. Annual publication of social statistics.. ~~~~~~~work programs and poverty monitoring

... ................ .. indicators.

... .. (......

.. ....... .t

...... Exit Strategy Reallocation o f component f find s Lack of utilization of funds would lead totechnical causes; component l reallocation or cancellation of outstanding

g.: .- -:- I ~~~~~~~~~~~~sums.

OAGF Closure of fiscal accounts for 1995-1999. Review current procurement practices i theOAGF.

E.s S .a <E .Triggers Publication of fiscal accounts for 1995- Implement recoum endations of procurementr1999 no undue delays in procurement. practices review.

pCarryout analyses of current accounting

FOstandards.

Exit Strategy Suspension of new commitments. Cancellation of uncommitted allocations.

OAuGF Draft revisions of Audit Law, Enactment of revised Audit Law, reenactmentrecommendations for strengthening PAC of PAC and establishment of Auditand establishing Audit Commission. Commission; publication of audited fiscalPublication of audited fiscal accounts for accounts annually.1995-1998.

it Triggers No undue delays in procurement, Continued publication of current audited fiscal..............- reasonable expectation that 1995-1999 accounts; no undue delays in procurement.

OaGF Closure of fiscal accountsfor199fiscal accounts will be available for audit.

Annex 3Page 3 of 3

DeveIopmext'; ObjEttves <K3'i4~naaiiAfiR

:.~~~~~~~~~~~~~~~~~~~ .-..-..... .

--- ::--Exit Strategy Suspension of new commitments. Cancellation of uncommitted allocations..,.,.-..........~ ~ ~ ~ ~ ~~............~~~~~~~~~~. .......

Project Unit Preparation to oversee EMCAP. Effective oversight of EMCAP.

Triggers Staffmg of Unit with effective Maintain up-to-date financial information onprocurement and training advisors, project project and program; PEA training focused onaccountant and project auditor; develop objectives; improvement in FGN procurement.procedures to provide up-to-date financial No undue delays in EMCAP's procurement.information on project; successful projectlaunch workshop; no undue delays inprocurement.

Exit Strategy Suspension of new commitments. Cancellation of uncommitted allocations.

Ministry of Petroleum Comprehensive review of the sector. NA

Triggers Selection of counterpart teams; NAengagement of consultants; provision ofappropriate data and information;completion ofjoint review.

Exit Strategy Cancellation of uncommitted allocations NA

NA: not applicable

Annex 4Page 1 of 1

Annex 4: Estimated Project Costs

Nigeria: Economic Management Capacity Building Project

Estimated Project Cost in Local and Foreign Currency.................... F...

?reject cost............... ... .ub Ciij-n X---..-t ---

lmprovement of Statistics 1.70 6.81 8.51Tmprovement and Monitoring of Public Expenditure 1.05 1.89 2.94Monitoring and Accounting of Fiscal Operations 4.06 3.03 7.09Petroleum Sector Review 0.53 3.00 3.53Strengthening the Procurement Activities in the Public Sector 0.44 2.50 2.94Strengthening Policy Development Capabilities 4.43 4.43 8.86Information Management Systems 0.20 2.32 2.52

1.43 1.43 2.86Support for the Project Unit 1.23 1.59 2.82Total Baseline Costs 15.07 27.00 42.07Contingencies 1.51 2.12 3.63

Total Project Costs 16.58 29.12 45.70Note: Differences due to rounding.

Project Costs By Category(in US$ millions)

.. ......... C. Mil " i "qu" nen . Tini rtigues T

IDA 9.26 5.48 4.51 1.75 20.00DFID 2.28 0.30 0.65 0.27 3.50EU 3.46 4.04 1.79 0.71 10.00PHRD/WBI 0.57 -- -- -- 0.57USAID 3.28 0.55 2.70 0.27 6.80FGN -- 3.40 0.80 0.63 4.83TOTAL 18.85 12.77 10.45 3.63 45.70

Note: Differences due to rounding.

Annex 5Page 1 of 4

Annex 5: Procurement and Disbursement Arrangements

Nigeria: Economic Management Capacity Building Project

1. Procurement

All goods and services financed under the IDA Credit would be procured in accordance with theappropriate IDA Guidelines (Guidelines: Procurement under IBRD Loans and IDA Credits, January 1995and as revised in January and August 1996, September 1997, and January 1999; and Guidelines: Selectionand Employment of Consultants by World Bank Borrowers, January 1997 and as revised September 1997and January 1999). Procurement of goods and services would be the responsibility of each of the PEAsreceiving financing under EMCAP, with assistance from the Procurement Advisor and the ProcurementSpecialist to be contracted by the Project Unit. The Project Unit is housed in the MULT. A formalassessment of the capacity of the PEAs for this task has been carried out according to ProcurementServices Policy Group (OCSPR) guideline dated August 11, 1998 (see Annex 12).

The Procurement Advisor and the Procurement Specialist are expected to be well acquainted with IDAdisbursement and procurement procedures. As part of preparation activities, financed by a PPF, theProcurement Advisor, in consultation with the Bank procurement specialist, would carry out training ofprocurement staff in each PEA. Once the staff havebeen identified, an orientation workshop would beheld; topics to be covered would include Bank procurement and disbursement procedures. The Bank'sStandard Bidding Documents (SBD) would be used for the procurement of all works and goods, and theBank's Standard Request for Proposals would be used for all consulting assignments.

A General Procurement Notice (GPN) is mandatory and would be published before Board presentation inthe UN Development Business and in a national newspaper as provided under the Guidelines. The GPNwould be updated on a yearly basis and would show all outstanding International Competitive Bidding(ICB) for goods contracts and all international consulting services. In addition a Specific ProcurementNotice (SPN) is required for all ICB and all consulting services with a value in excess of US$100,000prior to the preparation of the short list.

A. Equipment and supplies (US$5,480,000)

The Project would finance computer hardware and software upgrades, office equipment, andcommunication equipment in each of the PEAs and some limited procurement of supplies in the OAuGFand the Treasury Department of the OAGF. To the extent possible and practicable, goods and equipmentto be purchased by each PEA would be grouped into bid packages to take advantage of bulk purchase.Each contract estimated to cost the equivalent of US$ 100,000 or more would be procured under ICBprocedures using IDA Standard Bidding Documents. Each contract for goods estimated to cost betweenUS$ 30,000 and US$ 100,000, up to an aggregate of US$1.0 million, would be procured through NationalCompetitive Bidding (NCB) using procedures acceptable to IDA. Procurement for readily available off-the-shelf goods that cannot be grouped or standard specification commodities for individual contracts ofless than US$ 30,000, up to an aggregate of US$500,000, would be procuredunder InternationalShopping (IS) or National Shopping procedures as detailed in paragraphs 3.5 and 3.6 of the"Guidelines: Procurement under IBRD Loans and IDA Credits ".

To ensure that these limits are observed, each quarterly progress report of the Project would include atable setting out the number and value (in US$ equivalent) of the contracts issued through localshopping and national competitive bidding during the quarter as well as the cumulative total value (in

Annex 5Page 2 of 4

US dollar equivalent) of the contracts under each of these two procedures from the date of the projectstart-up.

B. Consultancy Services (US$9,260,000)

These services consist of consultancy services for studies and reports, technical assistance for coachingand training, workshops and focus group discussions internal for the various components of the project.Selection and appointment of consultants for studies, technical assistance and support of project executionwill be carried out in accordance with the Consultant Guidelines (Selection and Employment ofConsultants by World Bank borrowers, January 1997, revised September 1997 and January 1999). As arule, consultant services will be procured through Quality and Cost Based Selection (QCBS)methodology. All consultancy assignments estimated to cost US$ 100,000 or more would be procuredthrough QCBS and would be advertised in Development Business (UNDB) and in at least one nationalnewspaper. In addition, the scope of the service will be advertised in an international newspaper ormagazine seeking "expressions of interest." In the case of assignments estimated to cost less than US$100,000, the assignment may be advertised nationally and the shortlist may be made up entirely ofnational consultants, provided that at least three qualified national firms are available in the country andforeign consultants who wish to participate are not excluded from consideration. All consulting servicesof individual consultants will be procured under individual contracts in accordance with the provisions ofparagraphs 5.1 to 5.3 of the Guidelines. The Procurement Advisor and the Procurement Specialist may,with the agreement of IDA, be selected on single-source basis. For twinning arrangements, the sameStandard Request for Proposals for consultant services will be used for selecting twinning institutions.The expected output of the twinning arrangements and selection criteria will need to be defined up-frontand included in the Request for Proposals. For twinning arrangements to be financed by IDA, at leastthree prospective institutions will be invited to submitproposals except in cases where it can be verifiedthat expertise is limited to very few institutions in the world.

C. Training programs (US$4,510,000)

Training is geared towards improving management and skills of public servants. The Project Unit willcontract a Training Advisor to help each PEA ensure that its training program contributes effectively tothe agencies' objectives as agreed under the EMCAP.

D. IDA Prior Review

Table B provides the prior review thresholds. Each contract for goods estimated to cost US$100,000equivalent or more will be subject to IDA prior review as per paragraph 2 of appendix I of the Guidelines.Other contracts will be subject to post review in accordance with paragraph 4 of Appendix I of theGuidelines. All consulting contracts costing US$100,000 equivalent or more for firms, and US$50,000for individuals, will be subject to IDA prior review. Any exceptional extensions to non-prior reviewcontracts raising their values to levels equivalent or above the prior review thresholds will be subject toIDA clearance. All single-source selection and training programs above US$50,000 will be subject toIDA prior review. Other training programs will be reviewed and agreed annually, as part of theprocurement plan.

E. Other Procurement Method

On behalf of the Borrower, the Bank (ISG Department) will procure network access equipment for thevideo conference room and computers and computer-related communications equipment on a direct

Annex 5Page 3 of 4

contracting basis to ensure compatibility with the Global Distance Learning Network and to benefit froma bulk discount from the 3ank suppliers. The satellite bandwidth rental contract will be procured on adirect contracting basis (one supplier selected under the Bank umbrella).

F. Procurement Plans

The Bank's standard bidding documents for goods, and the Standard Request for Proposals (RFP) forconsulting services as well as the Standard Bid/RFP Evaluation Forms will be used. The Borrower willprepare a Global Procurement Plan (GPP), and a Detailed Procurement Plan (DPP) for the first year of theproject showing processing time for each component and will forward these documents to IDA beforeCredit effectiveness. The GPP and the DPP, which will be updated yearly, should be sent to IDA forclearance not later than three months before the end of each fiscal year.

2. Disbursement - Allocation of loan proceeds.

A. Statements of Expenditures (SOEs)

Disbursements for all expenditures would be against full documentation, except for items of expendituresand purchase below US$ 100,000 equivalent, for goods, below US$ 50,000 for consulting firms, andbelow US$ 50,000 for consultancy services (individuals), training, workshops and incremental costs forwhich disbursements would be based on statements of expenditures (SOEs). Supporting documentationfor SOEs would be retained by the Borrower for review by IDA missions and external auditors.

B. Special Accounts

To facilitate disbursements, a Special Account for the EMCAP would be established and operated by theProject Unit in US$ 500,000 at a commercial bank under terms and conditions satisfactory to IDA. Theauthorized Special Account allocation is US$ 1,000,000 to be capped at US$ 5000,000 until the aggregatedisbursement amount is SDR 2,500,000. Upon credit effectiveness, a sum of US$ 500,000 would bedeposited by IDA into this account. Further deposits by IDA would be made into this account againstwithdrawal applications supported by appropriate documentation.

C. Financial Reporting

The Project Accounts Statement, SOEs and the Special Accounts would be audited by independentauditors acceptable to IDA. Audited Financial Statements for the EMCAP consisting of each of thesestatements of accounts, together with the auditors' reports and certificates thereon would be submitted toIDA within six months of the close of the project financial year.

Overall Procurement Risk Assessment:

HighAverage XLow

Frequency of procurement supervision missions proposed: One every 4 months during the first yearand semi-annually thereafter (includes special procurement supervision for post-review/audits).

Annex 5Page 4 of 4

Table A. Project Costs by Procurement Arrangements (in US$ million equivalent)

Expenditur Procurement Method Totale Category

ICB NCB SHOPPING OTHER N.B.F.Consultants 10.10 10.38 20.48Equipment 4.48 1.00 0.50 7.89 13.87

and SuppliesTraining . 4.92 6.43 11.35Total 4.48 1.00 0.50 15.02 24.7 45.7

Table B. Thresholds for Procurement Methods and Prior Review

Goods US$100,000 and above ICB AllUS$30,000 to US$100,000 NCBless than US$30,000 Shopping

S6rvices US$100,000 and above QCBS' AllBelow US$100,000 (Firms) CQUS$50,000 (Individuals) and INDIVIDUAL Allabove INDIVIDUALBelow USS50,000 Single-Source All(individuals)

=____________ No specific ThresholdTraining International, Twinning Intermational Shopping All

National National Shopping AllNotes: ICB - International Competitive Bidding; NCB - National Competitive Bidding; QCBS - Qualityand Cost Based Selection; CQ - Selection Based on Consultants' Qualifications.

Table C: Allocation of Loan Proceeds (US$ million)

Expenditure Category Amount Financing Percentage

1. Equipment, materials and supplies 5.1 100% of foreign expenditures and85% of local expenditures

2. Consultant services 13.1 100%

3. Refunding of PPF 0.6 100%

4. Unallocated 1.2

Annex 6Page 1 of 1

Annex 6: Project Processing Budget and Schedule

Nigeria: Economic Management Capacity Project

........... P ro-e S ch ed u l -la ed. .- a....- ...... . .. .,:i tV.... .. ............. ' : . ... (tfinl C tge> _______

Time to prepare the project Seven months Seven monthsFirst Bank mission (identification) 10/29/1999 10/29/98Pre-Appraisal mission departure July June 28, 1999Converting Pre-Appraisal mission to November 11, 1999Appraisal MissionNegotiations November 15, 1999 November 18-19,

1999Board March 30, 2000 XXXXXXXXXPlanned Date of Effectiveness May 31, 2000 XX/XX/XXXX

Bank Staff and consultants who have worked on the project include:

......... ...... S..l.... .. ... t....y. ... .p....tJose B. Sokol Public sector managementT. Mpoy-Kamulayi LawyerHovsep Melkonian Disbursement OfficerMike Stevens Public sector management (peer reviewer)K.S. Venkatraman Public sector management (peer reviewer)Paul Meo Financial management (quality assurance)Robert G. Lynch StatisticsFrancis J. Earwaker PER and Project MonitoringThomas Hutcheson Financial AnalysisWinston Cox Accounting and AuditingKeith Soffe Accounting and AuditingGreg Nzekwu Public sector managementJeri Larson OperationsBayo Awosemusi Procurement SpecialistMuraino Olaseni Ogunsanya Financial Analysis

Annex 7Page 1 of 2

Annex 7: Documents in the Project File

Nigeria: Economic Management Capacity Building Project

1. FGN Vision 2010 Strategy2. FGN 1998 Budget Speech3. FGN 1999 Budget Speech4. World Bank Federal Public Expenditure Review of March 18, 19965. IMF: Nigeria: Selected Issues and Statistical Appendix of August 19986. CBN: Needs of the Research Department7. FGN Report of the Constitutional Conference Containing the 1995 Draft Constitution8. FMF: Functions of the Policy Coordinating Unit9. FMF: Budget Office: Required Assistance10. World Bank Proposed EMCAP Aide Memoire of November 17, 199811. NCEMA: The State, Leadership, Governance and Economic Development12. IMF: Nigeria: Strengthening the Budget Office, Report of November 199513. FMF: Terms of Reference for a Consultant for a Paris Club Rescheduling Exercise14. Nigerian Institute of Social and Economic Research Brochure15. FMF: Proposal for the Expansion of the FIRS Computerization Project16. Office of the Auditor General of the Federation: Duties and Responsibilities Document17. FOS: The Consumer Price Index 1995-199718. FOS Consumer Price Index: Development of Methodology in Nigeria19. FOS: National Accounts 1981 to 199620. FOS: National Accounts of Nigeria: Sources and Methods21. The Nigerian Economic Summit Group: Recommendations for the 1999 Federal Budget22. Closing Remarks by the Head of State at the Fifth Nigerian Economic Summit23. Address Delivered by the Pernanent Secretary of the National Revenue Mobilisation,

Allocation and Fiscal Commission on the 15th of January, 199924. National Revenue Mobilisation, Allocation and Fiscal Commission Proposal for the

Proposed EMCAP Project25. EMCAP - Further Submission from the National Planning Commission26. FOS: Social Statistics, Further Submission27. World Bank: Nigeria: Prospects for Development of August 2, 199628. "Proceedings of the Workshop: Nigeria - Prospects for Development," Central Bank of

Nigeria29. "Corruption and Development" PREMNotes May, 199830. "The South Africa Auditor General's Office" Findings November 199831. Computerization Consultancy Progress Report No. 21 ICC, Inc. Jan., 199932. "Budget of Realism" 1999 Budget Address by General Abdusalam Abubakar,

Head of State, Commander in Chief of the Armed Forces of the Federal Republicof Nigeria

33. Loan Administration Change Initiative: Implementation Overview, World Bank 199834. "Capacity Building for Economic Management in Nigeria: the Role of NCEMA,

NCEMA Occasional Papers No. 1, 199835. "The State, Leadership, Governance and Economic Development," address to

Annual Conference of the Nigerian Society, July 199836. "Office of the Auditor General for the Federation," AuGF, 199837. "A Draft Proposal for NCEMA's Participation in the Economic Management Capacity Project

(EMCAP," NCEMA, Nov., 199838. "Brochure," Nigerian Institute of Social and Economic Research, 1996

Annex 7Page 2 of 2

39. "Annual Report and Statement of Accounts," Central Bank of Nigeria 199740. "Proposals of the Money and Banking Statistics Committee on Measures to Address Comprehensive

Monetary and Financial Statistics Compilation an Analysis," CBN, Dec. 199841. "Needs of the CBN Research Department" CBN, Nov. 199842. "Foreign Operations Department of Central Bank of Nigeria" CBN, Nov., 199843. "National Planning Commission (proposal)" NPC, Nov., 199844. "Functions of the Policy Coordinating Unit," and "Brief on Policy Coordinating Unit," PCU, Nov.,

199845. "Computerization Cost/Benefit Analysis," Federal Inland Revenue Service, Nov. 199846. "Proposal for Expansion of the FIRS Computerization Project,' FIRS, Nov. 199847. "FIRS Computerization Expansion," FIRS, Nov. 199848. "Economic Management Capacity Project, Federal Office of Statistics Component (proposal)",

FOS, Nov. 199849. "Economic Management Capacity Project, Federal office of Statistics Component, National

Accounts Sub-component (proposal)", FOS, Nov. 199850. "Price Statistics Special Areas of Assistance," FOS, Nov. 199851. "Establishment Surveys and Census" FOS Nov., 199852. "Foreign Trade Statistics Branch," FOS, Nov. 199853. "Economic Statistics Production in Nigeria," FOS, Nov. 199854. "Specification of IMF's Special Data Dissemination Standard," IMF 1998 (?)55. "The Consumer Price Index" 1995-1997" FOS, Jan. 199856. "Social Statistics," FOS Nov. 1998

onaD w

p..

a) t4

r 0

Annex 8: Statement of Loans and CreditsNigeria: Economic Management Capacity Building Project

Closed 79Projects Bank

Difference BetweenLast PSR Expected and Actual13oard

Date Supervision Rating b/ Original Amount In USS Millions Disbursements"Fiscal DvlpetIpeettoYear Active Projects Develob ment Implementaion IBRD IDA Cancel. Undisb. Orig. Frm Revd

Obiectives Progress

1991 P002092 AG. RESEARCH S U 0 80.07 0 0.2 -3.78 -3.671991 P002106 HEALTH FUND S S 70 0 0 7.04 23.04 7.041991 P002134 PRIMARY EDUCATION S S 0 124.31 29.95 35.01 59.42 2.651991 P002084 WATER REHAB S S 256 0 0 46.83 46.83 46.831992 P002140 AGRIC TECH S S 42.5 0 0 7.4 7.17 3.91992 P002109 STATE WATER I S S .0 102.56 0 14.97 10.29 10.141993 P002156 DEV. COMMUNICATION S S 0 8.08 0 1.14 0.94 0.931993 P002176 STATE ROADS il S S 0 84.47 0 12.2 12.27 8.1

a. Intended disbursements to date minus actual disbursements to date as projected at appraisal.

Annex 82 of Page 2

IFC

As of 8/31/99(In US Dollars Millions)

Held Disbursed

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic1998 AEFAnsbby 0.1 0 0 0 0 0 0 0

1996/98 AEF Bailey Bridg 0.68 0 0 0 0 0 0 01992 AEF Canplas 0.04 0 0 0 0.04 0 0 01996 AEF Courdeau 0.46 0 0 0 0.46 0 0 01997 AEF Ekesons 0.29 0 0 0 0.29 0 0 01994 AEF Eterna 0.83 0 0 0 0.83 0 0 01996 AEF Mid-East 0 0 0.12 0 0 0 0.12 01998 AEFMinaj 0.5 0 0 0 0 0 0 01997 AEFMoorhouse 1.35 0 0 0 1.35 0 0 01997 AEF Radmed 0.29 0 0 0 0.29 0 0 01991 AEF Stark 0.03 0 0 0 0.03 0 0 01997 AEFTelipoint 0.16 0 0 0 0.16 0 0 01998 AEFTrans 0 0 0.15 0 0 0 0 01995 AEFVinfesen 1.1 0 0 0 1.1 0 0 01994 Abujalntl 1.75 0.75 0 0 1.75 0.71 0 0

1964/66/89 ArewaTextiles 0 0.12 0 0 0 0.12 0 01992 FSDH 0 0.86 0 0 0 0.86 0 0

1981/85/88 Ikeja Hotel 0 0.25 0 0 0 0.25 0 01993 Tourist CoNir 11 0 6.5 0 0 0 2.5 0

Total Portfolio: 18.58 1.98 6.77 0 6.3 1.94 2.62 0

Approvals Pending CommitmentLoan Equity Quasi Partic

1999 AEF CHARTERED 0.32 0 0 01999 AEF GLOBAL FABRI 0.32 0 0 01999 AEF HERCULES 1.3 0 0 01999 AEF HYGEIA 0.38 0.2 0 01995 AEF-NABEGU CO. I 0 0 0

Total Pending Commitment: 3.32 0.2 0 0

Annex 9

Annex 9: Nigeria At-A-Glance Page I of 2

Economic Management and Capacity Building Project 9/22/99

Sub-POVERTY and SOCIAL Saharan Low-

Nigeria Africa income [ Development diamond-1998Population, mid-year (millins) 121.3 628 3,515 Life expectancyGNP per capita (Atlas method, US$) 300 480 520GNP (Atlas method, US$ billions) 36.4 304 1844

Average annual growth, 1992-98

Population (%) 2.9 2.6 1.7Labor force (%) 2.9 2.6 1.9 GNP Gross

Most recent estimate (latest year available, 1992-98) per enrollment

Poverty (% of population below national poverty line) 66Urban population (% of total population) 42 33 31Life expectancy at birth (years) 54 51 63Infant mortality (per 1,000 live births) 77 91 69Child malnutrition (% of children under 5) 39 Access to safe waterAccess to safe water (% of population) 50 47 74illiteracy (% of population age 15+) 40 42 32Gross primary enrollment (% ofschool-age population) 98 77 108 Nigeria

Male 109 84 113 Low-income groupFemale 87 69 103

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1977 1987 1997 1998Economic ratios'

GDP (US$ billions) 36.0 23.4 39.9 41.4

Gross domestic investmenUGDP 28.3 16.0 15.3 20.0 TradeExports of goods and services/GDP 24.9 28.6 40.9 23.5Gross domestic savingstGDP 30.7 19.9 21.9 11.8 TGross national savings/GDP 29.3 11.4 20.0 8.7

Current account balance/GDP -2.8 -7.4 4.7 -7.3 D sInterest paymentslGDP 0.1 2.6 14 3.6 Do InvestmentTotal debtUGDP 8.7 123.8 72.0 69.6 SavingsTotal debtservice/exports 1.0 14.1 12.4 13.4Present value of debtUGDP .. .. 67.7 ..

Present value of debt/exports .. .. 172.7 Indebtedness

197747 1988-98 1997 1998 199943(average annual growth)GDP -1.3 3.3 3.6 1.8 2.1 __GDP -t3 3.3 3.6 1 .a 2.1 ~ ~I Nigenia Low-income groupGNP per capita -4.6 0.9 2.5 -1.8 -1.6Exports of goods and services -5.4 5.5 1.2 -8.3 14.2

STRUCTURE of the ECONOMY1977 1987 1997 1998 Growth rates of output and Investment (%)

(% of GDP) 30Agriculture 29.6 36.7 32.7 31.7Industry 31.4 33.3 46.9 41t0 1St

Manufacturing 4.6 6.8 4.8 .Services 39.0 30.0 20.4 27.3 .1 93 9 4 198XW >9 98

Private consumpton 55.9 68.9 69.6 77.5 | 0General govemment consumption 13.4 11.1 8.5 10.7 GD t GDPImports of goods and services 22.5 24.7 34.3 31.7

1977-87 1988-98 1997 1998 Growth rates of exports and Imports (%)(average annual growth)lAgriculture -0.5 3.0 4.2 1.5 20Industry -3.2 2.4 3.1 2.9 i I

Manufacturing 5.6 2.5 1.3 2.8 10Services 0.4 4.6 3.4 2.5

Private consumption 0.5 0.3 27.0 5.5 |General govemment consumpbon -2.7 1.6 18.5 2.0 . 96Gross domestic investment -13.7 10.8 -24.4 13.6 -10Imports of goods and services -9.6 4.9 8.4 7.8 Exports importsGross national product -1.6 3.9 5.4 1.0

Note: 1998 data are preliminary estmates.

The diamonds show four key indicators in the country (in bold) compared wfth its income-group average. If data are missing, the diamond willbe incomplete.

Page 2 of 2

Nigeria

PRICES and GOVERNMENT FINANCE1977 1987 1997 1998 Inflation (%)

Domestic prices(% change) 1 °Consumer prices 13.8 11.3 8.3 10.3 80Implicit GDP deflator 10.7 50.1 10.5 10.5 5

40

Government finance 20V

(% of GDP, includes current grants) n'

Current revenue 20.3 15.2 18.9 15.4 93 94 95 96 97 98

Current budget balance 12.3 -1.1 9.7 -6.0 GDPrdfator o COverall surplus/deficit -6.8 -7.6 1.1 -8.6

TRADE 1977_198__199______

(L/S$ millions) 1977 1987 1997 1998 I Export and Import levels (US$ millions)(US$ millions)jTotal exports (fob) 12,373 7,532 15,208 9,727 2000

Fuel 11,564 6,994 14,850 9,519 j 0

Cocoa.. ... . _Manufactures .. .. 40 36 12,000

Total imports (cif) 13,225 6,392 10,246 10,873 6,000

Food 1,373 671 1,219 1,479 4, t0Fuel and energy 240 27 143 130 '

Capital goods .. .. .. .. | 0 _ _ _ f92 e3 94 s5 95 97 sa

Export price index (1995--tO0) 94 100 112 82 Importprice index (1995=100) 45 75 92 84 N Exports uImportsTerms of trade (1995=100) 210 134 122 98 |

BALANCE of PAYMENTS

(USS millions) 1977 1987 1997 1998 Current account balance to GDP rao%)Exports of goods and services 12,955 7,757 15,330 9,845Imports of goodsand services 11,731 6,689 12,753 12,045Resource balance 1,224 1,068 2,577 -2,200

Net income -2,046 -2,770 -2,211 -2T661Net current transfers .. .. 1,512 1 833

Current account balance -1,007 -1,726 1,877 -3,027 s

Financing items (net) 189 1,648 1,183 3,026 -8 .Changes in net reserves 817 78 -3,061 1 -15

Memo:

Reserves including gold (US$ millions) 4,259 1,199 7,222 7,221Conversion rate (DEC, local/USS) 0.9 4.6 * 81.1 88.0

EXTERNAL DEBT and RESOURCE FLOWS1977 1987 1997 1998 j

(US$ millions) 1 Composition of total debt, 1998 (US$ millions)Total debt outstanding and disbursed 3,146 29,021 28,712 28,774

IBRD 410 2,939 2,373 2,278 A: 2.278IDA 39 32 410 564 G: 6,571 B: 564

Total debt service 138 1,106 1,934 1,352IBRD 47 332 518 467IDA 1 1 4 4

Composition of net resource flowsOffical grants 6 14Official creditors 38 378Private creditors 18 425 .. .. F: 5,765 E: 13,596Foreign direct investment 439 603Portfolio equity 0 0

World Bank programCommitments 62 71 0 0 A - IBRD E - BilateralDisbursements 64 385 260 222 B - IDA D -Other multilateral F - PrivatePrincipal repayments 18 125 339 314 C-IMF G-Shot-temnNet flows 46 260 -79 -93 -___ _

Interest payments 30 209 182 156Net transfers 16 52 -261 -249

Development Economics 9/22/99

FROM : DIRECTOR MUIT,INST. FMF ABUJR. PHONE NO. : 09 2343609 Feb. 04 2000 10:40PM P2

Annex 101 of Page 6

FEDERAL MINISTRY OF FINANCEOffice of the Honourable Minister

P.M.8. 14, Gark, W: 09-2340932Central Area, -2346928Abuja, Nigeria Fax:09-2340903

F.11373/S.34/C.96/38 4th February., 2000

Mr. Yavw, Ansu,Country Director for Nigeria,Africa Region,The W¢rid Bank,Washington D.C.U.S.A.

LE-TTS ROFSC R LDEM-OPMENT POLICY FOR THIE WORtLDBANK~ ASSISTED ECONOMIC MANAGEMN

CAPAC BUILPDXNG P0E:(MA

The Govemment of the Federal Republic of Nigeria has embarked onvarious .ar reaching reforms of the Nigerian Economy with a view tostrengt,Iening economic govemance through effective economic managementcapable of putting the economy on the path to recovery and prosperity. TheGovemment intends in this letter to highlight its strategy and modus operandito the envisaged reforms and to re-affirm its request and desire for thesupport of the IDA and the international donor agencies/countries in thefinancing of the EMCAP programme.

Country background

2. After initial success in undertakirg structural adjustment reforms startingin 1986, its abandonment in 1992 led to years of slow and stagnated growth,rising inflation and increased poverty. The situation left the economyextremely weak and highly vulnerable to the precipitous dedine In oil pricesthat began In late 1997 and continued through the early part of 1999.

FROM DIRECTOR MUIT,INST. FMF ABUJA. PHONE NO.: 09 2343609 Feb. 04 2000 i0:40AM P3

Annex 102 of Page

Though the FGN has recently achieved initial success in stabilizing theeconomy, economic activity continues to be undermined by inadequatemanagerial capacity, inappropriate budget priorities, inadequate financialmanagement and information system, weak Institutions, long delays in theaudit of the accounts of key government agencies, inadequate accounting andmonitoring of public expenditure and outdated procurement practices. Inaddition, statistcal information is partcularly weak, inadequate and producedwith major lags. The staff are insufficiently trained and there is insufficientfocus on key economic govemance issues, culminating in massive corruption.The enabling environment for ensuring integrity and transparent handling ofpublic finances was very weak. Such a situation is fraught with manyproblems which have to be urgently tackled if Nigeria is to move to a path ofrapid growth and development. The solution to all these problems requiresustained long term efforts. The announced intentions and recent actions ofthe Federal Govemment in the areas of govemance, economic managementand poverty alleviation give credence to the dawn of a new beginning forNigeria, under a democratic system of government. It is instructive at thisjuncture to mention that one of the first bills to be presented to the NationalAssembly was the anti - corruption bill which is meant to combat corruptionand economic mismanagement, both of which pose formidable barriers toeconomic development.

Sector background

3. EMCAP consttutes a first step in FGN's bid to strengthen economicgovernance by:

(a) ensuring greater transparency, accountability and probity in fiscaloperations;

(b) strengthening the systems designed to improve the efficiency ofresource allocation, while discouraging those elements that havehindered such efforts in the past;

(c) improving the quality and timeliness of data production foreconomic and social analyses and dissemination; and

(d) enhancing the capacity to cary out, coordinate, and monitor

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Annex 103 of Page

macroeconomic and structural policies. While EMCAP itself willfocus on a relatively small number of priority areas of technicalassistance and capacity building in key institutions ofgovernment, it will also be used to help identify and define theoverall technical assistance and capacity building agenda.Strengthening Nigeria's economic governance will drive theImplementation of the project. While the project on its own isnot expected to lead to full achievement of this objective, it couldserve as a springboard for reforms in the civil service as well as inlegal, judidal, procurement and tax policy areas, and in fiscaldecentralization by supporting studies in these areas.

Pro-ram/Prgject objectives

4. The Economic Management Capacity Building Project (EMCAP) aims atassisting the Federal Government of Nigeria (FGN) in strengthening keyaspects of economic management. EMCAP is a part of a broader, ambitiouseffort by the FGN to improve economic governance and the tools foreconomic management. Nigeria's past economic record confirms that thesegoals are the initial, but not the sole, requirements underpinning the longer-term stategy of reducing poverty, reviving economic growth, and betterallocation of resources. Within the broader efforts of the FGN at addressingeconomic govemance issues, EMCAP will concentrate on certain high priorityareas which require rapid resolution. These areas are:

(a) improvement of the national accounts as well as price, social andpoverty statistics in the Federal Office of Statistics (FOS);

(b) improvement and monitoring of public expenditure profile by theNational Planning Commission (NPC);

(c) monitoring and accounting for fiscal operations in the Office of theAccountant General of the Federation (OAGF) of the FederalMinistry of Finance (FMF), the Ofmce of the Auditor General of theFederation (OAuGF), and In the National Assembly;

(d) support for a comprehensive (financial, operational, technical and

3

FROM DIRECTOR MUIT,MINST. FMF ABUJA. PHONE NO. : 09 2343609 Feb. 04 2000 10:41AM P5

Annex 104 of Page 6

legal aspects) review of the petroleum sector as well as reform ofkey sector Institutions;

(e) strengthening the procurement activities in the public sector;

(f) strengthening of the policy development capabilities of thegovemment in order to enable it focus on key reform policiescritical for economic management, induding distance learning orthe exchange of lessons;

bg) supporting the design and implementation of an IntegratedFinancial and Economic Management System (IFEMIS) whichwould insttutionalize and ratlonalize statistical managementwithin the government; and

(h) support for a Project Unit, located in the Multilateral InstitutionsDepartment (MULT) of the FMF, to accelerate preparation as wellas to evaluate and monitor activities in the other agencies anddepartments involved in the program.

Proaram Description:

S. As noted, the proposed EMCAP project is a first step in addressing issuesof economic governance and management, but with a much strongeremphasis on institutional development and capacity building. The project wasidentified In parallel wtth govemment efforts to improve economic governance.Within the broader efforts of the FGN that address economic govemanceissues, EMCAP will concentrate on certain high priority areas which requirerapid resolution:

(a) improvement of the national accounts, price, social and povertystatistics in the FOS;

(b) improvement and monitoring of public expenditure in the NPC;

(c) monitoring and accounting of fiscal operations In the OAGF, the4

Annex 105 of Page (

OAuGF and the National Assembly;

(d) support for a comprehensive (financial, operational, technical,legal and finandal aspects) review of the petroleum sector as wellas reform of key sector institutions;

(e) strengthening of the procurement activitles in the public sector;

(f) strengthening of the policy development capabilities of thegovemrnment to focus on key reforrn policies critical for economicmanagement, including distance learning or the exchange oflessons;

(g) supporting the design and implementation of an IFEMIS whichwould institutionalize and rationalize statistical managementwithin the government; and

(h) support for a Project Unit to accelerate preparation as well as toevaluate and monitor activities in the other PEAs involved in theprogramme;

(i) support a study of the current fiscal federalism and equitablemethod by which revenues are collected and shared among thefederating units; and

Oi) review of the tariff policy and the development of a new tariffschedule.

Prject Implementation

6. The project will Initially concentrate on preparatory work in priorityareas: development of the IFEMIS in the FMF; support to strengthen theOAGF and the OAuGF; support for greater transparency and a stronger anti-corruption stance; assistance to Improve and disseminate economic, social andpoverty statistics by the FOS; and preparatory work by the Project Unit. Itwould also further advance the strengthening of economic management and

FROM DIRECTOR MUIIT, INST. FMF ABUJA. PHONE NO. 09 2343609 Feb. 04 2000 10:42AM P7Annex 106 of Page 6

capacity building efforts and expand the focus to all project executingagencies. This phased approach will permit the democratically electedgovemment to review and shape implementation proposals before they areexecutad.

PrMiect Sustainabit

7. There are a number of aitical factors that will be important for theproject's sustainability. First, and most important, will be the degree andcontinuity of FGN's commitment to greater transparency and probity. Secondwill be the level of the FGN's continued financial and loglstical support for thedifferent sub-components of the project beyond implementation. Thenecessary costs of these elements for capacity building and strengtheningeconomic management would be taken Into consideration and integrated.intothe FGN's budget. Finally, of crucial importance will be a particIpatoryapproach involving all relevant stakeholders during and beyond theimplementation of the capacity building programme. Comprehensiveinstitutional and systemic changes that are part of the programmme's agendaw'ill be widely publicized, internal feedback and opportunities for processinnovatfon would be established to increase motivation and to provide upwardfeedback to management

8. The FGN developed the project jointly with the World Bank and withsome participation and contribution of donor agencies namely the USAID,DFID, European Union and Japan. However, the content of the projectemanatbd from the Govemment and was based on the myriad of problemsmilitating against the development and growth of the Nigerian economy. Theproject details reflect our desire to ensure that at the dose of the credit,Nigeria would have gone a long way in eradicating corruption and enthroningtransparency, probity, accountability and good govemance in Nigeria.

Adanwu CiromaMinisteraof Finance

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Annex 1 1Page 1 of 1

Annex 11: List of Project Executing Agencies

Nigeria: Economic Management Capacity Building Project

Improvement of Statistics

1. Federal Office of Statistics (FOS).

Improvement and Monitoring of Public Expenditure

2. National Planning Commission (NPC).

Monitoring and Accounting of Fiscal Operations

3. Accountant General of the Federation of the FMF (OAGF).4. Auditor General of the Federation (OAuGF).

Petroleum Sector Review

5. Ministry of Petroleum and Natural Resources.

Strengthening the Procurement Activities in the Public Sector

6. Project Unit of the FMF.

Strengthening Policy Development Capabilities

7. Project Unit of the FMF for the time being.

Information Management System

8. Policy, Research and Statistics Departnent of the FMF (PRS).

Support for the Project Unit

9. Project Unit of the FMF.

At a Distance Learning

10. Project Unit of the FMF.

National and State Assemblies

11. National Assembly Secretariat.

Strengthening the Legal/Judicial Systems

12. Office of the Attorney-General of the Federation in close cooperation with the Office of the ChiefJustice.

Annex 12Page 1 of 10

Annex 12: Institutional Capacity Assessment of Participating Project Executing Agencies

Nigeria: Economic Management Capacity Building Project

EMCAP constitutes a first step in assisting the FGN strengthen economic governance by: (a) ensuringgreater transparency, accountability and probity in fiscal operations; (b) improving the quality andtimeliness of data for economic and social analyses, as well as their wide dissemination; (c) strengtheningthe systems designed to improve the efficiency of resource use, while discouraging - via publictransparency - those elements that have deterred such efforts in the past; and (d) enhancing its capacity tocarry out, coordinate, and monitor macroeconomic and structural as well as poverty policies.

A capacity assessment involves a description of: (a) human skills; (b) institutional structures; (c)organizational structures; and (d) institutional procedures and systems for the purpose of assessing thestrengths as well as the weakness of PEAs involved in EMCAP and of assessing if the PEAs have aminimum capacity to undertake the Project successfully. This Annex summarizes the review of thecapacity assessment undertaken during project preparation and appraisal of the participating agencies anddepartments. Six government agencies have been identified as key agencies to participate in the EMCAP.These include: (a) the FMF, and within the FMF, the OAGF, PRS and Project Unit; (b) FOS; (c) NPC; (d)OAuGF; (e) NNPC; (f) the National Assembly; and (g) the Office of the Attorney General of theFederation in close cooperation with the Office of the Chief Justice.

While economic policy-making in Nigeria has improved significantly in the last few years, it is faced withproblems which stem from a number of factors including: (a) economic decline and increasing poverty;(b) inadequate capacity for planning, budgeting, and policy decision making and implementation; (c)unavailability of user friendly data; (d) inadequate availability of competent and committed civil servants;and (e) inadequate management capacity.

Nigeria's economy has, in the past fifteen years, experienced many adverse trends, including loweconomic growth, declining capacity utilization in industry, high deficits in public finances, non-performing utilities, bloated external debt with substantial arrears, huge balance of payments deficits, andhigh unemployment levels. In particular, there is a problem of inadequate linkages between the variouseconomic and financial programs, which result in inconsistent priorities. Also, there is a high incidenceof abandoned projects, which is clear evidence of inadequacies in the planning and budgeting procedures.

Economic management is still crippled by unavailability of timely, accurate and user friendly statisticalinfornation, as well as the lack of access to on-line stored data and information. More effectivecoordination and timely availability of relevant statistical data will not only improve management andapplication of relevant data and information, it is also critical for improved management of the economy.This would require enhanced capacities and compatible technical facilities. The flight of civil servants tothe private sector is frequent due to existing poor conditions of service in the public sector. It has alsobeen difficult for the Govermment to retain the capacity already built due the brain drain, and criticalshortages of skilled personnel remain. Management problems are also pervasive. This is evidenced bythe lack of capacity in the public sector for managing extemal assistance, existence of undue bureaucraticbottlenecks that prevent the easy flow of donor resources and the lack of harmony in the utilization ofdomestic and extemal resources. The number of viable institutions to provide training to public servantswhose roles are addressing these problems is inadequate. The shortage of managerial and technicalmanpower to convert existing facilities to use has resulted from the adoption of weak economic policies.

Annex 12Page 2 of 10

There is also evidence of generally deteriorating housing conditions, inadequate infrastructure facilities,human and environmental poverty and declining quality of life. There is, therefore, a need to build andstrengthen the capacities for development. Steps taken by the government to address these problemsinclude enhanced policy, planning and budgeting processes, improved statistical information base, andstrengthening capacity.

The proposed EMCAP operation is a first step in addressing issues of economic governance andmanagement but with a much stronger emphasis on institutional development and capacity building.Within the broader efforts of the FGN that address economic governance issues, EMCAP will concentrateon certain high priority areas which require rapid resolution in the area of capacity building. Theassessment of institutional capacity to address these issues is discussed below.

Improvement of Statistics

FOS. The FOS is an arm of the NPC and the principal government agency in charge of collecting,processing, compiling and publishing all economic and social statistics in Nigeria. As an arm ofgovernment, FOS is regarded as an extra-ministerial agency supervised by the NPC. The approvedbudgets (recurrent and capital) create a limitation in what the FOS can do to improve the statisticalsystem. Apart from the human resource constraints facing the FOS, including difficulties in retainingcapable and trained statisticians at the very low civil service wages, there are also technical deficienciesthat hinder the improvement of data processing techniques. As an institution, FOS is also faced withinadequate office space to accommodate its staff and resources to analyze, process and publish statisticalresults for public use. The FOS has offices in all states of the Federation, and at the various ports.

The FOS has benefited from EMTAP and stood out as one of the very successful PEAs under theprogram. Through IDA assistance from EMTAP, major achievements were made in the delivery rate ofstatistical information. For example the lag associated with the measurement of inflation was reducedfrom six months to no more than two months. The data on external trade, which remained unprocessedfor four consecutive years, 1985-1990, were processed and published and a fresh stream of activitiesgenerated therefrom. Currently there is enhanced data processing capability in the FOS, especially asthey affect information on poverty. However, despite these improvements, there are still some unresolvedissues and serious problems with consumer prices, the national accounts, and social and poverty statistics.

The staff of FOS is comprised of statisticians, economists, economic statisticians, enumerators, andstatistical officers. The FOS currently employs some 5,673 staff or 90% of its 1999 approved staffcomplement of 6277. However, for senior statistical staff (grade level 13 to 15), this ratio falls to 60-75percent. The bulk of statistical officers and statisticians are located in the Census and Surveys department.Most of the staff of FOS, especially high level, is well trained. Many of the economists have worked inthe FOS for some time and have become specialized in national accounts statistics. Most staff of the FOShas restricted mobility within the civil service. FOS has no training school of its own, but has affiliationwith some of the universities and technical institutions where it conducts training. Other skills in the FOSinclude enumerators, programmers and data entry operators. The middle-level staff of the FOSundertakes training at any of the three Federal School of Statistics at Ibadan, Enugu or Kaduna, while theuniversities handle the degree programs for statistical staff. For staff to be fully integrated into EMCAP,they would need to be trained.

One of the missions of the FOS is to produce high quality statistical information relating to thecommercial, industrial, agricultural, mining, social, economic and other national activities. FOS does thisthrough collaboration with other departments and agencies of government, including Federal, state andlocal governments.

Annex 12Page 3 of 10

The FOS organizational structure is comprised of the following: (a) Director General's Office, comprisingthe public relations unit, legal services unit, and intemal audit unit; (b) Personnel Management,responsible for personnel issues, training and welfare; (c) Finance and Supplies, charged with preparingthe budget, monitoring expenditures and handling purchases; (d) Corporate Planning and TechnicalCoordination with responsibility for corporate planning in the FOS, coordinates technical assistance andthe dissemination of statistical information to the public; (e) Social and Economic Analysis, responsiblefor the formulation of the national accounts statistics as well as social statistics; (f) Census and Surveys,including agricultural and household surveys, economic surveys and census as well as trade and pricestatistics and industrial, business, energy, construction, transport and other surveys; (g) Field Services andMethodology coordinates the activities of the FOS in the field and formulates relevant methods to beapplied to various exercises; and (h) the Computer Management and Information Services Unit, in chargeof computers and information systems.

FOS is structured along the pattern of the Federal Civil Service. The chief executive is the DirectorGeneral and all issues are channeled through him. The Director General reports to the Minister ofNational Planning on issues affecting FOS. The establishment currently has six deputy directors and tenassistant directors. There are four zonal controllers, one each for Northeast, Northwest, Southeast andSouthwest Zones. The FOS plays a critical role in the National Council of Statistics, a policy-makingorgan chaired by the Minister of National Planning. Other bodies include the National ConsultativeCommittee on Statistics (NCCS) which consists of states' central statistical agencies and selectedparastatals of government. The NCCS puts forward a national statistical program for the country. TheDirector General of FOS is the chairman of the NCCS.

FOS has a central computer unit, but because of separate and distant office locations at headquarters,several departments have their own computer units. Different departments use different softwarepackages that have been funded by different donors -- an integrated information technology developmentpolicy is yet to be established. For departments that have to rely on secondary data (such as socialstatistics), accessing statistics from other governmental agencies and parastatals has proven to be difficultand time consuming. This is the result of the dispersion of agencies throughout the country and of theAct granting independence between ministries, which has interrupted the flow of information. ThePlanning, Research and Statistics departments within the ministries, which were supposed to provide suchinformation, do not do this on an effective and reliable basis. FOS thus has to collect the informationfrom the source, without being endowed with the resources for this task.

The FOS is grossly under-funded. Details of the budget bids, allocations and receipts from the FederalGovernment for the past three years suggest that the FOS budget as a whole, and that allocated toeconomic statistics in particular, has declined in real terms over time. FOS capital expenditure iscontrolled centrally and disbursed on a project by project basis. Capital expenditures were approved atbetween 27 million and 108 million Naira during 1994-98. However, the approved amounts are likely tosuffer cuts by as much as 50 percent. Thus, the amounts received have fluctuated between 21 million andabout 60 million Naira during the same period. Budgeted recurrent expenditures, on the other hand, havenot experienced significant variance between approved and actual amounts received. In 1998, approvedbudgeted recurrent expenditures amounted to 228 million Naira. However, the received amount reached325 million Naira as a result of the salary revisiona that took place. Personnel costs have fluctuatedbetween 75 percent and 90 percent of total recurrent expenditures. The amount left for materials,supplies, maintenance, purchase of services and training is quite small for the activities that FOS needs toundertake.

The FOS buildings are in a gross state of disrepair, the basic furniture, toilet facilities, brickwork, floors,and lighting, are all significantly sub-standard. Electricity supply is intermittent, and the dispersion of the

Annex 12Page 4 of 10

office across many locations is a significant barrier to good liaison between departments. Consumablegoods such as paper are in very short supply; transport for travel between FOS locations is limited.

National accounts receive low priority in the call on collection and survey processing objectives withinthe FOS. The reasons seem to be as follows: (a) traditional surveys and their outputs receive priority overoutputs for economic statistics; (b) given lack of government or other user demand for economicstatistics, there has been little extemal pressure for reliable and timely economic statistics; and (c) thenational accounts section has not risen to the challenge of managing with the cut in resources. However,examination of the 1992 sources and methods of publication reveals that even the annual accounts ofGDP are mostly based on the very old benchmark statistics and heroic assumptions on continuing ratios.This means that the current outputs are very poor measures of recent changes in the economy, and it isunderstandable that outside users such as the CBN have been forced into making their own estimatesthrough ad-hoc surveys. It also makes understandable the reluctance of the national accountants toemploy even more quick fix methods to produce timely indicators of little intrinsic value. Despite theabove reasons for low morale, staff responsible for the production and publication of economic statisticsremains committed to do a good job if the raw material, equipment and resources are made available.

Priorities of the FOS reflect current extemal demands. For example, the desire of internationalinstitutions for information on poverty and their provision of resources to the FOS to collect such data,have directly improved the quality of output in this area, but at the expense of economic statistics. Thechange from having FOS staff outposted in other ministries and agencies has meant that data fromgovernment departments has dried up, making the estimation of output and expenditure estimates for thegovernment sector almost impossible.

In order for the national accounts to be improved, it is necessary to enhance both the funding of nationalaccounts compilation, and more importantly, the collections and processing which provides the inputsinto the national accounts. This makes it critical that the first steps in this Project pay particular attentionto the flow of information into the national accounts, and assessing the timeliness and quality of the datasources with a view to identifying those inputs which are key, and most deserving of higher priority andfunding.

This process must be supported by a clearer specification of user demands from the economic planningagencies of government. Emphasis should be placed on the new nature of these demands, helping theFOS to re-orient its internal priorities to meet this new set of demands. Ideally, a clear specification ofthe inputs necessary for the government management of the economy should be translated into a set ofoutputs from the FOS, and a plan drawn up to allow the customer demands to be met over the next fewyears. It is difficult to see how much improvement can be made without a better set of inputs into thenational accounts estimation process.

Communications and liaison between the various departments and divisions of the FOS need to bestrengthened. Differences of opinion exist on how well the needs of the national accounts are being metby the collection and processing divisions. The collection process, in particular, seems not responsive tonational accounts needs. Evidence such as the back-log of work on the agricultural survey, the completeabsence of timely data on modern holdings in agriculture, the failure of the quarterly industrial productionindex, the lack of new weights to re-base the consumer price index from the national consumption survey,are all concrete evidence of the failure of the system to allow good national accounts estimates to bemade.

One of the deductions from the analysis of its current weaknesses is that every effort should be made towork with the FOS to draw-up an inclusive strategic plan for the office in terms of economic statistics. Inattempting to respond to donor preferences there is a danger of achieving sub-optimal solutions in terms

Annex 12Page 5 of 10

of bolstering different components of the statistical system, without addressing central issues such as theintegration of the various components to an agreed set of final outputs.

National Planning Commission

The NPC is a ministerial department of the FGN under the Federal Civil Service Structure. It isresponsible for the formulation of broad economic and development objectives and the setting of nationalpriorities and goals. NPC also prepares the Rolling Plan and Long-term Perspective Plan as well as theCommunity Action Program for Poverty Alleviation. The NPC has a cabinet minister at the head and aPermanent Secretary as the accounting officer responsible for the day-to-day activities.

The NPC comprises ten operational departments, of which the Plan, Budget and Policy Department(PBPD) would be the institutional focus of both these two project sub-components. The principalresponsibilities of the PBPD are to: (a) coordinate the preparation of a three-year rolling NationalDevelopment Plan; (b) organize and coordinate all aspects of project monitoring nationwide; and (c) issueclearance for the release of capital funds to line ministries on the basis of quarterly progress reports.

NPC staff carry out tasks related to planning which includes project preparation and appraisal, integrationof projects to the available resources in the budget, project monitoring and supervision. They are alsoexposed to macroeconomic modeling techniques. NPC staff was involved in the Joint Govemment/BankPER carried out in 1995. NPC staff was also part of the committee that drafted the FGN's PovertyAssessment.

While NPC is staffed primarily by graduates with background in economics, statistics, and socialsciences; within the civil service, staff is moved from other ministries to the NPC with or without therelevant exposure to economic analysis. This creates problems for planning as gaps begin to emerge inthe capacity to manage the economy. There are shortages of the right caliber of trained staff to fit into theplanning processes. There is no distinction between the staff in the NPC and any other arm of the civilservice and this means that staff could be moved from one section to another without reference tobackground and competence in performing the task. The required tools for planning and informationmanagement are grossly inadequate. Also, for monitoring the investment program, the NPC lacksvehicles and effective communication mechanisms, and good follow-up.

The project monitoring sub-component of EMCAP would address the second of PBDP responsibilities, toorganize and coordinate all aspects of project monitoring nationwide, which, at present, is impaired byinsufficient trained staff and logistical support. PBPD fulfills the role of manager and coordinator incarrying-out the project monitoring function. It draws upon personnel from other departments of NPCand from the line ministries to staff project monitoring missions. Even so, the combined resources ofthese agencies are not sufficient to permit all projects to be monitored at the national, state and local level.The task is made even more difficult by the lack of equipment, which slows down data processing. In anyone year a sample of about ten percent of the total is monitored by PBPD.

At present, the higher level staff of PBPD number only nine. In recent years, an across-the-boardmoratorium on hiring has prevented PBPD from increasing the number of higher level staff although theestablishment calls for a total of twenty. It is anticipated that the new administration will now permitPBPD to fill some of the vacancies. This prospective increase in staff numbers and the need to deployexisting staff more effectively in a management and coordinating role underscores the need for a vigoroustraining program.

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Office of the Accountant General of the Federation

The OAGF has the responsibility for financial control and resource management. The major areas ofresponsibility include collation of accounts of all federal ministries and extra-ministerial departments,publication of annual statements of accounts and other statutory financial statements; management andcontrol of the pool of accountants and internal auditors; revenue monitoring and accounting; funding ofall federal ministries and parastatals through cash backing of the recurrent and capital warrants;management of federal government investments, and management and distribution of the federationaccounts to all tiers of government; training of all accounts and internal audit personnel of the FGN, andservicing the debt of the FGN.

There are six departments in the OAGF; the personnel management, finance and supplies, and theplanning and research departments are the three service departments common to all ministries andparastatals. Other departments of the OAGF are revenue and funds department responsible for revenuemonitoring and accounts, funds, and the final accounts, the Inspectorate department responsible forinspections, investigations, and boards of enquiry into loss of government property, and the Ministry ofFinance Incorporated (MOFI) department which is responsible for government investments incommercial enterprises, whether by equity or loans. Each director is assisted by three deputy directors,except in the case of MOFI, which has only two deputies. There is no Deputy Accountant General and inthe absence of the OAGF the most senior deputy acts in the position. The OAGF has a staff ofapproximately 7350 persons located throughout the country; 1560 officers are in the FPOs, 5000 in theministries and extra ministerial departments, and 784 in the head office. The OAGF employs some 3,000chartered accountants and an even larger number of account clerks and assistants. Most staff above level15 is located in the head office or in the offices of ministries and departments in Abuja or Lagos.

Since 1993 the OAGF has not been able to prepare final accounts of the FGN and deliver them to theAuditor General, one of its most important functions. There are many reasons for this failure, including anapparent lack of interest in fiscal reporting by the Administration at that time when the PAC ceased tofunction. The move of the Department from Lagos to Abuja in 1998 was badly planned and executed anduntil the beginning of 1999 the accommodation assigned to the Office in Abuja was poor and insufficient,especially for the Data Processing Unit, Final Accounts Department and the Revenue Department. Thislack of accommodation still extends to the personal accommodation of staff, many of whom were forcedto live under squatter conditions. Shortages of essential stationary and supplies have reached the pointwhere even the most basic functions cannot be performed. The OAGF is staffed with qualifiedaccountants and accounts clerks and is the major source of recruits to the Audit, Revenue and TreasuryTraining School (ARTTS) for middle-level staff. Staff is also exposed to training in the professionalaccounting schools and the universities but training has been neglected in the recent past. The OAGF hasinadequate facilities for handling its responsibility, especially computers and appropriate accounting andnetworking software. In recent times, staff morale seems to be on the rise following the improvement inoffice accommodation and the interest, which the new leadership has shown, in the work and welfare ofthe staff.

A major concern is the lack of influence, which the OAGF has over the spending policies, and actions ofline ministries. The OAGF is no longer represented on the Appropriations Committee of the FMF, asituation that should be rectified because of the importance of the Office in financial management. Thenew Financial Regulations will provide sanctions against cases of wrong spending, delay in rendition ofmoneys collected by other ministries, failure by ministries and departments to pay monies collected intothe Consolidated Revenue Fund and other administrative offences. Such offences have become a seriousproblem, but the OAGF currently has no powers to impose sanctions on offenders. Essential returns andaccounts from line ministries are regularly delayed, and are often not received at all. Some essential

Annex 12Page 7 of 10

returns have not been made for up to 54 months in some cases with out penalty. Cases of criminalwrongdoing remain province of the police.

The only management data available to the FGN is the fiscal accounts prepared by the Revenue andFunds Department (formerly the Treasury Department). In this regard, of immediate concern are theproblems facing the Revenue and Funds Department of the OAGF that is responsible for overall controlof the federal accounting system, producing the annual accounts of the FGN and providing regularfinancial information to assist other Departnents. Prompt presentation of accurate accounts is critical inthe effort to promote transparency and accountability in the financial transactions of the FGN. Lateprocessing of accounts means that there is neither effective budgetary control nor any chance ofidentifying fraud or corruption in time to take corrective action. The lack of timely and accurate accountsalso erodes the trust and confidence of creditors, limits opportunity for the FGN to credibly explain itsfinancial status and undermines the work of the OAuGF and the Public Accounts Committee.

Office of the Auditor General for the Federation

The OAuGF is an independent organ of the FGN with responsibility for the audit of public accounts ofthe Federation including all offices, courts, government statutory corporations, commissions, authoritiesand government agencies. The OAuGF has access to all books, records, returns and other documentsrelating to such accounts. The OAuGF also has a mandatory responsibility to provide all agenciesestablished by laws of the National Assembly with a list of qualified auditors from which the externalauditors must be appointed, and with guidelines on the scale of fees for external auditors. Although theOAuGF is not responsible for the audit of such agencies it is required to comment on their auditedaccounts and has the power to perform periodic checks on their books.

The OAuGF is headed by the Auditor General for the Federation who is appointed in accordance with andcarries out the functions assigned under Sections 85 to 87 of the 1999 Constitution. The current staffcomplement of the OAuGF is 2000 of which 1600 are qualified in auditing. The staff of the Head Officeis made up of 100 auditors and 113 support staff; 1500 auditors and 287 support staff are deployed in the24 branch and eight regional offices (1123) and in the Federal ministries and extra-ministerialdepartments (664). The OAuGF has five directorates, the most senior of who acts in the absence of theAuditor General, and each director is assisted by two deputy-directors. There is no position of directorneither for personnel management nor for research and statistics; officers at the level of deputy directorcarry out these functions. There is also an Internal Audit Division, a Losses Committee Division and anAnnual Reports and Public Accounts Committee Division all of which report directly to the AuditorGeneral.

Out of the 1600 staff qualified in auditing, 700 public sector auditors and 900 audit assistants, withbackgrounds in accountancy especially public accounting. The public sector auditors are qualified mainlyin accountants with exposure in economics, business management, and statistics. The audit assistantsserve as account clerks and supervisors and are under the direction of the public sector auditors. In theregional offices of the OAuGF there are 400 public sector auditors and 500 audit assistants out of a totalof 1123 persons. A further 250 auditors and 350 audit assistants are deployed in Federal Ministries andextra-ministerial departments.

The OAuGF submits reports to the National Assembly with copies to the Presidency; its budgetrequirements are currently approved by the FMF. The Office of Establishments approves the staffcomplement of the OAuGF and Management and the positions are filled by the Federal Civil ServiceCommission on the request of the OAuGF. There is close cooperation between the OAuGF and theauditors general at the state and local government levels through a strong net work of informal links, asevidenced by joint publications, training and conferences.

Annex 12Page 8 of 10

The training and accommodation of the staff of the OAuGF have been badly neglected under previousAdministrations which did not assign a high priority to accurate and timely financial reporting andauditing of such reports. As a result the Audit occupies offices that are poorly equipped, poorly appointedand in disrepair. Although assistance was provided to the OAuGF under the EMTAP, this was inadequateto meet the backlog of basic training for junior staff and the continuing professional education for seniors.The OAuGF does not make use of up-to-date information technology and computer equipment except forsimple data processing and staff generally is not sufficiently familiar with computers. The budget of theOAuGF is inadequate and often audits of projects cannot be undertaken because there are no funds to payper diems or transport costs, as vehicles often are unserviceable. Most of the headquarters staff of theOAuGF is in Lagos while most of the working documents are in Abuja where there is a small office forthe AuGF. As a result of the poor communications and transport the regional offices often are isolatedfrom head quarters and this feeling is reinfdrced by the occasional late payment of salaries in thoseoffices.

Nigerian National Petroleum Corporation

The Nigerian National Petroleum Corporation (NNPC) was established on April 1, 1977 in accordancewith the provisions of the Nigerian National Petroleum Corporation Act No. 33. The corporation ischarged under section 4 (1) of the Act with the duty of: (a) exploring and prospecting for, working,winning or otherwise acquiring, processing and disposing of petroleum; (b) refining, treating, processingand generally engaging in the handling of petroleum for the manufacture and production of petroleumproducts and its derivatives; (c) purchasing and marketing petroleum, its products and by-products; (d)providing and operating pipelines, tanker-ships or other facilities for the carriage or conveyance of crudeoil, natural gas and their products and derivatives, water and any other liquids or other commoditiesrelated to the Corporation's operations; (d) constructing, equipping and maintaining tank farms and otherfacilities for the handling and treatment of petroleum and its products and derivatives; (e) carrying outresearch in connection with petroleum or anything derived from it and promoting activities for thepurpose of turning to account the results of such research; (f) generally engaging in activities that wouldenhance the petroleum industry in the overall interest of Nigeria; and (g) undertaking such other activitiesas are necessary for giving full effect to the provisions of the Act.

NNPC was established as an integrated company designed to facilitate the government's participation incontrol, management, and development of the country's oil industry. The government holds the majorityshare (about 57 percent) in joint ventures with foreign oil companies in exploration and production.NNPC does exploration on its own, although on a relatively limited scale. It owns and manages thedomestic refineries and has an interest in several petroleum product-marketing companies. TheDepartment of Petroleum Resources (DPR), an arm of the Ministry of Petroleum Resources, is chargedwith enforcement of petroleum sector regulations.

The petroleum sector is characterized by many weaknesses: the sector falls short of running on acommercial basis, the institutional capacity in the sector is weak, there are funding constraints andinadequacies, there is a lack of strategic direction, there are governance issues in the financial area and inthe management of social tensions, and the subsidiaries of NNPC are not capitalized,

Planning, Research and Statistics Department

The PRS is a department of the Federal Ministry of Finance that has overall responsibility for planningthe Ministry's own activities and facilities. It is also responsible for information technology and datamanagement to serve the needs of the Ministry and its dependent offices such as the OAGF. SinceIFEMIS would focus, first and foremost, on fiscal data and financial management, the PRS is a natural

Annex 12Page 9 of 10

place to locate the function because it already possesses a core of specialist expertise that manage the datarequirements of the FMF, albeit with limited resources.

The PRS is structured in two divisions, a Planning Division and a Research and Statistics Division, eachof which is headed by a deputy director. The total staff of the department numbers 92, of which one thirdare professionals and the remaining two-thirds support and technical staff. The Research and StatisticsDivision manages the data processing needs of the Ministry and furnished data to other departments onthe basis of requests. It also produces the Annual Report of the Ministry. However, much work remainsto be done in terms of constructing a more comprehensive data base of revenues and expenditures (bothrecurrent and capital) as well as borrowing and transfers for all government entities at the federal, stateand local levels. There is also a need for a local area network that would permit users within the FGN toaccess data directly rather than indirectly by individual request to PRS. IFEMIS would address that needby providing appropriate hardware, software, training and management systems.

Over and beyond the financial data requirements of the FMF itself to manage the budget and the processof budget execution, there is a broader need to integrate the data system of the FMF with that of otherinstitutions such as he Central Bank and the Federal office of Statistics. That calls for the introduction ofa wide area network to encompass the data resources of those other institutions and link them with usersthroughout the Federal Government, including the office of the President and the legislature. IFEMISwould also address that need with the design and implementation of an open-ended system that wouldpermit progressive expansion to different levels of government as future requirements dictate.

Project Unit

The PU is housed within MULT. The performance of the PU on the EMTAP Project was reviewedduring project identification and was found to have fulfilled expectations. Management of the EMCAPwould be placed under the same group that provided logistical and other support during projectidentification.

Staff of MULT has been involved in many other Bank credits as well as in major external borrowingprograms of the FGN. They have attended programs and seminars designed to acquaint them with WorldBank operations as well as guidelines on procurement of goods, works and consultants. However, highturnover has depleted the PU and it is necessary to train continuously to ensure that there is a minimumnumber of trained staff for effective operation. This training should also extend to the staff of MULT toensure that substitutes are readily available in the event of a shortage of core staff of the PU.

The PU currently has 8 staff, who will be involved in EMCAP. These persons are under the overallsupervision of the Director of MULT. They include the Deputy Director, who will coordinate the Project,the Chief Financial Officer, who is responsible for the day to day management of the Project, with theassistance of a Principal Finance Officer and a Senior Finance Officer. In addition, the PU will have afull-time Project Accountant, and two Assistant Accountants. The Project will also engage an independentauditor. Because of recent turnover, the current staff of the PU will require extensive training inprocurement procedures, project administration and project monitoring and evaluation.

National Assembly

The National Assembly comprises two arms of the legislature. These include the House of Senate and theHouse of Representatives. The Senate is the upper house with the President of the Senate at the helm ofaffairs. The House of Representatives has the Speaker of the House presiding. Both arns of thelegislature function through Committees. The National Assembly is serviced by staff drawn from theFederal Civil Service. In the National Assembly, there is a Finance Department headed by a Director.

Annex 12Page 10 of 10

The Finance Department has a career staff with statistics and economics background. However, theirlevel of exposure is grossly inadequate for the type of budget and expenditure control and investigationresponsibilities of the legislature. There is therefore a need for intensive training of the staff in budgetingand expenditure process monitoring, planning techniques, analytical tools and general economictechniques. The Finance Department also requires computer training as well as computers in order toundertake its responsibilities.

Annex 13: Annual Work Plan Annex 13Nigeria: Economic Management Capacity Building Project Page 1 of 12

Office ofthe Accountant General ofthe Federation

1_9 _ 2000 '051 02 '03Office of the Accountant General for the Federation ui Aug Sep Oct iNov Dec Jan Feb Mar Apr MaY Jan Ju Aug Sep Oct Nov Dcc I

I Bring Accounts up to dateHire local consultants to clear backlog

Complete 1994 to 1996 AocountsComplete 1997 to 1998 AccountsComplete 1999 Accounts

2 Review of 195 8 Finance Act and drafting of new legislationTendering for Internatonal Consultancy Services- drawing up list of invited frirms- launch tender- Evaluation of tender bids- Approval of selected firm by WB

Issue contract to selected frm_Contracted firm undertakes workPresentation of recommendationsDrafting ofnew Finance Act to replace 1958 legislationFinal Draft of Legislation

3 New Financial Regulations and Treasury Accounting ManualPrinting and distribution of new Treasury Accounting ManualPreparation of Treasury Accounting ManualIssue of Treasury Accounting Manual

4 Feasibility study on the LANsTendering for international Consultancy Services

- drawing up list of invited firms- launch tender- Evaluation of tender bids- Approval of selected finn by WB

Issue contract to selected frnnContracted fnmn undertakes workPresentation of reports and recommendations

5 Implementation of recommedations onLANS6 Layout of traming Program

Traimng needs identifiedLocal and External Training

7 Procurement of EquipmentPreparation of specs and tender documents- drawing up list of invited funns- approval of shortlist by WB- launch tender-Evaluation of tender bids- Approval of selected firm by WB

Issue Contract to selected firmContracted firm begins delivery

8 Procurement of equipment under no objections contractRequest no-objections waiver for issue of contracs=Receive no-objection waiver from WV Rep. OfficeDelivery of equipment

Annex 13: Annual Work Plan Annex 13Nigeria: Economic Management Capacity Building Project Page 2 of 12

Office of the Auditor General for the Federation First Year Work Plan

1999 2000 .01 '02 '03Office ofthe Auditor General for the Federation Jul Aug ISep |Oct NoV IDec Jan IFeb M Apr IMay Jun JU Aug SepOct Nov Dec

1 Review of 195 8 Audit Act and drafting of new legislationTendering for International Consultancy Services- drawing up list of invited fims- launch tender

- Evaluation of tender bids- Approval of selected fnmn by WB

Issue contract to selected firmContracted finn undertakes workPresentation of reports and recommendationsDrafling of new Audit Act to replace 1958 legislationNew Legislation and set up of ASC

2 Feasibility study on the LANsTendering for International Consultancy Services

- drawing up list of invited fims- lanmch tender

- Evaluation of tender bidsIssue contract to selected firmContraoted fmn undertakes workPresentation of reports and reconrmendations

3 Implementation of reconomedations on LANS4 Layout of training Program

Training needs identifiedLocal andfExtenalTraining _ _ - - * j m M M M u a E -

5 Revise and Publish PSAS and PSICS6 Procurement of Equipment

Preparation of specs and tender documents- drawing up list of invited fnmns- approval of shortlist by WB- launch tender

- Evaluation of tender bids- Approval of selected firm by WB

Issue Contract to selecoted farmContracted fum begins delivcry E7E=

Annex 13: Annual Work Plan Annex 13

Nigeria: Economic Management Capacity Building Project Page 3 of 12

Work Plan of the Project Unit

1999 2000 '01 '02 '03

Project Unit Ju3 lAug Sep lt Nov |Dec Ilan |Feb IMar |Apr IMay IJuo Jul |Aug |Sep |Oct INov IDec I I I

I Hiring of Consultants and AdvisorsPreparing TORs for

- Training Advisor- Procurement Consultant- Project Auditor (World Bank)-ProjectAuditor (Et)

- Training Advisor- Procurem ent Consultant-Project Auditor (World Bank)

-Project Auditor (EU)-Long term advisor (EU)

2 Hire Project Accountant I3 Prepare Procurement Strategic Plan f I4 Preparation of Training plan5 Training for PU and PEAs Staff in Procurement6 Evaluation Report on EMTAP7 Complete first year project AuditS Purchase of Office equipment for PU

Annex 13 Annual Work Plan Annex 13

Nigeria: Economic Management Capacity Building Project Page 4 of 12

Integrated Finandal and Economnis Management System (IFEMIS)

1999 -- 2000 -- 'Cugsl=0 102 1'03Integrated Financial and Economic Jul Aug Sep |Oct |Nov IDec lJan Feb Mar Apr May Jun TJU AU Sep |Oct |Nov |Dec I I IManagement System (IFEMIS)

Develop Poverty Monitoring Indicatorsin support of Core WelFare Indicators

1 Initial short-term consultant (individual or firm)Draft terms of referenceTendering for International Consultancy Services

- advertize for services- approval of shortlist by IBRD & EU- invite tenders- evaluation of tenders-approval of selected firm by IBRD & EU

Issue contract to selected firmContracted firm undertakes workConsultant issues reportEvaluation of cosultant report

2 Principal system designDraft terms of referenceTenderng for International ConsuHtancy Services

- advertize for services-approval of shortlist by IBRD &EU- invite tenders- evaluation of tenders- approval of selected firm by IBRD & EU

Issue contract to selected firnContracted firm undertakes work _Consultant issues reportEvaluation of consultant report

3 Initial support to FMFEquipment & supplies- packaging and tender preparation- approval by EU- invite bids- evaluation of submissions- selection of supplier- purchase and installation of equipment = MMLocal Area Networking- shopping for contractor- contractor installs network infrastructure

Training for FMF staff

4 Principal support to FMF, OAGF & CBNEquipment & Supplies- packaging and tender preparation- approval by EU- invite bids- evaluation of submissions- selection of supplier- purchase and installation of equipmentWide Area Networking- shopping fo, contractor-contractor installs network infrastructure

Training for FMF staffConsultant services

Asnex 13:Arnal Work Plan Annex 13Nigeria: Economic Management Capacity Building Project Page 5 of 12

Federal Statistical Ofrice - Poverty Statistics

Poverty Statistics . 2000 01 302 WlJui Aug IeP lOt INov IDeC Jla IFeb TM. lApr IMay 1Jo |JU lAug |Sep Out rNov IDe. I I I

I Develop Poverty MonRtoring Indicators and support ofCore Welfare Indicator Natonal Survey

Development of Poverty Monitoring IndicatorsIdentification of indicators from existng surveysTendering for Intemational Consultancy Services

- drawing up list of invited firms _. __ _- approval of shortlist by EU- launch tender- Evaluabon of tender bids- Approval of selected firm by EU

Issue contract to selected firmContracted firm undertakes workStreamlining existing indicatorsPreparabon of questionairesProduction of instrumentsSupport forNabonal Survey on CWl quesffonaire survey_ =_ _ =

Planning and preparationPilot testTrainingData collectionData retrievalData processing and analysisReportwritngPublication and dissemination

2 Rural poverty and agricultural sector analysisAnalysis of NASS 1996/1997 and report writingTendering for Local Consultancy Services

- drawing up list of invRted firms- approval of shorhist by EU- launch tender WA-Evaluation of tender bids- Approval of selected firm by EU

Issue contractto selected firmContracted firm undertakes workIdentification of linkage variablesLinkage of NCS and NASS 1996/97Production of Rural Poverty reportReview of NASS questionairePilot testing, analysis and report

3 Integraton of qualitative and quantitativepoverty studiesPlanning commiteeIdentification of gaps for qualitative studiesTenderng for Intematonal Consultancy Services

- drawing up list of invited firms- approval of shorUlist by EU- launch tender- Evaluation of tender bids- Approval of selected firm by EU

Issue contract to selected firmContracted firm undertakes workPreparation of instrumentField test instrumentAnalysis of pretest instrumentFinalisabon of instrumentNational survey on qualitative studiesto complete NCS 200/2001

Data processing and analysisPreparation of reportPrnting of report and dissemination

4.Poverty profile of 2000/2001 using NCSPlanning and preparabon I I I IProduction of survey instrumentsTrainingData collectonData retrievalData processing and anaivsisPublicabon and disseminaton

5 Promobon of poverty informabon topolicy makers and public

Production of poverty reportSeminar userfproducerPolicy workshop and launching of report

6 Gender related analysisHiring of a consultantTrainingGender related analysis from existing surveys

Annex 13: Annual Work Plan Annex 13

Nigeria: Economic Management Capacity Building Project Page 6 of 12

Federal Statistical Office - Social Statistics

Social Statistics 1999 1 2000 101 02 03Jul JAug |Sep |Oct INov |Dec |Jan |Feb |Mar |Apr |May lJun Jul Aug Sep Oct Nov Dec

1 Assessment of data and publicationsTendering for consultancy services

- drawing up list of invited firms a .- approval of shortlist by EU- launch tender- Evaluation of tender bids- Approval of selected firm by EU

Issue contract to selected firmRecruit short-term consultantS-T consultant undertakes study =Consultant delivers reportReview of consultants report

2 Review of methodology and trainingTendering for consultancy services- drawing up list of invited firms- approval of shortlist by EU- launch tender

- Evaluation of tender bids- Approval of selected firm by EU

Issue contract to selected firmContracted firm undertakes workMethodology review and development of social indicatorsReport deliveryIdentify the course for training and twinning = = = = =

Make arrangements - - - -.Foreign training = = =Twinning arrangementLocal training workshop __

3 .Sourcing of dataLocal training workshop

- on computer use-on data entry-on data analysis ==…

Constructon of key social indicatorsForeign training _=

Twinning arrangement . . .Procurement of equipment

- preparation of tendering dossier- approval by EU- launching of tender- evaluation of submissions- selection of supplier- purchase of equipment

4 Producing a minimum social data setProcurement of equipment- preparation of tendering dossier- approval by EU Ws- launching of tender- evaluation of submissions

-selection of supplierpurchase of equipment

Training of staff overseas- identification of training institutions I- approval by EU- make training arrangements- undertake training __ l

Annex 13 Annual Work Plans Annex 13Nigeria: Economic Management Capacity Building Project Page 7 of 12

National Planning Commission

National Planning Commission 1i9o. 25000'0 02*Jul lAug ISep [Oct iNov IDec Jian [Feb IMar jApr iMay IJun IJct Aug ISep lOct iNov lDecI I l

1. Publro ExpendAture Review

Consultant for overall PER processDraft terms of referenceSelecton of consultantApproval by iDAIssue consultant contractConsultant undertakes assignment- * . . 2:

WorkshopsPreparation _

Resource consultants, local and foreign-Draft terms of reference P-Selection of consultant-Approval by IDA-Issue consultant contract-Consultant undertakes workshop

Study ToursPreparations with host countriesApproval by IDAUndertake study toura

Attachment to IDAPreparations for attachmentVisit to IDA

Public Expenditure Review Completed

2 Project Supervision

Consultant to examine plan/budget linkageDraft terms of referenceShopping for consultantApproval by IDAIssue ContractConsultant undertakes work program

Consultant for hardware/software needsDraft terms of referenceShopping for consultantApprval by IDAIssue ContractConsultant undertakes work program

Consultant specialists for project supervisionDraft terms of referenceShopping for consultantApproval by IDAIssue ContractConsultant undertakes work program

VehiclesInvitations to bidEvaluation of bidsApproval by IDASelection of supplierPurchase of vehicles

Equipment & suppliesPackaging of equipment and suppliesInvitatons to bidEvaluation of bids,Approval by IDAISelection of suppliergaI IPurchase of equipment & supplies

TrainingIdentification of training insftittonsApproval by IDAArrange trainingUndertake training

Annex 13: Annuad Work Pian A-n x 13

Nigeria: EConoan-C Monagmonr Cap-tily BEildiraPgEojeor PThn5 oflZ

F.rdlr SM^tamrIoul OffIoDlD Ci-opoti.oo

fIDTh Spfrap dnr Wrair Plaa-fFSO

F-al prop=noo of TORNo objon from W_ _T-deng fotro tinodal Condtoncy Snv_

app-oo at of tMftit by WB

- lanooorino lande bid _ _ _ _ _ _ _ _

-App,onad of =ntt by WBApponal by id. Beoerd (FON)

Cooeatraomokrorroo orn

2 Enonror Sialnre

Finl praplnn of TOR d landerNo rt1rdonforr=fllD ___ _ _ _ _ _ _ _ _ _ __

T.dsmgfnIte-orm..aI Cntrnny fs-, d-nsnOdp l,t of -nrrndfi-___- approvl rfhndtby DFTDr

- Appl- anebYDFmMlp A -obonby rd.rBnd (r_N)

W.tofh,tul.byDr] __ __M_ Ainp-n ned xe by MM_

_ _

-App-i a by -dir Bo-d (PON)I-_t__ _ ____ __

Connadad t fono dW olasrol

Pr pflor of TORfer rea rnealrI__ _

No nbpdhrfrom DECo _T13 Tnndarngfno ,rrtanolnatnoralrC__on_ar__lr. _ _ _fq,arertot.oaoatdoanoseadi>Id oorua _ Tt_ _ _

- gpn li of ind i _dfrn._

-Appro-IadofomnhhabyDFlDF

-AppontboaderByl IE)F

C-nnitdfirnrrd.oaoavnk-

3 rntioo ofrfnro _er _ro_n_ _ __lI_rro

F.l ,pp.. u¢ TOR F_T_____T- No obnfom WBr_T__

_ __ _

Tid-rrg for. nrrnlnnrntCndrn

-= -n n=g. l p o in ir d o - _ _ -

dr-.a1 ofbrldrt by WBr

I- Roanmno ofd reae bidTs ___ -App-Wooatnfnnn byIDJ

-App-nl otby WBrda _Bod _N)

l.i robor srl.ddfnr __ _ __ ConnoddfnronDds.lar_ i_ nnrIFT __

3 Prier tooter ~ ~ ~ ~ ~ ~ ~ I m --

Finti pop xum of TOR

| No obrl in fonon WE

| edao for lorp1ernamtinoal rC_naTl__alio_ _ T _o _

-po atofdrorriabyWE

|-RoattiI C ofoarersbida _____

- App-onl of airnan by WB

-App-lo byrsnderkoed (PEN)fIn ronrondro anadfnrn_T -ZF!

|5T-gnfn FOSr_ _T__ __ I____

Pro xof p Lon=pernarr of__ TO__ _

Tererrgforftnnerarl rCon_er_ _a__y_fT _i_

R .- byoatof* , Noby_T

Aprp-alofIDby3-

-AppoonabytrDerBai OlNIo annfnorndtatraw__ od__ ll__

,one rt_ _ T aiboniroq_io _n

Lot Toanoone

PrnPa ofn nsirog pli.nIn bytnong erparar-

Appro,a byDFlD

l.f.aitfnonarI I ong

App-onI byDF km_

T-zono

Amnex 13Page 9 of 12

Annex 13: Annual Work PlanNigeria: Economic Management Capacity Building Project

USAID) Components Work PlanUSAID Work Plan 19ctgg 2000201

Ju |AUg sin, Oct |N.. ID.0 J |Feb |r|APr |MaY |J |JUI |A9 IS.p loc |ND|.C |Feb |M. Apr MayJuneJulyvAug SeD1 Fiscal Federalism and Tax System

Development of Scope of Work, Phase I

Idenification,of Consultant(s), Phase IConsultancy TA to MOF and Revenue Commssion

Policy Paper as Input to Budget 2000Developmnent Scope of Work, Phase II

Contractor Selection, Phase 11Contract AwardContractor to finalize VWork PlanWork Plan Approved by AIDIGONLocal Contractor hiredStudies LaunchedMIS Development begins for Home Finance and Rev ComnmissionTraining Program Developed

In-countryTrainingStudy Tours

Interim Draft ReportsPolicy Paper for 2000 BudgtetWorkshop

Draft Report m MWorkshops

Final ReportPolicy Paper for 2002 Budget

2 Trade PolicyScope of Work to hire ContractorIndentification of ContractorContractAwardedConsultancy TA to MOFLocal Consultants hiredContractor to finalize Work PlanWork Plan Approved by AID/GONTariff Studies Begin

TA for Rationalizing New Tariff Schedule for 2001-2005MIS Development and Training Begins

In-countryTrainingStudy Tours

Draft ReportWorkrshopsFinal Report

Policy Paper for 2002 Budget

3. Investor Road MapScope of Work for Globat Bureau T

Study.-GlobalFinal ReportWorkShop

4. Legislative Capacity BuildingScope of Work for ContractorSelection of ContractorContractor to finalize Work PlanWork Plan Approved by AIDIGONTraining and Workshops

S. Pnvate Sector Enabling EnvironmentScope of Work for Consutant Phase Iidentifcation of ConsultantConsultant AwardConsulltant Drafts Work Plan, Phase 11Review of Work Plan, USAIDIGON, Phase 11TAIStudies beginMIS System and Training begin

In-house TrainingStudy ToursTraining on PEPES

Development of Regulatory FrameworkFinal Report and RecommendationsWorkshops

6. Transparency AuditsScope of Work for ContractorSelection of ContractorContract AwardedConsulltant Drafts Work PlanWork Plan Approved by AIDIGONSelection of Local ConsurBng FinmDevelopment of Survey InstrumentAudits Begin

7. Training For ENCEMA and Other Training InstitutionsScope of Work for ConsultantSelectin of ConsultantConsultantAwardTraining Plen Developed

Approval of Training Plan by AID/GONSelection of Contractor

Training of Trainers, In-houseTvwinning wth U.S. Institutions

Annex 13: Annual Work Plan Annex 13Nigeria: Economic Management Capacity Building Project Page 10 of 12

European Union Components - Policy Studies

European Union Workplan - Policy Studies 199S 2000 301 '02 03Jul |Aug |Sep lOct |NOV IDec Jan |Feb IMar |Apr IMay I Jun |JUI|Aug Isep lOct ]Nov |Dec I I I

1. Fiscal Federalism: Capacity building

Preparatin of terms of referenceApproval of ToR by EUTendering for Consultancy Services

- drawing up list of invited firms- approval of shortlist by EU- launch tender- Evaluation of tender bids- Approval of selected firm by EU

Issue contract to selected firmContracted firm undertakes work

2. Private sector enabling environment

Preparation of terms of referenceApproval of ToR by EUTendering for Consultancy Services

-drawing up list of invited firms- approval of shortlist by EU- launch tender- Evaluation of tender bids- Approval of selected firm by EU

Issue contract to selected firmContracted firm undertakes work v.:

3. Review of the judicial system

Preparation of terms of referenceApproval of ToR by EUTenderng for Consultancy Services

- drawing up list of invited firms- approval of shortlist by EU- launch tender- Evaluaton of tender bids- Approval of selected firm by EU

Issue contract to selected firmContracted firm undertakes work

Annex 13 - Annual Work Plan Annex 13

Nigeria: Economic Management Capacity Building Project Page 11 of 12

Distance Learning Center Component

1999 I 2000 I 20011Oct NDec |Jan IFeb |Mar |Apr |May |Jun IJui |Aug ISep lOct |Nov |Dec lJan |Feb |Mar APr May Jun

1. Site selection and requirementspecifications

2. Financing availability

3. Retrofit

4. Technical design and contracting

5. Procurement

6. Staging, testing, shipping,implementation

7. Inauguration

Annex 13: Annual Work Plan Annex 13Nigeria: Economic Management Capacity Building Project Page 12 of 12

Petroleum Sector Review

1 9 9 9 2 0 0 0NOV. DEC. JAN. FEB. MAR. APR. MAY JUNE JULY AUGUST SEPT

MONDAYS 1 8 15 22 29 6 13 20 27 3 10 17 24 31 7 14 21 28 6 13 20 27 3 10 17 24 1 8 15 22 29 12 19 26 3 10 17 24 31 7 14 21 28 5 12 19 26WEEK 40 45 50 1 5 10 15 20 25 30

PRELIMINARIESPrepare TORs. Review internally/IMFOrganize Abuja counterpart teamJoint reviews of TOR in AbujaIndication of Interest adverts.Counterpart team selects short listBank response _

Counterpart team issues RFPResponse timeBid evaluation: technical

: financial _

Bank responseContract negotiation/award recomm.Bank approvalConsultant starts work _

SPECIFIC STUDIES = = == = = == =_=_=

Financial management

Environmental and social issues = =

Downstream activities

Upstream activities _ - -

Natural gas

Structure of sector _

Annex 14Page 1 of 4

Annex 14: Financial Management Action Plan

Nigeria: Economic Management Capacity Building Project

EMCAP's Project Unit will be responsible for ensuring that financial management and reportingprocedures for the Project are acceptable to all stakeholders. The financial management system (FMS) tobe introduced will support the management of the Project in ensuring adequate internal controlarrangements for proper, efficient utilization, and management and accounting of funds. Specifically, theFMS should be capable of producing timely, relevant, clear and reliable financial information needed forthe planning, coordination, implementation, monitoring, and evaluation of EMCAP's overall progress. Inorder to attain EMCAP's objectives, the Project Unit's financial management system must besubstantially strengthened and enhanced (i.e., computerized) as discussed below.

1. Project Management Committee. To ensure the smooth flow of project activities, arepresentative project management committee (PMC) would be constituted. The PMC would becomprised of representatives of the PEAs, chaired by the Director of the Multilateral Department of theFMF. The PMC would be responsible for reviewing the project management report (PMR) every quarter;the minutes of its quarterly meetings will be properly documented. The PMR would be comprised of the:(i) financial statements discussed below. Members of the PMC would review and approve quarterly andannual financial statements. They would also examine material variances between budgeted and actualfigures, seeking remedial action(s) as appropriate within an agreed timeframe; (ii) project progress report,i.e., output monitoring report (OMR). The format and details of the OMR would need to be developed.Project physical progress would be measured against planned financial/operational performanceindicators; and (iii) procurement management report. The latter would also include the contracts statusreport.

2. Staffing and Capacity Building. The assistant chief accountant of the Project Unit has beenappointed as project accountant for EMCAP. He previously was the project accountant for the recentlyclosed IDA-financed EMTAP. He has a considerable wealth of experience in government accounting andhas shown that he is capable of directing and guiding the financial management operations of EMCAP.To strengthen the accounts group, two senior accounting personnel have been identified and have beendeployed to the Project Unit. Two other relevantly qualified and experienced accounting support staffhave also been identified and appropriately deployed. While the project accountant is experienced inprocedures relating to the utilization of funds, i.e., special accounts, SOEs, direct payment, specialcommitments, etc., varying levels of training will be required for all accounting personnel in financial,management and public sector accounting, and, in particular, in information management systems andcomputer applications.

3. Financial Procedures Manual. The Committee on the Restructuring of the Published Accountsof the FGN has produced a Federal Treasury Accounting Manual which is currently being implementedby the FMF. The manual provides detailed procedures on cash receipts and disbursements, includingbank reconciliation, contract accounting, and internal audit. However, given that it is currently a manualsystem, simple, computerized, clear and transparent financial and accounting policies and procedures thatwould govern the financial management and accounting of the Project would be developed. These wouldinclude procedures on procurement, preparation of journal vouchers, extraction of monthly trial balanceand preparation of financial reports. A detailed chart of accounts would also be developed to capturefinancial data under appropriate headings and classify group financial data for the various financialreports. The structure of the chart of accounts would conform closely with the project cost tables toenable comparison of actual project costs during implementation with those estimated during projectpreparation.

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4. Accounting System/Status of Accounting Books and Records. Currently there is a cashpayment register with the respective PEAs files in place. Principal books of accounts, i.e., cash and bankbooks, journal book, general ledger, fixed assets register, contract/other subsidiary ledgers andsequentially pre-numbered payment vouchers would be introduced to ensure improvement in financialmanagement reporting. The accounting system would be based on principles of double-entrybookkeeping.

5. Internal Audit. An internal audit group would be staffed with relevantly qualified andexperienced personnel. The group would carry out periodic reviews of EMCAP's activities (including theactivities of the PEAs) and ensure effectiveness and compliance with financial and accounting policiesand procedures as well as internal control mechanisms. The group, which will report to the PMC, wouldalso be responsible for the overall reliability of the accounting systems, data, and financial reports.

6. Computerization. Currently, the Project Unit has no financial information system in place.Pending the development and installation of a computerized financial management information system,the project accountant would continue the application of a spreadsheet system (Excel) to facilitate timelyaccounting for the Credit and counterpart funds. Basic computer appreciation training (Microsoft Wordand Excel) and hands-on implementation assistance would be provided for the staff of the accounts group.

7. Planning and Budgetary System. Each of the PEAs will follow the FGN's budgetary process andprepares its annual budget based on approved work program. The project accountant will haveresponsibility for budget preparation. With the support from PBPD, counterpart funds would be approvedand made available quarterly on a pool basis. The budgeting system would be integrated with theaccounting system to enable comparison of actual performance with budget targets (quarterly, annual andcumulative) for the Project, while funding will be based on projected work programs and actualperformance.

8. Accounting System Basis. The cash basis system of accounting has been currently adopted.However, it is being modified for management reporting purposes. The intention is to convert it to anaccrual one under EMCAP.

9. Procurement of Goods, Works and Services. The procurement procedures will be documentedin the revised financial procedures manual and the key members of the Project Unit will be conversantwith such procedures. Proper documentation will be maintained for all goods and service contracts byboth procurement and accounting groups of EMCAP. A procurement management report, detailingprocurement status and contract commitments, will be prepared quarterly for consideration by the PMC.

10. Banking Activities. The Project Unit will maintain three bank accounts as follows: (i) a currentproject account with a commercial bank to which the PEAs' counterpart funding would be deposited; (ii)a special account with a commercial bank to which the IDA initial deposit would be made; and (iii) aspecial account - (interest) to which interest on the US dollar special account would be credited. All thebank accounts would need to be reconciled on a monthly basis. Reconciled accounts would be reviewedon a timely basis by the project accountant and approved by the project officer. Identified differences aswell as long outstanding reconciliation items would be promptly investigated.

11. Withdrawals/Disbursements. The Project Unit will not adopt a PMR-Based disbursementsmethod for the time being. At the initial stage, the traditional disbursements procedures as implementedunder the recently closed EMTAP will be adopted. The strengthening of the accounts group is expectedto provide a more conducive internal control environment and facilitate the introduction of PMR-Baseddisbursements within 15 months following the declaration of effectiveness.

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12. Fixed Assets/Service Contracts and Inventories. A fixed assets register (FAR) will beintroduced and regularly updated for the capital expenditure component of the Credit. A stock verifierwill be appointed and shall have responsibility for ensuring compliance with the inventory controlprocedures as will be documented in the financial procedures manual. The contracts ledger will bemaintained for all service contracts and a contracts status report will be prepared on a quarterly basis aspart of the procurement management report for consideration by the PMC.

13. Financial Reporting (monthly, quarterly and annually). In meeting IDA's and otherstakeholders' reporting requirements for project monitoring, the project accountant will be responsible forpreparing monthly, quarterly and annual reports. Such reports will include: (i) a statement of sources anduses of funds by credit category/activity; (ii) monthly Statement of Cash Position for the counterpartfunding, taking into consideration significant reconciling items; (iii) a monthly/quarterly statement ofexpenditure classified by PEAs, project components, disbursement categories, and comparison withbudgets - variance analysis; (iv) a cash forecast for the next two quarters - based on approved workprograms; (v) project financial statements as at the reporting date with the notes on significant accountingpolicies; (vi) SOE withdrawal schedule listing individual withdrawal applications relating todisbursements by the SOE method, by reference number, date and amount; and (vii) special accountstatement/reconciliation showing deposits and replenishment received, payments supported by withdrawalapplications, interest earned on account and the balance at the end of the reporting period costs for keyitems and comparison with budgets. Formats of the various periodic financial reports to be generatedwould be developed. However, sample formats of these reports are contained in the World Bank's LoanAdministration Change Initiative (LACI) Handbook and Financial Accounting Reporting and AuditingHandbook (FARAH).

14. External Audit. The external audit will cover both interim and annual audits of project financialstatements. Independent auditors will be appointed with acceptable terms of reference (TOR). The TORfor the auditors will be developed for World Bank review.

15. Actions Completed By Negotiations: (a) notification of the membership of the Project ManagementCommittee to the IDA with acceptable terms of reference; (b) revision/updating of the FinancialProcedures Manual; (c) development of a detailed Chart of Accounts; (d) review of basic books ofaccounts - cash and bank books, general ledger; (e) terms of reference (TOR) for the external auditorscleared with the IDA; and (f) review format and content of Monthly, Quarterly, and Annual FinancialReporting.

16. Required Actions and Next Steps.

By Board Presentation: (a) IDA advised of the authorized signatories; and (b) training undertaken inWorld Bank procedures for the new staff.

16. Actions Required to attain LACI Compliance over a 15 Month Period

Below are detailed the required actions to be taken in order to attain LACI compliance for the EMCAPwithin 15 months of credit effectiveness (15 months after May 9, 2000). The authorities have agreed tothis set of actions and are proceeding with their compliance.

Staffing Requirements/Internal Controls: The staff of the Accounts Unit will be exposed to basiccomputer appreciation training by April 2000. The structuring of the Internal Audit function with respectto the EMCAP implementation activities would be completed by June 2000 with the Unit being fullystaffed by that date. Internal Audit manual for internal audit arrangements should also be finalized by

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June 2000 while the schedule of duties of all staff in the Accounts/Internal Audit Units will be finalizedand documented for inclusion in the Financial Management Manual by September 2000.

Accounting Systems and Procedures: While the accounting systems and procedures to be used forrecording financial transactions and reporting financial payments and status are being documented in theFinancial Management Manual, specific procedures for each significant accounting transactions will befinalized by not later than June 2000. The Chart of Accounts being currently developed will be underreview for adequacy and appropriateness and will also be finalized for incorporation into the Manual bythat date. To maintain efficiency and timeliness of financial reporting, the accounting systems will becomputerized. The software package would be identified and installed, taking into account therequirements of the EMCAP by December 2000.

Financial Reporting: Formats, contents and structure of the various financial reports to be produced willbe scrutinized to establish clear linkages between the information in these reports and the Chart ofAccounts as well as quality and timeliness of information. Finally agree format and content of financialreporting comparable to those sample formats that are contained in the World Bank Loan AdministrativeChange Initiative (LACI) Handbook by September 2000.

Financial Management Manual: This would be updated and finalized by September 2000 and it wouldcover, among others, the following aspects: (i) flow of funds; (ii) financial and accounting policies forthe EMCAP; (iii) accounting systems and procedures; (iv) authorization procedures for transactions; (v)budgeting and budgetary controls; (vi) procurement and contract administration and monitoring systems;(vii) financial reporting; (viii) audit arrangements; and (viii) procedures for the replenishment of thespecial account under a PMR-Based disbursement method

Audit Arrangements: The selection of external auditors has been determined and communicated toIDA.