Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15870 PROJECT COMPLETION REPORT FEDERAL REPUBLIC OF NIGERIA TRANSPORT PARASTATALS PROJECT (LOAN 2734-UNI) June 28, 1996 Infrastructure Operations Division West Central Africa Department Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = Naira (N) US$1.00 = 1.00 (appraisal) US$1.00 = 4.0 (1987) US$1.00 = 4.5 (1988) US$ 1.00 = 7.4 (1989) USS.00 = 8.0 (1990) US$1.00 9.9 (1991) US$1.00 = 17.3 (1992) US$1.00 = 21.8 (1993) USS1.00 = 21.99 (1994) FISCAL YEAR January I - December 31 SYSTEM OF WEIGHTS AND MEASURES: METRIC 1 kilometer (kim) 0.6 mile (mi) I square kilometer (km2) = 0.39 square mile (mi2) 1 m3 = 1,000 liters (1) = 6.37 barrels = 247.54 gallons ABBREVIATIONS AND ACRONYMS CWTC - Central Water Transportation Company FGN - Federal Goverrnment of Nigeria FMTA - Federal Ministry of Transport and Aviation (from early, 1988) (previously Federal Ministry of Transport) FMWH - Federal Ministry of Works and Housing ICB - International Competitive Bidding LASG - Lagos State Government LIB - Limited International Bidding MIS - Management Information System NAA - Nigerian Airports Authority NAL - Nigeria Airways Limited NCHC - National Cargo Handling Company NFC - National Freight Corporation NITT - National Institute of Transport Technology NNSL - Nigerian National Shipping Line NPA - Nigerian Ports Authority NRC - Nigerian Railway Corporation NTCD - National Transport Coordinating Department (later TCID) PCU - Project Coordinating Unit PMU - Project Management Unit TA - Technical Assistance TCID - Transportation Coordination and Inspectorate Department (earlier NTCD) TCPC - Technical Committee for Privatization and Commercialization TPP - Transport Parastatal Project FOR OFFICIAL USE ONLY The World Bank Washington, D.C. 20433 U.S.A. OMce of the Director-General Operations Evaluation June28, 1996 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Nigeria Transport Parastatals Project (Loan 2734-UNI) Attached is the Project Completion Report (PCR) on the Nigeria Transport Parastatals project (Loan 2734-UNI, approved in FY86), prepared by the Africa Regional Office. The loan for US$20.9 million was approved on June 26, 1986, and closed on June 30, 1994, two years behind schedule. US$2.76 million was canceled. The Borrower did not contribute Part II of the report. The project objectives were: (a) to lay the foundations for the reform of transport parastatals by improving accountability, specifying financial and operational objectives, improving staffing plans and examining future roles of several enterprises; and (b) to improve the efficiency with which the two largest parastatals-the Nigerian Ports Authority (NPA) and the Nigerian Railway Corporation (NRC}-utilize their facilities. The project consisted primarily of technical assistance (one third of total costs) and procurement of spare parts and equipment (two thirds). Specific components were: (a) technical assistance and training for NPA and NRC in several areas: financial controls, accounting and information systems, setting of financial targets, revenue/cost studies, marketing and tariff setting, manpower planning, workshop operations, and effective use of computers; (b) provision of computers, workshop equipment and spare parts to support technical assistance and training to NPA and NRC; (c) technical assistance to the Federal Ministry of Transport and Aviation (FMTA) to carry out policy studies; and (d) management training for senior officials of FMTA, NRC, and NPA. The project's most important objectives were not achieved. Some studies (e.g., National Transport Policy, Railroad Revitalization) provided useful background information and immediate action plans for the reform; however, they had little effect on the parastatals' management or FMTA policy because their recommendations were not implemented. Other important studies (e.g., Valuation of NRC's Assets, Transport Policy) were never completed. Equipment and spare parts were procured, especially for NRC, and helped slow down the deterioration in service. However, because of delays and the lack of counterpart funds, the rehabilitated equipment failed to support sustained improvements in efficiency of NRC's and NPA's services. During implementation, several new studies on Maritime Development, Vehicle Administration and Lagos Mass Transit were added with the Bank's agreement; but these also failed to be completed or followed up. No economic rate of return was estimated at appraisal for the project. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. The project's outcome is rated as unsatisfactory, sustainability as unlikely, and institutional development as negligible. The Bank performance is rated as unsatisfactory as supervision effectiveness was hampered by high staff turnover and a lack of specialized skills (e. g., for aviation and trucking). These ratings are in line with the substance of the PCR. The project may be audited together with other Nigeria transport projects. FOR OFFICIAL USE ONLY Table of Contents Pae N2. PREFACE EVALUATION SUMMARY PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE ..........................................1 A. Project Identity ................................................... 1 B. Background ...................................................1 C. Project Objectives and Description ...................................................4 D. Project Design and Organization ...................................................5 E. Project Implementation ...................................................6 F. Project Results ...................................................7 G. Project Sustainability .................................................. 10 H. Bank Performance ...................................................11 I. Borrower Performance ...................................................11 J. Project Relationship .................................................. 12 K. Consulting Services .................................................. 13 L. Project Documentation and Data .................................................. 13 PART II: BORROWER'S ASSESSMENT ................................................. 14 PART HI: STATISTICAL INFORMATION .................................................. 15 Table 1: Related Bank Loans ......................................... 16 Table 2: Project Timetable ......................................... 16 Table 3: Studies .......................................... 17 Table 4: Procurement of Spare Parts .......................................... 22 Table 5: Project Costs .......................................... 27 Table 6: Project Financing .......................................... 28 Table 7: Cumulative Loan Disbursements .......................................... 29 Table 8: Allocation of Loan Proceeds .......................................... 30 Table 9: Use of Bank Resources .......................................... 31 Table 10: Status of Covenants ......................................... 32 Annex A: NRC Working Ratios .................................................. 35 |This documnent has a restricted distribution and may be used by recipients only in the performance of their I official duties. Its contents may not otherwise be disclosed wiihout World Bank authorization. l PROJECT COMPLETION REPORT FEDERAL REPUBLIC OF NIGERIA TRANSPORT PARASTATALS PROJECT (LOAN 2734-UNI) PREFACE This Project Completion Report (PCR) describes and evaluates the identification, preparation, appraisal and implementation of the Transport Parastatals Project in Nigeria, for which Loan 2734-UNI in the amount of US$20.9 million was signed on October 31, 1986. The loan became effective on April 23, 1987. It was originally scheduled to be closed on June 30, 1992, but was extended four times to allow more time for completion of project-financed components. The loan was closed on June 30, 1994. The last disbursement under the loan was on November 30, 1994; only 87 percent of the loan was disbursed, with a balance of US$2,758,796, which was canceled. The Preface, Evaluation Summary, Parts I and III of the PCR were prepared by the Infrastructure Division of the West Central Africa Department (AF4IN). The Bank's contribution to the report was prepared on the basis of, inter alia, the President's Report, Loan Agreement, Subsidiary Loan Agreements, Project Agreements, supervision reports, quarterly progress reports, correspondence between the Bank and Nigerian authorities, internal Bank memoranda and consultations with Bank staff who served as project officers on the project. Parts I and III of the PCR were sent to the Borrower for comment. The Borrower was then requested to prepare Part II and to return it to the Bank within three months. However, the Borrowers' Part II has not yet been received. The Task Manager for this PCR is Mr. Elie Saleeby. Messrs. James Wright and Olivier Lafourcade are the managing Division Chief and Department Director, respectively, for the operation. PROJECT COMPLETION REPORT FEDERAL REPUBLIC OF NIGERIA TRANSPORT PARASTATALS PROJECT (LOAN 2734-UNI) EVALUATION SUMMARY Background and Objectives 1. In the early 1980s, the Nigeria transportation system was characterized by numerous transport parastatals, the largest of which were the Nigeria Railway Corporation (NRC) and the Nigerian Port Authority (NPA). About 1982, railway and port traffic turned sharply downward after an extended period of general prosperity and rapid traffic growth. Financial results of both NRC and NPA deteriorated alarmingly after 1982. The Transport Parastatals Project was identified in November 1982 and the project was under preparation for about two and a half years. 2. A 1984 Bank review indicated that the Nigerian parastatal transport companies were experiencing a number of basic problems. Particular attention focused on institutional weakness and operating inefficiencies. Serious questions were raised also about the economic role of some of these parastatals and the possibilities for privatization of some of them. Several financial problems suggested a need for major efforts to increase cost recovery from users of transport services. Consideration of these problems and needs by the Ministry of Transport and Aviation, NRC and NPA resulted in preparation of terms of reference for studies that should be undertaken and a review of needs for locomotive spare parts and cargo handling spare parts. The Bank assisted in this preparation activity. The project was appraised in May 1985 and was approved by the Bank's Board in June 1986. The loan became effective in January 1987. 3. The major objectives of the project were to: (i) lay the foundation for reform of transport parastatals by improving accountability, specifying financial and operational objectives, preparing staff rationalization plans and examining the future roles of several enterprises, and (ii) improve the efficiency with which the two largest parastatals, NPA and NRC, utilize their facilities. Implementation Experience 4. An important part of the NRC component of the project was the procurement of spare parts for locomotive repairs. While implementation of spare parts procurement began well, it was soon delayed as a result of difficulties in obtaining NRC and Federal Ministry of Transport and Aviation (FMTA) approval of tender evaluations. The principal studies undertaken were the railway revitalization study and the valuation of assets study; the scheduled Management Information System (MIS) and traffic costing ii completed. Factors accounting for implementation shortcomings were: (i) delayed approval of tender evaluations; (ii) delayed issuance of letters of credit; (iii) insufficient counterpart funds; (iv) long delivery times by some suppliers; (v) production stoppages in NRC due to poor financial state of the corporation; (vi) extremely poor condition of many locomotives; and (vii) bureaucratic delays. 5. Implementation of the NPA component had a reasonably good start, particularly the accounting and manpower studies. The MIS study, however, was not implemented. While the first phase of the equipment rehabilitation program was carried out on time, subsequent activities became stalled because of failure of consultants to provide adequate tender evaluations. High turnover in the NPA project managers was an adverse factor for effective implementation. 6. The FMTA component was lagging in mid- 1987 at which time the ministry had accomplished little more than establishing a training program abroad. Several studies were initiated concerning future roles of transport parastatals, multimodal operations, domestic aviation policy and other subjects. Three of the studies were not completed. The initial project coordinator for the entire project performed satisfactorily but his successor did not function very effectively. The project coordinator and three project managers were seriously handicapped by insufficient support services. Eventually, the failure of NPA, NRC and the FMTA to provide adequate project support indicated a lack of Borrower's commitment to this project. Results 7. The objectives of the project were only partly achieved. Studies laid some of the foundation for the reform of transport parastatals. Little was accomplished toward improving the efficiency of the NRC and NPA. 8. Spare parts for locomotives were procured to facilitate the repair of selected locomotives. Of the 75 units planned for repair, only 37 were actually repaired. Even this limited number of locomotives did not perform satisfactorily after their repair. 9. The mechanical workshop in Apapa Port was renovated and re-equipped. Rehabilitation of cargo handling equipment was about 50 percent completed in mid-1994. 10. The NRC actuarial and asset valuation studies were completed satisfactorily and provided useful recommendations for NRC. The revitalization study provided a basis for basic policy and institutional reforms. 11. For NPA, the MIS study was the most useful study output. A manpower study helped rationalize the authority's manpower. iii 12. The various FMTA studies, particularly the study of future roles and policy options for transport parastatals, improved the information base for planning, policy formulation and decision making. Project Sustainability 13. Locomotive spare parts financed under the project were intended to improve equipment repairs and increase availability of locomotives; however, availability of such units declined. Thus, no continuing benefits of this component are foreseen. Although project-financed spare parts for NPA equipment were expected to have beneficial effects on the availability of cargo handling equipment, such benefits were in fact minimal and, therefore, little positive results are to be sustained. Various studies provided considerable useful information and some of the recommendations; to the extent they are implemented, will probably have long-term favorable impacts on the transport sector. However, all in all, project sustainability has not been met. Lessons Learned 14. Three lessons are suggested by the experience with this project: First, a broad scope project, such as the Transport Parastatals Project, requires supervision missions carefully balanced between persons with specialized skills and persons of broad experience. Ideally, most of the supervision missions for such a project would be staffed by a number of specialists to deal with diverse technical matters but this means the ,nissions would be costly and would impose a heavy drain on the Bank's scarce technical specialists. A compromise is to staff a number of these missions with persons of broad experience, supplemented at times by consultants specialists. 15. The second lesson is that Project Coordinating Units (PCUs) are not suited to ensure internalization and follow-up of complex reorganization studies, particularly in parastatals. 16. The third lesson is that adequate management tools and organizational changes should be established ahead of project effectiveness to generate measurable improvements of operating performance. PROJECT COMPLETION REPORT FEDERAL REPUBLIC OF NIGERIA TRANSPORT PARASTATALS PROJECT (LOAN 2734-UNI) PART L PROJECT REVIEW FROM THE BANK'S PERSPECTIVE A. PROJECT IDENTITY Project Name: Transport Parastatals Project Loan Number: 2734-UNI Loan Amount: US$20.9 million RVP Unit: Africa Region Country: Federal Republic of Nigeria Sector: Transport Subsector: All B. BACKGROUND 1. Nigeria, the largest country in Africa, had a population in 1993 of about 89 million, and the population was increasing at a high rate of 2.9 percent annually. The country has an extensive transportation system including a large road network, a railway system, pipelines, ocean and river ports, airports, ocean shipping lines, river transport companies, trucking companies and bus operations. Transport parastatals play important roles in this system. 2. During the seventies, the Nigerian oil industry experienced a sharp increase in both demand for its oil and the prices of oil products. The boom conditions led to a strong growth in overall transport demand. Road, port and air traffic increased during this period 15 to 20 percent annually. Rail traffic, however, declined in this period, except in the years 1979-1982, when the Nigeria Railway Corporation (NRC) was under expatriate management and enjoyed considerable financial and policy support from the Federal Government of Nigeria (FGN). As a result of the favorable circumstances in these few exceptional years, railway traffic doubled, suggesting that there was a significant latent demand for railway services. 3. The strong overall traffic demand in the seventies and early eighties led the Federal Government of Nigeria to invest substantial funds in transport facilities during the period. About naira 7 billion (US$9 billion) was expended on roads, largely federally owned roads; some 10,000 km of these roads were constructed and 3,000 km rehabilitated. Port capacity was more than doubled in these years and 14 major airports were constructed or improved. The major rail infrastructure project was the transformation of the existing single line narrow gauge network into a dual standard gauge network. -2- 4. A Transport Sector Strategy Paper, prepared by the Bank in 1984, reviewed this program of physical expansion and improvement and concluded that, while much of the program had been favorable, the downturn in the economy in the mid-eighties reduced the need for further facility expansion. The paper also noted that the expansion did not have a concurrent program of enhancing the financial and institutional capacity of the responsible organizations. Accordingly, the Bank recommended that attention be concentrated on improving maintenance and rehabilitation of the existing transport infrastructure, increasing the efficiency of the transport systems and augmenting cost recovery from transport users. The need for increased cost recovery was emphasized, given the high level of subsidies identified in the sector. The Bank report also noted an urgent requirement for improved transport sector planning, with particular attention to the need for a road inventory and reconsideration of the roles of both NRC and Nigerian Airways. Additional policy issues included: (i) the appropriate balance of road expenditures between levels of government; (ii) the optimum means of meeting future port requirements in the Lagos area; (iii) the future roles of major ports; (iv) the future needs for new airports, and (v) the economic role of river transport. 5. The Federal Government owned parastatals in all transport modes and all of them operated at a loss. The two largest transport parastatals were the Nigerian Railway Corporation (NRC) and the Nigerian Port Authority (NPA). Other important parastatals were in the road transport and sea transport subsectors (National Cargo Handling Company), aviation (Nigerian Airport Authority and Nigeria Airways Limited), and inland waterways (Central Water Transportation Company). The Federal Ministry of Transport and Aviation (FMTA) was responsible for sector policy coordination and overview of all transport modes except roads which were the responsibility of the Federal Ministry of Works and Housing (FMWH). Most of the parastatal organizations reflected poor financial results, excessive staffing, institutional weakness and operating inefficiencies. 6. At the time of appraisal, the NRC was in serious financial difficulty. Despite the substantial growth of the Nigerian economy over the 20-year period 1965-1985, the operating and financial performance of NRC had declined consistently, except for a brief period between 1979 and 1981, when NRC was managed by RITES of India under a management contract. While road traffic had increased approximately five-fold after the mid-sixties, rail traffic had declined by almost one-third. This poor traffic performance was reflected in NRC's declining financial results; the working ratio (working expenses divided by revenues) had deteriorated from around 90 percent in the mid-sixties to 230 percent in 1983 and 240 percent in 1984. 7. Several factors had contributed to NRC's poor performance. Commodity exports, which accounted for almost 40 percent of rail traffic in the sixties, virtually ceased during the seventies. In addition, the competitive position of road transport had been greatly strengthened by substantial investment in roads and vehicles. The principal explanation for rail's loss of traffic was its poor operating performance which was primarily attributable to poor management, inadequate foreign exchange for spare parts, a shortage of qualified technical staff, and a surplus of unskilled labor. The number of mainline locomotives available for service declined from 170 in late 1981 to -3- only 85 in mid-1985 due to inadequate running maintenance and failure to carry out periodic overhauls. 8. In addition to reducing its labor force, NRC needed to focus its resources on the markets where it had comparative advantage over road transport. NRC also needed to improve its revenue collecting system and cost controls. However, its ability to do this in 1985 was seriously hampered by lack of financial information; annual accounts were two years behind and basic accounting records were incomplete. There was an economic role for the NRC, and it could become economically and financially viable through a combination of increased traffic, higher tariffs, and considerable rationalization of the cost structure. The project was intended to promote these changes. 9. NPA was also experiencing many problems. Its financial condition had seriously deteriorated after 1978. Annual and monthly accounts were not current, although NPA had made progress over the preceding 12 months in redressing the backlog. The Port Authority suffered many of the same institutional problems facing the NRC, although to a lesser degree. 10. As a result of NPA's construction program between 1975 and 1980, port capacity had more than doubled and was adequate in 1985, especially with the downturn in traffic following 1982. While the fall in port traffic in 1983 and 1984 aggravated financial problems, NPA's results were deteriorating before that time, due primarily to the fact that three new ports were brought into service and the vastly increased costs of dredging, workshops, personnel, administration and supervision. About a year before appraisal, NPA took action to improve the situation by reducing its staff by 6,000 or 20 percent; despite this step, the staffing level remained excessive. Two other actions were taken by NPA about this time: it closed Sapele Port to commercial operations and obtained government approval of a 15 percent tariff increase. 11. NPA requested assistance through the project to: (i) improve its workshop and stores operation; (ii) assess manpower and training requirements; and (iii) introduce a new management information system. These measures, together with actions already taken, were expected to enable NPA to attain, within 3 years, an operating ratio similar to those achieved in 1980 and 1981, targets considered reasonable for the medium term. 12. There were uncertainties as to the appropriate roles of both the railway and the parastatal involved in inland waterways transport. In 1986, the government indicated to the Bank its intention to undertake policy reforms concerning these parastatals. Substantial reductions were to be made in budgetary transfers to them, parastatals would be required to generate more internal revenue and some organizations would be privatized or liquidated. The specific steps necessary to achieve these aims and a timetable for their implementation were to be worked out through the proposed Transport Parastatals Project. 13. The discussions with various transport related organizations included, inter alia, specific consideration of (i) urgently required spare parts; (ii) need for improved management information systems; (iii) need for management training; (iv) potential for improvement in workshop and cargo operations at NPA; and (v) possible transport policy studies. A formal request for the Transport 4- Paastatals Project was submnitted by FGN to the Bank in early 1985. The project was appraised by Bank staff in May 1985 (for a list of previous Bank financed projects in the sector see Table 1). C. PROJECT OBJECTIVES AND DESCRIPTION Project Objectives 14. The major objectives of the projects were to: (a) lay the foundations for reform of transport parastatals by improving accountability, specifying financial and operational objectives, preparing staff rationalization plans and examining the future roles of several enterprises; and (b) improve the efficiency with which the two largest parastatals, NPA and NRC, utilize their facilities. Project Description 15. The project comprised three main undertakings as follows: (a) Technical assistance and training for NPA and NRC. This activity was to be carried out in several specific subject areas, namely, to: (i) improve internal financial controls, accounting and management information systems; (ii) define financial targets including a basis for compensation for any non-commercial obligations; (iii) carry out revenue/cost studies to identify cost-cutting, marketing and tariff setting strategies; (iv) assist in manpower planning and development, including the preparation of staff rationalization and training programs; (v) assist in improving workshops and operations; and (vi) promote more effective use of computer facilities. (b) provision of computers, workshop equipment and training equipment as well as spare parts, in support of the above-mentioned technical assistance and training. (c) Technical assistance and consulting services to FMTA to carry out policy studies on subjects including the following: (i) the future options for other transport parastatals, including possible restructuring, privatization or liquidation; (ii) the respective roles of Nigerian Airways and private operators in domestic aviation; (iii) the feasibility of intermodal transport, including management training for senior officials of FMTA and its parastatals, especially NRC and NPA. -5- D. PROJECT DESIGN AND ORGANIZATION 16. The project design emphasized assistance to the NRC and NPA but with some attention to the needs of FMTA. A particularly large share of the funding (40 percent of the allocated amount of the loan) was directed to the procurement of spare parts for NRC's locomotives to increase locomotive availability critical to operating efficiency. Likewise, spare parts for NPA's cargo handling equipment were a significant project element and also were intended to enhance the efficiency of port operations. 17. In addition to spare parts for NRC and NPA, provision was made in the project for procurement for both organizations of computers and training equipment, workshop equipment and tools. Also, the project included management training in NRC, NPA and FMTA. 18. Studies for NRC under the project included: (i) improvement of locomotive workshops and stores management; (ii) design and implementation of new internal control, accounting and management information systems; (iii) revenue/cost studies; (iv) manpower studies; and (v) project planning and programming. Additional technical assistance was provided to train trainers to implement recommendations from NRC manpower studies. 19. Studies for NPA included the following: (i) improvement of the Lagos workshop including the identification of needs for spare parts; (ii) manpower planning and development; (iii) MIS for financial and operational purposes; and (iv) rationalization of data processing activities, etc. including implementation. 20. The project was designed to improve the operating efficiency and financial results of the NRC and NPA in both the short and long term. In order to monitor the performance of these organizations, the project included specific output targets for both NRC and NPA. Among these, those set for locomotive performance were considered particularly important. 21. The project included a Project Coordinating Unit (PCU) to have overall responsibility for the management of the project. The PCU was based in the FMTA and was to report directly to the Chief Executive of FMTA. The day-to-day management of the project was the responsibility of Project Management Units (PMUs) in each of the major organizations (FMTAS, NRC and NPA). Each PMU was headed by a Project Coordinator who coordinated project components within his organization. 22. A number of conditions of loan signing and effectiveness were established by the Bank. One of these was government approval of tariff increases for NRC and NPA, which was accomplished. Another was that locomotives for rehabilitation were to be selected, spare parts needs identified and specifications for bidding prepared. This was not achieved, as a spare parts list was not ready until May 1987 and bid documents were prepared later. Some other conditions were met prior to effectiveness and some were not. Negotiations were completed in December -6- 1985; the loan was approved on June 26, 1986, signed October 31, 1986 and became effective January 23, 1987 (see Table 2). E. PROJECT IMPLEMENTATION 23. Nigerian Railway Corporation. By mid-1987, implementation of this component was progressing well but it was still at an early stage. As work proceeded, it became clear that NRC's equipment was in a state of dilapidation and, as a result, the railway's capacity was severely crippled. In November, the Bank sent a high level mission to Nigeria and it agreed with NRC and FMTA that an Emergency Rescue Plan was urgently required for NRC. Terms of reference were prepared by February 1988 for a Revitalization Study to include a diagnosis with an immediate action plan, manpower plan, investment plan, corporate and business plan, and a perfornance agreement. Consultants were selected for the study which was completed in mid-1989. A subsequent project was to implement its recommendations. A costing study was initiated but was not completed. 24. The locomotive rehabilitation component of the project had a smooth start but soon lost ground due to delays in approval of tender evaluations by NRC and FMTA. Delays also arose in the issuance of letters of credit by NRC's bankers. Locomotive rehabilitation in particular was proceeding slowly because of procurement delays and the use of improper procedures. Counterpart funds were inadequate for vitally needed supplies and, as a consequence, some new locomotives were purchased at high prices. By mid-1990, progress on the NRC component was rated unsatisfactory. 25. NRC apparently underestimated the magnitude of the technical and managerial tasks involved in locomotive rehabilitation. Several factors accounted for the shortcomings in implementation. These included: (i) limitations in available counterpart funds; (ii) long delivery times required by some suppliers; (iii) production stoppages in NRC due to poor financial state of the Corporation; (iv) extremely poor condition of many of the locomotives; (v) insufficient shop space, and (v) bureaucratic delays. 26. The performance of the PMU in NRC was not satisfactory, partly because of the manager's limited experience. Also, he was handicapped by insufficient support services. There was, however, reasonable continuity in the staffing of the position. 27. Nigerian Port Authority. Implementation had a reasonably good start and, by mid-1989, progress was fair on the accounting system and manpower studies. While Phase I of the equipment rehabilitation program was carried out on time, Phase II, comprising tender and bid evaluation, became stalled because of unsatisfactory performance of consultants and shortcomings of the PMU. As of mid-1990, project implementation was rated unsatisfactory, the principal problem being an inadequate tender evaluation prepared by consultants. -7- 28. The performance of the PMU in NPA was also unsatisfactory. One of the main problems was the frequent change in the Project Manager, causing delays in decision-making. Also, there was a lack of understanding on the part of the PMU concerning the objectives of the project. 29. There were a number of causes of delays in the implementation of the NPA component. In addition to the lack of understanding of the objectives of the project and the high turnover of project managers, few staff seemed to have an adequate knowledge of Bank procedures and requirements. External factors included bureaucratic interference from high level officials in the Ministry, uncertainty concerning reorganization of NPA and the failure of some consultants to perform satisfactorily. 30. Federal Ministry of Transport and Aviation. By mid-1987 only a program for training abroad had been established. Several studies were launched in early 1989: (i) future roles and policy options for transport parastatals; (ii) freight and multimodal operations; (iii) a national transport survey; and (iv) domestic aviation policy. Progress on these studies was being made in mid-1989. Early in 1990, FMTA authorized a new study to develop a strategy and plan for the Nigeria Institute of Transport Technology. Studies were also authorized for the Maritime Academy, the National Motor Vehicle Administration, Lagos Mass Transit and a transport systems management study. In 1993, a study was authorized for the inland waterway subsector, but it began too late to be completed within the project period. Three studies planned earlier were not undertaken; these were the national transport survey and projections; development and policy analysis; and management information system studies, which could not be started before closing of the loan. 31. In response to a request from FMTA, the Bank agreed to the use of project funds for a short-term consultant to assist FMTA in producing a draft national transport policy. The consultant produced, on schedule, a draft which was adopted by Government in 1993. 32. Among the problems that impacted the project negatively were frequent changes in executives of the Ministry. Also, the depressed state of the economy adversely affected the execution of the project. Finally, the high level of inflation led to considerable agitation for wage and salary increases which caused disruption in project implementation. F. PROJECT RESULTS Achievement of Objectives 33. Little was accomplished toward improving the efficiency of the two largest parastatals, the NRC and NPA. The project objectives were only partly achieved. On the other hand, the studies laid some of the foundation for the reform of transport parastatals. Useful studies dealt with the roles of certain parastatals and various policy issues. -8- Equipment Rehabilitation 34. The locomotive rehabilitation program of NRC was directed at rehabilitating 75 locomotives in the fleet, 30 in the first tranche and 45 in the second. Under the project, only 32 were rehabilitated in the first tranche and 5 in the second tranche, a total of 37. In May 1994, only 16 of the 37 rehabilitated locomotives were running. Four of the 37 were out of service because of accidents, while 3 were in need of compressor/exhauster repairs, and 9 were held in running sheds for repairs. Eight of the original 75 locomotives targeted for rehabilitation could not be rehabilitated. The average number of available locomotives steadily declined from 66 in 1987 to 25 in 1992. 35. The NPA equipment repair program was divided into phases: (i) repair; (ii) rehabilitation of mechanical workshop at Apapa port; and (iii) rehabilitation of cargo handling equipment. Phase I was completed on schedule in August 1987 but the other phases were seriously delayed. The mechanical workshop of Apapa port was renovated and re-equipped as planned. Rehabilitation of cargo handling equipment was about 50 percent completed. (The remainder was scheduled for completion by the end of October 1994.) A small amount of computer and training equipment was procured for both NPA and NRC. Results of Studies 36. Table 3 presents the objectives, main outputs and impact of the studies undertaken for NRC. The studies were mainly designed to review railway operations and management as a basis for defining the railway's future role and investment needs. The actuarial study and the valuation of assets provided useful results; they served to highlight problem assets. The revitalization and costing studies (the latter only partially completed) provided the basis for basic policy and institutional reforms and a proper costing of NRC's services. Implementation of recommendations in the studies was weak because of management inadequacies and a tendency to rely too heavily on the Technical Committee for Privatization and Commercialization (TCPC) which was responsible for the restructuring framework. 37. Only three studies were carried out under the NPA component of the project. Their objectives, output and impact are also presented in Table 3. The MIS study was the main accomplishment. As a result of the study, NPA was provided with a commercially-oriented accounting system and a computerized payroll system; the final phase of the study, creation of an authority-wide MIS, was not completed. A manpower planning and development study helped rationalize the authority's manpower. 38. The major objectives, outputs and impacts under the FMTA component are summarized in Table 3. While the quality of these studies varied, they improved the information base for planning, policy formulation and decision-making. The study of future roles and policy options for transport parastatals was particularly useful in preparing a National Transport Policy produced in early 1990. Delays in executing three of the studies, however, prevented their having a major influence on the reform activities of the TCPC. The Lagos Mass Transit study provided a clear framework for manpower training and development needs for Nigeria's transport sector. While -9- the results of some studies were positive, FMTA did not implement many recommendations and thus missed opportunities to strengthen its institutional capacity. 39. Conspicuous failures in the FMTA study program were the exercises designed to: (i) improve policy analysis capabilities of the ministry; (ii) provide the ministry with an information system for monitoring the sector; and (iii) create a transport data bank. The first two studies were not executed and the latter was terminated early. The FMTA training program was fully implemented but it was a qualified success because of a failure to monitor the subsequent performance of trainees and the alleged award of training assignments based on favoritism. Performance Targets and Achievements 40. Performance targets were established at the outset of the project. None of these targets were achieved during the project period, except locomotive kilometers per day. Locomotive availability, a particularly important factor, declined from 54 percent in 1986 to 19 percent in 1993. The railway's working ratio target was 180, but the actual ratio increased from 212 in 1986 to 238 in 1993. 41. Targets for NPA equipment availability were established, but it was not possible to assess the actual performance in this regard. Project Costs 42. The total project cost, as indicated in Table 5, was approximately US$24.10 million as compared with the appraisal estimate of US$30.26 million. NRC expended naira 18,004,180 in counterpart funds, or 58 percent of its commitment of naira 30,946,574. Since the NRC commitment was equivalent to US$5.8 million, the NRC counterpart funding was about US$3.36 million. NPA met its commitment of US$2.70 million. FMTA counterpart funding covered only the costs of the PCU and its PMU, somewhat less than the US$0.9 million commitment. The total counterpart funding was US$6.76 million. Adding this counterpart funding to the Bank's loan disbursement of US$18.14 million brings the total project cost to US$24- 10 million. 43. The actual cost of the NRC component of US$16.13 million was 10 percent lower than the appraisal estimate, while the cost of the NPA component was 44 percent less than the appraisal estimate. In the case of the FMTA component, however, the actual cost exceeded the appraisal estimate by 24 percent. Overall, the total project cost was 18 percent below the appraisal estimate and this is explained largely by the shortfall in NRC's contribution of counterpart funds. Project Financing 44. The original plan for project financing along with the actual project financing are presented in Table 6. As indicated in that table, the Bank's US$18.1 million contribution to the project financing was 75 percent of the actual project cost while in the appraisal estimate the -10- Bank's participation was planned as 69 percent. NRC failed to contribute its planned share of the financing but the NPA and FMTA more or less met their financial commitments to the project. Disbursements 45. Loan disbursements, as indicated in Table 7, began in FY 1988. Although the loan was to be fully disbursed by June 30, 1992, according to the appraisal plan, actual disbursements on that date were only 48 percent of the US$20.9 million Bank loan. A year later, 73 percent of the loan had been disbursed. After all loan disbursements were completed, the cumulative amount was US$18.1 million or about 87 percent of the loan amount. Special accounts were established to facilitate disbursements from the loan. The main reason for delays in disbursements was that substantial delays occurred in carrying out various elements of the project as detailed above in the discussion on project implementation. Allocation of Proceeds 46. Proceeds of the Bank loan, as originally planned and as finally allocated are shown in Table 8. In the Loan Agreement, US$12.14 million was the specified allocation for NRC; actually, a slightly larger amount of US$12.77 million was allocated to NRC. Originally, NPA was allocated US$6.89 million but in the end only US$2.59 million was actually allocated to the authority. In the case of FMTA, the original US$1.87 million changed to an actual US$2.78 million. Thus, only NPA suffered a sizable shortfall in the allocation of funds. Eventually, the provision of spare parts consumed more than 72 percent of the Bank disbursements, a much higher percentage than the 55 percent originally expected. Environmental Impact 47. The nature of the project was such that its impact on the environment was minimal. G. PROJECT SUSTAINABILITY 48. Locomotive spare parts financed under the project were intended to improve equipment repairs and increase the availability of locomotives; measures of availability, however, actually declined, as indicated above. Thus, no continuing benefits of this component are foreseen. Although project-financed spare parts for NPA equipment were expected to have beneficial effects on the availability of cargo handling equipment, these benefits likewise probably were not realized and therefore little positive results are likely to be sustained. The studies financed under the project provided useful information to policy makers and planers; some of the study recommendations, to the extent implemented, will probably have long-term favorable impacts on the transport sector. However, overall, the project results have to be considered unsustainable. -1 1- H. BANK PERFORMANCE 49. Bank missions for both preparation and supervision of the project are shown in Table 10. Following project identification in November 1982, the Bank sent four preparation missions to Nigeria during the period 1982 through 1984. A preappraisal mission visited Nigeria early in 1985, followed by the appraisal mission later that year. In addition, post-appraisal and post- negotiation missions were sent to the country. It therefore appears that an unusual amount of effort was put forth by the Bank to prepare and appraise the project. 50. The first supervision mission arrived in Nigeria in November 1986 and the final one in February 1993. During the intervening period of just over 6 years, a total of 19 supervision missions reviewed implementation. Thus, the Bank sent about 3 such missions a year which is somewhat above the average for Bank projects. 51. Over two-thirds of the 19 missions comprised only one staff member and a third of them included two or three staff. Since the project involved several modes of transport and the Bank could not often send specialists for all modes, the project was difficult to supervise adequately. Railway engineers participated in only six missions and port engineers were involved in only five missions. Some of the studies involved aviation and trucking subsectors and none of the supervision missions involved specialists in these fields. 52. Another problem was that there was a high turnover of Bank staff assigned to the project. No Bank staff member remained with the project throughout its life, and staff changes were frequent. At least four Division Chiefs were responsible for the project at different times over the project period. The lack of continuity in staff made it difficult to supervise this rather complex multimodal project. 53. Two lessons are suggested by this experience. First, a broad scoped project, such as the Transport Parastatal Project, requires supervision missions carefully balanced between persons with specialized skills and persons of broad experience. Ideally, most of the supervision missions for such a project would be staffed by a number of specialists to deal with diverse technical matters, but this means the missions would be costly. 54. A second lesson is that the Bank should make every effort to minimize changes in the staff it assigns to a particular project. The continuity of staff the Bank assigns to a project has a large impact on effectiveness of project execution. Achieving this goal is particularly difficult over a long period of time. I. BORROWER PERFORMANCE 55. The PCU required a strong organization with full support from FMTA and required appropriate staff and facilities. Unfortunately, it never received the required support to enable it to carry out its assigned functions. Moreover, the PMUs in NRC and NRC also did not receive adequate support from their respective organizations. A shortage of counterpart funds in NRC -12- was another serious problem. These shortcomings account in large part for the lack of achievement of the project. The failure to provide adequate project support indicated a lack of full Borrower commitment to the project. 56. Performance of the Borrower with regard to covenants in the Loan Agreement show mixed results, as indicated in Table 11. NRC covenants fall into three categories: (i) counterpart funding requirements; (ii) performance targets; and (iii) requirements relating to a subsidiary loan agreement, auditing and the maintenance of financial records. Counterpart funding never reached the levels required. None of performance targets, neither operating nor financial targets, were achieved, except locomotive kilometers per day. With regard to other covenants, the subsidiary loan agreement was executed, a special account was opened and proper financial records were maintained and audited. 57. Compliance with covenants relating to the NPA component was also mixed. Covenants relating to subsidiary loan agreements, record keeping, opening of special accounts, and auditing were generally complied with. NPA met its counterpart funding obligations. Performance under other covenants, however, was less than satisfactory; the identification of equipment repair needs was completed almost a year behind schedule and actual equipment repairs were accomplished with a four year delay. Targets for cargo handling equipment availability were not achieved. Also, working ratio targets were not reached; in fact, the working ratio became worse between 1986 and 1990 and, although it improved thereafter, never reached the target level. 58. Two lessons may be drawn from the implementation experience. First, the combination in a single operation of a significant TA program with a component designed to provide spare parts required unusual skills mix and capabilities in the PMUs of NPA and NRC. The establishment of separate coordination units within parastatals that are expected to be accountable, both for the internalization of complex reorganization studies and also for the procurement of standard items, is indeed questionable. A second lesson is that it is unrealistic to expect that major management weaknesses would be eliminated in the course of a single project, when the adequate management tools are not set in place ahead of effectiveness. J. PROJECT RELATIONSHIP 59. Relations between the Bank and the agencies involved in the execution of the project were generally satisfactory. Communications facilities between Nigeria and the Bank in Washington were often poor during the period of project implementation, and the Bank's field office played a vital role in expediting communications between Bank headquarters, the PCU and other executing agencies. 60. Bank staff were flexible in their dealings with the Borrower and agreed to changes in the project as warranted by unanticipated events. The amounts of funds allocated to different project categories in the Loan Agreement were revised from time to time, as indicated in Table 9. Also, -13- the closing date was extended on three separate occasions, the first extension to June 1993, the second to December 31, 1993 , and the third to June 1994. K. CONSULTING SERVICES 61. The performance of consultants involved in the project was mixed. In carrying out the NPA's equipment rehabilitation program, consultants performed poorly with long delays in completion of work on Phases 2 and 3, in part at least, because of the deportation of some of their personnel. On studies also, the performance of consultants varied considerably, as indicated in Table 3. L. PROJECT DOCUMENTATION AND DATA 62. The legal documents were sufficiently clear and specific for effective implementation of the project. The President's Report provided a useful framework for the Bank and the Borrower during implementation. Supervision reports, quarterly progress reports of the Borrower and other data in project files were adequate for the purposes of preparing this PCR. -14- PART II: BORROWER'S ASSESSMENT (THE BORROWER WAS GIVEN THE REQUIRED TIME OF THREE MONTHS TO PREPARE ITS ASSESSMENT OF THE PROJECT. HOWEVER, THE BORROWER DID NOT SUBMIT THE ASSESSMENT.) -15- PART mII: STATISTICAL INFORMATION -16- Table 1: Related Bank Loans Loan No. and Title Purpose Year of Status Approval Loan 193-UNI Railway Project Rehabilitation 1958 Completed Loan 694-UNI Transport Rehabilitation Wagons, spares, track 1970 Completed Project material and equipment Loan 326-UNI Apapa Port Port development 1963 Completed Loan 922-UNI Apapa Port Container berths, 1973 Completed equipment, technical assistance Source: President' Report: Transport Parastatals Project Table 2: Proiect Timetable Item Planned Revised Actual Invitation by government 4/84 Identification 6/84 Appraisal 9/83 5/85 Negotiation 12/85 Board Approval 6/26/86 Loan Signature 10/31/86 Loan Effectiveness 1/23/87 1/23/87 Loan Closing 6/30/92 12/31/92 6/30/94 12/31/93 Last Disbursement T 11/30/94 Sources: President's Report; IBRD "Statement of Loans" for various years. -17- Table 3: Studies A. NRC Activity Objective Main Output Major Achievements Remarks 1. Revitalization Aimed at identifying Technical and First detailed look at Completed in Study problems of NRC and Management audit of NRC since Canac October 1988 and their remedies. Led to NRC, Manpower Study of 1974. FMTA policy formulation of Planning and Provided basis for position given to Diagnostic, Corporate Development Plan, NRC/govt. WB in Dec. 1988. Plan, Action Plan, Investment Plan appreciation of the Intervention of Manpower Plan, (1988-98), Corporate deep-seated problems TCPC in early 1989 Investment Plan (10 yrs) and Business Plan (5 of NRC and the need led to policy and Draft Performance yrs), Draft for major policy and conflict with Agreement. Review of Performance institutional reforms. WB/FMTA which conditions of service Agreement and Provided the basis for frustrated latter's done also Immediate Action WB acceptance of attempts at Plan. provision of assistance implementation of to NRC in support of study the reforms and recommendations TCPC's subsequent reform activities. 2. Management To develop Corporate- NONE NONE Although awarded, Information System wide MIS based on not implemented (MIS) Study recommendations due to non- emanating the implementation of Revitalization Study Revitalization Study recommendations. 3. Traffic Costing To establish a traffic Traffic costing fully Provided framework Not fully Study coating and business defined and for NRC to get a implemented evaluation system and computerized. Draft detailed and because of lack of Unit (TCBEU) within MIS produced. comprehensive view management NRC. TCBEU framework of its business commitment (data designed include job transaction and to fully validate the description, etc. and mechanism for system not able to recruitment advert. informed business be collected due to Shell of unit created decisions and lack of funds and with seconded internal monitoring of market external recruitment staff. trends. not done). 4. Valuation of To value the landed Draft valuation and Provided an in Final Report not Assets assets of NRC and also legal reports for indication of the submitted plants, equipment, etc. landed Assets and potential worth of especially the plant to allow for NRC's Interim Reports for the NRC landed assets and machinery restructuring (financial valuation of the and highlighted its valuation due to corporate). plants, machinery, etc. inadequate non-payment of fees management to date to consultant and inadequacy of it to valuers by NRC. the rewards. 5. Actuarial Study To establish the state of First valuation Led to realization of of Pension Fund the Fund and make exercise of the Fund need to strengthen the recommendations on its in recent times. management of the future. Established the Fund (which was actuarial state of the done) and the need to Fund and outlined find ways of making it options for the Fund to solvent (which was meet its liabilities and not done). suggested how fund may be strengthened. -18- B. NPA Activity Objective Main Output Major Achievements Remarks 1. MIS Study - To define Final Reports and A new accounting Described in project Phases I and 11- commercially- Accounting Manuals system was evolved document as MIS for New Accounting oriented accounting and implemented but the authority, but in System and system and its computerization fact TOR narrowed Implementation implement, has been limited to it to simply evolving including only the payroll new accounting computerization system and implementing it. An MIS strategy evolved for definition and implementation under project never implemented. 2. MIS Study - Expansion of MIS Strategy Report Led to realization by Never implemented, Phase Im - Definition accounts system into NPA of the perhaps because of of Corp. wide MIS full MIS for all limitations of their the TCPC reform system departments information and proposals which had management implication for the decision-making form of MIS to be basis and agreement evolved. of for redressing the situation. 3. Manpower To establish Final Reports Used by NPA and Indicated a need for Planning and optimum staffing TCPC to undertake detailed study of Development Study levels, conditions of major staff NPA operational service, review rationalization in practiced towards organizational 1990/91 their improvement structure, etc. and, perhaps, more staff reductions. Not followed-up. -19- C. FMTA Activity (Contr. Objective Main Output Major Achievements Remarks Value) FMTA Policy To define the role of Diagnostic and Provided same Usefulness reduced Studies. Etc. transport parastatals, Final Report background input into by delay in execution, 1. TRAPARS - government's policy evolvement of first which prevented its Future Role and position, the entities' National Transport use by TCPC in its Policy Options for resource needs and Policy for Nigeria work on reform of Transport Parastatals performance targets transport parastatals. ($210,308 +N660,265 = $294,957 equivalent) 2. FREMOPS - To assess the demand Diagnostic and Provided data and Gave clear idea of Freight and for freight and Final Report policy cost and non-optimal Multimodal multimodal traffic and recommendations muse of multi-modal Operations Study. the institutional, legal used as input to transport. In (f, 107,176 and investment National Transport particular, highlighted +N173,556 = framework for Policy high cost to the $223,791 improving present economy of equivalent) situation and future bureaucratic customs prospects. procedures. Useful study that has been .___ ___ ___ ___ ___ ____underutilized. 3. Domestic To review the state of Diagnostic and Included a National Most of its policy Aviation Policy domestic aviation and Final Reports Airspace Traffic recommendations (S57,643 + recommend ways of System which overtaken by actions N163,152 = $78,559 improving the operation provided for military of FMOA which was equivalent) of the sub-sector. and civilian needs. created in 1988 from __ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ FM T A . 4. Management To design MIS for the __ Firm of consultants Information System monitoring of the appointed never (MIS) - Phase I performance of the commenced work due sector and of the to none finalization of activities of the contract. Ministry. Included pilot _ implementation. 5. Development of To improve the policy . Not executed. Policy Analysis formulation and Division - Phase I implementation capacity of FMTA by reinforcing the capabilities of Policy Analysis Division of TCID. Included training program. 6. NTSP - National Primarily to design the Interim Report None Terminated due to Transport Survey specifications of a slow progress by and Projections transport statistics data consultant and their (Review and bank - scope, data subsequent request Extensions) - Phase I gathering and for increases in (S156,420 + processing and reimbursable costs N498,762 = computer needs, etc. which was rejected. S227,151 Did not include equivalent) purchase of computer which was to be in Phase 11 of the study. -20- Activity (Contr. Objective Main Output Major Achievements Remarks Value) 7. Lagos Mass To determine the Diagnostic and Provided basis for Main Transit and contents of a proposed data collection identification and recommendations Transport Systems Mass Transit Project for and Final ongoing preparation adopted by a Management Study funding by WB. Reports, (by WB/LASG) of workshop on the ($960,000) Included system Working Lagos Urban recommendations of specification and Papers and Transport Project to the study. Findings preliminary engineering Drawings be executed by and design of infrastructures LASG. Recommendations of (roads, railways, etc.) the study summarized in a Sunimary Report produced for the workshop. 8. NFIT To formulate a Strategic Final Report Provided a framework Although adopted in Developnment Plan Development Plan for for reorienting the principle, its and Strategy NITT to guide its priorities for NlTT's implementation ($54,900) development over a five incremental stalled by NMTl's year period, with agreed development, the inability to obtain recommendations to be financial and other external funding. sued as a basis for resource implications. seeking external funding. 9. Training External and local Evaluation Training Inadequate Programs Phases I & training of senior and Report for opportunities monitoring of inpact II ($216,603 + middle management Phase I provided to almost all on post-training $313,264 = staff of FMTA, and its senior staff of FMTA performiance of $529,867) parastatals, especially and a large number of beneficiaries. NRC & NPA senior staff of its Selection of parastatals, mainly on beneficiaries also not management aspects optimal. Parastatals of transport planning could have benefited and management more. 10. National Motor To evolve a unified Draftl Report to Not possible to assess Vehicle vehicle licensing, FMTA since report yet to be Administration registration, etc. system accepted. System - Phase I for the country ($250,000) 11. Maritime Same as for NITf above Draft Report - ditto - Academy, Oron: Development Plan and Strategy ($53,334) 12. National To produce a Draft Draft Policy Provided a holistic Implementation has Transport Policy National Policy Document understanding of not been effectively ($14,915) Document transport sector trends carried out. by sector managers at state and national levels when discussed by National Council of T ransport in 1992. Adopted by Federal Executive Council in May 1993. -21- Activity (Contr. Objective Main Output Major Achievements Remarks Value) 13. Revitalization To monitor the work of Comments on Helped to facilitate Study: Monitoring the international study political acceptability of Study Consultants consultants undertaking consultants' of the study's findings (N917,004 the main study. outputs and S124,248 recommendations, equivalent) which at the time, were seen as controversial. 14. Inland To assess the potential Final Report Highlighted the need Waterways for nland Waterways in for institutional Development Study - Nigeria reforms in the more Phase I ($180,000) effective management of the use of Nigeria's I inland waterways. I Source: Supervision Reports -22- Table 4: Procurement of SDare Parts A. NRC Tranche I - Spare Parts 1. Lot/Item SLC 486/Loco SLC 486/Loco SLC/486/3 SLC 486/2 SLC 486/Loco Supplied Spares Spares Loco Spares Loco Spares Spares 2. Contractor Gen. Motors GE Electric GE (Canada) Kessler (USA) Holdtrade (USA) (USA) GmbH (Germany 3. Contract Value $232,414.00 $1,658,788 $379.170.00 $766,488.33 $399,156 4. Date of Bid 11/9/87 11/9/87 11/9/87 11/9/87 11/9/87 2Opening 5. Date of 23/11/87 23/11/87 23/11/87 23/11/87 23/11/87 compilation of Bid Evaluation 6. Date of Award 27/7/88 27/7/88 27/7/88 27/7/88 27/7/88 7. Date of 17/11/88 17/11/88 17/11/88 17/11/88 17/11/88 _ Agreement 8. Date of Sept. 1990 5/1/89 (reqd. Sept. 1990 Sept. 1990 Sept. 1990 Confirmation of Form M only) Order/LC due Adv. Pmt. 9. Expected shipment date 10. Actual date of 7/9/90 Aug. 1989 Oct. 1990 Feb. 1991 Oct. 1990 shipment 11. Date arrived port 20/9/90 Sept. 1989 Nov. 1990 31.3.91 Oct. 1990 12. Date cleared or Dec. 1990 Sept. 1989 Dec. 1990 Jun. 1991 Jan. 1991 delivered to NRC 13. Remarks: Time Elapsed to: Award/Approval (a) Agreement 8 months 8 months 8 months 8 months 8 months (b) Confimnation 5 months 5 months 5 months 5 months 5 months (c) Shipment 23 months 2 months 23 months 23 months 23 months (d) Clearance 5 days 7 months I month I month I month (e) 3 months no loss in time I month I month 3 months Total elapsed time (4 to 36 24 36 43 38 12) months -23- Emergency/Supplementary Orders I. Lot/Item SLC 536 - SLC 558 - SLC 566 - SLC 567 - SLC 568 - M3556(W) Supplied Undersize Emergency Repair of 18 Remanufacture Loco - Elec bearings for spares for No. Traction of 7 Diesel Starting Overhead 1801 class 1801 class Motors Engines Batteries Crane Spame 2. Contractor GE (USA) GE (USA) ABB Service, GM (USA) Rocket (S. Crown Spain Korea) Agents/I Morris of UK 3. Contract Value $54,750 $45,638.68 $592,713 $1,171,835 $156,480 S188,483 4. Date of Bid 13/12/89 13/12/89 7/3/90 7/3/90 7/3/90 21n188 Opening 5. Date of 13/12/89 13/12/89 1214/90 29/3/90 12/4/90 Evaluation 6. Date of Award 13/2/90 13/2/90 15n/91 Re-negotiated 12/4/90 18t7/89 _____________ 4/3/91 7. Date of 23/3/90 23/3/90 17/9/91 4/6/92 27/5/91 Agreement 8. Date of 3/5/90 3/5/90 15/3/93 9/2/93 25/11/91 June 1990 Confirnation of Order 9. Expected July 1990 July 1990 25/5/92 Shipment Date 10. Actual Date 31/1/91 31/1/91 18/3/93 29/4/93 26/4/92 28/3/91 Shipped 11. Dated Arrived 11/3/91 11/3/91 13/4/93 25/5/93 30/5/92 17/4/91 Port 12. Date Cleared 23/8/91 23/8/91 19/5/93 7/10/93 18/12/92 25/9/91 or Delivered to l__ NRC 13. Remarks: Time Elapsed to: (a) Award 2 months 2 months 15 months 24 months 11 months 12 months (b) Agreement I month I month 2 months 2 months 2 months (c) Confirmation 2 months 2 months 7 months 8 months 6 months (d) Shipment 8 months 8 months I month 2 months 5 months (e) Clearance 5 months 5 months 4 months 5 months 7 months 5 months Total elapsed time (4 21 21 39 42 33 38 to 12) months -24- Tranche II - Spare Parts 1. Lot/Item SLC 594/1-GM SLC 594/3- SLC 594/2- SLC 594/4 - SLC SLC SLC Loco Spares 1801 Loco 1701 and Air Brake 594/6 - 594/7 594/5 Spares 1801 Spares Spares Loco Wheels Kessler Batteries & Aides Spares 2. Contractor GM (USA) GE (USA) GE HoldtraW Rocket Satusung Gesticorp (Canada) AMECO (Korea) (Korea) (Swiss) (USA) 3. Contract Value $1,072,131.37 $859,302.12 $1,155,166 $470,883.0 S370,012 S344,156 $46,515 6 4. Date of Bid 20/7/90 20/7/90 20/7/90 20t7/90 20/790 20/M90 20/7/90 - Opening 5. Date of 10/9/90 10/9/90 10/9/90 10/9/90 10/9/90 10/9/90 10/9/90 Evaluation _ 6. Date of Award 17/4/91 17/4/91 17/4/91 17/4/91 17/4/91 16/4/91 19/4/91 Amended Amended 21/8/91 on 27/6/91 7. Date of 26/91 6/8/91 27/8/91 27/5/91 24/6/91 24/6/91 Agreement 8. Date of Feb. 1992 Feb. 1992 23/1/92 25/11/91 22/11/91 Confirmation L I I 9. Expected Aug. 1992 Aug. 1992 Jul. 1992 Apr. May Shipment Date X __!__ 1992 1992 10. Actual Date 22/4/92 1/10/.92 12/6/92 10/5/92 15/6/92 Shipped 5/9/92 11. Date Arrived 1/9/93 and 14/5/92 27/10/92 17/7/92, 25/5/92 13/10/92 22/6/92 Port 15/10/93 and 10/8/92, by air ______________ ____________ 14/12/92 23/9/92 12. Date Cleared in batches from 23/10/92 15/12/92 - 25/9/92, 22/9/92 3/2/93 25/9/92 or Delivered to 23/12/93 to 15/1/93 21/9/92, NRC 17/5/94 6/8/93 13. Remarks: Time Elapsed to: Award (a) Agreement 7 months 7 months 7 months 7 months 7 months 7 months 7 months (b) Confirmation 3 months 4 months 4 months I month 2 months 2 months (c) Shipment 7 months 6 months 5 months 6 months 5 months (d) Clearance 2 months 2 months 4 months 5 months 6 months (e) 3-7 months 5 months 2 months 2-3 months 4 months 4 months 3 months Total elapsed time (4 39-44 27 29-30 26-37 26 31 26 to 12) months - 25 - Spare Parts Purchased from NRC Resources. (1986-1993) Catbay 1986 1987 1988 1929 1990 1991 1992 1993 ToWa1 Repair Parts USS241,051 92,254 123,424 73,090 1,026,960 825,023 364,119 402,450 3,219,371 N271,441 392,749 237,395 580,335 8,173,681 8,062,178 5,508,097 9,452,827 32,C6U4703 Runnrng Spam USS2S5,798 S6,679 134,313 21,292 47,563 14,233 74,650 724.714 N303,545 319,478 571,722 540,932 377,651 I N/A 1,326,196 3,684,784 Coringunbles N/A NIA N/A N/A N/A N/A N/A N/A N/A Total USS527,029 183,933 257,737 154,3S2 1,134,523 839,26 364,119 483,100 3,944,085 N574,986 718,227 209.123 1,121,267 8,551,332 2,247,432 5,508,097 tO,S39,023 36,369,487 Note: 1. Exchange rate was as at the tune of contract. 2. Figures are invoiced values. Clearance and other charges not included. 3. Most of the consumable items were purchased directly by users through cash releases and imprests and hence the costs could not be isolated from other materials expenses. Source: Extracted from NRC Store's Register -26- B. NPA Project Element Contractor Contract Value * Payment to- Remarks date* _ _ _ _ __ _ _ _ _ A. Technical Assistanc 1. Equipment and workshops Hamburg Post Completed. Spare parts rehabilitation ConsultingiTechnology identification phases executed Systems timely but preparation of bid - Phase I Nigeria $241,000 plus N440,000 fully paid documents and bid evaluation -Phase 11 -ditto- S147,000* fully paid unduly delayed by consultant's non- - Phase m -ditto- S107,200* fully paid perfonnance and non-compliance with bidding conditions in bid 2. New Accounting System Coopers and Lybrand $47,348 plus N441,851 fully paid evaluation. and Implementation include. Computerization 3. Manpower Planning and Fountainhead and Development Study Coopers and Lybrand S202,863 plus N594,147 fully paid B. Sp=r Parts I. Demas Cranes Flohr and Co. $392,149.11 fully paid Fully supplied. Repairs ongoing IPESL DM346,703.65 fully paid but near completion 2. Jones Cranes Rannel 199,817.00 fully paid Spare parts fully supplied Damen 106,305.00 fully paid Spare parts fully supplied 3. Hyster Container Hyster $362,543.00 fully paid Mostly supplied. Handlers New Ventures Nig. Ltd. S 38,852.00 fully paid Repairs started but stalked by Various by int'l shipping $1,799,717.60 fully paid insufficiency of spares supplied. 4. Caterpillar Forklifts MAFI Transport System Additional needs being compiled IPESL S324,823.96 fully paid Spare parts fully supplied. Repair works ongoing 5. MAFI Trailers All World Trading Co. S147,866.00 fully paid -ditto- $228,136.16 fully paid -ditto- C. Workshop Eauioment 1. Tools and equipment VASAR Services S1,226,200.74 Fully paid Supplied and installed. 2. Hydraulic equipment All World Trading Co. S163,314.00 -ditto- Supplied *Status as of May 1994 Source: Supervision Reports -27- Table 5: Proiect Costs (USS million) Appraisal | Actual* NRC__________ Local Foreign Total Local Foreign Total NRC Tech Assistance 2.00 2.43 4.43 1.63 Spare Parts 0.00 12.28 12.28 11.04 Equipment 0.00 1.23 1.23 0.10 Sub Total 2.00 15.94 17.94 3.36 12.77 16.13 NPA Tech. Assistance 1.45 1.83 3.28 0.56 Spare Parts 0.00 4.37 4.37 2.03 Equipment 0.00 1.87 1.87 0.00 Sub Total 1.45 8.07 9.52 2.70 2.59 5.29 FMTA Tech. Assistance 1.20 1.60 2.80 0.70 2.78 3.48 Total Project Cost 4.65 25.61 30.26 6.76 18.14 24.90 * Data available are not sufficiently detailed to permit a breakdown of costs by sub-component. Note: Contingencies in appraisal cost table of President's Report have been added to the basic cost estimates for the project components. Sources: President's Report and Disbursement Officer' -28- Table 6: Proiect Financing (US$ million) Source of Funds Appraisal Estimate Actual Nigerian Railway Corporation 5.8 3.36 Nigerian Port Authority 2.7 2.70 Federal Ministry of Transport and Aviation 0.9 0.70 IBRD 20.9 18.14 Total 30.5 24.90 Source: President's Report and Disbursement Officers' Report on disbursements. -29- Table 7: Cumulative Loan Disbursements (US$ million) Fiscal Year and Quarter Appraisal Estimate Actual Actual as percent of Estimate FY1987 Sep 1986 Dec 1986 Mar 1987 Jun 1987 4.9 0 FY1988 Sep 1987 0.7 Dec 1987 0.8 Mar 1988 0.8 Jun 1988 11.0 1.6 13 FY1989 Sep 1988 1.7 Dec 1988 1.8 Mar 1989 2.8 Jun 1989 15.4 3.5 23 FY 1990 Sep 1989 3.7 Dec 1989 3.8 Mar 1990 4.8 Jun 1990 18.5 5.5 30 FY1991 Sep 1990 6.6 Dec 1990 7.0 Mar 1991 7.0 Jun 1991 20.6 7.4 36 FY1992 Sep 1991 7.7 Dec 1991 8.0 Mar 1992 8.2 Jun 1992 20.9 10.0 48 FY1993 Sep 1992 13.4 Dec 1992 13.8 Mar 1993 14.7 Jun 1993 15.3 73 FY1994 Sep 1993 17.5 Dec 1993 17.7 Mar 1994 17.8 85 Jun 1994 17.8 FY1995 Sep 1994 17.9 Dec 1994 18.1 87 Mar 1995 Jun 1995 Source: Appraisal estimates from President's Report dated 6/5/86. Actual disbursements from IBRD "Statement of Loans" for various years. -30- Table 8: Allocation of Loan Proceeds (US$ million) Category Original Revised Actual Allocation Allocation Disbursements NRC Technical Assistance 2.04 2.33 1.63 Spare Parts 6.50 11.22 11.04 Comp. & Trg Equip. 1.00 0.50 0.10 Unallocated 2.60 0.00 0.00 Sub Total 12.14 14.05 12.77 NPA Technical Assistance 1.50 0.60 0.56 Spare Parts 2.28 2.79 2.03 Comp, WS, & Trg Equip. 1.50 0.13 0.00 Unallocated 1.61 0.00 0.00 Sub Total 6.89 3.52 2.59 FMTA Technical Assistance 1.17 3.33 2.78 Unallocated 0.70 0.00 0.00 Sub Total 1.87 3.33 2.78 Total 20.90 20.90 18.14 Sources: President's Report and Disbursement Officer's Report on disbursements. -31- Table 9: Use of Bank Resources A. Missions Stage of Project MonthNYear No. of Days in Specialization Performance Dates of Cycle Persons Field Represented " Rating Status R Identification 11/82 4 28 EC,PE,FA,C 01/28/83 1,3 Preparation 1 11/82 1 10 ED 12/20/82 Preparation 2 06/83 1 14 C n/a Preparation 3 06/84 3 10 EC,RE,PE 07/19/84 Preparation 4 11/84 2 10 EC,FA 12/06/84 Pre-Appraisal 02/85 1 14 EC 03/29/85 Appraisal 05/85 5 20 EC,ME,PE,RE,FA 07/18/85 Post Appraisal 09/85 3 7 FA,PE,RE 10/25/85 Post-negotiations 1 5 FA N/A Supervision 1 11/86 3 21 EC,FA,PE 1,1,1,1 01/08/87 Supervision 2 03/87 1 6 FA 04/20/87 Supervision 3 05/87 1 10 PE 1,1,1,1 06/12/87 Supervision 4 07/87 1 5 EC 08/31/87 Supervision 5 07/87 1 4 RE 1,1,2,2 09/04/87 Supervision 6 11/87 2 3 RE,PE 1,2,2,2 12/09/87 Supervision7 02/88 1 15 FA 1,3,2,2 04/11/88 Supervision 8 06/88 1 2 FA Supervision 9 10/88 3 9 FA,EC,RE 1,3,2,2 12/08/88 Supervision 10 06/88 1 10 FA 2,2,2,2,1 07/24/89 Supervision 11 11/89 I 12 RE I_____ 2/21/89 Supervision 12 02/90 1 10 PE 04/03/90 Supervision 13 05/90 2 5 FA,RE 2,2,2,2,1 08/08/90 Supervision 14 11/90 3 | FA,RE,PE 2,2,2,2,2 12/20/90 Supervision 15 03/91 2 7 ER,RE 2,2,2,2,2 04/15/91 Supervision 16 10/91 1 3 EC _________ 11/27/91 Supervision 17 02/92 1 17 PE _____ 04/01/92 Supervision 18 10/92 1 1 EC _ =________ Supmision 19 02/83 1 5 FA According to TOR dated February 13, 1992 and September 27, 1992, brief supervision visits were scheduled for March and October, respectively, but there are no reports on file. Source: Correspondence Files. 1. PE = Ports Engineer, EC = Economist; FA = financial Analyst; DC = Division Chief; RE = Railways Engineer, C = Consultant; ME = Mechanical Engineer, ED = Education 2. Project Brief 3. Issues Paper/Decision Mernorandum dated July 19, 1985. TOR Item 5. -32- Table 10: Status of Covenants A. NRC S/N COVENANT COMPLIANCE REMARKS a) Execution of a Subsidiary Loan Complied with The effectiveness of the Loan Agreement depended on Agreement between NRC and this agreement. it was signed in April 1987. Government (Section 3.02 (a) of the Loan Agreernent) b) Fulfillment of the terms of the Partially complied with. The conditions were not fully met by Government. Subsidiary Loan Agreement such NRC was only partially assisted financially when it as Section 11, which compelled found it difficult to provide local funds for the project. the FGN to assist NRC in In 1990, about N42 mn was required but only N10 mn providing counterpart funding was provided. In 1992, N12 mn was required to finalize where the Corp. was not the valuation of assets, only N2.6 mn was released. No financially capable of doing so. funds were released for clearance of spare parts from the port. As a result, the assets valuation could not be finalized; valuable spare parts were adversely delayed. 2. NRC to open a Special Account Complied with The Dollar Special Account was operated to the (Dollar) and a Revolving Fund satisfaction of the World Bank and it was retired in Account (Naira). Section 2.01 October 1993 when the Agreement was to terminate on (b) and (e) of the Project 31/12/93, as required., there was never insufficient Agreement funds for reasons stated in l(b) above. 3. List of spare parts for Complied with in June The Canac and Transurb experts chosen for the rehabilitation program to be 1987 compilation could not be on site until April 1987. They submitted to the Bank no later completed inspection of the Locos in June 1987. Delay than 31/3/87 (amended from was probably due to long negotiation with and 31/12/86), Section 2.01 (e). mobilization by donor agencies as NRC, for financial reasons preferred to benefit from CIDA and Belgium aid offers for the exercise. 4. NRC to procure spare parts out of Complied with Satisfactory evidence of compliance submitted by NRC its own resources to the value of was accepted by the Bank during their supervision $1.75 mn for Tranche I not later mission of June 7-16, 1990 and confirmed in the Aide- than 26 months from loan Memoire of that mission. effectiveness (Section 3.02(b) of PA. 5. Loco perfonnance and Not achieved Targets were not achieved because the rehabilitation maintenance targets to be program suffered delays as a result of long delay in achieved under Part C of the receipt of spare parts, insufficient funds even from the project. Schedule 3 of the Project loan (materials had to be reduced to the available Agreement money) and complete lack of running spares due to poor local funding. Failure rates of locomotives increased because of unreliability of cannibalized parts on which R/Shed maintenance depended. These factors contributed to the observed inadequate management of the locomotive maintenance function and lowered quality of maintenance undertaken. 6. Except as the Bank shall Not achieved Operating ratio, that is, working expenses to operating otherwise agree, NRC to attain revenue had remained well above 240 percent. Despite operating ratio of 180 percent by various actions taken by NRC management to reduce 31/12/87. Section 3.04(a) of operating expenditures such as heavy staff reductions in Project Agreement. 1988 and 1993, upward adjustments in rates and fares in 1990, 1992 and 1993, the total expenditure continued to outstrip the total revenue. May not be unconnected with NRC's inability to fully achieve traffic levels due to lack of sufficient locomotives (and their inadequate use and fleet management) and rolling stock, unhealthy -33- SIN COVENANT COMPLlANCE REMARKS political and industrial atmosphere that existed in the country since 1990. High inflation resulting from devaluation of the Naira cunrency resulting in high wage bills due upward revision of salaries and fringe benefits by government after labor pressure. The expected gains from World Bank project did not materialize due reasons stated against procurement and loco rehabilitation program. 7. Financial Covenants: Partially complied with Audited accounts and related statements have been a) Audited accounts to be submitted up to 1991 and submissions have lapsed furnished to the Bank as soon as beyond the stipulated 6 months. The statement of available but not later than 6 affairs as of 31/12/86 was done under the project and months from end of the fiscal audited accounts for 1987-91 were submitted as year. required, while 1992 and 1993 are yet to be submitted. NRC blames the delay on problem of communication between the divisions and the headquarters but it would appear that excessive bureaucracy in the appointment of external auditors are also responsible for the delay. The firm to be appointed has to be approved by the FMTA. Separate accounts and records were kept by NRC b) Maintenance of separate Complied with project unit and separately audited as part of audit of records of account for the WB overall accounts of NRC by auditors agreed to with the Project Bank. c) Project accounts to be Complied with parately audited by auditors acceptable to the Bank d) Records of expenditure on Complied with basis of statement of expenditure to be properly kept, be available for Bank's examination and such expenditure audited as part of audit of project account. e) Maximum withdrawal from the The limit was exceeded by about $235,000.00 (with the loan for Tranche I spare parts not Not achieved agreement of the Bank) due to the fact that the to exceed $3.25 mrn. necessary tools for both Tranche I and 2 had to be procured early in the program. -34- B. NPA SIN COVENANT COMPLIANCE REMARKS 1. a) Execution of a Subsidiary Loan agroement between NPA and Complied with The effectiveness of the Government (Section 3.02(a) of the Loan Agreement Loan Agreement depended on this b) Fulfilhment of the tenns of the Subsidiary Loan Agreement such Complied with agreement. It was signed as section 11 which compelled the FGN to assist NPA in providing in April 1987. counterpart funding where the Corp. was not financially capable of ___ doinig so. 2. NPA to open a Special Account (Dollar) and a Revolving Fund Complied with ____ Account (Naira. Section 2.01(b) and (c) of the Project Agreement. 3. Report on spare parb, workshop and training needs for equipment Complied in Delay due to late rehabilitation program to be submitted to the Bank no later than May 1987 appointment of 31/12/86, Section 2.01(e) consultants, inadequate support personnel from _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ N P A 4. NPA to procure spare parts out of its own resources to the value of Complied with NPA procured much more SI .2 mn not later than 26 months from loan effectiveness (Section than this amount but 3.02(b) of Project Agreement without real prior agreement with Bank 5. Cargo handling equipment availability targets to be achieved under Not achieved part 8 of the project. Schedule 3 of the Project Agreenent 6. Except as the Bank shall otherwise agree, NPA to attain operating Not achieved From 1986 to 1990, the ratio of 110 percent, 90 percent, 85 percent and 80 percent by 1986, ratio declined from 97 to 1987, 1988 and 1989, respectively and thereafter maintain the mtio 327 before it started to of 75 percent, Section 3.04(a) of Project Agreement improve sharply after cost-cutting (staff reductions) and tariff increases. It was 85 in 1992. 7 Financial Covenants: a)Audited accounts to be furnished to the Bank as soon as available Complied with but not later than 6 months from end of the fiscal years. b) Maintenance of separate records and account for the WB Project Complied with c) Project accounts to be separately audited by auditors acceptable to the Bank. Complied with d) Records of expenditure on basis of statement of expenditure to be properly kept, be available for Bank's examination and such expenditure audited as part of project account. Complied with e) Maximum withdrawal from the loan for Tranche I spare parts not to exceed $3.25 mn. Exceeded -35- Annex A. NRC Workinif Ratios 1986 1987 1988 1989 1990 1991 1992 1993 Revenue (total) 70.50 63.65 46.43 63.78 73.80 107.20 119.23 122.55 Working Expenses 149.40 191.74 189.04 219.92 253.23 314.39 325.98 292.09 Net Working Result 78.90 128.09 142.61 155.94 179.43 207.19 206.75 169.54 Working Ratio Actual ( percent) 212 301 407 345 343 293 273 238 Target ( percent) 180 180 180 180 180 180 180 1. Working expenses exclude depreciation 2. Based on statement in Annex VI of President's Report, Working ratio for NRC in 1984 was 231 percent and desired for 1995 was 94 percent. Table 14: NRC - Summary Financial Statements Source: Supervision Reports IMAGING Report No: 15870 Type: PCR