Document of The World Bank€¦ · Document of The World Bank. Report No: ICR 00003285 ....

Document of The World Bank

Report No: ICR 00003285

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-50760)

ON A

CREDIT

IN THE AMOUNT OF SDR 48.4 MILLION US$75MILLION EQUIVALENT

TO THE

FEDERAL REPUBLIC OF NIGERIA

FOR THE

FIRST EDO STATE GROWTH AND EMPLOYMENT SUPPORT CREDIT

March 31, 2015

Macroeconomics and Fiscal Management(GMFDR) AFCW2 Country Department Unit Africa Region

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NIGERIA – GOVERNMENT FISCAL YEAR

January 1 – December 31 CURRENCY EQUIVALENTS

Currency Unit: Nigeria Naira US$1 = 197 Naira

(Exchange rate effective March 18, 2015)

WEIGHT AND MEASURES

Metric System

ABBREVIATIONS AND ACRONYMS

ACN AGD BIR CAS CBN CoA CofO CPS DPC DPO DPL EDOPADEC EFT EIRS EGIS EMIS FCT FGPMO FMF FRL GDP GFS GIS IAASB IBRD ICT IDA IFC NTOSAI ISA ISQCI ISSAI ICT IFMIS

Action Congress of Nigeria Accountant General‘s Department Board of Internal Revenue Country Assistance Strategy Central Bank of Nigeria Chart of Accounts Certificate of Occupancy Country Partnership Strategy Development Policy Credit Development Policy Operation Development Policy Lending Edo Oil Producing Areas Development Commission Electronic Funds Transfer Edo Inland Revenue Service Edo Geographic Information System Education Management Information System Federal Capital Territory Fiscal Governance and Project Monitoring Office Federal Ministry of Finance Fiscal Responsibility Law Gross domestic Product Government Finance Statistics Geographic Information System International Auditing and Assurance Standards Board International Bank for Reconstruction and Development Information and Communications Technology International Development Association International Finance Corporation International Organization of Supreme Audit Institutions International Standards on Auditing International Standard on Quality Control International Standards of Supreme Audit Institutions Information Communication and Technology Integrated Financial Management Information System

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IGR IMF IMAP LDP LG LGA LIS MBPED MDA MTB MTEF MTFS MTSS NBTE PEFA PEMFAR PER PITA PFM PPP SBM SBMC SDR SEEFOR SHA SIFMIS TSA UNESCO UNCITRAL VAT

Internally Generated Revenues International Monetary Fund Joint Management Action Plan Letter of Development Policy Local Government Local Government Authority Land Information System Ministry of Budget, Planning, and Economic Development Ministries, Departments, and Agencies Ministerial Tender Board Medium-Term Expenditure Framework Medium- Term Fiscal Strategy Medium-Term Sector Strategies National Board for Technical Education Public Expenditure Financial Accountability Public Expenditure Management and Financial Accountability Review Public Expenditure Review Personal Income Tax Act Public Financial Management Public Private Partnership School Based Management School Based Management Committee Special Drawing Rights State Employment and Expenditure Effectiveness for Results State House of Assembly State Integrated Financial Management Information System Technical Assistance United Nations Educational, Scientific, and Cultural Organization United Nations Committee on International Trade Law Value Added Tax

Vice President: Makhtar Diop Country Director: Marie Francoise Marie-Nelly

Senior Global Practice Director: Marcelo Guigale Acting Practice Manager: Blanca Moreno-Dodson

Task Team Leader: Gloria Aitalohi Joseph- Raji ICR Team Leader: Daniel Boakye

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NIGERIA

IMPLEMENTATION COMPLETION AND RESULTS REPORT ON THE FIRST EDO STATE GROWTH AND EMPLOYMENT CREDIT

TABLE OF CONTENTS

DATA SHEET A. Basic Information ...................................................................................................... iv B. Key Dates .................................................................................................................. iv C. Ratings Summary ...................................................................................................... iv D. Sector and Theme Codes ........................................................................................... v E. Bank Staff ................................................................................................................... v F. Results Framework Analysis ..................................................................................... vi G. Ratings of Program Performance in ISRs ............................................................... viii H. Restructuring ........................................................................................................... viii

1. Program Context, Development Objectives and Design ............................................ 1 2. Key Factors Affecting Implementation and Outcomes .............................................. 5 3. Assessment of Outcomes ............................................................................................ 9 4. Assessment of Risk to Development Outcome ......................................................... 19 5. Assessment of Bank and Borrower Performance ..................................................... 20 6. Lessons Learned ....................................................................................................... 22 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 23

Annex 1 Bank Lending and Implementation Support/Supervision Processes ............. 24 Annex 2. Beneficiary Survey Results ........................................................................... 25 Annex 3. Stakeholder Workshop Report and Results ................................................... 26 Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 27 Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 28 Annex 6. List of Supporting Documents ...................................................................... 30 MAP .............................................................................................................................. 31

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DATA SHEET

A. Basic Information

Country: Nigeria Program Name: Nigeria Edo State First Development Policy Operation

Program ID: P123353 L/C/TF Number(s): IDA-50760 ICR Date: 10/03/2014 ICR Type: Core ICR

Lending Instrument: DPL Borrower:

Federal Republic of Nigeria (represented by the Federal Ministry of Finance)

Original Total Commitment:

XDR 48.40M Disbursed Amount: XDR 48.40M

Revised Amount: XDR 48.40M Implementing Agency: Edo State Government Co-financiers and Other External Partners: NA B. Key Dates

Process Date Process Original Date Revised / Actual Date(s)

Concept Review: 03/18/2011 Effectiveness: 06/28/2013 Appraisal: 12/06/2011 Restructuring(s): 02/21/2013 Approval: 03/29/2012 Mid-term Review: 07/22/2013 Closing: 06/30/2013 06/30/2014 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies: Satisfactory

Overall Bank Performance: Satisfactory Overall Borrower

Performance: Satisfactory

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C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance Indicators QAG Assessments (if any) Rating:

Potential Problem Program at any time (Yes/No):

Yes1 Quality at Entry (QEA): None

Problem Program at any time (Yes/No):

Yes2 Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Satisfactory

D. Sector and Theme Codes Original Actual

Sector Code (as % of total Bank financing) Secondary education 11 Sub-national government administration 78 Vocational training 11

Theme Code (as % of total Bank financing) Administrative and civil service reform 6 Education for the knowledge economy 16 Gender 6 Personal and property rights 22 Public expenditure, financial management and procurement

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E. Bank Staff Positions At ICR At Approval

Vice President: Makhtar Diop Obiageli Katryn Ezekwesili Country Director: Marie Francoise Marie- Nelly Marie Francoise Marie- Nelly Practice Manager/Manager: Mark Roland Thomas Jan Walliser Program Team Leader: Gloria Aitalohi Joseph-Raji Khwima Nthara ICR Team Leader: Daniel Kwabena Boakye ICR Primary Author: Daniel Kwabena Boakye

1 This was due to the long time interval between Board approval and effectiveness of the operation. This in turn was due to the delay in national parliamentary approval of the country’s borrowing plan for 2011/2012. 2 Same as above.

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F. Results Framework Analysis Program Development Objectives (from Project Appraisal Document) The program seeks to support the Edo State Government to improve upon the management of its public resources and to create a better environment for growth and employment creation in a socially accountable way. Revised Program Development Objectives (if any, as approved by original approving authority) There was no revision of the PDO. (a)PDO Indicators

Baseline Value (from approval documents)

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Values Achieved

at Close of Program

PDO Indicator 1: Ensuring fiscal sustainability by: (i) improving IGR and, (ii) ensuring payroll expenditure control.

Value (quantitative or qualitative)

1. Real growth rate of IGR: 38.9%. 2. Share of wage bill to recurrent expenditure: 50.8%

1. Real growth rate of IGR: 6.5% 2. Share of wage bill to recurrent expenditure: 60%

1. Real growth rate of IGR: 18.9% 2. Share of wage bill to recurrent expenditure: 49.7%

Date achieved 12/31/2010 12/31/2013 12/31/2013 Comments (incl. % achievement)

Fully achieved.

PDO Indicator 2: Improvement in budget planning, execution, accounting and auditing: (i) improved value for money, (ii) improved credibility of the budget, (iii) improved timeliness in the submission of audit reports to the State House Assembly (SHA) and (iv) improved follow-up on audit queries.

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Value (quantitative or Qualitative)

1. Percentage of public contracts above threshold awarded through competitive process: 20% 2. Percentage deviation of aggregate expenditure out-turn compared to budget: 16.9% 3. Number of months taken to submit the audit report to the SHA: 15 4. Percentage of audit queries that have been resolved: 0

1. Percentage of public contracts above threshold awarded through competitive process: 35% 2. Percentage deviation of aggregate expenditure out-turn compared to budget: 10% 3. Number of months taken to submit the audit report to the SHA: 10 4. Percentage of audit queries that have been resolved: 25

1. Percentage of public contracts above threshold awarded through competitive process:100% 2.Percentage deviation of aggregate expenditure out-turn compared to budget: - 27.4% 3. Number of months taken to submit the audit report to the SHA: 9 4. Percentage of audit queries that have been resolved: 85 Date achieved 12/31/2008 12/31/2013 12/31/2013

Comments (incl. % achievement)

Substantially achieved

PDO Indicator 3: Improvement in investment climate resulting in a reduction in the time it takes to register property in Edo State.

Value (quantitative or qualitative)

1. Total number of days to register3 a property in Edo state: 69

1. Total number of days to register a property in Edo state: 30.

1. Total number of days to register a property in Edo state: 30.


Fully Achieved

PDO Indicator 4: Improvement in quality of education: (i) increase in the number of accredited courses in TVET institutions in Edo; (ii) increase in the share of certified female science teachers in total number of female teachers located in rural areas; and (iii) reduction in drop-out rates of female pupils at basic education level in rural areas

3 “Register” here refers to obtaining a legal land title (certificate of Occupancy).

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Value (quantitative or Qualitative)

1. Percentage of certified female science teachers located in rural areas:13% 2. Percentage drop-out rate of female pupils at basic education level in rural areas:11% 3. Number of accredited courses in TVET institutions:21

1. Percentage of certified female science teachers located in rural areas:15% 2. Percentage drop-out rate of female pupils at basic education level in rural areas:8% 3. Number of accredited courses in TVET institutions:24

1. Percentage of certified female science teachers located in rural areas:11% 2. Percentage drop-out rate of female pupils at basic education level in rural areas:4% 3. Number of accredited courses in TVET institutions: 24


Substantially achieved.

(b) Intermediate Outcome Indicator(s) - from Program Document (Not available)

G. Ratings of Program Performance in ISRs

H. Restructuring

The project was restructured in February 2013 to extend the closing date from June 30, 2013 to June 30, 2014. The extension was necessary to provide the Edo State Government with adequate time for the operation given the delay in national parliamentary approval of Nigeria’s 2011/2012 External Borrowing Plan which in turn led to delays in the signing of the credit agreements and declaration of credit effectiveness. The PDO and key outcome indicators remained unchanged.

4 The effectiveness date was the 28th of June, 2013. Disbursement of the funds at the Central Bank of Nigeria took place in August and into Edo state’s account in September 2013. This was after the second ISR was filed.

No. Date of ISR Archived DO IP Actual Disbursement (USD million)4

1. November 14th, 2012 Satisfactory Moderately satisfactory

0

2. June 24th, 2013 Satisfactory Moderately Satisfactory

0

3. March 5th, 2014 Satisfactory Satisfactory 75 4. June 30th 2014 Satisfactory Satisfactory 75

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IMPLEMENTATION COMPLETION AND RESULTS REPORT

MAIN DOCUMENT

1. Program Context, Development Objectives and Design

1. The First Edo State Growth and Employment Support Credit was the second subnational Development Policy Operation (DPO) for Nigeria, after the Bank’s approval of Lagos DPO in March 2011. The design of the First Edo State DPO (FESDPO) was built on lessons learned from the Lagos DPO as well as DPOs for other federal states, in countries such as Brazil and India, where sub-national DPOs were successfully used to support policy and institutional changes. The successful implementation of the Lagos DPO was expected to have a demonstration effect on other State Governments in Nigeria, in terms of showcasing the benefits of being reform-oriented. As outlined in the Nigeria Country Partnership Strategy (CPS) for 2010-13 (Report No. 46816-NG), the DPO could be used in states with a good track record in public sector reforms, strong fiduciary systems and low debt levels, and possibly twinned with Technical Assistance (TA) operations to address governance and institutional capacity challenges. The achievements of the Edo state administration during its first term (2008-12), using the CPS criteria, provided a strong basis for selecting Edo state for a subnational DPO, after that of Lagos. FESDPO was therefore developed in the context of the Edo State Vision 2020, which sought to improve the lives of its people through good governance, human capacity development, infrastructure development and increased private sector investment in productive sectors.

2. The World Bank support to Edo State’s Government’s reform program was premised on the State Government’s achievements since 2008; improvement in the PFM system, increased IGRs and improved service delivery through infrastructure development and quality of education. FESDPO was envisaged to be part of a series of three programmatic operations in equal amounts of US$75 million, over the period 2012-2015. The implementation of the programmatic series was however cut short by a year’s delay in the ratification of the First Edo State DPO (FESDPO), after the Bank’s board approval in March 2012. This was due to the delayed approval of the country’s borrowing plan by the National Assembly. The Edo State Government (ESG) however continued with the reform program as envisaged under the DPO.

3. This Implementation Completion and Results Report (ICRR) assesses the contribution of the first Edo State DPO (FESDPO) in achieving the program development objectives. Secondly, it takes stock of government’s progress in implementing the reform agenda as defined in the DPO programmatic series. The ICRR assessment is based on the performance of the FESDPO as at end June 2014, when the program closed. However for results indicators that could only be measured at the end of each year, December 2013 was the cut-off date. In general, the ICR report recognized the challenge of assessing the impact of a one year operation on the program development objectives compared to what a three-year operation was expected to achieve; the full complement of the program reforms had not been undertaken at the time of the assessment because the programmatic series was cut short.

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1.1 Context at Appraisal

4. Soon after coming into office in November 2008, the new administration of Edo State announced its plans of focusing on the rehabilitation and upgrading of the state’s infrastructure; which had virtually crumbled following years of neglect, poor planning, and compromises in quality. The Governor also embarked on a fiscal consolidation program with the view to expanding the fiscal space for capital projects. Through improved efficiency and transparency in tax collection, as well as expansion in the tax base, internally generated revenues (IGR) increased by 300 percent over the period 2008-2010. This resulted in noticeable infrastructure development, focusing on construction and maintenance of roads, drainage systems, schools, and health centers. According to the World Bank Report: “Innovations in Infrastructure Development: A Study of Capital Spending in Edo State”, Edo State Government produced an unprecedented number of roads of adequate quality and other social infrastructure during 2009-2013.

5. Despite these achievements in infrastructure and service delivery, there were still challenges, including the need to ensure sustainability of the gains made. The infrastructure development plan still had huge financing gaps. Many schools at various levels of education needed rehabilitation. Similarly, although work had begun on the master plan of the Benin City storm water drainage system, the financing requirements of its full implementation were immense. Government systems also remained largely weak, thus threatening the long-term sustainability of progress achieved. Against this background, the State Government viewed the support of the World Bank in the form of a Development Policy Operation as a critical vehicle needed to support the state’s development agenda; both in terms of additional financial resources as well as the support to build a stronger institutional and regulatory framework that would create the conditions for growth and improved service delivery.

1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved)

6. The program development objective of FESDPO was to support Edo State‘s critical reforms for improving the management of public resources and creating a better environment for growth and employment creation in a socially accountable way. Two policy areas considered of primary importance were: (i) improving the quality of management of public resources through effective budget planning, better budget execution, financial reporting, external auditing and ensuring value for money; and (ii) improving the environment for economic growth and employment creation by enhancing the investment climate so as to attract more private investment while improving quality of education, particularly in the technical and vocational field. It was expected that increased private sector investment would lead to more job creation for which the well trained youth with employable skills, could take advantage of. Recognizing the fiscal challenges posed by financing infrastructure projects and improving service delivery, the state government’s development agenda had to be embedded in a medium-term fiscal sustainability framework. Development Policy Credit was therefore considered as an appropriate instrument for supporting the development agenda of transforming the Edo State economy while ensuring fiscal sustainability.

7. The Edo State Government recognized that sustainable development would ultimately depend on economic growth and the extent to which the state’s citizens could avail themselves of

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employment opportunities. Growth of the state economy would not only lead to increased availability of goods and services for individual consumers but would also improve the state’s revenues that were needed to expand the provision of public services in order to keep up with a growing population. Employment creation was also necessary for growth to have a significant impact on poverty reduction. This was even more critical for Edo, because the state had one of the highest unemployment rates in the country, particularly amongst the youth.5 .

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification

8. There was neither a revision to the PDO nor to the key outcome indicators of the program.

1.4 Original Policy Areas Supported by the Program (as approved)

9. The FESDPO focused on two main policy areas as mentioned earlier, with two sub-objectives (pillars) under each policy area, namely: (1.1) Ensuring fiscal sustainability, (1.2) Improving public budget institutions and practices, (2.1) Improving the investment climate and (2.2) Improving the quality of education.

Pillar 1.1: Ensuring Fiscal Sustainability

10. The program supported the State Government in maintaining fiscal sustainability by ensuring that spending plans were within the ability of the state to raise revenue and to keep debt within acceptable limits. The program aimed at stepping up efforts to increase Internally Generated Revenue (IGR) while ensuring improvements in efficiency of spending. In this context, reforms were focused on promoting growth in IGRs through improvements in tax administration and the promotion of non-oil sector growth. The program also aimed at dealing with all potential expenditure pressure points; particularly the payroll - keeping the ratio of public sector payroll to total expenditure within acceptable limits and thereby creating fiscal space for infrastructure spending.

11. The State Government, among other things, sought to construct and rehabilitate roads with the view to connecting many rural communities to urban centers for enhanced economic activities. It also aims at improving the urban drainage system so as to prevent flooding (which was a major challenge; particularly in the capital city of Benin) and the associated destruction to property and livelihoods. In education, the Government sought to construct and rehabilitate schools with particular focus on improving technical and vocational education. To achieve the aforementioned objectives, the State Government needed not just to raise more funding but also needed to ensure that the State’s development agenda was embedded in a medium- term fiscal sustainability framework.

5 Project Appraisal Document for FESDPO, pp.14

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Pillar 1.2: Improving Budget Institutions and Practices

12. The program supported a medium-term reform agenda in strengthening the legal and institutional framework for enhancing transparency and accountability in the use of public resources. To improve on budget planning and execution, the program focused on procurement reforms, improvements in public financial management system, as well as reforms in internal and external audit. Policy actions under this pillar were; (i) the enactment of modern procurement legislation; (ii) usage of selected IFMIS functions for transaction processing in the implementation of the budget; (iii) improving transparency in procurement through the publication of contracts awarded; and (iv) strengthening external oversight by clearing the backlog of audited financial statements that were required to be submitted to the State House of Assembly.

Pillar 2.1: Improving the investment climate

13. The program supported medium-term actions that would improve the business environment, promote private investment and stimulate economic growth within the State. The specific focus of reforms under this pillar was to improve access to investment land; through improvements in the land information system, strengthening the capacity of the Land Registry Department and streamlining the process of obtaining the Certificate of Occupancy (CofO). Policy actions under this pillar were; (i) execution of an agreement with a concessionaire for devising and running the Edo State Geographical Information System (EGIS), (ii) establishment of an online Land Information System (LIS), (iii) recruitment of an adequately skilled professional personnel, whilst further improving the capacity of current staff in electronic data management and (iv) reduction in the number of processes and time taken in obtaining a Certificate of Occupancy (CofO).

Pillar 2.2: Improving Quality of Education

14. The program supported medium term actions for improving the quality of education in order to make school graduates employable. This meant that pupils were to be equipped with relevant knowledge and skills obtained from institutions that were recognized by potential employers. The specific focus of reforms under this policy area were in three targeted areas; (i) the development of Education Management Information System (EMIS) to monitor quality performance targets, (ii) improvement in the quality of public technical and vocational educational institutions and (iii) improvement in the availability of certified teachers, in critical subjects, particularly female teachers in rural areas (as a key to boosting female pupil completion rates).

1.5 Revised Policy Areas (if applicable)

15. The policy areas were not revised

1.6 Other significant changes

16. The first Edo State DPO of SDR 48.4 (US$75 million), was planned to be the first operation in a series of three annual programmatic development policy operations. The delayed approval of the government’s borrowing plan by the National Assembly led to a lapse of more than 24 months between

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the board dates for the first and second operations. As such, the operation could no longer be considered programmatic lending operation and hence the need for an ICR Report. The next operation, which builds on the accomplishments and lessons learned from First Edo State DPO, is currently under preparation as the first in a new series of two programmatic operations.

2. Key Factors Affecting Implementation and Outcomes

2.1 Program Performance

17. All prior actions under the First Edo State DPO were completed prior to Board approval in March 2012 and were substantially sustained beyond the closing date of the operation. The government also made satisfactory progress under all the four pillars of the reform program, including policy actions supposed to be prior actions for the second DPO. The size of the payroll was kept within target levels, while effectively utilizing the fiscal space to support infrastructure development, within a fiscally sustainable framework. In terms of improving budget institutions and practices, government focused on increasing value for money through sound procurement rules and automating the financial management systems including budget management through the use of an oracle-based software platform- Integrated Financial Management Information System (IFMIS).

18. The investment climate has also improved due to the reduction in the procedures and time taken to process land certificates of occupancy. While efforts at creating a GIS-based land information system was delayed because of challenges with the contractual arrangements with the concessionaire, government did not change its policy focus. The government has now contracted another service provider to devise and run the GIS system to be piloted, in the urban areas first, on limited basis (Benin City only) and thereafter roll out the system to more local governments across the state. Lastly efforts at improving the quality of education comprised the setting up of the school-based management committees (SBMC), investment in the facilities at the school level, particularly technical and vocational schools and the piloting of an education information management system (EMIS).

19. Despite the uncertainty caused by delayed approval of government borrowing in 2012, the implementation of the reform agenda was maintained. The government remained committed to deepening the reforms envisaged under the program. The Bank continued its engagement to support the government; providing advisory services and technical assistance under the State Employment and Expenditure Effectiveness for Results (SEEFOR) project.

20. As seen in the policy matrix (See Table 1) below, all the prior actions were met and hence there was no waiver for the disbursement of funds. Preparation was to the extent possible, aligned with the government’s budget preparation cycle. Government’s showed commitment to the implementation reform programs beyond the prior actions, despite the delay in the preparation of the second DPO. Policy reforms that the Government undertook ahead of the second operation included the payroll audit which was supposed to be benchmark for the third operation, the Public Procurement Regulatory Agency and Council were set up and the oracle-based SIFMIS budget preparation module has been configured for use. Others include the operationalization of school-based Management Committees for the Technical and Vocational Schools.

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Table 1: Edo State DPO-1 Prior Actions and Status

Prior-Actions for DPO-1 Triggers (Bold) and Benchmarks for DPO-2

Benchmarks for DPO-3

Status of DPO-1 prior actions at

Approval of DPO-1

Progress since end of Program (2014 -2015)

Improving Management of Public Resources

Pillar 1.1: Ensuring Fiscal Sustainability (i) Gather relevant biometrics data pertaining to public servants and transfer said data to an Oracle-based human resources system to enable monthly payroll calculation

Publish detailed guidelines on fiscal reporting and monitoring of Parastatals, LGs, and contingent liabilities developed.

Follow-up payroll audit conducted

Met In order to assure the continued integrity of the payroll, the state government has conducted a payroll verification audit for the two largest sectors (Education and Health) in early 2015, as a prior action for the second DPO. This will be extended to all other sectors as a trigger for the third operation.

Pillar 1.2: Improving Budget Institutions and Practices (ii) Enact the Edo State Procurement Law

Establishment of Public Procurement Regulatory Agency and MDA level procurement units

Establish Procurement Complaints Review Body

Met The State has gone on to establish the Public Procurement Regulatory Agency as well as a State Procurement Council responsible for public procurement policy directions. Procurement units have also been created in the MDAs and a procurement professional cadre has just been created in the state civil service.

(iii)Introduce a system of processing financial transactions using Oracle-based applications within MoF, MoBPED, and the AGD.

Implement the budget preparation module (Oracle Hyperion) and Accounts Receivable modules of SIFMIS

Roll out SIFMIS to all MDAs for real-time transaction processing and reporting

Met

The state had launched the Procure-to-Pay (P2P) module of the Oracle SIFMIS for the processing of expenditure transactions in all MDAs. It has also completed the Oracle SIFMIS systems configuration and operational acceptance testing (OAT) of the

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Budget preparation module - a prior action for the second operation. The system will be used for 2016 budget preparation.

Improving the Institutional and Policy Environment for Growth and Employment Creation

Pillar 2.1: Improving Investment Climate

(v)Execute an agreement with a concessionaire for devising and running the Edo State Geographical Information System (EGIS).

Completion of First phase of EGIS including an Electronic Data Management System, and Land Information System

Increase state-wide access to EGIS by establishing regional offices of EGIS in Ekpoma (Edo Central) and Auchi (Edo North)

Met A concession agreement was signed between Edo state and a private service provider and the project had taken off. However, the agreement broke down in late 2013 and implementation of the EGIS was delayed. Nonetheless, the state remains committed to this reform and has contracted a new service provider. Work on the GIS is now in progress.

Pillar 2.2: Improving Quality of Education

(vii)Piloted Education Management Information System (EMIS) in at least one secondary school in three selected local government authorities (LGAs)

Roll out EMIS to all 18 LGAs

Publish Education Statistical Report based on decentralized system

Met As a DPO-1 prior action, the government piloted the EMIS in 3 LGAs. Informed by lessons learnt from this pilot, the state has rolled out the EMIS to cover 50 schools in up to 12 LGAs in the state

(viii)Establish School-Based Management Committees with broad representation in Technical and Vocational Education Institutions to carry out some of the responsibilities decentralized to the institution level

Operationalize established School Based Management Committees through the development of an improvement plan and provision of budget.

Met

The state has gone ahead to operationalize the established School Based Management Committees which now develop annual TVET school improvement plans. As a prior action for the second operation, budgetary provision was made in the 2015 state budget for implementation of the 2015 plans.

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2.2 Major Factors Affecting Implementation

21. The State Government remained committed to the implementation of the reform program despite a year’s delay in the disbursement of the first tranche of the Bank’s programmatic support. The national external borrowing plan for 2012, which included the DPO, was not approved by the National Assembly6 that year. The FESDPO became effective on 28th June 2013 and was disbursed in August 2013. During this period however the State Government undertook policy reforms that were considered critical for the achievement of the triggers under the Second Edo State DPO (SESDPO). The delayed disbursement however created a financing gap for the State Government and hence caused some challenges for the State’s fiscal operations in 2012.

22. Second, changes in policy at the federal government level posed some challenges to the maintenance of fiscal sustainability in Edo State. The amendments of the Personal Income Tax Act (PITA) aimed to reduce the economic burden on low to middle income taxpayers by lowering tax rates and requiring tax authorities to obtain a court order before confiscating a taxpayer’s assets negatively impacted on the tax revenue from personal income taxes to the State Government7. It also hampered tax recovery efforts. To maintain fiscal sustainability the State Government had to find innovative ways of growing the IGR and to suspend some infrastructure spending.

23. Third, infrastructure bottlenecks, including ICT capacity and network connectivity constraints have slowed down the pace of implementation of the ICT-related reforms. There were some delays in the publishing budget execution information online due to capacity constraints. As prior actions for the DPO-1, State Government published in government gazette and online, quarterly budget execution reports disaggregated by MDAs and line items and also initiated a system of regularly publishing procurement awards above N10m. However there were delays in ensuring that these types of information were put online on a regular basis. The pace of the roll out of the IFMIS to other MDAs has also been affected by network connectivity constraints.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization:

24. The State Government has consistently utilized the M&E data pertaining to fiscal sustainability to inform its resource allocation, expenditure policy decisions and debt management. Most of the policy actions could be tracked easily because of the use of clearly spelt out indicators. To ensure alignment with country-owned priorities, the process by which the program implementation was tracked was based on reviews of data provided by the Government’s Economic and Strategy Team. This was true for policy actions which aimed at maintaining fiscal

6 Whilst US$ 50m of the US$75m was approved in the external borrowing plan of 2011, balance of US$25m remained unapproved by October 2012 (Aide memoire, October 2012). 7 The amended PITA was signed by the President in 2011 but it took effect from 2012.

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sustainability and the management of budget and PFM reforms. The former relied on the fiscal sustainability framework while later relied on selected indicators within the PEFA framework.

25. The State Government relied on the M&E data pertaining to fiscal sustainability to inform its resource allocation; however that of monitoring investment climate and quality of education were relatively weak. The government regularly monitored the fiscal deficit, IGR collections and adjusted expenditures (wage, overhead, and capital) accordingly. The debt sustainability indicators have been employed to inform the government’s debt service burden, a profile that is suitable for maintaining long-term debt sustainability. However M&E framework monitoring progress in implementing reforms in the registration of investment land and that of quality education were not readily available to policy makers. This is now being corrected as the coordination M&E framework is being established at the office of the Government’s Economic and Strategy Team.

2.4 Expected Next Phase/Follow-up Operation (if any)

26. The new programmatic series beginning with the Edo State Fiscal Improvement and Service Delivery Development Policy Operation (ESFISDO) is expected to be approved by the Board in April 2015. The program development objectives of the new series and pillars are close to those of the FESDPO. The first pillar focuses on further improving fiscal sustainability through improvements in IGR and reducing expenditure leakages especially through the payroll; while the second pillar focuses on further improving budget institutions and practices. Reform policies under Pillar 3 focus on changing the regime of land transaction costs to make them more competitive while pillar 4 focuses on policy actions for improving the quality of education; including the involvement of the established School-based Management Committees at the basic education level in the monitoring of teacher and pupil attendance at schools and establishing partnership arrangements between the technical and vocational education institutions and the private sector to improve the relevance of TVET education.

3. Assessment of Outcomes

27. Assessment of program outcomes after the implementation of FESDO was not anticipated because it was intended to be the first of three in a programmatic operation. While the ICR was planned at the end of the series, the delay of the second operation procedurally called for an ICR. There were no monitoring indicator targets set for the end of the first operation. The assessment of the outcomes has thus been based on the results indicator targets for the end of the second operation. This therefore renders the assessment ambitious to the extent that results in some of the DPO areas could not be realistically expected after the first operation. The assessment takes stock of progress in implementing reforms over the period 2012 to June 2014 when the FESDPO ended. For results indicators that could only be measured at the end of the year, December 2013 was the cut-off date.

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3.1 Relevance of Objectives, Design and Implementation

28. The objectives of the program were highly relevant because they were strongly aligned with the development objectives of Edo State Strategic Plan. The success of State Government in improving upon infrastructure development and service delivery was possible because of improved efficiency of government spending and increased fiscal space for capital spending, which were financed mainly by increased IGRs and borrowing. The first pillar of the DPO program supported analysis and policies to ensure that Edo State’s medium-and longer-term fiscal and debt position remained sustainable. The second pillar supported improvements in comprehensiveness, transparency and accountability in budgeting and use of government resources with the aim of enhancing the quality of public expenditure. The third and fourth pillars supported improvement in investment climate and quality of education, thus leading to increased private investment, economic growth and enhanced employability of the people.

29. Overall, the design of the program is highly satisfactory in terms its support of the government’s reform agenda. The design of the program (reform pillars and actions, implementation capacity and financing instrument) was also highly relevant in terms of its support to the government’s reform agenda and contribution to the achievement of the CPS objectives. The reforms to improve budget planning and preparation, budget execution and the investment climate and quality of education were critical to Edo State’s development objective; that of accelerating infrastructure development, as well as promoting private investment and job creation.

3.2 Achievement of Program Development Objectives

30. This section evaluates the achievements of the program development objectives (PDO) based on contributions from the reform pillars. The PDO covered two main policy areas: (i) improve the management of public resources in implementing an infrastructure-oriented development strategy and (ii) improve the institutional and policy environment for growth and job creation in a socially accountable manner. The success of Edo state’s government in improving infrastructure development and services delivery to its people involved large increases in capital expenditures, financed largely by increased internal revenue generation and borrowing. In this regard the first pillar of the DPO program, supported analysis and policies to ensure Edo State’s debt position remained sustainable in the medium to long term. The second pillar supported improvements in transparency, accountability and efficiency of government expenditures, with the aim of enhancing the quality of public expenditure and consequently that of public services. Under third pillar, improvements in the investment climate would contribute to increased private investment and economic growth, and thereby lead to greater IGR in future and job creation. The fourth pillar supported improvements in the quality of education especially in the area of basic education, technical and vocational training. This pillar would therefore contribute to the acquisition of employable skills and consequently lead to more employment and better living standards in Edo State.

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31. Some critical policy actions were implemented in order to improve the institutional framework for the management of public resources. First, the state’s payroll system was sanitized by putting in place an Oracle-based human resource system that captured biometric data of all civil servants that was then used in monthly payroll calculation. Secondly, a new procurement law was enacted and a more transparent system of procurement was introduced. Thirdly, a new Oracle-based system of processing financial transactions was introduced. Improving the financial management system in Edo State contributed to effective budget management, control of the size of payroll, and the creation of fiscal space for infrastructure spending. The capital share of annual budgets increased from 42 % in 2007 to 58% in 20128.

32. Similarly, some critical policy actions were also undertaken to create a better environment for growth and employment creation. First, measures were taken to improve access to investment land by publishing improved land information on the website. Improved access to land was critical to improving private sector investment, and hence, growth and job creation. Secondly, two reform initiatives were introduced to improve the quality of education – one focused on improving education management information and the other on improving the governance of technical and vocational education institutions through the establishment of school based management committees. Improved quality of education was to have a dual positive impact - improve the supply of skilled labor force for the private sector, which would in turn lead to growth and job creation, but also improve people’s employability.

33. The first objective of the PDO, on improving management of public resources was overall achieved as seen by the following evidence: the target on percentage of public contracts above the threshold using competitive practices was exceeded as it reached 100 percent although the target was only 35 percent against a baseline in 2008 of 20 percent. Similarly, the target on timeliness in the submission of audit reports to the National Assembly was exceeded as it improved from a lag of 15 months after the end of the fiscal year, to 9 months, against a target of 10 months. In addition, the target on the share of audit queries that were resolved was also exceeded as it increased to 85 percent, from a baseline of 0 percent and against a target of 25 percent. However, target on reducing the deviation of aggregate expenditure out-turns compared to the original approved budget was not achieved as it was 23.7 percent compared to the target of 10 percent band and against a baseline of 16.9 percent. This was mainly due to shortfalls in projected revenues.

34. The second objective of the PDO, on creating a better environment for growth and employment creation was also achieved based on the following evidence: First, the target on the number of days it takes to register property was reduced from 69 in the baseline to 30 days fully achieved according to the program target. Secondly, in the area of improving the quality of

8 Innovations in Infrastructure Development A Study of Capital Spending in Edo State, pp. 6 World Bank, (January, 2014)

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education, the target on number of accredited courses in TVET institutions was fully achieved as it was 24, against a program target of 24 and a baseline of 21. However, the target on the percentage of certified female science teachers located in rural areas was not achieved as it was 11% against a target of 15% and a baseline of 13%. This was because the critical action to improve the situation had not yet been implemented at the time of the assessment – actual rollout of an incentive scheme for attracting female teachers in critical subjects to rural areas had not yet been implemented.

35. Overall, the achievement of the PDO is rated as moderately satisfactory. About 80 percent of the program development objectives were assessed to have been either exceeded, fully achieved, or substantially achieved. The assessment of achievement of program development objectives was based on the ten key results indicators, which took into account Government efforts at reforms and the achievement of outcome indicators. Overall s eight result indicators reached or surpassed their targets; namely the growth rate of IGRs, the maintenance of the ratio of payroll expenditure to total expenditure, timely submission of audited financial accounts to the State House Assembly, the percentage of audit queries resolved, publication of public contracts above N10m, the number of accredited TVET courses, reduction in number of days to register investment land and the reduction of dropout rate for female pupils in rural areas. . Two indicators were not achieved: namely percentage of expenditure outturn compared with original budget estimate and the ratio of female teachers in rural areas.

36. Overall progress in the achievement of the majority of the key program objectives were assessed to have contributed to development outcomes; namely increased inflows of private investment to the State, increased employment opportunities, increased IGR and improvement in infrastructure development.

Pillar 1- Ensuring Fiscal Sustainability

37. The Edo State budget was firmly anchored in a fiscal sustainability framework in order to ensure that the State’s fiscal operations were sustainable in the medium to long term. This pillar aimed at promoting IGR growth and ensuring efficient management of the payroll; thereby creating fiscal space in order to support infrastructure development and service delivery-particularly in health, education, transport and environment. This objective was considered fully achieved- (Table 2).

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Table 2: Achievement under Pillar 1- Fiscal Sustainability Indicators Baseline and Targets Achievements at the end of

the Program (2013) (i) Real growth rate in IGR

Baseline(2010): 38.9% Target: 6.5%

Fully achieved. Real IGR registered a growth rate of 18.9% in 2013.

(ii) Share of wage bill to recurrent expenditures.

Baseline (2010):50.8% Target: 60%

Fully achieved The ratio of wage bill to recurrent expenditures was 49.3% in 2013 well within the target of no more than 60%.

Source: Edo State Government and World Bank Staff’s estimates

38. Government efforts to broaden the income tax net and other non-tax revenue sources contributed substantially to IGR growth. The real IGR growth rate increased from -18.6% in 2012 to 18.9 % in 2013. The enactment of the Personal Income Tax Act (PITA) by the Federal Government in 2012 affected the state government’s performance. The situation improved in 2013 through aggressive tax drive as well as other tax administration and policy reforms. The state government also made efforts to raise IGRs by broadening the sources of IGRs in 2013. The Board of Inland Revenue (BIR) embarked on a medium-term reform program that increased revenues by promoting voluntary compliance with tax laws and developing effective mechanisms for collection of taxes and levies. The IGR growth in 2013 was largely attributable to the increased share of revenues from “fines and fees”.

39. The objective of maintaining the share of payroll in recurrent expenditure was fully achieved. In 2013, payroll performance, which was 49.3% of total expenditures, was an improvement over that of the baseline record of 50.8%. Edo State introduced the biometric registration of public sector employees, thus making it possible to monitor employee recruitment, management of salaries and to control the phenomenon of ghost workers.

Pillar 2- Improving Public Budget Institutions and Practices,

40. Policy objectives under pillar 2, which sought to improve upon the transparency and accountability in the use public resources- were substantially achieved. The sub components under this pillar were: (i) establishing a strong PFM institutional platform; (ii) improving practices in budget planning and preparation; (iii) improving practices in budget execution and monitoring; and (iv) improving practices in accounting, audit, and external oversight. Table3 below summarizes the program performance under each of the results indicators for pillar 2.

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Table 3: Achievements under Pillar 2- Budget Institutions and Practices Indicators Baseline and

Targets Achievements at the end of the Program (2013)

(iii) Percentage of public contracts above threshold awarded through competitive process.

Baseline:<20% Target: 35%

Fully Achieved. A database of all contracts awarded above N10m was compiled for the period 2009-2012; 100% percentage of all contracts awarded were done through competitive processes, given that all contracts above N10m were advertised in the print media and bids subjected to competitive criteria before finally awarded.

(iv) The percentage deviation of aggregate expenditure out-turns compared to the original approved budget.

Baseline:16.9% Target:10%

Not achieved. The percentage deviation of aggregate expenditure out-turn was -23.7% in 2013 (i.e. actual expenditure was short of budget by 23.7%) compared to a target of 10% deviation. The wide deviation margins were as a result of shortfalls in projected revenues.

(v) Number of months between end of fiscal year and the State Auditor General submitting the Audit Report to the SHA.

Baseline:15(months) Target:10(months)

Fully achieved. Number of months between end of fiscal year 2013 and State Auditor General’s submission of Audit report to State House Assembly (SHA) was 9-(months).

(vi) Percentage of audit queries that have been resolved.

Baseline: 0% Target:25%

Fully achieved. 85 % of queries raised by the 2012 Audit report were resolved in 2013. This represents a significant improvement over the previous years where state had a backlog of outstanding audits.


41. As a first step towards achieving the outcomes under pillar 2, the State Government enacted the new Public Procurement law, which provides the legal framework for coordinating all procurement activities at the MDAs and for ensuring value for money in state spending. In a bid to improve upon the transparency in the use of public resources, all contracts above N10m awarded since 2009, were compiled in an electronic database and closely monitored. The database showed the relevant MDAs, names of contractors, contract sum and date of contract award. All contracts above N10 million were duly advertised and contractors selected based on competitive criteria set by the state government. The State team is therefore expected to expand the database to cover all MDAs and to include information on the type of procurement method used in awarding the contracts.

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42. In order to ensure credibility of the budget, Government was expected to ensure that total expenditure compared to the budget stayed within 10% deviation band – this objective was not achieved. Actual expenditure fell short of budgeted expenditure by 23.7%, thus exceeding the target of 10% deviation band. This was due to non-realization of projected revenues, particularly federation account transfers. It is worthy of note that large expenditure deviations are prevalent among all states in Nigeria, including the federal government due to revenue shortfalls (World Bank PEMFAR Assessments 2010-2013). To improve budget credibility however, the Government team could have been more conservative in its revenue forecasts based on its historical knowledge of revenue flow patterns. It is however also worthy of note that is the practice of rationalizing expenditure based on lower-than-projected revenues is good public expenditure management practice as government is to align expenditure closely with mobilized revenue. The alternative would have been to maintain projected expenditure despite a shortfall in revenue and ramp up borrowing at a much faster rate.

43. Ensuring improved accountability through timely submission of the annual audit report to the State House Assembly was fully achieved. However the resolution of audit queries by Auditor General was fully achieved. About 85 percent of queries raised in the 2012 audit report were resolved in 2013. This represents a significant improvement over the previous years, when the state had a backlog of more than 200 unresolved cases unresolved. The improvement in resolving audit queries could be attributed to the state government resolve to ensure accountability and efficiency in the use of public resources.

Pillar-3 Improving the Investment Climate

44. The objective of the improving the investment climate pillar was to attract private investment and thereby increase employment opportunities and to increase IGR. The program focused on reducing the number of days to register investment land and obtain a C of O. This objective was fully achieved (Table 4). Edo State Government sees improved private sector investment in the state as critical to its efforts to promote growth, create employment opportunities, and increase IGR. The objective of pillar 3 was to ensure transparency in land acquisition by developing an electronic database of lands under the EGIS project and to reduce the time for registering land. The number of days it took to register a land was expected to have dropped from 69 to 30days. This was based on reforms that had been undertaken to reduce the number of steps and duration of each step in registering investment land.

45. The indicator however excluded the average number of days it took the Governor’s office to sign the Certificate of Occupancy (C of O). Thus while this indicator was fully met based on the administrative processes at the state Ministry of Lands and Survey, a more ideal measure would include the last step of obtaining the Governor’s signature. The introduction of service standards which regulates the number of days it takes for each stage in the registration process is a good way to sustain the progress.

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Table 4: Achievements under Pillar 3- Improving Investment Climate Indicator(s) Baseline and Targets Achievements at the end of the

Program (2013) (vii) Total number of days to register a property in Edo State

Baseline:69 days (2010) Target:30 days

Fully achieved. The number of days required to register an investment land has reduced to 30 days. This however excludes the time it takes to obtain the governor’s sign-off.


Pillar-4 Improving Quality of Education

46. The program objectives under this pillar (Table 5) were to (i) increase the number accredited courses in the technical and vocational institutions, (ii) improve the share of female science teachers in rural areas, and (iii) reduce the drop-out rate of female pupils in rural areas. The first PDO indicator under this pillar was to increase the number of accredited courses in the technical and vocational training institutions-this indicator was substantially achieved.

47. The number of technical and vocational courses with accreditation was expected to have increased from 21 (baseline) to the target of 24 after the second operation. To increase the number of accredited courses, government invested in the training of teachers, ensured adequacy of staffing and rehabilitated facilities in a number of institutions in order to satisfy the criteria for accreditation of the different courses. Second, School Based Management Committees have been established for the TVET institutions to improve governance at the institutional levels and school improvement plans for each of the TVET institutions were been developed.

48. The ratio of the certified female science teachers among teachers in the rural areas declined from a baseline level of 13% to 11% in the 2012/13 academic year and relative to the adopted target of 15%; indicating under-achievement on this indicator at face-value. However, as was previously indicated, the target result for this indicator could not have been achieved after just the first operation. It was under the second and third operations that hiring of more female teachers was to take place. Under the first operation, an action plan for this was developed. The assessment of this indicator was therefore deemed inconclusive. The state Government had recently gone ahead to put in place incentive schemes to attract female science teachers to the rural areas and a hiring process has recently been concluded. The incentives put in place include the provision of accommodation and salary top-ups of 20-40 % of basic salary. On the other hand, the female dropout rate of pupils at the primary level in the rural areas was 4.9%, thus staying within the maximum target of 8%. This indicator was assessed to have fully achieved its target.

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Table 5: Achievements under Pillar 4- Improving Quality of Education Indicator(s) Baseline and

Targets Achievements at the end of the Program (2013)

(viii) % share of certified female science teachers located in rural areas.

Baseline:13% Target:15%

Not achieved: The ratio of female science teachers in rural areas as at 2012/13 academic year was 11%, This indicator was not because the rollout of an incentive scheme for attracting female teachers in critical subjects to rural areas had not yet been implemented at the time of the assessment.

(ix) Reduction in drop-out rates of female pupils at basic education level in rural areas

Baseline:11% Target:8%

Fully achieved: Female dropout rate of pupils at the primary level in the rural area was on the average 4.9%, thus staying within the maximum target of 8 %.

(x) Increase in the number of accredited courses in technical and vocational education institutions in Edo

Baseline:21 Target:24

Fully achieved. The number of TVET courses with accreditation has reportedly increased from 21 to 24 during the period of reform implementation. Following improvements in governance structures and revamping of infrastructure in a number of the TVET institutions in early 2014, the National Board for Technical Education (NBTE) visited Edo state to re-accredit some of the programs in these institutions.


49. Overall, significant progress has been made in improving the quality of education at both basic and TVET levels based on the expected outcomes from improving the quality of education under the operation. At the end of the program period, it was expected that reforms for improving the quality of education supported by the DPO will result in (i) better governance at institutional level that will lead to an increase in the number of accredited courses in technical and vocational education institutions in Edo; (ii) increased share of certified female science teachers in total number of female teachers located in rural areas; and (iii) reduction in drop-out rates of female pupils at basic education level in rural areas. These were substantially achieved after the first operation. More generally, Edo state has improved significantly in terms education sector performance. The total pass rate of students obtaining five credits including English and mathematics in WAEC over the past three years shows that Edo remains in the top five

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performance compared to all other states; It has improved from a score of 48.14 in 2011 to 56.25 in 2013.

The Cross-Cutting Social Accountability Theme 50. A cross-cutting theme across the policy areas supported by the FESDPO was that of social accountability. Among actions to promote social accountability under the operation were plans to strengthen participatory budgeting, particularly in the selection of capital projects; improving public awareness of public procurement decisions, especially during and after the selection of contractors; publishing the budgets, in-year budget execution reports and the audited financial statements of the state government. During FESDPO implementation period, the state government made good on its plans to ensure citizen participation in capital project selection. This was achieved through the regular town hall meetings the governor and his team usually throughout all the local government areas in the state. At these meetings, community leaders are able to communicate to the government, the capital project needs of their communities. In public procurement, journalists and other civil society representatives still get invited to witness the opening of bids and the government introduced a system of regularly publishing awards of contracts above N10 million.

51. The government is yet to start publishing in-year budget implementation reports as it still considers these as “management reports”. However, the annual budget and end-of-year financial statements were regularly published on the state’s website, but more recently also on its open data portal. It is worthy of note that the state government, in in its bid to build a strong platform for social accountability, unveiled the open data portal in 2013 which is to some extent, interactive and allows the state to better open up its activities to public scrutiny. This initiative has become a reference point for other states in Nigeria; including the federal government.

3.3 Justification of Overall Outcome Rating

52. Overall, the outcome of the FESDPO is rated as Moderately Satisfactory. This is based on highly satisfactory relevance of the objectives, and design, satisfactory implementation of program reforms and the moderately satisfactory rating for the PDO achievement.

3.4 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

53. The implementation of the reform agenda of the State Government, supported by the DPO, has brought visible improvements to the lives of its citizens. Nigeria does not provide state–level data on GDP or consumption aggregates. However anecdotal evidence suggests that with increased infrastructural spending Edo State, the level of economic activities in Edo State have increased coupled with increased employment opportunities around infrastructure-related jobs. There are also indications of increased investor confidence in the state as demonstrated by

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increased demand for investment property. In 2014, Dangote Nigeria Plc. Requested for, and was awarded 50,000 hectares of land to establish a rice plantation where rice will be grown and fully processed. Also, existing companies in the state are expanding their operations. For example, Okomu Oil Palm Plc. And Presco Nigeria Plc. Have requested for additional land for increasing their oil palm production capacities. Also, Nigerian Breweries Plc. is significantly expanding its operations in the state. In October 2014, Azura Power Holdings Ltd. conducted the ground-breaking for a new 450 megawatts Independent Power Project (IPP) on the outskirts of Benin-city. The first phase of the plant, targeted to come on stream in 2017, is forecast to create at least 1,000 jobs during construction and operation. In 2012/13 the net primary school enrollment rate and population using an improved water source have improved to 76.6 percent and 72.8 percent respectively from 70.6 and 59.3 percent in 2008.

(b) Institutional Change/Strengthening

54. The program contributed to institutional changes and capacity development. The FESDPO program complemented by technical assistance from SEEFOR institutionalized the use of an IT platform to process financial transactions. The program has also laid a solid foundation for building the procurement and audit systems and institutions. This has contributed directly to greater transparency, accountability, and efficiency in the application of public resources. The incremental approach to the reform under the programmatic design is helping to build the long-term capacity of government officials in budget preparation and execution, reinforced by the annual budget processes.

(c) Other Unintended Outcomes and Impacts (positive or negative, if any)

55. The use of consultants to manage the IT- based components of the reforms had the advantage of kick- starting the implementation of the reforms. However the weak IT capacity and limited ICT infrastructure slowed down the pace of rolling out the IFMIS to all MDAs. Thus, in some cases, dual systems (manual and IT-based) for processing financial transactions have existed. Thirdly, over time there would be the challenge of how to internalize the role of the IT consultants in the civil service structure.

3.5 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A

4. Assessment of Risk to Development Outcome

Rating: Moderate

56. The risk to the development outcome – macro-fiscal, political and implementation risks – is moderate. Changes in the macro and fiscal environments in Nigeria are outside the control of the Edo State Government and pose a significant risk to program outcomes. The continuous decline in international oil prices, for instance, could lower federal allocations to Edo

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state and create further shortfalls in revenue projections and therefore impact negatively on medium-term fiscal sustainability position of the State.

57. Political risk associated with the upcoming State House and Governorship elections in 2015 and 2016 respectively are considered moderate. The participatory nature of reforms undertaken so far has strengthened the commitment of all relevant stakeholders in Edo State. The outcome of pending elections is therefore not likely to change the continued implementation of the State’s development agenda. Under this environment, the risk is assessed as moderate as the new government will likely continue the reform program.

58. Finally, a key implementation risk is the lack of IT capacity within the civil service. Most reforms which require IT skills have been contracted out to experts in the private sector. However, in order to operationalize the IT platforms that have been supported by the program, the civil service will need to build capacity in IT skills. A number of program outcomes, such as the successful and efficient working of all financial modules and GIS, depend to a large extent on motivated, well-paid and trained civil servants with requisite IT skills.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry Rate: Satisfactory

59. The design of the program was informed by comprehensive analytical work, and implementation was supported by technical assistance where possible. The preparation of the FESDPO benefited from extensive studies conducted by the Bank and other donors during 2007-2010 including the PEFA Assessment of the PFM system over the period 2006-2008. These helped inform the reform program under fiscal sustainability, budget planning and preparation and budget execution pillars. The Investment Climate pillar, which was guided by the ongoing Investment Climate Program and sub-national Governance Investment Climate, focused more on administrative procedures.

60. There were moderate shortcomings related to ensuring quality at entry. The risk to IGR performance due to changes in income tax policy by the federal government was not anticipated. Secondly, the design of the results framework had some weaknesses; particularly the baseline information for some key development outcome indicators such as the proportion of contracts (above N10m) awarded on competitive basis, the percentage of female teachers in rural areas and the percentage drop out rate of female pupils were not easily verifiable during the assessment.

(b) Quality of Supervision Rating: Satisfactory

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61. The Bank team included the required expertise, namely: PFM Specialists, Procurement Specialists, M&E Specialist, Social Development Specialist, Education Specialist and PSD Specialist. The team maintained the policy dialogue with the government even in the absence of the second operation. The engagement focused mainly on progress in implementing the prior actions for the FESDPO and triggers for the SESDPO. The Implementation Support and Results (ISR) reports did not however present the values for all M&E indicators; particularly those indicators tracking progress in the improvement of quality of education.

62. The progress in the implementation of the program reforms benefitted from the frequent supervision missions by both the DPO team and SEEFOR team. The DPO team supervision missions, which interfaced with that of the SEEFOR team resulted in the Bank team visiting the borrower almost on quarterly basis. This helped to maintain the policy dialogue at the DPO level, while technical assistance provided at the level of SEEFOR contributed to the effective rollout of the automation of the public financial management system, as well as enhancing public access and engagement through information and communication technology and Edo Open Data Portal.

(c) Justification of Rating for Overall Bank Performance

Rating: Satisfactory

5.2 Borrower Performance

(a) Government Performance

Rating: Satisfactory

63. Edo State Government, the implementing agency for the operation, demonstrated firm commitment and readiness to implement the agreed prior actions for FESDPO and the broad reform agenda. The overall reform program, was coordinated by the Ministry of Finance (MoF) and the Fiscal Governance and Project Monitoring Office (FGPM). Besides, there was broad-based commitment shared by all stakeholders in the various MDAs from the highest level: from the Governor of Edo state to the second, third, and forth levels of government (Commissioner, Permanent Secretary, and Director). All prior actions were implemented by key stakeholders in MDAs without delays before the Board discussion. The Government also sustained reforms beyond prior actions in order to achieve the twin of objectives of both the program objectives and development agenda under the Edo SSP.

64. However the use of M&E data for the government’s decision-making and resource allocation was uneven. While the government regularly used M&E data under the first two pillars to inform the maintenance of fiscal sustainability and budget institutions and practices, the use of M&E data to strengthen the investment climate reform and improvement in quality of education was weak. In particular, while the number of steps taken to obtain a CofO had been streamlined, there was no clear mechanism for tracking the number of days taken to obtain a CofO, from the

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date of application to the date of obtaining the Governor’s. With respect to the pillar on quality of education there was no central database for capturing the key development objectives under this pillar, even though the data could be pulled out manually from administrative records.

6. Lessons Learned

65. A key lesson is that the commitment of the State Government to reforms is critical to the success of the state-level subnational DPOs. Given that there are several implementation risk factors that are beyond the State. Despite the delay in disbursement of the FESDPO, the Edo State Government continued to drive the reform program by finding innovative ways of growing IGRs, strengthening budget preparation, budget execution and improving the investment climate. The State Government’s desire to improve upon the livelihood of its people through improved service delivery and infrastructure development was aligned with the achievements of the program’s development objectives, which reinforced the State’s commitment to implementation benchmarks and triggers. For example, the State Government recognized the positive relationship between improving investment climate and attracting private investment to Edo State. Increased private sector investment would in turn contribute to the growth of IGRs, hence more capacity to spend on infrastructure development and service delivery.

66. The use of DPOs at the state level to promote good governance and economic growth is increasingly motivating other State Governments in Nigeria to sustain their reform-oriented programs. Policy reforms under FESDPO have had a positive impact on Edo State, similar to the success recorded under the DPO for Lagos State9. The key ingredient for success is the government is commitment of the state government to institutional reforms and a dedicated team of professionals to implement reforms.

67. The existence of complimentary projects with funding for technical assistance supported the implementation of prior actions and enhanced sustainability program reforms. The SEEFOR project, contributed to the implementation of FESDPO prior actions and helped achieve the expected outcomes under three out of the four pillars; budget institutions and practices and improvement in investment climate and quality of education. Reforms under these pillars had components that required ICT platforms and required the hiring skills that were outside the public services. These activities were funded under the SEEFOR project. The policy reforms envisaged under the FESDPO therefore moved forward even in the absence of a programmatic engagement as evidenced by progress in implementing the prior actions and part of the subsequent DPO- 2 triggers.

68. The use of private sector ICT experts helped with the speedy implementation of public sector modernization components of the DPO such as the IFMIS and EMIS. However the risks associated with internet connectivity and in-house ICT capacities have to be addressed in

9 ICR Report for First Lagos State Development Operation, July 2014.

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order sustain such reforms. The FESDPO implementation was supported by the SEEFOR project (Component on Governance and Capacity Building) to provide support in a number of areas, including the implementation of the Oracle-based Integrated Financial Management Information System and the creation of an electronic database on public contract awards. The maintenance and roll out the ICT platforms to other MDAs have however progressed at a slower pace because of less-than-reliable internet connectivity and inadequate ICT capacity within the public sector.

69. Mainstreaming the M&E system during program implementation is critical for ensuring effective monitoring of progress being made on key development objective indicators. The existence of a results framework per se does not guarantee the availability of M&E information needed by policy makers on real-time basis during the project implementation. For example in the case of monitoring progress in achieving quality education, the indicators being monitored were not captured in the EMIS. The result was that information on progress being made under this pillar could only be obtained after a lag because of the need for a long search before the information can be put together for policy makers.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Borrower/Implementing agencies

70. The government counterparts at the MoF and FGPM expressed their appreciation regarding the role FESDPO has played in government’s reform program. The funding support under FESDPO provided a relatively cheaper development financing option compared to other sources such as government bonds. Additionally, the technical assistance associated with FESDPO reinforced government’s commitment to implementing PFM reforms, especially with the budget preparations, budget execution, procurement and audit. Implementing agencies also provided factual information to the drafting of the ICR report. Summary of the state government’s comments on the draft ICR is included in annex 4 of the report.

(b) Cofinanciers N/A

(c) Other partners and stakeholders N/A

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Annex 1 Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

(b) Staff Time and Cost

Stage Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending

Total: Supervision/ICR

Total:

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Annex 2. Beneficiary Survey Results

(if any) N/A

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Annex 3. Stakeholder Workshop Report and Results

(if any) N/A

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Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR

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Annex 5. Comments of Cofinanciers and Other Partners/Stakeholders

N/A

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Annex 6. List of Supporting Documents

1. Country Partnership Strategy for Federal Republic of Nigeria FY 2010 -2013

2. Edo State DPO- identification Mission ( November ,2010)

3. Edo State DPO –Minutes of PCN Review Meeting ( March 2011)

4. Edo State DPO –Decision Note (October, 2011)

5. Edo State DPO –Implementation Status Results Report (November,2012)

6. Edo State DPO –Implementation Status Results Report (June , 2013)

7. Edo State DPO –Implementation Status Results Report (March, 2014)

8. Edo State DPO –Implementation Status Results Report (June 2014)

9. Edo State PEMFAR Assessment, World Bank , June 2010

10. Edo State Strategic Plan (2010-2020)

11. Edo State Fiscal Improvement and Service Delivery Operation, February 2015

12. Edo State Financial Audit Report 2013

13. First Lagos State Development Policy Operation, Program Document , World Bank, July 2014

14. First Lagos State DPO Implementation Completion and Results Report, World Bank, (July 2014)

15. Innovations in Infrastructure Development: A Study of Capital Spending in Edo State, World Bank, (January, 2014)

16. Nigeria Partnership Strategy , World Bank (2010-2013)

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MAP

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Document of The World Bank€¦ · Document of The World Bank. Report No: ICR 00003285 ....

Documents

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