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Document of The World Bank

Report No: ICR2258

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-40120)

ON A

CREDIT

IN THE AMOUNT OF SDR 80.1 MILLION (US$120 MILLION EQUIVALENT)

TO THE

FEDERAL REPUBLIC OF NIGERIA

FOR A

SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT

November 28, 2012

Sustainable Energy, Oil, Gas, and Mining Unit Sustainable Development Network

AFCW2 Africa Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective November 28, 2012)

Currency Unit = Nigerian NIARA 1.00 = US$ 0.01 US$ 1.00 = 157.4

FISCAL YEAR

January 1 thru December 31

ABBREVIATIONS AND ACRONYMS

ASM Artisanal and Small Scale Mining AusAID Australia Agency for International Development BPE Bureau of Public Enterprises CAS Country Assistance Strategy CASM Communities and Small Scale Mining CBUDP Community-Based Urban Development Project CDAs Community Development Associations CDD Community Driven Development CIDA Canadian International Development Authority DCA Development Credit Agreement DFID Department for International Development EIR Extractive Industries Review EMIS Environmental Management and Information System FOSTER Facility for Oil Sector Transparency GDP Gross Domestic Products GSNA Geological Survey of Nigeria Agency ISRs Implementation Status Reports JIS Joint Interim Strategy KPIs Key Performance Indicators LEEMP Local Empowerment and Economic Management Project M&E Monitoring and Evaluation MCRC Mining Community Resource Center MDGs Millennium Development Goals MEC Mines Environmental Compliance MID Mines Inspectorate Department MMSD Ministry of Mines and Steel Development MSMD Ministry of Solid Minerals Development MTR Midterm Review NCC National Coal Corporation NEEDS National Economic Empowerment and Development Strategy

NGRL National Geosciences Research Laboratory NGSA Nigerian Geological Survey Agency NIMG National Institute of Mining and Geology NMG National Institute of Mining and Geoscience NRDF Natural Resources Development Fund PAD Project Appraisal Document PCC Project Consultative Committee PDO Project Development Objectives PF Process Framework PMU Project Management Unit PRA Participatory Rural Appraisal QALP Quality Assessment of the Lending Portfolio RAMP-2 Second Rural Access and Mobility RPF Resettlement Policy and Process Framework SESA Sector Environmental and Social Assessment SMART Specific, Measurable, Achievable, Realistic and Time SMDF Solid Minerals Development Fund SMMRP Sustainable Management of Mineral Resources Project UNDP United Nations Development Program

WGI World Governance Indicator

Vice President: Makhtar Diop Country Director: Marie Francoise Marie-Nelly Sector Manager: Christopher Sheldon Project Team Leader: Ekaterina Mikhaylova ICR Team Leader: Ekaterina Mikhaylova ICR Primary Author: Sabine Cornelius

NIGERIA Sustainable Management of Mineral Resources Project

CONTENTS

B. Key Dates .................................................................................................................. vi C. Ratings Summary ...................................................................................................... vi D. Sector and Theme Codes ......................................................................................... vii E. Bank Staff ................................................................................................................. vii F. Results Framework Analysis .................................................................................... vii G. Ratings of Project Performance in ISRs ................................................................... xi H. Restructuring (if any) ................................................................................................ xi I. Disbursement Profile ................................................................................................. xi 1. Project Context, Development Objectives and Design ............................................ 1

1.1. Context at Appraisal ......................................................................................... 1 1.2. Original Project Development Objectives (PDO) and Key Indicators (as approved) .................................................................................................................... 3 1.3. Revised PDO and Key Indicators, and reasons/justification ............................ 6 1.4. Main Beneficiaries ............................................................................................ 6 1.5. Original Components (as approved) ................................................................ 6 1.6. Revised Components ........................................................................................ 8 1.7. Other significant changes ................................................................................. 8

2. Key Factors Affecting Implementation and Outcomes ......................................... 10 2.1. Project Preparation, Design and Quality at Entry........................................... 10 2.2. Implementation ............................................................................................... 13 2.3. Monitoring and Evaluation (M&E) Design, Implementation and Utilization 15 2.4. Safeguard and Fiduciary Compliance ............................................................. 16 2.5. Post-completion Operation/Next Phase .......................................................... 18

3. Assessment of Outcomes ....................................................................................... 19 3.1. Relevance of Objectives, Design and Implementation ................................... 19 3.2. Achievement of the PDO:............................................................................... 20 3.3. Efficiency ........................................................................................................ 25 3.4. Justification of Overall Outcome Rating ........................................................ 27 3.5. Overarching Themes, Other Outcomes and Impacts ...................................... 27 3.6. Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops. 28

4. Assessment of Risk to Development Outcome ...................................................... 28 5. Assessment of Bank and Borrower Performance .................................................. 29

5.1. Bank Performance .......................................................................................... 29

5.2. Borrower Performance ................................................................................... 30 6. Lessons Learned..................................................................................................... 31 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners........ 32 Annex 1. Project Costs and Financing .......................................................................... 33 Annex 2. Outputs by Component ................................................................................. 34 Annex 3. Economic and Financial Analysis ................................................................. 40 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 41 Annex 5. Beneficiary Survey Results ........................................................................... 43 Annex 6. Stakeholder Workshop Report and Result .................................................... 44 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 45 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 53 Annex 9. List of Supporting Documents ...................................................................... 54

NIGERIA: SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES DATA SHEET

A. Basic Information

Country: Nigeria Project Name: Sustainable Management of Mineral Resources

Project ID: P086716 L/C/TF Number(s): IDA-40120 ICR Date: 11/28/2012 ICR Type: Core ICR

Lending Instrument: SIL Borrower: MINISTER OF FINANCE

Original Total Commitment:

XDR 80.10M Disbursed Amount: XDR 80.10M

Revised Amount: XDR 80.10M Environmental Category: B Implementing Agencies: Ministry of Minerals and Steel Development Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual Date(s) Concept Review: 11/26/2003 Effectiveness: 04/25/2005 04/25/2005 Appraisal: 11/01/2004 Restructuring(s): Approval: 12/14/2004 Mid-term Review: 07/01/2007 Closing: 06/30/2010 05/30/2012 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Moderately Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies: Satisfactory

Overall Bank Performance: Satisfactory

Overall Borrower Performance: Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance Indicators

QAG Assessments (if any) Rating

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

No Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

No 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) Central government administration 30 30 Micro- and SME finance 5 5 Mining and other extractive 50 50 Other social services 10 10 Vocational training 5 5

Theme Code (as % of total Bank financing) Micro, Small and Medium Enterprise support 17 17 Pollution management and environmental health 17 17 Regulation and competition policy 33 33 Rural non-farm income generation 33 33 E. Bank Staff

Positions At ICR At Approval Vice President: Makhtar Diop Gobind T. Nankani Country Director: Marie Francoise Marie-Nelly Hafez M. H. Ghanem Sector Manager: Christopher Gilbert Sheldon Peter A. van der Veen Project Team Leader: Ekaterina Mikhaylova Jeffrey Davidson ICR Team Leader: Ekaterina Mikhaylova ICR Primary Author: Sabine Cornelius F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) (i) Increase the Government's long-term institutional and technical capacity to manage Nigeria's mineral resources in a sustainable way;

(ii) Establish a basis for poverty reduction and rural economic renewal in selected areas of the country via the development of nonfarm income generating opportunities through small-scale and artisanal mining. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : 50% increase in per capita income for selected small-grants recipients

Value quantitative or Qualitative)

NGN 651,844 per ASM cooperative

50% increase in per capita income in pilot project areas, as measured by village income surveys

50% increase in per cap. income for selected small-grants recipients

NGN 968,131 per ASM cooperative (49% increase)

Date achieved 07/01/2010 06/30/2010 05/30/2012 05/30/2012 Comments (incl. % achievement)

48.5% increase based on sample of 15 cooperatives out of a total of 147 ASM cooperative grant recipient entities (achieved based on small sample)

Indicator 2 : Backlog of mining title applications at the MCO cleared Value quantitative or Qualitative)

3,000 pending applications

Backlog of mining title applications at the MCO cleared

Backlog cleared

Date achieved 04/24/2005 06/30/2010 05/30/2012 Comments (incl. % achievement)

Original backlog cleared in 2005, final clean-up of inactive licenses completed in July/August 2011 (100% achieved)

Indicator 3 : Mining Cadastre Office and ASM field offices staffed, fully equipped and operational


No MCO 5 ASM field offices

1 Mining Cadastre Office and 12 ASM field offices staffed, fully equipped and operational

1 MCO 17 ASM offices


The Mining Cadastre Office's operating budget is now fully funded through the Federal budget (100% achieved)

Indicator 4 : Number of artisanal and small-scale mining associations and enterprises established and fully operational under a legal license Value quantitative or Qualitative)

0 200 1030


1,030 associations/cooperatives established and licensed (100% achieved)

Indicator 5 : Adoption of new mining law, regulations - including environmental regulation for the sector


Old Mining Law - No regulation

New mining law and regulations

Adoption of new mining law, regulations including environmental regulation for the sector

Mining law and regulations adopted and gazetted.

Date achieved 04/24/2005 06/30/2010 05/30/2012 05/30/2012 Comments (incl. % achievement)

Mining law and mining regulations adopted and gazetted in 2007 and 2011, respectively. Environmental regulations have been prepared and were issued as part of the mining regulation (100% achieved)

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Number of licenses issued by Mining Cadastre Value (quantitative or Qualitative)

0 5,000 10,056


At project closing, 10,056 licenses had been granted, of which 6,300 were active licenses (100% achieved)

Indicator 2 : % of country covered by geophysical survey Value (quantitative or Qualitative)

40% 100% 100%


Airborne survey completed in late 2010. Interpretation of survey data and production of geo-physical maps, including radio-metrics, gravity and magnetics, completed in 2012 (100% achieved)

Indicator 3 : Annual solid minerals production Value (quantitative or Qualitative)

US$35 million US$100 million US$229 million

Date achieved 04/24/2005 12/31/2009 05/30/2012 Comments (incl. %

Since data regarding value of annual solid minerals production was not readily available, value of collected royalties was used as a proxy indicator (100%

achievement) achieved) Indicator 4 : New private investment in the mining industry Value (quantitative or Qualitative)

Not available USD100 million Not available


Compilation of this data was not feasible. More than 6,300 active licensesat end of Project compared to the 1,000 baseline suggests new investments. 50-60 international companies engaged in exploration (50% achieved)

Indicator 5 : Number of mining operators benefiting from financing and business development assistance, number of mining cooperatives or communities receiving grants.

Value (quantitative or Qualitative)

0 250 enterprises or cooperatives 245 ASM cooperatives and community groups


Project financed 147 sub-projects implemented by ASM cooperatives (improvements in granite/sand/gravel/laterite quarrying) and 98 community sub-projects (class-room blocks and water supply) (95%) achieved)

Indicator 6 : Sustainable environmental practices in ASM communities, as measured by EIA in pilot areas Value (quantitative or Qualitative)

0 100% of pilot projects/ ASM grants

100% of ASM grants


Achieved

Indicator 7 : Number of jobs formalized including self-employment in number of communities using matching grants Value (quantitative or Qualitative)

0 formalized jobs 200,000 formalized jobs Estimated 250,000 formalized jobs


250,000 miners previously engaged in informal and illegal mining became formally employed (100% achieved).

Indicator 8 : Direct project beneficiaries Value (quantitative or Qualitative)

0 persons 3,000 persons Estimated 15,000 persons


Estimated 12,000 ASM grant beneficiaries and 3,000 training beneficiaries. Indicator only introduced in 2009. IDA core indicator (100% achieved)

Indicator 9 : Number of female beneficiaries Value (quantitative 0 20% 28%

or Qualitative) Date achieved 04/24/2005 12/31/2009 05/30/2012 Comments (incl. % achievement)

25% of ASM beneficiaries and 40% of training participants were female. Indicator only introduced in 2009. IDA core indicator. (100% achieved)

G. Ratings of Project Performance in ISRs

No. Date ISR Archived DO IP Actual

Disbursements (USD millions)

1 06/30/2005 Satisfactory 1.76 2 11/25/2005 Satisfactory Satisfactory 6.58 3 04/17/2006 Satisfactory Satisfactory 8.90 4 11/17/2006 Satisfactory Satisfactory 14.73 5 05/03/2007 Moderately Satisfactory Moderately Satisfactory 17.19 6 10/16/2007 Satisfactory Satisfactory 27.17 7 04/18/2008 Satisfactory Satisfactory 35.47 8 12/11/2008 Satisfactory Satisfactory 51.36 9 06/05/2009 Satisfactory Satisfactory 59.91

10 10/30/2009 Satisfactory Satisfactory 68.98 11 05/28/2010 Satisfactory Satisfactory 83.92 12 06/21/2010 Satisfactory Satisfactory 84.86 13 12/22/2010 Satisfactory Satisfactory 93.32 14 10/10/2011 Satisfactory Satisfactory 112.70 15 05/27/2012 Satisfactory Satisfactory 122.32

H. Restructuring (if any) Not Applicable

I. Disbursement Profile

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1. Project Context, Development Objectives and Design

1.1. Context at Appraisal

1. Country context. At the time of Project appraisal, Nigeria ranked low on the human development scale of the United Nations Development Program (UNDP). With a population of 133 million people and an annual population growth rate of 2.6 percent, it was the most populous country in Africa (Project Appraisal Document (PAD), Second Rural Access and Mobility Project (RAMP-2), p. 24). About 67 percent of the population lived below the poverty line, and the majority of the 80-90 million Nigerians in dire economic conditions lived in rural areas. In 2002, the country ranked 151 out 177 countries on the Human Poverty Index (HPI). In 2004, at a per capita income of US$320 per year, Nigeria experienced one of the lowest per capita Gross Domestic Products (GDP) in the world (PAD, p. 24), despite the fact that Nigeria was the second largest economy in Sub-Saharan Africa (after South Africa). While Nigerias per capita GDP increased to low middle-income country level at about US$1,541 in 2011 as a result of the positive economic performance over the past decade, its Human Development Index remained low at 156 out of 187 countries. Nigeria is currently behind its target to meet most of its MDGs, including halving poverty to 31 percent by 2015, given that the poverty rate was 54 percent in 2008) (PAD, RAMP-2). 2. Overdependence on the oil sector. In Nigeria, overdependence on oil-driven growth had constrained pro-poor growth since the mid-1970s. While oil export earnings had increased to about US$300 billion between the 1970s and Project appraisal in 2004, Nigerias per capita income had dropped by 20 percent between 1975-2004 (Sustainable Management of Mineral Resources Project (SMMRP) PAD, p. 1). In addition, macroeconomic mismanagement, weak governance and corruption, a hostile business environment, and social conflict and insecurity contributed to the decline of the non-oil part of the economy and the persistence of poverty within Nigeria (PAD, p. 24). The macroeconomic instability had disproportionately impacted the poor, given that opportunities for rural populations to improve their livelihood declined as export agriculture contracted, productivity of subsistence agriculture weakened, and non-farm income generating activities became limited. Achieving pro-poor growth and attaining the Millennium Development Goals (MDGs) thus required a special focus on rural poverty, as well as significant growth and productivity gains outside of the oil sector (PAD, RAMP-2). 3. Sector background. Organized mining in Nigeria began around 1903, and until the 1960s coal and tin were extracted and exported on a large scale (PAD, p. 2). However, with the emergence of the petroleum industry about forty years ago, the Government shifted its attention away from the mining sector. The sectors decline, which was exacerbated by macroeconomic and socio-economic instability and poor management of state-owned enterprises led to a large-scale withdrawal of foreign investments in the sector. Existing mining operations declined, and new investment, in particular by foreign mining companies was constrained by the absence of a comprehensive geological survey, the lack of adequate proven deposits, an unfavorable fiscal regime, and an uncompetitive legal and fiscal regulatory framework (PAD, p. 25). At the time of appraisal, despite its substantial and widespread mineral endowment, Nigeria gained about 0.4 percent of its export earnings from solid minerals, compared to more than 20 percent in Namibia, Botswana and Zambia, and more than 50 percent of export earnings were generated in the Democratic of Congo (Eyre, 2007).

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4. Industry structure. At the time of Project appraisal, there were no medium- or large-scale mining operations in Nigeria. Active mining in the country was primarily carried out by small entrepreneurs and artisans, working deposits of precious, semi-precious stones, construction and industrial minerals. 1 Typically, these miners were not licensed or operating outside of the parameters of the licenses they held (PAD, p. 2). Government estimates available at the time of appraisal suggested that as many as 500,000 households (potentially 2-4 million people) depended directly or indirectly on informal mining for their sustenance. Common problems associated with informal Artisanal and Small-scale Mining (ASM) 2 operations included: (i) environmental degradation; (ii) social problems, including child labor and poor working conditions; (iii) national security risk due to migrations of cross-border labor; (iv) low productivity and waste of minerals due to inefficient mining methods; (v) poor health and safety conditions; (iv) high level of smuggling and loss of Government revenue (PAD, p. 25). Given that mining was the only cash-generating activity for subsistence farmers it represented the most immediate and promising means of poverty alleviation for rural communities (PAD, p. 2). 5. Sector Reforms. In 2002, in order to correct the poor performance of the mining sector, the Government constituted a Committee under the auspices of the Ministry of Solid Minerals Development3 to draft a reform strategy for the sector. The Committee published a seven-year strategic action plan to outline the framework for renewal and growth for the sector. Nigerias agenda for the development of the solid minerals sector, considered one of six priority sectors crucial for economic diversification away from oil dependence was outlined in the 2003-2007 National Economic Empowerment and Development Strategy (NEEDS) (NPC, 2004). The NEEDS pursued the dual aims of fostering the development of a modern, private sector driven solid minerals sector (and thus the exploration of base metals and precious and semi-precious stones) as well as formalizing the ASM sector (NPC, 2004, p. 79). To this end, at the time of appraisal, the Government had embarked on several key sector reforms: (i) the Ministry of Mines and Steel Development (MMSD) had begun to draft a new Mining Code and competitive fiscal regime to attract new private sector investment;4 and (ii) it had prioritized the integration of artisanal and small-scale mining into the formal economy, as part of its broader poverty reduction and rural economic renewal program.

6. Rationale for Bank assistance. The Project was the first Bank-funded mining project in Africa following the World Bank Groups Management Response to the July 2001 Extractive

1 A variety of minerals occur across Nigeria, with different types of mineral deposits clustered in different parts of the country. The main Artisanal and Small Scale Mining (ASM) mining areas include: PlateauState for tin and columbite; Niger, Zamfara, Kebbi and Kaduna States for gold; Benue and Cross River States for barites, Gombe and Yobe States for gypsum, and Oyo; Plateau and Kaduna States for gemstones; and Cross River, Ogun and Benue States for limestone for us in the manufacturing of cement (PMU). 2 According to the 2007 Minerals Act, Artisanal Mining refers to mining operations that utilize non-mechanized methods of reconnaissance, exploration, extraction and processing of mineral resources within a small-scale mining lease area. Small-scale mining refers to artisanal, alluvial and other forms of mining operations involving the use of low level technology or methods not requiring substantial expenditure for the conduct of mining operations within small-scale lease areas (MMSD, 2007). 3 In 2007, the Ministry of Solid Minerals Development (MSMD) was restructured and renamed Ministry of Mines and Steel Development (MMSD). Designated departments were created for: (i) Mines Inspection, (ii) Artisanal and Small-scale Mining, (iii) Mining Environmental Compliance, and (iv) Legal Advisor. In the remainder of this ICR, this Ministry will be referred to by its new name or acronym. 4 MSMD had also initiated work on an airborne geophysical survey, which was to cover about 35 percent of the countrys land area of interest (PAD, p. 1).

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Industries Review (EIR), 5 which affirmed the Banks legitimate role in the mining sector provided these interventions allowed extractive industries to contribute to poverty alleviation through sustainable development (PAD, p. 3). The Banks Managements response further emphasized the need for selectivity in the Bank Groups involvement in the extractive industries, and for greater focus on the needs of the poor, and increased focus on governance and transparency, as well as environmentally and socially sustainable development. These rules of engagement were fully embraced by the Projects focus on ASM activities as well as its intent to establish a rule-based system for the administration of mining rights as well as enforce the industrys compliance with sustainable development guidelines (PAD, p. 3). To this end, the Project was the first attempt to adopt a new governance centered approach to mining sector development, which provided valuable lessons learnt for other projects that followed. 7. The Project responded to all three strategic goals outlined in the World Bank Groups 2004 Joint Interim Strategy (JIS) for Nigeria: (i) improvement of economic governance; (ii) creation of the conditions for rapid private-sector led, poverty-reducing growth; and (iii) enablement of local communities to take charge of their own development (World Bank, 2003). The Project further aimed to support the JISs goal to assist the Government, and the Bureau of Public Enterprises (BPE) in particular, in advancing the privatization of the Nigerian Mining Corporation (NMC) and the National Coal Corporation (NCC), in accordance with the 1999 Privatisation and Commercialisation Act. The Project was also fully aligned with the main themes of the Banks 2005-2008 Country Assistance Strategy (CAS) for Nigeria, which was completed one year after the Project became effective.6

1.2. Original Project Development Objectives (PDO) and Key Indicators (as approved) 8. Project Development Objectives. The Project Development Objectives (PDO) as stated in the PAD Results Framework (PAD, p. 30) and the Development Credit Agreement (DCA), were to: (i) improve governance and technical capacity in the solid minerals sector to enable the Government to manage Nigerias mineral resources in a sustainable way; and (ii) establish a basis for poverty reduction and rural economic renewal in selected areas of the country 7 via the development of non-farm income generating opportunities through small-scale and artisanal mining and to diversify away from oil sources of income. The PDO statement followed standards applied to World Bank financed projects at the time of project preparation, which were focused on broader economic Project outcomes. 9. Part (i) of the wording of the PDO stated in the main text of the PAD differs slightly from that in the Results framework and the DCA, given that it aims to increase the Governments long-term institutional and technical capacity to manage Nigerias mineral resources in a

5 The Extractive Industries Review entailed an independent stakeholder review process which produced a number of recommendations, to which a Bank Groups Management response was prepared (World Bank, 2004). 6 The CAS was developed on the basis of the Governments Poverty Reduction Strategy, i.e. the National Economic Empowerment and Development Strategy (NEEDS), which aimed to reduce poverty, create wealth and human development through reforms and initiatives in three key areas: (i) overhauling the way government works; (ii) growing the non-oil private sector; and (iii) implementing a social charter to achieve improvement in human development. Under the NEEDS the government planned to vigorously promote the exploration and exploitation of solid minerals to provide inputs for local industries as well as for exports (NPC, 2004). 7 The only minor difference in wording between the PDO in the PADs Results Framework and the one in the DCA is that the latter refers to the territory of the Borrower instead of the country.

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sustainable way (PAD, p.5). The wording in Part (i) of the PDO in the Results Framework of the PAD and the DCA is more explicit as it refers to governance and technical capacity instead of long-term institutional and technical capacity. The former more appropriately reflects the Projects focus on the socio-political, economic and institutional dimensions of governance.8 Part (ii) of the PDO is essentially identical in all three references. Given the legal status of the DCA as an official document signed between IDA and the Federal Republic of Nigeria, and the relatively minor difference in the wording, the assessment of the Projects performance in this ICR will be based on the DCA version of the PDO. 10. Key Performance Indicators. A total of fourteen Key Performance Indicators (KPIs) were listed in the Results Framework of the PAD (see left column of Table 1 below). The indicators in the PADs Results Framework and those in the DCA were rather similar, and the DCA included additional indicators to measure the increase in solid minerals production and new private investment, and to track to what extent sustainable environmental practices were functional in artisanal and small-scale mining communities, as measured by environmental impact assessments in all pilot areas (DCA, Schedule 5, p. 35). The DCA further included two different sets indicators, which were to be monitored: (i) after Year 1, and (ii) at Midterm Review and Project completion. The assessment of the Projects achievements in this ICR will be based on the Project completion indicators in the DCA, which are listed in the right column in Table 1 below, given that they: (i) do not differ significantly in substance from the ones in the PAD; (ii) are the legally binding indicators; and (iii) were tracked particularly during the later stages of Project implementation. Table 1: Key Performance Indicators (as specified in the PADs Results Framework and DCA) PDO indicators as stated in the Results Framework in Annex 3 of the PAD (pp. 30f.)

PDO indicators, as stated in the DCA9

1. New Mining Law and regulations 1. Adoption into law of new mining law and regulations, including environmental regulations for sector, by Midterm Review.

2. Mining Cadastre and ASM directorates staffed, fully equipped and operational by mid-term review - Baseline: 0; End of Project target: 12

2. Establishment and effective operation of Mining Cadastre

3. Backlog of mining titles applications at the Mining Cadastre cleared Baseline: 3,000 pending; End of Project target: 0 (PDO indicator 4 in the DCA was included as Intermediate Result indicators 5 in the Results Framework of the PAD (see below).

3. Backlog of pending applications cleared by Midterm Review; and 4. Number of new mining titles issued in a transparent and efficient manner, as evidenced by compliance with procedures and timelines set out in new mining law and regulations (Midterm Review: 1,000; Project Completion: 5,000).

8 The World Governance Indicator (WGI) Project reports aggregate and individual governance indicators for six dimensions of governance: (i) voice and accountability; (ii) political stability and absence of violence; (iii) government effectiveness; (iv) regulatory quality; (v) rule of law; and (vi) control of corruption (World Governance Indicators, 2012). 9 The indictors in the DCA were numbered but not categorized as PDO and Intermediate Outcome indicators. However, they were divided into PDO and Intermediate Outcome indicators as shown in the right column of Table 1 during Project implementation. PDO and Indicators followed standards applied by the World Bank financed project at that time.

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4. Number of ASM associations and enterprises established and fully operational under a legal license (Baseline: 0; End of Project target: 200)

5. Number of artisanal mining associations established and operating in accordance with the law (Midterm Review: 85; Project Completion: 200).

5. By project end, 50% increase in per capita income in pilot project areas, as measured by village income surveys (Baseline: to be established by village income surveys; End of Project target: 50%)

6. Increase in per capita income in pilot project areas, as measured by village income surveys which shall set the baseline (Midterm Review: 10%; Project Completion: 50%).

Intermediate Outcome indicators as stated in the Results Framework in Annex 3 of the PAD (pp. 30f.)

Intermediate Outcome indicators, as stated in the DCA

1. Number of jobs formalized, including self-employment in number of communities using matching grants (Baseline: 0; End of Project target: 200,000)

1. Volume of formal employment created during the life of the Project (Midterm Review: 50,000; Project Completion: 200,000).

2. Increase in income (%) in pilot project communities (baseline established by village income surveys)

2. Number of mining operators benefiting from financing and business development assistance; and 3. Number of mining communities or associations receiving Subproject Grants under the Project (Midterm Review: 25% of artisanal mining associations and formal artisanal miners; Project Completion: 50%)

3. Number of foreign investors operating in Nigeria (Baseline: 0; End of Project target: 20)

Indicator was not included in the DCA

4. Investment in mineral exploration (Baseline: 0; End of Project target: US$80 million)

4. New private investment in the mining sector since Effective Date (Midterm Review: $12 million; Project Completion: $100 million).

5. Increase in annual solid minerals production in the sector (Midterm Review: $12 million; Project Completion: $100 million).

5. Number of licenses issued by Mining Cadastre

This indicator was categorized in the DCA as a PDO indicator (see PDO indicator 4 above)

6. Number of geological maps published in digital format (scale: 1:250,000) (Baseline: 0; End of Project target: 100)


7. Number of mineral inventory maps (for each state) (Baseline: 0; End of Project target: 36)


8. % of country covered by geophysical survey (Baseline: 20%; End of Project target: 100%)

6. Area covered by new geological maps, as percentage of total area of the Borrowers territory (Midterm Review: 50%; Project Completion: 100%).

9. Staff continuity (at least 2-year assignments) Indicator was not included in the DCA 7. Sustainable environmental practices functional in

artisanal and small-scale mining communities, as measured by environmental impact assessments in all pilot areas (Midterm Review: 50%; Project Completion: 100%

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1.3. Revised PDO and Key Indicators, and reasons/justification 11. The PDOs and the Key Performance Indicators were not revised. However, it was noted that the Performance Indicators were to be updated in accordance with the new format for project result frameworks, which was adopted after the Project became effective and to be aligned with the indicators that were used in the Implementation Status Reports (ISRs), which followed the new standards. This update was expected to be done concurrently with the Additional Financing. However, since the Bank dropped the proposed Additional Financing in May 2011, and since by that time the more than 90 percent of the Credit proceeds had been disbursed, the indicators were left unchanged. 1.4. Main Beneficiaries 12. The Projects direct beneficiaries included:

200,000 artisanal and small-scale miners whose employment was to be formalized and whose capacity to manage the environmental, health, and social impacts of their own extractive activities was expected to improve; and another 300,000 people working in the supply of goods and ancillary services to the 200,000 ASM operators (PAD, p. 73); and

The Ministry of Mines and Steel Development (MMSD) and its delegated authorizing agencies such as the Geological Survey of Nigeria Agency10 and the National Institute of Mining and Geology (NIMG) which were to benefit from improved institutional and regulatory capacity, which was needed in order to deliver services to private investors and artisanal miners in accordance with the proposed theme of the new proposed Minerals Act.

13. The projects indirect potential beneficiaries included:

About two million people living in mining communities, including disadvantaged population groups, who were to benefit from the expansion and creation of economic opportunities;

The people of Nigeria, who were envisaged to benefit from a more robust economic position resulting from the removal of potential impediments to new private investments in the mining sector; and

Private investors. 14. These primary target groups were not revised. 1.5. Original Components (as approved) 15. The Project objectives were to be supported by four components (see Table 2 below): (i) economic development and livelihood diversification in Artisanal and Small-scale mining (ASM) areas; (ii) strengthening governance and transparency in mining; (iii) private sector development; and (iv) Project coordination and management. Components 1 to 3 were to address the industrys key constraints concurrently from three different angles, while Component 4 supported the attainment of the PDO indirectly by orchestrating Project activities to be undertaken under Components 1, 2 and 3.

10 The Geological Survey of Nigeria Agencys (GSNA) name was later changed to the Nigerian Geological Survey Agency (NGSA).

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Component 1: Economic development and livelihood diversification in Artisanal and Small scale-mining Areas (US$48.9 million at appraisal). In support of Part (ii) of the PDO, Component 1 was to empower artisanal and small-scale miners to increase the extraction and production of solid minerals in an environmentally and socially sustainable way. Key activities to be undertaken under this Component included: (i) analytical work to characterize the nature and extent of small-scale mining and associated socio-economic, community, gender and health aspects; (ii) community-driven pilot projects aimed to improve technical, environmental and social conditions of small-scale mining operations; (iii) rehabilitation and resuscitation of the Jos School of Mines located in Nigerias Plateau zone; (iv) creation of a Small Scale Mining Unit at the Federal level with ASM satellite field offices; (v) improved access to credit and financing in particular for medium and small-scale mining operations; (vi) support for mining-related private sector trade associations and professional interest groups; and (vii) the promotion of small-scale mining of specific commodities with emphasis on important substitution and sector development (PAD, p. 6).

Component 2: Strengthening Governance and transparency in Mining (US$33.3 million at appraisal). In support of Part (ii) of the PDO, Component 2 sought to address governance and transparency issues, notably an unfavorable fiscal regime and an uncompetitive legal and fiscal regulatory framework that had previously deterred private investments (see paragraph 3). Nigerias attractiveness to private investors in mining was to be enhanced through the following activities: (i) revision and modernization of the legal and fiscal frameworks for mining; (ii) strengthening of public mining institutions to provide for transparent management of the sector; (iii) development of a computerized registry and mining Cadastre system in accordance in accordance with international best practice; and (iv) development of good environmental and social management practices within the mining sector (PAD, p. 8).

Component 3: Private Sector Development (US$26.1 million at appraisal). Component 3

sought to support Part (i) of the PDO by addressing a key constraint to the development of the mining sector, i.e. the absence of a comprehensive geological survey and the lack of adequate proven deposits (see paragraph 3). This was largely to be achieved through the following Project activities: (i) restructuring of the State-owned mining corporations (NMC and NCC see paragraph 6); and (ii) undertaking geophysical, geological mapping, and mineral assessments, as well as compiling and completing a large number of maps prepared by GSNA. The resulting geodata was to be made available to potential investors through a national solid minerals information system.

Component 4 Project Coordination and Management (US$6.9 million at appraisal).

Component 4 essentially represented the anticipated overhead costs for implementing the Project. These included the operating expenses of a Project Management Unit (PMU) within the MMSD, which was to coordinate and manage Project activities and functions, including procurement, monitoring and evaluation, financial management and record keeping, accounts and disbursement. The PCU was further responsible for coordinating Project activities with other stakeholders, i.e. other ministries and institutions at the Federal and State levels, stakeholders from the public and private sectors, and civil society (PAD, p. 8).

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Table 2: Indicative cost at Appraisal by Project Component (in US$ million) Project Components and Sub-Components Indicative Cost %

Component 1: Economic Development and Livelihood Diversification in Artisanal and Small-scale Mining Areas 48.90

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1. Sustainability of Small-scale Mining and Livelihoods Diversification 30.16

2. Financing Program for Business Development in Mining 16.54

Component 2: Strengthening Governance and Transparency in Mining 33.28 28

1. Legal and Fiscal Reform 2.17

2. Institutional Capacity Building 16.10

3. Mining Cadastre 5.31

4. Environment and Social Management 9.70

Component 3: Private Sector Development 26.81 24

1. Restructuring of Solid Minerals State-owned Enterprises 1.10

2. Strengthening of the Geological Infrastructure 25.71

Component 4: Project Coordination and Management 6.91 6

PPF 1.8 Total (US$) 117.7 100

1.6. Revised Components 16. The Components were not revised.

1.7. Other significant changes 17. Changes in the scope or scale of planned activities. During the Projects lifetime, the following activities were reduced in scope or cancelled altogether. Cost savings realized through these reductions were used to cover cost overruns incurred under other components (see paragraph 19).

At the request of the Minister in 2005, it was agreed that the scope of the rehabilitation and resuscitation of the Jos School of Mines activity be expanded to upgrade the Jos School to the Nigerian Institute of Mining and Geosciences (AM, December 2005 mission) which was to play the role of a Regional Center Excellence. The Project provided more support to the infrastructure of the NIMG.

In 2005, the number of ASM pilot studies in support of the demonstration projects to be undertaken under Component 1 was reduced from six to two, with focus on barites and gypsum (AM, October 2005 mission). The two studies were completed, but implementation of the pilot demonstration projects was subsequently dropped. This decision was motivated by the notion that the methodology was too complex and not a cost effective use of credit proceeds (as expressed reportedly by the Minister of Mines and Steel Development at the time). These changes did not adversely affect the achievement of Part (i) of the PDO, as they were offset by higher allocation for small grant programs as well as the addition of activities aimed at fostering value added in the gemstone industry by establishing a lapidary school in Jos and providing training in dimension stone quarrying all contributing to improved ASM value addition and improving ASM efficiency and productivity following good standards.

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The number of ASM field offices to be established under the Project was reduced from six to two in Ogoja (barites) and Nafada (gypsum) to meet the demands of artisanal and small-scale miners in the areas where the demonstration pilot projects were to be implemented (AM, October 2005 mission). Activities aimed to improve access to credit and financing in the mining sector, especially for mid-tier and small scale miners, were intentionally postponed by the Project to await the completion of the small grants program to provide lessons learnt. (Draft PP for AF, 2011). This sub-component was envisaged to be implemented under the proposed Additional Financing Credit, which did not materialize due to the Banks new selectivity criteria for lending in Nigeria (see paragraph 20)

The privatization of state-owned mining enterprises was carried out solely with government funding11 (Draft PP for AF, 2011);

The development of a National Solid Minerals Information System was postponed until the acquisition and organization of geodata was completed and could be linked to the database (preparatory work for this sub-component was to be completed under the original financing, but implementation was to be funded under the proposed Additional Financing (Draft PP for AF, 2011).

18. Changes in Implementation Schedule. The Project was approved by the World Banks Board of Directors on December 14, 2004 and became effective on April 25, 2005. The Project was originally scheduled to close on June 30, 2010. However, due to implementation delays (see paragraphs 33 and 34) that were actively addressed jointly by the Bank and the client but which had caused a 21-month disbursement lag by December 2008, the Midterm Review (MTR) mission recommended that an extension of the closing date be requested. This conclusion was endorsed during the review of the Project by the Banks Quality Assessment of the Lending Portfolio (QALP) exercise, which took place in October 2008. A 23-month extension until May 30, 2012 was subsequently requested and granted on November 24, 2009. The Project closed on May 30, 2012. 19. Changes in Funding Allocations. In 2008, the Government requested a reallocation pertaining to about US$65 million of undisbursed and uncommitted Credit proceeds, in order to raise the amounts in certain categories to enable the Project to accomplish its intended objectives (ISR No.8, December 2008). Several disbursement categories of the project, such as works, were overdrawn, while others remained underutilized, such as consultancies, due to the cancellation of the envisaged pilot projects and a reduction in the number of studies to be undertaken under the Project. A first reallocation was approved on December 5, 2008. Following a formal request by the Government, a second reallocation of Credit proceeds was approved by the Banks Vice President for the Africa Region on November 24, 2009, along with the above-mentioned extension of the closing date. A third reallocation of funds was requested and approved shortly before closing, on May 8, 2012, to prepare the credit for closing and to allow the recipient to utilize all credit proceeds within the agreed work program (Restructuring Cover Memo). This last reallocation shortly before the closing date solely represented a cleanup effort to advance disbursements under overdrawn categories (AM, April/May 2012 mission).

11 There was no formal assessment of the privatization of these SOEs. While the Project could have potentially helped to improve outcome of the privatization (the companies privatized remained nonperforming), given high sensitivity and political issues around the privatizations, the Government took the lead and full responsibility for this sub-component, thus freeing up the earmarked credit funds for other activities.

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20. The reasons for the overutilization of certain disbursement categories included: (i) underestimation of the cost of the airborne geophysics surveys, whose actual contract value amounted to about US$23.5 million versus the budgeted amount of US$10 million due to a sharp increase in commodity and fuel prices associated with the global mining boom (the estimate was based on per line-kilometer cost at the time of appraisal; the sharp increase in cost of surveying resulting from the commodity boom affected all surveying projects globally and was not Nigeria a specific issue); (ii) the addition of civil works, based on the incumbent Ministers directives, for the rehabilitation of MMSD headquarters in Abuja and regional office in Jos; (iii) increased funding requirements as a result of the decision to upgrade of the Jos School of Mining to the Nigerian Institute for Mining and Geoscience (NIMG); and (iv) the allocation of additional funding to promotional activities, training/workshops and operating costs in recognition of the strategic importance of the activities to the Projects achievement of its objectives. 21. While amount wise the changes were significant, on balance, they did not have negative impact on the achievement of the PDO and were made based on the business needs revealed during Project implementation. The large size of the credit and flexibility of the design, combined with dropping of some of the activities, allowed such decision to be made on as needed basis. It was noted that the Government had expressed interest in obtaining additional financing to finance some of the cost overruns and expand the scale of ASM support, enhance capacity building and institutional strengthening, expand activities carried out by the NGSA, and conduct additional work related to the seven strategic minerals (ISR No. 9, June 2009). While preparatory work for an additional IDA credit was completed in February 2011, the World Bank withdrew the proposed Additional Financing in May 2011 due to the Banks selectivity criteria, which determine the sectors that can be supported by the Bank at the same time (AM, August 2011 mission).

2. Key Factors Affecting Implementation and Outcomes 2.1. Project Preparation, Design and Quality at Entry 22. Soundness of background analysis. Project preparation took place between November 2003 (Project Concept Note Review) and November 2004 (appraisal). For the most part, the prevailing conditions were correctly diagnosed during Project preparation, in particular regulatory and governance factors that constrained the growth of the minerals sector and that adversely affected the environment, social fabrics and the health of miners and their families (PAD, pp. 24f.). The Project assessed the geological potential and sector development needs based on the existing data, such as past mining operations and geological data available at that time, global trends, and prevailing conditions in Nigeria. To comply with the safeguards requirements, the project prepared a Mining Sector Environmental and Social Assessment (SESA) (Wardell Armstrong, 2005), which characterized Nigerias mining sector and its mining potential, and appropriately identified key environmental and social management issues, notably institutional shortcomings in the implementation of environmental regulations, monitoring, and the evaluation of socio-economic impacts of mining projects. 23. It further provided specific recommendations for remedying these deficiencies such as: (i) setting up and capacity building of an environmental management unit at the Mines Department in collaboration with the EIA division of the Federal Ministry of Environment for the review and approval of EIAs; (ii) setting up of an Environmental Management and Information System (EMIS); and (iii) completion of Environmental and social baseline studies of selected mining areas (Wardell Armstrong, 2005, p. 21f.). As a precautionary measure, a Resettlement Policy and

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Process Framework (RPF) and a Process Framework (PF) were prepared to identify alternative sources of income in the event of displacement of small-scale miners. 24. Incorporation of lessons learned. According to the PAD (p. 9), Project design adequately incorporated lessons learned from Bank-supported community development as well as micro, small and medium enterprise projects that were operational in Nigeria at the time of appraisal.12 It also reflected lessons learned from ongoing similar capacity building operations for mineral sector technical assistance projects in other countries in the Africa region.13 Furthermore, findings from the World Banks Management Response to the Extractive Industries Review (EIR), the World Bank/DFID global Communities and Small Scale Mining initiative (CASM), and Bank supported small-scale mining projects in Mozambique and Madagascar were taken into consideration. In addition, Project design incorporated previous policy level experience with project implementation, which had highlighted the importance of involving Government counterparts at an early stage of project preparation [as] an important factor in future project success (PAD, p. 9). Accordingly, officials from the Ministry of Mines and Steel Development, Ministry of Finance, the (Federal) Ministry of Environment, the National Assembly, the Office of the President as well as representatives of the private sector, civil society and non-governmental organizations had been consulted at various stages of Project preparation (PAD, pp. 9f.). It was noted that the SMMRP was the first project following the Extractive Industries Review and as such became a valuable source of lessons learnt for future projects itself. 25. Assessment of Project objectives, design and components. The PDO was highly relevant at the time of appraisal, as evidenced by the fact that the mining sector was fully aligned with all three pillars (see paragraph 6) of the World Banks 2004 Joint Interim Strategy for country assistance and the three poles (see paragraph 6) of the Governments 2003-2007 National Economic Empowerment and Development Strategy (NEEDS). The PDOs continued relevance was confirmed during the MTR. The focus on improving the technical capacity under Part (i) of the PDO was appropriate, given that strengthening the capacity of key institutions was a prerequisite to the effective enforcement of legislation and regulations and sound management of the minerals sector. Regarding Part (ii) of the PDO, it is commendable that it aimed to create a basis for poverty reduction rather than the, at the time, customary higher level objective of poverty alleviation, even though the concepts of basis for poverty reduction and rural economic renewal could have been more clearly defined to make them more readily measurable, and there could have been some qualification as to which extent the Project could be held accountable for achievement (or not) of this part of the PDO. The PDO, as noted, was designed following standards at the time of appraisal and was in compliance with those. 26. Project design was consistent with the Projects stated objectives. While the PAD did not specify a particular theory of change upon which Project design was based, it is commendable that it implicitly embraced the World Banks at the time of appraisal novel value chain approach for supporting extractive industries. The value chain approach, which marked the evolution from the historic emphasis on merely increasing investment to promoting sustainable development (McMahon, 2010) posits that sustainable sector development requires the following interlinked elements: (i) confidence-instilling mineral legislation and award of licenses; (ii) a

12 Annex 2 of the PAD (pp. 28f.) contained a thorough review of potential linkages of the SMMR with contemporary projects, such as the FADAMA 2 (an irrigation project), Community-Based Urban Development Project (CBUDP), Local Empowerment and Economic Management Project (LEEMP). 13 These included Burkina Faso, Ghana, Mali, Mauritania, Mozambique, Madagascar, and Tanzania (PAD, p. 9).

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clear regulatory framework and adequate capacity for monitoring and enforcement; (iii) transparent and efficient collection of taxes and royalties; (iv) efficient management and allocation of fiscal revenues; and (v) the sector contributing to sustainable socio-economic development (McMahon, 2010). 27. Implementation arrangements. Implementation arrangements were appropriately designed. The Project was to be housed in the Ministry of Mines and Steel Development, and a Project Management Unit (PMU), comprised of a combination of Ministry staff and consultants, was responsible for the day-to-day management of Project implementation. The Project relied on the Project Steering Committee at the Ministry level, which comprised director generals and heads of the departments and agencies affected by the Project. The Steering Committee was tasked with higher-level decisions and oversight of implementation. The records indicate that the PSC meetings were well attended and steered project related decision-making. 28. While it was preferable for the PMU to be staffed by permanent public sector officers rather than consultants who were likely to leave the PMU after the closing date (and jeopardizing sustainability and continuity of the institutional infrastructure created under the Project), the unequal pay scales for public sector staff and individual consultants have been the cause of discontent and conflict among PMU members in the case of similar Projects elsewhere. In order to harmonize the two payment scales, the Government supported the payment of salary top ups to public sector staff employed by the PMU through Governments counterpart funding (ISR No. 3, April 2006). 29. The PMU was generally responsible for the procurement of all goods, services, and works under the Project. However, in the case of the envisaged pilot projects (which did not materialize), procurement was to be undertaken by local Mining Community Associations, i.e. local implementation committees, and funds were to be disbursed directly to these entities (PAD, p.12). In regards to the small grants program on the ground, the PMU engaged local NGOs and provincial departments to carry out outreach, dissemination of information and supervision of grant utilization. 30. Adequacy of Government commitment. At the time of appraisal, the Governments commitment was inferred from its preparation of a new Minerals Act to replace the 1999 Minerals and Mining Decree, which was considered inadequate in terms of improving Nigerias investment climate (PAD, p. 3). This action indicated a clear commitment of the Government during Project design and preparation to implement the strategic action plan of the NEEDS Agenda related to the solid minerals sector reform (see paragraph 6 and 29). The Project objectives, components and activities were designed to contribute to the governments objectives. 31. Stakeholder involvement and participatory process. Recognizing the need to involve Government counterparts as well as other stakeholders in all stages of project preparation Project preparation appropriately entailed a comprehensive consultative process and workshops much in line with the Governments own regulations for consultations on the topics of small-scale mining, fiscal reform, and legal and regulatory issues, which culminated in the formulation of project development objectives, a comprehensive Mining Code, and the piloting of ASM projects (PAD, p. 10). About 700 stakeholders comprised of individuals from the private sector, (Federal and State) Government, NGOs and civil society, participated in this National Policy Dialogue. Furthermore, according to the PAD, the Project was expected to select pilot sites through public consultation (PAD, p 10), but since this activity was dropped, the consultations on this particular issue were no longer relevant. For small grants purposes, there was no selection of sites per se the entire country was eligible but the Project successfully involved elements of public outreach

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and information dissemination in each mining district to ensure that communities and miners were aware of the opportunities. 32. The outreach was conducted through local NGOs under contract with the project, regional ASM officers and extension officers, as well as the PMU staff as appropriate. Primary stakeholders likely to be disadvantaged by a project activity, due to an unavoidable loss of access to resources upon which their livelihoods depends (PAD, p. 19) were to be identified through a Participatory Rural Appraisal (PRA) in accordance with the Projects Resettlement Policy Framework and Process Frameworks (RPF and PF) and to be involved in the design and implementation of compensatory measures. Since the project did not cause any involuntary resettlement, these provisions of the RPF and PF remained a recommendation and did not apply. The Project files retain appropriate documentation and proof of land transfers and acquisition documenting that there was no negative loss of land or access because of Project activities. 33. Assessment of Risks. Overall, the list of identified risks was comprehensive and the risk ratings appropriate. In light of the Banks experience with similar operations elsewhere (while the ICR notes that the Project was to test a new approach and as such had to rely on its own judgment), the High risk rating associated with the risk of insufficient knowledge and experience with IDAs procurement procedures was prudent (and the mitigation measures proved to be appropriate), as was the high risk rating associated with the complexity of the ASM component. Two risks were not identified at the time of appraisal, but were perhaps less unique given the nature of the government service: (i) the risk of implementation delays caused by the high turnover in high-level Ministry officials, given that during the 7-year life of the Project, eight Ministers and nine Permanent Secretaries had held appointments at the MMSD (PMU, 2012, p. 3) and by bureaucratic delays; and (ii) security-related risks particularly in the Northern parts of the country, given that Jos (location of a large regional office of MMSD, the National Institute of Mining and Geosciences (NIMG), the gem stone / lapidary school, and ASM community center), Kaduna (location of the National Geological Survey Agency (NGSA) laboratory and center for dimension stone cutting) and some of the ASM areas were strongly affected by religious and sectarian violence and rioting in 2010 and 2011. These risks were beyond the control of the Project, and the Banks supervision team and the PMU diligently and candidly addressed, to the extent possible, these unforeseen risks during the regularly conducted supervision missions. 2.2. Implementation 34. Extension of Closing Date. In order to ensure sufficient time for the completion of Project activities, which had been delayed by the frequent ministerial changes, the Midterm Review (MTR) mission as well as a review by the Banks Quality Assessment of the Lending Portfolio (QALP) recommended an extension of the closing date. In November 2009, a 23-month extension until May 30, 2012 was granted. The Project closed on May 30, 2012. It was noted that while a seven-year implementation period appears to be on a high end and is two years longer than the originally anticipated implementation period, this is a relatively standard actual implementation period for mining (and many other) technical assistance projects. In fact, the Project disbursement rate (US$120 million over seven years) was much higher than that of other SIL/TAL operations. 35. Temporary Disruption of Project implementation. For a brief four- to six-month period during the second year of implementation the Project experienced a temporary setback due to political interference. While the Project had made satisfactory progress related to the promotion of large-scale mining investment in Nigeria (Components 2 and 3), it had temporarily been unable to focus on poverty-reducing activities, such as the small grants program under

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Component 1, which accounted for about eight percent of total estimated Project baseline cost at appraisal (AM, March/April 2007 mission). In order to remedy the situation, in March/April 2007, the Banks task teams and the PMU promptly agreed on an Action Plan to improve project progress and performance. As observed during the subsequent mission the Government had made substantial progress towards rectifying14 the shortcomings previously observed, thus putting the Project back on track towards achieving its development objectives (AM July/August 2007 mission). 36. Midterm Review. In view of the above-mentioned temporary implementation challenges particularly in regards to ASM-related activities in the first years, the Mid-term Review (MTR) was postponed from November 2007 until May 2008 to allow the Project time to reach its mid point to make the review more relevant. The main recommendations identified during the MTR included the need to:

formally revise the disbursement projections since the project had a disbursement lag of 20 months;

discuss with the counterparts how activities related to EITI++ agenda could be covered under the project;

develop actions to improve and upgrade the Moderately Satisfactory rating for M&E, procurement and counterpart funding (ISR No. 7, April 2008);

recruit external and internal support to address capacity deficiencies in the PMU and the Ministrys ASM department;

consider replacing the pilot demonstration projects with more practical and cost-effective measures aimed at promoting value added in the ASM sub-sector, in particular with regard to strategic minerals, such as gemstones and dimension stones (see paragraph 16);

consider requesting an extension of the closing date to accommodate the slower than expected implementation of Component 1 activities at the beginning of the Project.

37. The Project was also randomly selected for a review as part of the Banks Quality Assessment of the Lending Portfolio (QALP) exercise in October 2008; it found no significant issues or weaknesses but emphasized the necessity of an extension (AM, October 2008 mission). The final (QALP) report appropriately gave a satisfactory rating only noting the delay in implementing the ASM component which is now underway (ISR No. 9, December 2008). 38. Implementation arrangements. Upon the successful implementation of the above-mentioned Action Plan, the Project promptly resumed the implementation of the ASM component in March 2007. In order to ensure a swift implementation pace during the remainder of the Projects lifetime, it was recommended that external and internal support be recruited15 to enhance the capacity in the PMU and the MMSDs ASM department. While the pilot activities, which had envisaged CDD-type implementation arrangements involving direct involvement of and disbursements to Mining Communities, did not materialize, the CDD-approach was embraced by the small grants program. Procurement under small grants was done by recipients and subsequently inspected by the PMU and assigned NGOs. The arrangement worked well with the vast majority of small grants, which were carried out in accordance with the agreed schedules and plans. However the cost of supervision was perhaps on a high side due to the multiple layers

14 For example, the Project Consultative Committee, which had been suspended for more than a year met in March 2007 and approved the 2007 budget (AM, March 2007 mission). 15 These included external consultants, such as an M&E consultant, the National Coordinator for the small grants program, and extension officers to facilitate capacity building for ASM operators, and experts in information technology, procurement, financial management, and geophysics.

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involved. To some extent the higher cost of supervision of this community driven development (CDD) program can be justified by the need to test this innovative approach, which was to be used in similar projects, to better understand the risks involved, and to ensure demonstration effects on other ASM operations. 39. Project Risk status. Throughout its lifetime, the Project carried a country record and a country environment flag. The Project risk status did not reflect the security risk (as mentioned earlier in this section) as warranted. 2.3. Monitoring and Evaluation (M&E) Design, Implementation and Utilization 40. M&E Framework Design. While the M&E system for the Project had deficiencies as mentioned in paragraph below, the majority of the performance indicators in the PAD and the DCA included end of Project target values as well as baseline values, although the latter mostly equaled zero, since most of the available information about the social, economic, and technological character of artisanal and small-scale mining in Nigeria, as well as its scope and extent, was anecdotal in nature (PAD, p. 31), including the estimated value of Nigerias minerals production (PAD, p. 73). At the end of the project, the volume of mineral production was estimated based on royalties collected. To measure poverty alleviation results, an extensive program of socio-economic profiling and baseline assessments was to be undertaken during the first year of the project (PAD, p. 41). However, with reduction of pilot areas to two (as mentioned in the earlier sections) and a delay in start of the ASM components in general, the approach had to be revised later in the Project, which however still did not produce much reliable socio-economic data due to deficiencies of methodology used by the consultants and insufficient time to remedy the survey. In part compensating for this deficiency, the PMU was tracking socio-economic data related to the Project grantees which indeed was correlated with the Project (this data was used in the reporting of performance indicators)16. 41. The performance indicators used in the DCA and PAD followed an older format which was discontinued after the Project was launched. Due to the faults of earlier format, some of the Projects Intermediate Results indicators were de facto outcome indicators, and vice versa (i.e. the offices staffed and equipped; number of associations formed and operational; and adoption of regulation indicators) (ISR No. 13, December 2010). One of the main shortcomings of the M&E framework was that it contained only one PDO and one Intermediate Results indicator pertaining to Part (ii) of the PDO.

42. Despite these shortcomings, the individual indicators demonstrated an implicit connection to the PDO, except for the basis for rural economic renewal aspect of Part (ii) of the PDO. The Project was able to monitor the indicators through supervision missions (see section below, paragraphs 43-44) and adjusted the Indicators to better fit with the newly adopted at that time Implementation Status Report format. As mentioned in the earlier sections, the Performance Indicators were expected to be amended to comply with the new requirements, but the amended did not happen since the the proposed Additional Financing with which it was linked was not supported in the end (as explained in paragraph 11 above).

16 Going forward, the MMSDs new M&E department which was formed between 2011-2012, will be in charge of M&E data collection and analysis which will sufficiently improve MMSDs reporting and analysis functions, but it will require time to build its capacity and will come too late for the purpose of this Project evaluation.

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M& E Framework Utilization 43. During the first five years of the Projects lifetime, the supervision reports partially monitored three out of five PDO indicators (ISR No. 10, October 2009). The full set of key performance indicators, which contained a blend of PAD and DCA wording of indicators was tracked for the first time in May 2010 (ISR No. 11). In order to intensify monitoring efforts, an M&E expert was recruited in 2007 (AM, October 2007 mission) to assist in establishing an appropriate system to monitor and evaluate the performance of the project as well as preparing the necessary report on the progress of the project as well as the mid-term review mid-term review (AM, July/August 2007 mission). Of particular concern at the time was the measurement of the Projects progress towards achieving Part (ii) of the PDO, pertaining to poverty reduction and rural economic renewal (ISR No. 14, October 2011). 44. The Task Team was urged to track the outcome indictor [50 %] increase in per capita income in pilot project areas, as measured by village income surveys which shall set the baseline, given that it represented the most directly related poverty reduction outcome indicator (ISR No. 15, May 2012). While baseline studies were completed for barites and gypsum, the socio-economic profiling did not materialize as discussed in earlier sections of this ICR. However, baseline and follow-up data has been collected diligently for the 245 small grants recipient entities, and an evaluation of the short-term impact on a sample of 15 ASM cooperatives was conducted in 2012. While these data are not statistically significant given the small sample and short time period, it shows a positive trend and is accurate being based on actual reports. With continued monitoring by the Government after the Projects closure together with data from new projects under Government financed programs, it will provide valuable information for measuring results in the future. 2.4. Safeguard and Fiduciary Compliance 45. Safeguard Compliance. The Project was categorized as an Environmental Category B Project; it triggered safeguard policies OP 4.01 (Environmental Assessment) and Involuntary Resettlement (OP 4.12).17 Throughout Project implementation, both environmental and social safeguard compliance were complied with and consistently rated Satisfactory in supervision reports,18 and no major safeguards issues were observed during supervision missions. Compliance with environmental and social safeguards was monitored by two Abuja-based Environmental and Social Specialists on the Banks supervision team. With the Social Specialists relocation in 2010, social safeguards oversight was transferred to a HQ-based Bank staff. On the PMUs side, two qualified Environmental and Social Specialists/Safeguards Officers trained in environmental and social issues in mining projects as well as World Bank safeguard policies, carried out site visits at least five times per year. In addition to the diligent monitoring of compliance with safeguards

17 The Projects intention was to avoid causing any resettlement or restricting access to the extent possible. Potentially, resettlement or restriction of access could have occurred in conjunction with the implementation of the originally planned six pilot projects, small grants program and civil works, but the Project was able to avoid causing any resettlement. 18 Three safeguard instruments were prepared and disclosed in 2005 for safeguarding Project activities during Project implementation: a Sector Environmental and Social Assessment (SESA); a Resettlement Framework; and a Process Framework. All three documents were updated and re-disclosed in 2011 prior to the appraisal of the proposed Additional Financing credit (Draft PP for AF).

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policies through regular supervision missions, a one-week environmental safeguard implementation support mission was carried out in July 2010 (ISR No. 14, October 2011), and an independent environmental and social safeguards audit was conducted in 2010. 46. A 2011 implementation support mission commended the PMU for their exemplary effort in supervising the implementation of the small grants program, in accordance with the recommendations of the previous years safeguards audit (AM, August 2011 mission). Several minor safeguard concerns were observed during the July 2010 safeguards mission in relation to the small-grants program, which were promptly addressed. While the mission noted the small grants beneficiaries high level of awareness on occupational health issues (AM, July 2010 mission) it noticed that some of the workers [did] not use ear musters and hand gloves, reportedly because of cost and discomfort (AM, July 2010 mission). In addition, the 2010 safeguards mission revealed that some land acquisition documentation associated with involuntary resettlement for several grants was missing in project files. By the subsequent mission this shortcoming had been remedied (ISR No. 14, September 2011). Furthermore, in 2010, a social and environmental checklist was prepared and used as mandatory documentation for small-grant applications (in case the check-list was triggered, adequate management plans were to be developed). 47. Financial Management. All audits were unqualified, and no cases of misdemeanor or fraud were uncovered in the Financial Management system. The Projects Financial Management performance was rated Satisfactory in supervision reports throughout the Projects lifetime, with the exception of two Moderately Satisfactory ratings at the beginning of implementation (ISRs Nos. 1 and 2), for the following reasons: a 2006 Financial Management mission had pointed out the need to upgrade the Project filing system and to pay the Projects suppliers directly, rather than through an intermediary (AM, March 2006 mission). Several remedial measures were taken in due course: the record keeping was revamped; receipts retiring was managed in a proper manner; and the Project no longer issued payments through intermediaries (AM, March 2006 mission). Secondly, deficiencies in the maintenance of the asset register were observed. Remedial action was promptly taken in the form of the recommended embossment of fixed assets (AM, October 2008 mission). The final supervision mission in May 2012 concluded that the project did not have any material financial management accountability and internal control issues except for NGN81.06 million, which was trapped in the defunct Hallmark bank for over two years (ISR No. 15, May 2012). As confirmed by the teams financial management specialist and reflected in the audit, these funds have since been released. 48. Procurement. During implementation, two-thirds of the Projects procurement performance ratings in supervision reports were mostly Satisfactory, and one-third of the ratings were Moderately Satisfactory or, in one instance, Moderately Unsatisfactory. The latter was related to the above-mentioned brief period of political interference, which was beyond the PMUs control and did not have any adverse impacts on the Project beyond this period. Several minor shortcomings were observed primarily during the early stages of implementation when a lack of attention to detail in preparation of procurement documents and poor filing (AM, March 2007 mission) was noted. To address these concerns, an additional Procurement Consultant was recruited in September 2006, and a filing procurement clerk was hired in April 2007 (AM March 2007 mission). As a result, procurement performance improved considerably after December 2006. A procurement review undertaken shortly before the Project closing date confirmed that all procedures were followed. Procurement implementation was satisfactory except that the project did not comply with the requirement for publication of NCB contract awards. This shortcoming was remedied prior to the closing date (ISR, No. 15, May 2012). There were no cases of mis-procurement under the Project.

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2.5. Post-completion Operation/Next Phase 49. The Government is committed to sustaining and expanding Project-funded investments, as evidenced, for example, by the fact that it expressed its intent to maintain the PMU going forward and progress made in setting up of the Solid Minerals Development Fund (SMDF)19 to support sector reforms. The continued development of the ASM sub-sector, as well as the continued development of human and fiscal capacity, geoscientific data gathering, and the equipment of mining institutions will be funded by the Solid Minerals Development Fund, as stipulated by the 2007 Minerals and Mining Act. With respect to the ASM sub-sector, the Government intends to finance an expansion of the small grants program and providing support to mid-tier operators. The Government has further raised the profile of the Mines Inspectorate Department, which is mandated to monitor the activities of information miners, by setting up a high-level inter-ministerial Task Force to ensure inter-agency cooperation in this matter. In addition to Governments own initiatives, there is a strong commitment from other donors, the Canadian International Development Agency (CIDA), Australian International Aid (AusAid) and Department for International Development of UK (DfID) to provide immediate support on most important topics ranging from update of fiscal regime for mining, preparation of the spatial analysis of potential mineral resources corridors, to other activities in supporting the Government in its effort to consolidate the reforms in the minerals sector (AM April/May 2012 mission, p. 2). 50. The PMU is envisaged to become the implementing entity for the Solid Minerals Development Fund and coordinate other donor aid given its excellent experience and track record in managing the Project since its launch in 2005 (AM, September 2012 mission). The SMDF, in turn, at least initially while sector revenues are still modest, is to be funded by the President-approved Natural Resources Development Fund (NRDF), which is based on the road map developed for the mining sector. The purpose of the NRDF is to provide funding for the longer-term development of the sector by: (i) funding the establishment and operation of the Solid Mineral Development Fund; and (ii) provide a financing mechanism for the Nigerian mid-tier operators (AM, September 2012 mission). Progress towards establishing the SMDF has been made but its actual start up date remains to be determined. 51. The Government is also demonstrating commitment to Project-supported investments by fully funding the budget of the autonomous Mining Cadastre as well as that of the Nigerian Institute for Mining and Geoscience through the annual National Budget Appropriation. In order to achieve the full benefits of Project-supported reforms MMSD has requested continued support from the Bank ideally through a project, but at a minimum through a non-lending TA/policy advice following the project completion in May 2012 (ISR 15, May 2012).

19 The SMDF was envisaged under the updated Mining Act 2007. The SMDF is not yet fully established, but enabling documents are drafted and are being processed through the legislation. The SMDF will have a Board and will carry out its activities in accordance with the procedures that are being developed.

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3. Assessment of Outcomes 3.1. Relevance of Objectives, Design and Implementation Rating: Substantial 52. The Substantial overall Relevance rating is based on the following observations: Relevance of Objectives. The continued Substantial relevance of the Project objectives is

evidenced by the fact that positioning Nigerias mining sector to take advantage of the world wide minerals boom is one of the key elements of Pillar I: Achieving Sustainable and Inclusive Non-Oil Growth of the World Banks Country Partnership Strategy for FY2010-FY2013 (World Bank, 2011). Both parts of the PDO are highly relevant to core focal areas of the Banks Country Partnership Strategy (CPS) for FY2010-FY2013 (World Bank, 2011), such as capacity development in the minerals sector, promotion of non-oil growth, and community participation. Furthermore, Nigerias Vision 20:2020 (NPC, 2009) identified the solid minerals sector as one of the strategic industries in the diversification of Nigerias largely petroleum dependent economy increasing job creation in rural areas. The Vision 20:2020s specific objectives to which both Project objectives are highly relevant are: (i) entrench sustainability as a fundamental principle in the exploration of mineral resources; (ii) strengthen institutional and human capacity across every aspect of the metals sector; and (iii) sustain stable and attractive legal and regulatory framework for the minerals sector (NPC, 2010, p. 120).

Relevance of Design and Implementation. The continued Substantial relevance of the

Projects design to the Projects objectives is evidenced by the fact that the Projects ambitious set of activities, sub-components and components were, for the most part, implemented as planned and contributing, as intended, to the achievement of both PDOs. Overall, Project design was sound, and given that the Project: (i) supported the right activities, some of which are explicitly referred to in the Governments Vision 20:2020 in relation to the objectives that are very similar to the two parts of the Projects PD