AFRICAN DEVELOPMENT BANK FEDERAL REPUBLIC OF NIGERIA ENABLE YOUTH NIGERIA APPRAISAL REPORT

Transcription

1 AFRICAN DEVELOPMENT BANK Public Disclosure Authorized Public Disclosure Authorized FEDERAL REPUBLIC OF NIGERIA ENABLE YOUTH NIGERIA APPRAISAL REPORT OSAN DEPARTMENT November 2016

2 TABLE OF CONTENTS Currency Equivalents. i Fiscal Year i Weights and Measures... i Acronyms and Abbreviations.ii Program Information Sheet... iv Project Summary... vi 1. STRATEGIC THRUST & RATIONALE Programme Linkages with Country Strategies and Objectives Rationale for Bank s Involvement PROGRAMME DESCRIPTION Programme Components Technical Solutions Retained and Other Alternatives Explored Programme Type Programme Cost and Financing Arrangements Programme Area and Beneficiaries Participatory Approach to Programme Formulation, Design and Implementation9 2.7 Bank Group Experience, Lessons Reflected in Project Design Programme s Performance Indicator PROGRAMME FEASIBILITY Economic and Financial Performance Environmental and Social Impacts IMPLEMENTATION Implementation Arrangements Monitoring Governance Sustainability Risk Management Knowledge Building LEGAL INSTRUMENTS AND AUTHORITY Legal Instrument Conditions Associated with Bank Group Intervention Compliance with Bank Policies RECOMMENDATION..20

3 Appendix Appendix I(a): Country Comparative Socio-Economic Indicators Appendix I (b) : Unemployment Rates by states in Nigeria Appendix II: AfDB s portfolio in Nigeria Appendix III: Map of the Project Area Appendix IV: Similar Projects Financed by Other Development Partners in the Country Appendix V: Organizational Structure for Program Implementation Appendix VI: Project Description Appendix VII: Nigerian Incentive based Risk Sharing System for Agricultural Lending (NIRSAL PLC) List of Tables Table 1: Financing Plan Table 2: AfDB s Key Financing Information (overall components) Table 3: Timeframe - Main Milestones (expected) Table 4: Result-Based Logical Framework (RBLF) Table 5: Project Timeframe Table 2.2: Technical Alternatives Considered and Reasons for Rejection Table 2.3: Project Cost Estimates by Components Table 2.3: Source of financing Table 2.5: Project Cost by Category of Expenditure Table 2.6: Category of Expenditure by Sources of Financing Table 2.7: Expenditure Schedule by Component (UA million) Table 2.8: Consideration of Lessons Learnt in Project Design Table 3.1: Summary of Sensitivity Analysis Table 4.1: Potential Risk and Mitigation Measures List of Figures Figure 1: The project Governance Framework

4 Currency Equivalents September, UA 1.40 US$ 1US$ Naira 1 UA Naira Fiscal Year 01 January 31 December Weights and Measures 1 metric ton 2,204 pounds (lbs) 1 kilogramme (kg) lbs 1 meter (m) 3.28 feet (ft) 1 millimetre (mm) inch ( ) 1 kilometre (km) 0.62 mile 1 hectare (ha) acres i

5 Acronyms and Abbreviations ADF African Development Fund AfDB African Development Bank AGTF Africa Growing Together Fund AGRA Alliance for a Green Revolution in Africa APPB Annual Performance Plan and Budget APP Agricultural Promotion Policy ADWG Agriculture Donor Working Group ATA Agricultural Transformation Agenda AVC Agricultural Value Chain BDS Business Development Service CBN Central Bank of Nigeria CIDA Canadian International Development Agency CSP Country s Strategy Paper CPM Country Portfolio Manager CPMT Country Programme Management Team CPPR Country Portfolio Performance Review DANIDA Danish International Development Agency DfID Department for International Development DPs Development Partners EIRR Economic Internal Rate of Return EU European Union RBLF Results-Based Logical Framework FAO Food and Agriculture Organisation of the United Nations FCT Federal Capital Territory FIRR Financial Internal Rate of Return FGN Federal Government of Nigeria FMARD Federal Ministry of Agriculture and Rural Development GAP Gender Action Plan GDP Gross domestic product GIZ German Technical Cooperation GoN Government of Nigeria GPRS-I Nigeria Poverty Reduction Strategy-Phase I GPRS II Growth and Poverty Reduction Strategy-Phase II IE Interim Evaluation IFAD International Fund for Agricultural Development IMF International Monetary Fund IITA International Institute of Tropical Agriculture JICA Japan International Cooperation Agency MDA Ministries, Departments and Agencies M&E Monitoring and Evaluation MGF Matching Grant Fund MOFEP Ministry of Finance and Economic Planning MSME Micro Small and Medium Scale Enterprise MTNDP Medium Term National Development Plan MTR Mid-Term Review NGO Non-Governmental Organization ii

6 NBS NGN NCO NIRSAL NSC PDR PFI PCR QA PMRRO SSC SIUs SI SDF SSE SV TA TBD UA UNDP UNICEF UNODC USD USAID WHO National Bureau for Statistics Nigerian Naira National Coordination Office Nigeria Incentive Based Risk Sharing Facility for Agricultural Lending National Steering Committee Programme Design Report Participating Financial Institution Project Completion Report Quality Assurance Program Monitoring, Reporting and Remedial Office State Steering Committee State Implementation Units Sensitivity Indicator Skills Development Fund Small Scale Enterprises Switching Value Technical Assistance To Be Determined Unit of Account United Nations Development Programme United Nations International Children s Education Fund United Nations Office on Drugs and Crime United State Dollar United States Agency for International Development World Health Organisation iii

7 Loan Information Client s information BORROWER: EXECUTING AGENCY: Government of the Federal Republic of Nigeria Federal Ministry of Agriculture and Rural Development (FMARD) Table 1. Financing plan S/N Source Amount (Million) Instrument UA US$ 1 ADB Loan 2 AGTF Loan 3 Federal Government of Nigeria Own Fund 4 State Governments Own Fund 5 NIRSAL Own Fund 6 Beneficiaries Own Fund TOTAL PROGRAMME COST Table 2: ADB/AGTF key financing information Loan Currency USD Loan Type Fully Flexible Loan Tenor TBD (Up to 25 years inclusive of grace period) Grace period TBD (Up to 8 years) Average Loan Maturity TBD (function of the amortization profile) Repayments TBD (Consecutive semi-annual payments after grace period) Interest Rate Base Rate +Funding Cost Margin+ Lending Margin + Maturity Premium if applicable Base Rate Floating Base Rate (6-month USD LIBOR reset each 1 st February and 1 st August). A free option to fix the Base Rate is available. Funding Cost Margin The Bank funding cost margin as determined each 1 st January and 1 st July and applied to the Base Rate each 1 st February and 1 st August Lending Margin 80 basis points (0.8%) Maturity Premium TBD: - 0% if Average Loan Maturity <= years - 0,10% if 12.75< Average Loan Maturity <=15-0,20% if Average Loan Maturity >15 years Front-end fees 0.25% of the loan amount payable at latest at signature of the loan agreement Commitment fees 0.25% of the undisbursed amount. Commitment fees start accruing 60 days after signature of the loan agreement and are payable on Payment dates Option to convert the Base Rate* In addition to the free option to fix the floating Base Rate, the borrower may reconvert the fix rate to floating or refax it on part or full disbursed amount. Transaction fees are payable. Option to cap or collar the Base The borrower may cap or set both cap and floor on the Base Rate to be applied Rate* on part or full disbursed amount. Transaction fees are payable. Option to convert loan currency** The borrower may convert the loan currency for both undisbursed and disbursed amounts in full or part to another approved lending currency of the Bank. Transaction fees are payable. * Conversion options and transaction fees are subject to the Bank Conversion Guidelines available: ** Loan currency conversion is not applicable under AGTF Loan. iv

8 Table 3: Project Financial and Economic Performance FIRR Programme 48% EIRR Overall Programme 32% Sensitivity Analysis Item Change NPV IRR % SI (NPV) SV(NPV) Base Case 1,314 Investment +20% 1, % Benefits -20% % Implementation delays one year % SI = sensitivity indicator, SV = switching value Table 4: Timeframe - Main Milestones (expected) Concept Note approval October, 2016 Program approval December, 2016 Effectiveness January, 2017 First Disbursement March, 2017 Completion December, 2021 Last repayment December, 2036 v

9 1. Project Overview Project Summary 1.1 The Federal Government of Nigeria (FGN) through the present Agricultural Promotion Policy (APP: ) has placed high priority on expanding wealth creation opportunities for youth and women as a key instrument for building agribusinesses capable of delivering sustained prosperity in domestic food security goals, exports, and supporting sustainable income and job creation. The APP ( ) is anchored on three main pillars (Pillar 1: Promotion of agricultural investment; Pillar 2: Financing agricultural development programmes and Pillar 3: Research for agricultural innovation and productivity. This programme will contribute to the APP ( ) strategic pillars of Promotion of Agricultural Investment & Financing Agricultural Development Programmes. 1.2 Nigeria s unemployment rate is increasing, with young people experiencing higher levels of unemployment and underemployment and a much greater concentration in rural areas. In the last ten years, approximately 20 million youth entered the country s labor market and only 20 % secured employment. As a result, the unemployment rate doubled in five years from 12.7 % in 2005 to 25% in 2013 (equivalent of more than 40 million people), with an estimated 56% of youth unemployed (National Bureau of Statistics, 2014). Besides, there is also a substantial problem of underemployment that does not support an adequate living wage: working poverty in Nigeria has reached a level of almost 60% on average and 65.3% for the youth, meaning that two thirds of young people who do have a job are living on less than USD 1.25 per day. Thus, there is a strong case for the provision of resources from the Bank to support the Country s priority of job creation. 1.3 The proposed ENABLE Youth Nigeria Programme aims to contribute to job creation, food security and nutrition, rural income generation and improved livelihoods for youths in both urban and rural areas. The specific objective of the Program is to create business opportunities and decent employment for young women and men along priority agricultural value chains. Key impacts of the project are the real agricultural GDP growth from the present 3.09% to at least 7% per year and reduce youth unemployed by 10% by 2021 from the present 21.50%. Expected outcomes of the ENABLE Youth Program are: i) increase youth income by 40%, ii) generate 185,000 additional jobs, iii) and increase access to finance by 8%. 1.4 Overall, the programme will equip youth with various skills, values, attitudes, and orientation that will impact on their lives, the lives of others and the society in general. The project will make agriculture business attractive and provide decent employment to the youth. The programme will also influence institutional changes in terms of access to finance particularly for youth. 2. Needs Assessment 2.1 Nigeria faces ominously increasing unemployment, particularly amongst its youth prompting the Nigerian Government to prioritize this challenge. Although agriculture employs about 70% of the labour force, it accounted for only about 20% of GDP in 2016 (Central Bank of Nigeria 2016), suggesting that productivity and incomes in the sector are very low. The dwindling trend of economic prosperity among youth called for the need to diversify the economy through Agriculture. Employment trends in Nigeria also reveal that youth make up almost 40% of underemployed workers in the country. Additionally, 37.5% of youth between the ages of 15 and 34 are classified as inactive, meaning they are neither working, looking for vi

10 work, or in school. Development of the agriculture and rural development sector is critical to economic development of Nigeria (See Annex1: Country and Rural Context) and in achieving food security, import substitution, job creation and economic diversification in the country. Stakeholders during the ENABLE Youth workshop held in Abuja April 2016, acknowledged the importance of this proposed intervention. 2.2 In that context, the Government of Nigeria through the Federal Ministry of Agriculture and Rural Development is exploring this opportunity for youth in agribusiness development under the ENABLE Youth Nigeria Programme. The programme has four components; 1) Enabling Environment for Youth Empowerment; 2) Entrepreneurship and Agribusiness Incubation; 3) Business Development and Financing; 4) Programme Management and Coordination. The programme will be implemented over 5 years in the 36 States and Federal Capital Territory (FCT) of the country. The programme will promote necessary reforms that will improve the ease of setting up businesses by young people, and enhance the enabling environment for youth to have equal access to resources and assets for agribusiness establishment and resultant employment generation. In addition, the programme will train youth and financially empower them through the Nigeria Incentive Based Risk Sharing Facility for Agricultural Lending (NIRSAL) by de-risking Commercial Banks to lend to them at mutually agreed and affordable interest rates after the 3-9 month agribusiness incubation and placement period, to actually setting up businesses. 3. Bank s Added Value The proposed intervention is in line with the Bank Group s HIGH 5 priorities that are crucial for accelerating Africa s economic transformation.. It is aligned with the Bank s Strategy for Agricultural Transformation in Africa ( ) specifically (1) Contribute to ending Extreme Poverty by 2025; (2) End Hunger and Malnutrition by 2025; (3) Turn Africa into a Net Food Exporter by 2025; and (4) Move Africa to the top of key global agricultural value chains by The program is aligned with Pillar I - Supporting the Development of a Sound Policy Environment of the Country s Strategy Paper (CSP) ( ). The programme will promote Policy Reforms that will make youth self - dependent and be an active participant in development effort of the nation. The programme is also consistent with the Bank s Group Strategy for Jobs for Youth in Africa ( ) and the Bank s Ten Year Strategy ( ) which pay particular attention to fragile states, agriculture and food security, and gender. Financing the proposed Programme will complement the Bank s continued involvement and support for the agricultural sector in Nigeria. The Programme will also complement the efforts of other donors in the agricultural sector. The Bank s experience in Nigeria and throughout Africa and lessons learned were built into the Programme design including: (i) reduction and streamlining of loan conditions for easier fulfilment; (ii) Ensure quality-at-entry to have clearer definition of components, advance preparation of a procurement plan and proper consultation during appraisal regarding implementation arrangements; (iii) ensuring proposer coordination between Federal and State Governments in the implementation of the program. The programme will support the 36 states and FCT to contribute to job creation, food security and nutrition, rural income generation and improved livelihoods for youth in rural areas. The intervention is also aligned with the Strategy for Addressing Fragility and Building Resilience in Africa ( ) which aims to place the Bank at the center of Africa s efforts to address fragility and pave the way for a more resilient and inclusive development trajectory, vii

11 as well as the Gender Strategy ( ) to operationalize the Bank s commitment to gender equality as espoused in the Bank s Ten-Year Strategy ( ). 4. Knowledge Management The experience gained from the implementation of this programme will be well documented in the various Programme reports including Programme completion reports, quarterly progress reports, audit reports, supervision reports and midterm review reports. The knowledge will be disseminated within the Bank to be applied in the design and implementation of new youth empowerment programmes. The Greenfields and Brownfields models proposed under the intervention hoped to enrich both business analysis and public policy discussion on investments by showing a more differentiated spectrum of entry modes for businesses. Greenfields model will create an enabling environment for decent employment of young unemployed graduates in Nigeria and a proportion of those already engaged in agribusiness under the Brownfields model. The Greenfield and Brownfield model could be replicated in other countries if proven successful in Nigeria. viii

12 Table 4: Result-Based Logical Framework (RBLF) NAME OF PROGRAMME AND COUNTRY: ENABLE Youth Nigeria Government of Federal Republic of Nigeria PROGRAMME PURPOSE: To create business opportunities and decent employment for young women and men along priority agricultural value chains Results chain Performance indicators Means of verification Risk/Mitigation Measures Indicators (including CSI) Baseline (2016) Target (2021) IMPACT OUTCOMES Improved livelihoods and reduced unemployment Outcome 1: Generate jobs and increased income for youths Outcome 2: Improved access to finance Contribution to GDP Average Annual Growth Rate Unemployed youths as % of population Increased youth income disaggregated by gender Jobs generated and upgraded for the youth disaggregated by gender Number of new agriculture-related businesses established Increased access to finance by program beneficiaries (data disaggregated by gender) 4.07% Growth of at least 5% per year 21.50% Unemployment reduced by 10% Average Naira 90, N.A NA Increased in income of beneficiaries by 40% (disaggregated by gender and age50% men & 50% women 185,000 additional jobs to be created (disaggregated by gender 50% men & 50% women) At least 7,000 new agriculture-related businesses to be created (by the 37,000 youths, some in groups) 4% Percentage of youths access to Agric finance increase by 7% (disaggregated by gender 50% men and 50% women) National Statistics and programme reports National Statistics and programme reports Nigeria living standards surveys, National household expenditures surveys State statistics Local Government (LGA) statistics, Programme reports. Reference surveys, studies Programme reports. Reference surveys, studies NIRSAL reports CBN Bank reports Risks: Policy reversal due to change in Government leadership and policy. Mitigation: Government remains committed to the implementation of the Agricultural Promotion Policy. Risk: Untimely and inadequate financial contribution by the Federal and State Governments. Mitigation: States have already expressed eagerness to participate in the program. State contributions are mostly in kind in the form of land, which is one of the readiness criteria for State participation Risk: Lack of interest by commercial banks to lend to agripreneurs Mitigation: NIRSAL has experience and good working relationship with commercial banks including Sterling, FCMB, UBA and Union Banks. The Banks have indicated willingness to participate in the program and NIRSAL will leverage on its existing relationships to drive the component. ix

13 NAME OF PROGRAMME AND COUNTRY: ENABLE Youth Nigeria Government of Federal Republic of Nigeria PROGRAMME PURPOSE: To create business opportunities and decent employment for young women and men along priority agricultural value chains Results chain Performance indicators Means of verification Risk/Mitigation Measures Indicators (including CSI) Baseline (2016) Target (2021) COMPONENT A: Enabling Environment for Youth Empowerment Results chain Performance indicators Means of verification Risk/Mitigation Measures Indicators (including CSI) Baseline Target (2021) OUTPUTS Output 1.1: Promotion of Policy Reforms Activities that will reduce discriminatory practices in the employment of women and youth in the sector and expand wealth creation opportunities for youths and women. Number of Greenfields and Brownfield youth employment policy advocacy workshops, trainings and studies Output 1.2: Enabling Number and type of graduate youth environment for rural employment promotion initiatives in youth to have equal participating States created and access to resources and strengthened assets for agribusiness establishment and resultant employment generation created COMPONENT B: Entrepreneurship and Agribusiness Incubation OUTPUTS 0 20 workshops 15 trainings 5 studies 0 At least 50 new employment promotion initiatives in all the States. Program supervision reports; Program Monitoring and Evaluation reports Programme reports Mid-term review; Supervision reports Program supervision reports; Program Monitoring and Evaluation reports Programme reports Mid-term review; Supervision reports Risk: Weak policy initiatives and strategies at federal and state levels for expansion of Greenfields and Brownfield approaches. Mitigation: Government at both level remains committed to promoting enabling environment for youth decent employment opportunities in the agro sector. Results chain Performance indicators Means of verification Risk/Mitigation Measures Indicators (including CSI) Baseline Target (2021) Output 2.1: Skills acquired by youths under the Greenfield and Brownfield through internship at the incubation cnters. Output 2.2: Youths successfully established their own agribusiness Number of youths trained (data disaggregated by type of training, gender, and age) Number of youths established own business as individuals or groups 0 At t least 90% of youths trained in agribusiness management skills/capacity, mindset change, various business model and ethics (disaggregated by gender 50% women & 50% men). 0 At least 90% trained youths established own business (disaggregated by gender 50% women & 50% men). Program supervision reports; Program Monitoring and Evaluation reports Programme reports Mid-term review; Supervision reports x

14 NAME OF PROGRAMME AND COUNTRY: ENABLE Youth Nigeria Government of Federal Republic of Nigeria PROGRAMME PURPOSE: To create business opportunities and decent employment for young women and men along priority agricultural value chains Results chain Performance indicators Means of verification Risk/Mitigation Measures Indicators (including CSI) Baseline (2016) Target (2021) COMPONENT C: Business Development and Financing Results chain Performance indicators Means of verification Indicators (including CSI) Baseline Target (2021) Means of verification OUTPUTS OUTPUTS Output 3.1: Participating youths transited from agribusiness interns to successful owners of agribusinesses Output 3.2: Agribusiness loans available and operational. Number of youths transited to successfully owners of business (data disaggregated by gender) Number of agripreneurs accessing loans 0 At least 90% of youths transited to successfully owners of business many constituted into groups disaggregated by gender 50% women & 50% men. 0 At least 90% of agripreneurs accessed loans disaggregated by gender 50% women & 50% men Program supervision reports; Program Monitoring and Evaluation reports Programme reports Mid-term review; Supervision reports Risk/Mitigation Measures Risk: Mind-set that considers youths in agriculture as failures. Mitigation: Advocate to change mind-set Risk: Women may be reluctant to step forward in some cultures. Mitigation: Offer special incentives to women. COMPONENT D: Programme Management and Coordination and Management Unit Results chain Performance indicators Means of verification Risk/Mitigation Measures Indicators (including CSI) Baseline Target (2021) Output 4.1: Program National Co-ordination Office and Risk: High turnover at recruitment management team personnel of the 37 States Mitigation: established and Implementation Units Competitive recruitment operational at federal and state level 4.2; Procurement of transport and office equipment; technical assistance, studies, surveys; and the establishment and operation of the M&E system. 2. NIRSAL s PMO (Program Management Office) operations in place 0 1 National Coordinator, 37 State Coordinators, 1 Agribusiness Development Officer, 1 M&E Officers, 1 Procurement officer, Accountants and Investment/Loan Officers 0 1 Program management office Procurement completed 0 Transport and office equipment; technical assistance, studies, surveys; and the establishment and operation of the M&E system. Program supervision reports; Program Monitoring and Evaluation reports Programme reports Mid-term review; Supervision reports Risk: Cumbersome procurement procedures will slow disbursement. Mitigation: Procedures simplified to ensure timely disbursements Risk: Fulfilment of loan conditions significantly delayed Mitigation: Work out easily fulfilled loan and grant conditions xi

15 NAME OF PROGRAMME AND COUNTRY: ENABLE Youth Nigeria Government of Federal Republic of Nigeria PROGRAMME PURPOSE: To create business opportunities and decent employment for young women and men along priority agricultural value chains Results chain Performance indicators Means of verification Risk/Mitigation Measures Indicators (including CSI) Baseline (2016) Target (2021) KEY ACTIVITIES Component A: Enabling Environment for Youth Empowerment Component B: Entrepreneurship and Agribusiness Incubation Component C: Business Development and Financing Inputs/Activities 1.1 A broad-based policy dialogue on rural youth employment in agriculture; 1.2 Coordination and partnerships with all public and private stakeholders involved in youth employment promotion; 1.3 Design of Risk-Sharing Facility to improve access to financial services; 1.4 Knowledge management and dissemination, using youth-friendly information and communication technologies. 1.5 The States Implementation Unit (SIU) will also support public sector capacity building to drive enabling environment reforms that will facilitate youth agribusiness investments at State levels. Inputs/Activities 2.1 Establish agribusiness incubation centers 2.2 Develop business incubation strategies; 2.3 Identify/explore promising ventures; 2.4 Track agribusiness start-ups to assess best practices/economic viability/expansion; 2.5 Training of youths in Agripreneurs Centers located in IITA 2.6 Agribusiness orientation designed by FMARD in partnership with IITA and the three Universities of Agriculture in Makurdi, Abeokuta and Umudike, and other identified partners. 2.7 strong business management skill/capacity through business development Service institutions. Inputs/Activities 3.1 Develop bankable proposals of planned businesses or enterprises 3.2 Access to commercial fund as loan to grow businesses 3.3 Setting up businesses 3.4 Participating commercial Banks establishing adequate outreach in urban and rural areas 3.5 Additional funds leveraged from participating commercial banks Inputs Sources of Financing (UA million) Sources Total Percent ADB loan AGTF Loan Federal Government of Nigeria State Governments Beneficiaries NIRSAL Total Component D: Programme Coordination and Management Unit Inputs/Activities 4.1 Competitively recruited key personnel of the National Co-ordination Office and personnel of the 37 States Implementation Units 4.2 Plan and coordinate programme implementation activities; 4.3 Monitoring and Evaluation; 4.4 Management of relevant studies 4.5 Management of procurements xii

16 Table 5: Programme Timeframe ACTIVITY Signing of Loan agreements & MOUs Conducting baseline studies Prepare, approve and float Bid Documents and contract awards for Policy Reforms Enabling Environment for Youth Empowerment Entrepreneurship and Agribusiness Incubation Training of youths in Agripreneurs Centers Business Development and Financing Quarterly reports submission Annual reports submission Programme Work plans and Budgets Steering committee meetings Bank s supervision missions Audit Mid-Term Review Program Completion Reporting Last Disbursement Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 xiii

17 REPORT AND RECOMMENDATION OF THE MANAGEMENT OF THE ADB GROUP TO THE BOARD OF DIRECTORS ON A PROPOSED LOAN TO THE FEDERAL REPUBLIC OF NIGERIA FOR THE ENABLE YOUTH NIGERIA PROGRAMME Management submits the following Report and Recommendation on proposed ADB loan of UA million and AGTF Loan of UA million to finance the ENABLE Youth Programme in Nigeria. I. STRATEGIC THRUST & RATIONALE 1.1. Programme Linkages with Country Strategies and Objectives This Program will contribute to the Nigerian Government s Agriculture Promotion Policy (APP: ) Building on the Successes of the Agricultural Transformation Agenda (ATA). The goal of APP is to drive forward Federal Government s priorities in partnership with State Governments in the following four areas: food security; import substitution; job creation; and economic diversification. The policy is anchored on three main pillars (Pillar 1: Promotion of agricultural investment; Pillar 2: Financing agricultural development programmes and Pillar 3: Research for agricultural innovation and productivity. This programme will contribute to the APP ( ) strategic pillars of Promotion of agricultural investment & Financing agricultural development programmes The programme will also contribute to the policy shifts on youth and women by expanding wealth and job creation opportunities. The principal focus of the ENABLE Youth Nigeria Programme is to tackle graduate youth unemployment. Within the context of the programme, it is expected that the programme would generate additional 222,000 jobs targeted towards youth and women to help reduce youth unemployment and to ensure gender balance in agricultural development. These jobs would be created along agricultural value chains through training, financing, and enabling young people to go into commercial farming and to set up agribusinesses along these value chains. The programme will contribute to the Nigeria s long term aspiration of Vision 2020 which seeks to drive Nigeria into the league of the first 20 developed economies by the year The programme is aligned with Pillar I - Supporting the Development of a Sound Policy Environment of the Country s Strategy Paper (CSP) ( ). The programme will promote Policy Reforms that will make youth self - dependent and be an active participant in development effort of the nation. 1.2 Rationale for Bank s Involvement The rationale for the Bank to support ENABLE Youth Nigeria Programme includes the following: i) Nigeria s unemployment rate is increasing, youth experience higher levels of unemployment and underemployment and a much greater concentration in the rural areas. In the last ten years, approximately 20 million youth entered the country s labour market and only 20% secured employment. As a result, the unemployment rate doubled in eight years from 12.7% in 2005 to 25% in 2013 (equivalent of more than 40 million people), (equivalent of more than 30 million people), with an estimated 56% of youth unemployed (National Bureau of Statistics, 2014). Besides, there is also a substantial problem of 1

18 underemployment that does not support an adequate living wage: working poverty in Nigeria has reached a level of almost 60% on average and 65.3% for the youth, meaning that two thirds of young people who do have a job are living on less than USD 1.25 per day (National Bureau of Statistics).Thus, there is a strong case for the provision of resources from the Bank to support the Country s priority of job creation. ii) The government s new economic strategy document has identified youth in Nigeria as entrepreneurial, yet face lower access to capital to start up and to scale up their businesses, and difficulty in accessing relevant training due to cultural or family constraints or lack of funds. iii) Among priorities emerging from the aspirations of the Country s Agricultural Promotion Policy (APP) is the need to maximize the contributions of women and youth to agricultural production and create business opportunities. The Bank will promote youth participation in agriculture in Nigeria through the proposed programme. iv) The proposed intervention is in line with the Bank s Group HIGH 5 priorities that are crucial for accelerating Africa s economic transformation.. It is aligned with the Bank s Strategy for Agricultural Transformation in Africa ( ). The program will contribute to the four strategic goals of the African Agricultural Transformation Agenda which includes 1. Contribute to ending Extreme Poverty by 2025; 2. End Hunger and Malnutrition by 2025, 3. Turn Africa into Net Food Exporter by 2025; and 4. Move Africa to the top of key global agricultural value chains by v) The proposed programme is fully consistent and it is one of the Flagship Action Plans of the Bank Group s Jobs for Youth Strategy ( ), which aims to provide technical and financial support to RMCs, to enable them pursue policies and plans that will contribute to better youth employment outcomes. vi) The intervention is also consistent with the Bank s Ten Year Strategy ( ) which pay particular attention to fragile states, agriculture and food security, and gender. The desired long-term outcome for the strategy is expanded economic opportunity for both male and female African youth, leading to improvements in other aspects of their lives. The programme is in line with the twin objectives of the TYS of inclusive growth and transition to green growth. vii) The intervention is aligned with the Strategy for Addressing Fragility and Building Resilience ( ) in Africa which aims to place the Bank at the center of Africa s efforts to address fragility and pave the way for a more resilient and inclusive development trajectory, as well as the Gender Strategy ( ) to operationalize the Bank s commitment to gender equality as espoused in the Bank s Ten-Year Strategy ( ). 2

19 1.3 Donors Coordination Table: 1.3 Donor Support to Agriculture in Nigeria Players - Public Annual Expenditure (average) Government Donors AfDB: 21.5% FAO 9.7%* UA m m IFAD: 12.1%* WB 35.8% % Total 16.7% 83.3% Level of Donor Coordination Existence of Thematic Working Groups (this sector/sub-sector) [Y] Existence of SWAPS or Integrated Sector Approaches [Y] ADB's Involvement in Donors Coordination Key: L: Leader. M: Member but not leader. N: No involvement. Y: Yes. N: No.; *indicative announced Donors co-ordination in Nigeria is managed by the National Planning Commission and the Federal Ministry of Finance in close collaboration with the Central Bank of Nigeria. In the agriculture sector, the Bank actively participates in donor coordination/harmonization activities in the country via the Agriculture Donor Working Group (ADWG). The ADWG, which is currently co-chaired by World Bank & GIZ consist of 15 members: Philanthropic Organizations (1); Bilateral Institutions (7); Financial Institutions (4); and Multi-Lateral Institutions (3). Amongst the mandate of ADWG is to promote coherence and consistency in development assistance to agriculture, through coordination of Development Partners support to the sector. It is aimed at achieving harmonization, promoting coordinated policy dialogue and reducing transaction costs. Intervention Pillars of the ADWG are: i) Production and Productivity Enhancement ii) Nutrition and Food Security iii) Value Chain Development/Market Access iv) Natural Resources Management/Climate Change Adaptation v) Financial Inclusion vi) Enterprise Development and vii) Rural and Agro-Infrastructure (irrigation, roads, etc.) viii) Sector Policy Reforms and Institutional Development. [M] II. PROGRAMME DESCRIPTION 2.1. Programme Components Programme Components The overall goal of the ENABLE Youth Nigeria Programme is to contribute to job creation, food security and nutrition, rural income generation and improved livelihoods for youths in both urban and rural areas. The specific objective of the Program is to create business opportunities and decent employment for young women and men along priority agricultural value chains of the various enterprises (aquaculture, crops framing, marketing, processing, etc) Key Indicators of outcomes of the ENABLE Youth Programme include: (i) the number of new agriculture-related businesses established; (ii) and the number of jobs created by the participating agripreneurs including both Green and Brown field agripreneurs, and their disaggregation by gender, age, state, and size of business; (iii) the average annual revenues generated by the emergent businesses, and (iv) the number of businesses obtaining loans and volumes of loans from financial institutions. 3

20 2.1.3 The Programme has four components: (i) Enabling Environment for Youth Empowerment, which aims to create an enabling environment nation-wide for decent employment of young unemployed graduates (Greenfields) and a proportion of those already engaged in agribusiness (Brownfield). The key objective here is a change in mind-set that will see agriculture as a viable business and career opportunity in which the youth can be profitably engaged. The Component has two sub-components; Sub Component 1.1: This sub-component will promote necessary reforms that will make setting up businesses by young people relatively easy at Federal level. Activities will focus on: (a) a broad-based policy dialogue on rural youth employment in agriculture; (b) coordination and partnerships with all public and private stakeholders involved in youth employment promotion; and (c) knowledge management and dissemination, using youth-friendly information and communication technologies. Sub Component 1.2: This sub-component is to enhance at State level the enabling environment for rural youth to have equal access to resources and assets for agribusiness establishment and resultant employment generation. The Program will build on ongoing graduate youth employment promotion initiatives in participating States in order to enhance their effectiveness, focus and outreach. The States Implementation Unit (SIU) will also support public sector capacity building to drive enabling environment reforms that will facilitate youth agribusiness investments at State levels (see Appendix VI) (ii) Entrepreneurship and Agribusiness Incubation, will operate in a two-step manner in agribusiness incubation with (1) youth first participating in a two-week agribusiness orientation training (for both Greenfield and Brownfield agripreneurs) organized by IITA in partnership with FMARD, the three Universities of Agriculture in Makurdi, Abeokuta and Umudike, and other identified partners. (2) Youth then serve either as interns within existing or newly-formed agripreneurs groups (the Greenfield option) or are attached to an existing agribusinesses (the Brownfield option) in order to obtain additional experience in modern farming and agribusiness operations and management skills to supplement their orientation training at the incubation centers (see Appendix VI); (iii) Business Development and Financing, which entails participating youth transiting from agribusiness interns to successful owners of agribusinesses or employees in going concerns. Financial empowerment is critical for effective transition after the 9-month (maximum) agribusiness incubation and placement period, to actually set up a business. Prior to completion of their training, agripreneurs, as individuals or in partnership, will develop bankable proposals of their planned businesses or enterprises. Under this component, Nigeria Incentive Based Risk Sharing Facility for Agricultural Lending (NIRSAL) hosted risk-sharing mechanism will leverage additional funds through participating commercial banks to lend to agripreneurs at mutually agreed and affordable interest rates (see Appendix VII and Annex C.3 and C.4); and (iv) Programme management and coordination, which entails the day-to-day management based on adequate results measurement framework. 4

21 Table 2.1: Programme Components Component 1. Enabling Environment for Youth Empowerment 2. Entrepreneurship and Agribusiness Incubation 3. Business Development and Financing 4. Program Management & Coordination Total Costs (UA million) (4%) (9%) Component Description This component will support creation of business enabling environment nation-wide for decent employment of young unemployed graduates (Greenfields) and youth already engaged in agribusiness (Brownfield); Support policy advocacy and coordination activities at Federal and States level Conduct sensitisation workshops for youth The Program will support policy reform studies Promotion of existing reforms for setting up businesses by young people at the Federal and State levels Support activities that will help rural youth to have equal access to resources and assets for agribusiness establishment Agribusiness Incubation and Entrepreneurship Under this component (1) youth will participate in a two-week agribusiness orientation training (for both Greenfield and emerging Brownfield agripreneurs) and (2) Youth then serve either as interns within existing or newly-formed agripreneurs groups (the Greenfield option) or are attached to an existing agribusinesses (the Brownfield option) in order to obtain additional experience in modern farming and agribusiness operations and management skills to supplement their orientation training at the incubation centres. Key activities include: Developing business incubation strategies; Identify/explore promising ventures; Track agribusiness start-ups to assess best practices/economic viability/expansion; Training of youths in Agripreneurs Centers (81%) Agribusiness Financing and Risk Sharing Mechanism Under this component youth will be financially empowered after the 3-9 month agribusiness incubation and placement period, to actually setting up a business. Prior to completion of their training, agripreneurs, as individuals or in partnership, will develop bankable proposals of their planned businesses or enterprises. Activities envisage under this component include: % De-risking agribusiness lending through credit guarantees via the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL) (Appendix VI and Annex C4 & C5). Provision of up to $50,000 in repayable loans to agripreneurs from commercial banks and guaranteed by NIRSAL at mutually agreed and affordable interest rates. Over 75% of the total ADB loan funds would serve as seed money / credit risk guarantee and interest drawback/rebate support via NIRSAL. Interest rebate fund to reward good repayment behaviour by reducing the effective interest cost to a single digit interest. Program Coordination and supervision at Federal and States level This Component will provide financing for management, coordination, monitoring and evaluation at the Federal and State levels. Such activities will also leverage on the NIRSAL s Project Monitoring Reporting and Remedial Office (PMRRO) operations under a structured technical support arrangement to monitor established field enterprise projects. Key activities include: Competitively recruited key personnel of the National Coordination Office and personnel of the 37 States Implementation Units 5

22 Component Total Costs (UA million) Total costs Component Description Plan and coordinate programme implementation activities; Monitoring and Evaluation; Management of relevant studies Management of procurements 2.2 Technical Solutions Retained and Other Alternatives Explored The technical solutions retained are based on criteria that will help ensure Program success and sustainability. Three technical alternatives were considered and rejected for their weaknesses in generating the expected impact on a sustainable basis. The technical solutions retained are also in line with Government preferences The technical alternative retained by the Programme is the Greenfields and Brownfields models. The reason for choosing these models is to create an enabling environment nation-wide for decent employment of young unemployed graduates (Greenfields) Nigerians and a proportion of those already engaged in agribusiness (Brownfield). While Greenfields offer maximum design flexibility to meet programme requirements Brownfields intervention will yield be quicker results with youths already engaged in agribusiness. The Greenfields are young unemployed graduates while the Brownfields are established and emerging existing agribusiness owners The alternative technical solutions explored and the reasons for their rejection are summarized in Table 2.2 below. Table 2.2: Technical Alternatives Considered and Reasons for Rejection Alternative Brief Description Reasons for Rejection Support to agripreneurs without link to NIRSAL and Commercial Banks Support based on call for proposals, support to the development of a business plan, business plan competition and loan in securing financing for businesses. Offers limited viability Weakened by lack of guarantee Potential for creation of sustainable jobs rather low Support to incomegenerating activities engaged by youth through the States Ministries of Agriculture. FARA-UniBRAIN s approach Support to financing income-generating activities for youth Equipping young graduates with additional soft skills through internships and industrial apprenticeships to make them more readily employable and to also encourage them to become entrepreneurs. Such support does not ensure sustainable improvement in the living conditions of the youth due to the lack of access to markets Does not address Government s major concern of resolving current unemployment crisis by tackling the issue of the large numbers of job seekers. The model is not desirable for this intervention because it fails to encapsulate the already engaged youth in business (brownfield). 2.3 Programme Type The ENABLE Youth Nigeria programme is a programmatic investment program that will be funded through ADB and AGTF loan to the FGN. The amount of resources will be augmented as more resources become available. 6

23 2.4 Programme Cost and Financing Arrangements The total Programme cost, net of taxes and customs duties, is estimated at million Units of Account (UA), or approximately NGN 163,321 million. This cost comprises UA million in local currency and UA million in foreign exchange. The price contingency is UA million. The summary of estimated costs by component, expenditure category, sources of financing as well as an expenditure schedule are presented in the tables below. Detailed Programme cost tables are presented in the Technical Annexes to this report. Table 2.3: Programme Cost Estimates by Component (USD Million) (UA Million) % Foreign Exchange Components Local Foreign Total Local Foreign Total 1. ENABLING ENVIRONMENT FOR YOUTH EMPOWERMENT ENTREPRENEURSHIP AND AGRIBUSINESS INCUBATION BUSINESS DEVELOPMENT AND FINANCING PROGRAMME MANAGEMENT AND COORDINATION Total BASELINE COSTS Price Contingencies TOTAL PROGRAMME COSTS The programme will be financed by an ADB loan of UA million (about USD million), AGTF Loan of USD 30.0 million (UA million). The Federal and State Government of Nigeria will contribute (UA 53 million) mostly in kind (in the form of making available land, training facilities, office facilities and other operating costs). NIRSAL contribution of UA 117 million will be in the form of its co-guarantee fund and Beneficiaries will contribute UA 3.8 million mainly in the form of labour. The respective contributions are as shown in Table 2.4 below. Table 2.4: Sources of Financing (UA million) Sources Foreign Local Total Percent ADB loan AGTF Loan Federal Government of Nigeria State Government Beneficiaries NIRSAL Total The cost of the Programme by category of expenditure and financing is presented in Tables 2.5 to 2.7 below: Table 2.5: Programme Cost by Category of Expenditure % Total Base Costs (USD Million) (UA Million) % Total Local Foreign Total Local Foreign Total % Foreign Base Costs A. GOODS B. SERVICES

24 C. MISCELLANOUS D. OPERATING COST Total BASELINE COSTS Price Contingencies Total PROJECT COSTS Table 2.6: Expenditure schedule by component (UA million) Base Cost Components Total 1. ENABLING ENVIRONMENT FOR YOUTH EMPOWERMENT ENTREPRENEURSHIP AND AGRIBUSINESS INCUBATION BUSINESS DEVELOPMENT AND FINANCING PROGRAMME MANAGEMENT AND COORDINATION TOTALBASELINE COSTS Price Contingencies TOTAL PROGRAMME COSTS Table 2.7: Source of Finance by Category of Expenditure (UA million) Category of Expenditure AGTF ADB Federal Gov t State Gov t Beneficiaries NIRSAL Total % A. GOODS B. SERVICES C. MISCELLANOUS D. OPERATING COST Total PROJECT COSTS Programme s target Area and Beneficiaries Programme Area The Programme will be implemented in all the 36 States of the Federation and FCT. All States plus FCT are eligible to be selected within two years based on readiness. Only those who meet pre-determined eligibility criteria, including evidence of support to agripreneurs, land, tax rebates, and other facilitations, including availability of training facilities in the State, will be among the first to start benefiting from the program (first served). States can start benefiting from the programme as they meet the start-up requirements. The criteria for programme start-up by the State will also include willingness and ability to provide counterpart funds and willingness and readiness to release or lease-out wasting production/processing assets for youth entrepreneurs to take-up etc Programme Beneficiaries The proposed programme will be implemented in all the 36 States of the Federation and FCT. The targeted beneficiaries will be in two categories. The first are unemployed young Nigerian graduates from any field of study who have finished their National Youth Service Corp (NYSC) program (Greenfield). The second are graduate youths who are already successfully engaged in agribusiness, but have no access to commercial loan to grow their businesses (Brownfields). The program will target a 50:50 male and female participation across the Federation aged years. The number of beneficiaries of the program will depend in large part upon the outcome of the agribusiness incubation placement and successful bankable proposals. In general, it is expected that all the youth that have successfully undergone the incubation program and satisfies the 8