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RESTORING URBAN NIGERIA

A STRATEGY FOR RESTORING

URBAN INFRASTRUCTURE AND SERVICES

IN NIGERIA

Prepared by the World Bank

with Nigerian Collaboration

Manufactured in the United States of America

First Printing December 1995

The material in this booklet is not copyright. Users may make and distribute copies as they wish.

The findings, interpretations, and conclusions expressed in this publication are those of the authors

and should not be attributed in any manner to the Federal Government of Nigeria or to the

International Bank for Reconstruction and Development/The World Bank, to its affiliated organiza­

tions, or to the members of its Board of Executive Directors or the countries they represent.

Preparation of this booklet was managed by Alan Carroll of the World Bank's Infrastructure and

Urban Development Division, West Central Africa Department. A considerable amount of the mater­

ial in this booklet was drawn from background papers prepared by Oluwole Komolafe and David

Garnvwa, consultants . Doug Addison, Alan Coulthart, Hazel Denton, Maria Kail, Jonadab Metibaiye,

Jose Sokol, and James Wright provided valuable comments. The assistance of the Nigerian Federal

Ministry of Works and Housing is gratefully acknowledged.

TABLE OF CONTENTS

I

INTRODUCTION ...... . ........... . ........... . .... . ... .. ........ . . . . . .. . ..... . . . . ... . . . .... .7

SUMMARy ......... . ............. . ........ . . . .. ........ . . . . .. . ... . . ....... . ................ . 9 The Urban Crisis . .... . ........ . .... . .. . . . . . .. . . . . . ... . ............. . .... . . . ..... . .. . .... . 9

Summary of Strategy ....... . ............. . . . . . . . . .. ................. . .................. . . 12 Financing Urban Infrastructure and Services . . . .......... . . . . ... .. . . .. . . . . ..... .. . .... . . . . 12

Immediate Priorities ......... . ....... . . ..... . ..... . . ............ . ... . . . ......... 12

Agenda for the Medium Term ...... . .................... . .......... . ... . .... . ..... 13

Institutional Arrangements for Urban Infrastructure and Services .... . ..... . .... . .......... . .. 15

Immediate Priorities ... . ..... . ....................... . .......................... 15

Agenda for the Medium Term ............. . .. . .. . ... . ... . .... . . . .... . .. . .......... 17

THE CRISIS OF URBAN INFRASTRUCTURE AND SERVICES ...... . ... . .... . . . . . .. . . . . . . . . . .. . . . .... 19

Urban Population Boom . ..... . ... . ...... . ............ . . . ..... . ...... . ......... . .... .. ..... 19

Power of the Urban Economy .. . ..... . ...... .. .... . . . .. . .. . . ...... . . . ... . . . . . .. . .. . . . .... .. . 19 Breakdown of Urban Infrastructure and Services .................. . .... . ......... . ........ . . . ... 19

Urban Poverty .. . .. . ........ . ... . . . ........ .. ....... . ...... . ....... . . .. . ... .. ... . . . . . ... . 20 Urban Pollution .... . ........ . ... . . . . . . . . . . .. .... . . . ... .. ................ . . . ... . .... ..... 20

Urban Policies in Disarray .. . .. .. .... . . .. .... . . . . .... ... ... . .. . ... . . ...... . .... . . . ..... . ... 21 Institutional Problems .......... . . . .... .. ....... . ..... . . . .... . ... . .. . ... . .. .. ...... . . ..... 22

FINANCING URBAN INFRASTRUCTURE AND SERVICES . . . . " . .. . ... . ...... . . .... ...... . ......... 25

Immediate Priorities ... .. ..... .. ..... . . . ..... . ....... . ....... . ....... . ..... . . . . . ... . .. . ... 26 Reorientation of Public Expenditure .... .... .... . .... . .. . ... . . . . . .... . .. . ......... . . . . ... 26 Targeting the Urban Poor .............. . .............. . .... . . . . ... . . . .. . ... . .. . . .... .. 27 Assuring Counterpart Funds from States' Annual Budgets . .... . . . ..... . .. . .. .. . . ............. 27

State Government Accounts .... . ...... . ...... . ..... . ... . ..... .. ... .. .... . ........... . . 28

TABLE OF CONTENTS -0- 3

Agenda for the Medium Term ............... . .... .. . ...... . . . ........ ... .. ... . ... . . .. . .. ... 28

Mobilizing State and Local Revenues .. . .. . ... . ... . .... . ...... . ............... . ....... .. 28

Property Taxes Have Great Potential . . . . ........ . ...... .. . . . . . ...... ..... .... . ... . ...... 30 Public Sector Borrowing ............... . .... . . . .... . . . .. .. . . . . . . . .... . ................ 32

Urban Development Bank of Nigeria .. ........ .. . ........ . .............................. 32

Alternative Financing Options ........ . .... . . . ...... . ... .. . . ... . .. . .. . .. ... ...... ...... 34

Liberating Private Investment ........................ . .. . .... . . . . . .................. . .. 35

INSTITUTIONAL ARRANGEMENTS FOR URBAN INFRASTRUCTURE AND SERVICES ... . . . .............. 37 Immediate Priorities . . . . . . . . . . . . . . . . . . . . . . . . . ................ . ........ . .. .. ..... 37

Assuring Effective Project Implementation .... . . . . .. ............ . .. ... ..... . . . . ... . ..... . 37 Reducing Turnover in Leadership ........................ . ........ . ...... .. . . ....... ... . 38

Improving Project Supervision and Technical Assistance .. . . .. .. ........... . . . . . ... . . . ....... 39

Capacity-Building .................................... .. . . ... . . . ..... . . . ..... . . . .... 040

Private Sector .......... .... .. . . . . . . . . . .. . .... . . ... . .. . . . . . . .. . . . . . . . ..... .. ... . . ... 40

Agenda for the Medium Term .............. . . . ......... . . ... .. . .... . . ... . .......... ... .40

Sorting Out Governmental Responsibilities .. .. ... ... . . .. .. . ...... . . . ...... . ...... ..... . . .40

Autonomy and Accountability ............ . ................. . ... . .. . .. .. . .... . ... ... .. .43

Commercialization and Competition ... . ....... ....... . ................. . .............. .43

MATRIX OF ISSUES AND STRATEGIES . . ...... . ...... . .... . .... ...... . .... .. . . . .... .. .. ...... .. .47

ANNEX 1: List of Participants in Seminars on Urban Infrastructure and Services ...... .... . . ..... . ... . .... 52

ANNEX 2: Overview of Existing Institutional Responsibilities for the Construction and Maintenance of Infrastructure and Services in Nigeria ........ . .... . . ... ...... ... .... 54

ANNEX 3: Summary of State Government Finances ................ . ..... ....... .. . ..... . . . . . . . . .... 55

REFERENCES .. . . . .... . . . . . . . ........ . ........... . .. . .. .. ... . . ................... . . . . . ... . .. 56

4 o¢' A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

INTRODUCTION

T wo of the most critical urban development issues facing Nigeria are the financing of urban infrastructure and

the institutional arrangements for dehvery of urban services. These Issues, among the many m urban devel­

opment, are the subjects of this document. They have been selected because the problems of urban infrastructure

and services are so severe and have such an immediate impact on economic and social development.

This document, which has been prepared primarily for dissemination in Nigeria, is intended to assist Nigerian

institutions and the donor community to chart their actions over the next several years. The strategy presented here

reflects the concerns and needs of Nigerians who are directly involved in urban development. It is the product of

intensive discussions held in Nigeria, which culminated in a series of five seminars conducted in March and May of

1995. They included representatives of the Federal Government, State Governments, the banking sector, private contractors and consultants, and academic, research and professional organizations. In total some 70 leading

Nigerian officials, managers, and professionals participated in the process (names and organizations are listed in

Annex 1). However, the proposals presented in this document are those of the authors and should not be attributed to these individuals.

The major challenges facing Nigeria in the field of urban development are, first, to make cities good places for economic development and, second, to provide basic services for urban dwellers, especially the urban poor. The essential ingredients for achieving these goals are urban infrastructure, a supportive urban policy framework, and institutional capacity.

The World Bank has provided assistance for improving urban infrastructure and services in Nigeria through sev­eral projects since 1980. There are presently three Bank-supported urban infrastructure projects under implementa­tion: the Infrastructure Development Fund (IDF) project, the OyojOsun State Urban Project, and the Lagos Drainage and Sanitation Project. The improvement of urban infrastructure and services, an essential element for national eco­nomic development, will continue to be an important part of the World Bank's assistance to Nigeria.

INTRODUCTION -0- 7

SUMMARY

THE URBAN CRISIS

U RBAN POPULATION BOOM: Nigeria is urbanizing at an astonishing pace. The share of Nigeria's urban popula­

tion increased from 20% in 1970 to about 38% in 1993. Of the nearly 110 million Nigerians, about 40 mil­

lion are now living in cities and towns. The urban population grew at around 5.5% per year from 1980 to 1993

(compared with 2.9% for the national population). This is among the highest urban growth rates in the world, due

mainly to migration from rural to urban areas. At current rates the number of urban dwellers will double in only 13

years. This is equivalent to adding a city of three million each year. Such growth is creating an immense and largely

unmet demand for urban services such as water, sanitation, roads, public transport, and waste disposal.

POWER OF THE U RBAN ECONOMY: Urbanization is a positive force in economic development. Cities and towns are

the home of most industry, commerce, and services. These sectors of the economy can be highly productive.

Worldwide, higher per capita incomes are closely related to higher levels of urbanization. Urban-based, non-oil

industry and services accounted for about half of Nigeria's Cross Domestic Product (CDP) between 1985 and 1994.

Thus, average per capita income in urban areas is about one third higher than in rural areas. This is the basic reason that people migrate to cities: they are searching for better economic opportunities.

The econorn.ic pressures behind urbanization are very powerful. World-wide experience shows that it is not practical to try to slow down migration to urban areas. Rather, efforts should be focused on reducing population growth nationally.

BREAKDOW OF I FRASTRUCTURE AND SERVI ES: The physical condition of Nigeria's urban infrastructure-water sup­ply, sewerage, sanitation, urban roads, electricity, drainage, waste disposal-is generally poor. For example, only about half of the people in Nigeria's urban areas have access to piped water in or around their homes. All types of infrastructure suffer from a massive backlog of neglected rehabilitation and maintenance, not to speak of the invest­ments needed to serve future growth.

SUMMARY -0- 9

Periodic and routine maintenance, by far the most

cost-effective types of infrastructure expenditures, are

almost nil. Instead, the norm is to wait for an infusion

of capital for rehabilitation. In effect, it has become

more convenient to replace than to maintain. But

declining financial resources is making this less and

less feasible. As a result, deterioration is accelerating.

Most manufacturing and commercial establish­

ments in Nigeria have their own electricity generators.

In the face of chronically unreliable public services,

many also have acquired radio equipment for commu­

nications, vehicles to transport personnel and freight,

and boreholes to assure their own private water supply.

These extra costs add from 10% to 2S % to the total

machinery and equipment budget of firms . Inadequate

public services can also raise costs for the urban poor,

who either rely on alternative, costly providers (such

as water venders) or spend large amounts of time (as in

fetching water from inconvenient sources).

RAPID URBAN

GROWTH IS CREATING

AN I MMENSE AND

LARGEI.Y UNMET

DEMAND FOR URBAN

SERVICES SUCH AS

WATER. SANITATION.

ROADS. PUBI.IC

TRANSPORT. AND

WASTE DISPOSAL.

U RBAN POVERTY: A large number of people in Nigeria's

urban areas do not have enough income to meet their

basic needs. About 21 % of the urban population-8.S

million people-was estimated to be below the poverty

line in 1992/93. Of these, about l.1 million were clas­sified as /I severely poor". The vast majority of the

urban poor are in cities other than Lagos. Their cash

income is insufficient to cover minimal standards of

food, water, fuel, shelter, medical care, and schooling.

The urban poor live in areas with bad environmental

conditions and the highest deficits of basic services.

They suffer more than other groups from the break­

down of urban infrastructure, especially in terms of

poor health and accessibility. Income generating activi­

ties of the poor are mostly in the informal sector.

Unemployment and underemployment are common.

The burden of coping with unreliable and inadequate

household services falls disproportionately on women

and children.

U RBAN POLLUTIO : Poor management of municipal

wastes-sewage, septage, and refuse-is Nigeria's

major urban environmental problem. Improving waste

management is more of a policy and management

issue than a technical one. Industrial waste is another

major urban environmental concern. Textile plants,

breweries, slaughterhouses, sugar refineries, pulp and paper plants, and petroleum industries discharge raw, untreated, and often toxic liquid effluents into open gutters, streams, drains, channels, and lagoons. This has rendered most surface and underground waters around urban areas unsafe for human, agricultural, or recreational use. All of the urban environment-air, land, and water-is affected by smoke, gases, and dust

from motor vehicles and factories.

INSTABILITY: In recent years, Nigeria's institutions, leadership and policies have been subject to sudden,

unpredictable change. Uncertainty and the ensuing

10 ./)0 A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

lack of confidence are the most serious, immediate constraints on the improvement of urban services. They make it difficult to plan ahead and to maintain implementation schedules. They defeat efforts to build

sustainable institutional capacity.

URBAN POLICIE IN DI ARRAY: A National Urban Development Policy was prepared in 1992 under the guidance of the Federal Ministry of Works and Housing. It was developed through widespread consul­tations with governmental and non-governmental organizations. Though it has yet to be adopted official­ly, this policy document provides a good foundation for future action.

In the meantime, other policies are having nega­

tive effects on urban productivity and welfare. Fiscal

THE POOR SUFFER MORE THAN OTHER GROUPS FROM THE

BREAKDOWN OF URBAN INFRASTRUCTURE, ESPECIALLY IN

TERMS OF HEALTH AND ACCESSIBILITY.

deficits fuel increased inflation, which in turn must be arrested through tight fiscal and monetary policies.

The successful implementation of stabilization poli­cies requires positive real interest rates, which in nom­inal terms are high enough to hamper the financing of urban services. Large subsidies for fertilizer, petrol, and loss-making government enterprises drain revenues away from more productive uses. Inadequate controls on public expenditures, large extra-budgetary alloca­tions, and a lack of fiscal accountability and trans­

parency hinder the allocation of resources for badly-

SUMMARY -0- 11

needed infrastructure and social services.

The development of urban land and housing in

Nigeria is severely constrained by government con­

trols. State ownership keeps large quantities of land off the market. Parcels of land for development are

extremely difficult to acquire from the mostly nation­

alized land stock. A certificate of occupancy for a par­

cel can take from one to five years to obtain.

Uncertain land titles impede the development of urban land for productive purposes and the use of land as col­

lateral for credit. Compliance with planning, subdivi­

sion, and building regulations is extremely costly in

time and money. Liberalization of land markets is

needed to expand the supply and lower the cost of land

and housing.

Barriers to participation of the private sector in

different aspects of urban infrastructure and services

need to be removed. These include prohibitions on the private ownership and management of services (such

as electricity, water, or telecommunicationslj lack of

clear laws allowing lease and concession arrangements for infrastructure servicesj and excessive political

involvement in management issues, including lack of

predictable, transparent mechanisms for tariff-setting.

G OVERNMENT CANNOT DO EVERYTHI G: The widely

held view that government should handle all urban development activities is another big problem. This idea persists even in the face of the obvious weakness­es of public sector institutions: inadequate budgets, low remuneration of employees, poor management practices, and political interference, to name a few. Experience shows that competitive markets-mainly involving private actors-are both the most efficient way to supply goods and services and the most accountable to users ' needs. Government's role usually can be limited to policy-making, regulation, owner­

ship, or financing, leaving actual investment, operation

and maintenance to non-government entities.

EFFECTIVE LOCAL GOVERNMENTS: A critical problem

affecting urban development in Nigeria is the non­functioning of Local Governments. LGs were led by

locally-elected councils and elected chairmen from

1976 to 1993. Today LGs are little more than caretak­ers, unable to carry out their assigned functions. The

large number of LGs-585-is a huge administrative and fiscal burden for States and the Federal Government. It also means that the scarce trained

manpower available in Nigeria must be spread even more thinly across the many LGs.

SUMMARY OF STRATEGY

FINANCING URBA INFRASTRUCTURE A ND S ERVICES

Immediate Priorities

FEDERAL PUBLIC EXPENDITURE: Reorienting public

expenditures to reduce waste can free resources for high-priority social needs, including urban infrastruc­ture . The Federal and State governments should reduce

the number and cost of publicly-funded capital pro­jects, keeping only those with the highest social and economic returns. Unaccountable and extra-budgetary

expenditures should be brought under control. The programme to privatize and commercialize state­owned enterprises should be reinvigorated and expand­ed. Expenditure priorities should move away from competition with or duplication of the private sector.

T ARGETlNG THE URBAN POOR: Poverty alleviation

should be among the highest priorities of any urban development strategy. Modest investments can make a large improvement in the lives of the urban poor. Upgrading of basic services such as water, sanitation, roads, solid waste, and street lighting in lower-income

12 .:- A STRATEGY FOR RESTO RIN G URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

urban areas have direct impacts on the welfare and productivity of the poor. These types of infrastructure

investments should be part of broader programs encompassing employment generation, primary health,

and education.

GOVERNMENT FuNDING PRIORITIES: Government funds

should be used preferentially for infrastructure that is purely public or not usually profitable: roads, drains, water supply, sewers, waste disposal facilities, and the

like. Government should rely on the private sector to finance commercially viable ventures such as housing

estates or markets. Housing should be provided through the private sector, with government's role

restricted to putting in place policies and regulations

that promote the supply of affordable financing and the

functioning of land markets.

DEDUCTION AT SOURCE FOR COUNTERPART FUNDS: The

use of the Standing Payment Order (SPO-deduction at source from the federation account) to guarantee the

availability of counterpart funds was a successful inno­vation of the World Bank-assisted Infrastructure

Development Fund (IDF) project. It has gained general

acceptance, and it should continue to be used in future projects.

STATE GOVERNME T ACCOUNTS: Simple improvements in financial accounting and reporting could be taken to

permit States to make informed decisions about their indebtedness and counterpart fund commitments.

State Ministries of Finance would need to keep better records of SPOs and loans. The Central Bank of Nigeria and Federal Ministry of Finance would also need to establish a coherent data base on SPOs and other deductions from the federation account shares of each State. Such data would make States more attrac­tive to lenders and investors by facilitating creditwor­thiness appraisals .

REORIENTING PUBLIC EXPENDITURES TO REDUCE WASTE

CAN FREE RESOURCES FOR HIGH-PRIORITY SOCIAL NEEDS.

I NCLUDING URBAN INFRASTRUCTURE.

A ge nda for the Medium Term

URBAN DEVELOPMENT BANK: To become a viable financial intermediary for federal government invest­

ments in infrastructure, the Urban Development Bank

of Nigeria needs to : (a) ensure that operating expenses are limited to what can be covered by net income; (b) establish coherent lending policies, including the use of market interest rates; Ie) adopt a clear strategy for maintaining the value of its paid-in capital and mobi­lizing additional funds; (d) limit its mandate to urban infrastructure and related technical assistance; (e) establish an autonomous, professional Board as free as

SUMMARY ~ 13

possible from political interference; and (f) put in place a reliable external audit system.

FEES FOR SERVICES: Public utilities are trapped in a

cycle of poor performance and low revenues. Obtaining

more income from user charges is essential for improv­

ing piped water, sewerage, electricity, and house-to­

house refuse collection. Only those public agencies with strong, professionally capable management and

political support will be able to produce enough tangi­

ble results to justify raising tariffs and intensifying bill

collection. State and LG agencies that collect user fees

for services must be allowed to retain their fee rev­enues rather than hand them over to general treasuries.

Without this, the agencies will be unable to improve

the quality of their services and will lack an incentive to pursue cost recovery diligently.

STATE AND LOCAL REVENUE MOBILIZATIO : Much

needs to be done to induce the States and LGs to real­

ize the vast untapped potential of the revenue sources

under their control: the personal income and value added taxes of the States and the property tax of the LGs . In the long term the Federal Government should

consider ways of dealing with the disincentive for

State and Local revenue mobilization due to the large

federation account transfers. The options include:

[a) Requiring that transfers be for capital investments only, so that States and LGs would be obliged to meet

recurrent costs by themselves; (b) Converting a part of the transfers to matching grants, which would only be

given if the State or LG put up a specified amount.

PROPERTY TAXES: Property taxes are by far the largest

untapped potential source of revenues for urban infra­

structure and services. In the short to medium term, joint efforts by States and concerned Local

Governments will be needed. It is essential to devise

an agreement that gives both parties adequate incen­tives to deliver results. In principle, property rating

and property tax collection should be done by the level of government responsible for the provision of ser­

vices. In the present situation, this will be the State. However, it is necessary to obtain support and cooper­ation from the LGs (including middle-level officials), traditional leaders, and community leaders at an early stage. Traditional leaders should receive some incen­tive for cooperation where this is essential for success. The use of contracted professional valuers and com­missioned collectors was successful under the IDF pro­ject and should be expanded. Flaws in previous State

edicts regarding property tax collection and powers of

enforcement should be corrected. However, care

14 ~ A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

THE CREATION OF CAPABLE LOCAL GOVERNMENTS IS

ESSENTIAL FOR IMPROVING MOST UR6AN SERVICES.

should be taken not to set precedents that will allow

States to retain property tax powers in the long run. Where property tax collection remains difficult, "spe­cial assessments" may be tried. These are one-time

levies on local residents who benefit from a specific improvement such as a road or a new drain. To suc­

ceed, this mechanism is best managed through local leaders or organizations that enjoy public trust.

MORE PREDICTABLE REVENUE FLOWS: Infrastructure

financing would be helped enormously if the flow of statutory allocations could be made more predictable.

This should be part of a rationalization of the budget­ing process. The eventual goal would be a State (and later LG) capital budgeting system in which revenue

projections can support an investment program of spe­

cific, prioritized projects.

E ABU G ENVIRO M£NT FOR DOMESTIC FINANCING:

Annual budget surpluses and federal grants will not be

enough to pay for many larger-scale investments in urban roads, water systems, primary drains, and the like. The only alternative will be debt financing by

States and, eventually, Local Governments. A top-pri­ority long-term goal of government policy should be to facilitate the use of the domestic capital market for

infrastructure. For this, fiscal and monetary discipline are required to bring inflation down and allow market interest rates to settle down to affordable levels. Furthermore, the government needs to come to grips with the crisis of the banking sector, restoring a credi­ble and effective regulatory system. The Federal Government should adopt the Securities and Exchange Commission's proposals to facilitate easier access of States to the capital market. To promote confidence by

investors, States may also establish sinking fund accounts for redemption of debt obligations on maturi­

ty. This would help forestall undue financial pressures

on the issuers. The most favoured method of payment into such accounts would be through SPO.

INSTITUTIONAL ARRANGEMENTS FOR URBAN

INFRASTRUCTURE AND SERVICES

Immediate Priorities

ASSURING EFFECTIVE IMPLEMENTATION: Nigeria's polit­

ical situation places severe restrictions on the public sector's capacity for policy-making and management at all levels. To assure effective implementation of pro­jects, various forms of special Project Implementation Units (PIUs) will be needed to insulate World Bank and

other donor-funded projects from political interference

SUMMARY -0- 15

and instability, Use of private contractors to staff key positions in PIUs has worked well and should contin­ue, The use of Project Steering Committees, composed

of senior civil servants from key agencies, has been

helpful in buffering projects from frequent political

leadership changes and ensuring continuity of imple­mentation,

COMMUNITY PARTICIPATIO : Opportunities should be

sought for community-based organizations to serve as

implementing agencies for small, local urban infra­structure projects,

PARTICIPATION BY BODIES RESPONSmLE FOR O&'M:

Where LGs or other local entities are expected to take over O&M of projects executed by higher levels, it is

essential that such groups participate substantively in

the planning and implementation, Otherwise, they

will not feel any sense of responsibility for O&M,

PRIVATE SECTOR: Much can be done in the short term

to extend the participation of the private sector in the provision of urban infrastructure and services, Among

the main measures are:

• Water: Service contracts for billing, tariff collection

and maintenance can be instituted relatively easily,

Some State Water Boards are good candidates for man­agement contracts (contractor bears no commercial risk) or lease contracts (contractor bears commercial risk), If these succeed, private enterprise could assume

concessions (where the contractor also makes invest­ments ),

• Solid Waste: The negative experience with Lagos Waste Management Authority (described in Section IV) shows the need for a private sector alternative, Contracting out vehicle maintenance is one possibility,

Ways should be sought to contract out refuse collec­tion in a systematic way, If full cost recovery from user fees is impossible, a hybrid of a service contract

with a franchise could be tried, Community-managed fee collection could be introduced in lower income areas, An independent regulatory authority is needed to license refuse collectors, set tariffs (according to

objective criteria) and establish contract zones,

LIMITED SCOPE OF PROTECTS: Implementation arrange­ments for specially-funded projects within any given

State need to be kept as simple as possible. Projects should include only the most essential components,

Where two or more agencies must be involved, much more careful attention should be paid to ensure that the coordination arrangements are truly workable, It is

most efficient for a single Project Implementation Unit to manage all components of a project or program. Having various implementing agencies tends to foster

delays and obscure accountability for good or bad per­formance, Projects covering many States are difficult

to supervise and lead to a scattering of small projects, reducing the development impact. For the time being, World Bank infrastructure projects should be limited to

two or three adjacent States. The idea of a national infrastructure "wholesaling mechanism", as originally

envisioned in the IDF, can be revived again in the

longer term.

ORGANIZATIO AL ISSUES: Because of the highly cen­tralized financial controls currently used by the States, heads of infrastructure projects and agencies should be as close as possible to the highest levels of authority, Ideally, a project or agency director should have a direct reporting relationship to the relevant Commissioner, who in turn reports to the State Administrator. Experience shows that it is best for an urban infrastructure project or program to be managed in the Ministry directly responsible for the sector. This

ensures that technically qualified staff are available. It also reduces problems of inter-agency coordination, Where a project director must coordinate the activities

16 o(io A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

of other agencies, it is crucial that

he/she have a suf­ficiently high rank to do this effec­tively. When pro­jects or programs are started, agree­

ments should be put in place to prevent the arbi­

trary removal of project directors and staff once they have demon­strated their capa­bilities.

TECHNICAL SERVlCES: More use should be made of domestic consultants and non-profit organizations for technical services under urban development projects.

Agenda for the Medium Term

ASSISTING TATES THAT SHOW C OMMITME 1': The "demand-driven" approach used in the IDF project has been positive. Funds have been channeled to States that demonstrated the most motivation by promptly submitting acceptable proposals and arranging SPOs to set aside counterpart funds. The more committed States tend to be more successful in implementation. This approach could be used again when it is feasible to re-introduce a "wholesaling" approach to infrastruc­ture financing.

PUBLIC UTILITY REFORM: Public utility agencies that provide urban services (such as water or solid waste ) need to be restructured to operate according to com-

mercial principles. The essential requirements are [a)

institutional autonomy, (b) professionally qualified management, and (c) the power to charge adequate tar­iffs and control staffing. Tariff-setting needs to be done objectively, based on clearly defined guidelines.

STRENGTHENING LOCAL GOVERNMENTS: Many types of urban infrastructure and services are best managed by Local Governments. States are too large and too popu­lous for State Governments to handle local services effectively. The creation of capable Local Governments

should be among Nigeria's highest long-term priorities. Several issues need to be addressed in the longer term

once conditions permit LGs to assume their constitu­tional functions. These include:

• Defining LG responsibilities more clearly, including distinguishing between types of LGs [urban and rural).

• Making revenue transfers to LGs more predictable. • Providing incentives-through the transfer system­and technical assistance for LGs to increase their inter­nal revenues .

• Improving the technical and management capacity of LGs (including the shedding of functions better per­formed by the private sector).

• Giving LGs meaningful involvement in planning (of investment programs and physical planning).

PRIVATIZATIO OF HOUSING AND SERVlCED LAND: The provision of housing and serviced plots should be left entirely to the private sector, with government being responsible for (a) laws and regulations that encourage the availability of land and financing, and (b) the provi­sion of trunk infrastructure.

101 T BOARDS FOR LARGER CITIES: LGs that are part of larger cities need to form joint boards to manage ser­vices requiring efficiencies of scale and wide geographi­cal coverage. LAWMA was an example of this.

SUMMARY -Ca 17

THE CRISIS OF URBAN

INFRASTRUCTURE AND SERVICES

URBAN POPULATION BOOM

N igeria is urbanizing at an astonishing pace (see Graphs I and 2). The share of

Nigeria's urban population increased from 20% in 1970 to about 38 % In 1993.

There are about 40 million people now living in Nigeria's cities and towns . While the

national population grew at an average of 2.9% per year from 1980 to 1993, the urban popu­

lation grew at around 5.5 % per year in this period. This is among the highest urban growth

rates in the world, due mainly to migration from rural to urban areas. At current rates the

number of urban dwellers will double in only 13 years. This is equivalent to adding a city

of three million each year.

POWER OF THE URBAN ECONOMY

T he economic pressures behind urbanization are very powerful. World-wide experience

shows that it is not practical to try to slow down migration to urban areas. Rather, efforts

should be focused on reducing population growth nationally.

Urbanization is a positive force in economic development. Cities and towns are the

home of most industry, commerce, and services. These sectors of the economy can be high­ly productive. Worldwide, higher per capita incomes are closely related to higher levels of urbanization. Urban-based, non-oil industry and services accounted for about half of

Nigeria's Gross Domestic Product (GDP) between 1985 and 1994. Thus, average per capita income in urban areas is around one third higher than in rural areas. This is the basic rea­son that people migrate to cities: they are searching for better economic opportunities.

BREAKDOWN OF URBAN INFRASTRUCTURE AND SERVICES

T he physical condition of Nigeria's urban infrastructure-water supply, sewerage, sanita-

GRAPH 1 :

GROWTH I N

NIGER I AN

URBAN

POPULATION

1970

1993

2010

THE CRISIS OF URBAN INFRASTRUCTURE AND SERVICES ~ 19

GRAPH 2:

URBAN

POPU L AT I ON

O F N IG ERIA

1 993 / 201 0

1001\1

1993 2010

tion, urban roads, electricity,

drainage, waste disposal-is gen­erally poor. For example, only about half of the people in

Nigeria 's urban areas have access

to piped water in or around their homes. All types of infrastruc­

ture suffer from a massive back­log of neglected rehabilitation and maintenance, not to speak

of the investments needed to

serve future growth. Periodic and routine mainte­

nance, by far the most cost-effec­tive types of infrastructure

expenditures, are almost nil. Instead, the norm is to wait for an infusion of capital for rehabil­

itation. In effect, it has become more convenient to replace than to maintain. But declining financial

resources is making this less and less feasible. As a result, deterioration is accelerating.

Most manufacturing and commercial establish­ments in Nigeria have their own electricity generators. In the face of chronically unreliable public services,

many also have acquired radio equipment for commu­

nications, vehicles to transport personnel and freight, and boreholes to assure their own private water supply. For firms with 50 or more employees, these extra costs amount to some 10% of the total machinery and equipment budget. For small firms the burden is as high as 25%. Inadequate public services can also raise costs for the urban poor, who either rely on alterna­tive, costly providers [such as water venders) or spend large amounts of time [as in fetching water from inconvenient sources).

URBAN POVERTY

A large number of people in Nigeria 's urban areas do not have enough income to meet their basic needs. About 21 % of the urban population-8.S million peo­ple-was estimated to be below the poverty line in

1992/93. Of these, about l.1 million were classified as "severely poor" . The majority of the urban poor are in

cities other than Lagos. Their cash income is insuffi­cient to cover minimal standards of food, water, fuel, shelter, medical care, and schooling. The urban poor live in areas with bad environmental conditions and

the highest deficits of basic services. They suffer more than other groups from the breakdown of urban infra­structure, especially in terms of ill health and lack of accessibility. Income generating activities of the poor

are mostly in the informal sector. Unemployment and underemployment are common. The poor lack access to productive resources such as credit, equipment, and land. The productivity of the resources that they do

own is low. The burden of coping with unreliable and inadequate household services falls disproportionately on women and children.

URBAN POLLUTION

R apid growth of cities has had a harmful effect on surrounding eco-systems. Urban environmental prob­lems fall into two major categories: industrial and non-industrial. Poor management of municipal wastes-sewage, septage, and refuse-is Nigeria's major urban environmental problem. Improving waste management is more of a policy and management problem than a technical one. The issues are discussed in Part N of this document.

Industrial waste is another major urban environ­mental concern. Textile plants, breweries, slaughter­houses, sugar refineries, pulp and paper plants, and petroleum industries discharge raw, untreated, and

20 -0- A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

often toxic liquid effluents into open gutters, streams, drains, channels, and lagoons. This has rendered most surface and underground waters around urban areas unsafe for human, agricultural, or recreational use. All of the urban environment-air, land, and water-is affected by smoke, gases, and dust from motor vehicles and factories. The most critical airborne emissions are sulfur dioxide, carbon monoxide, and nitrogen oxides, which pose serious health hazards in urban areas. Industrial and air pollution need to be dealt with by enforced regulation coupled with economic incentives to change the behavior of industries and users of motor vehicles .

URBAN POLICIES IN DISARRAY

A National Urban Development Policy was prepared in 1992 under the guidance of the Federal Ministry of Works and Housing. It was developed through wide­spread consultations with governmental and non-gov-

RAPID GROWTH OF CITIES HAS HAD A HARMFUL EFFECT

ON SURROUNDING ECO-SYSTEMS. POOR MANAGEMENT

OF MUNICIPAL WASTES IS NIGERIA'S MAJOR URBAN ENVI-

RON MENTAL PROBLEM.

ern mental organizations. Though it has yet to be adopted officially, this policy document provides a good foundation for further action (see Box 1, page 22).

In the meantime, other policies are having nega­tive effects on urban productivity and welfare. Fiscal deficits fuel increased inflation, which in turn must be arrested through tight fiscal and monetary policies. The successful implementation of stabilization poli­cies requires positive real interest rates, which in nom­inal terms are high enough to hamper the financing of urban services. Large subsidies for domestic oil, fertil­izer, and loss-making government enterprises drain revenues away from more productive uses. Inadequate controls on public expenditures, large extra-budgetary

THE CRISIS OF URBAN INFRASTRUCTURE AND SERVICES -0- 21

allocations, and a lack of fiscal accountability and

transparency hinder the allocation of resources for badly-needed infrastructure and social services.

The development of urban land and housing in

N igeria is severely constrained by government con­

tro ls. State ownership keeps large quantities of land off

the market. Parcels of land for development are

Box 1: NATIONAL URaAN

DEVELOPMENT POLICY

The National Urban I Development Policy

was prepared in 1991-92 by a committee of 14 dis­tinguished experts. The committee conducted meetings with a wide range of people and reviewed 70 memoranda from governmental and non-governmental sources. Here are a few selected highlights of the NUDP's report:

• A National Urban and Regional Development Commission should be established as the apex urban development organization in the government.

• States and Local Governments should have Urban and Regional Development Boards and Authorities, respectively.

• The Land Use Decree of 1978 should be reviewed with a view to making land more easily available and affordable.

• The participation of the private sector in the provi­sion of in&a8tructure should be encouraged.

• The Urban Development Bank of Nigeria should be supported to become an effective provider of loan funds and technical assistance for urban infrastruc­ture.

• Cost recovery mechanisms for urban infrastructure and services should be established and strengthened.

extremely difficult to acquire from the mostly nation­alized land stock. A certificate of occupancy for a par­

cel can take from one to five years to obtain.

Uncertain land titles impede the development of urban land for productive purposes and the use of land as col­

lateral for credit. Compliance with planning, subdivi­

sion, and building regulations is extremely costly in time and money. Liberalization of land markets is

needed to expand the supply and lower the cost of land

and housing. Finally, barriers to participation of the private sec­

tor in different aspects of urban infrastructure and ser­

vices need to be removed. These include:

• Prohibitions on the private ownership and manage­ment of services, such as electricity, water, or telecom­

munications.

• Lack of clear laws and regulations enabling lease and concession arrangements for infrastructure services.

• Excessive political involvement in management issues, including lack of predictable, transparent mech­

an isms for tariff -setting.

INSTITUTIONAL PROBLEMS

P olitical instability is the most serious, immediate

constraint on the improvement of urban services. Instability makes it difficult to plan ahead and to maintain implementation schedules. It defeats efforts to build sustainable institutional capacity.

The widely held view that government should handle all urban development activities is another big

problem. This idea persists even in the face of the obvious weaknesses of public sector institutions. In

Nigeria it is often said that, if only government agen­cies had more money, they would perform much bet­

ter. This ignores world-wide lessons about the limita­tions of public sector management. Experience shows

22 -0- p. STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERV I CES IN NIGERIA

THE WIDELY HELD VIEW

THAT GOVERNMENT

SHOULD HANDLE ALL

URBAN DEVELOPMENT

ACTIVITIES PERSISTS

EVEN IN THE FACE OF THE

OBVIOUS WEAKNESSES

OF PUBLIC SECTOR INSTI-

TUTIONS.

that competitive markets-mainly involving private actors-are both the most efficient way to supply goods and services and the most accountable to users' needs. Also, the scope of activity in which government intervention is required is narrower than previously believed. Usually it can be limited to policy-making, regulation, ownership, or financing, leaving actual investment, operation and maintenance to non-govern ­ment entities.

It is difficult enough for government agencies to perform their policy making and regulatory functions. They do suffer from inadequate resources. Low remu­neration, lack of equipment and supplies, and poor management practices severely depress the perfor­mance of the public sector.

A critical problem affecting urban development in

Nigeria is the non-functioning of Local Governments.

LGs were led by locally-elected councils and elected

chairmen from 1976 to 1993. Today LGs are little more than caretakers, unable to carry out their assigned functions. The large number of LGs-585-is a huge administrative and fiscal burden for States and

the Federal Government. It also means that the scarce trained manpower available in Nigeria must be spread even more thinly across the many LGs. It appears that

State interference in LGs' activities has contributed to their weakness. Examples include States appropriating LG revenue sources, reducing or withdrawing LGs' statutory allocations, and switching functions to or from LGs without adjusting their finances.

Annex 2 gives an overview of Federal, State and Local responsibilities for construction and mainte­nance of infrastructure and services. It highlights the degree of overlap that exists.

THE CRISIS OF URBAN INFRASTRUCTURE ANO SERVICES ~ 23

FINANCING URBAN

iNFRASTRUCTURE AND SERVICES

Severe under-investment is plainly visible in Nigeria's roads, water systems, drains, and other infrastructure.

Because of fragmented accounting, it is difficult to know how much is being spent by the Federal Government, States, and Local Governments on urban infrastructure. Large amounts of urban infrastructure and ser­

vices are provided directly by households, private firms and community groups.

Estimating Nigeria's future investment requirements for urban infrastructure depends on many uncertain

assumptions about economic trends, population growth, prices, and design standards. Undoubtedly, though, the amount of investment needed greatly exceeds what Nigeria, with a GNP per capita of US$280 (1994), will be able to

afford in the foreseeable future. It was estimated in 1987, for example, that about US$800 million would be required

only to rehabilitate existing urban and semi-urban water supply systems.

A limited amount of funding for urban infrastructure is being provided by multilateral agencies such as the

World Bank and African Development Bank. The total value of World Bank loan/credit commitments for urban infrastructure projects (including water supply) between 1987 and 1995 was US$878 million. Commitments by the

African Development Bank over the same period totaled US$884 million. Multilateral financing flows have been and probably will remain small relative to the nation's needs.

Lack of funds is not a root cause of poor infrastructure and services. It is a symptom of more fundamental prob­

lems. These include instability, lack of confidence, distorted economic policies, and difficulties of governance. The mobilization of public and private funds for urban infrastructure depends, in the long run, on the alleviation of these problems.

Everyone in Nigeria feels the effects of inadequate operation and maintenance of urban services. Road surfaces become covered with potholes. Water pipes break. Drains fill with silt and rubbish. Waste collection trucks cannot run due to lack of fuel and spare parts. Buses break down as they ply their routes.

More than 90% of all public sector revenues are collected by the Federal Government. At the same time, States and LGs have the legal responsibility for providing almost all infrastructure and social services (including public health and education). As the allocation of revenue generating powers is unlikely to change in the medium term,

FINANCING URBAN INFRASTRUCTURE AND SERVICES <- 25

States and LGs will continue to require large Federal transfers to fulfill their mandated functions.

There has been a continuing debate in Nigeria

about whether the States and LGs are receiving enough

money from the federation account to provide the pub­

lic services for which they are responsible. It is argued

that the current formula for sharing out the federation account (Federal 48.5%i States 24%i LGs 20%i and

special funds 7.5%) guarantees that State and locally provided services will be inadequate.

This argument ignores the enormous untapped potential of internal revenue mobilization by States

and LGs. Regardless of whether or not it makes sense

to change the federation account sharing formula,

States and LGs have the obligation to collect more rev­

enues from user fees and their own taxes.

IMMEDIATE PRIORITIES

REORJENTATION OF PUBLIC EXPENDITURE

T he first place to look for additional funds for invest­

ment in urban infrastructure is the existing Federal

budget, which accounts for more than 90% of all pub­

lic revenues and consumes close to half of total nation­al public expenditures. Currently, administrative and

security functions claim the highest share of expendi­tures from the treasury, the foreign exchange budget, and extra-budget sources such as the stabilization accounts. Economic services (agriculture, industry and housing), which in Nigeria's case generally compete with or duplicate the private sector, are also large claimants. Over-spending and extra-budgetary spend­ing increased rapidly, from near zero in 1986-89 to 17% of GDP in 1993. A majority of this increase was spent on a huge portfolio of large, un-economic capital projects. There have also been large increases in real terms in the public wage bill and subventions to loss­making public enterprises during the past several

SCARCE GOVERNMENT RESOURCES SHOULD NOT BE USED

TO COMPETE WITH OR DUPLICATE ACTIVITIES BEST DONE

BY THE PRIVATE SECTOR.

years . The fertilizer subsidy has been proven ineffec­

tive and exceedingly costly. At the same time, approved allocations for maintenance of existing capi­

tal assets, as a share of GDP, fell 21 % between 1989

and 1993. Reduction of wasteful public expenditures is

essential to free resources for high-priority social needs, including basic infrastructure . Even so, scarce available resources are not always used for the most productive or beneficial projects. The preferred criteria for selecting projects include cost-effectivenessi good financial, economic, and social returnsi affordabilitYi and actual demand by potential users.

Considerable resources can be made available by

reforming public expenditures. Government should reduce the number and cost of publicly-funded capital projects, keeping only those with the highest social

26 -0- A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERV I CES IN NIGERIA

and economic priority. Unaccountable and extra-bud­getary expenditures should be brought under control. Government should reinvigorate and expand the pro­

gram of privatization and commercialization. Budget

support to public enterprises should be phased out. Expenditure priorities should not compete with or

duplicate activities of the private sector. Instead, the top priorities in public expenditure should be primary and secondary education, primary health care, and basic infrastructure and serVIces.

The States should eliminate low priority, low­return projects from their investment programmes. States' capital budgets should be focused on a few pro­

jects with high economic and social returns, and these should be adequately funded to complete them on

schedule. Efforts are needed to implant and dissemi­

nate methods for project appraisal. Their use should make it easier to identify projects for which there is high demand by potential users.

Government's funds should be used preferentially for infrastructure that is purely public or not usually profitable: roads, drains, water supply, sewers, waste

disposal facilities, and the like. Government should rely on the private sector to fmance commercially

viabJe ventures such as housing estates or markets. Housing for lower-income people should also be pro­vided through the private sector, with government's role restricted to putting m place policies and regula­tions that promote the supply of affordable financing and the functioning of land markets.

TARGETING THE URBAN POOR

P overty alleviation should be among the highest pri­orities of any urban development strategy. Modest investments can make large improvements in the lives of the urban poor. Upgrading of baSIC services such as water, sanitation, roads, solid waste, and street lighting

in lower-income urban areas have direct impacts on the welfare and productivity of the poor. These types of infrastructure investments should be part of broader programs encompassing employment generation, pri­

mary health, and education.

ASSU1UNG COUNTERPART FuNDS FROM STATES'

ANNUAL BUDGET '

U nder World Bank-supported projects, States are nor­

mally required to contribute a share (from 10% to 25 %) of total project costs. The current, typical prac­

tice is to deduct the needed amounts from the States' statutory allocations at the Central Bank of Nigeria

(CBN). The deductions are made through Standing

Payment Orders (SPOs ) authorized by the States.

In the IDF project it has become customary for States to begin "saving" toward their required counter­

part contributions by starting their SPOs some time before the funds are needed. The subprojects under IDF

have been modest in size. The main problem has been high inflation, which has dramatically increased pro­

ject costs compared with design estimates.

The World Bank-supported Lagos Drainage and Sanitation Project requires Lagos State to contribute a

total of US$20.8 million from its own budget over the 1994-98 period. This large amount is being deducted periodically from Lagos State's federation account.

Lagos State is unique in that it generates most of its

budget from internal revenue (71 % in 1993). It collect­ed N. 1.95 billion from its internal sources in 1993. Although Lagos State has by far the highest revenues in absolute terms, its per capita revenues (N. 559 in 1993) are similar to those of several other higher­income States.

Budget data show that the States generally have not been burdened with excessive contributions to

externally funded projects. The difficulties that States

FINANCING URBAN INFRASTRUCTURE AND SERVICES -eo 27

have had in meeting their counterpart funding obliga­tions are due entirely to the attempt by State govern­ments to cling to a wide portfolio of projects, regard­

less of economic or social priority, and to try to fund

all of them with inadequate annual allocations, The

alternative would be to fund only a few, high-priority projects adequately and complete them on schedule,

The use of the SPO to guarantee the availability of counterpart funds was a successful innovation of the

IDF project, It has gained general acceptance, and it

shou ld continue to be used in future projects,

STATE GOVER MENT ACCOUNTS

T he best form of security for loans to States should be the Standing Payment Orders , These take loan repay­

ments directly from the States' allocations of the feder­

ation account. However, confidence was shaken by the

Government's decision in 1990 to revoke all SPOs, Mistrust of the SPO among merchant and commercial

banks persists despite the short duration of the revoca­tion and the fact that it has only happened once, Some

of the loans that were not paid as a result of the direc­

tive are still outstanding,

The SPO system is attractive as a means of guar­anteeing loan repayments by States, The problem is

that the SPO system operates without adequate record­keeping or financial analysis, The risk exists that a State could become financially over-extended without any "warning bells" being sounded by the State, the Federal Ministry of France, the Central Bank of Nigeria, or the Accountant GeneraL States commonly request the Federal Government to implement an SPO without any idea of its impact on their budgets, Records of past SPOs and borrowings have not been kept properly by the States, Frequent leadership changes have added to the confusion,

On the revenue side, it is very difficult for poten-

tial lenders to forecast the revenues of the States, The flow of Federal grant money, which accounts for most of the States' revenues, is not predictable, In fact, the

amounts of each State's statutory allocations are deter­mined and announced each month,

Under current law Local Governments are not allowed to borrow money, This is not an issue for the present, but it will become one in the longer term,

Immediate measures could be taken to permit

States to take informed decisions about their indebted­ness and counterpart fund commitments, This

involves relatively simple improvements in financial

accounting and reporting, State Ministries of Finance would need to keep better records of SPOs and loans,

The CBN and FMF would also need to establish a

coherent data base on SPOs and other deductions from the federation account shares of each State, These data

would be provided to the States regularly, Such mea­sures would make States more attractive to lenders and investors by facilitating creditworthiness appraisals,

AGENDA FOR THE MEDIUM TERM

MOBJLIZiNG STATE AND LOCAL REVE UES

T he main issue for States and Local Governments, in

terms of capital financing for urban infrastructure, is to generate an annual surplus of revenues over recur­rent expenditures, The surplus normally is devoted to

capital expenditures, Initially it may finance small pro­jects directly, Later the surplus can be used to repay loans for larger projects,

The States devoted an average of 62 % of their bud­gets to recurrent expenditures between 1990 and 1993 (varying from 56% to 70% over the period) , Capital

expenditures of all the States amounted to N, 14,3 bil­lion in 1993, This is about N, 152 per capita, The key

28 -0- A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

GRAPH 3

STATUTORY ALLOCATION FOR

A LL 30 STATES AS PERCENTAGE OF

TOTAL STATE REVENUES

1990 1991 1992 1993

question is, how can this be increased? The large wage bill of the States is a major con­

straint. Without a major rationalization of the civil ser­vice at the State level, pressures on the wage bill will

be increasingly unbearable to many States, unless fur­

ther deterioration in wages is tolerated. Some observers of the Nigerian situation have

expressed concern that States and LGs are too depen­dent on grants from the Federal level. The large size and unconditional nature of the federal allocation, involving no collection cost, discourages States and

LGs from making efforts to mobilize internal revenues. Budget figures show that States are indeed very depen­dent on federal transfers, but this seems to have been decreasing slightly in recent years (see Graph 3).

The major sources of public revenue-import duties, excise duties, mining rents and royalties, petro­leum profits tax, and companies income tax-are under the jurisdiction of the Federal Government.

There are three other taxes with large-scale revenue

potential: the personal income tax and the value added tax at the State level and the property tax at the

Local level. States and LGs have numerous other, minor revenue sources . In the foreseeable future this

assignment of revenue generating powers is likely

remain the same, meaning that the Federal Government will continue to collect the bulk of tax revenue. Thus, fiscal transfers will remain the largest

source of States' and LGs' income. The challenge for

future policy is to make the utilization of revenue

transfers more productive for economic and social

development.

It is unlikely, though, that federal grants to the States will grow significantly in the future. States will

be obliged to turn increasingly to their internal rev­enues to help finance infrastructure. Even with recent

improvements, however, internally generated revenues

accounted for only about 17% of total State revenues in 1993. This represents a paltry N. 63 per capita for

30

2S ... z

'" II: 20 II: ;)

u 15

'" z 0 10 -' -' III 5

z 0

GRAPH 4

REVENUE SOURCES OF STATES

1990 - 1993

1990 1991 1992 1993

• States' Internal Revenues • States' Statutory Allocations

FINANCING URBAN INFRASTRUCTURE AND SERVICES -(!o 29

a1130 States (N.46 per capita with Lagos left out) in

1993 values. Clearly the untapped potential of States ' own taxes and fees is huge.

Some States are beginning to make greater efforts

to generate their own revenues. Statutory allocations

grew at an average of 19% per year from 1990 to 1993,

while internal revenues of all the States grew at an

average of 30% per year during the same period (see

Graph 4, page 29). Other data on State Government

finances are presented in Annex 3.

Local Governments ' most important revenue

sources are property taxes (tenement rates), market and

motor park fees, user charges for services, and business and vehicle licenses. Actual collections are minuscule.

In 1992 the total internal revenues of the LGs was

N.327 million, roughly N.3 per capita. Potential rev­

enues are surely many multiples of current amounts.

As of 1991, federal statutory allocations made up

about 85% of LGs' revenues. This has probably

increased in recent years to nearly 90%. LGs' accounts

showed that they were allocating roughly 70% of their

budgets to recurrent costs and 30% to capital expendi­

tures in the 1980s. This is misleading, however. By far

the largest item of capital expenditures in LGs'

accounts is education. Most of this is for teachers' salaries, which is actually a recurrent expenditure. The

second largest capital item is roads, but a large share is maintenance, again a recurrent cost. Thus it appears that, in reality, LGs' capital expenditures have been

very small. Much needs to be done to induce the States and

LGs to realize the vast untapped potential of the rev­enue sources under their control: the personal income and value added taxes of the States and the property

tax of the LGs. To encourage States and LGs to gener­ate more internal revenues, the possibility of restrict­

ing the use of statutory allocations to capital invest­ment-perhaps partially-could be considered.

Technical assistance should be provided to States that show strong commitment to improving revenue mobI­lization.

Infrastructure financing would be helped enor­

mously if the flow of statutory allocations could be

made more predictable. This should be part of a ratio­

nalization of the budgeting process. The eventual goal

would be a State (and later LG) capital budgeting sys­tem in which revenue projections can support an

investment program of specific, prioritized projects.

In the long term the Federal Government should consider ways of dealing with the disincentive for

State and Local revenue mobilization due to the large federation account transfers. The options include:

• Requiring that transfers be for capital investments

only, so that States and LGs would be obliged to meet recurrent costs by themselves.

• Converting a part of the transfers to matching

grants, which would only be given if the State or LG put up a specified amount.

PROPERTY T AXES HAVE GREAT POTENTIAL

W hen the IDF project was designed it was expected

that much of the money needed for the recurrent costs of new infrastructure-especially roads and drains­would come from property taxes. Property rating was

included as a component of the projects in each State. Property rate collection is constitutionally the respon­sibility of Local Governments. Aware of the LGs' lack of capacity, the project's designers provided for Property Rating and Valuation Units to be established at the State level. LGs were asked to provide the State Governments with written mandates to manage prop­

erty rating and collection on their behalf. Funds col­

lected were to be shared between the State and LGs. The State property rating units were staffed by State

employees and private contractors. Junior officers of

30 -0- A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

FOR LARGE-SCALE INFRASTRUCTURE INVESTMENTS, THERE

IS NO ALTERNATIVE TO DEBT FINANCING THROUGH THE

CAPITAL MARKETS.

the LGs received training as Valuation Assistants. These efforts produced a one-time updating and

revaluation of the property rolls in several States. But actual property tax collections remained very low. In Adamawa, for example, the actual amounts collected

over the 1991-94 period were only about 12% of

billings. A close look at the IDF's experiences with the property tax shows numerous problems:

• Political support was lacking. Between 1991 and 1993, politicians elected or running for office tended to

oppose taxation.

• Collection efforts were weak, and property owners resisted making payments. • Staff performance was poor due to low salaries and insufficient equipment.

• LGs were not active participants in the process, and thus didn't cooperate with the State property rating units. Frequent changes of Commissioners and LG Chairmen made things worse.

• Traditional leaders and other influential people,

often owners of substantial property, opposed the

measures . • The agreements to pass on most of the revenues

lusually 70%-80%) to the LGs provided little incentive

to the State Governments.

If further efforts are to be made on property taxes,

they should be a joint effort of the State and concerned Local Governments. It is essential to devise an agree­

ment that gives both parties adequate incentives to

deliver results. In principle, property rating and proper­

ty tax collection should be done by the level of govern­ment responsible for the provision of services. In the

current situation, this will be the State. However, it is

necessary to obtam support and cooperation from the LGs lincluding middle-level officials), traditional lead­

ers, and community leaders at an early stage. Reliance on LGs for collection of property taxes

has been a failure. Alternatives are needed, including the use of contractors. Contracted professional valuers performed well under IDF, and this should be expand­

ed. Flaws in previous State edicts regarding property

tax collection and powers of enforcement should be

corrected. However, care should be taken not to set

precedents that will allow States to retain property tax powers in the long run.

In the short to medium term future, collection of property taxes will remain very difficult . In the

absence of public confidence, tax evasion is likely to

be widespread . The required politica l support is not likely to be forthcoming. Other forms of cost recovery from beneficiaries-tied to immediate, visible improvements-should be tried. In other countries "special assessments" have had some success. These are one-time levies on local residents who benefit from a specific improvement such as a road or a new drain. To succeed, this mechanism is best managed through

FINANCING URBAN INFRASTRU CT URE AND SERVICES .e- 31

local leaders or organizations that enjoy public trust. Political support from all interested parties, including traditional leaders, is essential.

PUBLIC SECTOR BORROWING

T he external debt stock of the States was estimated at about US$l.4 billion at the end of 1991. The States

owed about US$287 million of foreign debt service payments in 1993. These represented around 20% of

the States' share of the federation account. While this

debt service burden is high, it is manageable and

should not justify further accumulation of arrears. The debt owed to the Federal Government by the States

was about US$1.1 billion at the end of 1993. Actual cash payments on total debt obligations do not appear

to have been a large item of expenditures by the States in recent years. However, individual States have occa­sionally experienced large burdens.

It is almost impossible to gather reliable data on

scheduled debt obligations from State government agencies. Effective payments vary widely from year to

year due to ad hoc decision-making. Furthermore, deb­

its effected by the Accountant General, the Central

Bank, and the Federal Ministry of Finance to the States' shares of the federation account and stabiliza­tion account are not included in States' financial accounts .

The World Bank-supported Infrastructure Development Fund (IDF) project was originally intend­

ed to help establish an infrastructure financing mecha­nism. Merchant banks were to absorb the credit risk as onlenders of World Bank funds and finance a modest share (10%) of urban infrastructure projects with their own funds. In practice the banks did not invest their funds or assume any credit risks. One reason was the large depreciation of the Naira during the three years it took to make the IDF project effective. Other reasons

have to do with the breakdown of Nigeria 's capital market and banks' lack of confidence in lending to the public sector.

Given lowered inflation and reasonable market

interest rates, commercial and merchant banks could make a major contribution to financing urban infra­

structure. However, the current state of Nigeria's financial market does not allow for medium or long­term investment of loanable funds . At present such funds are limited to volatile, short-term placements

and deposits . Infrastructure projects require loan tenors of at least three and as many as 20 years.

Annual budget surpluses and federal grants will not be enough to pay for many larger-scale invest­ments in urban roads, water systems, primary drains,

and the like. The only alternative will be debt financ­ing by States and, eventually, Local Governments. A top-priority long-term goal of government policy should be to facilitate the use of the domestic capital market for infrastructure. For this, fiscal and monetary

discipline are required to reduce inflation and allow market interest rates to settle down to affordable lev­

els . Furthermore, the government needs to come to grips with the crisis of the banking sector, restoring a

credible and effective regulatory system. States and LGs remain high-risk borrowers in the view of the financial sector. Solving this depends mainly on better governance. Political stability and responsive leader­ship are pre-conditions for government bodies to inspire confidence among investors and lenders.

U RBAN DEVELOPME T BANK OF NIGERIA

T he Urban Development Bank of Nigeria (UDBN) was established in 1992 to provide loans to States, Local Governments, and private entities for urban infrastruc­

ture projects. So far the UDBN has been unable to implement a financially sustainable corporate strategy.

32 -0- A STRATEGY FOR RESTORING URBAN INFRASTRU CT UR E AND SERVICES IN NIGERIA

Part of the problem is a lack of consistent political support at the highest levels. The UDBN had a Board of Directors for about one year initially, but it was dis­solved and has not been reconstituted.

UDBN received N. 543 million in paid-up capital as of the end of 1994. Its shareholders are the Federal Government, State Governments, Local Governments, and the Nigeria Labour Congress. UDBN's operational expenses, loans, and advances are being financed out of the paid-up capital, most of which has been on short­term deposit with other banks. The UDBN's return on capital for the 1993 financial year was below 1 %. Of its gross earnings of N. 75.5 million in 1993, N. 70.5 million was realized through money market transac­tions. The UDBN has made only one loan, a 1993 package totaling N. 143 million to 20 States for the

acquisition of buses for public transport. The interest

INFRASTRUCTURE FINANCING WOULD BE HELPED ENOR­

MOUSLY IF THE FLOW OF STATUTORY ALLOCATIONS COULD

BE MADE MORE PREDICTABLE. THIS SHOULD BE PART OF A

RATIONALIZATION OF THE BUDGETING PROCESS.

rate was 21 % per annum and the tenor between four and five years. Repayments are by deductions from the federation account.

To fulfill its mandate, UDBN requires the same macro-economic improvements as the rest of the financial sector, namely fiscal and monetary disCipline to lower inflation and make it possible to lend at affordable interest rates without decapitalization. UDBN should be able to secure long-tenored funds at reasonable rates so that it can provide long-term loans for infrastructure. UDBN should look for more prof-

FINANCING URBAN INFRASTRUCTURE AND SERVICES ~ 33

itable and secure areas of investment other than

money market transactions . To become a viable finan­cial intermediary for federal government investments

in infrastructure in the near-term, UDBN needs to: [a) ensure that operating expenses are limited to what can

be covered by net income; [bl establish coherent lend­

ing policies, including the use of market interest rates; [cl adopt a clear strategy for maintaining the value of

its paid-in capital and mobilizing additional funds; [d) limit its mandate to urban infrastructure and related technical assistance; [e) establish an autonomous, pro­

fes sional Board as free as possible from political inter­

ference; and [f) put in place a reliable external audit

system.

ALTERNATIVE FfNA CING O PTIONS

In many countries, companies or governments finance infrastructure by issuing bonds, which are long-term

debt instruments. Usually bonds are tied to a specific

projec t. Another long-term debt instrument for infra­

structure finance is development loan stocks. In Nigeria, these are issued by the CBN for onlending to

States. The Nigerian Constitution of 1979 makes the rais­

ing of public sector loans from the capital market the

exclusive preserve of the Federal Government . In prac­tice this has meant that States wishing to borrow from the capital market must obtain approval from the

Federal Ministry of Finance. One of the advantages of encouraging public sector

organizations to finance their projects through capital market instruments like bonds is that all fund seekers, public and private alike, must submit themselves to

the discipline of the market. The Securities and Exchange Commission, which regula tes the issuance of bonds, has an important role to play in ensu ring that financial discipline is observed. SEC does not reg-

ulate development loan stocks, however.

The major problems facing State governments wishing to raise funds through the capital market are:

• Coupon rates on bonds are usually low relative to other investments available.

• Public sector institutions usually do not keep up-to­date, complete financial records in accordance with

SEC requirements.

• Obtaining FMF approval can delay the process . • Sales of bonds may be highl y localized, as interest may be restricted to State indigenes.

• Inves tors lack confidence in State governments and public sector projects.

Despite these problems, there have been several successful securities issues [as measured by the level of subscription) by States in recent years. These are a

loan stock issued by Ogun State in 1986 for the Abeokuta Water Scheme (N.IS million ); a loan stock

and a revenue bond issued in 1987 and 1988 by Lagos State for the Lekki Peninsula Development Scheme

(N.3D and N.6D million ); a revenue bond of Oyo State in 1989 for the Adamasingba Shopping Complex and New Gbagi Market (N.3D million); and a revenue bond of Kaduna State in 1989 for construction of a ginger processing plant (N.3D million). All of these securities

were for commercial projects with high prospects for

direct financial returns. The Federal Government should adopt the SEC's

proposals to facilitate easier access of States to the cap­ital market. To promote confidence by investors, States may also establish sinking fund accounts for redemption of debt obligations on maturity. This would help forestall undue financial pressures on the

issuers. The most favoured method of payment into such accounts would be through SPO.

34 .e- A STRATEGY FOR RE STO RING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

LmERATI G PRIVATE I. VESTME T

T he ability of government to invest in infrastructure

will be limited by fiscal constraints and the problems

of public sector implementation capacity. Private investment-both domestic and foreign-needs to be

harnessed to fill the gap. Private investment in urban infrastructure in

Nigeria is probably quite substantial. Private firms have their own power generators, boreholes for water,

and buses for transporting workers. Private entrepre­neurs provide solid waste collection services with their

own equipment. Some types of urban infrastructure, such as roads

and drainage, are public goods for which fees cannot be charged. Other types of urban services can be operated

on a commercial basis, however. These include water supply, electricity, refuse collection, markets, and housing estates. The high prices paid for water and

power when these are not available from public agen­

cies shows that there is a willingness to pay for urban

services. For example, in the city of Onitsha house­holds purchase about three million gallons of water per

day from private vendors . This is about twice the amount of water supplied by the State water board. Payments by water users to the private vendors

amount to around 12 times the total collected by the

State water board. Potential private investors in infrastructure are

exposed to formidable policy, country, commercial and currency risks. Policy risks relate to government

restrictions on private entry, lack of reliable regula­tions ("rules of the game"), and unpredictable tariff­setting criteria. Country risks involve the reliability of property rights and dispute resolution mechanisms. Commercial and currency risks are high in Nigeria's present unstable macroeconomic environment.

THE ABILITY OF GOVERNMENT TO INVEST IN INFRASTRUC-

TURE WILL BE LIMITED BY FISCAL CONSTRAINTS AND

PUBLIC SECTOR IMPLEMENTATION CAPACITY. PRIVATE

INVESTMENT BOTH DOMESTIC AND FOREIGN NEEDS TO

BE HARNESSED TO FILL THE GAP.

Lack of credit for domestic investors is another major obstacle. Nigeria 's financial sector is in disarray.

Numerous merchant and commercial banks are insol­vent or nearly so. The government's difficulty in regu­

lating the banks contributes to the lack of public confi­dence in the financial sector. High inflation, exchange rate controls and fluctuations, and lack of fiscal disci­pline make it difficult for even well-managed banks to survive.

FINANCING URBAN INFRASTRUCTURE AND SERVICES ~ 35

INST I TUT I ONAL ARRANGEMENTS FOR

URBAN INFRASTRUCTURE AND S E RVICES

R aising more money is necessary but not sufficient to improve urban infrastructure and services in Nigeria.

A host of institutional problems hinders the productive use of available funds. External assistance agencies, the Federal Government, and State Governments all share responsibility for not

paying enough attention to institutional issues. In the World Bank supported Infrastructure Development Fund (lDF) project, for example, it was thought that solid waste collection could be improved by providing new and reha­

bilitated trucks and training for the staff. In one of the States, 40% of the trucks provided to the Ministry of Works

for solid waste were diverted to road construction. If the institutional aspects of solid waste collection had been

taken into account, perhaps the project's original objectives wouldn't have been so easy to subvert.

IMMEDIATE PRIORITIES

ASSURI G EFFECTIVE PROJECT IMPLEMENTATION

N igeria'S current climate of uncertainty places severe restrictions on the public sector's capacity for policy-making

and management at all levels. Under these circumstances, assuring effective implementation of projects will have to

take precedence over public sector institutional strengthening. This means that various forms of special Project Implementation Units (PIUs) will be needed to insulate World Bank and other donor-funded projects from political

interference and instability. Use of private contractors to staff key positions in PIUs has worked well and should continue.

The use of Project Steering Committees, composed of senior civil servants from key agencies, has been helpful in buffering projects from frequent leadership changes and ensuring continuity of implementation.

Implementation arrangements for specially-funded projects within any given State need to be kept as simple as possible. Projects should include only the most essential components. Where two or more agencies must be involved, much more careful attention should be paid to ensuring that the coordination arrangements are truly workable. It is most efficient for a single Project Implementation Unit to manage all components of a project or pro-

INSTITUTIONAL ARRANGEMENTS FOR URBAN INFRASTRUCTURE AND SERVICES rOt 37

gram. Where there are several implementing agencies,

and the PIU acts merely as a coordinator, bureaucratic delays can multiply over decisions like contract

awards and payment authorizations. Having various

implementing agencies also tends to obscure account­

ability for good or bad performance.

Projects covering many States are difficult to

supervise. Also, having many States tends to produce a

scattering of small projects, reducing the development

impact. For the time being, World Bank infrastructure

projects should be limited to two or three adjacent

States. The idea of a national infrastructure "wholesal­

ing mechanism", as originally envisioned in the IDF

can be revived again in the longer term. '

Because of the highly centralized financial controls

currently used by the States, heads of infrastructure

projects and agencies should be as close as possible to

the highest levels of authority. Ideally, a project or

agency director should have a direct reporting relation­

ship to the relevant Commissioner, who in turn

reports to the State Administrator. Experience shows that it is best for an urban infra­

structure project or program to be managed in the

Ministry directly responsible for the sector. This

ensures that technically qualified staff are available. It

also reduces problems of inter-agency coordination.

Where a project director must coordinate the activities

of other agencies, it is crucial that he/she have a suffi­

ciently high rank. The "demand-driven" approach used in the IDF

project has been positive. Funds have been channeled to States that demonstrated the most motivation by promptly submitting acceptable proposals and arrang­ing Standing Payment Orders (SPOs) to set aside coun­terpart funds. The more committed States tend to be

more successful in implementation. This approach could be used again when it is feasible to re-introduce a "wholesaling" approach to infrastructure financing.

REDUCING TURNOVER IN LEADERSlflP

I t has not been unusual for appointed officials and top managers to be changed once a year, or even more fre­

quently. Each such change can set back the implemen­

tation of an infrastructure project by many months.

The appointment of new officials typically delays con­tract awards, payments to contractors, and counterpart

funding commitments. In one case, where a new State

was created during implementation of a World Bank

project, the new State administration rejected the pre­

viously-selected subprojects. Subsequent disagree­

ments on replacements delayed implementation by three years.

Frequent changes in leadership make it almost impossible to maintain a consistent policy or strategy.

Benue and the former Gongola (now Adamawa) States

received assistance in the first phase of the IDF project.

Between 1987 and 1994 both States had five Chief Executives. Over the eight years, the relevant

Commissioners and Local Government Chairmen

were changed an average of once a year. Benue had four

IDF Project Directors in the same period. A by-product of this instability is excessive cen­

tralized control. Because of past abuses facilitated by

frequent leadership changes, the authority to incur

expenditures at the State level is vested only in State

Administrators. This slows down public administra­tion even more.

When projects or programs are started, agreements should be put in place to prevent the arbitrary removal of project directors and staff once they have demon­

strated their capabilities.

38 oQo A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

IMPROVING PROJECT S UPERVISION AND

TECHNICAL ASSISTA CE

T he World Bank-supported Infrastructure Development Fund project originally envisioned that

merchan·t and commercial banks (PFIs, or Participating

Financial Institutions) would assume credit risks.

Thus, it was reasoned, the banks would have a strong

incentive to efficiently carry out financial intermedia­

tion, subproject appraisal, and project supervision.

The banks that were involved in the early stages

of the IOF performed supervision reasonably well.

They recruited qualified personnel, and they were

responsive to the needs of the State governments, the

Federal Government and the World Bank. As a result

of the liberalization of bank licensing in 1989-91, a

large increase occurred In the number of merchant and

commercial banks. This diluted the stock of experi­

enced bankers, diverted the banks' energies toward

money market transactions, and produced high staff

turnover. In addition the banks never gained a finan­

cial stake in IDF or took any credit risks. As a result

the performance of the PFIs on project appraisal, pro­

ject supervision, and the processing of payments has

been disappointing.

The PFIs have held the accounts for the States

under the IDF project. Because holding these accounts

is highly advantageous, the banks were diligent in per­

forming tasks related to mobilizing money, such as the processing of disbursement applications. They were

especially effective in pursuing the establishment of the SPOs needed for the depOSit of counterpart funds. This required the banks to expend considerable time and effort.

Some banks may remain interested in providing technical support services-as opposed to direct

financing-for infrastructure programs, but most banks probably are not. Banks do not have staff qualified to

MORE USE SHOUI.D BE MADE OF DOMESTIC EXPERTISE­

AMONG COUNSUI.TANTS AND NON-PROFIT ORGANIZA­

TIONS- FOR THE PROVISION OF TECHNICAl. ASSISTANCE.

deal with infrastructure projects, and they have little

incentive to hire consultants with these skills. More

use should be made of domestic consultants and non­

profit organizations for technical services. Future con­

tracts between States and providers of technical assis­

tance should be drafted to reward providers for work

actually accomplished. The contracts used in the IDF

project were faulty in that they enti tled the PFIs to

receive payments based on events rather than real per­formance.

Even if the Urban Development Bank of Nigeria

(UDBN) cannot act as a development bank, it could potentially perform the types of technical assistance

functions expected of the PFIs under IDF. This is, in fact, a part of UDBN's mandate. It has a number of

staff with technical backgrounds (e.g. urban planning, engineering).

INSTITUTIONAL ARRANGEMENTS FOR URBAN INFRASTRUCTURE AND SERVICES .). 39

CAPACITY-BUILDING

T he usual approach to capacity-building for govern­

ment agencies is to provide consultants, training, and equipment. This may improve institutional perfor­mance for a short time. However, the effect usually disappears quickly.

Consultants, training courses and equipment do not address the fundamental causes of poor perfor­

mance in government institutions. Low remuneration,

poor working conditions, bad management, and politi­cal interference in technical matters are pervasive in

the public sector. Such conditions discourage those civil servants who are skilled and competent. The pro­liferation of States and LGs in recent years has created

thousands of new job openings. Not enough qualified people have been available or willing to fill them. Many unqualified people have been hired. In such cir­

cumstances, training and technical assistance can make little impact.

This does not mean that technical assistance should be discarded. But it needs to be used more

selectively. Technical assistance should be reserved for those institutions which are likely to internalize it. The recipient organizations should participate in

designing the technical assistance.

PRIVATE SECTOR

M uch can be done in the short term to extend the participation of the private sector in the provision of urban infrastructure and services. Each situation needs to be handled individually: incrementally in certain cases, boldly in others.

• Water: Service contracts for billing, tariff collection and maintenance can be instituted relatively easily.

Some State Water Boards are good candidates for man­agement contracts (contractor bears no commercial

risk) or lease contracts (contractor bears commercial risk). If these succeed, private enterprise could assume concessions (where the contractor also makes invest­ments).

• Solid Waste: The negative experience with the Lagos Waste Management Authority described further on shows the need for a private sector alternative. Contracting out vehicle maintenance is one possibility. Ways should be sought to contract out refuse collec­tion in a systematic way. If full cost recovery from

user fees is impossible, a hybrid of a service contract with a franchise could be tried. Community-managed fee collection could be introduced in lower income areas. An independent regulatory authority is needed to license refuse collectors, set tariffs [according to

objective criteria) and establish contract zones.

AGENDA FOR THE MEDIUM TERM

SORTING OUT GOVERNMENTAL RESPO SIBILITIES

T he three tiers of government- Federal, State, and

Local-are involved in the provision of urban services. The Federal Government not only formulates policy but also executes infrastructure projects through vari­ous agencies. State governments often implement medium-sized works including roads, drainage and water supply. Legally, Local Governments are responsi­ble for almost all types of urban infrastructure and ser­vices within their jurisdictions.

In practice there are many overlaps as well as gaps in the system (see Annex 2). Some types of infrastruc­ture-those with economies of scale, wider geographi­cal scope, or technical complexity-require State involvement. Urban services that are relatively simple and can be provided economically in decentralized units (such as drainage, sanitation and solid waste management) are best handled by Local Governments.

40 -Co A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

However, Local Governments have become largely non-functional in recent years. State governments have assumed many of the responsibilities that LGs are unable to fulfill. But, it is difficult for State-level water corporations, urban development boards, and waste management authorities to adequately provide services to large State areas containing many cities and mil­lions of people.

Over the years new institutions-formal and ad hoc-have been created by the Federal Government and by States to cope with specific problems. Usually these have been set up without altering the pre-exist­ing arrangements. These improvised, short-term responses may have helped to address some immediate problems. But they have had negative effects. In the worst cases it is almost impossible to tell who is accountable for what. There may be so many legal ambiguities and so many actors involved in a sector,

OVER THE YEARS NEW

INSTITUTIONS HAVE BEEN

CREATED TO DEAL WITH

SPECIFIC PROBLEMS,

USUALLY WITHOUT ALTER­

ING THE PRE-EXISTING

ARRANGEMENTS. As A

RESULT, EVERYONE AND NO

ONE ARE RESPONSIBLE FOR

THE OUTCOME.

that both everyone and no one are responsible for the outcome. Box 2 (page 42) gives real examples of this

problem. In the absence of capable Local Governments,

State Governments will continue to assume responsi­bility for most urban infrastructure and services. The medium term strategy should be (a) to improve the

abilities of State level agencies to provide urban ser­vices in the interim and (b) to seek special opportuni­ties to build capacity at the LG or even sub-LG levels where there is a chance of improvements being sus­tained.

In the long term, many types of urban infrastruc­ture and services are best managed by Local Governments. States are too large and too populous for State Governments to handle local services effectively. World-wide experience indicates that strengthening LGs can: (a) improve the provision of local infrastruc-

INSTITUTIONAL ARRANGEMENTS FOR URBAN INFRASTRUCTURE AND SERVICES -0- 41

ture and services, (b) improve revenue mobilization, and (c) improve governance through power-sharing and

accountability. Thus the creation of capable Local

Governments should be among Nigeria's highest long­

term priorities. Several issues need to be addressed in

the longer term once conditions permit LGs to assume their constitutional functions. These include:

• Defining LG responsibilities more clearly, including

distinguishing between types of LGs (urban and rural) .

• Making revenue transfers to LGs more predictable.

• Providing incentives- through the transfer system­and technical assistance for LGs to increase their inter­nal revenues.

• Improving the technical and management capacity of LGs (including the shedding of functions better per­formed by the private sector).

• Giving LGs meaningful involvement in planning (of investment programs and physical planning).

LGs that are part of larger cities need to form joint

Box 2: WHO MANAGES SOLID WASTE7 CONFUSION IN GONGOLA AND BENUE

I n the former Gongola State during the 1980s, solid waste services were administered by the Gongola State Urban Planning and

Development Authority. But GSUPDA was unable to provide staff to cover the 16 local government centers. Its budget, dependent entirely on the State treasury, was meagre. GSUPDA was obliged to turn over the little revenue it collected to the State.

Not satisfied with the performance of GSUPDA, the State in 1985 set up a special Task Force on Sanitation. Without amendment of the GSUPDA edict, the staff of the Environmental Health Division of GSUPDA, including their solid waste plants and eqUipment, were trans­ferred to the Task Force_ The chairman of the Task Force was not con­cerned with long-term sustainability of solid waste services. His priority was to make immediate, visible impacts. As a result, no institutional improvements took place.

In May, 1994 the new Administrator of Adamawa State (former Gongola) approved the takeover of solid waste management by the new Adamawa State Environmental Protection Agency (ADSEPA). This meant that the staff trained and equipment procured under the World Bank-supported IDF project had to move. Unfortunately, the con­cerned staff were unhappy about the transfer and resisted it. Since then, the quantity of refuse collected has declined by one-half to two thirds.

Solid waste vehicles procured under the IDF project were distributed to each of the local governments in Gongola/ Adamawa. The LGs each sent several staff to be trained in their operation. In each town, a local Sanitation Committee manages the services. The members of the Committees are drawn from both State and LG agencies. The Committees are ad hoc, and their membership changes frequently. Members owe their primary loyalty to their parent agencies, making it difficult for the Committees to operate cohesively.

In Benue State, the Urban Planning and Development Authority has decided to carry out solid waste manage­ment. LGs are not involved. Without direct ties to the local level, the Authority finds it very difficult to collect fees for its services. Its State subvention is small. Consequently, service is poor.

42 ~ A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

boards to manage services requiring efficiencies of

scale and wide geographical coverage. The Lagos Waste

Management Authority was an example of this.

AUTONOMY A 0 ACCOUNTABILITY

W orld-wide experience has identified several require­

ments for successful performance of public utilities. One is autonomy: the ability of the provider to operate

professionally, free from undue political interference.

Second is commercial orientation: the willingness of users to pay and the provider to charge for services ren­

dered. A third is accountability: the ability of the pub­

lic and government to sanction the provider if services are inadequate. A final factor is the existence of a sup­

portive framework of laws and regulations, and the

capacity to implement them. The failure to apply these principles is one of the

root causes of poor infrastructure and urban services in

Nigeria. An illustration of this is the complete break­

down of the World Bank-supported Lagos Solid Waste Project. This is described in Box 3 (at right).

COMMERCIAUZATION A 0 COMPETITION

C onsidering all the problems of governmental provi­sion of urban infrastructure, it would seem natural for Nigeria to turn to the private sector as an alternative.

Nigeria's 1992 National Urban Development Policy calls for greater participation of the private sector in

infrastructure and services. However, government deci­

sion-makers at all levels have been reluctant to pro­mote this idea. In spite of this, the private sector fills voids where a demand for services exists . An example is described in Box 4 (page 44).

Many State agencies and Local Governments still favor doing civil works by direct labor. Public officials often view their main problem as a lack of

vehicles and equipment for construction. This is

Box 3 : LAGOS SOLID WASTE PROJECT

I n 1986 Lagos State undertook the Lagos

Solid Waste and Storm Drainage Project with financing from the World Bank. The pro­ject's total cost was US$I64 million, of

which 68% was for solid ri.~J~!!ff~:1 waste. Responsibility for 1;1 the solid waste component was given to the Lagos State Waste Disposal Board and its successor organi­zation, the Lagos Waste Management Authority (LAWMAI. The solid waste improvements had a noticeable effect during the project's initial years, but after 1991 the impact declined as LAWMA's facilities and equipment became unserviceable because of insufficient funding to repair and replace them. LAWMA earned some income from fees, but contributions from Local Governments and the State fell far short of what was required. The State government decided to commercialize LAWMA in 1991, but this did not improve operations. LAWMA suffered from conflicting policy guidelines under its Board (dominated by its clients, the LGsI and from internal inefficiencies such as management turnover, low salaries, difficulties in shedding unnecessary staff, and inadequate internal controls over stores and finances. By July 1993, only 40% of LAWMA's equipment was operational. It was col­lecting only about one third of the city's waste.

misgUided. It is very inefficient-not to mention unaffordable-for government agencies to keep large staffs of workers on the payroll and to pur­chase and maintain fleets of heavy equipment.

Civil works should almost always be undertaken by private contractors.

World Bank-financed urban infrastructure projects have so far supported the traditional public agency

INSTITUTIONAL ARRANGEMENTS FOR URBAN INFRASTRUCTURE AND SERVICES <- 43

Box 4: INFORMAL AND FORMAL

WASTE COLLECTION IN LAGOS

I n the high densi ty resi­

dential and commercial areas of Lagos, individuals with pushcarts are hired to collect refuse. They provide house to house collection two to three times per week. Their charges range from N. 40 to N. 60 per household per month. These collectors are neither licensed nor supervised by any government agency. Although they have no formal contracts with their clients, they receive pay­ments regularly. They dump the refuse at authorized transfer stations and informal communal dumps. Sometimes they dispose their loads improperly.

In newly developed areas of Lagos not served by public waste collection, residents acting through their own associations hire private refuse collection firms. Numerous small firms are engaged in this service. At one housing estate in Ikeja, a contractor supplies eight large plastic bags to each family per month. Refuse collection is carried out twice a week. Each family pays N. 150 per month.

Most commercial and industrial firms use private refuse collectors. Services and payments tend to be reliable, based on formal contracts. The refuse collection firms tend to be small, with one to three vehicles each manned by three to six persons.

The Lagos Waste Management Authority was supposed to license all refuse collectors. Even before the transfer of responsibility for solid waste to local governments in 1994, most collec­tors were not licensed. Lacking licenses, they are unable to obtain credit. Being unlicensed also makes them reluctant to form an association.

model of water supply, solid waste management, and even estate development. Within such projects one

finds the private sector involved in many things,

notably the construction of civil works and the provi­sion of equipment. Private contractors also prepare

designs, supervise projects, perform accounting and

audits, provide technical assistance and training,

process letters of credit, clear the importation of equip­

ment, and carry out property valuations.

The difficult challenge ahead is to break the tradi­

tional government monopoly over the provision of urban infrastructure and services.

It is now widely recognized that many aspects of

infrastructure and related services can be improved by

taking advantage of competition and private initiative. It is useful to think of infrastructure as a flow of ser­

vices valued by users, rather than as a stock of fixed

assets. Viewed in this way, many activities can be

attractive financially to the private sector. With the

incentive to remain in business and grow, private

enterprise can be a provider of high-quality services.

This removes government from involvement in day to

day delivery. But government needs to remain involved

in regulation to ensure fair competition, to see that the poor are not excluded, and to promote environmental

objectives.

Private sector participation is not an "all-or-noth­ing" proposition. There are many intermediate steps between complete government monopoly and a totally open private market. For example, a public utility can

contract out selected functions, such as equipment maintenance or billing and collection. Or, private firms may receive franchise or concession contracts to provide services such as water supply or refuse collec­

tion in designated areas. The following describes the various types of contracting arrangements between the

public and private sectors:

44 oQo A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

• Full government: Ownership and management by

"mainstream" government (Ministry, Department,

etc.')

• Service contract: Government owns and finances

assets; government operates and maintains system;

private party performs a specific service; duration 5

years maximum.

• Management contract: Government owns and

finances assets, investments, and working capital;

private party manages operations and maintenance

without assuming any commercial risks; duration

5 years maximum.

• Lease: Government owns assets and finances major capital expenditures; private party finances operations,

maintenance, short-lived assets, and working capital; private party bears most/all commercial risks and col­lects fees; duration 5-12 years.

INFRASTRUCTURE CAN BE

IMPROVED BY TAKING ADVANTAGE

OF COMPETITION AND PRIVATE

INITIATIVE. GOVERNMENT MUST

ENSURE FAIRNESS. SEE THAT THE

POOR ARE NOT EXCLUDED. AND

PROMOTE ENVIRONMENTAL

OBJECTIVES.

• Concession: Government owns fixed assets; private

party finances operations, maintenance, and major cap­

ital investments; private party bears commercial risk;

duration 15-50 years.

• Build-Operate-Own/Transfer: Private sector builds,

operates, owns or transfers to government; high lever­

age and risk; risk allocated among the various partici­

pants; complex web of agreements binding all parties.

• Partial/full divestiture: Privatization via private sale

(tender) or public offering; private sector owns and manages assets; regulation of private entity.

INSTITUTIONAL. ARRANGEMENTS FOR URBAN INFRASTRUCTURE AND SERVICES -0- 45

•

URBAN NFRASTRUCTURE AND SERVICES IN NIGERIA

MATRIX OF ISSUES AND STRATEGIES

ISSUES PROPOSEO ACTIONS RESPONSIBILITY BENEFITS

Reform of Federal public expenditure

Reform of States ' project portfolios

Public vs. pri vate invest­ment priorities

FINANCING

Reduce number and cost of projects, keeping only those with high economic returns.

Control unaccountable and extra-budget expenditures.

Revive programme for priva­tization and commercializa­tion of state enterprises.

Phase out support to loss­making public enterprises.

Avoid competing with or duplicating private sector.

Focus expenditures on pri­mary and secondary educa­tion, primary health, and basic infrastructure.

Eliminate low-priority, low­re turn projects.

Concentrate funds on a few projects with high economic returns.

Adequately fund these pro­jects.

Use government funds for public goods (those not 100% commercially viable): roads, drains, trunk water, sewers, waste disposal facilities .

Rely on private sector to finance commercially viable ventures including housing estates and markets.

Focus government on estab­lishing policies and regula­tions that facilitate availabili ­ty of financing and function­ing of land markets.

Federal Government

State Governments

All levels of government

Private Sector

Make more resources avail­able for high-priority needs.

Use available resources more productively.

Same as above

Same as above

Empower private sector to supply more housing.

Eliminate inequitable and inefficient subsidies, releas­ing public funds for better uses.

MATRIX OF ISSUES AND STATEGIES ~ 47

ISSUES PROPOSED ACTIONS RESPONSIBILITY BENEFITS

States' counterpart funds for externally financed projects

Lack of information on States' indebtedness and funding commitments.

Urban Development Bank of Nigeria

Urban poverty

Fees for urban services

FINANCING

Continue use of Standing Payment Order (SPO) to deduct funds from federation account.

Improve record-keeping on SPOs and loans.

Establish data base on SPOs and other deductions from federation account for each State.

Adopt strategy to maintain value of paid in capital.

Ensure operating expenses are covered by income.

Establish coherent lending policies.

Limit operations to urban infrastructure and related technical assistance.

Constitute an independent, professional board.

Implement external audits.

Give high priority to upgrad­ing of basic services in low­income urban areas.

Promote the charging of user fees for water, sanitation, solid waste, etc.

Where willingness and ability to pay exist, link improved services to adequate fees.

Allow agencies to retain the user fees that they collect.

Educate decision-makers and the public about the benefits of cost recovery.

Federal Ministry of Finance

State Ministries of Finance

Federal Ministry of Finance and Central Bank

UDBN

State governments, with sup­port of Federal authorities and donor agencies.

Public sector at all levels.

Assure and stabilize counter­part fund contributions.

Make it easier to assess soundness of new financing schemes.

Make productive use of UDBN as a provider of finan­cial intermediation and tech­nical assistance.

Improve welfare and produc­tivity of poor.

Better quality and sustain­ability of services

48 -:,. A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

ISSUES PROPOSED ACTIONS RESPONSIBILITY BENEFITS

State and local tax revenue mobilization

Unpredictable flow of rev­enue transfers

Vast untapped potential of State and Local revenues

Creating an enabling envi­ronment for the domestic capital market to finance urban infrastructure.

FINANCING

Obtain support from local and traditional authorities for increased revenue collection.

Use contractors on commis­sion for revenue collection.

Make flows more predictable through an improved federal budgeting system.

Increase collections from per­sonal income and value added taxes.

Increase collections from property taxes.

Mandate the use of statutory allocations only for capital investment to induce States and LGs to mobilize revenues for recurrent expenses.

Convert part of the transfers to a matching grant given only if the State or LG puts up its contribution.

Fiscal and monetary disci­pline to reduce inflation and interest rates.

Deal firmly with the crisis of the banking sector by restor­ing an effective regulatory system for banks.

Adopt SEC's proposals to make it easier for State gov­ernments to access the capi­tal market.

State and local governments.

Federal Ministry of Finance

State Governments

Local Governments

Federal Government

Federal Ministry of Finance; Central Bank

Better chances of success in tax collection.

Allow States to perform longer-term budgeting for infrastructure

Mobilize large amounts of revenues for both capital investment and recurrent costs of services.

Mobilize domestic savings for infrastructure financing by banks.

Facilitate the issuance of bonds for infrastructure financing.

MATRIX OF ISSUES AND STATEGJES ..;. 49

ISSUES PROPOSED ACTIONS RESPONSIBILITY BENEFITS

Assuring effective imple­mentation of programmes and projects under condi­tions of instability

Appropria te role of the pub­lic sector

Improvement of technical assistance and services

Private sector participation in provision of infrastructure and services.

INSTITUTIONAL

Establish Implementation Units and Steering Committees.

Keep projects and institution­al arrangements as simple as possible

Limit the geographic scope of projects to a maximum of two or three adjacent States.

Ensure that project or agency heads report directly to high­est authorities .

Prevent arbitrary removal of agency or project staff once they have proven their capac· ity.

Focus government on policy­making, planning, coordinat­ing, regulating, and supervis­ing.

Contract direct provision of infrastructure and services to private sector.

Make greater use of national consultants and non-profit organizations.

Establish service contracts with private firms for specific activities le.g. billing, mainte· nance of equipment, refuse collection, etc.).

Initiate management con­tracts for selected utilities.

Experiment with lease con· tracting where conditions permit.

Government at all levels

Government bodies at all levels.

Private sector

Institutions at all levels

State and local governments. Private firms

Insulate donor-funded pro· grammes from effects of political instability.

Avoid delays and keep responsible parties account­able for performance.

Ensure that projects can be supervised adequately.

Avoid delays in implementa­tion.

More efficient delivery of infrastructure and services.

National capacity-building.

More efficient provision of services.

Mobilization of private investment for rehabilitation and upgrading of facilities.

50 -0- A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

•

ISSUES PROPOSED ACTIONS RESPONSIBILITY BENEFITS

Community-level role in inirastructure and services

Reform of public utilities

Assisting States that make efforts

Strengthening Local Governments

Management of larger cities

INSTITUTIONAL

Seek opportunities for com­munity-based organizations to serve as implementing agencies for local infrastruc­ture and services.

Restructure water, sewer, and waste management agencies according to commercial principles: • autonomy • profeSSional management • control tariffs

Establish infrastructure financing programs that reward States which provide matching funds and prepare good proposals.

Define LG responsibilities more clearly (urban vs. rural).

Make revenue transfers to LGs more predictable.

Provide incentives and assis-tance for LGs to increase internal revenues.

Encourage LGs to shed func-tions better performed by pri-vate sector.

Improve the technical and management capacities of LGs.

Establish joint boards com-posed of LGs to manage ser-vices requiring efficiencies of scale and wide geographic coverage.

Local Governments; Non­governmental organizations

State governments with Federal support

Federal Ministry of Works and Housing

All levels of government

Local Governments with State government support

Tap underutihzed community capacity.

Improve public coniidence through involvement of com­munity organizations that are closer to the people.

Improve the quality and sus­tainability of services.

Encourage initiative by States_

Increase likelihood of pro­jects' success.

Improve provision of local infrastructure and services.

Improve revenue mobiliza­tion for urban development.

Improve governance through power-sharing and account­ability

Efficient management of water, sewer, and waste ser­vices.

MATRIX OF ISSUES AND STATEGIES -> 51

ANNEX

LIST OF PARTICIPANTS IN SEMINARS ON

URBAN INFRASTRUCTURE AND SERVICES

FEDERAL GOVERNMENT GROUP March 6, 1995

Name Organization

I. M. Alao Federal Ministry of Finance (Multilateral Dept. ), Abuja

2. E. Mejule Urban Development Bank of Nigeria

3. M. Zubairu Same 4. V. Gallitz Federal Capital Development

Authority, Abuja 5. A. Kure Same 6. J. Okuniulure Federal Ministry of Works and

Housing, Lagos 7. O.Oyewumi Same 8. R. Adebayo Same 9. R. Adediran National Planning Commission,

Lagos 10. S. Ojo Same

BA KING SECTOR GROUP March 7, 1995

Name

I. J. Ekundayo

2. C. Ogbonna 3. W. Adetunji

4. I. Ekundayo 5. D. Joda 6. A. Abiola 7. C. Idusogie 8. H.Okonta 9. H. Akunne 10. M. Zubairu

II. A. Rufai 12. C. Obute 13. A. Tayo-Tiwo 14. O. Olajide 15. F. Dauda 16. G. Tarfa 17. B. Onabajo

Organization

Chartered Institute of Bankers of Nigeria

Oceanic Bank of Nigeria Ltd. Sec uri ties and Exchange

Commission Same International Merchant Bank Pic. Same Central Bank of Nigeria Same Diamond Bank Ltd. Urban Development Bank of

Nigeria FSB International Bank NAL Merchant Bank Nigeria Merchant Bank Pic. Federal Mortgage Bank of Nigeria Same Meridian Equity Bank of Nigeria Chartered Bank of Nigeria

RESEARCHERS AND ACADEMICS GROUP May 11 , 1995

Name

1. Ben C. Arimah

2 J. E. Ogbuozobe

3. Arch. K. O. Efobi

4. I. B. Bello-Imam 5 Kunle Adeniji 6. Tunde Agbola

7. Remi Makinde

8. Idris D. Suleiman 9. Dr. G. A. Banjo

10. Prof. P. O. Adeniyi 11. Prof. Dele Olowu

Organization

Centre for Urban & Regional Planning, University of Ibadan

Nigerian Institute for Social & Economic Research (NISER), Ibadan

University of Nigeria Enugu Campus

NISER, Ibadan NISER, !badan Centre for Urban & Regional

Planning, University of Ibadan Nigerian Institute of Town

Planners Ahmadu Bello University, Zaria Dept. of Civil Engineering,

University of Lagos Unilag Consult Obafemi Awolowo University,

Ile-Ife

-

. .. ................ -- -

52 -:- A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

•

ANNE X (CONTINUED)

LIST OF PARTICIPANTS IN SEMINARS ON

URBAN INFRASTRUCTURE AND SERVICES

STATE GOVERNMENT GROUP May 12, 1995

Name

1. Engr. j.R. Olusoga

2. Dare Adebiyi 3. S. A. Adeyemi 4. M. O. Ovonlen

5. N.E. Osaya nde

6. Engr. M. M. Gbayan

7. G . A. Oke

8. T. O . Odisi

9. T. T. Macli 10. M. B. Ibrahim

II . j. C. Ndupuechi 12. D. I. Audu

13. Y. A. Bazing 14. Gambo Solomon 15. Engr. O. Kamson

16. Engr. O . R. Ashafa

Organization

Hon. Commissioner, Ondo State Ministry of Works and Housing

Ondo State IDF Project Ondo State lDF Projec t D.G . (Lands & Surveys)/Chairman,

Edo State IDF Inter-Ministerial Steering Committee

Projec t Director, Edo State IDF Project

Project Director, Benue IDF Sub­Project Project Director, Oyo State Urban

Project Rivers State Housing & Property

Dev. Authority Adan1awa State IDF Sub-Project Deputy Director (RD), National

Planning Commission Director, Anambra IDF Project Project Accountant, Taraba IDF

Project Project Director, Taraba IDF Project Ministry of Finance, Taraba State Director, World Bank Projects,

Lagos State Hon. Comm issioner, Ministry of

Environment and Physical Planning, Lagos State

CONTRACTORS A D CONSULTANTS GROUP May 13, 1995

Name

I . Amin Moussalli 2. j. Sadomski 3. Dr. O . O . Banjoko 4. T. A. Bielinski

5. Engr. B. O. Adeyemi 6. Engr. Bola Olowe 7. Dan Wilson 8. M. F. Famuyibo 9. Dr. P. O . Sonaike 10. Jacob Oladimeji 11. G. Garbi 12. Dr. Olusegun E. Ojo 13. Engr. A. M . Kalu 14. Jonas Hyczy

Da Costa 15. Engr. Babalola S.

Kayode

Organization

AIM Consul tants AIM Consultants Reynolds Construction Company Akideinde Allott & Lomax

(Nig) Ltd. Konsadem Associates Ltd. Konsadem Associates Ltd. OAF Trucks NY. Cotwaste Associates Coopers & Lybrand Coopers & Lybrand Ortech Construction Engineers Edward Simpson & Co., Ibadan DTV & Co. Ltd.

Sakamori Construction (Nig) Ltd.

Sakamori Construction (Nig) Ltd.

ANNEX 1: PARTICIPANTS IN SEMINARS -0- 53

ANN E X 2

OVERVIEW OF EXISTING INSTITUTIONAL RESPONSIBILITIES

FOR THE CONSTRUCTION AND MAINTENANCE

OF INFRASTRUCTURE AND SERVICES IN NIGERIA

1. Electricity Generation Transmission

Distribution Street Lighting

2. Water Supply Urban Rural

3. Sewage

4. Drainage

5. Solid Waste Collection

6. Telecommunications

7. Roads Arterial (Trunk A) Secondary (Trunk B) Tertiary (Local)

8. Public Transportation

9. Public Housing

10. Land Servicing

11. Commercial Facilities

12. Educatiou Adult Education Primary Secondary Higher

13. Health Facilities Hospitals Clinics

- ----

FEDERAL C M

x X

X

X

X

X X X

X

x

X X

x X

X

X

x

X X X

X

X

X X

NOTE: C • CONSTRUCTION M · MAINTENANCE

STATE C M

X

X X

X X

X

X

X

X X

X

X

X

X

X X X X

X

X

X X

X X

X

X

X

X X

X

X

X

X

X X X X

X

LOCAL C M

X X

X

X

X

X

X

X

X

X X

X

X X

X

X

X

X

X

X

X

X X

X

NOTES

States restricted to areas not covered in the national grid. LGs responsible for extension in rural areas and street Jigh ting.

Federal & State involvement started in 1986 with DFRRI.

State involvement in large urban centers.

Radio/TV licenses-issuance is a LG responsibility

Some Trunk B roads were taken over in 1978. Federal/State involvement began in J 986.

Federal Government began to provide financing in 1986

Local Govt. involvement in public housing indirect.

This is a clear LG responsibility but States in urban areas take it over.

Federal Govt. provides a part of financing.

Some states have clinics but these are being transferred to LGs under Primary Health Care Program. LG provides housing.

54 -0- A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

ANNEX 3

SUMMARY OF STATE GOVERNMENT FINANCES

(N. million) Percentage Change Between

1990 1991 1992 1993 (1&,2) (2&.3) (3&.4) 1 2 3 4 5 6 7

Total Revenue 19,1l6.5 24,1l4.3 31,870.5 35,532.2 26.1 32 11 Ii) Statutory Allocations 15,943.8 19,434.3 23,726.9 26,811.2 21.9 22.1 13.0 ( ii) Internal Revenue 2,726.2 3,147.1 5,212.0 5,971.2 15.4 65.6 14.6 (iii) Grants 330.5 1,086.1 957.3 1,094.3 228.6 ( 11.9) 14.3 (iv) Stabilization Fund Receipts 116.0 446.8 1,974.3 1,655.5 285.2 341.9 ( 16.1)

Recurrent Expenditure 12,749.6 15,405.1 19,883.1 25,237.1 20.8 29.1 26.9

Current Surplus / (DeHcit ) 6,366.9 8,709.2 11,987.4 10,295.1 36.8 37.6 ( 141)

Capita! Expenditure 5,355.9 9,810.5 15,702.9 14,309.5 83.2 60.1 18.9)

Total Expenditure 18,105.5 25,215.6 35,586.0 39,546.6 393 41.1 11.1

Overall Surplus/(De£icit ) 1,011.0 (1,101.3) (3,7155) (4,014.4) 1208.9) 237.4 80

Financing (a) Internal Loans 158.0 350.8 986.9 355.7 122.0 181.3 (64.0) (b) External Loans 2,818.3 1,070.0 2,628.9 2,560.3 162.0) 145.7 (2.6) (c) Other Funds 13,987.3) (319.5) 997 1,098.4 (92.0) (131.3) 9950

• Percentage of Recurrent Exp. to Total Exp: 70% 61% 56% 64%

· Percentage of Internal Rev. to Tota! Rev : 14% 13% 16% 17%

· Percentage of Statutory AJlocat'n to Tot. Rev: 83% 81% 74% 75%

Source. Central Bank of Nigeria Annual Report and Statement of Accounts.

ANNEX 3: SUMMARY OF STATE GOVERNMENT FINANCES -0- 55

REFERENCES

Asaju, A.S., "Towards a Positive National Urban Policy in Nigeria", Obafemi Awolowo University, Ile·Ife, Nigeria; pre­pared for the National Urban Policy, March 1992.

Ekundayo, J.O., "Problems and Prospects of Internal and External Funding for Infrastructural Development in Nigeria", Chartered Institute of Bankers of Nigeria; prepared for the Workshop on Financing of Urban Infrastructure, Kaduna, National Planning Commission, November 1994.

Fapohunda, Olanrewaju J., "Dimensions of Urban Poverty in Nigeria: A Case Study of Lagos, Kano, and Enugu, UNICEF, Lagos, Nigeria, August J 994 .

Federal Ministry of Works and Housing, "National Urban Development Policy for Nigeria", Lagos, Nigeria, July 1992.

Garnvwa, David, "Background Paper on lnstitutionallssues", prepared lor the Nigeria Urban Strategy Review, Yola, Nigeria, February 1995.

Komolafe, Oluwole, "Background Paper on Financial Issues", prepared for the Nigeria Urban Strategy Review, Lagos, Nigeria, February 1995.

Mbanefoh, Gini, "Fiscal Functions: A Review of Tax and Expenditure Responsibilities in Nigeria's Fiscal System", Department of Economics, University of Ibadan, Ibadan, Nigeria; prepared for the World Bank, Western Africa Department, Washington DC, U.S.A., March 1994.

National Planning Commission, "Government Policies and Programmes to Reach the Poor", Lagos, Nigeria, January 1994

Olomajeye, Joseph A., "Factors that Limit Access to Primary Social Services for the Urban Poor", prepared by UNICEF for World Bank Study on the Alleviation of Poverty, August 1994.

Olowu, Dele, "The Role of the Three Levels of Government in Urban Management and Development in Nigeria", Obafemi AwoJowo University, He-He, Nigeria; prepared for the National Urban Policy, April 22, 1992.

Todd, Dave, "Nigeria Poverty Assessment Qualitative Studies Draft Annex", ETC Foundation, Leusden, The Netherlands, September 1994.

World Bank, "Federal Republic of Nigeria Sector Study- Local Government Development", Report No. 9844-UNI, Western Africa Department, Washington DC, U.S.A, May 28, 1992.

World Bank, "Federal Republic of Nigeria-Strategies for Private Provision of Infrastructure and Urban Services", Report No. 12421-UNI, Western Africa Department, Washington DC, U.S .A. , July 28, 1994.

World Bank, "Nigeria Federal Public Expenditure Review", Report No. 14447-UNI, West Central Africa Department, Washington DC, U.S.A., May 25, 1995 .

World Bank, "Nigeria Public Expenditure Management at the State Level", draft, Nigeria Resident Mission, Western Africa Department, Washington, DC, U.S.A., March 25, 1994.

World Bank, "Nigeria Strategic Options for Redressing Industrial Pollution" (Vols. I and II), Report No. 13892-UNI, West Central Africa Department, Washington DC, U.S.A., February 3, 1995.

World Bank, "The Evolution of Poverty and Welfare in Nigeria (1985-921", Population and Human Resources Division, West Central Africa Department, Washington DC, U.S.A., July 19, 1995.

World Bank, "The Nigerian Banking System: Financial Assessment and Key Issues for Distress Resolution", Report No. 12781 -UNI, Western Africa Department, Washington DC, U.S.A., March 16, 1994.

World Bank, "Towards the Development of an Environmental Action Plan for Nigeria ", Report No. 9002-UNI, Western Africa Department, Washington DC, U.S.A., December 18, 1990.

56 -> A STRATEGY FOR RESTORING URBAN INFRASTRUCTURE AND SERVICES IN NIGERIA

t

ALL PHOTOGRAPHS IN THIS BOOK BY CURT CARNEMARK, EXCEPT PAGES 11. 13. 42 AND 43 BY DAVID HENLEY

BOOK DESIGN BY GALLAGHER WOOD DESIGN, WASHINGTON, DC