Document of

The World Bank

FOR OMC4AL USE ONLY

Repwt No. 13636

PROJECT COMPLETION REPORT

NIGERIA

LAGOS SOLID WASTE AND STORM DRAINAGE PROJECT(LOAN 2620-UNWI)

OCTOBER 26, 1994

Western Africa DepartmentAfrica Region

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Currency Equivalencies

Unit = naira (N)

N 0.75 = US$ 1.00 (March 1984)

N 0.89 = US$ 1.00 (mid-1985)

N 22.00 = US$ 1.00 (Official rate January 1994)

GLOSSARY

FGN = Federal Government of Nigeria

LAWMA = Lagos Waste Management Authority

LGA = Local Govemment Authorities

LSG = Lagos State Government

LSMLG = Lagos State Ministry of Local Government

LSMW&T = Lagos State Ministry of Works & Transport

LSVO = Lagos State Valuation Office

PCU = Project Co-ordinating Unit

SAR = Staff Appraisal Report

FOR OFFICIAL USE ONLY

THE WORLD BANKWashington, D.C. 20433

U.S.A.

Office of Director-GeneralOperations Evaluation

October 26, 1994

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on Nigeria Lagos Solid Waste andStorm Drainage Project (Loan 2620-UNI)

Attached is the Project Completion Report on Nigeria - Lagos Solid Waste and StormDrainage Project (Loan 2620-UNI) prepared by the Nigeria Resident Mission, with Part IIcontributed by the Borrower.

The project focused on the delivery of support to strengthen three existing institutionscharged with the tasks of implementing three separate project components (solid waste collectionand disposal, stormwater drainage, and property tax valuation). Project completion took almosteight years, compared to the four years envisaged in the SAR.

The project's physical achievements were substantial with respect to priority drainageimprovements implemented by contractors at the direction of the implementing agency(LSMW&T). Solid waste collection and disposal was improved in the project's early years, butineffective management and inadequate maintenance led to premature equipment failures andconsequent service reductions. The property valuation component achieved less than expectedbecause of a dependence on a multiplicity of local governments for revenue generation.

The project has demonstrated that civil service rigidities often create disincentivespreventing the effective delivery of solid waste collection and disposal services by a monopolisticparastatal organization (LAWMA). Such distortion in the policy and institutional frameworksgenerally argue for a larger role by the private sector in service delivery. The project outcomeis rated as marginally satisfactory, and its institutional development impact as modest. Thesustainability of project benefits is rated as unlikely.

The PCR is of satisfactory quality and provides a candid discussion of implementationexperience. The project may be audited.

Attachment

This document has a restricted distribution and may be used by recipients only in the performance ofI their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

FOR OFFICIAL USE ONLY

N[GERIA

Poiect Completion Report

LAGOS SOLID WASTE AND STORM DRAINAGE PROJECT(Loan 2620-UNI)

TABLE OF CONTENTSPage No.

Preface ................................... iEvaluation Summary ................................... ii

I. PROJECT REVIEW FROM THE BANK'S PERSPECTIVE

Project Identity ....................................... 1Background ....................................... 1Sector Constraints and Priorities ................................ 2Project Links with Sector and Economic Objectives ....... ............. 2Project Objectives and Description . .............................. 3Project Design and Organization ................................ 4Project Implementation ................................... SProject Results .................................... 8Project Sustaiabiity ................................... 10Relations and Performance of Parties Involved ........ .............. 12Lessons Learned .................................... 12

II. PROJECT REVIEW FROM THE BORROWER'S PERSPECITVE

Project Objectives .................................... 14Solid Waste Management Sector . .............................. 14Summary of Execution ..................................... 15Impact of Project on Solid Waste Management ....... ............... 15Problems Encountered During Execution of the Project ...... ........... 16Main Storm Drainage Sector ................................. 16Rating and Valuation ................................... 17Lagos Land Related Information System Study ....... ............... 18General ................................... 19

m. STATISTICAL INFORMATION

1. Related Bank Loans and Credits . ............................ 202. Project Timetable ................................... 203. Physical Execution of the Project . ............................ 214. Consultant Services ................................... 225. Loan Disbursements ................................... 236. Project Implementation .................................. 24

This document has a restricted distribution and may be used by recipients only in the performance of theirofficial duties. Its contents may not otherwise be disclosed without World Bank authorization.

Page No.

7. Project Cost and Financing ............................... 258. Project Results ............................... 269. Compliance with Legal Covenants . ........................... 2810. Use of Bank Resources ................................ 30

LIST OF TABLES

Table 1 - LAWMA Audited Revenues & Expenditures ...... .............. 31Table 2 - LAWMA Sources & Application of Funds ....... ............... 32Table 3 - LAWMA Audited Balance Sheets .......... ................. 33Table 4 - LAWMA Operating Status of Equipment ....... ................ 34Table 5 - Local Govnment Property Tax Collections ....... .............. 35

LAGOS SOLID WASTE AND STORM DRAINAGE PROJECT(Loan 2620-UNI)

PROJECT COMPLEITION REPO

PREFACE

This is the Project Completion Report for the Lagos Solid Waste and Storm Drainage Projectin Nigeria for which Loan 2620 - UNI was approved by the Executive Directors of the Bank onSeptember 19, 1985. The Loan was closed on September 30, 1993, two years and nine months afterthe Closing Date originally specified in the Loan Agreement. The last disbursement was in April 6,1994 and the undisbursement balance cancelled on April 28, 1994 was US$3,139,804.61.

The PCR was prepared by the Nigeria Resident Mission and the Infrastructure Division of theWestern Africa Department (Preface, Parts I and III). The Lagos State Government prepared Part 11of the Report.

The PCR was drafted by the Nigeria Resident Mission in August/September 1993 and wassubsequently reviewed by Bank staff who had previously supervised the project. It is based, interaliaon interviews with LAWMA's management, staff and consultants; the Staff Appraisal Report; legalagreements; supervision and consultant reports; correspondence and internal Bank memoranda.

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LAGOS SOLID WASTE AND STORM DRAINAGE PROJECT(Loan 2620 - UNI)

Project Completion Report

EVALUATION SUMMARY

i. The project was the result of extensive discussions in the early 1980s between Nigerianauthorities and the Bank on the country's urban development needs and priorities. It was generallyagreed that efforts to improve resource mobilization through property taxes and, where possible, usercharges should be given high priority since local, state or Federal authorities did not have theresources to fund even the most urgent urban needs. It was further agreed that since Lagos isNigeria's largest city and its principal industrial and commercial center its problems needed priorityattention. This was the first Bank-financed project for the city and it addressed two of its most urgentproblems besides resource mobilization. These were: accumulation of solid waste in streets andunauthorized refuse dumps, creating a major health hazard as well as aggravating traffic congestion,and severe flooding that paralysed several parts of the city during the rainy season.

ii. This project's total cost was estimated at $ 164.3 million equivalent in March 1984. Of this,68 percent was for solid waste management improvements; 26 percent for drainage extension andimprovements; 5 percent for property tax collection development and 1 percent for institutionalsupport.

iii. The Lagos State Government established a Project Coordinating Unit to monitor the project'sprogress and facilitate the flow of information, but responsibility for executing the waste disposalcomponent was given to the Lagos State Waste Disposal Board and its successor organization theLagos Waste Management Authority (LAWMA). The solid waste management component madeextensive use of modern, highly mechanized vehicles and equipment that were consideredindispensable to deal with the high volumes of refuse generated by the city. The drainage project wascarried out by the Lagos State Ministry of Works and Transport, while the rating and valuationcomponent was coordinated by the Lagos State Valuation Office.

iv. The project took almost eight years to be completed, about twice as long as visualized in theLoan agreements. The principal factors accounting for delays were: management wealnesses in theimplementing agencies and insufficient staff in the Project Coordinating Unit; excessive centralizationand slow decision-making processes in the Lagos State Government, particularly on procurementmatters, and slow counterpart fund contributions from 1989 onwards. To speed up implementation ofBank financed projects, the Lagos State Government established a Task Force in late 1989 whichhelped to accelerate project implementation.

iv. The solid waste management component had a noticeable impact on Lagos' environment bysubstantially improving refuse collection and disposal during the project's initial years of operation,but its effect declined after 1991 as LAWMA's equipment became unserviceable because ofinsufficient funding to repair and replace it.

v. LAWMA's revenues were expected to come from: contributions from Lagos's fifteen LocalGovernment Authorities in some proportion to services provided; charges to commercial andindustrial enterprises that would more than cover the cost of services provided to them, andsubventions from State Government, which undertook to subsidize the difference between revenues

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from other sources and LAWMA's full operating costs. In the event, local government contributionsand State subventions fell far short of providing resources to maintain equipment adequately andreplace assets as they wore out.

vi. To overcome LAWMA's difficulties, the Lagos State Government decided in 1991 tocommercialize its operations and reorganize it along the lines recommended by consultants. Whilethese measures were steps in the right direction, they did not ensure sustainability of operations. ByJuly 1993, only 40 percent of LAWMA's equipment was operational and it could collect only aboutone third of the refuse that accumulated in the city daily.

vii. In addition to insufficient revenues, LAWMA suffered from conflicting policy guidelines fromits Board of Governors which is dominated by representatives of Local Government Authorities - itmain clients - and from internal inefficiencies such as management changes, uncompetitive salaryscales, difficulties in shedding unnecessary staff and inadequate internal controls.

viii. The main drainage construction works were completed to a good standard by mid-1991 andrehabilitation works were completed in 1993. Appreciable reductions in flooding were experienced inthe respective catchment areas.

ix. On completing the ratine and valuation component, property taxes collections increased by104 percent and 57 percent in 1991 and 1992 respectively. However, receipts were only equivalentto 45 percent of possible collections as logistical problems obstructed collections and Federal andState governments were not paying their charges in full.

x. The performance of the Borrower, consultants and the Bank were satisfactory throughoutproject execution and relations between them were cordial and constructive.

xi. The principal lessons learned are:

a) because of institutional constraints, the provision of solid waste collection and disposalservices by a parastatal organization that has a monopoly of such services is likely to remain non-sustainable. A new approach should be sought by opening up solid waste services to private sectorparticipation in order to improve operating efficiency and lower costs through competition;

b) the modalities and regulatory mechanisms for introducing private sector participationshould be carefully considered to achieve the desired ends of acceptable sanitation standards, coverageof the city as a whole, greater efficiency of operation and affordable costs; it is recommended that areport be commissioned to recommend specific measures to introduce private participation in wastemanagement services;

c) the State Valuation Office lacks sufficient funds to maintain property rating and valuationrecords adequately and periodically prepare supplementary valuation lists; without them, the dataassembled under the project will lose relevance over time. The State Valuation Office's budgetshould be increased by contributions from the local government authorities as they are thebeneficiaries of the property tax system.

NIGERIA

LAGOS SOLID WASTE AND STORM DRAINAGE PROJECT(Loan 2620 - UNI)

Project Completion Report

Part I. PROJECT REVIEW FROM THE BANK'S PERSPECTIVE

1.1 Prject Identity

- Project Name: Lagos Solid Waste & Storm Drainage Project

- Loan number: 2620 - UNI'

- Region: Africa

- Country: Nigeria

- Sector: Urban Development

Background

1.2 Extensive discussions on Nigeria's urban development issues and priorities were held betweenFederal and state authorities and the Bank in the early 1980s. These resulted in agreements onpriorities, a strategy to address them and the content and scope of several projects that the Banksubsequently supported. Since it was clear that local, state or the Federal governments could notprovide all the funding required to resolve even Nigeria's most urgent urban development needs, theagreed strategy gave high priority to resource mobilization. Bank supported projects have thereforeroutinely included plans to improve tax collection and/or user cost recovery measures as appropriate.

1.3 The Bauchi Urban Development Project approved by the Bank's Executive Directors in FY79(Ln. 1767 - UNI) was the first urban project financed by the Bank in Nigeria. It was followed in FY86 by the Imo Urban Project (Ln 2607 - UNI) and this project, which addressed the principal urbanissues faced by Lagos, Nigeria's largest city. The Lagos Water Supply Project (Ln. 2985 - UNI)was approved in FY89 while the Oyo Urban Development Project, for which Loan 3238 - UNI wasapproved in FY90, addressed the main problems faced by Ibadan, Nigeria's second largest city. Theneeds of other urban concentrations were addressed through the Infrastructure Development FundProject approved in FY88 and financed under Loan 2925 - UNI.

1.4 Lagos is Nigeria's largest city and its principal commercial and industrial center. It issituated in poorly drained swampland on the country's southern coast. Its population grew rapidlyfrom about 350,000 in 1963 to over 5 million in 1993. Growth was particularly high during the oilboom years of the late 1970s as people migrated from rural areas to seek more profitable employmentin urban activities that prospered as oil related earnings entered the domestic economy. The pace ofdemographic growth was so rapid during this period that public resources were insufficient to provideadequate infrastructure and urban services, though some high visibility investments such as a modern

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primary road network with bridges and flyovers and an international airport, were constructed withFederal Government funding.

1.5 Responsibility of providing urban infrastructure rests principally with state governments inNigeria though local government authorities (LGAs) frequently have specific responsibilities,especially for operation and maintenance. Lagos State's financial position is more advantageous thanthat of other Nigerian states as its population has a higher level of income. As a result, over 70percent of Lagos State Government's (LSG's) revenues were derived from state taxes in 1985, whileother states only generated between 10 and 30 percent internally and had to rely on Federal sourcesfor the bulk of their income. In spite of this, LSG's current surplus in 1981-85 was only equivalentto about one quarter of the resources needed to meet priority urban investments.

1.6 Sector Constraints and Priorities. The more important constraints experienced by Lagos inthe early 1980s were: refuse accumulation, which constituted a major health hazard and caused trafficslowdowns; recurrent, severe and costly flooding in several parts of the city during the rainy season;unpaved and insufficient secondary and tertiary roads that aggravated traffic congestion; intermittentor non-existent water supply and power services as well as inadequate telephone connections thatslowed business transactions and exacerbated traffic problems. These and other deficiencies seriouslyreduced productivity and constituted major constraints on the city's economic growth and social well-being.

1.7 Solid waste management was identified as an area of overriding priority for Lagos as refuseaccumulation had become a serious environmental issue. Though Lagos State's LGAs had the legalresponsibility for collecting and disposing of solid waste, this obligation was not being fulfilledevenly, and in some cases not at all, because the LGAs had neither the financial resources normanagement capacity to do so. It was estimated at the time of appraisal that less than half of thesolid waste generated by the city was being collected and that almost none of it was being disposed ofin a sanitary manner. Extensive, unauthorized and unregulated solid waste dumps had developed invarious locations in and around Lagos, constituting unsightly health hazards. In addition, solid wastewas frequently dumped on streets, aggravating traffic congestion. Investments to modernize thecollection and transport of solid waste and to develop sanitary landfill areas in appropriate andcontrolled locations were required with urgency.

1.8 Investments in drainage were also required to reduce seasonal flooding in low areas of the cityand to arrest the resulting deterioration of existing roads and other infrastructure. Such investmentsare necessary before undertaking construction of additional secondary and tertiary roads to relieveLagos' traffic congestion, as rapid deterioration of new works would otherwise result. In addition,some action was required to ensure that both existing and new drains were cleaned regularly as theywere frequently clogged up with solid waste and could not carry water effectively during the rainyseason.

1.9 Proiect Links with Sector and Economic Objectives. The project reinforced the FederalGovernment's macroeconomic objectives. The efficiency of industrial activity in Lagos - whichaccounts for about half manufacturing value added in the country - as well as the productivity ofcommerce were expected to increase as a result of the project, thus increasing the competitiveness ofNigeria's economy as a whole. In addition, the project was expected to increase LSG tax revenues,helping relieve state fiscal imbalances.

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PROJECT OBJECTIVES AND DESCRIPTION.

1.10 Qbjectives. The project was expected to:

(a) strengthen the administrative, technical and financial capacity of LSG institutions andhelp them reorient their programs towards larger scale provision and maintenance ofinfrastructure;

(b) support the ongoing operations of the Lagos Waste Management Authority (LAWMA) 1/and the stormwater drainage operations of the State Ministry of Works and Transport(LSMW&T), expanding and improving their services so that sector and generaleconomic objectives might be successfully pursued;

(c) assist LSG revise and reactivate the rating system for property tax valuation in orderto mobilize additional resources for infrastructure and service investments and for themaintenance of such services.

1.11 Desion The project consisted of the following elements with total costs includingcontingencies shown in USS million:

(a) Solid Waste Management. Equipment, new maintenance and depot facilities; civilworks for industrial and domestic waste collection and disposal; abandoned vehiclemanagement and secondary and tertiary storm drainage cleaning and maintenance.The following main items were provided for:

(i) equipment for refuse collection and disposal and drain cleaning operations(USS 63.5 million);

fii) construction of refuse transfer stations and provision of long-haul vehicles(USS 7.8 million);

(iii) civil works for existing and new sanitary landfill sites, new vehicle depots andmaintenance workshops and improvement of existing facilities (USS 22.5million);

(iv) installation of bulk bin hardstandings (platforms) for refuse containersthroughout the city (USS 2.3 million);

(v) assistance to implement demonstration sanitation projects, a plan to transferresponsibility for secondary stormdrain maintenance to local governments,advisory services to LAWMA to train its staff, strengthen its management andoperations, improve its fmancial management by establishing a properaccounting system and a staff training program, as well as establishment of aresearch and development group for long-term operations programming (USS15.5 million);

/ Prior to 1992, the organization was called Lagos State Waste Disposal Board. To simplifypresentation and avoid confusion, this report refers to it by its present name throughout the text.

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(b) Main Stormwater Drainage. The dredging and construction of about 26 kins ofadditions to the main drainage system to reduce flooding in the western half of Lagosand a program to rehabilitate the existing primary system of earth drainage channels.These works, which were estimated to cost US$ 42.5 million, were to improvedrainage in high density residential and industrial areas totalling about 3,400 ha. tobenefit about 1.4 million inhabitants and over half Lagos' commercial and industrialinstallations;

(c) Rating and Valuation. Assistance to LSG at a cost of about USS 7.4 million to reviseproperty tax laws, identify properties omitted from valuation lists and carry out astatewide property revaluation program, and

(d) Institutional Support, to provide, at an estimated cost of USS 2.8 million:

(i) advisory and contractual services for project coordination, implementation andmonitoring in LSMW&T and preparation of future main drainage and areainfrastructure improvement projects;

(ii) advisory services to selected local government councils to improveadministration, financial management and maintenance operations.

1.12 The project's cost was estimated to be USS 164.3 million at March 1984 prices, includingforeign costs of USS 83.6 million equivalent and USS 80.7 million of local costs, of which USS 6.3million in local taxes and duties. Foreign costs were to be financed by the Bank Loan of USS 72.0million and cofinancing of USS 11.6 million that had not been identified at the time of appraisal.Local costs were to be financed entirely by LSG and its parastatal organizations. The foreignexchange value of the naira (N) was USS 1.31 when the project cost was estimated and USS 1.12 inmid-1985 when the Loan was approved.

PROJECT DESIGN AND ORGANIZATION

1.13 Dign. The project was tailored to overcome the problems it addressed. The solid wastecomponent made extensive use of modern, highly mechanized vehicles (compactors, tippers, flatbeds,etc.) and other equipment to remove and dispose of solid waste. Such equipment was considerednecessary to deal with the large volumes of waste generated daily by the city as well as to dispose ofthe large backlog of refuse that had previously been abandoned in the streets or left in informaldumps. The property rating and valuation component provided for the introduction of computers tomaintain property records and assist in billing and collection.

1.14 Organizio . To ensure proper coordination of the various arms and agencies that would beinvolved in implementing the project, it was agreed that the LSG would establish a ProjectCoordinating Unit (PCU) which would monitor implementation, assure timely completion of projectrelated tasks by the implementing agencies and facilitate the flow of information. The PCU was to beheaded by a Project Coordinator and assisted by a Project Implementation Committee that would haverepresentatives of all the agencies involved. The latter's function was to resolve implementationproblems that might arise. Direct responsibility for implementing the solid waste disposal componentwould be with the LAWMA, while the LSMW&T would be responsible for carrying out the drainagecomponent and the Lagos State Ministry of Local Government (LSMLG)/Lagos State ValuationOffice would carry out the rating and valuation component.

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1.15 Bank staff held extensive discussions with State officials during preparation and appraisal onstaffing needs and consultant services required by LSG to carry out the project successfully. LSGagreed to strengthen the Project Coordinating Unit as well as the executing agencies as needed.

1.16 Solid Waste Disposal. Though LGAs have formal responsibility for providing solid wasteremoval services in their respective areas, it was agreed that services could only be provided to thecity as a whole by a central organization because of the need to dispose of waste in a sanitary mannerand to maintain and repair complex equipment. By agreement between the State and local authorities,LAWMA was assigned responsibility for carrying out the solid waste disposal component.LAWMA's Board of Governors was constituted predominantly by representatives of twelve2/ LGAswho, it was believed, would facilitate coordination and resolution of issues that might arise inresolving the city's waste disposal problems. The possibility of contracting LAWMA's managementout to private operators was suggested by the Bank during project preparation and appraisal but theLSG rejected this alternative and agreed instead to reorganize and strengthen the management ofLAWMA by a date preceding Loan effectiveness (January 1, 1986).

PROJECT IMPLEMENTATIO

1.17 The project took almost eight years to be completed, about twice as long as visualized in theLoan agreements. The principal factors accounting for delays were: i) management wealnesses in theimplementing agencies and insufficient staff in the Project Coordinating Unit, ii) excessivelycentralized and slow decision-making processes in the LSG, particularly with regard to procurementmatters and iii) slow counterpart resource contributions from 1990 onwards.

1.18 Delays in reorganizing and improving project management were experienced from thebeginning. For example, a supervision mission that visited Lagos in December 1988, more than twoyears after Loan effectiveness, noted that sufficient staff had not yet been assigned to the ProjectCoordinating Unit to enable it to handle the worldoad associated with the project.

1.19 Up to 1991, State procedures required that all major procurement of goods and services beapproved by the Military Governor and the practice was to seek the Governor's clearance at variousstages of the procurement process, e.g. when invitations to bid and bidding documents werecompleted, when bid evaluation reports were completed as well as when final contract documentswere drawn up. The clearances of the State Tenders Board and State Ministry of Justice were alsorequired at some stages. Compliance with these and other clearance procedures unduly protractedprocurement with the result that accumulated Loan disbursements amounted to only $ 12.4 million inSeptember 1989 (30 months after effectiveness), or 25 percent of the amount expected to be disbursedat appraisal.

1.20 To speed up the execution of Bank supported projects, LSG formed a special Task Force inSeptember 1989 that was chaired by a high level executive to whom the Military Governor delegatedconsiderable decision-mating responsibilities. This Task Force was in existence until December 1991and improved project execution considerably, increasing cumulative disbursements by $ 44.5 millionduring its period of office.

2/ The number of Local Govermment Authorities in Lagos State was increased to fifteen in 1992.

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1.21 Counterpart fund contributions were made in a timely manner during the initial stages of theproject, but some delays were experienced from 1989 onwards when the larger investments in civilworks and other facilities were being made. To relieve the demand on LSG resources, the Bankagreed in February 1989 to increase the proportion of civil works costs that could be financed underthe Loan from 42 percent to 80 percent and for local technical assistance costs from 50 percent to 80percent.

1.22 Solid Waste Disposal. The reorganization of LAWMA to strengthen its management was notinitiated by the agreed target date as there was no clear plan for it. Consultants (Lavalin Internationalof Canada) were therefore commissioned in early 1988 to carry out a study that might serve as a basisfor reform. By February 1989, a working draft had been submitted to LSG and LAWMA for theirconsideration and the final report, including their respective views, was released in July 1989. Thesame consultants were retained in February 1991 to assist with implementation of the reorganization,which included the following principal features:

(a) streamlining of LAWMA's organization by reducing the number of managementlayers to improve communications and decision-making;

(b) creating cost/profit centers to increase management accountability by regroupingoperations and maintenance functions and placing them under two Regional Directorsand 15 Zone Managers who became responsible for operations in each localgovernment area;

(c) an extensive training program, including visits by LAWMA's management staff toforeign waste management organizations, and the establishment of a training unit toimprove operation and maintenance staff skills, and

(d) changes in systems and practices, including the establishment of a computerizedmanagement information system.

While the reorganization was on the whole successful, other measures recommended by theconsultants, such as a revision of pay scales to make them comparable to those prevailing in theprivate sector for similar levels of responsibilities and skills, were not carried through. Moreover,the benefits of management training in foreign waste management organizations were to a large extentlost when four senior managers were reassigned in 1993.

1.23 To facilitate collection, a large number of variously sized bins were provided for localcommunities to deposit their refuse. Collection is done by specialized refuse vehicles. In selectedparts of the city, four existing vehicle service depots were improved and one constructed.Improvements were also carried out in a maintenance/repair workshop (Ikeja). Works on one depot(Simpson Street) were not finished after the contractor abandoned the site; they are to be completedby LAWMA with its own resources. To reduce bin damage and facilitate refuse loading intovehicles, 85 bin hardstandings (platforms) were planned for strategic locations in the city. Smallbusinessmen were awarded contracts and 74 hardstandings of generally acceptable standards werecompleted by the Closing Date. To reduce the distance refuse trucks have to travel to complete theirrounds, LAWMA decided during implementation to convert an abandoned refuse incinerator into atransfer station from which larger vehicles could carry solid waste to landfill sites. Feasibility studiesand bidding documents were completed under the project but construction costs are to be financed

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under the Lagos Drainage and Sanitation Project for which Credit 2517 - UNI was approved in FY93.

1.24 In view of the prevalence of informal dump sites in the city, the project's original schedulegave priority to the early identification and preparation of sanitary landfill sites. However, because ofdifficulties and delays in obtaining Certificates of Occupancy from the respective authorities forsuitable sites, it was not until mid-1992 - one and a half years after the original Closing Date - thatthe Oregun site was selected and the Certificate of Occupancy approved. By this time, land movingequipment had been employed for considerable time in informal refuse dumps and much of it was inneed of repair (see Table 4). In spite of shortages of earth moving equipment, development andbuilding construction at the Oregun landfill site were completed before the Closing Date. Bulkcarriers to bring refuse from the transfer station and spare parts for earth moving and other equipmentwill be financed under Credit 2517 - UNI for the Lagos Drainage and Sanitation Project.

1.25 Drainge. The main works were carried out by two contractors which completed them togood standards during 1991. After a review of project costs that year, the component's scope wasextended somewhat to include lining existing drainage works in System 5 with concrete; this wascompleted in 1993.

1.26 A dispute arose during implementation with the contractors who submitted cost escalationclaims requesting compensation for local currency cost increases in foreign exchange converted at therate of exchange specified in their contracts for purposes of unit costs. The consulting engineers, aswell as the Bank, took the position that compensation should be made in local currency or itsequivalent converted at the prevailing rate of exchange. Prior to Loan Closing, the Bank agreed withLSG that part of the claims be financed out of the Loan. LSG was to subsequently reach agreementwith one contractor on the extent to which further compensation might be in order, with settlementbeing made from LSG's own funds.

1.27 erty Radng and Valuation. As part of the project, the State's existing property tax wasreviewed and a new Tenement Rate Edict was approved by LSG in 1989. To update property listsand valuations - which had last been done in 1955 and expanded in 1977 - an enumeration, surveyand valuation of all rateable properties in the State was carried out under the Project with theassistance of private sector valuation practitioners. The field work was carried out during 1990 and atotal of 201,564 rateable properties were identified in the State's fifteen local governments areas; theirtotal rateable value was N 2,455 million, of which N 400 million were accounted for by Federal andState government properties. The lists were published early in 1991 and an appeals procedure was setup which successfully dealt with most claims. The exercise was coordinated by the State ValuationOffice and property and valuation lists were given to LGAs when completed in order that they billand collect taxes at the rate of 10 percent of assessed property values per annum.

PROJECT RESULTS

1.28 Solid Waste Disposal. The project had a noticeable impact on Lagos' environment bysubstantially improving solid waste collection and disposal during its initial years of operation, but itseffect began to decline after 1991 as LAWMA's equipment became unserviceable because ofinsufficient funding to repair and replace it.

1.29 The Staff Appraisal Report (SAR) visualized that LAWMA's revenues would be derived fromthree principal sources:

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(a) contributions that LGAs would make (or that LSG would make on their behalf) insome proportion to services provided;

(b) charges made to industrial and commercial enterprises. It was expected that revenuesreceived from such enterprises would cover a significant proportion of costs, thoughthey only account for a minor proportion of the solid waste generated in the city, and

(c) subventions from the LSG to make up the balance of resources required by LAWMAto run its operations in a sustainable manner.

LSG agreed during negotiations that it would pay LAWMA the funds required to cover the full costof its operations [Section 2.03 (b) of the Project Agreement] promptly and as needed. It furtherundertook to cause LAWMA to revalue its assets periodically and write off the depreciable value ofits machinery, equipment and other assets, investing these amounts in interest bearing securities sothat sufficient funds could be available to replace assets when required.

1.30 LAWMA's revenues from 1986 to 1992 in fact fell well short of providing reserves to replaceasets and were insufficient to even purchase spare parts and materials to maintain its equipmentadequately. The following table shows the origin of LAWMA's revenues as a percentage of its totaloperating costs including depreciation: 3/

- Percentage of Total Operating Costs-

Source SAM 1986 1987 1988 1989 1990 1991 1992____ ___ ___ ___ ___ average _ _ _ _ _ _

LGA Contributions 26 14 n.a. 21 19 15 1 n.a.

Service Charges 46 18 n.a. 15 14 9 55 n.a.

Other 2 3 n.a. 4 3 1 - n.a.

LSG subventions 26 77 n.a. 29 24 13 1 n a.

TOTAL 100 112 n.a. 69 60 38 57 n.a.

LAWMA's equipment was expected to have a useful life of about five years and much of it was inneed of repair after the second and third year of use, reducing LAWMA's operating capacitynoticeably after 1990. To overcome it financial difficulties LSG decided in late 1991 toacommercialize LAWMA's operations; this was consistent with policies adopted by the Federal andother state authorities to move their parastatals towards financial self-sufficiency. While this was astep in the right direction, the decision was not accompanied by sufficient funding to enable LAWMAto start on a clean slate or by removal of internal constraints (see para. 1.36) so it was unable toattain operational sustainabiity. By July 1993 only 40 percent of LAWMA's equipment was usable(see Table 4), with much of the remainder out of commission because of lack of spare parts andresources to meet the cost of even simple repairs. LAWMA was having difficulty meeting its payrolland only collecting about one third of the refuse generated by the city each day.

I/ See, in addition, Part Ell, Paagraph 6 i) and ii).

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1.31 Drainage. Completion of the works included in the project resulted in an appreciablereduction in flooding in the respective catchment areas (see Part m 3 Stormdrain Civil Works).

1.32 Property Rating and Valuation. Property taxes collected by LGAs increased significantly oncompletion of the rating and valuation exercise. Total collections increased by 104 percent (to N69.6 million) in 1991, the first year in which the revised valuations were applied, and by 57 percent(to N 109.5 million) in 1992. Receipts were, nevertheless, only equivalent to 45 percent of the totalpossible collections that year as several logistical problems remained to be resolved and Federal andState governments were not yet paying their charges in full.

1.33 Billing is done manually by most LGAs and, since there is no effective postal system, thereare long delays in bill delivery and collection. A study financed under the Loan recommendingequipment and software to computerize billing was completed by consultants; however, insufficientbudget allocations and lack of support have prevented the State Valuation Office from centralizing andimproving the efficiency of property tax billing.

1.34 Economic Evaluation. The project's principal benefits have been improvements in theefficiency of stormwater drainage and waste management in Metropolitan Lagos which, in turn, haveresulted in noticeable reductions in health hazards, flood damage to private and public property androad erosion. Solid waste removal, which increased from 2.3 million tons in 1988 to 3.6 million tonsin 1990 speeded up traffic, reducing accidents and delays by decongesting streets.

1.35 The SAR recognized that 'While it is obvious that a project of this nature will have a veryhigh economic rate of return, the measurement of aggregate benefits is quite difficult, requiring amajor study and comparison of baseline conditions with those after project execution." Based on adetailed examination of rentable values prevailing in two areas of the city that would benefit from theproject -Ajegunle and Mushin - and assuming a 20 percent increase in the rentable value of variouskinds of properties in these areas, the SAR nevertheless estimated a 25 percent economic rate ofreturn (ERR). In preparing this report, it was not possible to establish the extent to which rentalvalues in the selected or other areas of the city may have been affected by the project because rentals,like all other costs, have been affected by high rates of inflation since 1990. In addition, as notedabove (para 1.28) the level of service has fluctuated. In the absence of a costly study, that might inany case be inconclusive, the report does not present an ERR estimate. In future such projects, moreattention should be given to collecting basic data in order to monitor economic viability.

PROJECT SUSTAINABL

1.36 Solid Waste Disposal. LAWMA's capacity to provide solid waste collection and disposalservices in a sustainable manner was seriously impaired even before the Closing Date (see paras 28 to30) and its operational trends do not suggest that a recovery is likely. Among the main reasons forLAWMA's difficulties are the following:

(a) conflicting policy guidelines stemming from the composition of LAWMA's Board ofGovernors, which is dominated by representatives of LGAs: its principal clients. It isnot clear whether such representatives act in the interest of their respective LGAs orLAWMA while sitting on the Board;

(b) non-payment of sanitation fees by LAWMA's principal clients - LGAs, the StateGovernment and Federal Government organizations (e.g. Federal parastatals, the

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armed services, police, etc.) in part because of their high cost and the absence of anappropriate authority to enforce payment of overdue fees;

(c) the high cost of sanitation services due to inefficiencies within LAWMA itself,resulting from:

(i) frequent changes in management and the appointment of temporary managerswho, because of the precariousness of their position, hesitate to take decisiveimprovement measures that might be controversial;

(ii) inadequate financial incentives for staff to improve performance. LAWMA'ssalaries are still tied to civil service scales though the consultants repeatedlyrecommended that they be made competitive with the private sector to attractadditional experienced and competent staff;

(iii) difficulty in shedding unnecessary staff because of civil service restrictions;

(iv) inadequate management systems to control use of equipment, spare parts andmaterials inventories, etc.; and

(v) unsatisfactory accounting and financial control systems. For example,LAWMA's accounts to the end of 1992 were still in preparation in September1993 and could not be examined by LAWMA's external auditors.

1.37 Because of these institutional constraints, the provision of solid waste management services bya parastatal organization that has a monopoly of such services is likely to remain non-sustainable. Itis therefore recommended that a new approach be sought by State and LGA authorities by opening upsolid waste management services to private sector participation to improve efficiency and lower costthrough competition.

1.38 Given that there are several options for introducing private sector participation in each one ofthe three phases of solid waste management - i) refuse collecdon; ii) transfer and transport, and iii)disposal - careful consideration should be given to how private participation can achieve acceptablesanitation standards, coverage of the city as a whole, greater efficiency of operation and affordablecosts. Some preliminary suggestions on desirable alternatives are made in 'Strategies for PrivateProvision of Infrastructure and Urban Service', a Sector Survey prepared by the Bank based on fieldwork carried out in March and April 1992. Because LAWMA's service coverage has turned out tobe much less extensive than anticipated at that time, possible adjustments to the report'srecommendations should be considered. In any event, it is recommended that a follow-up report beprepared recommending specific measures to introduce private participation in waste managementservices.

1.39 Drainage. To improve drainage maintenance and avoid one of the causes of flooding prior tothe project, the LSG decided in 1989 that LAWMA should be responsible for maintaining primary,secondary and tertiary drains in Lagos Island only, and that the Drainage Division of the StateMinistry of the Environment should be responsible for maintenance of primary and secondary drainsin the remaining areas, with LGAs responsible for the care of tertiary drains. These changes haveresulted in some improvements in drain maintenance.

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1.40 Poerty Rating and Valuation. The State Valuation Office is funded from the State budgetand lacks sufficient financial resources to maintain its property records adequately. Moreover, it isinsufficiently funded to retain enough staff with competency in enumeration and valuation and toprovide logistical support for the preparation of supplementary valuation lists to keep property recordsup to date. Contributions to its budget from the LGAs, which are the beneficiaries of its work,should be considered so that the tax data base assembled under the project does not lose relevanceover time.

RELATIONS AND PERFORMANCE OF PARTIES INVOLVED

1.41 Relations between the Borrower, consultants and the Bank were cordial and constructivethroughout the entire period of implementation and the parties cooperated with each other in pursuitof the project's objectives.

1.42 Borrower Performance. Particularly in its early stages, project execution was slow principallybecause both the Lagos State Waste Disposal Board and LAWMA, its successor organization,operated more like State civil service departments than autonomous entities. Procurement and otherdecisions were unduly delayed by the involvement of numerous layers of officials. However, onrealizing this, LSG formed a special Task Force with powers to take the necessary decisions to speedup implementation and subsequently commercialized and reorganized LAWMA to improve projectexecution and sustainabiity.

1.43 Compliance with the Bank's financial reporting requirements was frequently delayed and atthe Closing Date submission of the project's and LAWMA's audited financial statements were threemonths in arrears. At times during implementation, Bank supervision missions lamented the lack ofprogress reports with up-to-date information. Data on the outcome of construction, goods and servicesupply contracts were not readily available when this report was in preparation and somewhat delayedits completion.

1.44 Bank Performance. The project was supervised at least twice yearly throughoutimplementation and Bank staff showed flexibility in dealing with problems as they arose whilepursuing the project's principal objectives. The Bank's performance was satisfactory.

1.45 Consultant Performance. The consultants involved in the project, for solid waste disposal,drainage and valuation practitioners for the rating and valuation component, all performed creditably,maintaining good relations with their client and the Bank at all times. The consultants work onLAWMA's reorganization was done after an exhaustive institutional examination and deserves specialcommendation.

LESSONS LEARNED

1.46 The principal lessons to be derived from experiences under this project are:

(a) Solid Waste Disposal. Because of inadequate incentive structures, provision of solidwaste management services by a parastatal organization that has a monopoly of suchservices is likely to remain non-sustainable. A new approach should be sought byopening up solid waste management services to private sector participation in order toimprove operational efficiency and lower costs through competition (paras. 1.34 &1.35);

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(b) the modalities and regulatory mechanisms for introducing private sector participation shouldbe carefully considered to achieve the desired ends of acceptable sanitation standards,coverage of the city as a whole, greater efficiency of operation and affordable costs. It isrecommended that a report be prepared suggesting specific measures to introduce privateparticipation in waste management services (para. 1.36), and this is being undertaken underthe Lagos Drainage and Sanitation Project (Cr. 2517-UNI);

(c) Property Rating and Valuation. Completion of this project component resulted in substantialincreases in LGA property tax collections. However, the State Valuation Office lackssufficient funds to maintain property records adequately and prepare supplementary valuationlists; without them, the data assembled under the project will lose relevance over time. TheState Valuation Office's budget should be increased accordingly (para. 1.38).

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Part nI - PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE

2.1 Eiet Qbiectives

The Lagos Solid Waste Disposal and Storm Drainage Project was packaged together with thefollowing objectives:

(a) to strengthen the administrative, technical and financial capacity of key Lagos Stateinstitutions and reorient their existing programs towards a larger scale provision ofinfrastructure and maintenance;

(b) to support ongoing solid waste disposal and storm water drainage operations byexpanding and improving services rendered by both responsible agencies, whichwould, in turn, lead to a better functioning city and increased productivity; and

(c) to assist LSG mobilize additional resources needed to provide future infrastructure,services and maintenance for Metropolitan Lagos by revising and reactivating therating system for property tax valuation.

In a nutshell, the project was primarily aimed at strengthening three critical institutions ofLagos State Government:

(a) Lagos State Waste Disposal Board, now Lagos State Waste ManagementAuthority (LAWMA);

(b) Lagos State Ministry of Works and Transport and the Ministry of theEnvironment and Physical Planning's construction and maintenanceprogram (now Drainage Department), and

(c) the State property valuation system.

2.2 Solid Waste Management Sector

One of the primary aims of the project was to finance the following:

(a) Procurement of equipment for refuse collection and disposal and for drain cleaningoperations;

(b) construction of transfer stations, together with procurement of long-haul transfertrailers;

(c) civil works:

(i) construction and development of existing and new controlled sanitary landfillsites;

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(ii) new vehicle depots and workshops and upgrading existing depot facilities;

(iii) construction of bulk bin hardstanding;

(d) consultancy services for:

(i) establishment of small demonstration projects;

(ii) strengthening of waste management operations;

(iii) establishment of financial accounting systems;

(iv) training programs for staff.

2.3 Summary of Execution

The implementation of the project commenced in 1986. To date, the following have beenaccomplished under the project:

(a) supply of vehicles, plants, equipment, and workshop tools for the effective collectionand disposal of waste in Lagos Metropolis;

(b) development and construction of LAWMA's headquarters, five depots, twoworkshops, bin-hardstandings, and a sanitary landfill;

(c) computerization of LAWMA's information systems, payroll, billing and collection;

(d) consultancy services for a management reorganization and staffing study;

(e) commercialization assistance to LAWMA;

(f) training.

2.4 Impact of World Bank Project on Solid Waste Management

The project raised the level of commercial waste collection from about 350 industrial premisesin 1984 to about 1,200 premises at the end of 1992 while the revenue generated by the Authority rosefrom a litle over N3.0 million in 1984 to well over N 13.0 million for the year 1992.

Furthermore, the project extended the services of LAWMA to areas not hitherto covered, i.e.waste generated in high density areas of the metropolis.

2.5 Problems Encountered Durine Execution of the Project

(a) Sequence of Procurement. The sequence of procurement and delivery of theequipment affected the effectiveness and sustainability of the project after the fifthyear. For example, LAWMA took delivery of the mechanical shovels and landfillbulldozers two years ahead of the delivery of refuse compaction vehicles. This

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resulted in the gross over-utilization of these pieces of equipment as a result ofaccumulated refuse on the streets with few refuse collection vehicles to cope with theheaps of refuse. The resultant effect of this is that most of the mechanical shovelswere deployed to cope with the volume of waste at the communal depots. With thearrival of collection trucks, the need for the use of the shovels dropped, however, thehavoc had already been done.

(b) Durability of Equipment Procured. The trucks procured under the lowest competitivebidding procedures have performed below expectations with many grounded due totheir inability to cope with existing local conditions. This is because the durable andtested trucks that can withstand local conditions were not acquired.

(c) Commercialization of LAWMA. The Lagos State Government took a bold step bycommercializing the activities of LAWMA. However, this was done without a take-off grant. LAWMA has, therefore, not been able to operate the commercializationprograms as suggested in various commercialization reports. Under thecommercialization program it was intended that LAWMA would generate adequaterevenue to cover operational and other expenses. However, this has not beenaccomplished due to: (i) non-settlement of fees for services rendered by the variousarms of Government (Federal, States and Local), (ii) absence of an enabling by-law toprosecute defaulters of payment.

2.6 Main Stormwater Drainage Sector

The project was to finance the dredging and construction of 26 km of drain in addition to thethen Ministry of Works and Transport's plan. Also included is the rehabilitation of the existingprimary system of earth canals.

2.7 Ilementation. The construction of the drainage works comprising system 6B(Oshodi/Isolo); System 5 and 6C (Mosafejo/Odo Asimowu) and system 6F (Bale-Okoya/Badagry)channels, which are about 29 km long. The conception of the works comprised of:

(a) 6,302m U-shaped concrete lined channel;

(b) 2,000m concrete box conduit;

(c) 1,810m concrete line channel/duct including energy dissipator;

(d) 1,065m open channel with rock protection;

(e) 17,790m earth channel.

Also included in the above mentioned projects is the construction of some bridges andculverts.

2.8 Modification. In the course of implementation, the following design modifications werecarried out to overcome inadequacies of the project as designed in order to meet the desiredobjectives:

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(a) modification of + 900m earth drain within the LUTH Compound to concrete linechannel to improve its capacity;

(b) replacement of culvert to a three span Ishaga Bridge to with stand the expected flowupstream;

(c) design of adequate culverts at Ojuelegba Road, Olufe, Nathan Street on Mosefejo(system 5) alignment instead of retaining the existing ring culverts, which would havebecome grossly inadequate, because of the designed improvement carried out, at theup and down stream of the channel;

(d) construction of appropriate bridges on Itire/Mushin Road instead of a culvert, etc.

2.9 Cost Overrun. There was a huge overrun on the naira cost of the project, especially on thesystem 5 and 6C channel which was due to price escalation that followed the introduction of SFEM(Second-tier Foreign Exchange Market).

2.10 Problems and Suggestions. A prolonged dispute on the interpretation of certain clausescontained in the contract documents, relating to percentage of off-shore component payable under thefluctuation clause, affected the timely completion of the project. In order to avert this situation, it issuggested that future bills of quantities be clear-cut on unit rates of items for both the off- and on-shore components.

2.11 Lagos State bureaucratic procedures requires the State's Plans Programmes BudgetDepartment to carry out pre-payment inspection after having been certified by an appointed externalsupervising consultant; this contributed to immense delays in payment and consequently projectcompletion. It is therefore recommended that future projects financed by the World Bank wheresupervising external consultant has been appointed, should be excluded from further P.P.B.D. pre-payment inspection.

2.12 Rating and Valuation

2.13 Preamble. As part of the rating and valuation component of the Solid Waste Disposal andStorm Drainage Project, the Lagos State Government agreed to establish the Lagos State ValuationOffice. In June 1989, the Tenement Rate Edict was promulgated vide State Government Gazette No.27 of June 1989. The Edict gave overall rating and valuation responsibility to the Lagos StateValuation Office while revenue collection responsibility was given to the Local Government Councils.

2.14 The World Bank Expectation of the Lagos State Valuation Office (LSVO). According to theStaff Appraisal Report, the World Bank declared that property tax was the only instrument of revenuegeneration available to Local Government Councils in Lagos State. The Bank believed that reliableyields were needed to enable Local Governments to meet their operations and maintenanceresponsibilities and be able to repay the World Bank Loan, since refuse collection was recognized asthe responsibilities of Local Government Councils. The World Bank, therefore, expected that theLagos State Valuation Office would be a permanent institution which would assume the valuation ofall urban properties over a five-year period and be responsible for yearly updating and newrevaluations thereafter. The Bank expected that within a short time a competent and capable LagosState Staff would have been trained and be in a position to take over from the consultant in the

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capacity of Director. This was actually achieved during the life of the project. To strengthen theLagos State Valuation Office (LSVO), it was anticipated that its operations would be computerized,enabling an efficient revenue billing and collection system to be put in place. However, this couldnot be fully achieved for reasons highlighted below.

2.15 Problems Militating Against the Non-Completion of the Project:

(a) Delay in procurement of the key aspect of this component of the project, particularlythe identification of needs and acquisition;

(b) insufficient allocation of funds in the project for LSVO.

2.16 Impact of the Project on Lagos State Valuation Office. The non-completion of the project hasprevented the computerization of the Lagos State Valuation Office, one of the project's principalobjectives. It has also given room for fraudsters to parade in Local Government Areas defraudinginnocent rate payers. To complete the component, it is highly desirable that adequate funds beallocated under the new project loan for the Lagos State Valuation Office for:

(a) completion of the computerization of the Lagos State Valuation Records and the LocalGovernment Revenue Billing and Collection System;

(b) the training program for valuation and computer staff;

(c) the purchase of specialized materials for use by the office;

(d) provision of vehicles, and other utility services.

2.17 La&Qs Lan Related Information System Feasibility Study

2.18 Preambl. Although the Lagos Information System was not identified in the appraisal of theproject, it became necessary to carry out the Lagos Land Related Information System FeasibilityStudy as it was discovered that there were no existing data on land related matters, without whichmeaningful development plans could not be implemented. Accordingly, the feasibility studies onLand Related Information System were carried out and financed under technical assistance for theLagos Solid Waste Management and Storm Drainage Project. This will now form the bedrock offuture land related projects in the State.

General

2.19 The sustainabiity of the present level of LAWMA's revenue generation is posing problems.While the revenue to run LAWMA is tied to the revenue generation capacity of Local Governments,their revenue generation machinery is inefficient, (the records indicate a 40 percent revenueachievement). At this low level, Local Governments are unwilling or unable to pay LAWMA forservices rendered.

2.20 Since this project is the first major World Bank financed project in the State, it has served asa useful training ground for the Lagos State Government staff. It is now certain that staff are exposedand equipped for the timely implementation of any future World Bank assisted projects.

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2.21 The inability of the chief executives of executing agencies, or of the World Bank AssistedProject Office, to approve a certain maximum level of expenditure relating to each project withoutrecourse to the Chief Executive of the State, adversely affects implementation in line with agreedschedules, i.e. agreed action plans. It is therefore suggested that the Chief Executive of the WorldBank Assisted Project Office should have authority to approve commitments and expenditures up toUS$50,000.00 or its equivalent.

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Part Eg - STATISTICAL INFORMATION

1. Related Bank Loans and Credits

Loan/Credit Project Approved Status Comment

Ln 1767-UNI Bauchi Urban FY79 Completed PCR issuedDev.

Ln 2607-UNI Imo Urban Dev. FY86 Completed PCR in progress

Ln 2985-UNI Lagos Water FY89 Ongoing Counterpart &Supply management

problems.

Ln 2925-UNI Infrastructure FY88 Ongoing Slow progress.Development Closes 12/94Fund

Lu. 3238-UNI Oyo Urban Dev. FY90 Ongoing Slow progress.Closes 6/96

Cr. 2517-UNI Lagos Drainage FY93 Not yet effective& Sanitation_

2. Proiect Timetable

t=m Planned Da Actual Dat

- Identification early 1982 February 1982

- Preparation April 1982 April 1982

- Appraisal Mission December 1982 December 1982

- Negotiations June 1983 March 1984

- Board Approval early 1984 September 1985

- Loan Signature mid 1984 October 1985

- Loan Effectiveness late 1984 March 31, 1986

- Loan Closing December 1990 September 1993

- Project Completion Report by March 1994

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3. Physical Execution of the Project

Contrac Description Awarded Sttu

LAWMA Civil Works

1. Iddo Yard Depot improvement 4/89 completed2. Ijota New depot construction 4/89 completed3. Simpson St. Depot improvement 4/89 completed4. Isolo Rd. Depot improvement 6/89 completed5. Rowe Park Depot improvement 4/89 completed6. Ikeja Depot & w/shop 5/90 completed7. various locations Land fill site surveys8. various locations Additional depot sites9. various locations Bin Hardstandings

LAWMA Equipment

1. IA/IB/4R/4P refuse compactors, bins 7/89 deliveredspecialized truclcs

2. 2E/2F refuse carriers & bins 7/89 delivered3. Dutch Co-F 109 DAF trucks, 1074 bins delivered4. 4K 2 1/recovery trucks delivered5. 3G/4H/4J/4h) trucks, crane,workshop 7/89 delivered6. 4H/4S/4T ) washer, trailer, bus delivered7. IFB 3n7A&B workshop tools & equip. 4/88 delivered8. IFB 3nc 4/88 delivered9. IFB 3/7D U U 4/88 delivered10.IFB 3f7F 4/88 deliveredI I.IFB 3nE " u 4/88 delivered12.U.T.C. Komatsu refurbishment 4/88 delivered

234 replacement tyres delivered13.Dutch Co-F 537 replacement tyres delivered

Stormdrain Civil Works

1. 6B Oshodi /Isolo 11/87 completed2. 5 & 6C Mosafejo /Asimowu 3/89 completed3. 6F Baale & Badagary 5/89 completed4. Sys 5 Rehab.Surulere/Aguda completed5. Lagos Is. Priority projects: Adele,

Idumagbo & Simpson St. completed6. Konijn Dredger rehabilitation 9/88 completed

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4. Consultant Services

PumQseh Impa

Lagos State Government (Drainagel.

i.Drainage ) Completed successfullyproject )supervision )

ii.Lagos Island) Served as basis for subsequent project.Drainage Study)

iii.Apapa Drainage) dittoStudy )

Lis Ste Waste Disposal Board.

iv.Management Basis for institutional buildingOrganization assitance provided later.Study

v. Management Reorganization carried out.Organization& Training

vi.Design & Completed.Tender docs.Simson St. WasteTransfer Station.

vii.Construction Completed by closing date.SupervisionHardstandings &Landfill site.

viii.Commercialization Completed.Assistance.

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5. Loan Disbursements

Cumulative Estimated and Actual Disbursements(US$ '000)

Appraisal Actual Actual as %Estimate (6/30) of Estimate

1986 3.6 1.0 28

1987 12.7 1.0 8

1988 28.9 3.0 10

1989 48.2 11.8 24

1990 70.5 30.4 43

1991 72.0 56.3 78

1992 72.0 60.5 84

1993 72.0 63.7 88

1994 72.0 64.0* 89

DaE of fna disbursement: April 6 1994.

This does not include the cancelled undisbursed balance of US$3.1 million.

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6. Project Im,pementation

Indicators &pail Est, Actual (PCR)

i) LAWMA - Income (including State subventions and Local Government contributions) / totaloperating costs (including depreciation and financial charges)

1988 1.01 0.691989 1.01 0.611990 1.01 0.381991 1.02 0.571992 1.01 na

ii) LAWMA - Income (including State subventions and Local Government contributions) I cashoperatig expenses (excluding depreciation and financial charges)

1988 2.18 1.201989 2.43 0.991990 2.56 1.001991 2.68 1.511992 2.59 na

iii) LAWMA - Waste Processed 1988 - 1991 (in thousands of tons)

Domestic Environmental TOTALand other day collections

1988 2,310 1,662 3,9721989 3,398 1,019 4,4171990 3,638 910 4,5481991 2,522 737 3,2591992 1,913 507 2,420

iv) Rating and Valuation Component - Revenues collected by LGAs (in millions of N)

1988 27.51989 28.91990 34.11991 69.61992 109.51993 n.a.

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7. Prject Cost and FinancingA. Project Costs(in US$ million)

Appraisal Estimate Actual

Local Foreign Total Foreign TotalLocal4/

Solid Waste Disposal 20.5 57.5 78.0 4.7 47.7 52.4

Main Drainage 18.7 4.2 22.9 3.9 17.4 21.3

Rating and Valuation 2.2 2.8 5.0 1.1 1.9 3.0

Project Preparation & 0.4 1.6 2.0 1.5 1.5 3.0TIA

Base Cost 41.8 66.1 107.9

Contingencies:Physical 4.2 6.6 10.8 _

Contingencies:Price 34.7 10.9 45.6

TOTAL COSTS 80.7 83.6 164.3 .11.2 68.5 79.7

Commen: When converted into US dollars, the Project's local costs were much lower than esimatedduring appraisal because there were substantial devaluations of the naira after implementationcommenced. While naira costs increased, they were more than compensated by these devaluations soit was not necessary to use the high price contingencies (83 percent of base costs) included in thefinancial plan.

4/ Proviaional

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B. Project Financing(USS million)

Source Plsnned Einal Conmrent

IBRD 72.0 68.5

Cofinanciers 11.6 n.a. The Netherlands Government providedcofinancing for solid waste disposal vehicles

in parallel with the project.

Lagos State 80.7 11.2

TOTAL 164.3 79.7

8. Proect Results

A. Direct Benefits

- Improvements in solid waste disposal had a noticeable impact on Lagos' environmentduring the projects initial years of operation, but its effect began to decline after 1991 as LAWMA'sequipment became unserviceable because of insufficient funding to repair and replace it. By 1993only about a third of the refuse generated by the city was being collected by LAWMA.

- Improvements in storninain for high density residential and industrial areas ofMetropolitan Lagos totalling about 3,400 ha and containing about half of Lagos' commercial andindustrial installations were of benefit to about 1.4 million people. This has resulted in reducedhealth hazards from clogged drains and decreased flood damage to private and public property androad erosion.

- The Ratine and Valuaffon component updated 1955 and 1977 property lists and resulted inthe identification of 201,564 ratable properties. On the basis of these lists, local governmentsincreased property tax collection by 104 percent in 1991 and 57 percent in 1992.

B. Economic Rate of Return

- Based on a detailed examination of prevailing rental values in two areas of MetropolitanLagos that were to benefit from the Project and assuming an increase in rental values for variouskinds of housing, the SAR estimated an Economic Rate of Return of 25 percent for the project.Because of inflation, which fluctuated between 11.4 percent per annum in 1987 and over 90 percentin 1993, it was not possible to establish to what extent rental changes may have been affected by theproject. Calculation of an actual ERR was therefore not possible without a costly study that may haveturned out to be inconclusive.

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C. Financial Impact

- LAWMA, the agency responsible for carrying out the Solid Waste Disposal component ofthe project was unable to achieve sustainable operations before the Closing Date because its principalclients, local government authorities, did not pay for services provided and the State Governmentfailed to provide the agreed level of subventions. While reorganization and commercialization ofLAWMA's operations were steps in the right direction, they were not sufficient to improveLAWMA's performance. It is recommended that a report be prepared by specialists to suggest howsolid waste disposal services can best be opened up to private sector participation to improveefficiency and lower cost through competition.

- While local government revenues were improved by the rating and valuation component,there is room to increase revenues further through improved tax billing and collection practices asonly 45 percent of total possible revenues were collected in 1993.

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9. Compliance with Loan Covenants

Section Covenant Status

3.01 (b) LSO to rpay Ln to FPN over 20 doneyea with S of grmce at variableinteme.

2.01 (b) LSG to cablish and mainain Project doneCoordinating Unit (PCU).

2.01 (e) PCU to have i) project accountant, ii) done with delaytkhnial advisor, iii) other staff asreqZired and iv) office Mspc by1/1/86.

2.01 (d) LSG to i) by 1/1/86 employ Chief doneValuer for lagos State ValuationOffice (LSVO) and ii) cause LSVO tocarzy out a rating and valuationprogram.

2.02 (a) LSG to i) by 1/1/86 asign to i) done with delay, ii) done partialyLAWMA additional stff as required and with delayfor the project and ii) reorganizeLAWMA nd strengthen its projectexecution capacity.

2.02 (b) By 3/31/86 LSG to formally adopt a done with delymngment tfing plan forLAWMA, including timely provisionof adequate manageent ervices.

2.03 (a) LSG to provide in its budget i) i) done, sometimes with delay, ii)amounts required to cover capital insufficient payments madecosts of the project and ii) amountsrequired to cover LAWMA'soperating cost.

2.03 (b) LSG to i) open Project Accounts for i) done, ii) done with delay, iii) notexecuting agencies, ii) make initil metpayments of N 600,000 for LAWMAN 600,000 for LSMW&T and N300,000 for LSMLG and iii) promptlyas needed pay LAWMA amountsrequired to cover its operating costs.

2.03 (c) LSG agres that if it fails to providc Pederl Government did not act onfull contributions to the project's this authorization.capital cost, FGN may deduct LSG'squarterly contributions from LSG'sFederation Account and pay thesc intothe Project Account.

2.06 (a) LSG to appropriatcly insure all goods done with delayimported for the pro;:t

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2.06 (b) LSG shall caue all goods and doneervices financed under the LoAn to

be used exclusively for the Project.

2.07 (b) LSO to i) maintain, and cause its i) done, ii) done and iii) done withagencies to maintain, records to delaymonitor the project adequately, toidentify the goods and ervicesfinanced out of the Loan and todisclose its ue for the project, ii)enable the Bank to visit the projectand iii) furnish information on theproject regularly to the Bank.

2.10 LSG to acquire right to lands to done with delaycarry out the project.

3.02 LSG to caue LAWMA to i) operate i) done, ii) partially done bocause ofand maintain its plant, machinery nd insufficient fundsequipment and ii) repair and renewsuch properties as needed.

3.04 LSG to cause LAWMA to i) by done1/1/86 prepare a drft tatment offinancial policies and ii) by 3131/86furnish the Bank an approvedsatement of financial policiessatisfactory to the Bank.

3.05 LSG to cauwe LAWMA to i) estblish i) done with dely, ii) partially mcta management information system by1/1186 and ii) by 4/30186, and yealythcrcafter, dat on change inLAWMA's financial projection andmeasure taken to naintain itssolvency.

3.06 LSG to cauwe LAWMA to i) revalue i) not met, ii) done, iii) not doneits assts according to agreed becauwe of lack of funds.methods, ii) write off the depreciablevalue of such assets according toagreed methods and uiu) investdeprecated amounts in securities untilthey are needed to replace asets.

4.03 LSG to cause LAWMA not to incur metany debt in exces of 10 % of annualprojected investment costs unlessprojected internal cash generation is atleat 1.5 times LAWMA's total debtservice needs.

- 29 -

10. Use of Bank Resources

A. Staff Inputs (staff/weeks)

Stage Actual Comment

Through appraisal 95.9

Appraisal through 115.2 Board presentation took place 30 months after appraisalBoard presentation

Board approval to 29.0Effectiveness

Supervision 146.3

TOTAL 386.4

B. Missions

Stage Date Persa day/field Speclization Rating Problem

SPN 1 1/85 1 13 E n.a. n.a.11/85 1 24 UP n.a. n.a.2/86 6 30 UP,E,F,RV 1 n.a.5/86 1 8 E 1 n.a.1/87 1 9 E 2 M9/87 1 2 F 2 M11/87 1 4 E 3 M2/88 3 15 E(2),F 3 P,M

11/88 2 14 E(2),En 3 P,M2/89 2 25 E(2) 3 P,M

6/89 2 28 E,F 2 P,M10/89 2 6 E,RV 2 P,M2/90 2 6 F,UP 2 P,M7/90 1 5 F 2 P,M,F

11/90 1 11 F 2 P,M,F1/91 2 14 F,RV 2 P,M,F4/91 1 8 F 2 P,M,F9/91 1 11 F 2 P,M,F3/92 1 11 F 2 M,F6/92 1 20 F 2 M,F9/92 1 11 E 2 M,F

11/92 1 4 F 2 F,M10/93 2 3 F/E 3 F,M

Svecialization: E = Engineer Problem: M = ManagementF = Financial Analyst P = ProcurementUP= Urban Planner F = FinancialRV= Rating and Valuation expert

Table ILaMo Solid Wasde & Storm Drminag Priect

LAWMA - Audited Revenue and Expenditure Accounts (N '000)

REVENUES 1985 1986 1987 1988 1989 1990 1991 1992

Industrial OpCxtions 3,714 2,068 2,468 4,467 5,086 5,810 49,352 70,598

Lagos State GovemeKnt 7,834 9,078 9,402 8,488 8,551 8,819 1,009 _

Ministry of Local Government 327 1,702 5,977 6,904 9,554 610

OtherIncome 136 381 185 1,024 1,048 728 307 7,443

T 0 T A L 12,011 13,229 12,055 19,956 21,589 24,911 51,278 78,041

Less: EXPENDrrURES

Saaries 7,040 5,469 6,907 9,249 11,249 12,790 18,052 25,903

Maintenance 262 266 486 949 3,899 3,544 3,025 15,227

Other running Expenses 2,172 3,639 7,009 6,454 6,634 8,639 12,911 15,185

Denrciation 1,574 2,386 4,016 12,306 13,766 40,438 55,734 55,851

Tota Expenditures 11,048 11,760 18,418 28,958 35,548 65,411 89,722 112,166

Net Income/loss) 963 1,469 (6,63) (9,002) (13,959) (40,500) (38,444) 34,125

Toblk 2

Lagos SoLid Wate & Storm Draintae Proict

Proict Comoleion Report

LAWMA - Statements of Sourmcs and Am,lication of Punds (N '000)

SOURCE OF FUNDS 1985 1986 1987 1988 1989 1990 1991 1992

Net Income (lons) from Operations 963 1.469 (9,002) (13,959) (40,500) (38,444) 34,125

Depreciation 1,574 2,420 12,306 13,766 40,438 55,734 55,851Capital Grants 5,918 3,500 31,919 10,783 148,030 106,280 1,842

Loans - - - 1,000 (1,000)

Total Funds Generated 8,455 7,389 35,223 10,590 147,968 124,570 22,569

APPLICATION OF FUNDS 1985 1986 1987 1983 1989 1990 1991 1992

Purchase of Fixed Assets 6,733 1,820 37,615 12,198 140,729 106,408 2,584

Changes in Working Capital 1,722 5,569 (2,392) (1,608) 7,239 18,162 19,985tal Funds Used 8,455 7,389 35 ,223 10,590 147,968 124,570 22,569

Table 3

IL2o ' Solid Wame A Storm Drains= Proicd

Proict Comvktion Rep>ot

LAWMA - Audited Babnee Shet (N1 '000)

) 198S5 _ 1986 1_ 1987 1988 1989 1990 1991 1992

Fixed Assets (net) 5,355 ___4_755__ 30,701 29,133 129,424 180,098 126,830

Current Assets 5,746 9,635 8,999 9,026 16,992 39,930 71,073

Less: Current Liabilities 3,217 1,537 4,219 5,854 6,580 11,356 22,515

Net Current Assets 2,529 8,098 4,780 3,172 10,412 28,574 48,558

Total Assets 7,884 12,853 35,481 32,305 139,836 208,672 175,388

of which: Capital Grants 5,918 9,417 47,654 58,437 206,468 312,748 314,590

Accumulated Funds 1,966 3,436 (12,173) (26,132) (66,632) (105,076) (139,201)

Loan Account . . . _ 1,000 -

Lawn Sold Wafte Storm Drinfe Proect

Pli Conkdm Reni

1AWMA - Ooeml SWu of Eauhmim July 1M

Type of equipimt received Numnber Number in % in use or in Number in Esimated cost ofbetween 1987 and 1992 rceived working order reave workshop i (N

awaiting rpar million)

Bulldozer 23 2 9 21 15.3

Mechanical shovels 43 5 12 38 7.4

Diio Trucks 4 43 52 41 7.2

Compacton 141 49 35 92 8.9

Tippers 84 50 5/ 60 0 n.a.

Total 375 149 40 192 N 38.S m

0I About 34 and Dino Tncks an parked for futu use; parts have been taken from my of them to rpair equipment in use.

T&bk 5

LA Jn Solid Wate A Storm Dminew PrmicPm"Conkion Repor

LAomLocl Gyvmei PzrcvTax Corucd(in N V00)

LO)CAL GOVERNEnDT AREA PROPERY RATLABLE OOVERNMENT TOTAL 1990 1991 1992

NUMBERS VALUES PROPERTIS COLLBCTABLE

AGEGE 21,7S5 51,027 2,065 4,901 756 1,031 2,45S

BADAGRY 5,103 7,766 2,417 534 159 167 256

EPE 5,276 6,354 635 126 114 155

En OSA 6.791 304,706 55,321 69,937 9,010 24,549 33,072

IKEJA 39,874 21,310 11,351 25,995 3,090 4,362 10,222

ALIMOSHO n.. U.S. n.S. n.A. na.m. 936 2,212

IKORODU 11,459 23,276 444 2,327 774 1,305 1,659

MEJU LEMO 701 579 2 57 16 23 29

LAGOS ISLAND 1,575 290,616 40,594 24,222 5,224 9,200 11,200

LAGOS MANLAND 31,563 244,920 53,961 19,095 4,S12 3,377 6,450

SURULERE n.S. n.S. n.S. n.s. n.m. 2,0S2 6,112

MUSHIN 20,030 293,494 99,754 19,373 4,496 4,720 9,056

OSHOD/SOLO na. nU.. n.a. n.m. na. 2,082 5,481

O0O 27,772 326,3U3 123,858 20,252 1,U37 2,434 3,323

SHOMOLU 21,335 153,033 2,305 15,577 2,946 5,500 9,000

TOTAL 201,564 2,455,2J9 400,321 205,540 34,133 69,616 109,505