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The World Bank

FOR OFFICIAL USE ONLY

Report No. 5795-UNI

STAFF APPRAISAL REPORT

NIGERIA

SFCOND LT'.ESTOCK DEVELOPMENT PROJECT

May 7, 1986

Western Africa Projects DepartmentAgriculture Division B

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

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CURRENCY EQUIVALENTS

Currency Unit = NUS$1.00 N1.00N1.G0 0 US$1.00

WEIGHTS AND MEASURES

All weights and measures used in this report are metric.

1 metric ton (ton) = 2,205 pounds (lb)1 hectare (ha) = 2.47 acres (ac)1 kilometer (km) = 0.62 mile (mi)1 meter (m) = 3.28 feet (ft)1 liter (1) = 2.1 pints (pt)

ABBREVIATIONS AND ACRONYMS

ADP - Agricultural Development ProjectCBN - Central Bank of NigeriaERR - Economic Rate of ReturnFLD - Federal Livestock DepartmentFMAWRRD - Federal Ministry of Agriculture, Water Resources

and Rural DevelopmentFMG - Federal Military Government of NigeriaILCA - International Livestock Center for AfricaLCU - Livestock Credit Unit (in NACB)NACB - Nigerian Agricultural and Cooperative Bank Ltd.NAPRI - National Animal Production Research InstituteNLPD - National Livestock Projects DepartmentRBRDA - River Basin and Rural Development AuthorityRCF - Revolving Credit FundSLA - State Lending AgencyWLC - Western Livestock Company Ltd.

FISCAL YEAR

January 1 - December 31

FOR OMCIAL USE ONLY

NIGERIA

SECOND LIVESTOCK DEVELOPMENT PROJECT

TABLE OF CONTENTS

Page

DOCUMENTS CONTAINED IN PROJECT FILE ............................ (i)

LOAN AND PROJECT SUMMARY ....................................... (iii)

I. BACKGROUND ............................................ 1A. Introduction ...................................... IB. The Agricultural Sector ...... .................... 1

II. THE LIVESTOCK SECTOR ................... 2A. Significance of Livestock in the Economy .. 2B. Characteristics of the Livestock Sector . . 3

1. Livestock Distribution and ProductionSystems ....................................... 3

2. Socio-economic and InstitutionalOrganization .................................. 5

C. Development Strategies and Constraints. . 6

-III THE PROJECT.8II . TH PRJECT ................................... ...

A. Objectives and Summary Description . . 8B. Detailed Features . . 10

1. Livestock Production Program .................. 102. Project Management and Supporting Services .... 13

C. Cost Estimates .. 16D. Proposed Financing . . 17E. Procurement ....................................... 20F. Disbursement ...................... 21G. Credit Arrangements .................. 23H. Accounts, Budgeting and Reporting Requirements.... 26

This report is based on the findings of an appraisal mission con-sisting of Messrs. Raine, Headworth, Byrne, Maguire, Ms. Reedy (Bank)and Messrs. Yates, Awogbade, von Kaufman (consultants), and Jaiswal(Federal Agricultural Coordinating Unit), who visited Nigeria inJanuary/February 1985. Mrs. E. Sunderland provided the secretarialsupport and figures were checked by Mr. D.D. Taneja.

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

Table of Contents (continued) Page

IV. ORGANIZATION AND MANAGEMENT .. 27A. Project Coordination and Management ............... 27B. Research .......................................... 29C. Post-Project Development .......................... 29

V. PRODUCTION, MARKETING AND PRICES . . 30A. Production ........................................ 30B Demand and Marketing .............................. 30C. Prices ............................................ 31

VI. FINANCIAL IMPACT ...................................... 32A. Livestock Producers ............................... 32B. Credit Institutions ............................... 34C. Government ........................................ 35D. Cost Recovery of Farm Inputs ...................... 36

VII. ECONOMIC ANALYSIS ..................................... 36A. Project Benefits .................................. 36B. Economic Analysis ................................. 38C. Risks and Sensitivity ............................. 38

VIII. AGREEMENTS REACHED AND RECOMMENDATION ..... ........... 40

ANNEXES

1 Key Features of the Agricultural Sector

3-1 Phasing of Credit and Non-Credit Investment Program3-2 Livestock Production Program - Technical Coefficients of Models3-3 Livestock Production Program - Input Requirements3-4 Project Components by Year3-5 Detailed Cost Estimates by Nature and Purpose of Expenditure3-6 Project Costs by Financing Category3-7 Detailed Project Financing Plan3-8 Detailed Program Financing Plan3-9 Special Account No. 23-10 Local Competitive Procurement Procedures3-11 Estimated Schedule of Disbursements of Bank Loan3-12 Disbursement Profile3-13 Summary of NACB Profit and Loss Accounts3-14 Summary of NACB Balance Sheets3-15 Lending Terms and Conditions3-16 NACB - Indicative Revolving Credit Fund Summary

4-1 Technical Assistance, Credit Funds and Input Supply Flow Chart4-2 Project Implementation Schedule4-3 National Livestock Projects Department - Organization Chart

Table of Contents (continued)

ANNEXES (continued)

5-1 Projected Incremental Project Production5-2 Comparison of Financial and Economic Prices for Beef Sides Imported

as Frozen Beef and O.r-noof Cattle, in two Markets5-3 Calculation of Economic Liveweight Farmgate Price for Cattle from

Imported Frozen Beef and On-Hoof Cattle5-4 Financial and Economic Farmgate Prices for Commodities

6 Farm Income Analysis With and Without the Project

7 Economic Rate of Return

Naps IBRD 15065R6 - Nigeria - IBRD Assisted Agricultural ProjectsIBRD 19129 - Nigeria - Second Livestock Development Project

(i)

NIGERIA


DOCUMENTS CONTAINED IN PROJECT FILE

Document No.

A. Background

1. Nigeria - Agricultural Sector Memorandum, 4723-UNIFebruary 25, 1985

2. Nigeria- Agricultural Pricing Policy, 4945-UNIJune 15, 1985

B. Project Identification and Preparation

1. Second Livestock Development Project, 222.204Preparation Report, Vol. I, II, III, LivestockProject Unit Kaduna, March 1983

2. The Green Revolution, A Livestock Production Plan 222.205for Nigeria, Y.A.M. Mogaji, September 1981

3. Livestock Development Project (Loan 1091-UNI) UNI-LnlO91-R/CProject Completion Report, WAPAB, July 2, 1984

4. Second Livestock Development Project, 222.206Sociological Survey, Moses A. Awogbade, 1984

5. Livestock and Land Use in Southern Gongola State 222.207(Executive Summary, Main Report, Appendices) A, B and CResource Inventory and Management, Limited.December 1984

6. Trypanotolerant Livestock in West and Central 222.208Africa, Vol. 1 and 2, International Livestock A and BCentre for Africa, Addis Ababa, 1979

7. Nigeria, Arrangements for Institutional Credit 222.209Y.S. Borgaonkar and K. Nageswara Rao, Agric.Finance Corporation, Bombay, India, 1984

(ii)

Document No. (cont'd)

8. The Nigerian Livestock Feed Industry, Veritak 222.210(Nigeria) Ltd. in association with PAI AssociatesInternational, January 1983

9. The Dynamics of Cattle Distribution in the Nigerian 22 .21JSubhumid Zone, International Livestock Centre forAfrica, Aerial Survey Unit, David Bourn andKevin Milligan

10. The African Trypanosomiases, World Bank Technical 222.212Paper Number 4, C.W. Lee and J.M. Maurice, April 1983

11. Papers presented at the 2nd ILCA/NAPRI Symposium on 222.213Livestock Production in the Subhumid Zone of Nigeria (A aad B)1974-1984, Part I and Part II, ILCA, Kaduna

C. Working Papers

Volume I1. The Livestock Subsector 229.119(1)2. The Pastoral Fulani, Land Tenure and

Grazing Reserve Development 229.119(2)3. Livestock Production Models 229.119(3)4. N'D-ma Cattle Ranches 229.119(4)5. Livestock Systems Research Program ?22.ci9(5)6. Nigerian Agricultural and Cooperative Bank

-Credit Procedures 229.119(6)7. Assistance to the Federal Livestock Department

--Livestock Sectoral Planning Unit 229.119(7)

Volume II8. Staff Development and Training Program 229.119(8)9. National Livestock Projects Department

-Organization of Livestock Production Programand Job Descriptions 229.119(9)

10. Special Studies 229.119(10)11. Detailed Cost Tables 229.119(11)12. Economic Analysis 229.119(12)

WAPABFebruary 1986

(iii)

NIGERIA


LOAN AND PROJECT SUMMARY

Borrower: Federal Republic of Nigeria

Beneficiaries: Pastoralists and mixed farmers; National LivestockProjects Department 1|; NigerianAgricultural and Cooperative Bank Ltd.; 18 StateGovernments; Federal Livestock Department;International Livestock Center for Africa; andNational Animal Production Research Institute.

Loan Amount: US$81.0 million equivalent

Terms: Payable over 20 years. including five years ofgrace, at standard variable interest rates.

Project This second phase project would use some of theDescription: successful technologies developed under the First

Livestock Project (Loan 1091-UNI) which on thewhole, was only partically successful, and more recentresearch findings. On a nationwide but selective basis,the project would support the development of cattle andgoats and, to a small extent, sheep and poultry. Themain objective would be to increase livestock productionthrough improved nutrition and animal health and therebyincrease farmers' incomes. The project would support theGovernment's reoriented livestock development programwhich emphasizes the small scale private producer. Theproject would Include: (i) credit for the purchase offarm inputs, including imported trypanotolerant N'Damacattle; (ii) equipment for participating institutions;(iii) settling of pastoralists on grazing reserves; (iv)livestock systems research; (v) a manpower developmentand training program; (vi) technical assistance;(vii) greater involvement of the private sector insupporting services; (viii) establishment of a livestocksectoral planning capacity for the Federal Government;and (ix) funds for special studies including a review ofthe existing veterinary services.

1/ National Livestock Projects Department, formerly National LivestockProject Unit.

(iv)

Summary Project Cost Estimates

US $mnLocal Foreign Total

A. LIVESTOCK PRODUCTIONPROGRAM

1. Credit Program 7.5 21.4 28.92. Non Credit Program .9 1.0 1.93. N'dama Ranches 1.0 1.0 2.04. Grazing Reserves .8 .5 1.35. Livestock Systems Research 3.0 1.7 4.7

Sub-total: 13.2 25.6 38.8

B. PROJECT MANAGEMENT ANDSUPPORT SERVICES

1. Nat'l Livestock Projects Dept.- Admin. & Central

Services 8.2 18.9 27.1-Field Services 14.3 6.8 21.1

Sub-total NLPD: 22.5 25.7 48.22. NACB Livestock Credit Unit 1.3 .5 1.83. Fed. Livestock Dept.

Sectoral Planning Unit .2 2.5 2.7Sub-total: 24.0 28.7 52.7

Total Base Costs: 37.2 54.3 91.5Physical Contingencies .9 1.0 1.9Price Contingencies 20.2 14.4 34.6Total Project Costs: 58.3a) 69.7 128.0

a) of which US$5.0 mn in duties and taxes

Financing Plan (US$ mn): Local Foreign Tota'.

IBRD 11.3 69.7 81.0NACB 4.0 - 4.0Farmers 11.4 - 11.4Federal Government 31.6 - 31.6

Total 58.3 69.7 128.0

Estimated Disbursements (US$ mn):IBRD Loan

FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94

Annual 4.9 13.7 17.0 15.4 10.6 11.3 5.7 2.4Cumulative 4.9 18.6 35.6 51.0 61.6 72.9 78.6 81.0

(v)

Benefits and Risks: The project would: (i) increase livestock pro-duction and income of some 30,000 families(approx. 200,000 people); (ii) reorient Govern-ment livestock development strategy towards thetraditional smallholder and the private sector;(iii) promote mixed crop and livestock farming; and(iv) provide a livestock sector planning capacity.At full development, the expected annual productionwould amount to about 3,000 tons of meat, 1,000 tonsof milk and 300,000 dozen eggs. This project woulddevote considerable effort to expand nationwidesystems and channels to deliver credit and technicalassistance to farmers. Once these systems aresuccessfully set up, it is envisaged a follow-onproject could reach substantially more beneficiariesthan the 30,000 this project has targeted. Risksinclude maintaining control of this nationwideproject and providing adequate follow-up supervisionof project participants. Provision has been builtinto the project to reduce these two risks.

Economic Rate of Return: Approximately 19%.

Staff Appraisal Report: No. 5795-UNI

Maps: IBRD 15065R6IBRD 19129

WAPABFebruary 1986

NIGERIA


I. BACKGROUND

A. Introduction

1.01 The Federal Military Government of Nigeria (FMG) has requestedWorld Bank assistance for a Second Livestock Development Project (LivestockII). The project would be implemented over 5 years, and is estimated tocost US$128 mn. At full development, the project would increase theproductivity and incomes of about 30,000 pastoralists and farm familiesthroughout the country through the supply of credit for farm inputs,support services, improved institutional effectiveness and coordination.

1.02 The proposed project would be the successor to the FirstLivestock Development Project--Livestock I (Loan 1091-UNI, US$21 mn, ofDecember 1974, closed July 1983). Both the November 1982 identificationreport and the March 1983 preparation report, written by consultantscontracted by the Federal Livestock Department (FLD), proposed a projecttotalling about U3$620 mn. In September 1983, a pre-appraisal missionrecommended a smaller project of about US$120 mn that would concentrate onthe promotion of proven livestock development technologies on a scale thatcould be managed by available management. The appraisal mission confirmedthis approach as the most appropriate.

B. The Agricultural Sector

1.03 Economic Background. Recent macro-economic and policy develop-ments are discussed in "Nigeria - Country Economic Memorandum." Report No.5913-UNI, dated December 18, 1985 (green cover).

1.04 The Agricultural Sector 1/ Agriculture is the leading non-oilsector in Nigeria, directly supporting about 60% of the population, andproviding 26% of GDP, 5% of total exports and 98% of non-oil exports in1983. Production is overwhelmingly by smallholders, using traditional,manual technology. There are conflicting estimates of the growth indomestic food production due to the poor data base. However, the Bank'smost recent analysis 1/ concludes that in the period 1970-82, foodsupplies in Nigeria increased in absolute terms at or just below theassumed population growth rate (2.7%). Overall demand for staple food

1/ A full account of the agricultura'l sector is given in Nigeria -Agricultural Pricing Policy, Report No. 4945-UNI, June 15, 1985,and in Nigeria - Agricultural Sector Memorandum, Report No.4723-UNI, February 25, 1985. Key statistics of the sector are inAnnex 1.

- 2 -

grew at about 2.9% per annum and part of this growth was met by importsencouraged by trade and fiscal policies. Between 1973 and 1983 foodimports rose more than eleven times from US$174 mn to about US$2,000 mn.On the other hand, agricultural exports dropped from US$174 mn in 1974 toUS$71 mn in 1982. Recent restrictions on imports have reversed this trendand encouraged increases in domestic foodcrop production. The sector hasfaced intensive competition for labor and skills from other expanding partsof the economy, and many young people have left agriculture for the towns.This trend has diminished and has probably been reversed since the 1983drop in oil revenues. Inflation and ;he overvalued naira raised productioncosts, especially hired labor, so tlat competition in world markets becameincreasingly difficult.

1.05 The present administration has given high priority to the agri-cultural sector and has recently committed itself to increase the share ofthe Federal capital budget to agriculture. The Bank has been activelyinvolved in the sector, committing a total of US$1,252.9 mn for 25agricultural projects (Map 15065R6). Most of these projects have been forarea agricultural development, followed by tree crops, fertilizer imports,livestock, forestry, training and technical assistance.

II. THE LIVESTOCK SECTOR 2/

A. Significance of Livestock in the Economy

2.01 The livestock sector makes an important contribution to thenational economy. Nigeria has the largest animal population in West Africawith an estimated 9 million cattle and 30 million goats and sheep.Agriculture as a whole constitutes approximately 26% of GDP, whilelivestock, about 4%. In 1981 prices, this amounts to about US$2 billion.While supporting data is unavailable, livestock provides both a source ofemployment and income for a large segment of the rural population, and animportant source of protein in the local diet. It offers a source ofcapital accumulation and savings which can be easily liquidated when cashis needed.

2.02 The sharp rise in oil revenues in 1976 caused an increase indemand for animal products but supply did not keep pace. The 1981 Bank-assisted livestock sector review estimated that since 1976, supply has beengrowing at 1.8% per annum, while demand at 5.1% in the period 1976-81. Oi'lrevenues increased incomes considerably, and with a high income

2/ Because this report deals mainly with livestock and not otheragricultural subsectors, for simplicity, the term livestocksector will be used in this report.

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elasticity of demand for animal products, the growing gap between supplyand demand was largely met by imports. In 1981, imports valued at aboutUS$400 mn represented 25% of animal protein consumed. While importrestrictions have existed since 1979, since 1983 Government almostcompletely banned imports of most animal products and feeds, in an effortto reduce the import bill. This had the effect of increasing domesticprices and reducing animal protein intake in the Nigerian diet. The highprices however, have provided a strong incentive to increase localproduction. Working Paper 1 describes the livestock sector in moredetail.

B. Characteristics of the Livestock Sector

1. Livestock Distribution and Production Systems

2.03 Ecology and Livestock Distribution. Livestock distribution isdetermined by tsetse fly incidence. Tsetse flies are major transmitters oftrypanosomiasis among a wide range of wild and domestic animals. Innon-tolerant cattle species (97% of Nigerian cattle), a severe attack willresult in death. The N'Dama and Muturu cattle breeds are tolerant to thisdisease (trypano-tolerant).

2.04 The semi-arid ecological zone (400-900 mm rainfall/annum) isvirtually tsetse fly free and consequently carries 75% of the livestockpopulation, despite having the lowest forage resources. Because of lowrainfall and high population pressure on the land, overgrazing is often aproblem. The sub-humid zone (900-1,500 mm) has opened up to crop farmingin the last decade which, together with a tsetse fly eradication program,has reduced the tsetse fly's natural habitat. As a consequence, permanentcattle population in the zone has recently increased dramatically, and isnow estimated at 3-4 million head. This zone presents the greatestpotential for crop and livestock development due to lower populationdensity and higher rainfall. Despite having the greatest natural forageresources, the humid zone (+1,500 mm) has the smallest livestock populationbecause of the high tsetse fly infestation. Only about 300,000trypano-tolerant cattle and 3.5 million dwarf goats are held in this areaby smallholder crop farmers. These ecological zones are shown in Map19129.

2.05 Livestock Production Systems. Few traditional mixedcrop-livestock farming systems exist in Nigeria. Where they do exist, theyare oriented towards subsistence with some marketing of surplus animalproducts. The systems use little or no outside labor and very fewpurchased inputs. Livestock is a complementary enterprise to cropping:farmers take advantage of any land, labor or feed resources which have noalternative use. Cropping activities also benefit from livestock in termsof increased soil fertility (manure) and draught power. Despite thesystems' relatively low productivity, it increases the value of the finalproduct significantly, because in comparison to modern production methods,

- 4 -

the use of high cost resources and purchased inputs is low. From the pointof view of the economy, these systems are more efficient thanhigh-input/output production systems when the latter depend on distortedprice regimes (para 2.09). The development of existing and new mixedfarming systems would help provide significant production increases, bothfor livestock and crops.

2.06 Ninety-seven percent of cattle are owned by pastoralists, mostlyFulani. Unlike the mixed farmer described above, livestock is theprincipal source of income for the migrating pastoralist. The averagenumber of animals per family is about 45. Production is low, as in most ofWest Africa, averaging a 45% calving rate, 110 liters of milk per cow peryear, and an offtake of 9%. There are three main constraints to increasingcattle production: animal disease, lack of adequate nutrition and landtenure. (a) Inadequate control of animal diseases has led to seriouslosses in the national herd. Until recently, the major diseases of cattle,rinderpest and contagious bovine pluero-pneunomia (CBPP), had beencontrolled by vaccination. For several reasons, including poor veterinarycoverage (para 2.13), rinderpest has reappeared and caused an estimatedI mn deaths in the 1982-1984 epidemic. Trypanosomiasis (para 2.03) andstreptothricosis are other livestock diseases which can cause significanteconomic loss. (b) Nutritional stress is experienced by cattle during thelast 2.5 months of the dry season from January through March. This stressreduces fertility and milk production, and increases calf mortality. (c)Land tenure arrangements are a constraint to pastoralists who wish tosettle, which in turn, could provide the basis to increase livestock andcrop production through mixed farming. Pastoralists have establishedeconomic ties with crop farmers by exchanging milk for grain, and duringthe dry season migrations, manure for crop residues. However, thismigration, combined with greater pressure on land, has resulted inconflicts with crop farmers who claim that migrating livestock eat anddamage their crops. Partly because of these conflicts and the opening-upof the sub-humid zone, about 25% of pastoralists have settled where theyhave been able to overcome land tenure constraints (para 2.10). Settledpastoralists generally take up crop farming to meet family crop subsistencerequirements which reduces their economic dependence on livestock. As aconsequence, many pastoralists who cultivate crops (agropastoralists)reduce their herd size to accommodate the sedentary life. This is asignificant development because it reduces overgrazing problems, and, noreimportant, initiates mixed farming which increases the productivity of bothcrop and livestock production. It is estimated that a further 50% ofpastoralists wish to settle but cannot do so due to land tenureconstraints. Recent research findings, supported under Livestock I, by theNational Animal Production Research Institute (NAPRI) and the InternationalLivestock Center for Africa (ILCA) have been used to develop a leguminousfodder plot for pastoralists which integrates into this agropastoralistsystem and increases its productivity in two ways: (i) it provides a highquality feed during the critical dry season and (ii) after a few years, thesoil fertility increases, and the plot can be used for cropping, thusforming a permanent rotation system.

2.07 Three other less significant forms of cattle production exist inNigeria. The first is the semi-arid zone crop farmer who keeps a few headof cattle as draft oxen for land cultivation and transport, or to fattenfor sale at the end of the dry season when meat supplies are low and priceshigh. The second is the humid zone crop farmer who keeps trypanotolerantcattle--in larger herds of up to 30 head in the west and from one to sixhead in the east of the country. The third consists of large scale publicsector cattle ranching operations which have generally been unsuccessful(para 2.13).

2.08 The 30 million goats and sheep provide approximately 20% ofavailable animal protein. Most are kept as part of the pastoralists cattleherds in the semi-arid zone. In the humid zone, dwarf goats are commonlykept by mixed farmers and either allowed to free graze as in the west, orpenned as in the intensively cultivated areas in the east. The mainconstraints to increasing dwarf goat production is the disease PPR (pest ofsmall ruminants) and malnutrition, particularly during the goat's firstyear. The penning system often causes malnutrition by not providing asufficient or balanced diet. Because of these two constraints, themortality rate in dwarf goats is as high as 25%.

2.09 Nigeria's poultry population of about 130 mn birds is dividedinto two distinct flocks: the first, accounting for 88% of the nationalflock, is owned by farmers in traditional village scavenging flocks; thesecond, accounting for the remainder of the flock, is owned by commercialproducers. Productivity is higher in commercial production: hens from thetraditional flocks produce on average 50 eggs per year, while thecommercial flock produce about 170. The traditional flock is constrainedmainly by disease (newcastle, fowl pox and typhoid). The commercialflock's constraints are the same diseases, and an over-reliance on maizeimports which are cheap compared to locally produced maize due thedistorted price regime caused by the overvaluation of the naira, and to lowworld market prices. These imports have been periodically restricted byGovernment as part of austerity measures, which resulted in many commercialoperations collapsing due to the lack of a cheaper local source of feed.

2. Socio-Economic and Institutional Organization

2.10 Land Tenure. The 1978 Land Tenure Decree vested all land inState Governors. An official title to land (Certificate of Occupancy) canbe obtained through this Decree, but the process is both lengthy and costlyand, therefore, out of the reach of most farmers and pastoralists. Despitethe Decree, traditional land tenure systems continue to operate in mostareas. The community exercises the right of ownership and individualscannot possess absolute title to land. Village heads allocate uncultivatedland and usufructuary rights continue as long as land is cultivated. Thissystem favors the crop farmers over many pastoralists who wish to settle(para 2.06 and Working Paper 2).

2.11 Infrastructure and Marketing. The increase in the road networksince 1950 has been of major importance to the livestock sector as it

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allows easy access for mass vaccination campaigns, and to cattle markets.Virtually all cattle moving the 700-1,000 miles from traditional northernproducing areas to large southern markets, now travel by truck. Livestockare marketed and processed by the private sector atid the operations aregenerally considered well organized and cost-effective. Government attemptsto provide parallel marketing and processing facilities have beenunsuccessful (para 2.13).

2.12 Institutional Structure. Within each state government's Ministryof Agriculture is a Department of Animal Health and a D)epartment of AnimalHusbandry. The Federal Ministry of Agriculture, Water Resources and RuralDevelopment (FMAWRRD) has recently been reorganized. The Federal LivestockDepartment is now responsible for planning and monitoring livestockactivities, controlling rinderpest and CBPP (contagious bovinepleuro-pneumonia), and keeping a check on the veterinary public healthsituation. The state ministries are responsible for control of all otheranimal health problems. The National Livestock 1'roject Unit (NLPU) 3/established under Livestock I, was upgraded within FMAWRRD in 1984 andgiven the responsibility for coordinating and implementing all federallyfunded livestock production activities in the country. This gives NLPD animportant coordinating role in livestock production within each state.Federal and state parastatals involved in direct livestock productionschemes were established during the last decade, but many have beendisbanded following disappointing results (paras 2.13 and 2.19).

C. Development Strategies and Constraints

2.13 Livestock. In the 1970's, Government attempted co introducemodern commercial livestock operations in an effort to reduce the animalproducts supply gap (para 2.02). This effort included setting up largeparastatal ranches, marketing and processing facilities, and recruitinglarge numbers of staff into State and Federal Livestock Departments. The1981 Bank-assisted livestock sector report reviewed these experiences andpointed out the failings of this approach: the technology was inappropriatefor Nigerian conditions and state run enterprises operated at a loss. Inaddition, Government's large expenditure was not offset by cost recoveryfor services and inputs provided so that now, funds even for basicveterinary inoculations are unavailable. Because of this approach,production increases were minimal. At the same time, the small traditionallivestock producer, who owns 95% of the livestock in the country, wasby-passed.

2.14 Credit. Government's agricultural credit strategy has been toencourage agricultural development by: expanding the commercial banks

3/ National Livestock Project Unit (NLPU), now National LivestockProjects Department (NLPD).

branch network, establishing the Nigerian Agricultural & Cooperative Bank,Ltd. (NACB), providing subsidized interest rates to farmers, establishingan agricultural credit guarantee scheme for commercial banks, and directingcommercial banks to allocate an increasing percentage (now 12%) of theirloans and advances to the agricultural sector.

2.15 Despite the resources available for credit, the agriculturalcredit system as a whole is weak and has done little to stimulate thesector, particularly for smallholders. Financing institutions, especiallycooperatives, are affected by overdues ranging from about 10% in thestronger institutions to about 50% in the weaker ones. These overdues arecaused mainly by inadequate lending procedures, adverse climatic conditionsand political interventions. However, the overall situation is improvingrecently with better credit discipline and serious efforts being made, withconsiderable success, to recover overdues. Interest rates for agriculturaldevelopment are below both deposit and commercial lending rates and do notprovide commercial banks with the incentive required to increaseagricultural lending. Commercial banks have only relatively recentlyentered the field of direct agricultural credit to smallholders, e.g.Livestock I (para 2.16).

2.16 Experience with Past Lending. Although Livestock I (para 1.02)was largely unsuccessful, there were some successful components. LikeGovernment's other livestock development schemes (para 2.13), thecomponents which attempted to promote technologies which were inappropriateto Nigeria, failed. The Livestock I Project Completion Report (PCR)identified the smallholder fattening scheme as the only successfulproduction component. This scheme provided credit and simple technologicalimprovements to an existing production system (para 2.07). Farmer demandto participate in the scheme increased to the point that in 1983,Government, from its own resources, extended the project's scopenationally. In addition, commercial banks contributed a total of aboutUS$1.0 mn by way of parallel financing to the scheme. The additional scaffrequired for the national expansion were attached to NLPD from existinganimal production and veterinary state extension staff at the soleadditional cost of providing field and petrol allowances. Despite theseefforts, it was impossible to meet the full farmer demand to participate inthe scheme due to the lack of credit funds.

2.17 The PCR identified other successful aspects of the projectincluding importing 4,400 N'Dama cattle breeding stock into the tsetseinfested humid zone (paras 2.03 and 2.04), recovering costs for inputs, andsett4ing up an institutional framework to deliver credit, input supply, andanimal health and production assistance. The project also assisted NAPRIand TLCA in developing and replicating nationally, new technologies toimprove traditional mixed farming systems (para 2.06). Despite the overallsuccessful institutional framework, the PCR identified specificinstitutional weaknesses, namely inadequate field supervision, projectmonitoring and evaluation, and training.

2.18 Future Development Strategy and Bank Role. As a result of thelessons learned from the sector report, Livestock I, and from NAPRI andILCA research findings, the Federal Government has decided to shift theemphasis of its support to the livestock sector in two important ways: (a)technically, by encouraging the promotion of simple, proven improvements totraditional mixed farming systems, and (b) financially, by using existinginstitutions more effectively rather than creating new ones, giving theprivate sector a greater role in production, credit, marketing and inputsupply, and instituting cost recovery mechanisms for farm inputs. Bothmeasures would reduce Government expenditure in areas the private sectorwould assume and thus would allow Government to focus resources onproviding essential support services to the sector (e.g. veterinaryassistance).

2.19 In pursuit of the shift in emphasis described above, FMG hasalready taken certain measures. It is privatizing the National LivestockProduction Company--a parastatal involved in animal production, processingand marketing, and also the vaccine production facility at Vom. Regardingagricultural credit, Government has indicated its intention to make lendingfor agriculture more attractive to financing institutions by increasinginterest rates (para 3.43). The proposed Second Livestock DevelopmentProject (Livestock II) fully reflects the principles underlining theseobjectives and will be FMG's main livestock production program in the FifthNational Development Plan (1986-1990).

III. THE PROJECT

A. Objectives and Summary Description

3.01 The project's objective is to increase the production of animalproducts and consequently farmers' incomes. In addition, it wouldencourage a variety of sectoral reforms already endorsed by the FederalMilitary Government (FMG), in particular through: (a) shifting emphasistowards support of small traditional prcducers; (b) utilizing the privatesector as instruments for production and input supply; (c) introducing fullcost recovery of farm inputs and veterinary supplies; and (d) establishinga livestock sectoral planning capacity.

3.02 The proposed project would, over five years, help raise theproductivity of some 30,000 pastoralists' and mixed farmers' small cattleherds and goat flocks. Sheep and poultry production would be assisted on asmaller scale. The project would also devote considerable effort to expandnationwide systems and channels to deliver credit and technical assistai.ceto farmers. Once these systems are successfully set up, it is envisaged asubstantially greater number of participantes could be reached than the30,000 this project has targeted. Project components are divided into twomain categories:

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(a) the Livestock Production Program, which, through six types oflivestock development enterprises, would:

- assist about 11,000 smallholders fatten cattle and sheep;- help some 2,500 agropastoralists and mixed farmers grow dry

season fodder;- assist about 15,000 goat breeders grow forage;- manage a N'Dama nucleus breeding unit and distribute from it

trypano-tolerant N'Dama cattle to about 180 mixed farmers inthe western states;

- import a further 1,250 N'Dama cattle and distribute them to500 small mixed farmers in the eastern states;

- assist 100 farmers in poultry production; and- assist pastoralists to settle on grazing reserves by

providing infrastructure and land tenuce rights; and

(b) Management and Supporting Services, which would:

- strengthen the National Livestock Projects Departmeut (NLPD)by providing staff, technical assistance, training, housing,vehicles and equipment;

- provide training, vehicles, equipment and field allowancesto the Nigerian Agricultural and Cooperative Bank, Ltd.(NACB). and to the State veterinary and livestock productionstaff attached to the project;

- arrange for the delivery of farm inputs and veterinarysupplies to project participants;

- provide research institutions with staff, vehicles, equip-ment and allowances to conduct livestock systems research;and

- establish a livestock sectoral planning capability in theFederal Livestock Department.

3.03 Several existing institutions would participate in projectimplementation, of which NLPD and NACB would have the main roles. NLPDwould have principal responsibility for implementing the project and inparticular it would:

- coordinate field and credit services;- promote the adoption of technical packages by farmers;- provide training, supervision and management of selected

state livestock extension staff who would be responsible forthe field supervision of farmers' investments;

- arrange for the procurement and distribution of farm inputsand veterinary supplies;

- establish the simple infrastructure required (access roadsand small dams) on grazing reserves for the settlement ofpastoralists; and

- manage two N'dama holding ranches.

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3.04 NACB would be the principal credit agency and would make loans tofarmers through one or more selected lending agencies in each state.

B. Detailed Features

1. Livestock Production Program.

3.05 The livestock production program incorporates FMG's recentemphasis of utilizing simple traditional farming systems as a means toincrease livestock output (para 2.18). The technical packages for the sixtypes of enterprises or models the project would promote are relativelysimple and aim at improving animal nutrition and health. Removingnutritional and health constraints by providing dry season leguminousforages, other feeds, and veterinary assistance, has been shown to increaselivestock productivity in two ways: (a) the animal's growth rate is steady,and (b) the animal's reproductive capacity and the ability of the offspringto survive are significantly improved. Increasing productivity in thesetwo ways results in a quicker herd or flock growth, animals reachingslaughter age at an earlier age, and greater milk and egg production.

3.06 The techi.ical improvements are simple and yield attractivereturns to farmers (para 6.03), but have not been adopted before for threereasons: (a) only recently have iesearch findings identified theconstraints to improving traditional production systems, and foundsolutions which are socio-economically acceptable to producers; (b) theinitial investment required is often too large for the producer, but toosmall to interest the banking system; (c) farm inputs and veterinarysupplies have not been readily available at the farm level. The projectwould address these constraints by promoting research findings, providingcredit to finance farmer investments, and arranging for distribution offarm inputs and veterinary supplies. All livestock development modelswould receive credit except the goat breeder who can afford to pay thesmall initial investment costs from his own resources. During the latterpart of Livestock I's research program, NLPD promoted these models and theywere successfully adopted by pastoralists and/or mixed farmers. Sincethen, they have been further refined following a sociological study and anational replication of the models. By project completion, improvednutrition and health would be provided to about 40,000 breeding cows andcalves belonging to pastoralists settled by the project, 45,000 maturecattle before slaughter, 7,400 trypano-tolerant cattle to be introducedinto southern Nigeria, 100,000 goats and 20,000 laying hens.

3.07 Full cost recovery for farm inputs (except fertilizer, a minorinput, which is subsidized by Government) and veterinary supplies would becarried out (para 6.09) as was partially begun under Livestock I.

3.08 The different types of investment specifications required foreach operation, income and operating expenses, cash flow, expected returns

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and technical coefficients have been analyzed in six illustrative farmmodels, summarized below and detailed in Annexes 3-1 through 3-3, andWorking Paper 3.

L.vestock Production Program - Development Models

In,vestm.Number of % to be Cost ofParticipants/ Principal Financed ModelModels Inputs a/ by Farmer (Naira) b/

1. a. Agropastoralist/Mixed FarmerForage Development 925 FB, V,F 20 4,000

b. as above, withwater supply 925 FB,V,F,0 42 7,500

Subtotal 1,8502. Smallholder Cattle

Sheep Fattener 11,400 V,F,A 10 3,0003. Goat Breeder 15,200 FB,V 100 1004. Western N'Dama Breeder 180 FB,V,F,A 30 10,6005. Eastern N'Dama Breeder 500 FB,V,F,A 11 2,2006. Poultry Producer 100 V,F,A,0 20 3,300

Total 29,230

a/ FB = fodder plots or forage garden (goats)V = veterinary inputsF = feedA = animals0 = other major investment (Model lb =

water source, Model 6 = renovationof building and equipment)

b/ Rounded.

3.09 Model 1. Agropastoralist/Mixed Farmer Forage Development. Thismodel would assist 1,850 pastoralists and mixed farmers establishleguminous fodder plots to provide supplementary feeding to cattle herdsduring the dry season. The model is seen as the most important from anagricultural development point of view because it provides the basis forintroducing a mixed farming, crop rotation system. Such systems arelacking in most parts of Nigeria and West Africa, and they coaldsignificantly increase the productivity of both livestock and cropproduction. The fodder provides high quality dry season feed to the cattle

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thus preventing the severe nutritional stress they normally experience atthat time of the year. Equally important, the leguminous fodder cropimproves soil fertility and the fodder plot can be rotated with crops aftera few years. The principal constraints to the adoption of the technologyis the land tenure structure (para 2.06) which prevents pastoralists fromsettling. Under Livestock I, five grazing reserves totalling 115,000 ha,were developed by NLPD. A start has been made on these reserves inproviding 10 ha plots to pastoralists who wish to settle, crop, andestablish fodder plots. Under the project, three more reserves would bedeveloped. The pastoralists to be settled on the reserves would invest inestablishing a 4 ha leguminous fodder plot with ring fencing and wherenecessary, water facilities. At full development, herd numbers areexpected to increase by 20% and offtake and milk sales by 50%.Participants would include pastoralists to be settled on the reserves, andother agropastoralists and mixed farmers (not on the reserves) who arealready settled. The Livestock I reserves ore Kachia (Kaduna State), Gujba(Borno State), Udobo (Bauchi State), Garkida and Sorau (Gongola State).The three new reserves would be: Gidan-Magajiya (Kwara State), Donga(Gongola State) and one other to be selected by NLPD in Niger State(Working Paper 2). As the grazing reserves must be gazetted before landcan be officially assigned to pastoralists, it would be a condition ofeffectiveness that at least 5 reserves have been gazetted. This was agreedat negotiations.

3.10 Model 2. Smallholder Cattle, Sheep Fattener. This model,already proven successful under Livestock I (para 2.16), aims to increasethe slaughter weight of mature cattle and sheep of about 11,000 mixedfarmers. Farmers would purchase 4 head of cattle or 20 sheep and feed themcrop residues and locally available agro-industrial by-products (e.g.brewers grain, palm kernel meal, groundnut meal). Over a 120 day fatteningperiod, 4 head of cattle would gain about 70 kg live weight each and wouldbe prevented from losing another 35 kg during the dry season. The sheepwould gain about 10 kg each. Cattle would be sold at the end of the dryseason when meat supplies are low and prices high, and the sheep soldbefore the Muslim Salah festival when prices rise considerably. Whilemost cattle would be sold for slaughter, some would be retained as workoxen, thus doubling the area a farmer can prepare and crop.

3.11 Model 3. Goat Breeder. This model would assist some 15,000established mixed farmers in the south (para 2.08) develop their goat herds(on average, 6 head) through forage development and animal health. Asinvestment costs are low, no credit would be provided. At fulldevelopment, goat live weight sales from individual farms would rise from32 kg to around 90 kg per annum.

3.12 Model 4. Western N'Dama Breeder. Under Livestock I, 4,400N'dama cattle were imported into the country to increase the limited numberof trypano-tolerant cattle in southwest Nigeria (para 2.04). These cattlewere held on ranches owned by the Western Livestock Company (WLC),including Upper Ogun and Akunu in Oyo and Ondo States, to be bred and soldoff. The project would sell off most of the remaining herd and keep a

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nucleus breeding herd on Upper Ogun Ranch, to be managed by NLPD (WorkingPaper 4). About 180 medium-sized livestock owners in the 3 southwesternstates of Ogun, Oyo and Ondo would receive 10 breeding females each andwould establish dry season foddet plots. At full development, cattlenumbers in individual herds would increase from about 32 to 58 head, andcattle sales would increase from 2 to 9 per annum.

3.13 Model 5. Eastern N'Dama Breeder. The sEme rationale as inModel 4 applies to this model for the southeast of Nigeria. An additionalbenefit would accrue, however, as the base local herd is the Muturu cattlebreed which is significantly smaller than the N'Dama (about 602 lighterthan the N'Dama). Cross-breeding would, therefore, increase the averageweight of the Muturu cattle by 30%. About 1,250 N'dama cattle would beimported from other West African countries over a four-year period. Thecattle would be held on Odada ranch at Nsuuku, Anambra State, managed byNLPD, for a short quarantine and acclimatization period before being soldto about 500 established mixed farmers in groups of 2 or 3 head. At fulldevelopment, the average herd of 5 head would double, and valuabletrypano-tolerant breeding cattle would be sold in eastern Nigeria, an areawhere the cattle population was almost decimated in the 1967-1970 CivilWar.

3.14 Model 6. Poultry Producer. The project would help about 100small commercial egg producers who had given up production due to lack ofcredit and appropriate feeds, but who want to resuscitate their enterprise.This pilot scheme would be based on an ongoing research program (para 3.15)which is searching for economical local sources of monogastric (poultry andpig) feeds to overcome present reliance on imported feeds (para 2.09).Preliminary results indicate that it is financially viable to promote themodel, but cost and benefits would be checked yearly before credit isreleased as the financial viability of the model is sensitive toinput/output prices. Each participant would come into production withabout 200 layers producing about 3,500 dozen eggs and 300 kg of meatannually.

3.15 Research. The project would continue the support given under thefirst project (para 2.06) for four systems research activities and wouldadd a fifth. The four on-going investigations cover further research intothe use of fodder in mixed farming systems, trypano-tolerant cattle inhumid zone agriculture, and animal feeds, with particular attention tomonegastric feeds and work oxen maintenance feeds. The new researchactivity would cover development packages for small livestock (pigs,poultry, duckrs etc.) in villages. The National Animal Production ResearchInstitute (NAPRI) and the International Livestock Center for Africa (ILCA)would carry out the research program (Working Paper 5).

2. Project Management and Supporting Services.

3.16 In pursuit of FMG's policy to maximize the use of existingorganizations, public and private, the project's interventions would be

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limited to making better use of existing staff and organizations. Theproject would provide the following investment support.

3.17 National Livestock Projects Department (NLPD). By the end of thefirst project, NLPD had become established as an effective instrument forthe promotion of livestock development although it was recognized in theProject Completion Report that field supervision, monitoring andevaluation, and training needed to be strengthened. Under this project,Government has already agreed to set up three zonal offices which, with theone already established at Ibadan, would strengthen technical supervisionof state NLPD offices and would improve coordination between institutionsparticipating in project implementation. Training (para 3.21), monitoringand evaluation (para 3.23) would be strengthened and technical assistanceprovided (paras 3.22). Houses for staff would be built in states where itis more economical to build than rent. NLPD's organization is furtherdetailed in Chapter IV.

3.18 Extension Services. As under Livestock I, existing state staffwould provide animal health and production extension services under NLPD'sdirection and supervision. This small cadre of state staff, reaching amaximum of 25 per state, would cDntinue to have their salaries paid bytheir respective state governments. To improve their effectiveness, theproject would provide training, field allowances, and, where necessary,vehicles (mostly motorcycles).

3.19 Nigerian Agricultural and Cooperative Bank Ltd. (NACB). Supportwould be given to NACB by the provision of funds, as a grant, for technicalassistance, staff, vehicles and operating expenses, and office equipment.This would enable NACB to establish a small Livestock Credit Unit whichwould be responsible for implementing, supervising, and monitoring progressof the project's credit component. Further details of NACB are in para3.35 and Working Paper 6.

3.20 Federal Livestock Department (FLD). The project would assist inestablishing a Livestock Sectoral Planning Unit in FLD to provide theFederal Ministry of Agriculture with the institutional capability to designand implement a sector-wide planning, monitoring and evaluation program.This would support a recent Ministry of Agriculture reorganization (para2.12) whereby FLD has been mandated to plan, monitor and criticallyanalyze the sector's development. The project would provide the necessaryexpertise and equipment to enable FLD to assess its role, define a list ofsector planning priorities based on surveys and special studies, andregularly produce statistics and information for livestock sectoral policyplanning and decision-making (Working Paper 7).

3.21 Training. The project would set up a training unit in NLPD, asthis was identified as a weakness under Livestock I. A detailed skill gapanalysis was carried out to produce the project's first year trainingprogram by identifying: (a) particular activities required to implement theproject, (b) skills required to carry out those activities, and (c) skillsof existing staff. This analysis would provide the training unit with the

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necessary information to meet its two longer term objectives as the projecttraining needs change: first, identify the skills required to carry outproject activities and second, put in place a skilled training unit capableof providing on-the-job training and staff development programs. A smalltraining center would be set up at Kachia Grazing Reserve, 60 km fromproject headquarters in Kaduna, to assist the field staff training program.A special effort would be made to provide communication skills to extensionagents dealing with pastoralists that would be sensitive to thepastoralists' cultural norms. Management staff at headquarters and statelevel would receive training through the Bank assisted Agriculture andRural Management Training Institute (Loan 1719-UNI of June 1981) andthrough a well-planned and monitored counterpart training program. Aprogram of staff development would be established to enable promisingproject staff to acquire skills required for positions demanding increasedresponsibility. Details of the training and staff development program arein Working Paper 8.

3.22 Technical Assistance. The project would provide internationallyrecruited staff to give mainly technical rather than managerial assistance.Nigerians who have received on-the-job training during Livestock I andduring the more recent national expansion of the project, are considered tobe adequately trained to assume most management positions. In the interimperiod between the first and proposed second project, the existingLivestock I management contract was extended through a project preparationfacility (PPF) (para 3.34). The management firm's performance underLivestock I was found satisfactory by FMG and the Bank, and there is apossibility the same firm would be retained for this project. Funds werealso made available by the PPF to give training to Nigerians in seniormanagement positions in NLPD and NACB, before Livestock II effectiveness.Both these measures would provide staff with further formal and counterparttraining. In addition, it will ensure for a quicker project start up. ForLivestock II, fifteen experienced technical staff would be recruited onterms and conditions satisfactory to the Bank. The recruitment of these 15staff and their job descriptions, were agreed at negotiations. The projectwould provide funds for 12 internationally-recruited staff in NLPD, two inFLD and one in NACB for varying periods of time. Since a strongcounterpart training program would exist (para 3.21), several positionshave been made available for only three years. The positions required tobe filled by internationally recruited staff are: NLPD - financialcontroller, technical controller, head of training and manpowerdevelopment, head of monitoring and evaluation, chief land use planner,water development engineer, workshop engineer, zonal supervisor (4), N'damaranches manager; FLD - livestock sectoral planner and an informationspecialist; NACB credit-specialist. Job descriptions are in Working Paper9. It would be a condition of effectiveness that the financial controller,technical controller, head of training and four zonal supervisors had beenappointed.

3.23 Studies. The project would provide funds for three studies: (a)a national livestock census aimed at producing reliable livestockstatistics on which to base development plans; (b) an evaluation of animal

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health services. Government is intending to reduce the cost and improvethe performance of its veterinary services (para 2.13). The study woulddetermine means to make the service more effective, including privatizationof services, and would provide an action plan which the project could helpimplement; and (c) a monitoring and evaluation program for NLPD which wouldbe drawn up based on information required by management, and on whatinformation can be accurately collected by field staff. The work of themonitoring and evaluation unit would then be periodically reviewed. Termsof reference for these studies were agreed at negotiations (Working Paper10), and it was further agreed that NLPD and FLD would consult with theBank prior to the engagement of consultants, that the latter would beproperly qualified and experienced, and would be employed on conditions andterms satisfactory to the Bank.

C. Cost Estimates

3.24 Total project costs over the five year project implementationperiod 1986-91 are estimated at US$128 mn (N128 mn) of which US$69.7 mn(N69.7 mn) or about 54% would be foreign costs. If taxes and duties areexcluded, total costs would be US$123 mn (N123 mn). Project costs arecalculated using prices obtained at appraisal, and updated to levelsexpected to prevail in September 1985. Physical contingencies have beencalculated at 10% for civil works and 5% for vehicles and equipment andrecurrent costs other than salaries for which no physical contingencies areadded. Price contingencies are calculated on updated base costs plusphysical contingencies and are compounded annually, using the followingrates: all local costs: 1986-91 14%; foreign costs: 1986 7.5%; 1987-90 8%;1991 5%. FMG has taken some important positive initiatives as part of the1986 budget. However, uncertainties continue regarding futuremacro-economic policies, namely the timing and extent of a medium-termreform program. For the purpose of estimating project costs, it has beenassumed conservatively that the Government will compensate for half thedifferential between domestic and international inflation rates either byallowing the nominal exchange late to depreciate or through containingdomestic inflation. For the purpose of this analysis, the latter has beenassumed, i.e. a constant nominal exchange rate with domestic inflationcontained at 14%--below the level it would reach if the exchange ratedepreciated in nominal terms. Total contingencies are equivalent to 28% oftotal project costs or 40% of base costs. Detailed project costs are foundin Annexes 3-4 through 3-6 and Working Paper 11 and are summarized below:

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Project Cost SummaryZ of Z of

US $mn Naira mn Foreign BaseLocal Foreign Total Local Foreign Total Exchange Costs

A. LIVESTOCK PRODUCTIONPROGRAM

1. Credit Program 7.5 21.4 28.9 7.5 21.4 28.9 74 322. Non Credit Program .9 1.0 1.9 .9 1.0 1.9 53 23. N'dama Ranches 1.0 1.0 2.0 1.0 1.0 2.0 50 24. Grazing Reserves .8 .5 1.3 .8 .5 1.3 38 15. Livestock Systems Research 3.0 1.7 4.7 3.0 1.7 4.7 36 5

Sub-total 13.2 25.6 3d.8 13.2 25.6 38.8 66 42

B. PROJECT MANAGEMENT ANDSUPPORT SERVICES

1. Nat'l Livestock Projects Department- Admin. & Central Services 8.2 18.9 27.1 8.2 18.9 27.1 70 30- Field Services 14.3 6.8 21.1 14.3 6.8 21.1 32 23

Total NLPD: 22.5 25.7 48.2 22.5 25.7 48.2 53 53

2. NACB Livestock Credit Unit 1.3 .5 1.8 1.3 .5 1.8 28 23. Fed. Livestock Dept.

Sectoral Planning .2 2.5 2.7 .2 2.5 2.7 93 3Sub-total: 24.0 28.7 52.7 24.0 28.7 52.7 54 58

Total Base Costs: 37.2 54.3 91.5 37.2 54.3 91.5 59 100

Physical Contingencies .9 1.0 1.9 .9 1.0 1.9 53 2Price Contingencies 20.2 14.4 34.6 20.2 14.4 34.6 42 38

Total Project Costs: 58.3 69.7 128.0 58.3 69.7 128.0 54 140

D. Proposed Financing

3.25 In addition to IBRD and FMG financing, the project would befinanced by the Nigerian Agricultural and Cooperative Bank Ltd. (NACB) andby participating farmers. NACB, wholly owned by FMG, is the principallending institution to the agricultural sector. Its proposed contributionwould be direct to State lending agencies to fund part of the creditprogram, in accordance with a lending schedule agreed during negotiations.Farmers' contributions are aggregated from proposed down payments whichvary from 10Z to 42% of individual investment costs. Financing details bycomponent are in the table below and in Annex 3-7.

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Summary Project Financing Plan(US$/1 million)

IBRD NACB Farmers FMG Total

Civil Works 7.7 - - 1.9 9.6Plant, Vehicles,Equipment, Spares 18.2 - - 1.0 19.2

Farm Inputs, Credit 28.1 4.0 8.4 - 40.5Farm Inputs, Other 4.3 - 3.0 0.2 7.5Int. Salaries, Consul-tants, Training 14.4 - - - 14.4

Local Salaries - - 22.4 22.4Vehicle, Plant Op. Costs 1.3 - - 1.0 2.3General Op. Costs 7.0 - - 5.1 12.1

Total Financing Requiredfor Project 81.0 4.0 11.4 31.6 128.0

Z 63 3 9 25 100

3.26 Of the total project cost of US$128.0 mn (1128.0 mn), IBRD wouldfinance US$81 mn at its variable interest rate for a period of 20 yearsincluding a five-year grace period. The IBRD loan would represent 63% ofproject cost or 66% of costs net of taxes and would cover 100% of foreignexchange and 21% of local costs net of taxes. FMG would provide N31.6 mn(25% of project cost), phased to minimize the financial burden in the firstproject years, and increase gradually to a level corresponding toincremental recurrent costs after project completion. FMG's expendituresand recoveries deriving from the project are further discussed in para6.07. The remaining project cost would be financed by NACB N4 mn (3%), andfarmers N11.4 mn (9%). NACB would only finance credit for the smallholderfattening scheme (Model 2, para 3.10) and would fully disburse its 14 mnbefore using IBRD funds for that component. This was agreed atnegotiations. NACB's contribution is considered appropriate having regardto its financial resources and commitments (see para 3.35).

3.27 Program cost totals US$ 195.6 mn (1195.6 mn) and is composed ofproject costs of US$ 128.0 mn (para 3.24) and non-incremental recurrentcosts of US$ 67.6 mn made up and financed as follows and further detailedin Annex 3-8.

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Summary Program Financing Plan(US$/N million)

State OtherFMG Govt's Institutions a/ Total

Non-Incremental

Local Salaries 17.2 21.3 0.8 39.3Vehicle, Plant Operating 12.9 - 0.3 13.2General Administration 11.6 - 3.5 15.1

41.7 21.3 4.6 67.6

Project Cost (para 3.25) 128.0Program Cost 195.6

a/ Other institutions comprise NAPRI N 0.6 mn, ILCA N 3 mn, and WLCN 1 mn.

3.28 To help offset possible delays in disbursements due to foreignexchange authorizations, cash flow and budgetary procedural problems whichhave in the past adversely affected implementation of IBRD supportedprojects, the Bank would place a total of US$5 mn (N5 mn) in a ProjectSpecial Account which would be used to prefinance reimbursable eligibleexpenditures. Initially, while project expenditures are occuring at aslower pace, the amount advanced would be US$3 mn. Details of thisAccount, denominated Account No. 2 (the project's main bank account beingNo. 1) and agreements reached at negotations, are in Annex 3-9. Inaddition, it was agreed during negotiations that: (a) FMG would provide forthe non-incremental staff and operating costs at current levels in theFederal recurrent budget; (b) FMG would wake an initial deposit of N4 mninto Account No. 1, and would promptly thereafter pay the balance of itsannual contribution to project ccst, totalling N31.6 mn over the 5 years,and its share of non-incremental expenditure totalling about N42 mn overthe 5 years, quarterly and in advance into Account No. 1; (c) IBRD wouldreplenish the Account No. 2 upon receiving confirmation at the time ofreimbursement that FMG's share of local funding was up to date; and (d) allIBRD reimbursements, excepting those paid through Account No. 2, would becredited to Account No. 1. A condition of effectiveness would require NLPDto provide evidence satisfactory to IBRD that FMG's initial deposit of N4.0mn had been paid into the project bank Account No. 1.

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E. Procurement

3.29 Procurement arrangements are summarized below:

Amounts and Method of Procurement a/(US$/N million)

TotalProject Element ICB LIB LCB Other NA Cost

Civil Works 4.0 5.6 9.6(4.0) (3.7) (7.7)

Vehicles, Plant, 14.4 2.0 1.8 1.0 19.2Equipment & Spares (14.4) (2.0) (1.0) (0.8) (18.2)

Farm Inputs-Crecfit b/ 1.3 39.2 40.5(1.3) (26.8) (28.1)

Farm Inputs-Other 2.7 1.3 2.4 1.1 7.5(2.7) (1.3) (0.3) ( - ) (4.3)

Consultants 3.1 3.1(3.1) (3.1)

Int'l Salaries, Training c/ 10.3 1.0 11.3(10.3) (1.0) (11.3)

Local Salaries 22.4 22.4

C-) (-)Op. Costs and General Services 8.5 5.9 14.4

(4.3) (4.0) (8.3)Total 34.5 3.3 17.2 9.3 63.7 128.0IBRD (34.5) (3.3) (10.3) (5.1) (27.8) (81.0)

a/ Figures in parentheses are the respective amounts financed by IBRD.b/ Includes N1.3 mn for N'Dama cattle procured internationally by NLPD and supplied

to farmers on credit.c/ Includes US$2.5 mn of pre-project expenditure.

3.30 Civil works building contracts, with the exception of thosebuildings to be constructed at Kaduna, are expected to be unattractive tointernational contractors due to the scattered nature of the works.Consequently, they would be procured utilizing LCB procedures acceptable toIBRD (Annex 3-10), in which foreign bidders would be eligible toparticipate. Buildings concentrated at Kaduna amounting in value to aboutN4 mn, comprising mainly staff housing, would be procured by ICB. Otherminor civil works would be undertaken on force account. Vehicles, plant,equipment, furniture, farm inputs, vehicle/plane operating costs (excludingfuel and lubricants) and general services would be grouped, whereverpossible, into contracts valued at US$300,000 or more and would be procuredby ICB. A margin of preference equal to 15% of the CIF bid price ofimported goods or the actual customs duties and import taxes, whichever isless, would be allowed for domestic manufacturers. Allowance has been made

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for some limited international bidding for items where the amountsconcerned are small and where there are a limited number of suppliers ofparticular goods and services (e.g. procurement of N'Dama cattle).Contracts for fuel and lubricants and other contracts below US$300,000 invalue would be procured through LCB procedures acceptable to IBRD in whichforeign bidders would be eligible to participate. Contracts valued at lessthan US$60,000 would be procured by local and international competitiveshopping with at least three price quotations. Technical assistance(international salaries) consultant services and pre-project expenditure(mainly international salaries) would be supplied by consultants engaged inaccordance with IBRD guidelines for the use of consultants.

3.31 IBRD financed civil works contracts in Kaduna, amounting to aboutUS$ 4 mn (42% of civil works value) would be subject to prior review; othersmaller civil works contracts in the remaining states would be subject toselective post award review. All vehicle, plant, equipment and furniturecontracts over US$300,000 would be subject to prior review, which wouldcover about 85% of equipment value. Other contracts would be subject toselective post award review. Farm input supply Lontracts over US$300,000would be subject to prior review which would cover about 55% of theirvalue. Contracts for supplying vehicle, plant operating, and generalservice costs over US$300,000, which would be subject to prior review arenot expected to exceed about 202 in value. Contracts valued belowUS$300,000 would be subject to selective post award review. If credit forlocally procured farm inputs (US$39.2 mn) and local salaries (US$22.4 mn),which do not lend themselves to procurement procedures, are excluded fromproject costs, the total value of items subject to prior review wouldamount to 60% of remaining project costs, and approximately 50% of thetotal Bank loan.

3.32 The Federal competitive bidding procedures have been reviewed andfound generally acceptable. Some changes and/or additions are recommended(Annex 3-10) which were agreed at negotiations for application duringproject implementation.

F. Disbursement

3.33 The IBRD loan of US$81.0 mn would be disbursed over a 7.5 yearperiod from the second semester FY 1987 to FY 1994 as shown in Annex 3-11and 3-12. There is no IBRD disbursement profile for West African livestockor credit projects. The IBRD all region disbursement profile for livestockprojects indicates bank loans are generally disbursed over 7.5 years. TheEast African based livestock (without credit components) disbursementprofile indicates IDA Credits are normally disbursed over 10 years. Thereasons for not adopting the East African profile are as follows:

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(a) start-up delays, usually associated with a new project, should beminimized in this second phase project as most of the senior local andinternationally-recuited staff are already in place and have gainedconsiderable experience under the first livestock project (para 3.22); (b)total expenditure for civil works, vehicles, plant and equipmuent, 90% ofwhich is financed by the Bank, amounts to some US$28.8 mn of which US$23 mn(80%) would be incurred in the project's first three years. NLPD staffwould prepare appropriate international and local bidding documents beforestart-up, to ensure rapid implementation after effectiveness; (c) of theinternational salaries and consultant costs amounting to US$14.4 mn,US$11.1 mn (76%) would be incurred in the first three years and thereshould be no delays in disbursing the balance of US$3.3 mn in years fourand fiv' ; (d) credit to farmers to buy farm inputs is expected to bedisbursed in a timely manner over the project period in view of: (i)previous experience of IBRD projects involving credit components, whichhave 90% of the loan disbursed over six years, and (ii) and preparationwork for the credit component being considerably advanced.

3.34 The proposed allocation of loan proceeds and the disbursementpercentages are given below:

Summary Disbursement Schedule(US$ million)

Amount of Z of ExpenditureCategory Loan Allocated to be Financed

1. Civil Works 7.0 100% of foreign and 75Zof local expenditure.

2. Plant, Vehicles, Equipmt. 16.4 100% of foreign and 852urniture and Spares of local expenditure

3. (a) Farm Inputs, Credit 100% of amounts disbursedby NACB.

Mi) Model 2 14.9

(ii) Models 1,4,5(c),6 9.3

(b) Farm Inputs, Imported 1.1 100% of foreign expenditureN'Dama Cattle

(c) rarm Inputs, Other 3.8 100% of foreign and 85%of local expenditure

4. Inter'l Salaries, Consul- 13.0 100Ztants and Training

5. Veh. & Plant Operating Cost 7.5 58%& Gen'l Svcs, (excl. spares)

6. Project PreparationFacility (PO85-UNI) 1.1 100%

7. Unallocated 6.981.0

- 23 -All expenditure would be appropriately documented and disbursements wouldbe made either against either full documentation or certified statements ofexpenditure (SOEs) which would be checked during the course of supervisionmissions. SOEs would be allowed for (a) contracts of less than US$60,000equivalent for civil works and less than US$20,000 equivalent for othercategories; (b) force account civil works; (c) operating and generalservice costs; (d) subloans by NACB; and (e) local training programs.Disbursement into Account No. 2 (The Special Account) would be made inaccordance with procedures discussed in Annex 3-9. Assurances wereobtained at negotiations that all supporting documents for SOEs would bemade available upon request for inspection by the Bank. In addition to theUS$1.0 mn provided through a project preparation facility to be utilizedfor internationally recruited technical assistance January-September 1985 -US$940,000, and training US$60,000, provision has been made to finance upto US$2.5 mn of pre-project expenditure as follows: (a) retroactive financefor internationally recruited technical assistance - US$1.74 million; (b)US$0.1 mn for headquarters improvement; (c) US$0.5 mn for vehicle and plantspares and furniture; (d) US$0.1 mn for computer equipment and training;and (e) US$0.06 mn for short-term training. The disbursement of fundsunder loan category 3(a) above, would not include items financed undercategories 3(b) and 3(c), and disbursement conditions associated with thecredit component are outlined in paragraphs 3.26 and 3.39.

G. Credit Arrangements

3.35 The credit program, totalling US $40.5 mn 4/ would beimplemented nationally by NACB using State lending agencies (SLA). NACB isin a good financial position. Net profits increased from N1.3 mn in 1980to N3.7 mn in 1983 and, during the same period, reserves increased fromN8.4 mn to N18.5 mn. Past and projected summarized Profit and LossStatements and Balance Sheets are shown in Annexes 3-13 and 3-14. At thestate level, NACB would establish state credit committees which wouldinclude representatives from NLPD and NACB. This was agreed atnegotiations. The committees would prepare annual lending programs for thestates and for individual participating SLAs, and would monitor progress ofthe credit programs at state level. NACB would lend through the SLAs. Thetype of SLA selected would vary from state to state according toperformance but would be drawn from cooperative societies, state financinginstitutions, IBRD-assisted Agricultural Development Projects, and RiverBasin Rural Development Authorities. NACB is already lending through someof these institutions and, although performances vary, NACB's experience isgenerally satisfactory. Financial details of SLA are not available as thefinal selection has not yet been made, but only the stronger institutionswhich meet agreed eligibility described below, would be invited by NACB toparticipate. Preliminary survey by the NACB/NLPD credit committee (seebelow) indicate between one and three suitable SLAs are available perstate. Coordination of credit, input supply, and marketing would be

4/ US $1L3 mn for N'dama cattle to be imported by NLPD and US $39.2mn in other farm inputs to be provided locally.

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ensured through the already established joint NLPD/NACB credit committee,which is operating under terms of reference satisfactory to IBRD.

3.36 Eligibility criteria, which include, inter alia, recoveryperformance, organization and management, and area coverage, for SLAs toparticipate in the project have been agreed between NLPD and NACB and areacceptable to IBRD. The eligibility criteria are discussed in more detailin Working Paper 6 and would be included in a Subsidiary Loan Agreement tobe entered into between FMG and NACB (para 3.37). Signing of theSubsidiary Loan Agreement would be a condition of Loan Effectiveness.

3.37 Short-term credit (US $20.6 mn) and medium-term credit (US $19.9mn) would be available to farmers for the purchase of inputs, such ascattle, fencing, and feed, and for working capital in the case of poultryfarmers. The inputs are described in Annex 3-3 and Working Paper 3.Farmers in areas covered by selected SLAs, would apply for loans which, ifaccepted, would be approved in accordance with lending terms and conditionsdetailed in Annex 3-15 and in Working Paper 6. Funds for the creditprogram would be transferred to NACB as a Government loan which would berepayable in accordance with an amortization schedule in the SubsidiaryLoan Agreement between FMG and NACB (para 3.36). Agreement on this wasreached at negotiations, in addition to FMG assuming the foreign exchangerisk.

3.38 NACB would establish a new Revolving Credit Fund (RCF) from theproceeds of loan capital repayments, which would be used to make additionalloans (Annex 3-16). The balance of the RCF would reduce annually inrelation to NACB's repayments to FMG (para 6.07). A similar RCF wasestablished under Livestock I, but was administered by NLPD. It was agreedat negotiations that the balance of that account, about N3 mn, wouldcontinue to be operated by NLPD for one year after loan effectiveness afterwhich it would be handed over to NACB. This is to avoid disrupting theongoing lending program where a number of loan applications would be atvarious stages of processing.

3.39 To ensure that start-up of the credit component would not bedelayed, NACB's Livestock Credit Unit (para 3.19) has started preparatorywork, such as selection of SLAs and establishing operating procedures.Disbursement would be made to a SLA once a loan agreement has been signedbetween ITACB and the SLA, and it would be a condition of disbursement ofthe credit component that agreement had been signed by not less than 15SLAs. This was agreed at negotiations.

3.40 In order to determine the effectiveness of the credit systemproposed for the project, agreement was reached at negotiations that NACBwould carry out a full review of the project credit operations fordiscussions with IBRD by not later than twelve months after loaneffectiveness and, thereafter, as at October 31 annually. This wouldprecede the annual agricultural credit interest rate review (para 3.43).

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3.41 Commercial banks provided parallel financing through NLPD underLivestock I, totalling about N1.0 mn. For this second project, the bankshave confirmed their willingness to continue their support. A N2.0 mnceiling would be maintained on commercial bank lending through NLPD, untilFMG and IBRD are satisfied that additiona'L funds, beyond the project'slending program, could be absorbed without detriment to project activities.Agreement on this was reached at negotiations.

3.42 Countrywide, credit and input supply institutions and thelinkages between them are not well developed. These problems are beingaddressed through a National Agricultural Credit Study currently beingcarried out by the Central Bank of Nigeria, with IBRD assistance. Thestudy is extensive and covers issues such as institutional responsibilities(Central Bank, NACB and financing institutions), interest rate policies,subsidies, input supply, etc., the findings of which would be pertinent tothis project. Therefore, an assurance was obtained at negotiations thatGovernment would review the study with IBRD by not later than June 30,1986, and that a program for implementing agreed study recommendationswould be finalized by December 31, 1986, and thereafter implemented inaccordance with the terms of the implementing program.

3.43 Interest Rates. Farmers would be charged interest in accordancewith Central Bank of Nigeria's guidelines, currently 9% for both short andmedium-term loans. In addition, because the margins for SLAs would be low(1Z), they would add a minimum of 2% per annum administrative charge tocover costs. Annex 3-15 further details the project's lending terms andconditions. Although the 9% includes a recent 2X increase in interestrates, this is still below the current commercial rate of 13% and thedomestic inflation rate, estimated at 152 in 1985. Government would,therefore, review interest rates annually and exchange views with the Bankeach year during project implementation. The objectives of the reviewswould be to eventually: (a) bring the cost of borrowing more into line withinflation; (b) reduce the differential between agriculture and othersectors; (c) ensure adequate margins to lending institutions; and (d)reduce FHG subsidies on funds for credit on-lent to NACB. Interest rateswould be adjusted progressively so that by 1st January 1988 the differencebetween prevailing interest rates for agriculture and com'nercial lendingwould be not more than 3%, by 1st January 1989 not more than 2% and thedifference further reduced substantially by 1st January 1992. Agreement oninterest rates and administrative charges for the first year (92 and 2%respectively), and on the revisions, was reached at negotiations.Increasing interest rates from 9% to prevailing commercial rates would notaffect the financial viability of the livestock development models as theywere all calculated at 15%. As mentioned earlier (para 3.24),unrertainties continue regarding future macroeconomic policies in Nigeria,namely the timing and extent of a reform program, and the general level ofinterest rates. With current inflation rates not expected to drop below15% at present, real interest rates are negative. Discussions on thisissue were carried out during negotiations. FMG stated it is committed tothe principle of real interest rates, and would take measures to achieve

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this goal as soon as possible and thereafter endeavor to maintain interestrates at positive levels in real terms.

H. Accounting, Budgeting and Reporting Requirements

3.44 NLPD, NACB and participating SLAs would keep accounting recordsin accordance with generally accepted international accounting standardsand would prepare timely quarterly management reports and annual financialstatements to reflect their operations and financial positions. NACB andparticipating SLA's would establish and maintain separate project relatedaccounts.

3.45 NLPD's annual financial statements, in addition to a balancesheet and operating expenditure statement, would include an analysis ofexpenditure by operating division so as to facilitate measurement ofprogress and comparison with appraisal estimates. NLPD's and NACB's annualfinancial statements, and NLPD's Account No. 2 and Statements of Expendi-ture would be audited annually by firms of external auditors acceptable tothe Bank. The auditors' reports would include statements as to whether ornot in their opinion, Bank funds had been used fully for their intendedpurpose, and would be submitted together with the annual financialstatements to the Bank within six months of the end of each fiscal year.Assurances to this effect were obtained during negotiations.

3.46 NLPD would prepare an annual budget and work program based onappraisal estimates, amended where necessary to reflect changes in costsand project development policies. NLPD would also prepare an annualprocurement program for civil works, and goods and services giving itemsand quantities required, sources of funds, timing and procurement methods.This program would be submitted with the annual budget to FMG for approvaland to the Bank for information by August 31 each year. Assurances to thiseffect were obtained at negotiations. NLPD would prepare quarterly cashflow projections for both non-incremental and incremental costs which wouldbe submitted to FMG and the Bank, and would operate on the basis of theapproved budget and procurement program, and thereafter would release thenecessary funds to NLPD quarterly and in advance.

3.47 As in Livestock I, NLPD would submit timely quarterly managementreports to the Federal Ministry of Agriculture, the Federal LivestockDepartment, and the Bank, showing by component, actual and budgetedexpenditure to date, explanations for significant variances against theplan, proposed corrective actions, statements of progress achieved, andobjectives for the forthcoming quarter. Additionally, at projectcompletion, NLPD would prepare a Project Completion Report analyzing theimplementation of the project and its impact in relation to its objectivesand would submit this report to the Bank within six months of the closingdate. Assurances on the above were obtained during negotiations.

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IV. ORGANIZATION AND MANAGEMENT

A. Project Coordination and Management

4.01 The 1981 livestock sector report and experiences from Livestock Ihave demonstrated that there are essentially three elements which must bemade available to the livestock producer to stimulate increased production:technical and veterinary assistance, credit, and inputs. As not oneexisting institution is capable of providing all these services, theproject, through the National Livestock Projects Department (NLPD), woulduse a number of existing organizations to provide the services. This wouldmeet the Federal Military Government's (FMG) and the Bank's objective ofcontaining expenditures. Generally, linkages between institutions whichprovide these services are weak; for this reason it is envisaged that NLPDwould have a critical role in directing, coordinating and supervisingproject activities, leaving actual implementation to the specialistinstitutions. The principal organizational difference with Livestock Iwould be that NLPD would no longer handle credit. Their on-going creditactivities would be handed over to NACB (para 3.38), and the Livestock IIcredit program would in its entirety be handled by specialist creditinstitutions.

4.02 State Ministries of Agriculture would provide animal health andproduction extension staff who would be attached to, directed andsupervised by NLPD. The Nigerian Agricultural and Cooperative Bank Ltd.(NACB), the country's main agricultural financing institution, whichparticipated in Livestock I, would have responsibility for implementing thecredit component. It would operate through state lending agencies (SLA)which would maintain individual farmer loan accounts. Input supply wouldbe provided by private traders, multi-purpose cooperative societies, andagricultural development projects. A NACB/NLPD Joint Credit Committee hasalready been established to ensure timely liaison between NACB and NLPD oncredit, input supply and marketing. Annex 4-1 and 4-2 provide graphicrepresentations of the coordination and implementation of projectactivities.

4.03 The proposed organization and sequence of events to promote thedevelopment of the six livestock development enterprises/models describedin paras 3.09-3.14 is as follows:

(1) selection of SLAs and input supply agencies: by NACB and NLPD;

(2) selection of area for project credit activities: from areacovered by SLAs and input supply agents or organizations;

(3) promotion and selection of participants: NLPD/state extensionstaff promote ecologically appropriate model(s) at village level;local SLA/village heads select most appropriate participants frominterested farmers;

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(4) state and national credit program: NLPt/state staff assistselected participants with SLA credit application; allapplications aggregated at state, then national levels. Totalannual credit requirements communicated to NACB;

(5) distribution of credit and inputs: NACB passes credit funds toSLAs who pass part on to participant to purchase animals. Therest is paid by SLA directly to input supplier after delivery ofinputs to participant;

(6) technical and veterinary assistance: provided by NLPD/stateextension staff;

(7) loan recovery: by SLAs.

The institutions and their roles in project implementation are furtherdetailed below.

4.04 Project Coordination and Technical Assistance. L.-der theproject, NLPD will have overall responsibility for implementing the projectand coordinating the activities of participating institutions. NLPD'sspecific functions were described in para 3.03. Its weaknesses identifiedin the Livestock I PCR would be addressed (paras 3.17, 3.21). Theadditional staff required for promoting and supervising the project'slivestock development program would come from state livestock departments(para 3.18). NLPD's proposed organization for the project (Annex 4-3) hasbeen agreed with Government, and most of the reorganization has alreadytaken place. Some departments have been eliminated and others added toaccommodate the new project.

4.05 Credit. NACB would be responsible for implementing projectcredit activities. NACB would use SLAs to on-lend to project participants.Full details of credit arrangements are in paras 3.35-3.42.

4.06 Input Supply. Under Livestock I, part of the required farminputs were procured and distributed by private traders chosen by NLPDthrough local competitive bidding. As most inputs, except N'dama cattle tobe imported into eastern Nigeria and some veterinary supplies (to beprocured by NLPD), are available in the country, the project would expandthis form of input procurement and distribution to producers. However, inareas where this system has not been fully established, NLPD would have theresponsibility for input procurement to support the project. In the longerrun, development of these input supply channels (many of which alreadyexist), could lead to an increase in the demand for livestock productioninputs outside the project which would also be met by these privatetraders. Where this arrangement is not practical, multi-purposecooperative societies, World Bank assisted Agricultural DevelopmentProjects and River Basin Rural Development Authorities could be used byNLPD to distribute inputs through their farm service centers network.

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B. Research

4.07 The project-related research program begun under Livestock I, andimplemented by the National Animal Production Research Institute (NAPRI),and the International Livestock Center for Africa (ILCA) headquartered inEthiopia, would be continued and strengthened, and one new area of researchintroduced (para 3.15). NAPRI, located at Zaria, would cover the semi-aridecological zone research, and ILCA, located at Kaduna and Ibadan, would,respectively, cover the sub-humid and humid zone research. Scientists fromthese institutions would provide technical back-up to the field teams whichwould carry out the actual research. A Livestock Systems ResearchCommittee, headed by NLPD, would be set up to review both researchproposals and research progress. The Committee would includerepresentatives from NAPRI and ILCA (Working Paper 5). It is expected thatILCA would progressively hand over its research program to NAPRI, the localresearch institute.

C. Post-Project Development

4.08 The development of the livestock sector requires awell-coordinated system made up of a number of institutions to provide theservices and inputs the producer needs to increase production. LivestockII would bring together these institutions and services. As the projectscope would be expanded nationwide under this project, a minimuminfrastructure (e.g. field offices) is required by NLPD to cover all thestates. This expanded network, once completed, would allow for aconsiderably larger development program than is proposed under LivestockII. Nonetheless, the number of participants has been kept modest in thisproject so that this new system would not be overloaded. Thus theadministrative to development cost ratio is relatively high--1.4 or aboutN53 mn to N39 mn respectively. However, once the system is functioning,Nigeria would have a framework which could handle a far greater number ofparticipants with only marginally higher incremental costs, thus reversingthe ratio in favor of development rather than administrative costs. Thiscould therefore potentially benefit a large number of rural families. Inaddition, it appears the demand for more project activities exists: underLivestock I, the project had to turn away credit applicants because fundswere unavailable (para 2.16). As the project would work through existing,indigenous institutions, it is expected there would not be an institutionalor managerial vacuum once Bank support is completed, thereby improving thechances of post-project sustainability.

V. PRODUCTION, MARKETING AND PRICES

A. Production

5.01 The project would produce significant quantities of additionalbeef, goat meat and milk and smaller quantities of sheep meat, poultry meat

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and eg3s. In addition, increased cattle and goat numbers, especiallybreeding stock, would contribute to an expansion of the national cattleherd and goat flock. Additional benefits to crop cultivation would accruefrom the project, including extra land cultivated through the use of draftoxen, increased crop production from improved soil fertility in areas wherefodder has been planted, and the use of manure. These additional benefitsto crop cultivation have not been included in total quantified projectbenefits.

5.02 At full development (PY 10) incremental production due to theproject would total about 2,200 tons of beef, 900 tons of goat meat, 120tons of sheep meat, 1,000 tons of milk, 25 tons of poultry meat and 300,000dozen eggs. The incremental production for all models except thesmallhulder fattener, is from additional breeding or slaughter stock, milkand eggs. In the case of the smallholder fattener, incremental productionis the weight added during the four months of fattening plus weight whichthe cattle would have lost during the dry season (without projectsituation) when the cattle is fattened (Annex 3-2). With this yearly lossin weight during the dry season, it takes animals 3 to 4 years longer toreach slaughter age. Smallholder fattening loans are revolved but at adecreasing rate of 15% in each succeeding year due to overdues anddefaults. For the quantification of benefits, it has been assumed thatrecoveries from other loans do not revolve, although in reality it isprobable NACB would continue to use the recovered funds for these models.The projected incremental project production through PY20 is shown in Annex5-1. The value of this production from year 10 in 1985 base prices isestimated at N12 mn in financial prices and N8.0 mn in economic prices(Working Paper 12).

B. Demand and Marketing

5.03 Prospects for the growth of the livestock sector are good asthere is a large unmet demand for animal products in Nigeria and the gap iiwidening (paras 2.02). Recent import restrictions on poultry feed andfrozen meat have decreased supply. As a consequence, prices of animalproducts are rising, (para 5.04), yielding attractive returns to farmers(para 6.03). As far as project production is concerned, there should be nodanger of oversupplying the market with incremental project productionwhich is estimated at less than 1% of national production for each product.Marketing is considered to be competitively and cost-effectively handled bythe private sector. No need is foreseen for project intervention in theexisting marketing system, which coincides with Government efforts todivest itself of parallel processing and marketing facilities (paras 2.19).

C. Prices

5.04 Financial Prices. Animal product prices fluctuated widely in thelast three years (1982-84). The fluctuations were due to importrestrictions on animal products and feed (para 2.02), and the rinderpest

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epidemic of 1982 through 1984 which is estimated to have killed close toone million head of cattle. Recent import restrictions on poultry feedhave severely reduced poultry meat and egg production, driving the pricesfor these two items abnormally high. To offset this, the project'sfinancial analysis was based on poultry and egg prices 202 below currentlocal market prices. The effect of the rinderpest epidemic on cattle priceshas passed and prices have decreased; no adjustment is therefore considerednecessary. There are also price fluctuations of up to 702 between seasons.With the exception of the smallholder fattening scheme, the lowest pricesin the year have been used for project financial analysis. The higherprices for the fattening scheme were used because the benefits accruing tothe farmer are due both to weight gain and to selling the animal at the endof the dry season--a period of reduced supply. This also benefits theconsumer through supply increases at this time of the year. Over time, butnot because of this project alone, this could help smooth out seasonalprice variations.

5.05 Economic prices. Deriving an economic price for beef presents anumber of difficulties. Beef is imported into Nigeria in two differentforms and through different borders, yielding therefore distinct C.I.F.prices. The first product, frozen sides and quarters of in-bone beef, wasimported through the southern ports, mostly Lagos. At present, importre3trictions have cut these imports, but it can be assumed thatrestrictions could be lifted over the project's 20-year economic analysisperiod. The second form of beef is imported as on-hoof cattle brought inthrough the northern borders, with virtually no import restrictions. Thiscattle moves freely between West African countries and thus its price isconsidered both competitively set and internationally traded. Animalproducts from on-hoof cattle represented 2.5 times that from frozen sidesand quarters in years of limited or no import restrictions. At present,the two products are not directly comparable for the following threereasons: (a) the frozen product cannot be sold in most towns and villagesbecause of limited electricity distribution and refrigeration facilities;(b) there is a considerable preference for the fresh product. In 1978, ayear of relatively free trade before import restrictions were imposed, a 14to 62% preference for fresh meat was recorded in large southern cities.Preference in the north is higher: attempts to sell frozen beef in thenorth have been largely unsuccessful with commercial firms having to returnmost of the frozen meat to the south for sale; and (c) the frozen productdoes not contain offals, or what is classified as "inedible offals" in somecountries, but which is eaten in Nigeria, including the hide. Thus,on-hoof cattle have a higher overall value. Over time, however, the firsttwo reasons for non-comparability of the two products could change, asrefrigeration facilities increase and preferences change. Thus, becauseboth on-hoof cattle and frozen beef are internationally traded commodities,and because over the project's 20 year economic analysis period the twoproducts could become more comparable, an economic comparison of the twoproducts is justified.

5.06 An economic comparison was carried out assuming a 20% preferencefor fresh meat, although this is clearly low for the north where most

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project production would be consumed. A cost comparison between the priceto the consumer of frozen beef and fresh meat with the 20Z preference wascarried out. This was done to determine if the importation of either ofthe two products was a non-viable operation, either financially oreconomically, or alternatively, if a market delineation for each productexisted based on local transport and marketing costs. The comparisonshowed that financially, it is cheaper to import on-hoof cattle throughoutthe country. This explains why even in years of unrestricted imports, mostimported beef came from on-hoof cattle. In economic terms, however, it isless costly or more competitive to import frozen beef to the southerncities, but on-hoof cattle to the north. Annex 5-2 details these marketcomparisons. As all project output is measured in liveweight rather thanin slaughtered and butchered cuts, the exercise described above was carriedout to determine which product would yield the lowest economic liveweightfarmgate price for cattle. The two products yielded similar prices;however, the on-hoof cattle price was chosen because it is the lowest andbecause the data is the most reliable. Details are in Annex 5-3. Allother project production were treated as non-tradeable including the cattleedible and non-edible offals, goat meat, milk, poultry and eggs. Whilemilk and poultry meat are traded items, they were treated as non-tradeablesbecause milk is sold as a fermented product or in a mixture with grain, andpoultry meat would only be produced In small amounts by the project's pilotcomponent. Projected prices were held constant as bank estimates forecastonly a marginal increase in prices by 1995. Financial and economic pricesfor all project production are in Annex 5-4.

VI. FINANCIAL IHPACT

A. Livesto:k Producern

6.01. The six illustrative livestock development models (paras3.09-3.14), which represent enterprises already being carried out bypastoralists or mixed farmers, were designed using conservative productionincreases considered achievable by traditional producers. Investments werealso designed to be modest, using mostly locally available inputs andmaterials. The net effect of the above is to create a low input-outputsystem which modern/commercial producers would find unrewarding, but whichyield attractive returns to traditional producers.

6.02 The chart below shows total per capita farm income, from bothlivestock and crop enterprises (for mixed farmers), with and without theproject, and compares it with various national income levels.

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PER CAPITA FARM DNCOME FROMCROP AND LIVESTOCK PRODUCTDON ENTERPRISES

WITH AND WITHOUT PROJECTCNAM5

V - MM D 'Tvo - urnur er

2B-

MODEL t mAOROPASTOAL33T DM 4 - VEXTER4 N'DAMA 3REDlusEL 2 - UNALLHOLDER FATfElM 3WEL S - EASTERN HPAK D EEEPMODEL 3 - MAT DREERtMDL6-PUTYPDtM

It will be noted in the above table that the increase in totai ferm incomeis generally considerable, but modest for two enterprises: Model 2 -Smallholder Fattener and Model 3 - Goat Breeder. This is becaus.e these arerelatively small activities compared to the farmers' cropping activities.Nonetheless, the enterprises are attractive to farmers becauEse of theirquick return (e.g., 4 mon-ths for Model 2), and increased income from theenterprise: in Model 2, livestock income rises from nil to N430, and inModel 3, it more than doubles from N115 to N1260 (Annex 6).

6.03 In the without project situation, farmers' livestock incomes areassumed to remain constant because inputs required to increase productivityare not normally -available to farmers. Mixed farmers' (models 3, 4 and 5)livestock incomes range from 7-19% of farm income without the project. Withthe project it is estimated they would rise to 9-56%. By adopting the

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improved livestock practices, total farm incomes increase on average byover 60Z, with a range from 3-82%. The estimated financial rates of returnboth to the overall investment, as well as to the farmer, are high, rangingfrom 212 to greater than 50% (Annex 6). The high returns are not uncommonin investments which directly decrease mortality rates at relatively lowcosts, which the project veterinary and nutrition interventions aredesigned to do. In addition, market prices are quite high in Nigeria dueto decreased supply of animal products (para 5.03). The illustrativemodels for each enterprise, showing detailed investments, sales, operatingexpense projections and cash flows are in Working Paper 3. No increase incrop incomes is assumed with the project, although it is probable it wouldincrease due to the use of manure and leguminous forages.

6.04 Impact on poverty levels. Comparison of these farm income datawith income data based on national accounts must be interpreted withcaution due to the unreliability of national demographic and financialdata. Over 90% of project participants have incomes below the relative orabsolute poverty levels without the project. With the project it isestimated that project participants per capita income would rise aboveeither the relative or absolute rural poverty levels C1983 Bank estimates:N207 and N341, respectively), and three are above the GNP per capita incomeof N770. Participation in the project would bring all six types ofparticipants above the relative poverty level, leaving only the goatbreeder and the smallholder fattener below the absolute poverty level.Without the income from livestock enterprises, one of the participantswould remain below the relative poverty level and two below the absolutepoverty level.

B. Credit Institutions

6.05 The project would have a greater financial impact on NACB than onthe individual SLAs because of the small number of loans each SLA wouldhandle. NACB's net income from the project is estimated to increase fromabout N50,000 in the first project year, to about N800,000 in the fifthproject year (about 1% and 22% respectively of NACB's projected total netincome). NACB's incremental expenditure would be small as it wouldmaintain only one account for each SLA - for a maximum of only about 30accounts. The risk of bad debts would be low because (a) only theinstitutions with the best lending records would be invited to participate,and (b) in addition to the normal security taken by SLAs most of the SLAloans would be covered by State guarantees, as are the majority of ongoingNACB/SLA operations. NACB's margin of 2X between the cost of borrowingfrom FMG (6%) and the lending rate to SLAs (8%) is therefore, consideredadequate. With regard to SLAs financed by NACB, it is expected that alarge number would operate through affiliated institutions; e.g., apexcooperative societies would use primary societies. About 28,500 farmloans, which includes revolved funds, would be issued over the five yearperiod. Assuming that about 30 SLAs participate, each with a minimum offive affiliated financing institutions, the average number of accounts tobe maintained by each financing institution would be about 190 spread over

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five years. Administration of project loans would, therefore, be spreadover a large number of financing institutions starting slowly in the firstproject year and increasing gradually over the project period. On thisbasis, it is expected that project loans would be handled by existingstaff. Experience with Livestock I has shown that the risk of bad debtswould not be great: by project completion there were 15% overdues of whichit is expected a significant portion will be collected. In addition, inmany instances, State Government guarantees would be available as withon-going transactions between NACB and SLAs. The minimum proposed 3%margins for the SLAs, which includes a 2% administration fee (para 3.43)would be adequate to cover costs because of NLPD field support and the factno additional SLA staff or other administrative cost would be required tohandle the additional project loans.

C. Government

6.06 There are no formal cesses or taxes on farmers' produce. Someindirect public revenue generation can be expected as project beneficiarieswould spend part of their increased incomes on consumer goods and servicesoffered by the private sector, some of which will carry a tax element,mostly in the form of import duties. As such, increased tax revenue wouldaccrue mainly to FMG. Although precise quantification is difficult,assuming that 50% of incremental benefits enter the cash economy, and arespent on goods carrying an average tax rate of 10%, then additional publicrevenue would be about N600,000 per annum in 1985 constant base terms atfull development (year 10). Small amounts of additional revenue would begenerated at state or local government level through increased market ortrucking fees.

6.07 Financial costs to the Federal Military Government (FMG) from theproject, totalling about N73 mn over the five years, or on average N14.7 mnper year, would be divided into two categories: (a) FMG's share of projectcosts, in current terms amounting to about N31.6 mn over the five yearperiod. Incremental expenditure after project completion is estimated atN6.3 mn in current prices. FMG's contribution to project costs wouldgradually increase (Annex 3-7) over the project period to reach N8.5 mn bythe project's last year, thus avoiding the need for a sudden increase inFMG funding to support the project after IBRD funding is completed; and (b)FMG's responsibility for NLPD's non-incremental costs (salaries, vehicleand plant operating and general expenses) estimated at N41.7 mn over thefive-year period (or N5.5 mn per annum in constant terms). FMG's totalbudgetary allocation would be partially offset by surplus revenue generatedfrom NLPD's sale of veterinary supplies outside the credit program,estimated to average about NO.4 mn per annum. This income would accruefrom cost recovery practices to be used for the sale of veterinary supplies(para 6.09). Where NLPD provides water sources to settled pastoralists,costs would also be recovered and utilized to cover the operating costs ofthe water development unit in NLPD. In the post-project period FMG'sannual expenditure directly related to NLPD would amount to about N16.7 mnper annum (1992 prices) comprising ongoing incremental expenditure of N6.3

- 36 -

mn and non-incremental expenditure of N10.4 mn. In addition, FMG would beresponsible for servicing and repaying the US$81 mn loan from IBRD.Offsetting these payments would be NACE repaying FMG for funds borrowed forthe credit program, totalling N28.1 mn. NACB would repay the loan to FMGover a maximum period of 20 years, including a maximum 5 years period ofgrace.

6.08 State Governments would continue to pay non-incremental costs ofsalaries of veterinarians, extension agents and vaccinators attached toNLPD state offices. The total cost to State Governments is estimated atN21.3 mn over the five years, divided among 18 states.

D. Cost Recovery for Farm Inputs

6.09 Private distributors would carry out most farm input distri-bution, thus the prices they charge would reflect unsubsidized marketprices with the exception of fertilizer (a minor input) which is subsidizedby Government. NLPD would invite bids from distributors to ensure that themost competitive prices are made available to farmers (para 4.06). In thecase of veterinary drugs, NLPD would administer them directly and farmerswould be charged about double the cost of the drug itself (in 1985 prices,about N1.2 per vaccination) to cove: overheads. The funds recovered (onaverage N0.4 mn/year) would be revolved so that NLPD could continue toprovide veterinary health services to project participants. Costs wouldalso be recovered for water sources supplied to settled pastoralists (para6.07).

VII. ECONOMIC ANALYSIS

A. Project Benefits

7.01 The project would benefit some 30,000 smallholder families (about200,000 persons) through increased livestock production and hence incomes.Over 90% of project participants would have had incomes below the relativeand absolute poverty levels, but with the project, it is projected allwould rise above the relative poverty level. The project would alsoreinforce Government's new commitment to supporting the traditional smallscale private producer as the principle means to increase production in thelivestock sector. Once the credit and technical assistance systems andchannels are set up nationwide by this project, NLPD and NACB could reach asubstantially larger number of participants than is targeted for LivestockII. Thus, one of the principal benefits of the project would be achievedin the medium term, when a significantly larger number of participantscould be reached.

7.02 The 30,000 families involved in the project could expect boththeir incomes and consumption of animal products to inc"ease in the shortterm. In addition, consumers at large would benefit from a greater supply

- 37 -

of animal products, as well as a more even supply throughout the year. Thetechnology the mixed farmers would adopt is simple; it has been tried onfarm and found acceptable financially and culturally. The credit programwould encourage greater cattle ownership and the use of draft oxen. To theextent the proposed mixed farming systems are adopted, in particular theuse of the fodder plots in models 1, 4 and 5, they would yield theproject's most important benefits, since the separation of crop andlivestock development is one of the greatest bottlenecks to the developmentof agriculture in Sub-Saharan Africa. There would be direct benefits tocropping such as increased soil fertility from manure and planting ofleguminous forage crops, and increased cultivated land from the use ofdraft oxen. These benefits have not been included in quantified projectbenefits. The benefits to the economy of relying on traditional mixedfarming systems rather than modern high input-output systems, which dependon distorted price regimes and/or imported inputs to increase livestockproduction, have been previously described (para 2.05).

7.03 The project supports a change in Government's policy towards thesector. In the past, FMG devoted most of its resources to its directlyowned and operated schemes which proved unsuccessful, so that the smalltraditional livestock producer farmer was neglected. In contrast, thisproject would rely on the private, traditional sector to provide productionincreases and to increasingly take over support services. By giving updirect production schemes, Government would be able to make availableadditional resources and focus its efforts on increasing the effectivenessof existing support institutions. In addition, the project would providethe Federal Government with an improved planning capability which wouldevaluate the above strategies and generally allow for a better orientatiof both public and private sector investment in the livestock sector.

7.04 As was previously discussed (para 4.08), it is recognized thatadministrative/recurrent costs of the project are high compared todevelopment costs, although project benefits are sufficient to yield asatisfactory economic rate of return (para 7.05). The administrative costsinclude the minimum overheads necessary to expand the project scopenationwide. Once this is set up (by PY2 or 3), the system would be capableof handling a much larger number of loans than is proposed under theproject. However, a reduced number of loans has been used because this newsystem, which would be expanded significantly, and would includeadditional institutions, must be tried out gradually and not overloaded.Once the system is in operation, the number of loans can be increased at asmall incremental cost. The demand for additional loans appears to existas Livestock I had to turn away applicants due to lack of credit funds.This system will use existing indigenous institutions which should improvethe possibility of post-project sustainability.

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B. Economic Analysis

7.05 The project's economic rate of return (ERR) is about 19%(Annex 7), and its net present value, discounted at 10%, as a proxy for theopportunity cost of capital in Nigeria, is about N17 million. The ERR wascalculated on the basis of incremental costs and outputs or benefits.Without project benefits are assumed to remain constant as the necessaryinputs to raise production are not normally available to farmers. The onlyexception to this is the smallholder fattener whose cattle in the withoutproject situation would lose weight during the dry season. Project lifewas assumed to be 20 years, including a five-year investment period duringwhich development activities would be substantially completed. For thecalculation of project costs, farm inputs and veterinary supplies werecosted at full, unsubsidized economic cests. The standard conversionfactor (0.45) was applied to all incremental project-related local costsincluding on-farm labor which was financially costed at N5.90 per day. Theconversion factor adjustment allows for distortions to local costsresulting from import duties, quotas and similar factors and translatesdomestic prices into border prices. During the project period, NLPD andNACB would continue to carry out lending from funds still remaining fromthe Livestock I Revolving Credit Fund (para 3.37). This non-projectlending makes up a considerable portion of the total lending program: inPY1, 60% of the lending program would use Livestock I funds. Sincebenefits from these revolving funds are not included in the economicanalysis, the overheads attributable to the Livestock II credit componentwere reduced in the following manner: 33% in PY1, 20% in PY2 and 10% inPY3-5. Project benefits (para 5.02) comprise the value of incrementalproduction of animal products, priced at border farmgate prices derivedfrom import parity for internationally traded goods, and from domesticprices for non-traded outputs, multiplied by the standard conversion factor(0.45). Economic prices were discussed in paras 5.05-5.06. Working Paper12 details further assumptions used in the economic analysis.

C. Risks and Sensitivity

/.06 The main project risks perceived are of two types: those within,and those outside the control of project design and implementation. Forthose factors outside project control which can be measured, sensitivity ofthe ERR to changes in cost or benefit streams was tested. Switching valueswere also calculated, i.e. the percentage change in a stream or streams,other factors constant, that would reduce the ERR to its minimum acceptablevalue of 10%, or equivalently reduce the NPV at 10% to zero.

7.07 A number of unforeseen factors, such as production or pricedeclines due to disease, delays or lower adoption rates, oversupply of themarket. etc. could affect the project's ERR. The effect of the most likelyproblems to be encountered during project implementation, have been appliedto the economic analysis. Total project benefits would have to drop by34%, or total project costs increase by 52% to bring the ERR to the minimum

- 39 -

acceptable 10%. Incremental benefits from cattle production representabout 60% of project benefits. Cattle liveweight prices could drop up to40Z and still yield a 10X ERR due to, say, a localized oversupply caused bythe project in a particular village, although this is not expected tohappen nationally (para 5.03), or a national oversupply caused by a greaterinflux of imported cattle, or frozen beef if import restrictions arelifted. If the poultry component was not implemented due to unfavorableinput-output prices (para 3.14), the ERR would drop to 18Z. If ,:^eadoption of all models is delayed by three years, the ERR 's st ll' 12Z.Post-project benefits (YR 6-20) could drop 45Z due to say, opening up ofimport reotrictions or less effective management, and still yield a 10%ERR.

7.08 Seve-ral project design issues within the control of projectdesign and implemenation were seen as potential or actual risks.Technology appropriateness in Sub-Saharan African livestock projects andlocal funding are often seen as potential project risks. However, theappropriateness of the improved technologies proposed in the project doesnot appear to be a major risk since all are currently being implemented bytraditional livestock producers. Socio-anthropological studies werecarried out to further refiie the models to make them socio-economicallyacceptable to the potential participants. Local funding has been the majorconstraint for ongoing agricultural projects since the drop in oil revenuesin 1982. As much of the local funding problem has been due to lack offunds required by Government to prefinance expenditures which the Bankwould later reimburse, the setting up the prefinancing Special Account No.2 would reduce this problem and maintain a more constant project cash flow(para 3.28).

7.09 Two project design risks remain: project organization andadequate field supervision of the participants. Under Livestock I, allaspects of the project's organization were controlled by the projectmanagement unit. Under Livestock II, NLPD would serve more of a catalyticand coordinative role and would rely increasingly on other institutions tocarry out project activities. Organizational risks have been reduced byplacing NLPD staff at all critical levels of project implementation so thatthey can monitor the institutions to which they are providing financing.This financing and monitoring role would enable NLPD to keep close controlof project activities.

7.10 While the adoption of project activities is relatively simple, itwould require NLPD to organize follow-up technical supervision visits.This risk of inadequate supervision has been reduced by drawing up staffingrequirements for the promotion of each development model based on a carefulassessment of the on-farm experience to date with each model. In addition,Government has agreed to improve field supervision by setting up 4 zonalsupervision offices rather than depend on the logistically more difficultsupervision visits from headquarters.

7.11 The type of project risks and the sensitivity analysis indicatesthat while the project can tolerate a certain amount of latitude in actual

- 40 -

values from those projected, it is important that major divergencies incosts, production or timing be avoided (divergencies in economic prices areregarded as outside project control). Crucial to success will be: (a)sound management and field supervision; (b) regular and timely financing;and (c) efficient and dependable procurement and distribution of farminputs. Failure in any of these areas could have serious implications, andsafeguards to be sought in each area were taken into account in projectdesign (paras 3.06. 3.28, 7.08).

VIII. AGREEMENTS REACHED AND RECOMMENDATION

8.01 During negotiations for the proposed loan, the followingprincipal issues were discussed and agreement reached with FMG and NACB,and specified in the Loan and Project Agreements:

(a) FMG and NACB would recruit experienced technical staff withqualifications, experience, terms, conditions and jobdescriptions satisfactory to the Bank (para 3.22);

(b) the Special Bank Account, designated Project Bank Account No. 2,would be operated on terms and conditions satisfactory to theBank (para 3.28 and 3.34);

(c) FHG would maintain non-incremental expenditures at currentlevels, estimated to cost N41.7 mn over the 5-year implementationperiod of the project, and would also pay the balance of itsannual contribution to project cost, totalling N31.6 in,quarterly and in advance into the project's main bank account(para 3.28);

(d) FMG would agree to the additional conditions required to giveadequate control over local procurement procedures (para 3.32);

(e) NACB would establish state credit conmittees which would includerepresentatives of NLPD and NACB, to monitor the progress of thecredit programs (para 3.35);

(f) loans to farmers would be made on terms and conditionssubstantially similar to those set forth in Annex 3.13. FMCwould bear the foreign exchange risk for the portion of the loanonlent to NACB (para 3.37);

(g) NLPD would transfer the administration of the Revolving CreditFund established under Livestock I to NACB within one year aftereffectiveness (para 3.38);

(h) a N2.0 mm ceiling on commercial bank parallel financing of thecredit comporent, handled through NLPD, would be maintained until

- 41 -

FMG and IBRD are satisfied that further borrowings can beabsorbed without detriment to project activities (para 3.41);

(i) NACB would complete a full review of project credit activitiesand agricultural credit interest rates, for discussion with IBRD,by not later than twelve months after loan effectiveness, and,thereafter, by October 31 annually (paras 3.40 and 3.43);

(j) FMG would review the National Agricultural Credit Study with theBank by not later than June 30, 1986; agree on a program forimplementing agreed study recommendations by not later thanDecember 31, 1986; and thereafter implement the agreed program(para 3.42).

(k) Farmers would be charged interest at the rate of not less than 9%per annum, plus an administration charge of not less than 2Z perannum during the first year of the project. Interest rates wouldbe adjusted progressively so that by 1st January 1988, thedifference between prevailing interest rates for agriculture andcommercial lending would not be more than 3Z; by 1st January 1989not more than 2%, and there would be a further substantialreduction by 1st January 1992.

8.02 The following would be conditions of loan effectiveness:

(a) at least five project-supported grazing reserves had beengazetted (para 3.09);

(b) appointment of financial controller, technical controller, headof training and four zonal supervisors with qualifications,experience terms and conditions satisfactory to the Bank (para3.22);

Cc) FMG had deposited N4 mn into the project bank account (para3.28); and

(d) FMG had entered into a Subsidiary Loan Agreement with NACB,satisfactory to IBRD (para 3.36).

8.03 The following would be a condition of disbursement:

(a) For credit to smallholder cattle fattening: that NACB shall havelent N4 mn of its own funds (para 3.26);

(b) For the whole credit component: at least 15 lending agreementshad been signed between NACB and selected SLA's (para 3.39).

8.04 On the basis of the above assurances and conditions, the projectwould be suitable for a Bank loan of US$81.0 mn to the Federal Republic ofNigeria on terms given in the loan and project agreements.

WAPABApril 1986

- 42 -

-uy Features of the Agricultural Sector

Unit 1974-76 AV. 19J4

1. Poulation if

Total (growth rats) Million 74.9 (2.5) 93.6 (3.3)Rural a. Z Total I 81.8 76Rural FailL. *sO 10.211 12 16J

2 Economic Oveview

CDP/Head of Total Population 6 521 767Agric. GDP/seod of Rural population 8 173 233Agricultural GOP as I of Total S 24 30

3. Land Use a/

Land Area -l sq. km. 910.770 910.770Forest '000 he 16.357 14.000Perenial Crops 000 be 2.497 2.535Annal Crops '000 ha 27.503 27.900

Of Which: Area Irrigated at '000 ha 18 32

4. Outputo 69-71 A. - 100

1. Root Crops 104 902. Sorgbum 100 633. Millet II1 1074. Groundnut (in shall) 23 32Livestock

Cattle 100 106SHep/lOats 109 125Poultry 107 187Pigs 1 13 163

Cereal Production/Usad of TotalPopulatlon - 90 80

Cr al/Read of Rural Population 92 83

5. Inputs

Fertilizer '000 tone 124 60oPesticides '000 liters n.-e n.a.Tractors */ units 7.500 9.500

6. Trade *

Total Eports S u 9,312 11.314Of Which:

Agricultural Products S 5 4Of Wbich:

1. Cocoa end Producta 2 68 742. Rubber X 6 63. Pal. Produce (kernils. oil) 2 14 10

Total Imports j/ 5 a 5670 13.437Of Which:

Agricultural Products S 8 131. Cereals end Preparation : 38 422. Suge and Honey 2 23 233. Dairy Products and Eggs 2 19 9

Agricultural Inputs 2 2 6

7. Covernment Expenditures bh

Total Recurrent Budget S a 2.040 8.562Of Which: Agriculture 2 I ITotal Capital Budget S a 5.332 3.024Of Which: Agriculture 2 2 13

I/ ja fir 1983 only

Remining land area is under permanent pasture and other land use.

Data Sources: (1) FAo Production. Fertilizer and Trade Yearbooksa (i) YigeriaCountry Economie Iao (Dec. 1985); (iII) Nigeria Agricultural Pricing Policy PePort

WAPAB (Oct. 1984); (iv) Review of Public Expenditure Progra ln Nigeria (Oct. 1985); (v)January 1986 EPD Data Bank; and (vi) VAIDA's Key Indlcator Table of 1186.

NIGERIASECOND LIVESTOCK DEVELOPMENT PROGRAM.

Phasing of Credit and Non-Credit Investment Program(Number of Participants)

I. CREDIT PROGRAM Project Year1 2 3 4 5 Total

A. PASTORALIST/MIXED FARMER - Model 1 With- 1,850 New Loans (925 with water and 925 without Water) Water: 38 75 150 250 412 925- Main States in Lending Program - Anambra, Bauchi,Bendel, Benue, Borno, Gongola, Imo, Kaduna, Kano, WithoutKwara, Niger, Ondo, Oyo, Plateau, Sokoto Water: 37 75 150 250 413 925

Subtotal: 75 150 300 500 825 1850

B. SMALLHOLDER FATTENING - Model 2- 5,000 New Loans (600-1000-1000-1200-1200) + 6390 600 510 430 370 310 2220repeat loans financed from Revolving Credit Fund (RCF) 1000 850 720 610 3180

- 151 Annual Deduction from RCF to allow for Bad Debts,Late Payments, etc. 1000 850 720 2570

- Main States in Lending Program - Bauchi, Benue, Borno, 1200 1020 2220Gongola, Kaduna, Kano, Kwara, Niger, Plateau, Sokoto 1200 1200

Subtotal: 600 1510 2280 3140 3860 11390 a

C. WEST'RN N'DAMA - Model 4 30 70 80 - - 180 W

- 180 New Loans- Main States in Lending Program - Ogun, Ondo, Oyo

D. EASTERN N'DAMA - Model 5 - 100 100 100 200 500- 500 New Loans- Main States in Lending Program - Anambra, Benue, Imo,Cross Rivers

E. POULTRY - Model 6 - 10 20 30 40 100- 100 New Loans- All States

Total participants - Credit Program: 705 1840 2780 3770 4925 14020

II. NON-CREDIT PROGRAM

GOATBREEDER - Model 3 200 1000 3000 5000 6000 15200- 15,200 participants- Main participating states - Oyo, Ogun, Ondo, Bendel,Anambra, Imo, Benue

To-l participants, Credit 6 Non Credit Program: 905 2840 5780 8770 10925 29220

WAPABJuly 1985

- 44 -

AXNIE 3-2

NIGCUA

SECOND LrVESTOCK PRODCON DEMLOPFlT PROJECT

Livestock Production ProgramTechnical Coefficients of Models 1/

Model IAgro- Model 2 Yodel 3 Modul 4 Modal 5 Nodel 6

pa"toralist 2, Cattle Sheep Coats W. N'Daa E. N'D_am Poultry

1. Year of Model's Full Develop_nt 15 4 mnthe 4 months 3 11 9 1

2. Fertility Rate (Z) - w/o project 45 - - 155 40 40 -

- with project 55 - - 10 55 55

3. Mortallty Rate (Z)Adults - w/o project 5 - - 20 8 S

- with project 4 1 5 10 4 4< 1 year - vio project 20 - - 20 3/ 20 20 -

- with project 10 - - 10 15 15 17

4. Offtak Rate (Z) - W/o project 8.7 - - 38 6.6 6.3 -- with project 10.8 - - 53 14.7 14

5. Kg Livewight Sold - w/o project 1,296 4/ 1.064 5/ 945 6/ 32 7/ 72 8/ 615 9/ -

- with project. 2,058 1,339 - 1,112 o9 - 432 2.938 9 300 10/- 2 increase 59 26 18 178 500 378 -

6. Liveweight Gain/Day (kg)- with project - 0.6 11/ 0.12 12/ - - - -

7. Liters/Cow - v/o project 112 - -

- with project 160-I increae 43

S. Egg/U.n/Yr - w/o project - - - - - - 10- with projact - - - - - - 210-l2 incre - - - - - - 17

I/ With project is at models' year of full development2/ Model without water supply3/ 0-6 months - 20 to 10 mortality; 6-12 months - 10 to 52S/ Without project - 4 head herd (32 animal units). Inrease in production due to increased offt-ak

not anima weight gain wich remain constant at 260 kg/heifer or cull cow and 400 kg for mal > 3 years.With project - 58 head herd, 41 aimal units.

5/ 266 kg/head x 4 - 1,064 kg purchasd welght, and sold at 338 kg/head x 4 - 1,352 x 12 mortality - 1,339 kg.Incremental gain - 72 kgthead + 0.36 kg loss/day foregone in dry season-x 100 days - 108 kg x 12 mortality

6/ 45 kgrhead x 21 - 945 kg purchased weight, and sold at - 107 kg/head.55.7 kg/head x 21 - 1,170 x 5 mortality 1.112 kg.

7/ Flock without project - 6, with project - 7.7 head, see Working Paper 3, Table 3-2 for details.Herd size almost doubles from 3.2 to 6.1 head (by purchase of animls) and average weigbtof animal sold increas from 180 kg to 230 kg because of cross breading.

9/ Herd size without project - 32 head, with project - 58 head.10/ 200 cull hans x 1.5 kg each11/ 72 kg. 120 days - 0.6 kg x 12 mortality - 0.594 rounded to 0.6 kg12/ 10.7 kg livewaight gain + 85 days - 0.126 kg x 52 mortallty - 0.12 kg

VAPABJuly 1985

macutaSEWCD LIVhhT0= W91L02U2V 1902

SATIStAL LIVIS.O PROJCTS CSPARtT2fULIVE8T= PIinICh2 MIWIANINfl tQIRIfguT A/

Detailed Cost Table(lairs 1000) l*Jflun of TaRt fat. CS

iattlt law utftl ab ata .

Uni a ra : ta td t tJaO a a . s . IIta F LL ms P l aw. figd

A. FMtiWil

nra tx 1I i an 3 a.-we 0 :.Isa la' it". r6.o in1.o 691.' a.s.u 2-1m3.' ai.i . .oa.s a,1.1. 2.915.0 0,196.4 201.16 lk- 20. 2 4.8 1a.M.715717 gals * L IN 26299. 2/ 20C to 240 0 62 21 MIS0 a.a 314 4.1 i.6 21.1 - 2. 4.4 '.2. 25.1 24..1 Ij.7 LI1 2.2 24.2

WM 2 220 40?4 ON 76 200 .1365 tM06 6." .. ' 31.6 LI 1.3 I2.7 13.7 11.9 6.4 2.6 12. 22. U.si 539 22.2 2.4 6.610221.01 10 51 29 54 06 .54 2.4)4 4.012 5.: I! 2. I.: 2.0 4.8 1.1 3.a 1.: 1. 312 5'1 4.3 2 4.1 5.9

bi-s1315Sm1/ 5 .72 19 .1 .5 2.4 3.27 tS 2IN.2 1316 64576. 3.1 2.59.2 2542.3 197.2 1C.? 6A3. 2.IN12.' 2.40. s.e.- 2.50.6I I2.4 34.4 5417A.4

013K m InDitT l 2 3 66A 683 1.164 tot11 41,597 1.196 134.1 26.51 374.2 151.9 0.t 3.954.1 i17.1 En.' M1.4' .±. .31414 29 I.MS lgt WA 35. .O1 134.6 4.A.rumrKu 1fV2f41 fM .- 2* 17 6 I. 60 28 Us 0.5 24II.2 211.6 '2.9 57.2 0. 1-. 2r. A1. 173.0 424 9.0 2.0 2.1 534 14&4 21. 4 264

?11t1 Fm VSro Flow fin 47 94 202 IN 470 5.121 42.6 12.9 L25.9 187.9 41g.' -_-. 120 3. Wa.: sal.. 02.9 234 31.7 LileiENA BLe *Wi flo2 w it 29a Ku 2.414 1.0 4.leSS 11*21 t703 3,75 5.89 If.' 26.3 6.5 11.5 8.0 262.2 L.6 re6 53.9 Ci. 1.21 =J. 31' 7. 1.61624 KM1 . 7isu uSM iON 63 111 645 2.075 4e352 1195 24.271 29,510 6.9 .j 23. 4 6.3 7231 13.' .63. 6.6 =.4 54.3 20.12111.3 311.! 179. "A. 195 3111.51

81,1feTai USD 149.2 912.2 I'.&92 2.4425 2.73.1 7,254.2 311.61 hiN1 2,031.11 1N.46 4.4. 2,2.7-a?. 2417. 09. NOW8-I.F"l ilmf

27245123 MD IN 5 22.3 19,4 35.2 02 20.4 24.41 91.6 211.1 174.3 3.1 3116.6 l.0.9 71.6 ni1 67.6 S1.9 MAo Mir= 1'.".4 MAs "Me rmJ8232 ~ t 1123 11011 ill 92Wm no 62 247 24 325 in I'M9 9.29 22.9 12.9 44.0 3.7 T94 24L ILI 53.9 as- Vc1 asz aI hsa. PA. PO. 3.1simuwE m rAit 75 = M6 42 210 411 716 5.494 0.25 - 2., 9.e u.s 126.5 M.: 14.5 *2. in%a MA. 042 194.2 tiLt ma cia

IS-f Ia Wm MI 113.i 2V6.9 32.2 363.6 I 54 .62971.6 92.81 384 041 M 7 14.5 taNGO 1110. 2.0.4 134 241 2M.544.6102517 639.1f

rAtUttE S rVS F2501 WO 1.66 4,11 203 3210 49,14 UMm 27,611 1.6 22.8 5.4 69.5 276.0 111.5 631.9 24.2 444 219.1 3L7 301. 911. 51. SIj 44. u.1A67L2 52 LO to 2,46 6.51 9.229 122.8 254411 0.188 6.61 7.2 21.9 27. 17.2 647 21141.9 7.9 3.1 WI9 14.2 15.0 a924 2144 641 941 2016711 plgSit SI a . F lagin 1, LO INU 1.30 16.1 6.lm 7.96 3,641 0.0:2 29.2 42.4 25.8 42.7 93.6 3I.2 52,8 3.4 26.5 :29.2 2491. 0.2- 31.1 26; 36 0.IaW i-i f ~ I v" 10 .216 ?.M8 3.20 LL3M 91.M5 11811,06 0.5 2.3 17.1 59.2 23.7 NJAU 02.1 3.2 3.? 19.4 111.5 30.5 IVA 40.2 r.& 3.9 61.6

NM i9/ MO 10 20 a1 6 2t 062o 0.0 0.5 0.2 - 0.4 0.9 0.2 6.8 0.2 0.2 6.00- 0.0 0.1 . 2

Wta-fta 03L S 6912 11.6 224.5 29.0 04. 62.6 1,495.4 11.2 219.5 IW 5 110118 2,08.7 2.13. 2.5.4 S" *.9b"

5.6m

167226 am IV ao M6 93 iSm 30 5A 2.51 0711 211.2 05.1 144.2 371.6 0.3 .16.20. 6.6 1191.4 MO2. sLO uSIL Ze-a :,111 094 203.1 2.64.SWt is, aM in 2.36 2,54i 32.1? 0.3 22.90 0.132 3.9 1279.6 9.3 VI.9 MA 216.5L 7.1- 121.9 5L4 54.8 75.5 2,9113.1 1.36.J 46. 950 2.915"amt 271±115 WA3. 4,5111 7.M0 084I 24.151 0.21 1.0118.0 i0.1 10 2 1.6 14.2 4.2 9.2 24.9 22.7 Wi W4 0.7 2.5 Ci

ta6-ft.t 6151. 2,4.87. 4,256.4 8049.8 701,41 9,336.23.1,61.' a.3.2 3IMS. 5e44942.632,9L 26111.30. 61,.71I MICA. 20.32J 2.64.4 6.51.7

,"U 2.6,1 SIClll VS~ 57 ,490 526,60 .42,4 12.6 540 228,145 0.I6 80- 25.2 321.13 . 1A .4 2,VM. 28L6 209.? 34.t 461.2 36.7 is.'. 232 "UL 6.5 30.sNAs 1i.o1s rim fix= 5? - 2.304 1.83 I0,3 21320 6.56" 0.66 112.1 0.2 56.2 221. 564 26U.2 18.2 23.6 SLi 61.! V4 2IC. .4 41I.:an a r5 95mm 51 2. ,le 15.5101 35,501 31.511 76,.W 9.66 5.9 29.6 61.# 26.421.4 t77 6 MA .8 3.1A 225.:2 . 2.? 0.2 51.7 26714 S" M.;

5*0-fatltim LA3 IxU 4.0 100. 31.o 313.3 37.6 1.511.2 12.2 243.9 6.4 311.4 1.351 2.119.0 1.39. 134 36. 209

aMs i,,*.i5.6 IEi 63122925 18 19.3160 2hOeS 451.14 .54,114.4" 2.61,235 0.4I2 20-9 561. 452.6 541.1 79.2 2,1250.4 122.0 UL.2 631.0 196.' 1.22.0 2.671 2.51.2 7.9 2464. 2.21P6011 1 . Vu F1L" 1 334 215 aile11 195,5 25,06 2711.51 93,5 0.141 23.8 1.4 296.2 Wl71 392.6 66.1. 242.2 4 a. Ml 04.9 1.WI. 2412. 5.1 '2.5 2.06.9

fw10-ft41afIS S i 221.5 W.: 196.2 n.e 2.222.S 114.9 228-A W9.? M9.2' 2.211J 2.110.1 i.r.a 34t.9 2.4I. 21.4 0.CA2

095U16,2.4.2.1 . Will F9250 15 54.646 212,9.0 203.9.0 63.976 6.661 iA.M.= 0.6 61.2 ISM. 267.6 63.1 4169 .1 2. 25.3 My5 WA. 668 34. RA.mA 2.XL M". P2.9 20.110MRS 2I VS F150 LtN a.'14 9.5 27.51 6. 54.511 ibM. .0.3 2.2 5.3 17.2 65.3 14.4 IVJ? 2.0 U.S 31.2 .41 MA MO. 161.4 31.3 20.1 MO

3,0-7.9. 697219 CSIlSEMIf "2U 282. 2744 30.5 10.2 2.091.4 14J3 199 310. 345.51 Wi 2.0.3 3.06.3L "9.3 2 411.W.2

kb-ftaul riS 239m .475.' 6.01.6 9.9%9.1 M2IMI1.027, 01.06.72 Is.73.2.51.02327IIJ UaOIIJ 1,3.836RAW 6.151.9 314=. N2.3.30

fatal tISITM 071 7,471.' 6,CI.39,9291.2 23.93.931. 41,96.4.2 2.3.27,U5 41&42.33 N1.912J1.310V,11 .2 6A,51M.9 27.42- 2.S.1 3.06.

. ...... . . . ...... e,..e..t.et .flf - aew - . ,a nf - e-a

:' Include. inputs (of Credit ,re5haa (IgaluadIa areolved 166dm), oam-rodig pfupm. sopd larnmere rtcurrast Iospat

jaly 3965

- 46 - ANNEX 3-3Footnotes

1/ Includes 20 rolls barbed wire at N30/200 m roll - N600250 metal strainers at N2 - N5004 metal corner posts at N10 - N 40Tying wire - N 40

2/ Includes for poultry-rearing - lamps and brooding housesfor laying - battery cages (or nest boxes)

3/ Brewers grain is put here as an example of feed given for thesmallholder fattening scheme. In fact, a bran and molasses mix(3:1) is very commonly utilized. In addition, cotton seed, ground-nut or palm kernel cake are also added to the mix in a roughly3:1:0.5 weight mix.

4/ Includes chick, growers and layers mash.

5/ Includes rinderpest, CBPP and Clostridia vaccines for cattle.

6/ Includes ranide and thiobenzole for cattle.

71 Includes Semarin or Berenil (3 doses/annum), rinderpest and CBPPvaccinations, anthelminitic and acaricide.

8/ Includes TCRV, dipping and drenching for goats.

9/ Includes fowl pox, fowl typhoid and newcastle disease vaccinations.

10/ Cows imported from other West African countries.

11/ Milk containers, syringes (Model 1), tags, transport, feed and watertrough (Model 2), dip drum, feed and water trough (Model 3), syringes(Model 5), kerosene (Model 6).

NIGERIA


NATIONAL LIVESTOCK PROJECTS DEPARTMENT

Project Components by Year(US$/N'OOO)

Base Coats Total1 2 3 4 5 (US$'000)

...... ...... ...... ... ~~-S...National Livestock Project DepartmentAdmin. A Central Services - Directors Office 273.0 234.7 146.3 !31.5 131.5 917.0Admin. & Central Services - Internal Audit 195.2 149.4 82.3 75.0 89.1 591.1Admin. & Central Services - Admin. & Transport 620.6 560.6 542.1 420.7 433.5 2,577.5Admin. 6 Central Services - HQ Training Unit 652.5 604.1 457.9 370.7 389.5 2,474.6Admin. 6 Central Services - Kachia Training Unit 606.5 300.9 290.1 245.9 262.6 1,706.1Admin. & Central Services - Technical Control & Research 290.5 214.0 202.9 132.2 176.6 1,016.2Admin. 6 central Service.s - Accounting & Procurement 474.4 411.6 318.6 271.2 246.6 1,722.4Admin. & Ci. tral Services - Technical Assistance 4,394.2 1,751.9 1,748.3 1,142.5 1,170.6 10,207.7Field Services - Assistant Directors Office 314.3 264.4 427.0 518.7 784.6 2,309.0Field Services - Eastern N'Dama-Adada Ranch 261.4 95.4 72.9 72.9 72.9 575.6Field Services - Grazing Reserves 1,123.3 408.2 371.2 345.8 543.6 2,792.0 ^Field Services - Zonal Offices 1,171.1 319.0 319.0 491.1 550.7 2,850.8 -Field Services - State and District Offices 6,088.3 5,242.3 3,679.4 2,959.5 3,847.7 21,817.2Fld. Svcs. - Attached State Vet. & Animal Husbandry Ext. 1,632.9 2,506.2 3,921.7 4,794.8 6,252.1 19,107.7Development Planning - Assistant Directors Office 268.6 75.8 131.6 68.4 98.7 643.1Development Planning - Monitoring and Evaluation 786.9 571.9 541.5 376.5 350.9 2,627.6Development Planning - Land Use Planning 214.6 267.6 270.4 162.0 162.0 1,076.6Development Planning - Development Credit 298.5 329.7 243.8 181.8 179.7 1,233.4Engineering Services - Workshops North 1,122.1 500.5 328.8 342.1 366.2 2,659.7Engineering Services - Cravler Unit 945.1 717.0 430.7 365.6 486.3 2,942.7Engineering Services - Dam Unit 1,778.4 707.3 676.0 583.0 701.7 4,446.4Engineering Services - Water Development 547.4 977.9 891.0 655.2 547.4 3,618.9Engineering Services - Workshops South 90.3 90.3 147.5 125.1 90.3 543.4Fed. Lvak. Dept. - Support to Livestock Sect. Plan. Unit 1,548.9 506.7 447.6 113.0 53.9 2,670.1Weetern Livestock Company - Upper Ogun Ranch 813.0 341.6 280.2 287.4 287.7 2,009.9NACB - Livestock Credit Unit 533.6 314.8 314.8 297.3 400.4 1,860.8NIA - Livestock Production Program - Credit Program 2,546.8 4,849.8 5,845.0 6,765.3 8,869.1 28,876.0NLPD Livestock Production Program - Non-Credit Program 22.4 123.3 371.9 633.0 780.5 1,931.2NAPRI and ILCA - Livestock Systems Research 1,228.0 1,754.9 1,277.1 1,276.0 1,609.7 7,145.7Non-Incremental Cost - Negative -7,240.2 -7,905.9 -8,759.5 -9,257.3 -10,258.4 -43,421.3

Total BASELINE COSTS 23,602.6 17,286.0 16,018.1 14,946.7 19,675.6 91,529.0Physical Contingencies 847.9 456.0 282.9 119.5 225.5 1,931.8Price Contingencies 2,720.3 4,317.0 6,153.9 7,990.3 13,369.5 34,551.0

Total PROJECT COSTS 27,170.8 22,059.0 22,454.9 23,056.5 33,270.6 128,011.8 1Taxes 1,194.9 947.5 866.5 768.1 1,210.7 4,987.6 wForeign Exchange 16,798.7 12,128.9 11,822.7 11,495.9 17,429.4 69,675.6 Al

WAPABJuly 1985

NIGERIA

SEC0ND LIVESTOCK DIMVOPeCI PARECT

Detailed Coat EaCteates by Nature and Purase of ExpenditureCUSS or Nlrs OOes)

Vehicles Other Vehicle and General Total Physical PriceCivil Plant Credit Farm Intermtl. Local Plant Oper- Operating Uase Contic- Contin- ProjectWorks Equigeent Consultants Program Inouta Salaries Salariea atina Coat Cost Cost aanciea gnciea Cost

Livestock Production PronramCredit Program 28,876.0 25,876.0 11,602.1 0,4D18.1Non-Credit Progrm 1,931.2 1,931.2 1,069.4 3,020.6 1NDne Ranches 310.9 407.3 889.5 491.6 213.4 192.3 2,585.5 79.2 921.6 3,S86.3 ,Crazing Reserves 388.7 661.0 56.5 1,020.8 369.8 295.2 2,792.0 105.2 1,138.9 4,036.1Livestock Systems Research 42.2 812.4 941.7 342.4 2.274.7 534.5 2,197.7 7.145.6 181.3 3.380.3 10.707.2

Subtotal 741.8 1,660.7 56.5 26,876.0 3,762.4 342.4 3,787.1 1,197.7 2,685.7 43,330.3 365.7 18,132.3 61,628.3

ProJect Manaeent andSugOort ServicesNat'l Livestock Projects Dept.:

Admin. & Central Services 3,152.7 6,279.4 315.0 9,102.8 7,961.9 5,898.1 8,294.5 41,004.4 1,339.0 14,141.7 56,485.1Field Services 3.203.4 6.043.7 1.360.4 _ 25.5.4 3.5e0.4 6,352.2 46U064.5 1.119.2 24.132.1 71.335.8

TOTAL NLPU 6,356.1 12,323.1 315.0 1,360.4 9,102.8 33,504.3 9,478.5 14,646.7 87,068.9 2,45e.2 3e,273.6 1271820.9NAGS Livestock Credit Unit 321.5 870.4 54.0 614.5 1,660.7 49.5 30.2 2,7900.4Fad. Livestock Dept. Sectoral

Planning 64,4 2,336,3 36.3 233.4 2.670.4 1_ .7 477.9 3.165.0Subtotal 6,336.1 12,709.3 2,651.3 1,360.4 9,102.8 34,376.7 9,5068 15,494.6 91,620.0 2,524.4 39,631.9 133,7Th.3

Deduct lon-lncremrntl Coat (24,255.5) (9,282.2) (9,883.6) (43,421.3) (954.3) (23,213.2) (67,592.8)(67,592.8)

TOTAL PROJEC2 COST 7,097.9 14,590.0 2,707.8 28,876.0 5,122.8 9,445.2 13,908.3 1,464.3 8,296.7 91,529.0 1,931.5 34,551.0 1U,021.8 a

VAPAN

January 1986

NIGERIA


Project Costs by Financing Category(Naira '0OOs)

PY1 PY2 PY3 PY4 PY5 TOTAL

Civil Works 4,961.5 2,723.8 1,930.0 - - 9,615.3Vehicles, Plant Equipment, Furniture 7,704.9 3,956.8 1,868.4 1,108.7 4,590.9 19,229.7Farm Inputs - NACB 2,829.2 5,894.7 7,777.2 9,859.9 14,117.0 40,478.0Farm Inputs - Other 524.6 871.5 1,236.7 2,019.1 2,864.9 7.516.8International Salaries - Consultants 5,947.0 2,503.0 2,619.3 1,641.9 1,661.9 14,373.1

and TrainingLocal Staff Salaries 2,282.2 3,281.6 4,266.0 5,708.5 6,880.7 22,419.0Vehicles Plant Operating 184.0 373.2 459.2 534.9 717.3 2,268.6General Expenses 2,737.4 2,454.4 2,298.1 2,183.5 2,437.9 12,111.3

Total 27,170.8 22,059.0 22,454.9 23,056.5 33,270.6 128,011.8

WAPABJuly 9, 1985

0'

- 50 - ANNEX 3-7

NIGCRIA

SECOND LIVESTOCK DEVELOPHENT PROWECT

Detailed Project Financing Plan(Naira million)

Bank LoanPer Disbursement

P1I PY2 W 3 PY4 PY5 TOTAL US$ nM Schedule

Civil WorksIBRD 4.0 2.2 1.5 - - 7.7 7.7 7.0FMC 1.0 .5 .4 - - 1.9

5.0 2.7 1.9 9.6

Vehicles Plant EquipmentFurniture and Spares

TBRD 7.3 3.8 1.8 1.0 4.3 18.2 18.2 16.4FMC .4 .2 .1 .1 .2 1.0

7.7 4.0 1 9 11 4.5 19.2

Credit for Farm InputsIBRD 0.5 2.6 6.2 7.8 11.0 28.1 28.1 25.3 a)NACB 1.8 2.2 - - - 4.0Farmers 0.5 1.0 1.6 2.1 3.2 8.4

2.8 5.8 7.8 .9 9 14.2 40.5

Far. Inputs OtherIBRD .3 5 .7 1.1 1.7 4.3 4.3 3.8FHG - - - .1 .1 .2Farmers .2 .4 .5 .8 1.1 3.0

.5 .9 1.2 2.0 2.9 7.5

International Sa.lariesConsultants and Trainins

IBRD 6.0 2.5 2.6 1.6 1.7 14.4 14.4 13.0

Local SalariesFMG 2.3 3.3 4.2 5.7 6.9 22.4 - -

Plant Vehicle OperatingIBRD .1 .2 .3 .3 .4 1.3 1.3FG .1 .2 .2 .2 .3 1.0 7.5

.2 .4 .5 .5 .7 2.3General Operating

IBRD 1.6 1.4 1.3 1.3 1.4 7.0 7.0FMG 1.1 1.1 1.0 .9 1.0 5.1 Project Preparation

Facility 1.12.7 2.5 2.3 2.2 2.4 12.1

Unallocated 6.9

Total Incremental Project Cost27.2 22.1 22.4 23.0 33.3 128.0 81.0 81.0

Project Cost Financing SuimaryIBRD 19.8 13.2 14.4 13.1 20.5 81.0FMG 4.9 5.3 5.9 7.0 8.5 31.6NACB 1.8 2.2 - - - 4.0Farmers 0.7 1.4 2.1 2.9 4.3 11.4

27.2 22.1 22.4 23.0 33.3 128.0

Note: a) includes N1.3mn for N'Dam" Cattle

WAPAB

December 1985

- 51 -

NIGERIA ANNEX 3-8


Detailed Program Financing Plan(Naira millions)

PYI PY2 PY3 PY4 PY5 TOTALNon-Incremental Costs

FMGNLPD Salaries 2.6 3.0 3.4 3.8 4.4 17.2NLPD Gen'l Operating 1.8 2.0 2.3 2.6 2.9 11.6NLPD Veh. Plant Op. 2.1 2.3 2.6 2.8 3.1 12.9Total FMG 6.5 7.3 8.3 9.2 10.4 41.7

State Attached Staff Sals 1.3 2.4 4.0 5.4 8.2 21.3NAPRI Salaries/Overhead .1 .1 .1 .1 .2 .6ILCA Overhead .5 .5 .6 .7 .7 3.0WLC Salaries/Overhead .2 .2 .2 .2 .2 1.0

Total All Non-Incremental 8.6 10.5 13.2 15.6 19.7 67.6

Program Cost FinancingFMGProject Costs 4.9 5.3 5.9 7.0 8.5 31.6Non-Incremental Costs 6.5 7.3 8.3 9.2 10.4 41.7

11.4 12.6 14.2 16.2 18.9 73.3IBRD

Project Costs 19.8 13.2 14.4 13.1 20.5 81.0NACBProject Costs 1.8 2.2 - - - 4.0

State GovernmentsNon-Incremental Costs 1.3 2.4 4.0 5.4 8.2 21.3

FarmersProject Costs 0.7 1.4 2.1 2.9 4.3 11.4

NAPRINon-Incremental Costs .1 .1 .1 .1 .2 .6

ILCANon-Incremental Costs .5 .5 .6 .7 .7 3.0

WLCNon-Incremental Costs .2 .2 .2 .2 .2 1.0

Total Program Cost 35.8 32.6 35.6 38.6 53.0 195.6

WAPAB

December 1985

- 52 -

ANNEX 3-9

NIGERIA


Special Account No. 2

An amount of up to US$5 mn financed as an advance from the Bankloan would be deposited in a separate Special Bank Account designatedProject Bank Account No. 2, 1/ situated at the Kaduna branch of a Nigeriancommercial bank. The fund could be utilized to cover eligible expendituresagainst all categories. Initially, while project expenditures areoccurring at a slower pace, the amount to be advanced would be US$3 mn.Account No. 2 would be used to finance incremental expenditures eligiblefor reimbursement, and would be replenished against certified Statements ofExpenditure (SOE's) for those items eligible for disbursement on that basis(para 3.14). The disbursement application requesting replenishment wouldbe supportd:.y ,a) a certificate signed by the senior project engineercertifying the rsmbursement of civil works completed; (b) a statement oftransactions on the Account No. 2 certified by the commercial bank; (c) areconciliation of withdrawals and deposits with statements of permittedexpenditures and IBRD disbursements certified by the Project Director andFinancial Controller and that IBRD procurement guidelines and procedureshad been complied with; (d) statements disclosing the timely quarterlycontributions made by FMG for non-incremental and incremental project costscredited tc Account No. 1. Should any disbursement be made from thisaccount which is not acceptable to IBRD, FMG would refund the correspondingamount prior tq sAxfission of any further replenishment applications.

*k-A-p_cified in the Agreed Minutes of Negotiations, the Govern-ment's initkd -request for advance to the Special Account will be re-stricted to US$3.0 in. Withdrawal of the remaining US$2.0 mn would dependon the provision by the Government of adequate justification of the needfor additional funds as well as the experience with the use of the initialdeposit of US$3.0 mn.

1/ Project Account No. 1 would be the project's main bank account.

WAPABAugust 1985

- 53 -

ANNEX 3-10

NIGERIA


Local Competitive Procurement Procedures

The Federal Governments's general local competitive biddingprocedures have been reviewed and found generally acceptable with someexceptions. Bid documents for local competitive bidding under the projectshould specify:

(a) The criteria for evaluating bids should be clearly set out in thebid documents and should specify that award will be made to thelowest evaluated bidder;

(b) bids should be accompanied by a bid security, or bid bond;

(c) all bids should be opened in public and bidders' representativesallowed to attend;

(d) successful bidders should be required to submit a performancesecurity on release of their bid security, or bid bond.

WAPABAugust 1985

- 54 -

ANNEX 3-11

NIGERIA


Estimated Schedule of Disbursements of Bank Loan(US$ million

Cumulative AmountDisbursed

IBED Fiscal Year Quarter Amount Disbursed z Amount

1986 4 0a/ 0 01987 1 0 0 0

2 1.6 b/ 2 1.63 1.6 4 3.24 1.7 6 4.9

1988 1 1.6 8 6.52 4.0 13 10.53 4.1 18 14.64 4.0 23 18.6

1989 1 4.1 28 22.72 4.0 33 26.73 4.9 39 31.64 4.0 44 35.6

1990 1 4.1 49 39.72 4.0 54 43.73 3.3 58 47.04 4.0 63 51.0

1991 1 3.3 67 54.32 2.4 70 56.73 1.6 72 58.34 3.3 76 61.6

1992 1 2.4 79 64.02 3.2 83 67.23 3.3 87 70.54 2.4 90 72.9

1993 1 1.6 92 74.52 1.6 94 76.13 1.7 96 77.84 0.8 97 78.6

1994 1 0.8 98 79.42 1.6 100 81.0

a/ Estimated Board Presentation, June 1986.b/ Estimated Loan Effectiveness, December 1986.

WAPABJanuary 1986

NIGERIASECOND LIVESTOCK DEVELOPMENT PROJECT

DISBURSMENT PROFILE

tNQ110

xt 100- LIVESTOCK II DISBURSMENT PROFILE-BRD-ALL REGION LVSTK PROFILE

U, 90 . Z---IBRD-ALL REGION AGRIC. CREDIT PROFILE

70-

jeeVI.

0 I Z 3 4 S a 7

YEARS

10~~~~~~~~~~~~~~~~~~~~~~~~10-~~~~~~~~~~~~~~~~~~0 1 2 3 4 5 0 7 8~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

YEARS~~~~~~~~

- 56 -

Eml ANNEX 3-13

ani uws ROUTST PUllET- - a~ ~ ~~~- -

1990 191 1992 I3 51 l9 19 297 1999 I90

INTEREST ON LOANS 4239 7619 16 193 3550 22 244 26950 29500 2450 35700INTEREST N S.. DPSITS 2591 5511 4924 460 50 3 0 6 6500 6 650HISCELLANEDS INCONE 130 191 229 171 200 200 20 200 200 200 200MFIT SALE FIXED ASSETS 10 16 12 32 0 5 60 70 90 90 100

IA) TOTAL OPERATING IINCOE 6959 13327 22049 239 2533 27950 30M0 33 36210 32 4250

DIRECTORS FEES 20 31 39 31 35 0 45 50 55 60 65ADINm. & OTHER EXPENSES 2790 6001 970 130 17300 59900 21O 240 26490 2910 32050PENSION FID 297 630 99 19 1M 10 170 1910 2100 2310 2540AUDIT FEES 20 7 7 7 0 I R 9 9 9 10PROVISINS:DOUBTFUL DEBTS 2250 4000 5350 *00 11 2050 2200 2450 2650 2950 3250DEPRECIATION 330 591 894 1216 1000 160 1450 1300 1200 1050 950

(01 TOTAL OPERATING EXPENSES 5697 11260 16977 20201 3 2517 2 297 32504 35519 39965

NET OPERATINGPROFIT(A-BI 1262 2067 5072 3705 37 27 3327 3821 3776 3721 363

PRELIMINARY EXPENSES 167 209 222 222 - - - - - - -

AN RELATING TO PREVIOUS YR - - - 127 - - - - - - -

REPLACET RESERVE 100 100 100 100 1t 100 100 100 200 100 100TRANSFER TO GEIERAL RESERVE 995 1758 4750 3256 499 02 4%7 5631 5776 5931 6075

(C) TOTAL: 1262 2067 5072 3705 509 452 5067 5731 5876 601 6175

WAPABAugust 1985

- 57 -

MINEX 3-14NIGERIA

SECOND LIVISS1 DEVfoPWTl PROJ-SUMMIARY OF NACfl BALANCE SHEETS

(N '000)

ACTUAL MRJECTED

AST 190 1981 1912 19B3 194 1995 19 1997 119 19m .1990

LUans Current 94005 152337 214190 216622 238300 262150 299400 317250 349950 313900 422250Lous Arrears 39371 49743 62411 89711 97550 107300 1L9OOO 129100 142900 157050 172900

Sb-total: 133376 202090 276601 305333 335950 369650 40640 447050 491750 5409O 595050

Les Provision forBad Dkpts 5250 9250 14600 10600 20150 22200 24400 26950 29500 32450 35700

subtotal: 129126 192930 262001 296733 315700 347250 382000 420200 462250 S500 559350

Fixed AssetsuffterDepreriatimn 4169 4919 6929 11390 13000 15050 17300 19903 20900 21950 23050

Equity Investmnt 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000Stocks I Debtors 1790 2255 4058 460 5100 5600 6N0 6900 7450 B200 9000Prepaid & preliminary

expenses 1236 1346 1292 1061 1200 1300 1450 1600 1750 1900 2100Cash in hind & it Bank 105401 102779 70653 96755 93338 9290 94537 91895 00434 79655 76950

Total: 241721 305129 345932 401535 429339 4540 492497 531398 573704 620205 671450

Shareholders Fonds

Capital 150000 150000 150000 150000 150000 150 150000 150000 150000 150000 150O00Revenue Reserve 250 350 450 550 650 750 950 950 1050 1150 1250Gneral Reserve 9197 9955 14706 17961 21589 25630 30437 35998 41594 47305 53150

Liabilities

FEN Loans 79346 106346 130946 149221 164150 180550 198600 219500 240350 264350 290900Building Fund 2554 2554 2554 2554 2900 3100 3400 3750 4100 4500 5000IIRD Loans 1673 1976 3300 5614 6950 6950 8500 11450 14900 19850 23950Creditors 701 1941 4276 12568 13900 15200 16750 19400 20250 22300 24500CM3 Loans - 32000 39900 63067 69400 76300 83950 92350 101550 111750 122900

TOTAL: 241721 305129 345932 401535 429339 459480 492497 531399 573784 620205 671-450

WAPABAugust 1985

- 58 -

ANNEX 3-15Page 1 of 4

NIGERIA


Lending Terms and Conditions

1. Federal Government of Nigeria to NACB

(1) Rate of Interest Not less than 6% per annum on theprincipal amount of loan outstandingfrom time-to-time.

(2) Repayment (capital In accordance with the Amortizationand payment of Schedule attached to the Subsidiaryinterest) Loan Agreement to be entered into

between the Federal Government ofNigeria and NACB.

2. NACB to On-Lending Institutions

a. Short-term loans(purchase of livestock,feed, and transport)

(1) Rate of interest : Not less than 2% per annum above FMGlending rate to NACB.

(2) Period : 4-12 months

(3) Repayment (capital To coincide with repayments fromand payment of ultimate borrowers, but notinterest) : exceeding 12 months.

(4) Penalty for laterepayment : Not less than an additional

5% per annum.

b. Medium/long-:erm loans(purchase of I'vestock,feed, fencing, watersupply, and fodderbank establishment)

(1) Rate of interest : Not less than 2% per annum above FMGlending rate to NACB.

- 59 -


(2) Peried : 3-7 years

(3) Repayment (capital To coincide with repayments fromand payment of ultimate borrowers, but notinterest) :exceeding 8 years).


5% per annum.

3. On-lending Institutions toParticipating Farmers

a. Short-term loans

(1) Rate of interest : Not less than 1% per annum aboveNACB lending rate to on-lendinginstitutions, plus not less than 2% perannum administration fee

(2) Period : 4 months


5% per annum.

b. Medium-term loans

(1) Rate of interest : Not less than 1% per annum aboveNACB lending rate to on-lendinginstitutions, plus not less than 2% perannum administration fee.

(2) Period : 3-7 years.


5% per annum.

4. Revolving Credit Fund

NACB would establish and maintain a revolving fund into which theproceeds of capital repayments of all project loans to NACB, fromparticipating financing institutions, would be credited. Withdrawals

- 60 -


from the revolving fund would be made by NACB for the following purposes:

a. non-incremental loans direct to farmers, on-lending institutionsand NLPD for similar purposes (including input procurement), andon similar lending terms and conditions as loans granted underthe Second Livestock Protect; and

b. repayments of capital to the Federal Government of Nigeria inaccordance with the amortization schedule attached to theSubsidiary Loan Agreement between the Federal Government ofNigeria and NACB.

5. General

a. Federal Government of Nigeria would bear the foreign exchangerisk.

b. NACB would establish eligibility criteria, satisfactory to IBRD,for on-lending institutions to participate in the Project, andwould enter into separate financing agreements with eachparticipating on-lending institution.

c. NACB and participating financing institutions would maintainseparate records for project loans.

d. Security to be in accordance with the normal securityrequirements of the financing institutions and, in the case of amedium/long-term investment, to include a charge over the assetspurchased with the loan.

e. Each loan applicant would agree to follow technical adviceprovided by the Livestock Project Department.

f. Lending institutions would charge loan applicants a loanapplication fee of N5 plus an administration fee of not less than2% per annum which would be in addition to the interest charge.

g. Loans would not be granted to applicants who are in default withcurrent loans.

h. Farmer contribution would be between 10% and 42% of individualinvestment.

i. NACB would review interest rates with the Bank as at 31stOctober annually and, if necessary, revise the rates in agreementwith the Bank to reflect Central Bank of Nigeria guidelines andthe costs of administering the program.

- 61 -


j. KACB would carry out a full review of project creditactivites, for discussion with IBRD, by not later than twelvemonths after credit effectiveness, and, thereafter, as at 30thOctober annually.

k. These lending terms and conditions listed under 1-5 above may beamended from time to tlme as agreed between IBRD, FMG, NACB, andNLPD.

WAPABAugust 1985

NIGERIA


NACB - Indicative Revolving Credit Fund Summary(N '000)

PY 1 PY 2 PY 3 PY 4 PY 5

A. Cash Flow

Source of Funds

IBRD 2,075.1 4,276.6 5,427.9 6,850.4 9,436.2

NACB own Funds 283.4 589.5 777.4 986.0 1,411.0

Repayment Development Loans 41.7 156.7 421.4 871.8 1,589.5Repayment New Short-Term Loans 1,794.0 3,280.0 3,590.0 4,716.0 5,148.0Repayment Repeat Short-Term Loans - 1,672.8 4,970.0 7,624.2 11,411.4

4,194.2 9,975.6 15,186.7 21,048.4 28,996.1

B. Use of Funds

Long-Term Development Loans 564.5 1,586.1 2,615.3 3,120.4 5,699.2New Short-Term Loans 1,794.0 3,280.0 3,590.0 4,716.0 5,148.0

Repeat Short-Term Loans - 1,672.8 4,970.0 7,624.2 11,411.4

2,358.5 6,538.9 11,175.3 15,460.6 22,258.6

Balance available on RevolvingLoans Fund 1,835.7 3,436.7 4,011.4 5,587.8 6,737.5

Cumulative - 5,272.4 9,283.8 14,871.6 21,609.1

Cash Available on Revolving Loans Fund as at end PY 5: 21,609.1

Development Loans outstanding: 10,504.4

32,113.5

WAPABJuly 1985


Technical Assistance, Credit Funds and Input SupplV FRow Chart

TICENICAE ASSI5TANCE CRE1NI OM SUPKY L1

IF0t/~~~~~~~~~~~~~~~~~~~~~~di I~~~~~~~~~~~~~~~~~~~~FedarN GamnAsIimeg& 'eehn5sl

Proiwfs D9pafI I

TUectvDePo Euac - . .

(NE\D) . g mmtelIFkt d AOpwaR Ce/C oum* (N,)- t d( _Fg

-- Tn CtO'1t Fu,d Ou§ FI

| edtF,jn -t #k l l

Jul 1985

- - Teh{8kd ,4sista/Coorcretostat

. t c~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ot

NLDStt A =bhd o W&R

RORDA's~~~~~~~~Ate C-o ARf COOP SU D h

EWtoinAWPABcl GM eincmmL

July 1985~~~~~~~~~~C,

- 64 -

ANNEX 4-2

NIGERIASECOND LIVESTOCK DEVELOPMENT PROJFCT

Pro*ct Implefenatlon Schedule

Pld %. WoodPt PV PC2 PF3 P_ Pomal- pay1 FM -Y8 --

M1 PaM VeO 1UtWa _ 9WI"7 IMAM _ l9U/19fl9 __ _9_!1o 19W0/191 19W 1W2

Qua; 2 3 a 1 2 3 A i 2 3 4 1 2 d 1 2 3d A 1 2 3 4 1 2 3 _

11 NaoFlblnq S

1.3_ E :s ,. , t IACor,ial.llN Dt

2OEC lIDVtAIA. ENETOOC pROD.CyToN pR2OGIt

21 kt.n _ t gtt_ u_

LOM I-Ad pdx

1o 2- SomwisFaten_ r2, I 4 - VI.em IN Ow1LModal 5 - Eadter NOant

Moodl 6 - PauLby

2.2 NDwom kivot le

23 Gro&qi Rammru-Goadisi of 5 Raseaw.

-Gan*tkg d 3 bin..v

of 3 NsmvR...wes-Mhin#urceo d 8 Roeset.

K L1ft.ABJ18ff& SJtLF0G SERVKCE5

25 T_&vlW A=WW=o (TA)- Short-Tint (5 podhiOis

- ROSd ReTA Fa--t---r tjg

- RaoeftrOotlenancdtm

26 RepoMtng- mja Walk< Plgrn +jgg I&l

Prwa t Apo4, W i + i i - A.Noted PIMU

A10Un2h _ ¢ _ _ _LFX__

2.7 CvIl Waoft

- AStllSfMat atan AWXlctju

- _wlev of WM"__ RctI a

Crit 1 5Acivte

- Waronay Sody

- Uwstaak C.nas- R)0Mmmmcth.tui& & EvaWluton a

2.10 TralWtg

- SWcrwwv ac tIIgCne

WAPABAugust 1985


Nationl LNsock Propch DepartmentOrganization Chait

l l-

LZ~~~~~~w aJ

9A-27"

WAPABJuly 1985

N16ERIA

SECOND LIVESTXCK XEKLOPFNT PROECT

Projected Incremental Project Production

NOXL

1. AGROPASiORkIST 1 2 3 4 5 6 7 * 9 16 11 12 13 14 15 16 17 to 19 2t 2

FORAME 6ROWER

MILK ODUCTION IHNT 25.4 77.9 14.0 403.0 737.9 851.5 1056.9 1159.1 15429.5 165.3 1734.9 SOf.6 1959.4 1959.4 2959.4 199.4 1959.4 199.4 599.4 19.9.4NENT PRODCTION (Ktl 19.6 74.4 112.8 340.9 610.8 703.0 413.4 449.3 791.2 1007.5 11H.9 953.0 M95.5 1245.5 195.0 135T .4 140.0 1410.0 1410.0 637.1

2. SMALLaDER FATTENER 3/

NEAT PRODCTION INTl ;59.2 652.1 995.0 1356.0 1668.0 1417.0 1205.0 .024.0 970.0 740.0 629.0 534.0 454.0 316.0 123.0 m.0 237.0 201.0 172.0 146.0

3. GOAT BREEDER

EAT PRODUCTION ITl) 3.0 21.5 G98. 239.2 49.6 7114.0 166.4 966.4 566.4 866.4 SM.4 64.4 866. .4 64 .4 114.4 U6.4 166.4 1i6.4 1327.6

4. HESTERH I'DA4A.. _..........

NEAT PRODCTION INT) * 21.3 77.4 549.5 563.9 569.0 596.9 219.9 232.! 265.1 310.9 377.1 353.8 417.6 417.6 417.6 417.4 417.6 417.6 1497.6

5. EASTERN HNMAM

MEAT PRODUCTION INT) - 4.3 20.3 39.7 77.3 116.9 139.5 168.3 169.8 175.5 178.1 179.1 179.1 179.1 179.1 519.1 179.1 179.5 179.1 91.6

6. POULTRY BREEDER

NEAT PRODUCTION INT) - 2.7 9.1 12.2 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 27.0 77.0 27.0 27.0

E66 PRODUCTiON 5000 DOZES) - 11.1 53.8 121.3 234.3 316.7 3514.7 316.7 3516.7 315.7 315.7 316.7 314.7 316.7 316.7 351.7 3516.7 315.7 316.7 316.7

I/ NOTE - NEAT PRODLUCTION IS IN FORM OF METRIC TONS Of INCREMENTAL LIVE fEIENT BAIN2/ RESIDUAL HERD VALUES ADDED TO MODELS 1,3,4,53/ ASSUNES A 152 ANBAL DEFAULT RATE IN LOAN RECOVERY

AUGUST 15, 5965


Comparison of Financial and Economic Prices for Beef SidesImported as Frozen Beef and Cattle on-Hoof, in two Markets

(kg)

Lagos Market (South) Kaduna Market (North)financial economic 1/ financial economic 11

CIF on-hoof cattle Northern Border 2/ (N) 1.99 1.99 1.99 1.99Transport to Maiduguri 3/ 0.01 0.005 0.03 0.014Marketing costs Maiduguri 0.19 0.085 0.19 0.086Transport to Lagos 4/ 0.30 0.135 - -Marketing costs Lagos 5/ 0.55 0.248 0.35 7/ 0.16

Subtotal 3.04 2.46 2.56 2.25

Conversion to in-bone sides 6/ 6.08 4.92 5.12 4.50Deduct value of offals (0.8) (0.36) (0.8) (0.36)

Price of sides in Lagos/Kaduna 5.28 4.56 4.32 4.14mm....amm moom === a ..

CIF frozen beef Lagos (US$/N) 2.2 2.2 2.2 2.2Port handling and clearing 0.04 0.018 0.04 0.018Transport to Kaduna - - 2.3 0.18Marketing costs in Lagos/Kaduna 2.3 1.035 0.4 1.035

Subtotal 4.54 3.253 4.94 .3

Add 20Z preference 0.91 0.41 0.99 0.45

Price of sides in Lagos/Kaduna 5.45 3.66 5.93 3.88m... . .mmu mum

1/ Local financial costs are multiplied by the standard conversion factor of 0.452/ N530/266 kg head3/ Maiduguri - One of several border towns where imported cattle are sold for the Nigerian Market4/ N80/head5N N145/head includes slaughter, transport in Lagos, losses, mark-up.6/ at 50% carcass veight7/ N95/head

Annex 5-3 contains greater details of costings

WAPABAugust 1985

- 68 -

NIGERIA ANNUX S-3SECOND LIVESTOCK DEVELOPMENT PROJECT

Calculation of Economic Liveweight Fargate Price for Cattlefrom Imported Frozen Beef and on-Hoof Cattle

(kg)

Frozen Beef On-loof Cattlefinanclal economlc 1/ financial econooic

CIF Lagos, Northern Border (USS) 2/ 2.2 2.2 1.99 1.99Naira equivalent (N) 2.2 2.2 1.99 1.99Add port handling and clearance 0.04 0.018 - -Add local transport to reference market 0.4 0.18 0.02 0.009Add marketing costs 3/ 2.34 1.05 0.19 0.086Market Price Kaduna 4.98 3.45 - -Add 201 preference 0.99 0.45 - -

Reference market price (Kaduna) 5.97 3.90 2.21 8/ 2.085

Conversion to liveweight 5/ 2.99 1.95 - -Deduct slaughter 6/ (0.11) (0.05) - -Deduct local transport (farm to Kaduna) (0.074) (0.033) (0.01) (0.005)Add value of offals, inedible offals

and hide 7/ 0.63 0.28 - -

Economic Liveweight Faragate Price for Cattle 3.44 2.14 2.21 2.09--.- ---- --- rounded 2.10

1/ Local financial costs are multiplied by the standard conversion factor of 0.45 to arrive at economiccosts.

2/ Frozen bone-in quarters and sides imported from Brazil, US$2,200/ton; N530/266 kg on-hoof head of cattle,northern border.

3/ 10% losses (101 of 2.200) (220)refrigeration (1 month) 350admin. overheads-25% of costs (2,200+40'400+220+350) 802mark-up of 352 (3.210+802) 1,404

2,336-2,340This data is from two large com_ercial firms in Nigeria which import or have imported frozen meat.

4/ The Mambilla SAR (Report 3777-UNI) shows that in 1978, a year of reasonably free trade before importrestrictions were imposed, a preference of between 14-62Z for fresh meat existed in the southernurban markets. Attempts to sell frozen beef in the north have failed as the preference is even bigher.In this report, a 20Z preference for fresh meat was utilized.

5/ at 50Z carcass welght6/ slaughter- M35/340 kg head7i edible offals N 95

inedible offals 93hide 25

213 head(taken from a study conducted by NLPD in conjunction with the University of Maiduguri, of 16 slaughteredhead of smallholder fattened cattle, weighing on average 341 kg).

8/ Cattle used by the smallholder fattening scheme will travel on hoof to village markets and then tofarms, rather than to major cities (e.g. Kaduna)

WAPABAugust 1985

- 69 -

ANNEX 5-4

NIGERIA


Financial and Economic Farmgate Prices for Commodities 1/(1985 Prices, N)

Financial Economic

Northern Zebu Cattle (kg) 2.66 2.10

Western N'Dama (kg) 3.32 2.10

Eastern N'Dama/Muturu (kg) 3.91 2.10

Goats (kg) 3.55 1.60

liens (kg) 7.70 3.47

Eggs (dozen) 2.84 1.28

Milk (liter) 1.18 0.53

11 For full details see Working Paper 12. All are liveweights, except eggs andmilk.

WAPABAugust 1985

SECOND LIVESTOK DEVELONT PRECT

FA IN RENE MLYSIS 1ITH AND LITWT MJECT

MITT PROJECT LITH PROECT- - - - -- FlSt~~~~~~~~~~~~~~~~~~~~~~IUKIAE Whf

LIVESTOCK PR CROP PER a FARN PER CAPITA LIVESTOC PER PER a/ FAR PER CAPITA INCRAE I INCEAE U TI TI Lh1i

INCOME CWITA INCOME CAPITA INCOME lKNCE INE CAPITA INME CAPITA INOME INCOME LIVESTOC INWE FAN lES of5ISE iL

MO.L I --- --- -- _ _ _ __ __ _ -_ Itl IDI ID

WASTORALISTMITHUT VAMR 5711 I7.L - 0.0 5711 379 0 1354 0 UOO I4 54 54 U

MITHUATER 5711 Il.L - 0.0 9711 179 .il 1195 -0 7765 1195 36 3 23

MOEL 2

tHILLHOLOER FATIERER - 0.0 1326 204.0 1326 204 40 U 232& 204 1756 270 - .32

IIOOL 3

MODEL 4

LESTEE E"M III 101.2 3351 171.1 41I6 595 5722 II6 35 479 902 1295 04 III 31 i

MDOKL 5

ATERN I DAAM 270 36 1576 225 1146 264 1157 Its 157t M 2723 1l0 329 41 41

MCL '

PLTRV E6 PRODUCER 0 3351 479 3351 479 2612 373 3351 479 5963 52 - 76 50 t

YERAE IINCOE 1303 274 360 230 1400 501 3820 s52 27 230 2231 03 112 S 59 7

a/ DATA TAIEN FRM UPDATED AOP SAR FIOURESi bi RTURN TO FARErS IVESTE T IS OVER !50 FOR ALL

NOOL 2 CROP INCONE a NORTHERN SMALLHOLDER NMLS ECEPT ARASTORXIITI UITH MATER MNICI 15 232.

NODELI I 5 CROP INCOME *5OUTIERN SHALLHOLOERMODEL 4 1 6 CROP INOME - MEDIUM SIZED FARMER

uWEuT 1Y,118

NIGERIASECOND LIVESTOC9 DEVELOPMENT PROJECT

Economic Rate of Return

…-- --- -- - -- - -- -- _____-_-_-_-_-_-___-_ ______-_-_--- ------ …

1 2 3 4 5 6 7 9 9 1o 11 12 13 14 I5 16 17 18 19 20……-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - --------------------------------------- _-_._ _ _ __---- - -- - …

BENEFITS

MODEL I AGROPASTORALIST-MILK 14 42 104 215 393 459 563 617 762 897 925 963 1044 1044 1044 1044 1044 1044 1044 1044MODEL I AGROPASTORALIST-MEAT 41 156 363 716 1283 1476 1288 1406 1662 2116 2404 2001 2069 2616 2843 2916 2961 2961 2961 13770MODEL 2-S,HOLDER FATTENER-MEAT 544 1369 2069 2848 3503 2976 2531 2150 1827 1554 1321 1121 953 811 6E9 586 498 422 361 307MDEL 3 GOAT IREEDER-MEAT 5 34 142 382 781 1142 1385 1385 1385 1385 1385 1385 1385 1385 1385 1385 1385 13 135 2121MODEL 4 W. N DANA-MEAT - 45 163 314 344 353 392 462 488 557 653 792 906 877 877 877 877 I" 877 3145MODEL 5 E. N DAM-MEAT - 9 43 93 162 245 291 354 357 368 374 376 376 376 376 376 376 376 376 1242MODEL 6 POULTRY - HEAT - - 9 n3 56 94 94 94 94 94 94 94 94 94 94 94 94 94 94 94MODEL 6 POULTRY-EGGS - 14 69 164 300 405 405 405 405 405 405 405 405 405 405 405 405 405 405 405

TOTAL BENEFITS 604 1670 2961 4750 6822 7148 6949 6972 6978 7366 7560 7137 7132 7607 7713 7683 7639 7564 7503 22128

TOTAL COSTS 9170 6539 5999 4258 6750 3134 2405 1716 1248 1089 954 939 741 658 58a 528 477 433 39 365

NET BENEFITS -9566 -4970 -3027 492 72 4014 4543 5156 5730 6277 607 6298 6391 6949 7125 7155 7163 7131 7106 21763…::::::: =:::::: =ee:e:: : :r:::s : w=z::z= ::::e:: :====== = ===r: gz::5sr tee5:: rs:s : s: _ e: S =:_ e e---= 1:-e Bse _S

Economic Rate of Return = 19% |

W --APA-August 1985

N I G E RW~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

IN<. , ., .; da

ENI N K A DbsXH-e

j I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Lt

_<~~~~~~~~~~~~~~~~~~~~~~~~~ 4.4_ N ortiu

/PTEA U

a~~~~, ' N0 0 N S f.

,SA N _,,,b.

AURE*.o.nAABEOEr . A/EN E /

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lkom 10~~~ Not,o.oI Cop.taI* Stoic / Po.n.ce Caw.aks

&gh~~ / 8 -2 ~{L I MO I ~I E If A.,ponts w.h sched.Ied se-nces

- Ao.. Roods

-- R.ne,s

-' HARrOURT ilBo,dni6;.i/ t

P ofI G c',,e o Inie,oi.ool Boi*.dones

B,gh, ~ ~ ~ ~~~~~~~~~*20 .0 0 6GA mit,l .;D

IBRD 15SW Sr 14'

R NIGERIAIBRD ASSISTED

A>)_ 4 AGRICULTURAL PROJECTS

_ _'- ~ _ {sz A_grsqlturol Development Progictsj

9- \_-_ /°8 ; \ - (COMPLETED-' C_ Nqi.ru J % \ F uni:: l F oonl 1092 UNII

J jEi¢ - / \ C:w~~~~~~~~~~~~~~~~~~~~useu lloun 1099-UNIJf .* / / \ ~~~~~~~~~~~~~~~~~~~Gam6p (Loup Ilt.A UN@I

X1 ' i / t \ Ayongbo (LoonlA54-UNI)

{, V ~~~~~8 (, R N 0 1XSlN:ae 1 /I | [llN

4rf .ib;L - IsA BoW loan 1667- UNI)

4.. x oFliar,'.m II Loon 1668 -1UN1Ora Natib Iloan 183h-WNI)

Lk it Akao (LoonigSAtUNII

:_hBu. State (loor 1981-UNIISokoto Stham lloon 215-UNIIKono Stole (Loan 1982 -UN I)''A t sourHev <Kaduna Stale ILoon 21436 LjNI)

801N0 ! [ APPRAISED4 U H I t. ,onumnrn boaro

L N .; A j(' (b - A7Z,S

__ _ e e FJ-B < <t% < _ _lae ~~~~~~~~~~~~~~~Ararnbro Stafw Ogunh Stat

l _ 6 < ~~~~~t HA fi ( Cross River State? - -".< | , \ ~~~~~~~~~~~~~~~~Technical Assistance:

T r ^ t, \ 5;w\L A ) \ t Agricultural Technical AmlstanceT EOLA Project (Loan 2029-UNI)

IrEAU _ - 1 _ YOL V Troaining _rqolQ±4TE ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Agriculteurl and RuralInFAU I ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~angmn Training Iiifl4F _, (Lookxn 1719-UNI)

Tree Crop Proiects_ V I - J CCMPLETED

Cocoo I Loon 764 UNI) ond/ /)Cocoa 1 (Loon 1045- UNI)

_ ) . ~~~~~~~~~~~~~~~~~~~~~CANCELLEDEN\' (t ,_/ n 8 -- ~~~~~~~~~~~~~~~~~~~~~~~~Onclo 0-lPalrm (oon 1 92 - UNII

Bmndel 0O Palm (Loon 1183-UNI)se". EXISTING

otsne - - irnimoOil PoJmnLoonIl9-UNIJ

_Riers Stote Oil Pakn (Loon 1591-UNIJN11 i - Forestry (Loon 1679-UNI)

g r w > ?~~~~~~~~~~~~~~~~~~~~~~~ rigcl garn 2ro,eCL| ' 5 w f ~~~~~~~~~~~~~~~~~o!ptEcTED

, S _ . _ ,, w.n.r .- ~.=n * R-ce (loan I OJ UNIN)

._zzz=zzzz..: z.___.7.- Fes) Livestock Development Project

A, Aipoors scheduled r -cs ..In . Western Ivesiatl t. IonchfesN+ Ati..l &iw-th Atheouled se-sc.s 1G' ~ t ''- rtlf5w X North Eosiern Co Ranches

MRn Raods Ir - E R I r --- SrQo.lAcdrs ) NI^, sr o G E R GA Ir'az.ng Reserves Fulon. Ronches- Rivers yf -

* - - :tor HAflf 6-D Sartdle i .ivestorl, DeveloDment Protect4iJecINA'td - - :. . ifAr. I Appraised) -

State Boundaries .. v,,1i r -. r a ' t, 0 N Dama Ranches Livestock I & ll_-_ In,ernoiionoJl Bosundar len (0*55/ ,?t P rl o .i aI~ster..r....c^^ 1 * N'Dnma Ranches Livestack I

tOGOI _ I } Ji- r'1> _ _ ~ ~ > SX Grazing Reserves - Developod under Livestock I,tz so o rall wi irn 17C *ea nee r.ia Edl C°jar<;-%-~ J/ to be further used in Livestock IL

. G.04

01 s I-ŽrQ.sJ Ne- Grazing Reservesa ma a0 Oa no sA0

*'c o EjE 1 9 8 5NtOVEMBER 1985

lEAD 191G R .

I A

N I G E R I A DEVELOPMENT PROJECT CH-ADSECOND LIVESTOCK DEVELOPMENT PROJECT

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v/ TBa' a V 0ur Fr DUN 14A Ri Fv (t vs b. O .1

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M IOK L.,, RVERB @ a IVR LIBESTOC. 1I"C HI,D

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B B? 100150 050 atB EQ. GUiNEA KIIBtaSlSSS ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~~jJL1198

World Bank Document - Documents &...

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