FOR OFFICIAL USE ONLY

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY RESTRUCTURING PAPER ON A Report No: NG PROPOSED PROJECT RESTRUCTURING OF NIGERIA - GROWTH & EMPLOYMENT IN STATES PROJECT CREDIT NO.: IDA BOARD APPROVAL DATE: MARCH 17, 2011 Finance and Private Sector Department Africa Region TO THE FEDERAL REPUBLIC OF NIGERIA June 4, 2013 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 ii

3 FISCAL YEAR January 1 December 31 CURRENCY EQUIVALENTS (Exchange rate effective as April 30, 2013) Currency Unit = Nigerian Naira (NGN) US$1 = NGN ABBREVIATIONS AND ACRONYMS ATA CPS DFID FA FGN FMF FMTI FPIU GEM GEMS ICT IDA MDA PAD PDO PPF PPP RF RP SDR USAID Agricultural Transformation Agenda Country Partnership Strategy Department for International Development Financing Agreement Federal Government of Nigeria Federal Ministry of Finance Federal Ministry of Trade and Investment Federal Project Implementation Unit Growth and Employment Growth and Employment in States Information and Communication Technology International Development Association Ministries, Departments and Agencies Project Appraisal Document Project Development Objective Project Preparation Facility Public Private Partnership Results Framework Restructuring Paper Special Drawing Rights United States Agency for International Development Regional Vice President: Makhtar Diop Country Director: Marie Francois Marie-Nelly Sector Manager / Director: Paul Noumba Um Task Team Leader: Michael D. Wong iii

4 NIGERIA NIGERIA - GROWTH & EMPLOYMENT IN STATES P CONTENTS Page A. SUMMARY... 1 B. PROJECT STATUS... 1 C. PROPOSED CHANGES... 3 D. APPRAISAL SUMMARY ANNEX 1: RESULTS FRAMEWORK AND MONITORING. NIGERIA: GROWTH & EMPLOYMENT ANNEX 2: SUMMARY OF CHANGES TO ACTIVITIES UNDER COMPONENT B AS RECORDED IN THE FINANCING AGREEMENT iv

5 DATA SHEET Restructuring Restructuring Type: Level one Last modified on date : 05/30/2013 Status: Draft 1. Basic Information Project ID & Name Country Task Team Leader Sector Manager/Director Country Director Original Board Approval Date 03/17/2011 Original Closing Date: 12/30/2016 Current Closing Date 12/30/2016 Proposed Closing Date [if applicable] 09/07/2018 EA Category Revised EA Category EA Completion Date 03/01/2010 Revised EA Completion Date P103499: NG:Growth & Employment in States Nigeria Michael D. Wong Paul Noumba Um Marie Francoise Marie-Nelly B-Partial Assessment B-Partial Assessment 2. Revised Financing Plan (US$m) Source Original Revised BORR IDA Total Borrower Organization Department Location Federal Ministry of Finance International Economic Relations Department Nigeria 4. Implementing Agency Organization Department Location Federal Ministry of Trade and Investment Directorate of Trade Nigeria v

6 5. Disbursement Estimates (US$m) Actual amount disbursed as of 06/05/ Fiscal Year Annual Cumulative Total Policy Exceptions and Safeguard Policies Does the restructured project require any exceptions to Bank policies? N Does the restructured projects trigger any new safeguard policies? If yes, please select from the checklist below and update ISDS accordingly before submitting the package. N 7a. Project Development Objectives/Outcomes Original/Current Project Development Objectives/Outcomes To increase growth and employment in participating states. 7b. Revised Project Development Objectives/Outcomes [if applicable] To increase firm growth and employment in participating firms in Nigeria. vi

7 A. SUMMARY NIGERIA - GROWTH & EMPLOYMENT IN STATES RESTRUCTURING PAPER 1. The Federal Ministry of Finance requested a restructuring of the Growth and Employment in States (GEMS), Credit Number IDA to: a. Ensure that the project proceeds apply to all parts of Nigeria that have the potential to develop jobs and employment for the poor. b. Ensure that the project is aligned with recent government policies and priorities. c. Ensure that the proceeds of the credit are primarily used for infrastructure and targeted beneficiaries with only the necessary minimum reserved for project administration and management expenses. 2. In response to the Government s request, it is proposed to restructure the project, which constitutes a Level 1 restructuring and requires Board approval. The main responses to the requests are: a. A revision and sharpening of the project objective: To increase growth and employment in participating States, which will now be: To increase firm growth and employment in participating firms in Nigeria. The name of the project is subsequently also changed from Growth and Employment in States to Growth and Employment (GEM); b. Reallocation of proceeds between Components: Component C (Project Implementation, Communication and Monitoring and Evaluation) is reduced by US$2 million. The US$2 million is allocated to Component B (Increased Competitiveness of Strategic Clusters ). c. Modifications in the results indicators to reflect changes in project design and reallocations. d. Extension of the Closing Date from December 30, 2016 to September 7, 2018, to take into account the delay in Project signing and effectiveness. e. There is no change to the Safeguards categories. B. PROJECT STATUS 3. The project was approved by the Board on March 17, 2011, with a total commitment of SDR million (US$160 million equivalent). The Project Development Objective is to Increase Growth and Employment in Participating States and has three Components: A) Improved Investment Climate (funded by DFID); B) Increased Competitiveness of Strategic Clusters (of which sub-components B.V and B.VI are funded by DFID); C) Project Implementation, Communication and Monitoring and Evaluation. Project effectiveness is estimated to be July 1, Component A, Improved Investment Climate, consists of four sub components, Land Administration Reform; Tax Administration reform; Investment Promotion and Facilitation; and other Investment Climate Reforms and Peer Learning Activities. This component is fully funded by DFID. 1

8 5. Component B, Increased Competitiveness of Strategic Clusters, consists of seven subcomponents, of which some are financed by DFID and some financed by IDA. IDA financing is for I 1. Information and Communication Technology (ICT) Cluster; II, Entertainment Cluster; III, Hospitality Cluster; and IV Wholesale and Retail Cluster. DFID financing is for the Construction and Real Estate Cluster (V); and the Meat and Leather Industry Cluster (VI). Additional clusters (VII) is to be financed by IDA. 6. Component C, Project Implementation, Communication and Monitoring and Evaluation will be funded under the credit. 7. A Project Preparation Facility (PPF) of US$2 million was approved in September 2008, and was extended in 2009, 2010, 2011 and To date US$552,000 has been utilized to: establish and build the capacity of a Federal Project Implementation Unit (FPIU) in the Federal Ministry of Trade and Investment; support policy dialogue in growth and employment through an Employment Summit of August 2010; and preparation work for Sub Components I and II. The PPF closing date has recently been extended from March 25, 2013 to September 25, Component A of the project, financed by DFID, has been fully operational since August Initiatives to improve tax and land administration systems have already started in Lagos, Cross River, Kaduna, Kano and Ondo States. Point of sale technology has been introduced to tax collection in Kaduna State, for example; and in Ondo State 2000 land registrations have been completed using a new IT system supported by the project. New regulations for the reform of land administration have been drafted with the support of the project in partnership with the Presidential Technical Committee of Land Reform. The identification of broad business environment reforms with Federal Ministries, Departments and Agencies (MDAs) has already been completed. In February 2012, in collaboration with the World Bank and FGN, this component funded a Doing Business workshop in Nigeria, and is supporting ongoing related reform efforts. 9. Parts of Component B of the project, financed by DFID, have also been operational since Sub-component VI, support for the Meat and Leather Industry, started project activities in Kano, Kaduna, Lagos, Abia and Anambra States in April It has initiated activities to support, inter alia, livestock feeding, leather trade fairs and supply chain linkages. Sub-component V, support for the Construction and Real Estate Industry, started in Lagos with initiatives on skills development and contracting processes. 10. Component B, sub-component IV, support for the Wholesale and Retail Trade Industry, which was to be financed by IDA, is now being financed by DFID. DFID started operations in August 2012, and is due to complete its inception/design phase in May To date 17.3 million 2 has been disbursed by DFID across all its operational components, out of an allocation of 90m. 1 Roman numerals refer to original numbering of sub-components in the PAD. 2 This figure represents total DFID expenditure across components A and B. The original allocation was 70m; 20m has been added in support to the wholesale and retail sector. 2

9 11. The European Union is proposing to provide million, in form of a Bank executed trust fund to support investment climate reform. The funding is intended to complement GEM and would target three main results: (i) cluster specific investment climate reforms in ICT, Entertainment, Agro-processing, Hospitality, Construction and other sectors targeted by GEM; (ii) lower cost of land registration 3 ; and (iii) effective implementation of the Nigerian Competition Policy Framework. A Concept Note is currently under review; the review process will be completed in June C. PROPOSED CHANGES BACKGROUND TO CHANGES REQUESTED 12. The Federal Ministry of Finance (FMF) requested a review of the project design to ensure that relevant work within its new policies and initiatives to support growth and employment can be funded by the credit. In particular, FMF requested that the project support the Agricultural Transformation Agenda, and the YouWin business plan competition. IDA was also requested to review project design and ensure that the project is not primarily used for government administrative expenditure. Agricultural Transformation Agenda 13. The competitiveness of agro-processing and manufacturing is a key pillar of the Federal Government s Agricultural Transformation Agenda (ATA). The ATA represents the Government s renewed focus on agro-processing as a source of development, employment and poverty reduction across the country. The ATA focuses on key value chains such as rice, cassava, cocoa and cotton in which output is severely constrained by numerous market and policy failures. An essential part of the strategy is the development of agro-processing to increase the demand pull for agricultural production. However, incentives to invest in agro-processing are reduced by a weak and unpredictable business environment, a history of failed out-grower schemes, and a lack of infrastructure. 14. The World Bank supports the implementation of the Agenda, and agrees that the credit is an appropriate vehicle to address the non-farm aspects of the ATA. The expertise that the project will make available to FGN, in terms of market analysis, investment, and regulatory reform advisory will add significant value to the World Bank Group s response to the ATA. The GEM project complements World Bank support to the ATA through its ongoing FADAMA and Commercial Agricultural Development Projects, and its proposed Agriculture DPO. The Finance and Private Sector Unit works closely with these projects, and is currently providing technical advice in support of the World Bank s engagement in the Federal Ministry of Agriculture s proposed Staple Crop Processing Zones. The GEM project will support agro-processing firms through technical assistance and grants to: build firm capacity; business to business linkages and new business development services; improve standardization; and strengthen the investment climate. Internal Bank coordination mechanisms are in place to avoid 3 This result will target States the DFID funded business environment component will not reach. 3

10 duplication of efforts, offer consistent policy advice and maximize synergies between the various projects. YouWin business plan competition 15. Enterprise development and innovation, particularly through supporting youth and women entrepreneurs, is a central policy priority of the Federal Government. In October 2011, FGN launched the YouWin business plan competition with support from the World Bank and DFID, with the aim of stimulating employment and business growth across the country. YouWin is a competitive grant program aimed at new businesses and start-ups. In 2012, YouWin identified and funded, 1200 innovative business start- ups and business expansion plans; a second round is now underway. Analysis of applicants and winners to date indicates a strong crossover with GEM: agriculture, ICT and manufacturing sectors were the three most represented sectors amongst participants. 16. Due to the success and high profile of YouWin, FGN requested a review of the GEM sub-components to ensure that existing and future supported YouWin enterprises can access further support under GEM. IDA confirms that the use of competitive or performance grants can include support to the winners of the YouWin business plan competition awards. Flexibility and phasing of clusters 17. To simplify the project design, the project will focus its interventions in the Services and Light Manufacturing sectors. The original IDA project design focuses on supporting four clusters of firms and additional clusters, while agro-processing and, more broadly, manufacturing have now also been identified as Federal Government priorities. Priority clusters will now be placed within Services and Light Manufacturing sectors with focus on 2 to 3 industry clusters while other clusters will be added or dropped if the promised targets are not being achieved 4. Project success will be measured by firm performance in terms of: sales growth; value added per worker; and number of employees. The new sectoral focus reflects changing priorities during the two years since Board approval, relating to the identification of new opportunities as well as activities of other donors. For example, wholesale and retail no longer requires IDA funding due to DFID investment in this cluster, while agro-processing and light manufacturing have been identified as a priority opportunities for support. Approach or Methodology 18. The funding instruments applied under this IDA financing are expected to build and expand firm level capabilities by encouraging firms to make investments in their labor force, in improved management, in production processes, in product standards, increased specialization and standardization. Firm linkages will be enhanced by addressing information and coordination issues within clusters. Growth in participating firms is expected to increase demand for labor amongst the large number of under- and 4 Some clusters, such as hospitality, could be added within the first 18 months, as studies are completed. An assessment of components during the Mid Term Review (MTR) will identify those to be dropped, if any. 4

11 unemployed poor. Project support for infrastructure will be realigned to prioritize productive investments which are unlikely to attract private sector financing. Impact Evaluation 19. The project will work closely with national data and research institutions to encourage the development of evidence based policy making. The project will work with the National Bureau of Statistics, which last conducted a complete census of business activities in Nigeria in the 1990 s, to update the business census. The project will develop proper databases and collect data from collaborating firms on an annual basis to inform project adjustments. DETAILS OF PROJECT CHANGES Project Development Objective 20. The original PDO is: To increase growth and employment in participating states. The revised PDO is: To increase firm growth and employment in participating firms in Nigeria. FGN requested a review of the PDO to ensure proceeds of the credit could apply to growth opportunities across the Federal Republic of Nigeria. The PDO is also updated to reflect the other changes proposed in the project. 21. As a corollary to the change in the PDO, it is proposed to change the project name from Growth and Employment in States to Growth and Employment (GEM). Results and Indicators 22. Revisions to the Results Framework have been made in order to: (i) include indicators that reflect the revised PDO; (ii) reflect lessons learned from project preparation and parallel financed activities; and (iii) provide intermediate level indicators that are relevant across all clusters within Component B. Reflecting the new PDO, the PDO indicator: To increase growth and employment in selected states is changed to: Employment growth and growth rates within participating firms in targeted clusters. The RF originally contained indicators relevant to both DFID and IDA funded components. However, the time lag between the parallel operations is now over three years, and the DFID components are due to close less than two years into the IDA funded operations. Hence, indicators that refer only to DFID managed components and sub components are removed. DFID will share information on the results of their parallel financed components as part of the strong collaboration between DFID and IDA on this project. The latter are replaced by indicators relevant for interventions across all IDA funded clusters. Table 1 below lists the main changes. Please see Annex 1 for the new Results Framework. 5

12 Table 1: Summary of changes to indicators Original Indicator PDO LEVEL New indicator Comments 1. Time required to start a business in Kano, Kaduna, Lagos and Cross River 2a. Growth rate of selected enterprises within target clusters. REMOVED 2b. Formal jobs REMOVED created in selected clusters INTERMEDIATE RESULTS Component A: All indicators removed 1. Employment growth and growth of participating firms within target clusters % Growth in Sales of participating firms % increase in value added per worker of participating firms % increase in average no. of workers in participating firms Indicators will only measure those aspects of the project which are funded by IDA. Sub-indicators deepen understanding of firm performance impacts Annual milestones added. Baseline now added to A, B and C from Enterprise survey Sub indicators A-C are more measurable, and use of Enterprise Survey indicators provides baseline. Employment impacts captured in revised indicator 1C Indicators will only measure those aspects of the project which are funded by IDA. Component B: increased competitiveness of strategic clusters All sector specific No. of product improvements indicators No. of sector policy reforms removed No. of sector assessments No. of sector investment climate reforms Business Census completed Business start-ups a) established after two years, or b) projected to survive after two years based on survival rates to that point Increased investment in participating firms New indicators are cross cutting across all sectors, are more measurable, and more relevant to restructured project design. 6

13 Components Component A: Component A continues to be financed in parallel by DFID and is unchanged. Sub-Component B.1: SERVICES (formerly B.1 ICT, B.II, Entertainment, B.III Hospitality and B.IV, Wholesale and Retail) Information Communication Technology (ICT) 23. The overall allocation for ICT is increased from US$50 million to US$58 million, reflecting the addition of the Asaba ICT Park as a beneficiary, and the readiness of the sector for IDA supported investments. The allocation for consultancy services will be reduced, and allocation for grants increased. The reduction in consultancy services is enabled by the increase of DFID funds for regulatory reform advisory. Therefore: Allocation for Category 1 expenditure ( Goods, works, consultants services, and Training, Workshops and Study Tours ) within ICT cluster is reduced by US$5.6 million Allocation for Category 3 expenditure ( Grants for Sub-Projects ) within the ICT cluster is increased by US$13.6 million 24. Due to the extended project development period, several activities within the ICT sub component require updating, as other projects and private sector parties have made the planned investments. The following changes, developed in consultation with stakeholders, are to be made: The Abuja Technology Village has attracted interest from private sector investors in regard to on-site investments proposed for support under the IDA credit. The project will therefore realign IDA support towards investments which are unlikely to attract private sector financing. The proposed cyber café in the Digital Bridge Institute has been removed and replaced with support for software testing and technology incubators to reflect changing technological and market developments within the sector. The Asaba ICT Park, in Delta State, has been identified as an appropriate target for IDA supported investment 25. Changes to activities in the Financing Agreement (FA): The list of six activities supporting (a) the creation of an enabling business environment for IT and ITES development, are reduced to two: (i) review and reform of ICT regulation and policy; and (ii) support for the development of ITES-BPO strategy and investment promotion in international markets. All other activities listed in the FA under ICT remain unchanged 5. For a full list of changes activities under Component B in the Financing Agreement, see Annex 2. 5 Further simplification is achieved through the wider use of performance grants, rather than technical assistance, across other ICT activities 7

14 Entertainment 26. The overall allocation for Entertainment is reduced from US$25 million to US$20 million, reflecting increased funding for the sector from alternative sources. 6 The primary category of expenditure within Entertainment shifts from consultancy (within Category 1) to performance grants (Category 3), to enable the project to respond directly to, and leverage, private sector innovations and investment. The allocation for Category 3 therefore increases substantially, and impacts on each of the three main activity areas: anti-piracy, distribution and marketing, and industry skills and services. The new approach reduces the need for expenditure for consultancy, equipment and goods, and training under Category 1 expenditure. In addition, support for the Nigerian Film Institute (NFI) is dropped as the costs and risks associated with supporting it are substantially increased by insecurity in its home State, Plateau. Objectives linked to increasing access to equipment and skills through the NFI will be reached through performance grants (for which NFI may still be eligible). Thus: Allocation for Category 1 expenditure within Entertainment is reduced from US$20 million to US$4.05 million; Allocation for Category 3 expenditure within Entertainment increases from US$5 million to US$15.95 million. 27. Changes to activities in the FA. Activity c. (iii) establishing a hub center for hosting industry events and developing key industry skills ; and c.(iv) setting up a facility for equipment leasing to film-makers are changed to c.(iii) providing grants to eligible enterprises for specific development projects to support development of hub centers for hosting industry events and developing key industry skills ; and c.(iv) providing Grants to eligible firms or institutions for specific development projects to set up facilities for leasing equipment to film-makers. No other changes listed under this sector in the FA are required. Other service clusters 28. The overall allocation for other service clusters, including hospitality and construction, is US$17 million. Allocation is refocused from Technical Assistance and Infrastructure (Category 1) to Grants (Category 3): allocation for Category 1 is US$2.15 million and for Category 3 it is US$14.85 million. Work in these sectors will not begin until further preparatory studies are undertaken and assessed. s are required to activities listed in the FA under hospitality or construction. Wholesale and Retail 29. The Wholesale and Retail sub-component is now funded by DFID, at a comparable scale ( 17 million). Following DFID s approach to the sector, activity (a) in the FA is changed from: investment in markets to increase space and improve handling and storage facilities, solid waste disposal and storm water drainage to Provision of technical assistance to support investment in markets to increase space and improve 6 The Federal Ministry of Finance is about to launch an USUS$18m initiative targeting the film sector. 8

15 handling and storage facilities, solid waste disposal and storm water drainage. No other changes in the activities listed under this cluster in the FA are required. Sub Component BII: LIGHT MANUFACTURING (formerly BVII: Additional Cluster Activities) 30. This is a new sub-component, and has been appraised by the Bank task team. It has an overall allocation of US$47 million. The project design envisaged engagement in additional growth clusters but these were left unspecified. The team has identified the light manufacturing sector, and within this, the agro-processing cluster as a priority. The project design is well positioned to provide the necessary support to facilitate private sector investment in post-harvest management and processing, including: (i) investment promotion of envisaged agro-processing zones; (ii) business development services and skills development; and (iii) supporting business linkages. Project activities will build firm capacity, business to business linkages and new business development services; improve standardization; and strengthen the investment climate. The project will provide TA to review the licensing and regulatory requirements in specific value chains where investors are active. The project will establish public private dialogue mechanisms at local/state/federal government level as appropriate to the specific investment climate issues under discussion. The market analysis will be conducted for the cluster overall, working with our counterparts at the FMTI and the firms themselves. As with all other clusters (see para 39 below), all activities under this cluster will be guided by an Industry Cluster Group. The eligibility criteria for Performance Grants for firms in this cluster will include levels of: (i) matching investment; (ii) innovation; (iii) outreach; and (iv) local demand generation. The number of firms participating will depend on the specific market clusters. The type of firm will include processors; packaging and bottling firms; and cluster business services such as marketing, logistics and financial service firms. The total number of performance grantees in the cluster will be in the order of 200 to 300. These firms will be identified through a competitive grant application process. 31. The delay in project effectiveness also provides an opportunity to learn and benefit from the sub components linked to light manufacturing under Component B already started by DFID, namely meat processing and leather goods production. The project will roll out activities that have achieved a positive impact under the parallel financed activities to the same clusters in other states. For example, the meat and leather clusters have supported five feed suppliers in developing and marketing new products to livestock owners to improve the quality and amount of meat for sale in three states in Nigeria. This model can be expanded and further developed across other appropriate states. Criteria for cluster activity expansion and the selection of additional states will focus on market impact and employment growth potential. 32. A focus on manufacturing will create sustainable jobs in Nigeria. Market studies over the last two years indicate the presence of manufacturing clusters with the potential to establish competitive production in light manufacturing such as leather goods and car parts 7. Following the identification of Manufacturing by the Federal Ministry of Trade 7 For example, Justin Lin and Volker Treichel (August 2011): Applying the Growth Identification and Facilitation Framework: The Case of Nigeria, World Bank Policy Research Working Paper,

16 and Investment as a priority 8, the project will fund technical assistance to analyze and identify opportunities in Light Manufacturing and develop activities including: (i) provision of technical assistance in support of investment climate improvements in targeted light manufacturing sectors; (ii) provision of performance grants to support the development of improved capacity and new business models in targeted light manufacturing clusters. Current market activity exists in household consumer items, such as plastics, bottles and refrigerators, and intermediary products for the agroprocessing industry. Allocation for Category 1 expenditure is US$11.45 million Allocation for Category 3 expenditure is US$35.55 million. 33. s are required in the FA to the parallel activities financed by DFID within the meat and leather, and construction clusters. Component C. Project Implementation, Communication and Monitoring and Evaluation 34. The main change under this component is the merging of the Federal Project Implementation Unit (FPIU) and Project Management Unit (PMU). Administration costs are reduced from US$20 million to US$18 million, reflecting a more streamlined contract for the PMU. An allocation will be made within Component C for support to the National Bureau of Statistics to update the business census and develop reliable databases. Institutional Arrangements 35. Project implementation arrangements will remain largely the same but with some simplification. The Minister of Trade and Investment will chair the Steering Committee. The project management unit will be merged with the FPIU. Industry Cluster groups will be formed consisting of public and private parties to guide and act as advisory services to the FPIU. The inclusion of agro-processing in the project will be reflected in (i) the establishment of an agro-processing industry cluster group, and (ii) senior representation from the Ministry of Agriculture on the project Steering Committee. 8 A new Nigerian Industrial Revolution Program is being launched in June

17 Financing Table 2: Project Costs Project Costs (US$ million) Components/Sub-components Original Revised B.1 SERVICES ICT Entertainment Other Services Wholesale and 30 0 Retail B.II LIGHT Agroprocessing MANUFACTURING Other 30 Manufacturing Total Component B C. Project Implementation, Communication and Monitoring and Evaluation Project Total Disbursement arrangements Table 3: Estimated Disbursements Estimated disbursements (Bank FY/US$ million) FY Annual Cumulative Reallocations 36. The proposed restructuring involves reallocation among the five categories resulting in decrease in the amount allocated to Categories 1 and 2; increase in Category 3; no change in Category 4 and removal of Category 5. Allocation for Goods, works, consultants services, and Training, Workshops and Study Tours ( Category 1) is reduced from US$115 million to US$56 million. Allocation for Goods, works, consultant s services and Training, Workshops and Study Tours and Operating Costs under part C (Category 2) of the project is reduced from US$20 million to US$18 million. Allocation for Grants for Sub-Projects ( Category 3 ) is increased from US$13m to US$84 million. The US$2 million allocated for repayment of the Project Preparation Facility (PPF), Category 4, is unchanged. The unallocated category 5 (US$10 million) is removed. See Table 4 below, for these figures expressed in SDR. 9 The US$10 million here was originally allocated to Additional Cluster Development. 11

18 Table 4: Reallocations in SDR Category of Expenditure Allocation % of Financing Current Revised Current Revised Current Revised (1) Goods, works, consultants services, and Training, Workshops and Study Tours under Parts B.1, B.2, B.3, B.4 and B.7 No change 73,700,000 35,900, % (2) Goods, consultants services including audit, Training, Workshops and Study Tours, and Operating Costs under Part C of the Project (3) Grants for Subprojects under Parts B.1, B.2. B.3, B4 and B.7 of the Project (4) Refund of Preparation Advance No change No change No change 10 SDR calculation based on original exchange rate US$1 = ,800,000 11,500, % 8,300,000 53,800, % of amounts payable under the applicable Grant Agreement 1,300,000 1,300,000 Amount payable pursuant to Section 2.07 of the General Conditions (5) Unallocated Removed 6,400,000 0 TOTAL 102,500, ,500,000 AMOUNT Procurement 37. Procurement of all goods, works and services to be financed by IDA under the project will be carried out in accordance with the World Bank s Guidelines:

19 Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers, dated January 2011 and Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers dated January Procurement of Works: Works procured under this project include infrastructure for (i) the Abuja Technology Village: uninterrupted power and water supply, other common usage infrastructure and supplementary infrastructure; (ii) common usage and last mile infrastructure within markets and agro processing zones; (iii) common usage and last mile infrastructure supporting the development of tourism assets; and (iv) fiber optic cabling. National Competitive Bidding will used for procurement of works. Closing date 39. The closing date is proposed to be extended from December 30, 2016 to September 7, This is to take account of the delay in project signing and effectiveness since the submission of the original PAD to the Board. Implementation schedule 40. The implementation schedule, as set out in the PAD, is now delayed by 28 months, reflecting the delay since the project was sent to the Board. Proposed Project implementation period: July 2013 September 2018 Projected Project effectiveness date: estimated September 2013 Proposed Project closing date: September 7, 2018 Other changes 41. The Federal Ministry of Commerce and Industry (FMCI) has been renamed as the Federal Ministry of Trade and Investment (FMTI). All references to FMCI are therefore to read FMTI. D. APPRAISAL SUMMARY Economic and Financial Analysis 42. The proposed reallocations within the project led to reconsideration of the economic rate of return. The most significant change in the project is the use of performance grants, which have increased from less than 10% of the budget, to over 50%. The new cost benefit analysis uses assumptions regarding the economic returns to business grants drawn from the peer reviewed paper, "One time transfers of Cash or Capital have long lasting effects on Microenterprise in Sri Lanka 11 ". Additional assumptions have been developed to estimate returns to specific investments in fiber optic cabling, ICT parks and training interventions across all sectors. Finally, the Treasury bill rate in Nigeria is now substantially higher than when calculations were 11 de Mel et al, Science 335, 962 (2012). 13

20 previously made (approximately 12% versus 3.3%), which has been reflected in the discount rate for NPV calculations. Taking these changes into account, we estimate the Project Net Present Value at US$31.4 million, with an Economic Rate of Return of 31%. Table 5, below, summarizes the NPV rates calculated for each of the key project clusters. Table 5: Summary of NPV calculations Project Component Services: ICT Services: Entertainment Other Services Agro processing and additional Manufacturing clusters M and E and Project management Project Total Net Present Value (US$3,774,377) US$15,467,543 US$6,729,678 US$25,756,374 (US$12,735,613) US$31,443, This analysis assumes that the first two years of the Project disbursement schedule are utilized to further refine the design and implementation plans for the Project, so as to ensure that Project interventions respond as closely as possible to an economic constraint. The cash flow for the Project is shown in the Figure below. A full Economic Analysis is available on file. 14

21 Figure 1: Projected cash flow $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 Cumulative cash flow Annual cash Flow NPV $ $(20,000,000) $(40,000,000) $(60,000,000) Technical Analysis 44. The GEM Project Implementation Unit in the Ministry of Trade and Investment has increased its capacity in the last two years. It s Project Coordinator, Deputy Coordinator, M and E officer and project officers have been in place since Members have been exposed to the DFID GEMS components (such as through participation in Annual Reviews) and have benefitted from coaching by World Bank staff, formal training, and through mentoring of the Implementation Unit of the World Bank s Public Private Partnership Project. Procurement officers with experience of World Bank projects from the Bureau of Public Procurement have recently been nominated to join the team. Support from FGN and private sector partners for the project remains strong, while the political economy risks identified in the PAD technical analysis also remain relevant. However, it may be assumed that risks associated with State and Local Government are reduced as a result of the greater focus on performance grants to the private sector. 45. Lessons from the ongoing components of GEMS and other relevant projects have informed the technical design of this proposed restructuring. DFID funded components of GEM indicate that firm level interventions, such as the GEM meat and leather intervention in animal feed supply, can create sustainable enterprise growth and income increases. Government led reforms of policy and regulation are slow due to capacity constraints, the speed at which National and State assemblies operate, and the complex arrangements of ministries and para-statals at Federal and State level. The success of the Nigeria YouWin business plan competition has highlighted the potential of performance grants direct to the private sector to deliver quick and sustainable income and employment impacts. The role of the Enterprise Development Centre in the YouWin 15

22 project (training YouWin grantees and applicants across all regions of Nigeria) has also highlighted the strength of a private sector approach to delivering training. Major successes in the DFID funded agriculture project have also demonstrated excellent potential for wide scale transformation in specific markets through private sector led innovations supported by projects 12. Fiduciary Analysis 46. to the Fiduciary Appraisal is required and the Financial Management action plan remains current. Procurement Analysis 47. The Bureau of Public Procurement has nominated two procurement officers to the GEMS project Implementation Unit, of whom one has experience of World Bank projects. If the nominations are accepted, procurement risks ( risks due to lack of manuals, lack of capacity, lack of adequate record keeping and management systems, and frequent political interference in procurement systems ; and risks related to the fact that the FPIU does not have previous experience in implementing Bank funded projects and therefore have limited knowledge of Bank s procurement procedures, are therefore reduced. Social Analysis 48. There is no change to the social appraisal. Environment Analysis 49. None of the proposed changes will raise the environmental category of the project or trigger new safeguards policies. Exceptions to Bank Policies 50. The proposed changes will involve no exceptions to Bank policies. A re-appraisal will therefore not be needed. Project Risks 51. The risks originally identified by the PAD remain relevant, although the risks linked to severe national recession and a destabilized financial system are somewhat reduced. Political risks, linked to withdrawal of political support for the project and political turnover, are sharpened by the forthcoming presidential election in More significantly, attacks on government, religious institutions and citizens by Boko Haram in Northern Nigeria, and the subsequent military responses by Federal and State governments, represent a new high risk to project operations and outcomes in the North of the country. Economic activity in the North appears to be significantly impacted, and 12 DFID s work with a leading supplier of fertilizer has established access to fertilizer for over 1 million additional poor farmers. 16

23 incentives to invest and grow businesses are much reduced. However, the importance of project impacts in the North, especially those linked to employment, is increased by the current situation, despite the additional difficulties of delivering results. Risks are mitigated and managed by the increased use of performance grants. Performance grants have two key advantages in a high risk context: (i) they can be managed with relatively few resources in the location where the grant is received and (ii) they enable the project to move flexibly to different locations in response to key opportunities and threats. Taking into account the increased political and conflict-related risks, the overall risk rating is increased from moderate to substantial. 17

24 ANNEX 1: Results Framework and Monitoring. NIGERIA: GROWTH & EMPLOYMENT Revised Project Development Objective: To increase firm growth and employment in participating firms in Nigeria PDO Level Results Indicators* Core D=Dropped C=Continue N= New R=Revised Unit of measure Baseline Cumul ative Target 14 Frequency Data Source/ Methodology Responsibility for Data Collection PDO Indicator: Employment growth and growth rates of participating firms within targeted clusters 1A. % growth in sales of participating firms 15 1B. % increase in value added per worker of participating firms 1C. % increase in average no. of workers in participating firms Services Sector N % increase Light Manufacturing sub-sector N % increase Services Sector N % increase Light N % Manufacturing increase sub-sector Services Sector N % increase Light Manufacturing sub Sector N % increase US$15,614 US$15,614 US$2339 US$2339 Baseline + 0% Baseline + 0% Baseline + 0% Baseline + 0% 5 Baseline + 0% 5 Baseline + 0% +0% +0% +10% +20% +20% Every year Annual enterprise survey; monitoring DFID GEMS 3 team; teams, PIU 16 +0% +0% +10% +20% +20% As Above As Above As Above +0% +0% +0% +10% +10% As Above As Above As Above +0% +0% +0% +10% +10% As Above As Above As Above +0% +10 % +0% +10 % +15% +20% +20% As Above As Above As Above +15% +20% +20% As Above As Above As Above 13 Baselines for indicator 1A, 1B and 1C are drawn from 2010 Enterprise Survey figures, based on sample of firms across the private sector. Baselines will be updated with sector specific information when ongoing baselines studies are complete. 14 Indicators 1A to 1C are measured with a one year time lag, so the final target is drawn from Data will track firms directly impacted and control firms for indicators 1A, 1B, and 1C; control data will inform narrative report of additionality 16 Project Implementation Unit located within the Federal Ministry of Trade and Investment 18

25 INTERMEDIATE RESULTS No. of product improvements (cumulative) D=Dropped C=Continue N= New R=Revised Unit of Measure Baseline Cumulative target Frequency Data Source/ Methodology N Number Annual Survey of infrastructure investments Responsibili ty for Data Collection GEMS PIU Sector market assessments (cumulative) Sector Investment climate assessments (cumulative) N Number Annual Documents sighted N Number Annual Documents sighted GEMS PIU GEMS PIU No. of sector policy reforms N Number Annual Project grant GEMS PIU (cumulative) disbursement records Business Census N Number One time Report sighted GEMS PIU Business start-ups a) established after two years, or b) projected to survive after two years based on survival rates to that point (cumulative) N Number Every year Survey of grantees and incubatees Increased investment in N % increase % 5% 10% 10% Every year Survey of participating firms 17 grantees and infrastructure partners GEM PIU GEMS PIU 17 Target calculated approximately based on expected interventions. Targets will be refined once baseline work is complete 19

26 Annex 2: Summary of changes to activities under Component B as recorded in the Financing Agreement ICT Activities in original FA Changes (a) creation of an enabling business environment for IT and ITES development (i) developing a comprehensive ITES policy and strategy (b) development of IT parks and other infrastructure related to IT and ITES services (c) development of ICT skills and entrepreneurial capacity (d) development of the local IT/ITES industry (ii) establishing an ITES-BPO secretariat under the Recipient s National Information Technology Development Agency to work with key stakeholders to facilitate investment promotion, infrastructure and skills development (iii) developing and implementing an integrated ITES- BPO investment promotion strategy (iv) preparing data protection, consumer privacy and electronic transactions laws and regulations (v) developing simplified regulations and procedures for ITES-BPO investors (vi) developing a comprehensive package of economic and policy measures for facilitating growth of the ITES- BPO sector (i) providing technical assistance and Grants to eligible start-up IT companies for specific development projects aimed at building the capacity of such companies in technical, management, financing and market knowledge skills, and create a network of IT business incubators in Nigeria (ii) carrying out a program to link domestic industry with international industry leaders and forge partnerships among key domestic training institutions (iii) providing technical assistance and Grants to eligible public and private institutions for specific development projects to train trainers and professionals in key niche areas for IT/ITES development (i) providing market intelligence services, access to ondemand research and annual customer surveys (ii) carrying out promotional activities to sensitize government and other stakeholders about the objective of attracting investment and business into the sector (iii) providing Grants to eligible IT business associations and public institutions for specific development projects designed to build their capacity to carry out their functions (iv) providing technical, operational and administrative support to the Outsourcing Development Initiative of Nigeria to promote the growth of the Nigerian IT/ITES sector from an outsourcing perspective (i) Review and reform of ICT regulation and policy (ii) ITeS-BPO strategy and investment promotion in international market. 20

27 Entertainment Activities in original FA Changes (a) strengthening the protection of intellectual property rights (b) improving the distribution and marketing of entertainment industry products (c) establishment and/or provision of capacity building assistance to a selected Nigerian film institute (i) developing improved registration standards and procedures for recognition of intellectual property rights (ii) carrying out public awareness building activities related to the protection of intellectual property (iii) providing technical assistance to relevant public authorities to strengthen the mechanisms for enforcement of intellectual property laws and regulations (i) providing technical assistance and grants to eligible enterprises for specific development projects to establish music and film packaging and joint marketing companies (ii) providing Grants to eligible enterprises for specific development projects to create twinning arrangements with established entertainment distribution networks (iii) developing streamlined export procedures for Nigerian entertainment industry products (iv) providing technical assistance and Grants to eligible enterprises for specific development projects to build the capacity of the Nigerian film and music industry to market its products overseas (v) providing technical assistance and Grants to promote Nigerian film and music at international film and music festivals (vi) exploring options for long-term loans and venture capital facilities dedicated to the entertainment industry (vii) providing technical assistance and Grants for specific development projects to explore alternative Internet-based distribution channels (i) providing a professional film studio facility (ii) improving sound, light and other technical quality standards through training and other capacity building measures to industry stakeholders (iii) establishing a hub center for hosting industry events and developing key industry skills (iv) setting up a facility for equipment leasing to film-makers (iii) providing Grants to eligible enterprises for specific development projects to support development of hub centers for hosting industry events and developing key industry skills; and (iv) providing Grants to eligible firms or institutions for specific development projects to set up facilities for leasing equipment to film-makers. 21