ICRR 10135
                                                                                      Report Number : ICRR10135
                    ICR Review
                    Operations Evaluation Department




1. Project Data :
             OEDID:
             OEDID :    L2985
         Project ID :   P002082
      Project Name :    Lagos State Water Supply Project
            Country :   Nigeria
             Sector :   Other Water Supply & Sanitation
       L/C Number :     L2985 - UNI
  Partners involved :   UNDP, Canada, French commercial banks
       Prepared by :    Charles Derek Poate, OEDST
      Reviewed by : Tauno K. Skytta
    Group Manager : Roger H. Slade
       Date Posted : 08/03/1998

2. Project Objectives, Financing, Costs and Components :
Objectives: (i) increase population access to public water supplies by doubling production capacity and
more than doubling the number of house-connections; (ii) eliminate subvention from the Lagos State
Government to Lagos State Water Corporation (LSWC) for recurrent expenditures; (iii) strengthen LSWC
including its management, operations and maintenance, training facilities and programs, manpower
development, accountability, economic efficiency, financial performance and future viability .

Components: expansion of water production facilities at Adiyun; construction of transmission and
distribution system; provision of installation materials and meters for new service connections;
rehabilitation of existing water production facilities; improvement of administrative infrastructure; and
institutional support.

Costs and financing: The total project costs were US$ 380.5 million (US$ 461.8 at appraisal) of which the
Bank financed US$ 173.3 million. Co-financing was to be provided by the European Investment Bank
(EIB), the Government of Canada, UNDP, and French Commercial Banks, but EIB withdrew its support in
1992. The Bank loan was approved on March 31, 1989 and was eventually closed on December 31, 1997
after being extended twice. Final disbursement took place on May 13, 1998 at which time the loan was
fully disbursed.

3. Achievement of Relevant Objectives :
The project's physical objectives were partially achieved . Due to EIB's withdrawal, only 640kms of the
planned 1157kms of secondary and tertiary pipelines were built . About 25% of the planned connections
were installed and 90% of the planned standpipes constructed. Population access has increased by 50%
to about 3.1 million and service through standpipes has more than doubled to about 1 million.
Achievement of the financial objectives was adequate . However, although the objective of increasing
water supply was partially met, delays in strengthening institutional capacity will make it difficult for the
sector to become financially viable . Achievement of the economic objectives was partial . The decline in
real tariffs over time and low capacity utilisation did not allow the projected increase in the delivery of
water with associated economic benefits.

4. Significant Achievements :
There are no significant achievements in this project, beyond what was planned in the SAR .

5. Significant Shortcomings :
LSWC was expected to generate sufficient earnings to eliminate operating subventions and meet all
operating costs as well as the greater proportion of debt service and depreciation . However, revenue
figures have been grossly overstated and operating expenses understated to fit expected cash flows .
Actual annual revenue collection averages 20% of billings with the result that LSWC remains dependent
on government recurrent and debt service subvention.


6. Ratings :               ICR                  OED Review                Reason for Disagreement /Comments
               Outcome : Unsatisfactory         Marginally                The partial achievement of the
                                                Unsatisfactory            physical and institutional objectives
                                                                          has improved the Lagos water supply
                                                                          to the extent that the project will have
                                                                          some limited development results,
                                                                          including upward trend of actual
                                                                          collections.
    Institutional Dev .:   Partial              Modest
        Sustainability :   Uncertain            Uncertain
   Bank Performance :      Satisfactory         Satisfactory
      Borrower Perf .:     Deficient            Unsatisfactory
       Quality of ICR :                         Satisfactory


7. Lessons of Broad Applicability :
Expectations for project start up should take into account the implementing agency's prior experience with
Bank projects. Weak institutions should be assisted incrementally with projects that are modest in design
and objectives. A more radical approach, such as private sector participation in operations, could help
achieve sustained results.

8. Audit Recommended?      Yes      No
           Why? Audit would look into lessons from a complex and large project, especially the issues of achieving
institutional objectives.

9. Comments on Quality of ICR :
The quality of the ICR, which addresses all the project issues clearly and specifically, is entirely
satisfactory. It provides comprehensive information analysis of the current situation and future orientation
of the project. The aide-memoire of the ICR mission is clear and focused . The comments from the
borrower are adequate but comments from the co-financiers were not available.