Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 49974-NG

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

IN THE AMOUNT OF SDR 119.6 MILLION (US$190.0 MILLION EQUIVALENT)

AND

A PROPOSED TRUST FUND GRANT

FROM THE GLOBAL ENVIRONMENT FACILITY

IN THE AMOUNT OF US$4.5 MILLION

TO THE

FEDERAL REPUBLIC OF NIGERIA

FOR THE

LAGOS URBAN TRANSPORT PROJECT 2

JUNE 2, 2010

Transport Sector Country Department AFCW2 Africa Region

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

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CURRENCY EQUIVALENTS (Exchange Rate Effective October 30, 2009)

Currency Unit = Nigerian Naira

US$1 = 151 Nigerian Naira US$1 = SDR 0.6289

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AFD Agence Française de Développement (French Development Agency) BCR Benefit-Cost Ratio BPP Bureau of Public Procurement BRT Bus Rapid Transit CAS Country Assistance Strategy CBO Community Based Organizations CEO Chief Executive Officer CFAA Country Financial Accountability Assessment CMS Church Missionary Society CO Carbon Monoxide CO2 Carbon Dioxide CBD Central Business District CPAR Country Procurement Assessment Review CPS Country Partnership Strategy CQS Consultants’ Qualifications Selection CRM Customer Relationship Management DA Designated Account DfID United Kingdom Department for International Development DsTV Digital Satellite Television EIA Environmental Impact Assessment EMP Environmental Management Plan ERGP Economic Reform and Governance Project ESMF Environmental and Social Management Framework FAD Financial and Accounts Department FBC Lagos NURTW (First BRT) Cooperative Society Limited FGN Federal Government of Nigeria FM Financial Management FMS Financial Management System FPM Financial Procedures Manual GEF Global Environment Facility

FOR OFFICIAL USE ONLY

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

GHG Greenhouse Gas GIS Geographic Information Systems IAU Internal Audit Unit IBRD International Bank for Reconstruction and Development IC Individual Consultant ICB International Competitive Bidding IDA International Development Association IDF Institutional Development Fund IFRs Interim Unaudited Financial Reports IRR Internal Rate of Return ISR Implementation Status Report ITS Intelligent Transport Systems LAMATA Lagos Metropolitan Area Transport Authority LASTMA Lagos State Traffic Management Authority LCDAs Local Council Development Areas LGA Local Government Area LRT Light Rail Transit LSG Lagos State Government LSMT Lagos State Ministry of Transportation LSMPT Lagos State Ministry of Public Transportation LSMWI Lagos State Ministry of Works and Infrastructure LSMWT Lagos State Ministry of Works and Transport LUTP Lagos Urban Transport Project M&E Monitoring and Evaluation MD Managing Director MDG Millennium Development Goals MOF Ministry of Finance MOT Ministry of Transport (or Transportation) MOW Ministry of Works NCB National Competitive Bidding NEEDS National Economic Empowerment and Development Strategy NGOs Non-Governmental Organizations NMT Non-Motorized Transport NPV Net Present Value NURTW National Union of Road Transport Workers OSP Operations Service Plan PDO Project Development Objective PEFA Public Expenditure Financial Accountability PEMFAR Public Expenditure Management and Financial Accountability Review PFM Public Financial Management PPP Public Private Partnership PRP Procurement Reform Program PRSP Poverty Reduction Strategy Paper QCBS Quality and Cost Based Selection RAP Resettlement Action Plan RPF Resettlement Policy Framework

SBD Standard Bidding Documents SIL Specific Investment Loan SOE Statement of Expenses TPU Transport Planning Unit US United States VKT Vehicle Kilometer Travelled WB World Bank

Vice President: Obiageli K. Ezekwesili

Country Director: Onno Ruhl Sector Director Inger Andersen

Sector Manager: C. Sanjivi Rajasingham Task Team Leader: Ajay Kumar

NIGERIA

Lagos Urban Transport Project 2

TABLE OF CONTENTS Page

A. STRATEGIC CONTEXT AND RATIONALE ......................................................................... 1

1. Country and sector issues ............................................................................................................... 1

2. Rationale for Bank involvement ..................................................................................................... 5

3. Rationale for GEF financing .......................................................................................................... 6

4. Higher level objectives to which the project contributes ............................................................... 7

B. PROJECT DESCRIPTION ........................................................................................................ 8

1. Lending instrument ........................................................................................................................ 8

2. Project development objective and key indicators ......................................................................... 8

3. Project components ........................................................................................................................ 9

4. Lessons learned and reflected in the project design ..................................................................... 10

5. Alternatives considered and reasons for rejection ........................................................................ 12

C. IMPLEMENTATION .............................................................................................................. 13

1. Partnership arrangements ............................................................................................................. 13

2. Institutional and implementation arrangements ........................................................................... 14

3. Financial Management Arrangements .......................................................................................... 14

4. Monitoring and evaluation ........................................................................................................... 15

5. Sustainability ................................................................................................................................ 15

6. Critical risks and possible controversial aspects .......................................................................... 19

7. Credit conditions and covenants................................................................................................... 20

D. APPRAISAL SUMMARY ....................................................................................................... 21

1. Economic and financial analyses ................................................................................................. 21

2. Technical ...................................................................................................................................... 22

3. Fiduciary ....................................................................................................................................... 22

4. Social ............................................................................................................................................ 24

5. Environment ................................................................................................................................. 25

6. Safeguard policies ........................................................................................................................ 26

7. Policy exceptions and readiness ................................................................................................... 27

Annex 1: Country and Sector Background ......................................................................................... 28

Annex 2: Major Related Projects Financed by the Bank and/or other agencies ................................. 44

Annex 3: Results Framework and Monitoring .................................................................................... 45

Annex 4: Detailed Project Description ............................................................................................... 56

Annex 5: Project Cost ......................................................................................................................... 68

Annex 6: Implementation Arrangements ............................................................................................ 69

Annex 7: Financial Management and Disbursement Arrangements .................................................. 79

Annex 8: Procurement Arrangements ................................................................................................. 94

Annex 9: Economic and Financial Analysis ..................................................................................... 106

Annex 10: Safeguard Policy Issues ................................................................................................... 117

Annex 11: Project Preparation and Supervision ............................................................................... 124

Annex 12: Documents in Project File ............................................................................................... 125

Annex 13: Statement of Loans and Credits ...................................................................................... 126

Annex 14: Incremental Cost Analysis .............................................................................................. 128

Annex 15: Country at a Glance ......................................................................................................... 136

Annex 16: Map ................................................................................................................................. 138

IBRD Map No. 37136

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NIGERIA

LAGOS URBAN TRANSPORT PROJECT 2

PROJECT APPRAISAL DOCUMENT

AFRICA

AFTTR Date: June 2, 2010 Country Director: Onno Ruhl Sector Manager: C. Sanjivi Rajasingham Sector Director: Inger Andersen Project ID: P112956 Environmental Assessment: B - Partial Assessment Lending Instrument: Specific Investment Loan

Team Leader: Ajay Kumar Sectors: General transportation sector (80%); Central government administration (20%) Themes: Other urban development (40%); Access to urban services and housing (50%); Regulation and competition policy (10%) Joint IFC: Joint Level:

Global Supplemental ID: P114762 Lending Instrument: Specific Investment Loan Focal Area: C-Climate change Environmental Assessment: B - Partial Assessment Supplement Fully Blended: Yes

Team Leader: Ajay Kumar Sectors: General transportation sector (100%) Themes: Other urban development (100%) Joint IFC: Joint Level:

Source Total (US$ million)

BORROWER/RECIPIENT 35.00

International Development Association (IDA) 190.00

Global Environment Facility (GEF) 4.50

French Development Agency (AFD) 100.00

Total 329.50

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Borrower: Federal Republic of Nigeria Responsible Agency: LAGOS METROPOLITAN AREA TRANSPORT AUTHORITY (LAMATA) Block C, 2nd floor, 1, Motorways Avenue Alausa, Ikeja, Lagos State Lagos State Nigeria Tel: 234-1-2702778-82 Fax: 234-1-2702784 dmobereola@lamata-ng.com www.lamata-ng.com

Estimated disbursements (Bank FY/US$ m)

FY FY11 FY12 FY13 FY14 FY15

Annual 15.5 61.5 70.0 30.0 13.0

Cumulative 15.5 77.0 147.0 177.0 190.0

GEF Estimated disbursements (Bank FY/US$ m)

FY FY11 FY12 FY13 FY14 FY15

Annual 1.0 1.5 1.0 1.0 0.00

Cumulative 1.0 2.5 3.5 4.5 4.5

Project implementation period: Start: October 29, 2010 End: June 30, 2015

Expected effectiveness date: October 29, 2010

Expected closing date: June 30, 2015

Does the project depart from the CAS in content or other significant respects?

Ref. PAD A.4. [ ]Yes [X ] No

Does the project require any exceptions from Bank policies?

Ref. PAD D.7.

Have these been approved by Bank management?

Is approval for any policy exception sought from the Board?

[ ]Yes [ X] No

[ ]Yes [ ] No

[ ]Yes [ X] No

Does the project include any critical risks rated “substantial” or “high”?

Ref. PAD C.6. [ ]Yes [X ] No

Does the project meet the Regional criteria for readiness for implementation?

Ref. PAD D.7. [ X]Yes [ ] No

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Project development objective Ref. PAD B.2., Technical Annex 3 The project is fully blended and co-financed with a Global Environment Facility (GEF) Grant. Some of the components will be financed and disbursed directly by the French Development Agency (AFD). The project development objectives are to: (i) improve mobility along prioritized corridors; and (ii) promote a shift to more environmentally sustainable urban transport modes. This will be achieved through a combination of traffic engineering measures, management improvements, regulation of the public transport industry, and expansion and enhancement of Bus Rapid Transport (BRT) system. Global Environment objective Ref. PAD B.2., Technical Annex 3 The project is fully blended and co-financed with a GEF Grant. The project development objective is to promote an incremental shift to more environmentally sustainable urban transport modes among users with relatively high carbon foot print. Project description Ref. PAD B.3., Technical Annex 4 The GEF is co-financing two of the four components with the objective to facilitate removal of barriers for sustained urban transport interventions. The components are: Component 1: Institutional development and capacity building: This component focuses on capacity strengthening of Lagos Metropolitan Area Transport Authority (LAMATA) for continuing to provide an overall vision and a strategic planning basis for transport planning, regulation, monitoring, and administration and coordination of sector-wide management; and building capacity of bus operators. This component would finance goods, works, consultants’ services, training, and operating cost for LAMATA to carry out its functions; and goods, training and consultancy services for bus operators. The GEF will also finance studies and training to develop public transport delivery capacity in Kano. Component 2: Improvement of public transport infrastructure and enhancement of traffic management systems: This component would finance BRT infrastructure construction and supervision, including interchange and traffic management, at Oshodi-Mile 2-Obalende, investments in Intelligent Transport Systems (ITS), and improvements in safety; pedestrian facilities; mass transit alternative analysis studies along five corridors; and development of bus feeder system including stations and terminals. The GEF component will specifically finance: a) BRT consultation, communications, and media strategy for better acceptance of the new approaches; and b) upgrade and rationalize system operation. The AFD component will finance BRT investments along Oshodi-Mile 12-Ikorodu corridor. Component 3: Improvement of Lagos State metropolitan road network: This component would finance routine maintenance of the declared road network; periodic maintenance of about 12 km of strategic roads which are degraded but structurally still intact to ensure that they remain in a maintainable condition; and rehabilitation of about 5 km of strategic roads identified to be structurally damaged. Under this component, LAMATA will further enhance capacity of the Pavement Management System. Component 4: Project management and monitoring: This component would finance technical

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assistance, equipment, vehicles, office equipment, and other operational support for monitoring project progress and, on an ongoing basis, transport system supply, demand and performance; institutional, technical, procurement, and financial audit; project outcome monitoring in terms of transport (including safety), environment, social, and capacity development indicators. Which safeguard policies are triggered, if any? Ref. PAD D.6., Technical Annex 10 The project is a category B project. The safeguard policies triggered are Environmental Assessment (OP/BP 4.01), Physical Cultural Resources (OP/BP 4.11), and Involuntary Resettlement (OP/BP 4.12). Significant, non-standard conditions, if any, for: Ref. PAD C.6. Board presentation: There are no conditions of Board. Effectiveness Conditions of the IDA Financing Agreement:

• The First Subsidiary Agreement has been executed on behalf of the Recipient and Lagos State;

• The Second Subsidiary Agreement has been executed on behalf of Lagos State and LAMATA; and

• The GEF Grant Agreement between the Recipient and Association has been executed and delivered and all conditions precedent to its effectiveness or to the right of the Recipient to make withdrawals under it (other than the effectiveness of this Agreement) have been fulfilled.

Effectiveness conditions of the GEF Grant Agreement:

• The IDA Financing Agreement has been executed; • The First GEF Subsidiary Agreement has been executed on behalf of the Federal

Government of Nigeria and Lagos State Government; • The Second GEF Subsidiary Agreement has been executed on behalf of the Lagos

State Government and LAMATA; and • The execution and delivery of this Agreement on behalf of the Recipient, and the

LAMATA GEF Project Agreement on behalf of the Project Implementing Entity, have been duly authorized or ratified by all necessary governmental action.

The covenants applicable to project implementation are:

• Standard financial management, procurement and implementation covenants as tailored to the project;

• Project-specific covenants relating to: (a) preparation of annual work plans and budgets for approval by the Bank; (b) implementation of the project in accordance with the Environmental and Social Management Framework (ESMF), Resettlement Policy Framework (RPF), Environmental Management Plan (EMP), Resettlement Action Plan (RAP); and (c) key outcome indicators; and

• The Co-financing deadline for effectiveness of the Co-financing Agreement is June 30, 2011. This Co-financing is by AFD.

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A. STRATEGIC CONTEXT AND RATIONALE 1. Country and sector issues The Country Context

1. The population of Nigeria is about 151 million with more than 73 million living in urban areas. The urban growth rate (4.5 percent per year) is above the national average (three percent per year). There are two mega cities (Lagos, Kano) with populations greater than 10 million and five other cities with population between five and 10 million. It is estimated that the country’s urban areas contribute over 65 percent of the gross national product, illustrating both their importance and also their potential for contributing further to economic growth. 2. Lagos is the largest city in sub-Saharan Africa and the sixth largest city in the world, with a population of over nine million 1, which is growing at six percent per annum in the past few years. The megacity of Lagos has grown beyond the physical boundaries of the state of Lagos, spilling over into the adjoining state of Ogun. Although the smallest state in Nigeria, Lagos is by far the most densely populated. By 2015, the population of the megacity is projected to be about 25 million, making it the third-largest in the world. Lagos’s seaport and international airport handle more than 70 percent of the nation’s cargo. It contains the largest manufacturing sector and provides employment for over 45 percent of the skilled manpower of the country. The commercial sector is similarly dominant with a vibrant local trading tradition. During the last twenty years, the level of efficiency and productivity in the metropolitan area has been adversely affected by growing weakness in the physical infrastructure necessary to support basic needs of the population and production sectors. While Lagos is no longer the federal capital, its role as the principal commercial center and gateway to the country is still unquestioned. The Lagos Urban Transport Context 3. Key issues in the city transport system are: (a) insufficient and poorly managed and regulated services and infrastructure; (b) lack of clear and coherent policies; and (c) weak and disorganized institutions. The central urban transport context can be described as follows: a growing urban population inadequately served by the transport system, declining standards of public transport, overlaps and conflicts among the agencies responsible for planning and implementing transport solutions, massive growth in the use of minibus services, growing dependence on private transport (cars and motorcycles), increasing congestion, inadequate and deteriorating transport infrastructure, and poor facilities for non-motorized transport (walking and bicycling). 4. Like in most cities in developing countries, authorities have had difficulty in meeting service demands of the growing population, particularly the poor, who are most dependent on public provision of water, electricity, transport, and other services. But the effects of rapid

1 The 2006 Nigerian census puts the population of Lagos at nine million, but the authorities of Lagos have disputed this figure. According to the Lagos Central Bureau of Statistics, the population is closer to 17.5 million (2008) with annual population growth of roughly four percent over the last 10 years. World Urbanization Prospects (2003) estimated the population as 11 million.

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growth affect all segments of society. The absence of policies on land use and economic development has led to urban sprawl, which multiplies the challenge posed by rapid growth. The declining population density associated with sprawl has increased travel distances and pushed up the price of public transport. Again, these developments affect the poor disproportionately, often effectively excluding them from work and social services. Meanwhile, the rising use of private cars has choked the roads, endangering the safety of pedestrians and the health of city residents who breathe in automobile emissions.

5. The transport infrastructure and services in Lagos remain at levels that supported a population of no more than six million some 20 years ago. The density of the road network (about 0.4 km/1000 population), for example, is quite low even by African standards. The provision of bus public transport is highly fragmented with multiple private operators, operating small buses of poor quality and in absence of any management or a regulatory authority. Despite the size of the city, there are few organized mass transit systems introduced in the past few years—the Bus Rapid Transit (BRT) and LAGBUS and a few ferry routes in the inland waterway system offering alternative non-road based commuter services. Bus fares are high (average fare of US$1 per trip) which consume over 20 percent of the average household disposable income. Congestion is a major issue in the city affecting the cost of production and the quality of life. 6. Institutional and Regulatory Context: The institutional structure of Nigeria has three levels: federal, state and local. At the federal level, the Ministry of Transport (MOT) makes national transport policy and the Ministry of Works (MOW) develops the federal road network. Urban transport was devolved to the states by the 1999 Constitution, and the states make their own laws on traffic and transport. Federal agencies with divisions in the states include the Nigeria Police – Lagos State Traffic Division, which includes Traffic Wardens, and the Federal Road Safety Commission which is responsible for traffic control and enforcement, primarily on federal roads. 7. At the Lagos State Government (LSG), the MOT is the primary agency for transport policy formulation and implementation whilst the Lagos Metropolitan Area Transport Authority (LAMATA) is empowered to plan an integrated transport system for the state with specific focus on implementing and regulating mass transit systems. 8. The state ministry comprises five functional divisions. The Motor Vehicle Administration is the regulatory authority for public transport. There is also a Transport Operations Division. The Local Government Councils are responsible for local traffic management schemes, parking control and management of public transport terminals. Until recently, the Lagos metropolitan area consisted of 18 local government areas (LGA) out of 20 in the state, with their own elected governments. More recently, 37 Local Council Development Areas (LCDAs) have been created from the 20 LGAs. These LCDAs have a works department and a traffic management unit responsible for road maintenance and traffic management on local government roads. As a result, more than 100 agencies at local, state or federal government levels had a role in transport provision and/or services in the city. Often, most agencies develop and implement their own policies and programs in isolation, and without much regard for its effect on policies of other agencies.

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9. Public transport environment: Public transport operation in Lagos is almost entirely owned and managed by the private sector—principally individuals owning one or two second-hand vehicles that they rent out to drivers on a daily basis. The existing bus fleet is estimated at 75,000. Minibuses (danfos) make up the bulk of the fleet, and their numbers are rising as the number of midi-buses (molues) dwindles. Every danfo and molue is affiliated with one of several associations, the largest being the National Union of Road Transport Workers (NURTW). Buses account for almost 82 percent of the share of motorized person trips (10 percent regular size buses and 72 percent mini buses), the taxis and private cars account for about 13 percent, and the reminder five percent accounted by motor cycles. 10. Sector Management: Between the early 1980s and 1994, responsibility for the management of the transport sector in the Lagos state rested with the Lagos State Ministry of Works and Transport (LSMWT). During this period, transport actions in the state were driven by expansion of the road network and a focus on capital spending rather than sector planning and the development of a holistic approach to resolving urban transport problems. The concern of dealing with the immediate problems has led the authorities to ignore the long term impact of the proposed solutions. Attempts were not made to come to grips with defining policies that relate the value and needs of the urban transport sector to macro-economic considerations. The interventions were carried out on a project-by-project basis and the transportation system has evolved from the unsystematic accumulation of public projects and policies. 11. The LSMWT was split in 1994 into the Lagos State Ministry of Works and Infrastructure (LSMWI) and the Lagos State Ministry of Public Transportation (LSMPT). The latter was given the mandate for overall sector policy development and planning and was, later renamed the Lagos State Ministry of Transportation (LSMT). LSMWI oversees the operation of the Public Works Bureau, which carries out force account works and is mainly responsible for the state road network. 12. The key issues which have affected the transport sector in Lagos over the years can therefore be summarized as follows:

• Absence of an articulated and adopted policy and strategic framework for the

transport sector; • Fragmentation of institutional responsibilities among various agencies at the three

levels of government with no coordination framework; • Absence of a well equipped traffic management institution; inadequately trained

transport/traffic engineering staff; involvement of traffic police with traffic management planning because of an absence of professional civilian alternative;

• Inadequately defined public transport planning and regulatory functions; • Absence of standard procedures for the technical and economic evaluation of

programs and projects resulting in a strong bias toward capital expenditure rather than making better use of existing investments through better management and maintenance practices; and

4

• Involvement of over 100 agencies at local, state, and federal government levels in transport provision and/or service delivery in the city, often in an uncoordinated manner.

13. Government Strategy: In response to the growing problems with the management and delivery of transport services, a number of studies have been conducted over the past decade by the LSG to develop a strategy and appropriate solutions. The Lagos Mass Transit and Transport Systems Management Program Study was undertaken in 1992. This work set out to identify actions necessary to address the complex transport situation in Lagos. The study had as one of its recommendations the creation of LAMATA to coordinate transport policies, programs and actions of all agencies at the different tiers of government. 14. LAMATA’s Institutional Status: LAMATA is a corporate body with an independent board responsible for formulation, coordination, and implementation of urban transport policies and programs in the Lagos metropolitan area.2 It was created by a State Act (LAMATA Law) signed into law on January 13, 2002 and formally launched on December 2, 2003. The Authority has the overall responsibility for transport planning and coordination in the Lagos metropolitan area with the primary mandate to play a lead role in carrying out transport planning and assist in transport policy formulation and coordination of major operational and investment decisions and implementation. The law grants LAMATA several powers to facilitate the discharge of its statutory functions, including the power to levy and collect user charges in connection with the provision of its services and to collect any other tariffs, fees and road taxes as may be authorized by the Governor. The law establishing LAMATA was strengthened further in 2007 to include planning and regulatory functions across the various modes of transport. 15. Sustainability of Funding: A transport fund has been set up with the following sources: (a) Lagos State budget provision; (b) license fees (hackney permit, road taxes, license plate registration, auto registration; (c) concession fees; (d) other road user charges (tolls). In discussions with the representatives of the 36 states, LAMATA has successfully made a case with the Joint Tax Board at the Federal Government level to increase road user charges, to be shared between LAMATA (50 percent), state treasury office (40 percent), Motor Vehicle Authority (five percent), and state MOT (five percent). As a result, LAMATA is able to meet 60 percent of the total funding requirements of US$42 million in 2008 (an increase from less than 20 percent in 2004) with the World Bank financing the balance 40 percent. 16. LAMATA’s Achievements: Over the past five years, LAMATA has been able to provide an overall vision and strategic direction for addressing the long neglected transport needs of the metropolis and to coordinate activities of the different executing agencies to provide a common and consistent basis for implementation. LAMATA has started, for the first time in the country, the design and execution of maintenance works with participation of private sector through awarding contracts to local consultants and contractors. As a result of introducing professional supervision, transparent application of procurement rules, high standards, and prompt payment to

2 The 13-member Board, which is fairly representative of the Authority’s stakeholders, comprises representatives of transport operators, transport unions in Lagos State, the organized private sector, the general public, local government areas, and transport related Lagos State Government agencies. The only full time member is the Managing Director/Chief Executive Officer (MD/CEO), who heads the management team.

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contractors, the cost of road works has come down. The LAMATA has been successful in: (a) preparing a strategic long-term plan for the transport sector in Lagos; (b) coordinating activities of the multiple agencies involved in the sector; (c) rationalizing motor vehicle tax administration, resulting in a substantial increase in revenues; (d) maintaining, upgrading, and rehabilitating 632 km of the declared road network; (e) implementing a pilot BRT “Lite” system from Mile 12 to Church Missionary Society (CMS)3; (f) rehabilitation of four jetties; (g) creation of over 1.3 million person-days of employment; and (h) most important, changing the attitude among users towards bus transport system. 17. Implementation of BRT-Lite: Launched in March 2008, the new BRT system provides Lagos commuters with a clean, affordable and reliable means of getting around in the city. The BRT is a bus-based mass transit system that delivers fast, comfortable and cost-effective service. The implementation of BRT-Lite system in Lagos is the first example of a comprehensive and integrated approach to improving public transport in sub-Saharan Africa. The project was mainly financed by the LSG with the Bank providing technical support. The Bank has also provided funds used in up-front system planning. The key feature is that the project design is driven by consideration of local requirements and what is most appropriate at the local level, combining institutional and regulatory reform together with specific investments, and delivered at very low cost per kilometer as compared to BRT projects in other parts of the world, making it easier to replicate along other corridors and other low-income countries in sub-Saharan Africa. 18. The Next Steps: While the BRT project has been a success, it has also raised expectations among city residents to scale-up the reform and investment program and extend BRT service to other parts of Lagos metropolis. LAMATA with support from LSG has prepared a transport sector policy and a strategic plan to address mobility needs of the population in a clean, safe, and affordable manner. The objective is to create an integrated multi-modal transport system. Some of the key elements of the plan are: (a) extension of BRT to other corridors, including Oshodi-Mile 12-Ikorodu and Oshodi-Mile 2-Obalende. The rationale behind selection of these corridors is based on a comprehensive network analysis, traffic flows and ease of implementation; and (b) the construction of two commuter rail lines—Agbado to Marina (Red line on an existing railroad right-of-way) and Okokomaiko to Marina (Blue line). The State government has requested Bank’s support for extension of the BRT corridors while the commuter lines are being constructed using a Public Private Partnership model, with infrastructure being funded by the LSG under a design/build contract (at a cost of over US$1 billion) and the actual railway operations being funded and managed by the private sector under a concession agreement. 2. Rationale for Bank involvement 19. The objectives and activities designed under the proposed project are consistent with the government’s overall strategy for non-oil dependent growth as stipulated in the National Economic Empowerment and Development Strategy (NEEDS) and Lagos State Economic Empowerment and Development Strategy. The Federal Government of Nigeria (FGN) is keen to propagate the concept of sustainable urban transport that calls for inclusion of parameters such as safety, cleanliness, and reliability in transport systems for Nigerian cities. The proposed project

3 Actual physical investments of about US$40 million were funded by the state government, reflecting ownership on part of the government.

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would build on success of the on-going World Bank supported urban transport project in Lagos to promote government’s agenda. The project would also support the Nigeria Vision 2020 developmental blueprint adopted by the federal government. 20. Additionally, the World Bank and the United Kingdom’s Department for International Development (DfID) have jointly developed the Country Partnership Strategy (CPS), which was approved by the Bank on July 28, 2009. The CPS is aligned with the pillars of both the NEEDS and State Economic Empowerment and Development Strategy, especially the second pillar that focuses on improved environment and services for non-oil growth. The proposed project would remove some of the key bottlenecks to sustainable transport by facilitating market transformation, strengthening institutional capacity and laying the basis for acceptability of the reform program. 21. Bank’s comparative advantage: Drawing upon its international and regional experience, the Bank is in a strong position to support government in formulating strategies to address complex traffic and transport management issues. The Bank is currently financing a US$150 million Lagos Urban Transport Project (LUTP) to support government’s efforts to facilitate a “transformation” in the operations of urban transport towards greater inclusion of sustainability parameters (i.e. safer, cleaner, reliable, and affordable). Bank’s continued involvement in the sector will ensure: (a) consolidating and building on the achievements of the past five years; (b) scaling-up the results achieved in Lagos and working towards supporting initiatives in other large cities (e.g., Kano); (c) providing confidence to the private sector and minimizing its perceived risks in undertaking public private partnerships (PPPs) related to public transport; (d) utilizing technical expertise for policy analyses and project formulation, coordinating, and leveraging financing from other development partners (aid harmonization); and (e) helping raise awareness of the need to go beyond investments in infrastructure and address mobility issues in the broader contexts of increasing urbanization, economic development, poverty reduction, and climate change. The Bank can provide assistance in linking transport and mobility issues with human and social development challenges, such as how to increase the access and mobility of disadvantaged groups, the poor, women, school children, the disabled and the young and old in an environmentally sustainable manner. 3. Rationale for GEF financing 22. The proposed project fits under the new Climate Change focal area strategy of GEF-4. It supports the Strategic Objective 7 (facilitating market transformation for sustainable mobility in urban areas leading to reduced greenhouse gas (GHG) emissions) through its alignment with CC- SP5 (promoting sustainable innovative systems for urban transport). The project’s activities are in line with CC-SP5 since it promotes the long-term shift towards low emissions and sustainable transport operations through strengthening institutional and regulatory framework for sustainable urban transport, and monitoring and evaluation of GHGs. 23. The project would support a number of strategies to achieve higher bus productivity and improve vehicle emission standards and vehicle state of repair, all of which will enable reduced GHG and local air emissions and a higher return to be earned on bus investments. Increased asset productivity derived from improved traffic management, combined with the particulars of the

7

cooperative bus operations off the BRT itself, designed by the transport association, would improve cash flow even for informal bus operators of the BRT system itself, thereby increasing their chances of attracting funding to upgrade and modernize their fleets. As shown on the BRT-Lite corridor, rationalization of bus supply reduces predatory competition, increases ridership and fare-box revenue, and reduces operating cost. The project will demonstrate the viability of such investments in other cities in sub-Saharan Africa to enable them to reduce energy consumption in the transport sector and reduce present and future GHG emissions in a manner that increases sustainable mobility. 24. Without the GEF funds, the project would likely focus on service delivery and poverty alleviation aspects of the various urban transport interventions that the FGN has identified as a priority. In Lagos, the BRT system would be expanded and enhanced, but the emphasis likely would remain on infrastructure investments and accessibility of the urban poor. The issues related to service integration, improved operations and acceptability, modal integration, and particularly outreach and marketing to attract current public transport non-users would not be likely to get much attention. The proposed GEF funds would be used to improve the technical and financial ability of the local governments’ public transport authorities to engage in service-tailoring strategies that can enhance mode-switching. In addition, GEF funding would be used for strengthening capacity in operational planning (and more intensive training to undertake such planning) that would allow the BRT service to minimize its use of energy per vehicle kilometer of service provided. A part of the funds would be used to begin sensitizing officials in Kano – an emerging megacity in its own right – to similar concerns. The GEF contribution to the project, therefore, will be to transform the orientation of technical staff and policy makers in both cities into creating an enabling environment to engage in more sustainable city and transport planning than the underlying project (without GEF funds) would have been able to address. 4. Higher level objectives to which the project contributes 25. The World Bank Group’s work in the country is currently being guided by the NEEDS, and the CPS. NEEDS is based on three pillars: (a) empowering people and improving social service delivery; (b) fostering economic growth, in particular in the non-oil private sector; and (c) enhancing the effectiveness and efficiency of government, while improving governance. The report highlights the need to: maintain sound macroeconomic policies, strengthen the basis for private sector growth, and improve transparency and accountability of the public sector. 26. The proposed project activities are strategically aligned with all three pillars of the NEEDS. On empowering people and improving social service, the project components were identified based on broad consultation, involving users and community residents. The project would continue to support development of an information, education, and communication strategy not only to guide the involvement of transport users and beneficiary communities in the planning and implementation of project elements, but also for use as a monitoring and evaluation tool to provide feedback on the project’s impact. On fostering economic growth, the project has a strong focus on developing an enabling environment for increased private sector participation in the sector, and improving delivery of services. Those services – improved affordable mobility in Lagos – are themselves critical to ensuring the ongoing economic productivity of Nigeria’s largest city. On improving governance, a key element of the project is to strengthen LAMATA,

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increase its budgetary accountability and improve its sector planning and programming capacity. This strengthening is likely to have ripple effects, since within Nigeria, LAMATA is already held up as a model of public sector governance. B. PROJECT DESCRIPTION 1. Lending instrument 27. The proposed lending instrument is a Specific Investment Loan (SIL). The credit will be on standard International Development Association (IDA) terms with a repayable period of 40 years with a 10-year grace period. The GEF and the French Development Agency (AFD) will co-finance some of the project components. 2. Project development objective and key indicators 28. The project development objective is to (a) improve mobility along prioritized corridors; and (b) promote a shift to more environmentally sustainable urban transport modes. This will be achieved through a combination of traffic engineering measures, management improvements, regulation of the public transport industry, and expansion and enhancement of Bus Rapid Transport (BRT) system. 29. The specific global environmental objective is to promote an incremental shift to more environmentally sustainable urban transport modes among users with relatively high carbon foot print. 30. Expected outcomes of the project along BRT corridors are as follows:

• Reduced travel times; • Reduced household expenditures on transport; • Increase in bus operational efficiency (e.g., Number of passengers carried per

standard bus per day); • Length of road network rehabilitated on Lagos metropolitan network; • Number of direct beneficiaries by gender; and • Number of indirect beneficiaries by gender.

31. Expected Global Environmental Objective outcomes are:

• Increase in percent of trips made by BRT among households owning cars or motorbikes; and

• Reduced carbon dioxide (CO2) emissions from vehicles along BRT corridor.

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3. Project components 32. The proposed project has four components, as summarized in Table 1 (see Annex 4 for a detailed project description and Annex 5 for detailed project cost). GEF is co-financing two of the four components with the objective to facilitate removal of barriers for sustained urban transport interventions.

Table 1: Project Cost by Components and Source of Financing

(US$ million)

Component TOTAL LSG IDA AFD GEF

1. Institutional development and capacity building

34.0 10.0 23.0 - 1.0

2. Improvement of public transport infrastructure and enhancement of traffic management

236.5 - 133.0 100.0 3.5

3. Improvement of Lagos State metropolitan road network

50.0 25.0 25.0 - -

4. Project management and system monitoring

9.0 - 9.0 - -

Total Project Cost 329.5 35.0 190.0 100.0 4.5 33. Component 1: Institutional development and capacity building: This component focuses on capacity strengthening of LAMATA for continuing to provide an overall vision and a strategic planning basis for transport planning, regulation, monitoring, and administration and coordination of sector-wide management; and provide support to bus operators and beneficiary agencies (including Lagos State Traffic Management Authority (LASTMA), LCDAs, LSMT, and LSMWI). This component would finance goods, consultants’ services, training, and operating cost for LAMATA to carry out its functions. The GEF will finance studies, training and equipment to develop public transport delivery capacity in Kano. 34. Component 2: Improvement of public transport infrastructure and enhancement of traffic management systems: This component would finance BRT infrastructure construction and supervision, including interchange and traffic management, at Oshodi-Mile 2-Obalende, investments in intelligent transport systems (ITS) and improvements in safety; pedestrian facilities; mass transit alternative analysis studies along major corridors; and development of bus feeder system including stations and terminals. The GEF component will specifically finance: a) BRT consultation, communications, and media strategy for better acceptance of the new approaches; and b) upgrade and rationalize system operation. The AFD component would finance BRT infrastructure construction and supervision along Oshodi-Mile 12-Ikorodu corridor.

35. Component 3: Improvement of Lagos State metropolitan road network: This component would finance routine maintenance of the declared road network; periodic maintenance of about 12 km of strategic roads which are degraded but structurally still intact so as to ensure that they remain in a maintainable condition; and rehabilitation of about 5 km of

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strategic roads identified to be structurally damaged. Data collection, upgrading, and further enhancement of the existing Pavement Management System so as to enable LAMATA build the foundation upon which the State can rationalize its road sector investments will also be supported under this sub-component. 36. Component 4: Project management and monitoring: This component would finance technical assistance, equipment, vehicles, office equipment, and other operational support for monitoring project progress; transport system supply, demand and performance; institutional, technical, procurement and financial audit; project outcome monitoring in terms of transport (including safety), environment, social, and capacity development indicators. 4. Lessons learned and reflected in the project design 37. Setting up a strong institutional basis for coordinated planning and regulation is critical to the success of urban transport projects. The Bank urban transport policy paper “Cities on the Move” (2002) identifies institutional weaknesses as the source of many observed failures in urban transport in developing countries. Strengthening urban transport institutions often requires legislative, institutional, and management changes at the national, state, and municipal level to minimize jurisdictional and functional impediments to efficient and effective service delivery. Strengthening transport also requires setting up dedicated institutional bodies for urban transport planning and regulation, with commitment from the highest levels of government and a champion to further the cause of good management. The LSG has established LAMATA with the overall responsibility for transport planning and coordination in the Lagos metropolitan area. 38. Key to a successful project design is based on an approach which is comprehensive (covers multiple administrative boundaries, is multi-modal), continuous (plans, planning data and tools are updated on a regular basis), cooperative (all stakeholders participate, develop communications plan and stakeholder analysis), connected (capital projects are consistent with adopted long range plans), championed (support at the highest political level, ownership), and incremental change (scale-up interventions in an incremental fashion and allow flexibility in design). 39. Interactions with the borrower and beneficiaries should take place in a context of their choosing. The impact of changes in policy, governance, and institutional frameworks in developing countries like Nigeria should not be underestimated. Where the requirements bring about changes in roles, responsibilities, and relationships, there is a need to understand the impact on the culture and values of the societies, sectors, and institutions for which the change is proposed. It is critical to understand the broader country-specific context. Experience shows that best results are achieved through long-term relationships where new ideas can be introduced indirectly and gradually, in pursuit of a shared vision and a road map. The design of this project is driven by consideration of local requirements and what is most appropriate in the local context. It is equally important to build alliances and develop value propositions early-on in project preparation so as to be able to respond to specific questions like: (a) who is likely to benefit most from proposed interventions; (b) what is at stake; (c) what is the motivating factor; and (d) develop what-if scenarios (counterfactuals). Utilization of communications techniques to

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build partnerships can hardly be over-emphasized. It is critical to begin with a few key people and as the concept grows, have them become project champions and owners of the design. 40. Allow a measure of flexibility in the design and set reasonable targets. The growing problem of urban mobility is the result of a long absence of regulatory institutions, inadequate capacity for planning public transport services, and inadequate investments. To reorganize urban transport service planning and delivery is a long-term process and its prominence in achieving urban sustainability compounds the need for more integrated, long-term and inclusive decision making. Such reorganization often requires a long period of internalization, capacity building, and behavioral adjustment within organizations necessitating flexibility in project design, ability to adapt to changes and manageable expectations. Sustained engagement and complementary actions by other sectors (urban, environment, energy, social) are crucial to making an impact in cities. This project has adopted a “corridor” approach to comprehensively address multiple issues focused on integrating road capacity, traffic management, public transport, and traffic safety enhancements. 41. Implementation of BRT is a big challenge and requires considerable up-front preparation and consensus building. BRT is a “system” and requires extensive up-front planning and discussions that consider all the relevant issues as a package, including the design of the bus-way; operations and service planning, design of the stops and junctions; design of the ticketing systems, fare levels, and structures; regulation and ownership of the buses; traffic and non-motorized transport (NMT) safety measures, traffic management strategies; and enforcement of traffic management (e.g., turn prohibitions, exclusive use of transitways by BRT vehicles) and public transport operating regulations. A successful system requires ownership by existing operators, drivers, and users and incorporation of their specific concerns in the design. The initial ground work has been set through the on-going work by LAMATA. The project would involve additional support to ensure: (a) strengthening the regulatory framework, institutions, and a culture of compliance with the framework and an industry structure that can compete and operate within the framework; (b) organizing and regulating existing services; (c) bringing the operators on board; and (d) understanding needs of the users through surveys and focus group discussions.

42. It is equally critical to strengthen the enforcement capacity. Reforms cannot work unless new arrangements are consistently enforced (e.g. franchise operators should be protected against illegal operators) based on formal statutes. This applies both to public transport operations and traffic management. Consistent enforcement requires close coordination of all implementing agencies. Effort initiated under LUTP (set up a task force for implementation, coordination with traffic police and Lagos State Traffic Management Authority (LASTMA), implementation of penalty clauses) would be further strengthened under LUTP 2. 43. Provide opportunities to learn from successful implementation of the reform program. The private bus operators accompanied the government team on a study tour to London and cities in South America. The tour provided an opportunity to develop a vision and understand the complexity of tasks required to reform the urban bus transport industry by learning from successful implementation in other cities. Some of the key lessons documented by the study team at the conclusion of the study tour were as follows: (a) a need for clear political will from the key decision makers and allocation of resources; (b) clear vision on passenger transport services as a

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means of improving the quality of life of the citizens, not just moving vehicles; (c) identifying transport services as business; (d) helping traditional, informal sector operators transform into legal entities to enable access to support from financial institutions; (e) clear and powerful communication and marketing strategies; (f) developing business models for traditional operators as basis for accessing funds; (g) making the system user friendly for all, from children to the elderly and physically challenged; and (h) integrating the system with sidewalks and bicycle ways with bicycle parking facilities at terminals and stations. 44. A good project monitoring system is necessary for effective management. A detailed monitoring and evaluation component, including collection of all necessary baseline data, has been designed and built into the project. Given that the project entails a lot of innovations and changes, there are plans for close monitoring combined with extensive consultations, which should allow appropriate adjustments to be made in a timely fashion. 5. Alternatives considered and reasons for rejection 45. Fundamentally, this project builds on successful implementation of LUTP. However, given the highly innovative nature of the project, various approaches and alternatives were considered in the design of various project components. The reason why certain approaches were considered more appropriate and why they were selected is discussed below. 46. Developing a Bogotá-style BRT system versus adapting the design to African conditions. The exemplary BRT system in Bogotá, Columbia - TransMilenio - has served as a model for urban passenger transport development in other cities across the world. However, the infrastructure construction cost of the first phase of TransMilenio was US$5.3 million per kilometer (in 2000 prices), and this scale of investment has proved extremely difficult to finance in the sub-Saharan Africa. The economic and administrative context in sub-Saharan Africa cities is also quite different, requiring some adaptations. Levels of wealth are much lower as compared to Bogotá. Motorization levels are also much lower and city development patterns are less constrained by geography. The road density in African cities is also much lower than Latin America, making it much more difficult to construct multi-lane transit-ways by taking lanes away from general traffic. 47. The challenge, therefore, is to develop a high-quality bus system that is affordable in the local context and applicable to local operating and physical environments while retaining as many of the most desirable BRT characteristics as possible. The proposed system consists of segregated bus-ways on trunk corridors, with integrated tributary services; restricted entry to transit-ways, by a mix of standard and articulated buses compatible with BRT demand patterns and volumes, but with appropriately low air and noise emissions levels; improved fare collection technology; and graduated or zonal fare structures, with explicit, integrated fare payment for BRT and ancillary feeder services. System capacity in the proposed BRT network would be somewhat lower than the capacity for a full blown BRT system, but still appropriate to the levels of demand found in the main corridors of the city. 48. Public-sector investment in rolling stock for the BRT system versus adopting a PPP model. Regional experience with direct public-sector involvement in the delivery of urban

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passenger transport services has generally been unsatisfactory, both because of political interference in the management of the businesses and the desire to hold down fares, with the consequence of insufficient levels of financial support for maintenance. In the proposed project, the government has committed to a PPP whereby it accepts responsibility for the enabling environment and infrastructure provision, but the private sector will be responsible for service delivery, including rolling stock provision and management. 49. Developing a multiple cities investment project versus a single city. Two options were considered: First, develop a physical investment program for Lagos while building institutional capacity in other cities, and second, develop a multiple city investment project. The first option was selected because while Lagos is well advanced in setting up an institutional framework and a bus transport reform program, other cities have yet to clarify institutional responsibilities and develop a strategic plan. It takes time to clarify institutional responsibilities, develop a strategic plan and develop a policy reform program. In order not to delay implementation in Lagos and lose momentum, it was decided to limit the proposed project to investments in Lagos while assisting other cities (mainly Kano) to develop a basic policy framework and strategic plans, which could lead to specific investments at a later time. 50. Developing a ‘corridor’ focused approach versus spreading investments throughout the city. The choice was between making small investments throughout the city focused on spot improvements, traffic management, safety, and public transport improvements as compared to identifying specific corridors with high demand volumes and preparing an integrated program to include public transport improvements, pedestrians and NMT facilities, signal improvements, parking facilities, street lights coupled with improved implementation and enforcement. Lagos is a large city with a population of over 15 million people and a huge unmet demand from decades of neglect. Given the paucity of available resources (both human and capital) it is important to have a focused strategy with clear wins aimed at demonstrating the success of any interventions to population through well defined and measurable indicators. The project is designed with a focus on implementing an integrated program of improvements on a few well defined corridors.

C. IMPLEMENTATION 1. Partnership arrangements 51. The GEF is financing some of the project components. The GEF-funded activities will complement Bank funding and foster reduction of GHG emissions from the urban transport sector by making direct investments on the BRT and removing barriers at local and national level to promote and implement more sustainable and efficient transport systems. AFD is financing construction of BRT on Oshodi-Mile 12-Ikorodu corridor. In addition, the project is promoting a strong partnership with the private sector (bus associations, transport unions), media, commercial banks, non-governmental organizations (NGOs), local agencies, and departments.

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2. Institutional and implementation arrangements 52. LUTP 2 will be implemented by LAMATA, which has been implementing the on-going LUTP. LAMATA is a corporate body with an independent Board responsible for formulation, coordination and implementation of urban transport policies and programs in the Lagos metropolitan area. It was created by an act signed into law on January 13, 2002 and formally launched on December 2, 2003 and subsequently amended on April 16, 2007. The law establishing LAMATA prescribes a 13-member Board of Directors for the Authority. The Board, which is fairly representative of the Authority’s stakeholders, comprises representatives of transport operators, transport unions in Lagos State, the organized private sector, the general public, local government areas, and transport related LSG agencies. The only full time member is the Managing Director, who heads the management team. The Chairman and members of the Board are appointed by the Governor. The Managing Director is also appointed by the Governor on the advice of the Board of Directors. 53. LAMATA will undertake procurement and financial management for activities to be carried out for the benefit of the Kano State Transport Authority. A Memorandum of Understanding (MOU) on disbursement under GEF will be signed between the Lagos State Government (LAMATA) and Kano State Government (Kano State Transport Authority) outlining the activities to be carried out on behalf of Kano State by October 29, 2010.

54. The Credit and Grant will be made available from the Federal Government of Nigeria to the LSG (the credit will be on-lent and the grant will be on-granted to LSG), who will on-grant both to LAMATA pursuant to the Subsidiary Agreement which will be signed to this effect. The fiduciary obligations of LAMATA as the Project Implementation Entity are documented in the Project Agreements between IDA and LAMATA, and between the International Bank for Reconstruction and Development (IBRD) and LAMATA. The fiduciary arrangements for components financed by AFD are shown in Annex 6 (Table 1). 3. Financial Management Arrangements 55. The financial and accounts department (FAD) at LAMATA will be responsible for managing the financial affairs of the project covering IDA, GEF and counterpart funds. The department is staffed by qualified accountants, headed by a Director of Finance, a chartered accountant with vast experience, supported by appropriately qualified accountants. The FAD will also be responsible for ensuring compliance with the financial management requirements of the Bank and the government, including forwarding the quarterly unaudited interim financial reports and audited annual financial statements to IDA. The project will follow disbursement procedures described in the World Bank Disbursement Handbook. Regarding flow of funds and banking arrangements, IDA will disburse the IDA credit and GEF grant through two Designated Accounts (DAs). The FAD will maintain adequate financial management (FM) arrangements to support the deployment of project resources in an economic, efficient and effective manner to achieve the stated development objectives. The arrangements will also provide relevant information to the various stakeholders (including Lagos State Auditor General and LAMATA Board of Directors) to facilitate the performance of their oversight functions.

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56. Project activities, records, books of accounts and systems will be reviewed by the Internal Audit Unit (IAU) in LAMATA. The unit is headed by a qualified internal auditor who will be supported by appropriate qualified staff. 4. Monitoring and evaluation 57. The project includes a comprehensive monitoring and evaluation component based on qualitative and quantitative performance indicators for each subcomponent. These include transport, social, environmental, and capacity development indicators. This data would be used, in turn, to estimate project-related GHG emission reductions in the project corridors. A mobile source inventory would be established and periodically updated, building on the baseline developed under the project. (Please see Annex 3 for details.) 5. Sustainability 58. Factors critical to the sustainability of the project’s objectives are:

• At the institutional and policy level: (a) develop a clear policy framework and a

strategic plan; (b) create an independent metropolitan institution with: (i) strong statutory authority, (ii) positive, cooperative relationships, (iii) independent, dedicated sources of funding, and (iv) superior human capacity, data and technical resources.

• At the technical level: (a) develop integrated public transport priority/traffic

management measures (including improving NMT travel, sidewalks, pedestrian passes, bike parking, better lighting, roadway fencing); (b) introduce comprehensive, integrated program of complementary improvements (covering entire route/corridor, focus on facilitating movement of people); (c) up-front planning for a successful implementation (preparation of operations and service plans as the basis of detailed design); (d) use of ITS for public transport (signal priority, automatic vehicle location, digital communications, smart cards, surveillance cameras); (e) develop a communications and stakeholder participation plan.

• At the operational level: (a) acknowledge from the onset that existing operators

must be integrated into any reform program; (b) vehicles to be used must be operable and maintainable locally; (c) bus shelter design should include infrastructure to encourage orderly queuing and boarding at bus stops; (d) given the high demand, operation of efficient buses can be a profitable business and can operate without any subsidy from the state, and (e) put in place a simplified ticketing and bus fare zoning system to minimize fare evasion and leakages.

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59. Evidence of the borrower’s commitment to and ownership of the project and the relevant policies are:

• The project would focus on ensuring sustainability of the critical legal and institutional structures necessary to support long-term implementation of an integrated reform program. The LAMATA has been established to assist in planning, regulating and procuring urban public transport services and help establish local and national capacity for market regulation, supported by a nucleus of professionals. This would ensure institutional sustainability of the BRT, the NMT facilities, and the limited competitive regime. In addition, setting up institutions within a framework common to the whole transport sector would provide a sustainable basis to manage an effective and efficient transport system in the long run.

• A transport fund has been set up with dedicated funding sources (license fees,

concession fees, other road user charges) to finance investments in public transport in the city. The state government is financing construction/rehabilitation of two commuter lines as part of the integrated inter-modal transport plan for the city.

60. Attempt by project design to address these factors are:

• The Lagos BRT project design is driven by consideration of local requirements and what is most appropriate at the local level4. For example, it combines institutional and regulatory reform together with specific investments. It also encompasses all elements of a successful public-private partnership, with the state financing infrastructure, and the private sector financing buses and maintenance facilities. The project is being implemented in full partnership and cooperation of bus unions and other local interests, with the union operating the buses. On the existing BRT-Lite corridor, even though fares are not subsidized, they are still lower than those charged previously by the mini buses because of operational efficiencies and reduced operating costs on the dedicated BRT corridor.

• LAMATA is expected to generate sufficient resources from the user fees (lease of depot, bus franchise fee, income from advertisement) and the transport fund (license fees, permit, auto registration) to provide for annual maintenance of assets created by the project.5

• The project would support a number of strategies to achieve higher productivity of

buses and improve standards of vehicle maintenance and repair, which would enable a higher financial return on bus investments. Increased asset productivity

4 The exemplary BRT system in Bogotá has served a model for this project design. However, given the very different economic and institutional context in sub-Sahara Africa, the project design has been adapted to local conditions, while retaining most of the desirable BRT characteristics. 5 Annual maintenance of infrastructure created by the project is estimated at US$9.8 million; total annual estimated revenue from user fees and transport fund is estimated at US$11.1 million. Where necessary, LAMATA budget will be supplemented by the Lagos State Government.

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derived from improved traffic management would allow informal bus operators to attract the necessary funding. Rationalization of bus supply would eradicate predatory competition, increase ridership and fare box revenues, and reduce operating costs. This would make the public transport industry more profitable and allow informal private operators to secure funding, thereby improving chances of financial sustainability.

• Revenue integrity is of paramount importance in any passenger transport

undertaking, but even more so in a commercial environment such as Lagos characterized both by problems of affordability and by a widespread desire to circumvent individual controls or discipline in paying fares. The processes for securely printing tickets and managing their distribution have been developed with the objective of minimizing fare evasion. BRT tickets are sold to passengers prior to boarding and verified at the entry to bus station and buses. The tickets would be color coded for ease of identification and to thwart counterfeiting. To support the arrangements for revenue integrity in ticket sale and verification process, a small team of inspectors would be employed for random ticket checks within the system and the bank (financing the buses) would establish its own monitoring and control procedures. Off-board fare collection also reduces fare revenue shrinkage by making it more difficult for drivers and conductors to short change the company on board.

• The project design also builds on the great operating and market knowledge of

current taxi and bus operators by integrating them into the rationalized system with a focus on: (a) incentivizing the formalization of informal operators; (b) allowing choices for captive users; (c) scaling up and phasing in changes gradually to control service disruption; (d) enforcing law and order. Efforts by existing operators to resist shifting from self-regulation to contractual obligations, law enforcement would be managed through: (a) making strong outreach efforts to all affected groups (owners/operators, drivers, unions, financial institutions); (b) making provision for damage control (likely disruptions in service); (c) building confidence (help informal operators incorporate, acquire capacity, strengthen operational capacity, access finance); and (d) making incremental changes.

Replicability 61. Segregated bus-ways, rationalization of public transport operations, and feeder NMT services have enormous potential for replication in other corridors within the city and other sub-Saharan Africa countries. Most cities in sub-Saharan Africa share common characteristics: (a) a growing urban population inadequately served by the transport system; (b) declining standards in public transport system; (c) multiplicity of agencies responsible for planning and implementing transport solutions; (d) massive growth in informal privately operated bus services, (e) an increasing dependence on private transport modes; and (f) consequent deteriorating environmental quality and safety standards. Furthermore, the project is focused on integrating existing operators into the service plan, thereby avoiding the sentiment that the BRT scheme is a threat to their livelihoods. Evidence suggests that introduction of BRT systems

18

coupled with NMT facilities as feeder systems is one way to check the rapid growth of private vehicles, bring discipline to private bus operations, and reduce GHG emissions, and provide an organizing basis for land-use planning in the long run.

62. Implementation of a BRT system on Lagos corridors would be of high interest to other cities faced with similar problems. The project is designed at low cost per kilometer as compared to BRT projects in other parts of the world (about US$3-4 million/km6 as compared to US$10-15 million in similar schemes in others parts of the world), this makes it easier to be replicated along other corridors and low-income countries in sub-Saharan Africa. The Bank has already begun to partner with LAMATA, bus operators and driver union representatives in capacity building events, e.g., in Washington, elsewhere in sub-Sahara Africa and in South Asia. One of the potential outcomes would be a step-by-step procedure for planning and designing a BRT system in an African context, which can be used as an example by other cities. A dissemination plan and a set of activities will be developed during project implementation to replicate the proposed pilot project on other corridors in the city. Elsewhere in sub-Saharan Africa, a number of cities including Accra, Tshwane, Dar-es-Salaam, and Addis Ababa are cross-fertilizing from experience in Lagos. Stakeholder involvement 63. The LAMATA Act recognizes the need to engage civil society in validating major infrastructure investments and policy changes. The task of building and sustaining an efficient and effective transportation system in metropolitan Lagos is one that calls for active involvement of all stakeholders, through information, consultation and participation on various consultative, interactive and participatory forums. The identified stakeholders comprise about 100 general contact groups classified into 10 major categories – internal, government, development partners, mass media professionals and institutions, civil society, transport associations, police, private sector, and general public.

64. In an effort to build local ownership and reflect local needs in project design, extensive user surveys and focus group discussions were carried out to understand the specific concerns and best ways to accommodate them during implementation (please refer to paragraph 89 for details on the communication strategy). LAMATA has built a strong ownership with the transport union, as part the project design. The design is based on the premise that the success of the project depends on promoting social inclusion in transport policies and investments. 65. The public relations strategy during development and construction consists of advertising within the corridor, in newspapers, radio, television. The television commercials include 90 second demonstration on how to use BRT, getting and paying for a ticket, how to board and alight. Third party advocacy is proposed to be employed whereby those with a voice in the community, local government chairman, local chiefs and community leaders are welcomed to discussions on BRT and its potential benefits. Road shows are planned to be held at which handbills are distributed in a number of languages, explaining the BRT concept. Community meetings are to be endorsed by local community leaders through prior discussions.

6 Design concept is based on maximum reallocation of existing road space, and avoidance of new bridge structures, resulting in a lower cost of implementation.

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66. Key to stakeholder engagement and wider marketing is the engagement of NURTW. The focus is on underscoring a need to move to a more regulated form of public transport. Training would be provided to bus drivers to become “pilots” of BRT. The status of drivers choosing to be part of the new system among their peers is greater and provide a feeling that they are engaged in transport revolution that is sweeping across Lagos. BRT needs to be seen as a catalyst for change.

67. The BRT and LAMATA branding would be used prior to implementation and intensified post implementation, to create awareness of its distinct identity with a variety of stakeholders. 6. Critical risks and possible controversial aspects 68. Key risks associated with the project and corresponding mitigation measures are as follows in Table 3 (see detailed table in Annex 6).

Table 3: Risks and Mitigation Measures

Risk

Rating Mitigation measures

Residual

Risk

Rating

Political commitment to introduction of a large scale Public Transport reform program may be weak.

S Government buy-in demonstrated by its support for LUTP by two successive elected Governors; as part of implementation of LUTP, LSG has demonstrated ownership by introducing institutional, legal and regulatory reforms in the public transport sector; a user fees supported transport fund has been created to finance public transport investments.

M

Multiplication of agencies with overlapping respon-sibilities at federal, state, and local government levels may result in poor coordination.

S Establishment of LAMATA has been critical to structural reform of the Lagos transport sector. This has helped in streamlining responsibilities at different levels in the LSG by clearly defining the role and mandate of LAMATA as a planning and regulatory body.

M

Effective enforcement of the BRT corridor may not be achieved; could lead to deterioration of operating conditions, either due to high level of traffic violations or encroachment by curbside traders and street hawkers.

M LAMATA together with LASTMA has been very effective in successful implementation of traffic management along the demonstration corridor—enforcement reinforced by regulations and implementation of penalty clauses; the proposed project would further strengthen the capacity of institutions dealing with traffic management and enforcement.

L

By design, many of the existing operators will be displaced from the franchised route. As a

S Key lessons from LUTP: use market knowledge to integrate operators in rationalized bus system; build on existing operational capacity, self-regulation, flexibility, and retain cost-effectiveness.

M

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Risk

Rating Mitigation measures

Residual

Risk

Rating

result, private bus sector may not participate in initial stages and frustrate efforts to regulate the sector.

Residents of adjoining properties may be affected adversely especially during the construction period.

S The concern of the residents will be addressed through an intensive communications plan and a participation strategy developed as part of the project design; residents along the corridor have been extensively consulted and a call center is set up to address any specific concerns.

M

Project Financial Manage-ment may be weak.

S Practical, simple and sound financial procedures manual and training provided to the FM team. • Strong and robust systems and controls

including institution of independent and effective internal audit function in the FAD and IAU.

• Risk-based supervision and external audit.

M

To project components

The detailed project designs for the BRT would not be finished until the first year of project implementation. This uncertainty can constitute a project risk if the final construction costs are higher than those estimated at appraisal.

S BRT is a flexible concept which has pre requisites for success but can be designed within a budget. The estimated costs include sufficient high contingency to accommodate possible cost escalations. The planned approach is to ensure that a robust and effective operational and service plan is integrated into the final physical design of the BRT. In addition, the operations and service plan allows for some flexibility in adopting an incremental approach to planned interventions with little impact on project outcomes.

M

Overall Risk Rating S M

H=High; S=Substantial; M=Moderate; L=Low

7. Credit conditions and covenants

69. Effectiveness conditions of the IDA Financing Agreement:

(i) The First Subsidiary Agreement has been executed on behalf of the Recipient and Lagos State;

(ii) The Second Subsidiary Agreement has been executed on behalf of Lagos State and LAMATA; and

(iii) The GEF Grant Agreement between the Recipient and Association has been executed and delivered and all conditions precedent to its effectiveness or to the

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right of the Recipient to make withdrawals under it (other than the effectiveness of this Agreement) has been fulfilled.

70. Effectiveness conditions of the GEF Grant Agreement:

(i) The IDA Financing Agreement has been executed; (ii) The First GEF Subsidiary Agreement has been executed on behalf of the FGN and

LSG; (iii) The Second GEF Subsidiary Agreement has been executed on behalf of the LSG

and LAMATA; and (iv) The execution and delivery of this Agreement on behalf of the Recipient, and the

LAMATA GEF Project Agreement on behalf of the Project Implementing Entity, have been duly authorized or ratified by all necessary governmental action.

71. The covenants applicable to project implementation are:

• Standard financial management, procurement and implementation covenants as

tailored to the project; • Project-specific covenants relating to: (a) preparation of annual work plans and

budgets for approval by the Bank (and any related Resettlement Action Plan (RAPs) / Environmental Management Plan (EMPs) required for the activities included in the plan); (b) implementation of the project in accordance with the Environmental and Social Management Framework (ESMF), Resettlement Policy Framework (RPF), EMP, RAP; and (c) key outcome indicators; and

• The Co-financing deadline for the effectiveness of the Co-financing Agreement is June 30, 2011. This Co-financing is by AFD.

D. APPRAISAL SUMMARY 1. Economic and financial analyses 72. A cost-benefit economic analysis was conducted for investments to support the BRT infrastructure component and improvements in the road network accounting for 75 percent of the total financing. The investments in road maintenance accounting for 15 percent of the financing are spread over the city and past experience suggests that such investments provide significant benefits in terms of improving traffic flow and reducing vehicle operating costs and these investments are selected based on cost-effectiveness analysis.

73. Based on travel time and vehicle operating cost savings, the benefit-cost ratio (BCR) for the BRT investments is estimated at about 2.1, with a net present value (NPV) of US$208 million and internal rate of return (IRR) between 15 and 17 percent. Please see Annex 9 for details.

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74. The estimated rates of return are conservative. They do not reflect derived benefits from any forecasts of the air quality, and safety benefits of the project which are likely to be significant. 75. Road network improvement component: Ten road sections were subjected to a cost-benefit analysis, based on: (a) assumed life cycle of 20 years; (b) annual routine and five-year periodic maintenance cost; (c) annual traffic growth rate of seven percent. The benefits are based on savings in travel time and vehicle operating costs. The NPV and benefit-cost ratio at seven percent and 3.5 percent traffic growth rate are estimated to be greater than one. 2. Technical

76. The proposed project builds on the successes of LUTP with a focus on expanding the BRT network as part of the Lagos strategic plan. The selection of the pilot corridor to implement BRT scheme was based on the general criterion of hourly peak passenger bi directional flows, and the need to provide an integrated public transport network. In the design of the BRT system, con