Document of The World Bank

FOR OFFICIAL USE ONLY

Public Disclosure Authorized Report No: 49974-NG

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED CREDIT

Public Disclosure Authorized IN THE AMOUNT OF SDR 119.6 MILLION (US$190.0 MILLION EQUIVALENT)

AND

A PROPOSED TRUST FUND GRANT

FROM THE GLOBAL ENVIRONMENT FACILITY IN THE AMOUNT OF US$4.5 MILLION

TO THE

Public Disclosure Authorized FEDERAL REPUBLIC OF NIGERIA

FOR THE

LAGOS URBAN TRANSPORT PROJECT 2

JUNE 2, 2010

Transport Sector Country Department AFCW2 Africa Region

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

CURRENCY EQUIVALENTS (Exchange Rate Effective October 30, 2009)

Currency Unit = Nigerian Naira US$1 = 151 Nigerian Naira US$1 = SDR 0.6289

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AFD Agence Française de Développement (French Development Agency) BCR Benefit-Cost Ratio BPP Bureau of Public Procurement BRT Bus Rapid Transit CAS Country Assistance Strategy CBO Community Based Organizations CEO Chief Executive Officer CFAA Country Financial Accountability Assessment CMS Church Missionary Society CO Carbon Monoxide CO2 Carbon Dioxide CBD Central Business District CPAR Country Procurement Assessment Review CPS Country Partnership Strategy CQS Consultants’ Qualifications Selection CRM Customer Relationship Management DA Designated Account DfID United Kingdom Department for International Development DsTV Digital Satellite Television EIA Environmental Impact Assessment EMP Environmental Management Plan ERGP Economic Reform and Governance Project ESMF Environmental and Social Management Framework FAD Financial and Accounts Department FBC Lagos NURTW (First BRT) Cooperative Society Limited FGN Federal Government of Nigeria FM Financial Management FMS Financial Management System FPM Financial Procedures Manual GEF Global Environment Facility

FOR OFFICIAL USE ONLY

GHG Greenhouse Gas GIS Geographic Information Systems IAU Internal Audit Unit IBRD International Bank for Reconstruction and Development IC Individual Consultant ICB International Competitive Bidding IDA International Development Association IDF Institutional Development Fund IFRs Interim Unaudited Financial Reports IRR Internal Rate of Return ISR Implementation Status Report ITS Intelligent Transport Systems LAMATA Lagos Metropolitan Area Transport Authority LASTMA Lagos State Traffic Management Authority LCDAs Local Council Development Areas LGA Local Government Area LRT Light Rail Transit LSG Lagos State Government LSMT Lagos State Ministry of Transportation LSMPT Lagos State Ministry of Public Transportation LSMWI Lagos State Ministry of Works and Infrastructure LSMWT Lagos State Ministry of Works and Transport LUTP Lagos Urban Transport Project M&E Monitoring and Evaluation MD Managing Director MDG Millennium Development Goals MOF Ministry of Finance MOT Ministry of Transport (or Transportation) MOW Ministry of Works NCB National Competitive Bidding NEEDS National Economic Empowerment and Development Strategy NGOs Non-Governmental Organizations NMT Non-Motorized Transport NPV Net Present Value NURTW National Union of Road Transport Workers OSP Operations Service Plan PDO Project Development Objective PEFA Public Expenditure Financial Accountability PEMFAR Public Expenditure Management and Financial Accountability Review PFM Public Financial Management PPP Public Private Partnership PRP Procurement Reform Program PRSP Poverty Reduction Strategy Paper QCBS Quality and Cost Based Selection RAP Resettlement Action Plan RPF Resettlement Policy Framework This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. SBD Standard Bidding Documents SIL Specific Investment Loan SOE Statement of Expenses TPU Transport Planning Unit US United States VKT Vehicle Kilometer Travelled WB World Bank

Vice President: Obiageli K. Ezekwesili Country Director: Onno Ruhl Sector Director Inger Andersen Sector Manager: C. Sanjivi Rajasingham Task Team Leader: Ajay Kumar

NIGERIA

Lagos Urban Transport Project 2

TABLE OF CONTENTS Page

A. STRATEGIC CONTEXT AND RATIONALE ...... 1 1. Country and sector issues ...... 1 2. Rationale for Bank involvement ...... 5 3. Rationale for GEF financing ...... 6 4. Higher level objectives to which the project contributes ...... 7 B. PROJECT DESCRIPTION ...... 8 1. Lending instrument ...... 8 2. Project development objective and key indicators ...... 8 3. Project components ...... 9 4. Lessons learned and reflected in the project design ...... 10 5. Alternatives considered and reasons for rejection ...... 12 C. IMPLEMENTATION ...... 13 1. Partnership arrangements ...... 13 2. Institutional and implementation arrangements ...... 14 3. Financial Management Arrangements ...... 14 4. Monitoring and evaluation ...... 15 5. Sustainability ...... 15 6. Critical risks and possible controversial aspects ...... 19 7. Credit conditions and covenants...... 20 D. APPRAISAL SUMMARY ...... 21 1. Economic and financial analyses ...... 21 2. Technical ...... 22 3. Fiduciary ...... 22 4. Social ...... 24 5. Environment ...... 25 6. Safeguard policies ...... 26 7. Policy exceptions and readiness ...... 27

Annex 1: Country and Sector Background ...... 28 Annex 2: Major Related Projects Financed by the Bank and/or other agencies ...... 44 Annex 3: Results Framework and Monitoring ...... 45 Annex 4: Detailed Project Description ...... 56 Annex 5: Project Cost ...... 68 Annex 6: Implementation Arrangements ...... 69 Annex 7: Financial Management and Disbursement Arrangements ...... 79 Annex 8: Procurement Arrangements ...... 94 Annex 9: Economic and Financial Analysis ...... 106 Annex 10: Safeguard Policy Issues ...... 117 Annex 11: Project Preparation and Supervision ...... 124 Annex 12: Documents in Project File ...... 125 Annex 13: Statement of Loans and Credits ...... 126 Annex 14: Incremental Cost Analysis ...... 128 Annex 15: Country at a Glance ...... 136 Annex 16: Map ...... 138 IBRD Map No. 37136

NIGERIA

LAGOS URBAN TRANSPORT PROJECT 2

PROJECT APPRAISAL DOCUMENT

AFRICA

AFTTR Date: June 2, 2010 Team Leader: Ajay Kumar Country Director: Onno Ruhl Sectors: General transportation sector (80%); Sector Manager: C. Sanjivi Rajasingham Central government administration (20%) Sector Director: Inger Andersen Themes: Other urban development (40%); Project ID: P112956 Access to urban services and housing (50%); Environmental Assessment: B - Partial Regulation and competition policy (10%) Assessment Joint IFC: Lending Instrument: Specific Investment Loan Joint Level:

Global Supplemental ID: P114762 Team Leader: Ajay Kumar Lending Instrument: Specific Investment Loan Sectors: General transportation sector (100%) Focal Area: C-Climate change Themes: Other urban development (100%) Environmental Assessment: B - Partial Joint IFC: Assessment Joint Level: Supplement Fully Blended: Yes

Source Total (US$ million) BORROWER/RECIPIENT 35.00 International Development Association (IDA) 190.00 Global Environment Facility (GEF) 4.50 French Development Agency (AFD) 100.00 Total 329.50

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Borrower: Federal Republic of Nigeria

Responsible Agency: LAGOS METROPOLITAN AREA TRANSPORT AUTHORITY (LAMATA) Block C, 2nd floor, 1, Motorways Avenue Alausa, Ikeja, Lagos State Lagos State Nigeria Tel: 234-1-2702778-82 Fax: 234-1-2702784 [email protected] www.lamata-ng.com

Estimated disbursements (Bank FY/US$ m) FY FY11 FY12 FY13 FY14 FY15 Annual 15.5 61.5 70.0 30.0 13.0 Cumulative 15.5 77.0 147.0 177.0 190.0 GEF Estimated disbursements (Bank FY/US$ m) FY FY11 FY12 FY13 FY14 FY15 Annual 1.0 1.5 1.0 1.0 0.00 Cumulative 1.0 2.5 3.5 4.5 4.5 Project implementation period: Start: October 29, 2010 End: June 30, 2015 Expected effectiveness date: October 29, 2010 Expected closing date: June 30, 2015 Does the project depart from the CAS in content or other significant respects? [ ]Yes [X ] No Ref. PAD A.4. Does the project require any exceptions from Bank policies? Ref. PAD D.7. [ ]Yes [ X] No Have these been approved by Bank management? [ ]Yes [ ] No Is approval for any policy exception sought from the Board? [ ]Yes [ X] No Does the project include any critical risks rated “substantial” or “high”? [ ]Yes [X ] No Ref. PAD C.6. Does the project meet the Regional criteria for readiness for implementation? [ X]Yes [ ] No Ref. PAD D.7.

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Project development objective Ref. PAD B.2., Technical Annex 3 The project is fully blended and co-financed with a Global Environment Facility (GEF) Grant. Some of the components will be financed and disbursed directly by the French Development Agency (AFD).

The project development objectives are to: (i) improve mobility along prioritized corridors; and (ii) promote a shift to more environmentally sustainable urban transport modes. This will be achieved through a combination of traffic engineering measures, management improvements, regulation of the public transport industry, and expansion and enhancement of Bus Rapid Transport (BRT) system. Global Environment objective Ref. PAD B.2., Technical Annex 3 The project is fully blended and co-financed with a GEF Grant.

The project development objective is to promote an incremental shift to more environmentally sustainable urban transport modes among users with relatively high carbon foot print. Project description Ref. PAD B.3., Technical Annex 4 The GEF is co-financing two of the four components with the objective to facilitate removal of barriers for sustained urban transport interventions. The components are:

Component 1: Institutional development and capacity building: This component focuses on capacity strengthening of Lagos Metropolitan Area Transport Authority (LAMATA) for continuing to provide an overall vision and a strategic planning basis for transport planning, regulation, monitoring, and administration and coordination of sector-wide management; and building capacity of bus operators. This component would finance goods, works, consultants’ services, training, and operating cost for LAMATA to carry out its functions; and goods, training and consultancy services for bus operators. The GEF will also finance studies and training to develop public transport delivery capacity in Kano.

Component 2: Improvement of public transport infrastructure and enhancement of traffic management systems: This component would finance BRT infrastructure construction and supervision, including interchange and traffic management, at Oshodi-Mile 2-Obalende, investments in Intelligent Transport Systems (ITS), and improvements in safety; pedestrian facilities; mass transit alternative analysis studies along five corridors; and development of bus feeder system including stations and terminals. The GEF component will specifically finance: a) BRT consultation, communications, and media strategy for better acceptance of the new approaches; and b) upgrade and rationalize system operation. The AFD component will finance BRT investments along Oshodi-Mile 12-Ikorodu corridor.

Component 3: Improvement of Lagos State metropolitan road network: This component would finance routine maintenance of the declared road network; periodic maintenance of about 12 km of strategic roads which are degraded but structurally still intact to ensure that they remain in a maintainable condition; and rehabilitation of about 5 km of strategic roads identified to be structurally damaged. Under this component, LAMATA will further enhance capacity of the Pavement Management System.

Component 4: Project management and monitoring: This component would finance technical

iii assistance, equipment, vehicles, office equipment, and other operational support for monitoring project progress and, on an ongoing basis, transport system supply, demand and performance; institutional, technical, procurement, and financial audit; project outcome monitoring in terms of transport (including safety), environment, social, and capacity development indicators. Which safeguard policies are triggered, if any? Ref. PAD D.6., Technical Annex 10 The project is a category B project. The safeguard policies triggered are Environmental Assessment (OP/BP 4.01), Physical Cultural Resources (OP/BP 4.11), and Involuntary Resettlement (OP/BP 4.12). Significant, non-standard conditions, if any, for: Ref. PAD C.6. Board presentation: There are no conditions of Board.

Effectiveness Conditions of the IDA Financing Agreement: • The First Subsidiary Agreement has been executed on behalf of the Recipient and Lagos State; • The Second Subsidiary Agreement has been executed on behalf of Lagos State and LAMATA; and • The GEF Grant Agreement between the Recipient and Association has been executed and delivered and all conditions precedent to its effectiveness or to the right of the Recipient to make withdrawals under it (other than the effectiveness of this Agreement) have been fulfilled.

Effectiveness conditions of the GEF Grant Agreement: • The IDA Financing Agreement has been executed; • The First GEF Subsidiary Agreement has been executed on behalf of the Federal Government of Nigeria and Lagos State Government; • The Second GEF Subsidiary Agreement has been executed on behalf of the Lagos State Government and LAMATA; and • The execution and delivery of this Agreement on behalf of the Recipient, and the LAMATA GEF Project Agreement on behalf of the Project Implementing Entity, have been duly authorized or ratified by all necessary governmental action.

The covenants applicable to project implementation are: • Standard financial management, procurement and implementation covenants as tailored to the project; • Project-specific covenants relating to: (a) preparation of annual work plans and budgets for approval by the Bank; (b) implementation of the project in accordance with the Environmental and Social Management Framework (ESMF), Resettlement Policy Framework (RPF), Environmental Management Plan (EMP), Resettlement Action Plan (RAP); and (c) key outcome indicators; and • The Co-financing deadline for effectiveness of the Co-financing Agreement is June 30, 2011. This Co-financing is by AFD.

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A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

The Country Context

1. The population of Nigeria is about 151 million with more than 73 million living in urban areas. The urban growth rate (4.5 percent per year) is above the national average (three percent per year). There are two mega cities (Lagos, Kano) with populations greater than 10 million and five other cities with population between five and 10 million. It is estimated that the country’s urban areas contribute over 65 percent of the gross national product, illustrating both their importance and also their potential for contributing further to economic growth.

2. Lagos is the largest city in sub-Saharan Africa and the sixth largest city in the world, with a population of over nine million 1, which is growing at six percent per annum in the past few years. The megacity of Lagos has grown beyond the physical boundaries of the state of Lagos, spilling over into the adjoining state of Ogun. Although the smallest state in Nigeria, Lagos is by far the most densely populated. By 2015, the population of the megacity is projected to be about 25 million, making it the third-largest in the world. Lagos’s seaport and international airport handle more than 70 percent of the nation’s cargo. It contains the largest manufacturing sector and provides employment for over 45 percent of the skilled manpower of the country. The commercial sector is similarly dominant with a vibrant local trading tradition. During the last twenty years, the level of efficiency and productivity in the metropolitan area has been adversely affected by growing weakness in the physical infrastructure necessary to support basic needs of the population and production sectors. While Lagos is no longer the federal capital, its role as the principal commercial center and gateway to the country is still unquestioned.

The Lagos Urban Transport Context

3. Key issues in the city transport system are: (a) insufficient and poorly managed and regulated services and infrastructure; (b) lack of clear and coherent policies; and (c) weak and disorganized institutions. The central urban transport context can be described as follows: a growing urban population inadequately served by the transport system, declining standards of public transport, overlaps and conflicts among the agencies responsible for planning and implementing transport solutions, massive growth in the use of minibus services, growing dependence on private transport (cars and motorcycles), increasing congestion, inadequate and deteriorating transport infrastructure, and poor facilities for non-motorized transport (walking and bicycling).

4. Like in most cities in developing countries, authorities have had difficulty in meeting service demands of the growing population, particularly the poor, who are most dependent on public provision of water, electricity, transport, and other services. But the effects of rapid

1 The 2006 Nigerian census puts the population of Lagos at nine million, but the authorities of Lagos have disputed this figure. According to the Lagos Central Bureau of Statistics, the population is closer to 17.5 million (2008) with annual population growth of roughly four percent over the last 10 years. World Urbanization Prospects (2003) estimated the population as 11 million. 1 growth affect all segments of society. The absence of policies on land use and economic development has led to urban sprawl, which multiplies the challenge posed by rapid growth. The declining population density associated with sprawl has increased travel distances and pushed up the price of public transport. Again, these developments affect the poor disproportionately, often effectively excluding them from work and social services. Meanwhile, the rising use of private cars has choked the roads, endangering the safety of pedestrians and the health of city residents who breathe in automobile emissions.

5. The transport infrastructure and services in Lagos remain at levels that supported a population of no more than six million some 20 years ago. The density of the road network (about 0.4 km/1000 population), for example, is quite low even by African standards. The provision of bus public transport is highly fragmented with multiple private operators, operating small buses of poor quality and in absence of any management or a regulatory authority. Despite the size of the city, there are few organized mass transit systems introduced in the past few years—the Bus Rapid Transit (BRT) and LAGBUS and a few ferry routes in the inland waterway system offering alternative non-road based commuter services. Bus fares are high (average fare of US$1 per trip) which consume over 20 percent of the average household disposable income. Congestion is a major issue in the city affecting the cost of production and the quality of life.

6. Institutional and Regulatory Context: The institutional structure of Nigeria has three levels: federal, state and local. At the federal level, the Ministry of Transport (MOT) makes national transport policy and the Ministry of Works (MOW) develops the federal road network. Urban transport was devolved to the states by the 1999 Constitution, and the states make their own laws on traffic and transport. Federal agencies with divisions in the states include the Nigeria Police – Lagos State Traffic Division, which includes Traffic Wardens, and the Federal Road Safety Commission which is responsible for traffic control and enforcement, primarily on federal roads.

7. At the Lagos State Government (LSG), the MOT is the primary agency for transport policy formulation and implementation whilst the Lagos Metropolitan Area Transport Authority (LAMATA) is empowered to plan an integrated transport system for the state with specific focus on implementing and regulating mass transit systems.

8. The state ministry comprises five functional divisions. The Motor Vehicle Administration is the regulatory authority for public transport. There is also a Transport Operations Division. The Local Government Councils are responsible for local traffic management schemes, parking control and management of public transport terminals. Until recently, the Lagos metropolitan area consisted of 18 local government areas (LGA) out of 20 in the state, with their own elected governments. More recently, 37 Local Council Development Areas (LCDAs) have been created from the 20 LGAs. These LCDAs have a works department and a traffic management unit responsible for road maintenance and traffic management on local government roads. As a result, more than 100 agencies at local, state or federal government levels had a role in transport provision and/or services in the city. Often, most agencies develop and implement their own policies and programs in isolation, and without much regard for its effect on policies of other agencies.

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9. Public transport environment: Public transport operation in Lagos is almost entirely owned and managed by the private sector—principally individuals owning one or two second- hand vehicles that they rent out to drivers on a daily basis. The existing bus fleet is estimated at 75,000. Minibuses (danfos) make up the bulk of the fleet, and their numbers are rising as the number of midi-buses (molues) dwindles. Every danfo and molue is affiliated with one of several associations, the largest being the National Union of Road Transport Workers (NURTW). Buses account for almost 82 percent of the share of motorized person trips (10 percent regular size buses and 72 percent mini buses), the taxis and private cars account for about 13 percent, and the reminder five percent accounted by motor cycles.

10. Sector Management: Between the early 1980s and 1994, responsibility for the management of the transport sector in the Lagos state rested with the Lagos State Ministry of Works and Transport (LSMWT). During this period, transport actions in the state were driven by expansion of the road network and a focus on capital spending rather than sector planning and the development of a holistic approach to resolving urban transport problems. The concern of dealing with the immediate problems has led the authorities to ignore the long term impact of the proposed solutions. Attempts were not made to come to grips with defining policies that relate the value and needs of the urban transport sector to macro-economic considerations. The interventions were carried out on a project-by-project basis and the transportation system has evolved from the unsystematic accumulation of public projects and policies.

11. The LSMWT was split in 1994 into the Lagos State Ministry of Works and Infrastructure (LSMWI) and the Lagos State Ministry of Public Transportation (LSMPT). The latter was given the mandate for overall sector policy development and planning and was, later renamed the Lagos State Ministry of Transportation (LSMT). LSMWI oversees the operation of the Public Works Bureau, which carries out force account works and is mainly responsible for the state road network.

12. The key issues which have affected the transport sector in Lagos over the years can therefore be summarized as follows:

• Absence of an articulated and adopted policy and strategic framework for the transport sector; • Fragmentation of institutional responsibilities among various agencies at the three levels of government with no coordination framework; • Absence of a well equipped traffic management institution; inadequately trained transport/traffic engineering staff; involvement of traffic police with traffic management planning because of an absence of professional civilian alternative; • Inadequately defined public transport planning and regulatory functions; • Absence of standard procedures for the technical and economic evaluation of programs and projects resulting in a strong bias toward capital expenditure rather than making better use of existing investments through better management and maintenance practices; and

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• Involvement of over 100 agencies at local, state, and federal government levels in transport provision and/or service delivery in the city, often in an uncoordinated manner.

13. Government Strategy: In response to the growing problems with the management and delivery of transport services, a number of studies have been conducted over the past decade by the LSG to develop a strategy and appropriate solutions. The Lagos Mass Transit and Transport Systems Management Program Study was undertaken in 1992. This work set out to identify actions necessary to address the complex transport situation in Lagos. The study had as one of its recommendations the creation of LAMATA to coordinate transport policies, programs and actions of all agencies at the different tiers of government.

14. LAMATA’s Institutional Status: LAMATA is a corporate body with an independent board responsible for formulation, coordination, and implementation of urban transport policies and programs in the Lagos metropolitan area.2 It was created by a State Act (LAMATA Law) signed into law on January 13, 2002 and formally launched on December 2, 2003. The Authority has the overall responsibility for transport planning and coordination in the Lagos metropolitan area with the primary mandate to play a lead role in carrying out transport planning and assist in transport policy formulation and coordination of major operational and investment decisions and implementation. The law grants LAMATA several powers to facilitate the discharge of its statutory functions, including the power to levy and collect user charges in connection with the provision of its services and to collect any other tariffs, fees and road taxes as may be authorized by the Governor. The law establishing LAMATA was strengthened further in 2007 to include planning and regulatory functions across the various modes of transport.

15. Sustainability of Funding: A transport fund has been set up with the following sources: (a) Lagos State budget provision; (b) license fees (hackney permit, road taxes, license plate registration, auto registration; (c) concession fees; (d) other road user charges (tolls). In discussions with the representatives of the 36 states, LAMATA has successfully made a case with the Joint Tax Board at the Federal Government level to increase road user charges, to be shared between LAMATA (50 percent), state treasury office (40 percent), Motor Vehicle Authority (five percent), and state MOT (five percent). As a result, LAMATA is able to meet 60 percent of the total funding requirements of US$42 million in 2008 (an increase from less than 20 percent in 2004) with the World Bank financing the balance 40 percent.

16. LAMATA’s Achievements: Over the past five years, LAMATA has been able to provide an overall vision and strategic direction for addressing the long neglected transport needs of the metropolis and to coordinate activities of the different executing agencies to provide a common and consistent basis for implementation. LAMATA has started, for the first time in the country, the design and execution of maintenance works with participation of private sector through awarding contracts to local consultants and contractors. As a result of introducing professional supervision, transparent application of procurement rules, high standards, and prompt payment to

2 The 13-member Board, which is fairly representative of the Authority’s stakeholders, comprises representatives of transport operators, transport unions in Lagos State, the organized private sector, the general public, local government areas, and transport related Lagos State Government agencies. The only full time member is the Managing Director/Chief Executive Officer (MD/CEO), who heads the management team. 4

contractors, the cost of road works has come down. The LAMATA has been successful in: (a) preparing a strategic long-term plan for the transport sector in Lagos; (b) coordinating activities of the multiple agencies involved in the sector; (c) rationalizing motor vehicle tax administration, resulting in a substantial increase in revenues; (d) maintaining, upgrading, and rehabilitating 632 km of the declared road network; (e) implementing a pilot BRT “Lite” system from Mile 12 to Church Missionary Society (CMS)3; (f) rehabilitation of four jetties; (g) creation of over 1.3 million person-days of employment; and (h) most important, changing the attitude among users towards bus transport system.

17. Implementation of BRT-Lite: Launched in March 2008, the new BRT system provides Lagos commuters with a clean, affordable and reliable means of getting around in the city. The BRT is a bus-based mass transit system that delivers fast, comfortable and cost-effective service. The implementation of BRT-Lite system in Lagos is the first example of a comprehensive and integrated approach to improving public transport in sub-Saharan Africa. The project was mainly financed by the LSG with the Bank providing technical support. The Bank has also provided funds used in up-front system planning. The key feature is that the project design is driven by consideration of local requirements and what is most appropriate at the local level, combining institutional and regulatory reform together with specific investments, and delivered at very low cost per kilometer as compared to BRT projects in other parts of the world, making it easier to replicate along other corridors and other low-income countries in sub-Saharan Africa.

18. The Next Steps: While the BRT project has been a success, it has also raised expectations among city residents to scale-up the reform and investment program and extend BRT service to other parts of Lagos metropolis. LAMATA with support from LSG has prepared a transport sector policy and a strategic plan to address mobility needs of the population in a clean, safe, and affordable manner. The objective is to create an integrated multi-modal transport system. Some of the key elements of the plan are: (a) extension of BRT to other corridors, including Oshodi- Mile 12-Ikorodu and Oshodi-Mile 2-Obalende. The rationale behind selection of these corridors is based on a comprehensive network analysis, traffic flows and ease of implementation; and (b) the construction of two commuter rail lines—Agbado to Marina (Red line on an existing railroad right-of-way) and Okokomaiko to Marina (Blue line). The State government has requested Bank’s support for extension of the BRT corridors while the commuter lines are being constructed using a Public Private Partnership model, with infrastructure being funded by the LSG under a design/build contract (at a cost of over US$1 billion) and the actual railway operations being funded and managed by the private sector under a concession agreement.

2. Rationale for Bank involvement

19. The objectives and activities designed under the proposed project are consistent with the government’s overall strategy for non-oil dependent growth as stipulated in the National Economic Empowerment and Development Strategy (NEEDS) and Lagos State Economic Empowerment and Development Strategy. The Federal Government of Nigeria (FGN) is keen to propagate the concept of sustainable urban transport that calls for inclusion of parameters such as safety, cleanliness, and reliability in transport systems for Nigerian cities. The proposed project

3 Actual physical investments of about US$40 million were funded by the state government, reflecting ownership on part of the government. 5 would build on success of the on-going World Bank supported urban transport project in Lagos to promote government’s agenda. The project would also support the Nigeria Vision 2020 developmental blueprint adopted by the federal government.

20. Additionally, the World Bank and the United Kingdom’s Department for International Development (DfID) have jointly developed the Country Partnership Strategy (CPS), which was approved by the Bank on July 28, 2009. The CPS is aligned with the pillars of both the NEEDS and State Economic Empowerment and Development Strategy, especially the second pillar that focuses on improved environment and services for non-oil growth. The proposed project would remove some of the key bottlenecks to sustainable transport by facilitating market transformation, strengthening institutional capacity and laying the basis for acceptability of the reform program.

21. Bank’s comparative advantage: Drawing upon its international and regional experience, the Bank is in a strong position to support government in formulating strategies to address complex traffic and transport management issues. The Bank is currently financing a US$150 million Lagos Urban Transport Project (LUTP) to support government’s efforts to facilitate a “transformation” in the operations of urban transport towards greater inclusion of sustainability parameters (i.e. safer, cleaner, reliable, and affordable). Bank’s continued involvement in the sector will ensure: (a) consolidating and building on the achievements of the past five years; (b) scaling-up the results achieved in Lagos and working towards supporting initiatives in other large cities (e.g., Kano); (c) providing confidence to the private sector and minimizing its perceived risks in undertaking public private partnerships (PPPs) related to public transport; (d) utilizing technical expertise for policy analyses and project formulation, coordinating, and leveraging financing from other development partners (aid harmonization); and (e) helping raise awareness of the need to go beyond investments in infrastructure and address mobility issues in the broader contexts of increasing urbanization, economic development, poverty reduction, and climate change. The Bank can provide assistance in linking transport and mobility issues with human and social development challenges, such as how to increase the access and mobility of disadvantaged groups, the poor, women, school children, the disabled and the young and old in an environmentally sustainable manner.

3. Rationale for GEF financing

22. The proposed project fits under the new Climate Change focal area strategy of GEF-4. It supports the Strategic Objective 7 (facilitating market transformation for sustainable mobility in urban areas leading to reduced greenhouse gas (GHG) emissions) through its alignment with CC- SP5 (promoting sustainable innovative systems for urban transport). The project’s activities are in line with CC-SP5 since it promotes the long-term shift towards low emissions and sustainable transport operations through strengthening institutional and regulatory framework for sustainable urban transport, and monitoring and evaluation of GHGs.

23. The project would support a number of strategies to achieve higher bus productivity and improve vehicle emission standards and vehicle state of repair, all of which will enable reduced GHG and local air emissions and a higher return to be earned on bus investments. Increased asset productivity derived from improved traffic management, combined with the particulars of the

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cooperative bus operations off the BRT itself, designed by the transport association, would improve cash flow even for informal bus operators of the BRT system itself, thereby increasing their chances of attracting funding to upgrade and modernize their fleets. As shown on the BRT- Lite corridor, rationalization of bus supply reduces predatory competition, increases ridership and fare-box revenue, and reduces operating cost. The project will demonstrate the viability of such investments in other cities in sub-Saharan Africa to enable them to reduce energy consumption in the transport sector and reduce present and future GHG emissions in a manner that increases sustainable mobility.

24. Without the GEF funds, the project would likely focus on service delivery and poverty alleviation aspects of the various urban transport interventions that the FGN has identified as a priority. In Lagos, the BRT system would be expanded and enhanced, but the emphasis likely would remain on infrastructure investments and accessibility of the urban poor. The issues related to service integration, improved operations and acceptability, modal integration, and particularly outreach and marketing to attract current public transport non-users would not be likely to get much attention. The proposed GEF funds would be used to improve the technical and financial ability of the local governments’ public transport authorities to engage in service- tailoring strategies that can enhance mode-switching. In addition, GEF funding would be used for strengthening capacity in operational planning (and more intensive training to undertake such planning) that would allow the BRT service to minimize its use of energy per vehicle kilometer of service provided. A part of the funds would be used to begin sensitizing officials in Kano – an emerging megacity in its own right – to similar concerns. The GEF contribution to the project, therefore, will be to transform the orientation of technical staff and policy makers in both cities into creating an enabling environment to engage in more sustainable city and transport planning than the underlying project (without GEF funds) would have been able to address.

4. Higher level objectives to which the project contributes

25. The World Bank Group’s work in the country is currently being guided by the NEEDS, and the CPS. NEEDS is based on three pillars: (a) empowering people and improving social service delivery; (b) fostering economic growth, in particular in the non-oil private sector; and (c) enhancing the effectiveness and efficiency of government, while improving governance. The report highlights the need to: maintain sound macroeconomic policies, strengthen the basis for private sector growth, and improve transparency and accountability of the public sector.

26. The proposed project activities are strategically aligned with all three pillars of the NEEDS. On empowering people and improving social service, the project components were identified based on broad consultation, involving users and community residents. The project would continue to support development of an information, education, and communication strategy not only to guide the involvement of transport users and beneficiary communities in the planning and implementation of project elements, but also for use as a monitoring and evaluation tool to provide feedback on the project’s impact. On fostering economic growth, the project has a strong focus on developing an enabling environment for increased private sector participation in the sector, and improving delivery of services. Those services – improved affordable mobility in Lagos – are themselves critical to ensuring the ongoing economic productivity of Nigeria’s largest city. On improving governance, a key element of the project is to strengthen LAMATA,

7 increase its budgetary accountability and improve its sector planning and programming capacity. This strengthening is likely to have ripple effects, since within Nigeria, LAMATA is already held up as a model of public sector governance.

B. PROJECT DESCRIPTION

1. Lending instrument

27. The proposed lending instrument is a Specific Investment Loan (SIL). The credit will be on standard International Development Association (IDA) terms with a repayable period of 40 years with a 10-year grace period. The GEF and the French Development Agency (AFD) will co- finance some of the project components.

2. Project development objective and key indicators

28. The project development objective is to (a) improve mobility along prioritized corridors; and (b) promote a shift to more environmentally sustainable urban transport modes. This will be achieved through a combination of traffic engineering measures, management improvements, regulation of the public transport industry, and expansion and enhancement of Bus Rapid Transport (BRT) system.

29. The specific global environmental objective is to promote an incremental shift to more environmentally sustainable urban transport modes among users with relatively high carbon foot print.

30. Expected outcomes of the project along BRT corridors are as follows:

• Reduced travel times; • Reduced household expenditures on transport; • Increase in bus operational efficiency (e.g., Number of passengers carried per standard bus per day); • Length of road network rehabilitated on Lagos metropolitan network; • Number of direct beneficiaries by gender; and • Number of indirect beneficiaries by gender.

31. Expected Global Environmental Objective outcomes are:

• Increase in percent of trips made by BRT among households owning cars or motorbikes; and • Reduced carbon dioxide (CO2) emissions from vehicles along BRT corridor.

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3. Project components

32. The proposed project has four components, as summarized in Table 1 (see Annex 4 for a detailed project description and Annex 5 for detailed project cost). GEF is co-financing two of the four components with the objective to facilitate removal of barriers for sustained urban transport interventions.

Table 1: Project Cost by Components and Source of Financing (US$ million) Component TOTAL LSG IDA AFD GEF 1. Institutional development 34.0 10.0 23.0 - 1.0 and capacity building 2. Improvement of public 236.5 - 133.0 100.0 3.5 transport infrastructure and enhancement of traffic management 3. Improvement of Lagos 50.0 25.0 25.0 - - State metropolitan road network 4. Project management and 9.0 - 9.0 - - system monitoring Total Project Cost 329.5 35.0 190.0 100.0 4.5

33. Component 1: Institutional development and capacity building: This component focuses on capacity strengthening of LAMATA for continuing to provide an overall vision and a strategic planning basis for transport planning, regulation, monitoring, and administration and coordination of sector-wide management; and provide support to bus operators and beneficiary agencies (including Lagos State Traffic Management Authority (LASTMA), LCDAs, LSMT, and LSMWI). This component would finance goods, consultants’ services, training, and operating cost for LAMATA to carry out its functions. The GEF will finance studies, training and equipment to develop public transport delivery capacity in Kano.

34. Component 2: Improvement of public transport infrastructure and enhancement of traffic management systems: This component would finance BRT infrastructure construction and supervision, including interchange and traffic management, at Oshodi-Mile 2-Obalende, investments in intelligent transport systems (ITS) and improvements in safety; pedestrian facilities; mass transit alternative analysis studies along major corridors; and development of bus feeder system including stations and terminals. The GEF component will specifically finance: a) BRT consultation, communications, and media strategy for better acceptance of the new approaches; and b) upgrade and rationalize system operation. The AFD component would finance BRT infrastructure construction and supervision along Oshodi-Mile 12-Ikorodu corridor.

35. Component 3: Improvement of Lagos State metropolitan road network: This component would finance routine maintenance of the declared road network; periodic maintenance of about 12 km of strategic roads which are degraded but structurally still intact so as to ensure that they remain in a maintainable condition; and rehabilitation of about 5 km of 9

strategic roads identified to be structurally damaged. Data collection, upgrading, and further enhancement of the existing Pavement Management System so as to enable LAMATA build the foundation upon which the State can rationalize its road sector investments will also be supported under this sub-component.

36. Component 4: Project management and monitoring: This component would finance technical assistance, equipment, vehicles, office equipment, and other operational support for monitoring project progress; transport system supply, demand and performance; institutional, technical, procurement and financial audit; project outcome monitoring in terms of transport (including safety), environment, social, and capacity development indicators.

4. Lessons learned and reflected in the project design

37. Setting up a strong institutional basis for coordinated planning and regulation is critical to the success of urban transport projects. The Bank urban transport policy paper “Cities on the Move” (2002) identifies institutional weaknesses as the source of many observed failures in urban transport in developing countries. Strengthening urban transport institutions often requires legislative, institutional, and management changes at the national, state, and municipal level to minimize jurisdictional and functional impediments to efficient and effective service delivery. Strengthening transport also requires setting up dedicated institutional bodies for urban transport planning and regulation, with commitment from the highest levels of government and a champion to further the cause of good management. The LSG has established LAMATA with the overall responsibility for transport planning and coordination in the Lagos metropolitan area.

38. Key to a successful project design is based on an approach which is comprehensive (covers multiple administrative boundaries, is multi-modal), continuous (plans, planning data and tools are updated on a regular basis), cooperative (all stakeholders participate, develop communications plan and stakeholder analysis), connected (capital projects are consistent with adopted long range plans), championed (support at the highest political level, ownership), and incremental change (scale-up interventions in an incremental fashion and allow flexibility in design).

39. Interactions with the borrower and beneficiaries should take place in a context of their choosing. The impact of changes in policy, governance, and institutional frameworks in developing countries like Nigeria should not be underestimated. Where the requirements bring about changes in roles, responsibilities, and relationships, there is a need to understand the impact on the culture and values of the societies, sectors, and institutions for which the change is proposed. It is critical to understand the broader country-specific context. Experience shows that best results are achieved through long-term relationships where new ideas can be introduced indirectly and gradually, in pursuit of a shared vision and a road map. The design of this project is driven by consideration of local requirements and what is most appropriate in the local context. It is equally important to build alliances and develop value propositions early-on in project preparation so as to be able to respond to specific questions like: (a) who is likely to benefit most from proposed interventions; (b) what is at stake; (c) what is the motivating factor; and (d) develop what-if scenarios (counterfactuals). Utilization of communications techniques to

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build partnerships can hardly be over-emphasized. It is critical to begin with a few key people and as the concept grows, have them become project champions and owners of the design.

40. Allow a measure of flexibility in the design and set reasonable targets. The growing problem of urban mobility is the result of a long absence of regulatory institutions, inadequate capacity for planning public transport services, and inadequate investments. To reorganize urban transport service planning and delivery is a long-term process and its prominence in achieving urban sustainability compounds the need for more integrated, long-term and inclusive decision making. Such reorganization often requires a long period of internalization, capacity building, and behavioral adjustment within organizations necessitating flexibility in project design, ability to adapt to changes and manageable expectations. Sustained engagement and complementary actions by other sectors (urban, environment, energy, social) are crucial to making an impact in cities. This project has adopted a “corridor” approach to comprehensively address multiple issues focused on integrating road capacity, traffic management, public transport, and traffic safety enhancements.

41. Implementation of BRT is a big challenge and requires considerable up-front preparation and consensus building. BRT is a “system” and requires extensive up-front planning and discussions that consider all the relevant issues as a package, including the design of the bus- way; operations and service planning, design of the stops and junctions; design of the ticketing systems, fare levels, and structures; regulation and ownership of the buses; traffic and non- motorized transport (NMT) safety measures, traffic management strategies; and enforcement of traffic management (e.g., turn prohibitions, exclusive use of transitways by BRT vehicles) and public transport operating regulations. A successful system requires ownership by existing operators, drivers, and users and incorporation of their specific concerns in the design. The initial ground work has been set through the on-going work by LAMATA. The project would involve additional support to ensure: (a) strengthening the regulatory framework, institutions, and a culture of compliance with the framework and an industry structure that can compete and operate within the framework; (b) organizing and regulating existing services; (c) bringing the operators on board; and (d) understanding needs of the users through surveys and focus group discussions.

42. It is equally critical to strengthen the enforcement capacity. Reforms cannot work unless new arrangements are consistently enforced (e.g. franchise operators should be protected against illegal operators) based on formal statutes. This applies both to public transport operations and traffic management. Consistent enforcement requires close coordination of all implementing agencies. Effort initiated under LUTP (set up a task force for implementation, coordination with traffic police and Lagos State Traffic Management Authority (LASTMA), implementation of penalty clauses) would be further strengthened under LUTP 2.

43. Provide opportunities to learn from successful implementation of the reform program. The private bus operators accompanied the government team on a study tour to London and cities in South America. The tour provided an opportunity to develop a vision and understand the complexity of tasks required to reform the urban bus transport industry by learning from successful implementation in other cities. Some of the key lessons documented by the study team at the conclusion of the study tour were as follows: (a) a need for clear political will from the key decision makers and allocation of resources; (b) clear vision on passenger transport services as a

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means of improving the quality of life of the citizens, not just moving vehicles; (c) identifying transport services as business; (d) helping traditional, informal sector operators transform into legal entities to enable access to support from financial institutions; (e) clear and powerful communication and marketing strategies; (f) developing business models for traditional operators as basis for accessing funds; (g) making the system user friendly for all, from children to the elderly and physically challenged; and (h) integrating the system with sidewalks and bicycle ways with bicycle parking facilities at terminals and stations.

44. A good project monitoring system is necessary for effective management. A detailed monitoring and evaluation component, including collection of all necessary baseline data, has been designed and built into the project. Given that the project entails a lot of innovations and changes, there are plans for close monitoring combined with extensive consultations, which should allow appropriate adjustments to be made in a timely fashion.

5. Alternatives considered and reasons for rejection

45. Fundamentally, this project builds on successful implementation of LUTP. However, given the highly innovative nature of the project, various approaches and alternatives were considered in the design of various project components. The reason why certain approaches were considered more appropriate and why they were selected is discussed below.

46. Developing a Bogotá-style BRT system versus adapting the design to African conditions. The exemplary BRT system in Bogotá, Columbia - TransMilenio - has served as a model for urban passenger transport development in other cities across the world. However, the infrastructure construction cost of the first phase of TransMilenio was US$5.3 million per kilometer (in 2000 prices), and this scale of investment has proved extremely difficult to finance in the sub-Saharan Africa. The economic and administrative context in sub-Saharan Africa cities is also quite different, requiring some adaptations. Levels of wealth are much lower as compared to Bogotá. Motorization levels are also much lower and city development patterns are less constrained by geography. The road density in African cities is also much lower than Latin America, making it much more difficult to construct multi-lane transit-ways by taking lanes away from general traffic.

47. The challenge, therefore, is to develop a high-quality bus system that is affordable in the local context and applicable to local operating and physical environments while retaining as many of the most desirable BRT characteristics as possible. The proposed system consists of segregated bus-ways on trunk corridors, with integrated tributary services; restricted entry to transit-ways, by a mix of standard and articulated buses compatible with BRT demand patterns and volumes, but with appropriately low air and noise emissions levels; improved fare collection technology; and graduated or zonal fare structures, with explicit, integrated fare payment for BRT and ancillary feeder services. System capacity in the proposed BRT network would be somewhat lower than the capacity for a full blown BRT system, but still appropriate to the levels of demand found in the main corridors of the city.

48. Public-sector investment in rolling stock for the BRT system versus adopting a PPP model. Regional experience with direct public-sector involvement in the delivery of urban

12 passenger transport services has generally been unsatisfactory, both because of political interference in the management of the businesses and the desire to hold down fares, with the consequence of insufficient levels of financial support for maintenance. In the proposed project, the government has committed to a PPP whereby it accepts responsibility for the enabling environment and infrastructure provision, but the private sector will be responsible for service delivery, including rolling stock provision and management.

49. Developing a multiple cities investment project versus a single city. Two options were considered: First, develop a physical investment program for Lagos while building institutional capacity in other cities, and second, develop a multiple city investment project. The first option was selected because while Lagos is well advanced in setting up an institutional framework and a bus transport reform program, other cities have yet to clarify institutional responsibilities and develop a strategic plan. It takes time to clarify institutional responsibilities, develop a strategic plan and develop a policy reform program. In order not to delay implementation in Lagos and lose momentum, it was decided to limit the proposed project to investments in Lagos while assisting other cities (mainly Kano) to develop a basic policy framework and strategic plans, which could lead to specific investments at a later time.

50. Developing a ‘corridor’ focused approach versus spreading investments throughout the city. The choice was between making small investments throughout the city focused on spot improvements, traffic management, safety, and public transport improvements as compared to identifying specific corridors with high demand volumes and preparing an integrated program to include public transport improvements, pedestrians and NMT facilities, signal improvements, parking facilities, street lights coupled with improved implementation and enforcement. Lagos is a large city with a population of over 15 million people and a huge unmet demand from decades of neglect. Given the paucity of available resources (both human and capital) it is important to have a focused strategy with clear wins aimed at demonstrating the success of any interventions to population through well defined and measurable indicators. The project is designed with a focus on implementing an integrated program of improvements on a few well defined corridors.

C. IMPLEMENTATION

1. Partnership arrangements

51. The GEF is financing some of the project components. The GEF-funded activities will complement Bank funding and foster reduction of GHG emissions from the urban transport sector by making direct investments on the BRT and removing barriers at local and national level to promote and implement more sustainable and efficient transport systems. AFD is financing construction of BRT on Oshodi-Mile 12-Ikorodu corridor. In addition, the project is promoting a strong partnership with the private sector (bus associations, transport unions), media, commercial banks, non-governmental organizations (NGOs), local agencies, and departments.

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2. Institutional and implementation arrangements

52. LUTP 2 will be implemented by LAMATA, which has been implementing the on-going LUTP. LAMATA is a corporate body with an independent Board responsible for formulation, coordination and implementation of urban transport policies and programs in the Lagos metropolitan area. It was created by an act signed into law on January 13, 2002 and formally launched on December 2, 2003 and subsequently amended on April 16, 2007. The law establishing LAMATA prescribes a 13-member Board of Directors for the Authority. The Board, which is fairly representative of the Authority’s stakeholders, comprises representatives of transport operators, transport unions in Lagos State, the organized private sector, the general public, local government areas, and transport related LSG agencies. The only full time member is the Managing Director, who heads the management team. The Chairman and members of the Board are appointed by the Governor. The Managing Director is also appointed by the Governor on the advice of the Board of Directors.

53. LAMATA will undertake procurement and financial management for activities to be carried out for the benefit of the Kano State Transport Authority. A Memorandum of Understanding (MOU) on disbursement under GEF will be signed between the Lagos State Government (LAMATA) and Kano State Government (Kano State Transport Authority) outlining the activities to be carried out on behalf of Kano State by October 29, 2010.

54. The Credit and Grant will be made available from the Federal Government of Nigeria to the LSG (the credit will be on-lent and the grant will be on-granted to LSG), who will on-grant both to LAMATA pursuant to the Subsidiary Agreement which will be signed to this effect. The fiduciary obligations of LAMATA as the Project Implementation Entity are documented in the Project Agreements between IDA and LAMATA, and between the International Bank for Reconstruction and Development (IBRD) and LAMATA. The fiduciary arrangements for components financed by AFD are shown in Annex 6 (Table 1).

3. Financial Management Arrangements

55. The financial and accounts department (FAD) at LAMATA will be responsible for managing the financial affairs of the project covering IDA, GEF and counterpart funds. The department is staffed by qualified accountants, headed by a Director of Finance, a chartered accountant with vast experience, supported by appropriately qualified accountants. The FAD will also be responsible for ensuring compliance with the financial management requirements of the Bank and the government, including forwarding the quarterly unaudited interim financial reports and audited annual financial statements to IDA. The project will follow disbursement procedures described in the World Bank Disbursement Handbook. Regarding flow of funds and banking arrangements, IDA will disburse the IDA credit and GEF grant through two Designated Accounts (DAs). The FAD will maintain adequate financial management (FM) arrangements to support the deployment of project resources in an economic, efficient and effective manner to achieve the stated development objectives. The arrangements will also provide relevant information to the various stakeholders (including Lagos State Auditor General and LAMATA Board of Directors) to facilitate the performance of their oversight functions.

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56. Project activities, records, books of accounts and systems will be reviewed by the Internal Audit Unit (IAU) in LAMATA. The unit is headed by a qualified internal auditor who will be supported by appropriate qualified staff.

4. Monitoring and evaluation

57. The project includes a comprehensive monitoring and evaluation component based on qualitative and quantitative performance indicators for each subcomponent. These include transport, social, environmental, and capacity development indicators. This data would be used, in turn, to estimate project-related GHG emission reductions in the project corridors. A mobile source inventory would be established and periodically updated, building on the baseline developed under the project. (Please see Annex 3 for details.)

5. Sustainability

58. Factors critical to the sustainability of the project’s objectives are:

• At the institutional and policy level: (a) develop a clear policy framework and a strategic plan; (b) create an independent metropolitan institution with: (i) strong statutory authority, (ii) positive, cooperative relationships, (iii) independent, dedicated sources of funding, and (iv) superior human capacity, data and technical resources.

• At the technical level: (a) develop integrated public transport priority/traffic management measures (including improving NMT travel, sidewalks, pedestrian passes, bike parking, better lighting, roadway fencing); (b) introduce comprehensive, integrated program of complementary improvements (covering entire route/corridor, focus on facilitating movement of people); (c) up-front planning for a successful implementation (preparation of operations and service plans as the basis of detailed design); (d) use of ITS for public transport (signal priority, automatic vehicle location, digital communications, smart cards, surveillance cameras); (e) develop a communications and stakeholder participation plan.

• At the operational level: (a) acknowledge from the onset that existing operators must be integrated into any reform program; (b) vehicles to be used must be operable and maintainable locally; (c) bus shelter design should include infrastructure to encourage orderly queuing and boarding at bus stops; (d) given the high demand, operation of efficient buses can be a profitable business and can operate without any subsidy from the state, and (e) put in place a simplified ticketing and bus fare zoning system to minimize fare evasion and leakages.

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59. Evidence of the borrower’s commitment to and ownership of the project and the relevant policies are:

• The project would focus on ensuring sustainability of the critical legal and institutional structures necessary to support long-term implementation of an integrated reform program. The LAMATA has been established to assist in planning, regulating and procuring urban public transport services and help establish local and national capacity for market regulation, supported by a nucleus of professionals. This would ensure institutional sustainability of the BRT, the NMT facilities, and the limited competitive regime. In addition, setting up institutions within a framework common to the whole transport sector would provide a sustainable basis to manage an effective and efficient transport system in the long run.

• A transport fund has been set up with dedicated funding sources (license fees, concession fees, other road user charges) to finance investments in public transport in the city. The state government is financing construction/rehabilitation of two commuter lines as part of the integrated inter-modal transport plan for the city.

60. Attempt by project design to address these factors are:

• The Lagos BRT project design is driven by consideration of local requirements and what is most appropriate at the local level4. For example, it combines institutional and regulatory reform together with specific investments. It also encompasses all elements of a successful public-private partnership, with the state financing infrastructure, and the private sector financing buses and maintenance facilities. The project is being implemented in full partnership and cooperation of bus unions and other local interests, with the union operating the buses. On the existing BRT-Lite corridor, even though fares are not subsidized, they are still lower than those charged previously by the mini buses because of operational efficiencies and reduced operating costs on the dedicated BRT corridor.

• LAMATA is expected to generate sufficient resources from the user fees (lease of depot, bus franchise fee, income from advertisement) and the transport fund (license fees, permit, auto registration) to provide for annual maintenance of assets created by the project.5

• The project would support a number of strategies to achieve higher productivity of buses and improve standards of vehicle maintenance and repair, which would enable a higher financial return on bus investments. Increased asset productivity

4 The exemplary BRT system in Bogotá has served a model for this project design. However, given the very different economic and institutional context in sub-Sahara Africa, the project design has been adapted to local conditions, while retaining most of the desirable BRT characteristics. 5 Annual maintenance of infrastructure created by the project is estimated at US$9.8 million; total annual estimated revenue from user fees and transport fund is estimated at US$11.1 million. Where necessary, LAMATA budget will be supplemented by the Lagos State Government. 16

derived from improved traffic management would allow informal bus operators to attract the necessary funding. Rationalization of bus supply would eradicate predatory competition, increase ridership and fare box revenues, and reduce operating costs. This would make the public transport industry more profitable and allow informal private operators to secure funding, thereby improving chances of financial sustainability.

• Revenue integrity is of paramount importance in any passenger transport undertaking, but even more so in a commercial environment such as Lagos characterized both by problems of affordability and by a widespread desire to circumvent individual controls or discipline in paying fares. The processes for securely printing tickets and managing their distribution have been developed with the objective of minimizing fare evasion. BRT tickets are sold to passengers prior to boarding and verified at the entry to bus station and buses. The tickets would be color coded for ease of identification and to thwart counterfeiting. To support the arrangements for revenue integrity in ticket sale and verification process, a small team of inspectors would be employed for random ticket checks within the system and the bank (financing the buses) would establish its own monitoring and control procedures. Off-board fare collection also reduces fare revenue shrinkage by making it more difficult for drivers and conductors to short change the company on board.

• The project design also builds on the great operating and market knowledge of current taxi and bus operators by integrating them into the rationalized system with a focus on: (a) incentivizing the formalization of informal operators; (b) allowing choices for captive users; (c) scaling up and phasing in changes gradually to control service disruption; (d) enforcing law and order. Efforts by existing operators to resist shifting from self-regulation to contractual obligations, law enforcement would be managed through: (a) making strong outreach efforts to all affected groups (owners/operators, drivers, unions, financial institutions); (b) making provision for damage control (likely disruptions in service); (c) building confidence (help informal operators incorporate, acquire capacity, strengthen operational capacity, access finance); and (d) making incremental changes.

Replicability

61. Segregated bus-ways, rationalization of public transport operations, and feeder NMT services have enormous potential for replication in other corridors within the city and other sub- Saharan Africa countries. Most cities in sub-Saharan Africa share common characteristics: (a) a growing urban population inadequately served by the transport system; (b) declining standards in public transport system; (c) multiplicity of agencies responsible for planning and implementing transport solutions; (d) massive growth in informal privately operated bus services, (e) an increasing dependence on private transport modes; and (f) consequent deteriorating environmental quality and safety standards. Furthermore, the project is focused on integrating existing operators into the service plan, thereby avoiding the sentiment that the BRT scheme is a threat to their livelihoods. Evidence suggests that introduction of BRT systems

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coupled with NMT facilities as feeder systems is one way to check the rapid growth of private vehicles, bring discipline to private bus operations, and reduce GHG emissions, and provide an organizing basis for land-use planning in the long run.

62. Implementation of a BRT system on Lagos corridors would be of high interest to other cities faced with similar problems. The project is designed at low cost per kilometer as compared to BRT projects in other parts of the world (about US$3-4 million/km6 as compared to US$10-15 million in similar schemes in others parts of the world), this makes it easier to be replicated along other corridors and low-income countries in sub-Saharan Africa. The Bank has already begun to partner with LAMATA, bus operators and driver union representatives in capacity building events, e.g., in Washington, elsewhere in sub-Sahara Africa and in South Asia. One of the potential outcomes would be a step-by-step procedure for planning and designing a BRT system in an African context, which can be used as an example by other cities. A dissemination plan and a set of activities will be developed during project implementation to replicate the proposed pilot project on other corridors in the city. Elsewhere in sub-Saharan Africa, a number of cities including Accra, Tshwane, Dar-es-Salaam, and Addis Ababa are cross-fertilizing from experience in Lagos.

Stakeholder involvement

63. The LAMATA Act recognizes the need to engage civil society in validating major infrastructure investments and policy changes. The task of building and sustaining an efficient and effective transportation system in metropolitan Lagos is one that calls for active involvement of all stakeholders, through information, consultation and participation on various consultative, interactive and participatory forums. The identified stakeholders comprise about 100 general contact groups classified into 10 major categories – internal, government, development partners, mass media professionals and institutions, civil society, transport associations, police, private sector, and general public.

64. In an effort to build local ownership and reflect local needs in project design, extensive user surveys and focus group discussions were carried out to understand the specific concerns and best ways to accommodate them during implementation (please refer to paragraph 89 for details on the communication strategy). LAMATA has built a strong ownership with the transport union, as part the project design. The design is based on the premise that the success of the project depends on promoting social inclusion in transport policies and investments.

65. The public relations strategy during development and construction consists of advertising within the corridor, in newspapers, radio, television. The television commercials include 90 second demonstration on how to use BRT, getting and paying for a ticket, how to board and alight. Third party advocacy is proposed to be employed whereby those with a voice in the community, local government chairman, local chiefs and community leaders are welcomed to discussions on BRT and its potential benefits. Road shows are planned to be held at which handbills are distributed in a number of languages, explaining the BRT concept. Community meetings are to be endorsed by local community leaders through prior discussions.

6 Design concept is based on maximum reallocation of existing road space, and avoidance of new bridge structures, resulting in a lower cost of implementation. 18

66. Key to stakeholder engagement and wider marketing is the engagement of NURTW. The focus is on underscoring a need to move to a more regulated form of public transport. Training would be provided to bus drivers to become “pilots” of BRT. The status of drivers choosing to be part of the new system among their peers is greater and provide a feeling that they are engaged in transport revolution that is sweeping across Lagos. BRT needs to be seen as a catalyst for change.

67. The BRT and LAMATA branding would be used prior to implementation and intensified post implementation, to create awareness of its distinct identity with a variety of stakeholders.

6. Critical risks and possible controversial aspects

68. Key risks associated with the project and corresponding mitigation measures are as follows in Table 3 (see detailed table in Annex 6).

Table 3: Risks and Mitigation Measures

Risk Rating Mitigation measures Residual Risk Rating

Political commitment to S Government buy-in demonstrated by its support for M introduction of a large scale LUTP by two successive elected Governors; as part Public Transport reform of implementation of LUTP, LSG has demonstrated program may be weak. ownership by introducing institutional, legal and regulatory reforms in the public transport sector; a user fees supported transport fund has been created to finance public transport investments. Multiplication of agencies S Establishment of LAMATA has been critical to M with overlapping respon- structural reform of the Lagos transport sector. This sibilities at federal, state, has helped in streamlining responsibilities at and local government levels different levels in the LSG by clearly defining the may result in poor role and mandate of LAMATA as a planning and coordination. regulatory body. Effective enforcement of M LAMATA together with LASTMA has been very L the BRT corridor may not effective in successful implementation of traffic be achieved; could lead to management along the demonstration corridor— deterioration of operating enforcement reinforced by regulations and conditions, either due to implementation of penalty clauses; the proposed high level of traffic project would further strengthen the capacity of violations or encroachment institutions dealing with traffic management and by curbside traders and enforcement. street hawkers. By design, many of the S Key lessons from LUTP: use market knowledge to M existing operators will be integrate operators in rationalized bus system; build displaced from the on existing operational capacity, self-regulation, franchised route. As a flexibility, and retain cost-effectiveness.

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Risk Rating Mitigation measures Residual Risk Rating

result, private bus sector may not participate in initial stages and frustrate efforts to regulate the sector. Residents of adjoining S The concern of the residents will be addressed M properties may be affected through an intensive communications plan and a adversely especially during participation strategy developed as part of the the construction period. project design; residents along the corridor have been extensively consulted and a call center is set up to address any specific concerns. Project Financial Manage- S Practical, simple and sound financial procedures M ment may be weak. manual and training provided to the FM team. • Strong and robust systems and controls including institution of independent and effective internal audit function in the FAD and IAU. • Risk-based supervision and external audit. To project components The detailed project designs S BRT is a flexible concept which has pre requisites M for the BRT would not be for success but can be designed within a budget. finished until the first year The estimated costs include sufficient high of project implementation. contingency to accommodate possible cost This uncertainty can escalations. The planned approach is to ensure that a constitute a project risk if robust and effective operational and service plan is the final construction costs integrated into the final physical design of the BRT. are higher than those In addition, the operations and service plan allows estimated at appraisal. for some flexibility in adopting an incremental approach to planned interventions with little impact on project outcomes. Overall Risk Rating S M

H=High; S=Substantial; M=Moderate; L=Low

7. Credit conditions and covenants

69. Effectiveness conditions of the IDA Financing Agreement:

(i) The First Subsidiary Agreement has been executed on behalf of the Recipient and Lagos State; (ii) The Second Subsidiary Agreement has been executed on behalf of Lagos State and LAMATA; and (iii) The GEF Grant Agreement between the Recipient and Association has been executed and delivered and all conditions precedent to its effectiveness or to the

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right of the Recipient to make withdrawals under it (other than the effectiveness of this Agreement) has been fulfilled.

70. Effectiveness conditions of the GEF Grant Agreement:

(i) The IDA Financing Agreement has been executed; (ii) The First GEF Subsidiary Agreement has been executed on behalf of the FGN and LSG; (iii) The Second GEF Subsidiary Agreement has been executed on behalf of the LSG and LAMATA; and (iv) The execution and delivery of this Agreement on behalf of the Recipient, and the LAMATA GEF Project Agreement on behalf of the Project Implementing Entity, have been duly authorized or ratified by all necessary governmental action.

71. The covenants applicable to project implementation are:

• Standard financial management, procurement and implementation covenants as tailored to the project; • Project-specific covenants relating to: (a) preparation of annual work plans and budgets for approval by the Bank (and any related Resettlement Action Plan (RAPs) / Environmental Management Plan (EMPs) required for the activities included in the plan); (b) implementation of the project in accordance with the Environmental and Social Management Framework (ESMF), Resettlement Policy Framework (RPF), EMP, RAP; and (c) key outcome indicators; and • The Co-financing deadline for the effectiveness of the Co-financing Agreement is June 30, 2011. This Co-financing is by AFD.

D. APPRAISAL SUMMARY

1. Economic and financial analyses

72. A cost-benefit economic analysis was conducted for investments to support the BRT infrastructure component and improvements in the road network accounting for 75 percent of the total financing. The investments in road maintenance accounting for 15 percent of the financing are spread over the city and past experience suggests that such investments provide significant benefits in terms of improving traffic flow and reducing vehicle operating costs and these investments are selected based on cost-effectiveness analysis.

73. Based on travel time and vehicle operating cost savings, the benefit-cost ratio (BCR) for the BRT investments is estimated at about 2.1, with a net present value (NPV) of US$208 million and internal rate of return (IRR) between 15 and 17 percent. Please see Annex 9 for details.

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74. The estimated rates of return are conservative. They do not reflect derived benefits from any forecasts of the air quality, and safety benefits of the project which are likely to be significant.

75. Road network improvement component: Ten road sections were subjected to a cost- benefit analysis, based on: (a) assumed life cycle of 20 years; (b) annual routine and five-year periodic maintenance cost; (c) annual traffic growth rate of seven percent. The benefits are based on savings in travel time and vehicle operating costs. The NPV and benefit-cost ratio at seven percent and 3.5 percent traffic growth rate are estimated to be greater than one.

2. Technical

76. The proposed project builds on the successes of LUTP with a focus on expanding the BRT network as part of the Lagos strategic plan. The selection of the pilot corridor to implement BRT scheme was based on the general criterion of hourly peak passenger bi directional flows, and the need to provide an integrated public transport network. In the design of the BRT system, consideration was given to developing a high-quality bus system that is affordable in the local context while retaining as many of the most desirable BRT characteristics as possible.

77. The routine maintenance activities will require basic inputs in terms of labor, materials and equipment. Small scale contractors will recruit local labor to inter alia repair potholes, cracks, minor defects on the pavements and to clean the drains. Repaired roads will improve travel time, reduce road user costs and improve road safety. In addition, this activity will result in employment creation. Periodic maintenance will typically include placing of bituminous overlays on the selected pavements for the purpose of preserving their structural integrity. Rehabilitation activities will include scarification of damaged pavement layers, replacement of the layers and the construction of a new bituminous surface.

3. Fiduciary

78. Financial Management: Implementation of the Country Financial Accountability Assessment (CFAA) (2000) recommendations was confirmed in the January 2005 review and by a recent Public Expenditure Management and Financial Accountability Review (PEMFAR), which showed that the FGN has made significant efforts to advance the reform of Public Financial Management (PFM) system since 2003. Substantial progress has been achieved in: (a) the adoption of an oil-based fiscal rule that has greatly improved the quality of macroeconomic management; (b) launching of significant steps toward increased transparency of the budget process; (c) more efficient cash management; (d) procurement reforms; (e) updating the legal framework for PFM; (f) reallocation of budget resources in support of Millennium Development Goals (MDGs) related government functions; (g) strengthening monitoring and evaluation; and (h) introducing a more strategic longer term focus in budget management. The impact of these early measures is also evident in the significantly improved fiscal and broader macroeconomic outcomes. There is, nevertheless, much more to be done and PFM initiatives and reforms are supported under the CPS, specifically through two Bank-assisted projects (Economic Reform and Governance Project (ERGP), and State Governance and Capacity Building Project (SGCBP) as well as funding from other donors and government.

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79. Financial management services for the implementation of the project will be provided by the FAD and the IAU in LAMATA. The FM arrangements for this project are designed to: (a) ensure that funds are used only for the intended purposes; (b) ensure production of timely information for project management and government oversight; and (c) facilitate compliance by the project with IDA and GEF fiduciary requirements. The FAD features amongst other things the following: (a) all key elements of FM, including: budgeting, funds flow, accounting, internal control, reporting and audit; (b) computerized system and robust FM procedures manual; (c) relevantly qualified staff who are well-trained in relevant Bank procedures and requirements, including procurement; (d) robust segregation of functions/duties; (e) a strong control environment, which is required to mitigate fiduciary risks; and (f) highly independent and well- trained internal auditor. Considering the financial management capacity of FAD including capacity to prepare reliable and regular Interim Financial Reports (IFRs), it is therefore proposed to continue use of IFRs for purposes of reporting on use of financing. Additional supporting documentation may be requested for higher value transactions.

80. FAD and IAU will maintain adequate FM arrangements to ensure compliance with the financial management requirements of the Bank and the government. These arrangements will support the deployment of project resources in an economic, efficient, and effective manner to achieve the stated development objectives. The arrangements will also provide relevant information to facilitate the performance of oversight functions. Experienced and well-qualified external auditors will be appointed (on a terms of reference acceptable to the Bank) to audit project accounts, financial statements, and transactions irrespective of the source of financing. The scope of the audit of LAMATA will also include a value for money statement on LAMATA’s technical and institutional practices and performance during the year under review giving due regard to its corporate objectives, its corporate and investment plan and developments in its business environment. The overall gross FM risk for the Project is assessed as Moderate. Various measures to mitigate FM risks are outlined in Annex 7. With these measures, the overall FM residual risk remains Moderate.

81. To augment the risk management strategy, recommendation has been made to establish Finance and Audit Committee of the Board within the first year of operation from among Board of Directors. This committee will oversee the fiduciary work of LAMATA. The existing PFM detailing appropriate internal control framework and risk management strategy will be updated. In addition, the internal audit unit staff will apply risk based audit techniques/skills in conducting their work. Regular reporting arrangements and supervision plan will also ensure that the implementation of the Project is closely monitored and that appropriate remedial actions are taken expeditiously. The FM risks will be reviewed during project implementation and updated as appropriate.

82. Procurement: Since fiscal year 2001, Nigeria has been implementing a procurement reform program based on the recommendations of the 2000 Country Procurement Assessment Review (CPAR). The 2007 PEMFAR, shows that implementation of procurement reform has brought about substantial improvements in obtaining value for money in the public sector expenditure. Some of the actions taken by government to advance the procurement reform in Nigeria include: (a) the establishment of the procurement professionals cadre at the Federal level

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in 2006; (b) the passage of the Procurement Bill in June 2007 to further sanitize the public procurement system; and (c) the establishment of a functional regulatory body, the Bureau of Public Procurement (BPP) to speed up implementation of recommendations. A Cash Management Team chaired by the Minister of Finance (MOF), of which the BPP is a member, ensures that payments are made only when certified by the Bureau, enhancing transparency of the procurement system. Currently, the Government Procurement Reform Program is being supported by an IDA Credit, ERGP. There are three Institutional Development Fund (IDF) grants, supporting the FGN and two grants to address weak public procurement capacity and to build partnerships with the private sector. “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, revised October 1, 2006; and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004, revised October 1, 2006, have also helped.

83. Procurement reform work in Lagos State is also making gradual progress. Lagos is the only state in Nigeria where a review of the procurement system was conducted in November 2003. The implementation of the recommendations of Lagos State Procurement Assessment Review is ongoing and is being supported by an IDF grant. Lagos has substantial experience in implementing Bank-financed projects dating back to 1974 with six ongoing Bank projects including LUTP which is successfully being implemented. The procurement unit in LAMATA will be responsible for coordination of the project activities, including procurement of works, goods, and services. The procurement risk in this operation is considered moderate due to experience of the Authority in implementing Bank financed LUTP.

4. Social

84. Social benefits: The expected social benefits of the proposed project include: (a) reduced travel time; (b) reduced fares; (c) reduced vehicle operating costs; (d) improvements in the safety and quality of transport services; and (e) an increase in governments levy and tax revenues through a formalize urban transport system. A survey of 7,000 households was carried out, to study travel patterns of the inhabitants along the corridor and establish baseline data. In conjunction with the household survey, a survey of travel diaries focusing on school children, market women, people with disability along the pilot BRT corridor was carried out. The findings will not only feed into the design of the BRT, but will also serve to monitor the social development outcomes of the project in a before-and-after study of the social impacts. The household and focus group surveys will be carried out annually during the project life.

85. Poverty and equity: The main social contribution of LUTP 2 is the provision of basic, affordable, and safe urban transport services, through the BRT. Specifically, the proposed project would benefit women, the elderly, and the physically challenged by responding to their needs and providing them with better access to basic social services (health, school, administration), jobs, and markets, at a lower cost than currently available.

86. Participation/Consultation/Communication Mechanisms: The design of LUTP 2 has been participatory at several levels: at federal, state and local government levels, at donor community level (AFD), and civil society. The channels of communication set up by LAMATA

24 provide a good opportunity for the concerns and views of multiple stakeholders to be mainstreamed into project implementation. Some of the channels include:

• Stakeholder meetings on LAMATA projects: Stakeholder meetings are called to inform communities benefiting from projects under the project. The essence is to get their buy-in for smooth implementation of the projects • Consultative fora: Consultations are held with various stakeholders on new projects to get their inputs. For instance, LAMATA called a consultative forum to critically examine the Traffic Operations Manual.

• BRT Parliament: The BRT parliament is a forum established to discuss issues relating to the operations of the Bus Rapid Transit System in Lagos. One of the BRT parliamentary sessions was held to mark the first anniversary of the BRT operation and it was led by Lagos State Governor.

• Television Programs: Two television program are presently run by LAMATA (“BRT Half Hour” and “Lagos On The Move”). The two are primed at stimulating stakeholder buy in into LAMATA’s various projects aside from helping to generate patronage to the BRT scheme. They also serve as platforms to generate feedback from the commuting public as one of the TV program runs live and allows call in.

• Website Management: The authority’s website is constantly updated to encourage traffic as well as disseminate information to all stakeholders of LAMATA and outsiders.

• Customer Relationship Management Platform – Telephone number 01-280- 5000: The platform was established to get feedback from the commuting public on the operations of the BRT system including the conduct of operatives of the system.

5. Environment

87. Transport services, rather than road construction, is the focus of LUTP 2. Safeguards policy OP 4.01 was triggered as components 2 (BRT infrastructure construction) and 3 (Road Network Efficiency Improvement) of project include civil works. OP 4.12 was triggered due to the planned civil works operations. OP 4.11 was triggered as the policy applies whenever OP 4.01 applies, i.e. whenever there is likely to be significant civil works, as earth works have the potential of exposing chance finds. The ESMF has made provisions for addressing potential chance finds of cultural heritage. An environmental impact assessment (EIA) and an ESMF have been prepared to mitigate adverse impacts, and the mitigation measures have been budgeted. The cost will be covered by the client. No long term or cumulative adverse impacts were identified in the EIA and the ESMF. LUTP 2 would encourage and foster the use of environmentally friendly fuels by its mass transit buses.

88. The ESMF was prepared because even though the Operations Service Plan (OSP) and feasibility studies for the proposed investments on the BRT are available, detailed designs are yet not available and will be prepared during the first year of project implementation. As a result, the

25 exact alignment of the specific project site is not yet known and the safeguard instruments did not attempt to address impacts related to individual investments (in any specific form).

89. Mitigation measures to address the impacts were identified and costed by the safeguards instruments. Cost for resettlement/rehabilitation (compensation of project affected persons) will be covered by the Lagos State Government (LSG) and implemented by LAMATA. Cost for environmental mitigation measures, will be incorporated in the works contracts, including daily monitoring and supervision. Under LUTP, the client demonstrated its commitment to mitigating adverse social and environmental impacts by funding the environmental unit of LAMATA, and providing timely budgetary resources to mitigate adverse social impacts (resettlement rehabilitation and HIV/AIDS prevention) identified in the ESMF and subsequent RAPs. Budgetary provisions for the mitigation of social impacts are made yearly, based on LAMATA’s work program. Potential RAPs will be subject to clearance by the Bank, before implementation. Environmental protection clauses will be incorporated into the works contracts as well as social clauses, including Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome (HIV/AIDS) prevention. Compliance in the implementation of the clauses will be monitored by the environmental unit of LAMATA. LUTP 2 will continue supporting LAMATA’s environmental unit through capacity building and hands on training.

90. The following safeguard instruments have been prepared and disclosed in-country (July 20, 2009) and in Info-shop (July 21, 2009).

(i) Environmental and Social Management framework (ESMF) for LUTP 2 program of work. (ii) Resettlement Policy Framework (RPF) for LUTP 2 program of work. (iii) Environmental Impact Assessment (EIA) for Aboru/Pipeline road rehabilitation under LUTP 2 road network efficiency improvement program. (iv) Resettlement Action Plan (RAP) for Aboru/Pipeline road rehabilitation project rehabilitation under LUTP 2 road network efficiency improvement program. (v) Environmental Impact Assessment (EIA) for the proposed LAMATA building.

6. Safeguard policies Safeguard Policies Triggered by the Project Yes No

Environmental Assessment (OP/BP 4.01) [x] [ ] Natural Habitats (OP/BP 4.04) [ ] [x] Pest Management (OP 4.09) [ ] [x] Physical Cultural Resources (OP/BP 4.11) [x] [ ] Involuntary Resettlement (OP/BP 4.12) [x] [ ] Indigenous Peoples (OP/BP 4.10) [ ] [x] Forests (OP/BP 4.36) [ ] [x] Safety of Dams (OP/BP 4.37) [ ] [x] Projects in Disputed Areas (OP/BP 7.60) [ ] [x] Projects on International Waterways (OP/BP 7.50) [ ] [x] Piloting the Use of Borrower Systems to Address Environmental and Social Safeguard Issues in Bank- [ ] [x] Supported Projects (OP/BP 4.00)

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7. Policy exceptions and readiness

91. The project complies with all applicable Bank policies. The engineering design documents for the first year activities are complete and ready for the start of project implementation. An action plan has been developed to address key issues prior to contract mobilization.

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Annex 1: Country and Sector Background

NIGERIA: Lagos Urban Transport Project 2

1. The Country Context

1. The population of Nigeria is about 151 million with more than 73 million living in urban areas. The urban growth rate (4.5 percent per year) is above the national average (three percent per year). There are two mega cities (Lagos, Kano) with populations greater than 10 million and five other cities with population between five and 10 million. It is estimated that the country’s urban areas contribute over 65 percent of the gross national product, illustrating both their importance and also their potential for contributing further to economic growth.

2. Lagos is the largest city in sub-Saharan Africa and the sixth largest city in the world, with an estimated population of over nine million 7, which is growing at six percent per annum. The megacity of Lagos has grown beyond the physical boundaries of the state of Lagos, spilling over into the adjoining state of Ogun. Geographically the smallest state in Nigeria, Lagos is by far the most densely populated. By 2015, the population of the megacity is projected to be about 25 million, making it the third-largest in the world. Lagos’s seaport and international airport handle more than 70 percent of the nation’s cargo. It contains the largest manufacturing sector and provides employment for over 45 percent of the skilled manpower of the country. The commercial sector is similarly dominant with a vibrant local trading tradition. During the last twenty years, the level of efficiency and productivity in the metropolitan area has been adversely affected by growing weakness in the physical infrastructure necessary to support basic needs of the population and production sectors. The transport infrastructure and services remain at levels that supported a population of no more than six million some 20 years ago. The density of the road network (about 0.4 km/1000 population), for example, is quite low even by African standards. The provision of bus public transport is highly fragmented with multiple private operators, operating small buses of poor quality and in absence of any management or a regulatory authority. Despite the size of the city, there are no organized mass transit systems nor is the inland waterway system exploited to offer alternative non-road based commuter services. Bus fares are high (average fare of US$1 per trip) which consumes over 20 percent of the average household disposable income. Congestion is a major issue in the city affecting, significantly, the cost of production and the quality of life. While Lagos is no longer the federal capital, its role as gateway to the country is still unquestioned.

3. The other large cities in the country are Kano, the commercial and industrial capital for northern Nigeria, with a population of about 10 million, and Abuja, the administrative capital of Nigeria with a population of about one million. These cities are facing the same transport-related problems as Lagos: rapid growth of population and vehicles (particularly cars and two-wheelers), growing congestion, deteriorating local air quality, and increasing household consumption of energy and emissions of greenhouse gases (GHG) for transport purposes. The state

7 The 2006 Nigerian census puts the population of Lagos at nine million, but the authorities of Lagos have disputed this figure. According to the Lagos Central Bureau of Statistics, the population is closer to 17.5 million (2008) with annual population growth of roughly four percent over the last 10 years. World Urbanization Prospects (2003) estimated the population as 11 million. 28 administration has been focused on upgrading the urban mass transit infrastructure through provision of buses and non-motorized modes (e g. tri-cycles).

2. The Urban Transport Context in Lagos

4. Urban transport in Lagos is characterized by a number of challenges not unique to Lagos or even Nigeria: a large and rapidly growing urban population inadequately served by the existing transport system, declining standards of public transport, overlaps and conflicts among the agencies responsible for planning and implementing transport solutions, massive growth in the use of minibus services, rapid growth in ownership and use of cars and particularly motorcycles, inadequate and deteriorating transport infrastructure, and poor facilities for non- motorized transport (walking and bicycling). These challenges have combined to further marginalize the most vulnerable segments of society, which depend mostly on public transport and cannot afford private alternatives.

5. As in most cities in developing countries, authorities have had difficulty meeting service demands of the growing population, particularly the poor, who are most dependent on public provision of water, electricity, transport, and other services. But the effects of rapid growth affect all segments of society. The absence of policies on land use and economic development has led to urban sprawl, which multiplies the challenge posed by rapid growth. The declining population density associated with sprawl has increased travel distances and pushed up the price of public transport. Again, these developments affect the poor disproportionately, often effectively excluding them from work and social services. Meanwhile, the rising use of private cars has choked the roads, endangering the safety of pedestrians and the health of city residents who breathe in automobile emissions.

3. Institutional and Regulatory Context

6. The institutional structure of Nigeria has three levels: federal, state and local. At the federal level, the Ministry of Transport (MOT) makes national transport policy and the Ministry of Works (MOW) develops the federal road network. Urban transport was devolved to the states by the 1999 Constitution, and the states make their own laws on traffic and transport. Federal agencies with divisions in the states include the Nigeria Police – Lagos State Traffic Division, which includes Traffic Wardens, and the Federal Road Safety Commission which is responsible for traffic control and enforcement, primarily on federal roads.

7. The state ministry comprises five functional divisions. The Motor Vehicle Administration is the regulatory authority for public transport. There is also a Transport Operations Division. The Local Government Councils are responsible for local traffic management schemes, parking control and management of public transport terminals. Until recently, the Lagos metropolitan area consisted of 18 local government areas (LGAs) out of 21 in the state, with their own elected governments. More recently, 57 Local Council Development Areas (LCDAs) have been created from the 21 LGAs. These LCDAs have a works department and a traffic management unit responsible for road maintenance and traffic management on local government roads. As a result, more than 100 agencies at local, state or federal government levels had a role in transport provision and/or services in the city. Often, most agencies develop and implement their own

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policies and programs in isolation, and without much regard for its effect on policies of other agencies.

8. LAMATA is set up to plan an integrated transport system for the state. LAMATA is a corporate body with an independent Board responsible for formulation, coordination and implementation of urban transport policies and programs in the Lagos metropolitan area. It was created by an act signed into law on January 13, 2002 and formally launched on December 2, 2003 and subsequently amended on April 16, 2007. The law establishing LAMATA prescribes a 13-member Board of Directors for the Authority. The Board, which is fairly representative of the Authority’s stakeholders, comprises representatives of transport operators, transport unions in Lagos State, the organized private sector, the general public, local government areas, and transport related LSG agencies. The only full time member is the Managing Director, who heads the management team. The Chairman and members of the Board are appointed by the Governor. The Managing Director is also appointed by the Governor on the advice of the Board of Directors.

9. Public transport environment: Public transport operation in Lagos is almost entirely owned and managed by the private sector8—principally, individuals with one or two second- hand vehicles that they rent out to drivers on a daily basis (see Box 1 for details on mode shares). Minibuses (danfos) make up the bulk of the fleet, and are increasingly supplanting midi-buses (molues) because of their relatively lower cost. Both types of vehicles are generally operated by crews who pay rent to the vehicle owners; the daily rental fee varies with the condition and capacity of the vehicle and the route on which it operates. In Box 1: Mode Share* addition to the rental fee, the crew also pays for fuel, minor running repairs, and parasitic payments to Mode Share various groups that extort illicit fees. Regular bus 10% 10. Every danfo and molue is affiliated with one Minibus 72% of several associations, the largest being the Taxis 6% National Union of Road Transport Workers (NURTW). As in some other cities, the associations Private cars 7% are based in terminals that may be leased to the Motorcycle 5% association by a local government. By controlling the terminal, the association can limit access to the *excluding walk trips route. Passengers board in the terminals. The association collects a fee from each driver for each trip from the terminal. Drivers attempting to avoid

8 Prior to independence, the city relied on a monopoly supplier of large-bus service as the backbone of its urban transport system. This company was nationalized as the Lagos State Transport Corporation in the process of decolonization, ushering in a regulated regime of public transport in the immediate postcolonial era. Fares were regulated, and government was often reluctant to increase them. Initially, the state-owned bus company was able to operate without subsidy, but, as deficits grew and public subsidies did not grow commensurately, it had difficulty maintaining and renewing its fleet, resulting in deterioration in service coverage and quality. It eventually collapsed in the 1980s, leaving no major fleet operator, and giving way to the unregulated private sector.

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the fee by turning short of the terminus are likely to be harassed. Other associations operate at informal curbside “terminals.”

11. The use of motorcycles for commercial transport has grown very rapidly in recent years, mainly as a consequence of the poor state of the roads and the inability of bus companies to meet growing demand. Motorcycles are better able than larger vehicles to negotiate congested streets, as well as potholed and broken surfaces. Initially, motorcycle services provided access from residential areas to main roads, where passengers would take taxis or buses. However, motorcycle services are now found on main roads, and even in the city center.

12. Most of the motorcycles used for urban public transport have small engines (less than 100cc), and the drivers are not required to have a driver’s license. The drivers are often young and inexperienced. Accidents are common—and often fatal. Most operators of motorcycle taxis own their machines or buy them on hire purchase, which can normally be completed within a year.

13. In comparison with Asian cities, the use of non-motorized vehicles (bicycles, rickshaws) is surprisingly low in African cities (including Lagos) as is the use of two-wheeled motorized vehicles as a personalized form of transport. The extent of walking as a mode of commuting is significant though there are no reliable estimates of its share among total trips.

14. Sector Management: Between the early 1980s and 1994, responsibility for the management of the transport sector in the Lagos state rested with the Lagos State Ministry of Works and Transport (LSMWT). This period witnessed establishment of the now defunct publicly-owned passenger transport operator, the Lagos State Transport Corporation, the establishment of the Lagos State Ferry Services Corporation, the Lagos State Parking Authority and the Central Licensing Authority, now transformed into the Department for Motor Vehicle Administration in the Lagos State Ministry of Transport (LSMT). During this period, transport actions in the State were driven by the expansion of the road network and a focus on capital spending rather than sector planning and development of a holistic approach to resolving urban transport problems. The concern of dealing with the immediate problems led government to ignore the long term impact of the proposed solutions. Attempts were not made to come to grips with defining policies that relate the value and needs of the urban transport sector to macro- economic considerations. The interventions were carried out on a project-by-project basis and the transportation system has evolved from the unsystematic accumulation of public projects and policies. This approach has neglected the critical interconnections between parts of the system and between the system and the basic processes of the city.

15. The LSMWT was split in 1994 into the Lagos State Ministry of Works and Infrastructure (LSMWI) and the Lagos State Ministry of Public Transportation (LSMPT). The latter was given the mandate for overall sector policy development and planning and was, later renamed the LSMT. LSMWI oversees the operation of the Public Works Bureau, which carries out force account works and is mainly responsible for the state road network.

16. The key issues which have affected the transport sector in Lagos over the years can therefore be summarized as follows:

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• Absence of an articulated and adopted policy and strategic framework for the transport sector; • Fragmentation of institutional responsibilities between various agencies at the three levels of government with no coordination framework; • Absence of a well equipped traffic management institution; inadequately trained transport/traffic engineering staff; involvement of traffic police with traffic management planning because of an absence of professional civilian alternative; • Inadequately defined public transport planning and regulatory function; • Absence of standard procedures for the technical and economic evaluation of programs and projects resulting in a strong bias toward capital expenditure rather than making better use of existing investments through better management and maintenance practices; and • Involvement of over 100 agencies at local, state and federal government levels in transport provision and/or service delivery in the city. Often most developed and implemented their own policies and programs in isolation, without much regard for the effect on other policies.

4. Government Strategy

17. In response to the growing problems with the management and delivery of transport services, a number of studies have been conducted over the past decade by the LSG to develop a strategy and appropriate solutions. The Lagos Mass Transit and Transport Systems Management Program study was undertaken in 1992. This work set out to identify actions necessary to address the complex transport situation in Lagos. The study had as one of its recommendations, the creation of Lagos Metropolitan Area Transport Authority (LAMATA) to coordinate transport policies, programs and actions of all agencies at the different tiers of government. It was the recognition that these issues needed to be resolved lest transport in Lagos deteriorated to intolerable levels that ultimately inspired the creation of LAMATA.9

18. LAMATA’s Goals and Objectives: LAMATA has therefore been created to address the major transport issues affecting Lagos. It is founded on the premise of recognizing each major function, assigning responsibility for each function to an identified management unit, resourcing the units adequately to perform the designated tasks and clearly defining the relationship with other organizations.

9 The World Bank Urban Transport Strategy Review, “Cities on the Move” (2002) identifies institutional weakness at the heart of growing transport problems in cities. It states that “institutional weaknesses are the source of many observed failures in urban transport in developing countries. At the municipal level, institutional structures for transport are weak and inadequately staffed. The need to integrate policies both within the transport sector and between transport and other aspects of urban development calls for the development of institutions that minimize jurisdictional and functional impediments to policy integration and allow for extension of the role of the private sector within an integrated strategy.” It goes on to add that, “cities that have failed to find acceptable institutional mechanisms have also frequently failed to address the problems of increasing road congestion, environmental deterioration, and the decline of public transport.” 32

19. LAMATA is a corporate body with an independent board responsible for formulation, coordination and implementation of urban transport policies and programs in the Lagos metropolitan area10. It was created by an act (LAMATA Law) signed into law on January 13, 2002 and formally launched on December 2, 2003. The Authority has the overall responsibility for transport planning and coordination in the Lagos metropolitan area with the primary mandate to play a lead role in carrying out transport planning and assist in transport policy formulation and coordination of major operational and investment decisions and implementation. The law grants LAMATA several powers to facilitate the discharge of its statutory functions, including the power to levy and collect user charges in connection with the provision of its services and to collect any other tariffs, fees and road taxes as may be authorized by the Governor. The law establishing LAMATA was strengthened further in 2007 to include planning and regulatory functions across the various modes of transport.

20. The specific functions as identified are: (a) ensure the physical traffic serviceability of declared roads network; (b) undertake traffic management activities towards ensuring efficient and effective movement of traffic in metropolitan Lagos; (c) plan and co-ordinate the supply of adequate and effective public transport within metropolitan Lagos; and (d) make policy recommendations to the Governor including mechanisms for their implementation.

21. The law grants LAMATA several powers to facilitate the discharge of its statutory functions, including the power to levy and collect user charges in connection with the provision of its services and to collect any other tariffs, fees and road taxes as may be authorized by the Governor. LAMATA has since set out its vision and mission as follows:

• Vision: To be a foremost facilitator of a sustainable and effective integrated transport system (in Lagos). • Mission: To transform the Lagos State transport system by facilitating an enabling environment through committed and credible professionals working as a team, employing transparent methods thereby adding value to the quality of life.

22. Organizational Structure: The law edict establishing LAMATA prescribes a 13-member Board of Directors for the Authority. The Board, which is fairly representative of the Authority’s stakeholders, comprises representatives of transport operators, transport unions in Lagos State, the organized private sector, the general public, local government areas, and transport related LSG agencies. The only full time member is the Managing Director/Chief Executive Officer (MD/CEO), who heads the management team.

23. LAMATA is currently structured into five directorates and six units that report to the MD/CEO. The Directorates are: Corporate and Investment Planning, Finance, Public Transport, Business Systems, and Roads Maintenance. The Units are: Corporate and Legal Services, Transport Planning, External Relations, Environmental and Social Safeguards, Internal Audit,

10 The 13-member Board, which is fairly representative of the Authority’s stakeholders, comprises representatives of transport operators, transport unions in Lagos State, the organized private sector, the general public, local government areas, and transport related Lagos State Government agencies. The only full time member is the Managing Director/Chief Executive Officer (MD/CEO), who heads the management team.

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and Procurement. These directorates and units are equipped with modern IT and other office hardware and have access to an adequate library and necessary software, including geographic information system.

24. LAMATA staff remuneration and retention packages are pitched at private sector levels so as to attract, retain, and motivate high caliber staff that can assist LAMATA meet the challenge of transforming the transportation in Lagos. The organization has also prepared and is implementing several policies designed to assure effective operations. These include employee handbook, a financial management system manual, procurement procedures manual, IT policy, staff training needs assessment and plan and a LAMATA policies and procedures manual.

25. Sustainability of Funding: A transport fund has been set up with the following sources: (a) Lagos State budget provision; (b) license fees (hackney permit, road taxes, license plate registration, auto registration; (c) concession fees; (d) other road user charges (tolls). In discussions with the representatives of the 36 states, LAMATA has successfully made a case with the Joint Tax Board to increase road user charges, to be shared between LAMATA (50 percent), state treasury office (40 percent), Motor Vehicle Authority (five percent), and state MOT (five percent). As a result, LAMATA is able to meet 60 percent of the 2009 funding requirements from state support and the transport fund (from less than 20 percent in 2004), with the objective of becoming self financing in the coming years.

Table 1: LAMATA Funding Arrangements, by Source Year World LSG Transport Total Bank (%) (%) Fund (%) (US$ million) 2004 81 19 N/A 14.4 2005 80 20 N/A 27.4 2006 84 16 N/A 26.7 2007 44 53 3 65.1 2008 40 49 11 42.5 2009 40 48 12 111.9

26. LAMATA Achievements: Over the past five years, LAMATA has been able to provide an overall vision and strategic direction for addressing the long neglected transport needs of the metropolis and to coordinate activities of the different executing agencies to provide a common and consistent basis for implementation. The Authority has matured into a professional organization, winning respect of other state departments and the citizens. LAMATA has succeeded in contributing to increased awareness about the need for traffic management, transparency and discipline in procurement processes and involving the users in decision making processes. LAMATA has started, for first time in the country, the design and execution of maintenance work with participation of private sector through awarding contracts to the local consultants and contractors. Experience has shown that the output of maintenance works through contracts is more efficient, cost effective and better in quality compared with the traditional methods of using force accounts procedures. The on-going Lagos Urban Transport Project (LUTP) is now widely recognized by the government, participating communities and

34 development partners as an efficient and well performing initiative that has significantly contributed to the city’s poverty reduction goals notably by improving accessibility in low- income areas, involving communities in identification of priority programs and improving sector management.

27. LAMATA has been successful in (a) preparing a strategic long-term plan for the transport sector in Lagos; (b) coordinating activities of the multiple agencies involved in the sector; (c) rationalizing motor vehicle tax administration, resulting in a substantial increase in revenues; (d) maintaining, upgrading, and rehabilitating 632 km of the declared road network; (e) implementing a pilot Bus Rapid Transit (BRT) “Lite” system from Mile 12 to Church Missionary Society (CMS); and (f) most important, changing the attitude among users towards bus transport system.

5. Implementation of BRT-Lite

28. Launched in March 2008, the new BRT system provides Lagos commuters with a clean, affordable and reliable means of getting around in the city. The BRT is a bus-based mass transit system that delivers fast, comfortable and cost-effective service. Through the provision of exclusive right-of-way lanes and excellence in customer service, BRT essentially emulates the performance and amenity characteristics of a modern rail-based transit system, but at a fraction of the cost.

29. The implementation of BRT-Lite system in Lagos is the first example of a comprehensive and integrated approach to improving public transport in sub-Saharan Africa. The project was mainly financed by the LSG with the Bank providing technical support. Key elements of innovation are: (a) the project design is driven by consideration of local requirements and what is most appropriate at the local level and it combines institutional and regulatory reform together with specific investments; (b) it was delivered at very low cost per kilometer as compared to BRT projects in other parts of the world, making it easier to replicate along other corridors and other low-income countries in sub-Saharan Africa; (c) it encompasses all elements of public-private partnership (PPP), with the state financing infrastructure and the private sector financing buses maintenance facilities; and (d) the project is being implemented in full partnership and cooperation of bus unions and other local interests.

30. A legislation was passed in late 2007 granting powers to LAMATA to, “plan, regulate, and coordinate the supply of adequate and effective public transport…” and granting specific powers to make bus regulations. The power to regulate franchises enables LAMATA to award concessions for exclusive operating rights on defined routes or in specific geographical areas. The proposed scheme includes an operator development function in partnership with NURTW under the private-public approach. A special purpose entity was established for the actual operation of BRT-Lite.

31. Over 100 new buses were procured by the private sector without any direct public sector support. A regional Bank (Ecobank) purchased the buses on credit for lease/purchase by the transport union. During the initial phase, preference was given to selection of a BRT operator formed as share-capital co-operative by the existing route unions and associations. Franchise

35 bids were accepted from entities in formation, though the granting of operating rights was conditional on completion of those legal formalities of corporatization. The members of the route association are required to accept ‘individual and collective’ liabilities for the bus leases in lieu of taking out comprehensive motor insurance policies. Further, the co-operative responsibility is found to be critical in the success of micro-credit schemes and is likely to provide greater repayment confidence to the equipment financiers.

Box 2: Impact and significance of the pilot BRT “Lite” system in Lagos

The Lagos BRT-Lite scheme has positively affected the metropolis in a number of key ways: First, patronage has exceeded expectations. Average weekday ridership is twice what had been forecasted. Second, passengers now pay on average 30 percent less in fares, and enjoy a greater degree of fare stability, even though fuel costs have risen by over 100 percent in the past few years. They have also experienced an average reduction in journey time of 40 percent, in average waiting time of 35 percent, and in exposure to theft on public transport11. Third, the scheme has attracted increased patronage from sectors that had hitherto shied away from public transport, namely children, car-owning middle classes, the elderly and the mobility-impaired. Fourth, the scheme has created direct employment for over 1,500 people, mostly graduates, and indirect employment to over 500,000 people in the state. Fifth, the scheme has demonstrated the capacity of local operators to successfully run formal public transport operations and has subsequently generated intense interest from local banks and financiers and vehicle suppliers for other planned BRT schemes. Sixth, it has demonstrated and confirmed the strategic role of public transportation in Lagos to the extent that planned State investment in the sub-sector has risen 50-fold. Seventh, preliminary figures suggest that the project has helped reduce ambient concentrations of pollutants which pose dangers to human health along the corridor.

6. BRT-Lite Operational and Service Planning Framework

32. Bus Regulation Framework: In the past regulations were based on the principle of regulating individual vehicles, and thus were difficult to balance with fleet operations or franchising of services. In an effort to introduce a consistent set of provisions for awarding a franchise (a collective license covering all buses in one owner’s fleet, or all the buses on one route or in one zone), LAMATA’s powers were expanded in March 2007 from planning and coordination of transport operations to their actual regulation. The power to regulate franchises enables LAMATA to award concessions for exclusive operating rights on defined routes or in specific geographical areas. The framework for the provision of passenger transport services consists of high-capacity buses operating under exclusive franchises designed and regulated by LAMATA.

33. Operational arrangements and service offer: At the current state of development and consolidation of the passenger transport industry in Lagos, there was no single private-sector undertaking capable of operating the BRT-Lite system on its own. The proposed scheme

11 Typical responses from public in support of the project include: “safer”, “faster”, “stress free”, “save fuel cost”, “reliability”, etc., priority seating for, young, old, women, and disabled.

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includes an operator development function in partnership with NURTW under the private-public approach.

34. Building on the conceptual framework developed for bus franchise scheme (as described in Figure 1), NURTW established a special purpose entity for the actual operation of BRT- Lite—Lagos NURTW (First BRT) Cooperative Society Limited [referred to as First BRT Cooperative (FBC)]. While this entity remains a wholly owned subsidiary of the Lagos State Council of the NURTW, it is managed on an arm’s length basis with day-to-day control vested in about 50 members who subscribed equity at its launch. Subsequent members may only be admitted to the Society by agreement with those already included, and on payment of the same equity subscription. The FBC is a legal entity formed specifically for the purpose of the bus franchise scheme, and able to enter into contracts both for the franchise and the vehicle lease.

35. The proposed bidding and award process for operation along the new route: Key elements of the contract process are:

• LAMATA advertises and holds stakeholder forum – participants to include banks, existing corporate bus operators, vehicle suppliers, registered transport unions, leasing companies etc. The objective is to showcase the schemes, explain scheme objectives, delivery mechanisms and to discuss strategies for linkages with transport unions and encourage consortia formation with participation by members of existing transport unions; • Advertise and invite expressions of interest; • Shortlist groups to be issued with request for proposals (RFPs). Short listing to consider make up of team, degree of participation by recognised transport unions, financial backing, etc; • Evaluation of proposals (from shortlisted consortia) – based on fare proposal, franchise fee proposal, track record in bus operations, operational management capacity, financial readiness, likelihood of commercial and financial closure, availability of relevant assets, degree of participation by transport unions etc; and • The contract for exclusive right to operate along the BRT corridor is for two years renewable for a maximum period of five years.

36. In view of the limited capacity and experience in NURTW for operating large-scale scheduled bus service, support was provide by LAMATA in: (a) organizing, operating and scheduling bus services12; (b) vehicle maintenance function were outsourced to the vehicle supplier, who provides full technical support including trained personnel and spare parts stockholding; (c) financial management functions are being provided by a commercial bank; and (d) operations management outsourced to a specialist business handling large vehicle fleet and drivers across Nigeria.

12 LAMATA will charge the successful operator(s) a franchise fee in order to recoup its direct costs in administering the scheme and managing the enabling framework. It will subcontract the traffic enforcement function to a dedicated unit within LASTMA established for the purpose, and will also subcontract the terminal management functions to private businesses based in the locality.

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Figure 1: Key relationships and issues for private sector participation

Issues and risks

Development Finance Export credit agencies Local institutions Source of funds

Foreign exchange exposure Line of credit Debt service High local interest rates

Funds Vehicle specification International bidding Equipment supplier Operating-lease company Warranty and support Buses

Fleet of buses Net payment Contract pricing Reward and incentives

Vehicle specification Maintenance contractor Workshop facilities Parts procurement

Available buses Lease payment Availability/reliability standard Kilometers operated

Franchise specification Regulatory authority Tender Tender process Infrastructure support

Route-operating cooperative Regulatory enforcement – Kilometers achievable Franchise LAMATA

Tariff authorization Service offer Fares paid Carriage privileges

Passengers

37. Rolling stock Financing: Over 100 new buses were procured by the private sector without any direct public sector support. From the financier perspective, the key risk was the security of repayment to the financier (Ecobank) which was mitigated in two ways. First, the scheme design provided the bank the initial lien on revenues collected from services, with only the balance (after deduction of financing costs) being passed through to the operator.13 The bank was given

13 To allow Ecobank (the financier) to manage its counterpart risk for vehicle financing, NURTW (the operator) accepted that the bank would collect all revenues on its behalf and create a sinking fund to meet the scheduled remittances to the vehicle supplier. The residual cash flows after the appropriate deduction was then available to the operator to meet his direct expenditures. However, such expenditures were monitored and pre-authorized by a Steering Committee, which included three representatives from LAMATA (the regulator), with Ecobank acting as its Secretary. 38

the right to act as ticket distributor and security monitor. Second, the scheme design required the participating operators to accept collective liability for all the obligations that they had entered into. Any individual default, whether by peculation of revenues or through non availability of vehicles, was to be made good by an additional charge on all remaining members. Where the default was fraudulent, the individual would lose his deposit/collateral. From the operator perspective, the two main risks were: (a) the new buses would not carry sufficient passengers to cover the high fixed cost of the vehicle finance; and (b) difficulties with vehicle availability and reliability during the initial years necessary to service the loan. The first of these could be addressed through productivity gains arising from the segregated running ways of BRT-Lite. The second was addressed by requiring a commitment from the vehicle supplier to local spare parts stock holding and technical support and training from a small team of expatriate service engineers.

38. Route-operating association: During the initial phase, preference is being given to selection of an operator formed by the existing route unions or associations. Franchise bids were accepted from entities in the process of formation, though the granting of operating rights was conditional on the completion of all legal formalities. The voting rights in the route association are in proportion to the equity invested in the pilot scheme, and members elect association officials on a term basis. A situation where association officials receive preferential treatment in route-duty allocations is not tolerated.

39. The members of the route association are required to accept ‘individual and collective’ liabilities in respect of the bus leases in lieu of taking out comprehensive motor insurance policies. Further, the co-operative responsibility is found to be critical in the success of micro- credit schemes and is likely to provide greater repayment confidence to the equipment financiers.

40. Both drivers and small-fleet operators apply to join the route association, but their acceptance is subject to peer review in light of the individual and collective liabilities. In either case, the actual drivers concerned receive training from the vehicle supplier, and were required to pass a test set by him. Refresher training and repeated tests (especially after an accident or detected operational abuse) is required throughout the franchise period.

41. The route franchise agreement includes the operating characteristics set by the regulator (LAMATA) with respect of the frequency and hours and days of service. The association (FBC) breaks down these requirements into duties for each member, and that these duties are rostered so as to provide equal commercial opportunity over the roster period. Technical assistance in this process is provided by LAMATA as required.

Scoping of Operational and Service Plan for the LUTP 2 BRT corridors

Operational Service Plan

42. Following on from the travel demand analysis in the corridor and its catchment, it is necessary to construct an outline Operations Service Plan (OSP) on which to base the infrastructure design. The primary purpose of the OSP is to optimize the application of both the infrastructural and the operational resources through a combination of express, limited-stop and

39 stage-carriage services that avoid all buses stopping at all stations in the corridor whilst also retaining the capability to make trips between any two stations without needing to make an interchange between buses. In this manner, the capacities of individual stations are matched to their anticipated utilization and designed accordingly. Where there is to be an operational connection between BRT lines as now proposed at Oshodi, suitable provision would be made for the relevant through-services.

43. The OSP has identified: (a) the rolling-stock requirements for each of the service types, both in quantitative and qualitative terms; (b) an efficient packaging of the relevant route service contracts for the provision of the services and identification locations for the stabling and maintenance of the buses required for each of these; (c) the buses for each service type through iteration with the linked study on the evaluation of the comparative merits of different types of buses for use in Lagos; and (d) the appropriate dimensions for the bus-stop lay-bys and for the passenger platforms at the bus stops.

44. The extension of BRT infrastructure to Ikorodu and the introduction of new infrastructure between Anthony and Obalende will facilitate an integrated approach to BRT service planning that seeks to make best use of BRT infrastructure to best serve user needs in respect of economic development and poverty alleviation. Services will run both directly between Ikorodu and Lagos Island and Ikorodu and Mile 2. This will necessitate adaption at the appropriate juncture, of existing operating contracts between Mile 12 and Lagos Island and existing tributary operations between Ikorodu and Lagos Island that join BRT infrastructure at Mile 12. The nature of services that would represent an ‘optimized solution’ would be:

• Ikorodu – Lagos Island express • Ikorodu – Mile 2 express • Ikorodu – Oshodi stopping service • Mile 12 – Lagos Island express • Mile 12 – Lagos Island stopping service • Oshodi – Obalende express service • Oshodi – Obalende stopping service

45. In addition there is likely to be demand for a ‘turn around’ service that operates between Ketu and Lagos Island. To minimize the need for interchange there is likely to be merit in having tributary services such as:

• Iyana-Ipaja – Lagos Island (stopping at Maryland and express thereafter) • Fadeyi – Iddo (via Yaba) • Agege – Oshodi • Badagry – Mile 2

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46. In addition it may be appropriate to operate a tributary service between destinations in Ikoyi and/or Vistoria Island and Obalende. To operate a service to accommodate derived demand would require the following:

• Oshodi – Obalende: 2 buses • Ikorodu – Oshodi: 240 buses

47. The existing fleet operating BRT-Lite only caters for part of total demand. The residual demand not catered for by BRT-Lite is served by other forms of public transport and other transport modes. In addition to tributary services additional feeder service would be required with major interchanges being located at: Ikorodu, Mile 12, Oshodi, Mile 2, CMS, and Obalende.

Route service contracts

48. The form of contract between regulator and operator employed for BRT-Lite is a hybrid between traditional net-cost and gross-cost forms. The operator, FBC, is authorized to collect all relevant fares but is also required to make payment to the regulator for the use of the public infrastructure – net-cost contract with premium payment, and no subsidy. However the regulator retains control over the expenditure of the operator so as to limit his reward and then direct how the surpluses might be applied – effectively a gross-cost contract, though without a fixed payment rate.

Fares structure 49. The fare structure on BRT-Lite was simplified by widening the fare bands to roughly 10 km, allowing the application of a two-zone system that could then use color coding as a primary identifier of the trip payment made for the control of over-riding.

50. However, now that the various bus sector initiatives are beginning to be connected, such simple zonal systems can no longer be readily applied. The approach to be adopted in the current scheme is to convert from a zonal fares structure to a fares stage structure that would then retain the broad 5 km fares bands for simplicity of application and of understanding by the passengers. A more finely graduated system would be technically possible once electronic ticketing has been introduced.

Fare setting

51. Fare levels were developed for BRT-Lite on the basis both of full cost recovery including track access charges, and of comparability with the lowest fares available on the services that would be displaced. However, when it became apparent that new buses could only be financed over two years for this innovative scheme, it became necessary to raise the planned fare by 25 percent so as to generate the necessary short-term operational cash flows. However, even with the increase, the fare charged on the BRT is about 30 percent less than the similar services provided by the operators on the non-BRT corridor.

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Revenue collection

52. BRT-Lite employs a system of off-board fares collection backed up by on-board checking and cancellation of tickets purchased. Pre-printed tickets, color coded incorporating security features, are available from sales agents located at or near the bus-stops. These agents act on behalf of the revenue manager who is paid a commission, currently 4.5 percent for the service provided. The operator is responsible for checking and cancelling the tickets on board, and collates their numbers for each trip made for internal management information purposes.

53. This system is designed in such a manner that each party is motivated to ensure its effective implementation through carrying the risk to which he is best able to respond. The manager secures his revenues through demanding pre-payment from his agents, whose livelihood in turn is dependent on the integrity and energy of their staff. The operator controls bus boarding and travel with the appropriate ticket, and utilizes its color coding to prevent over-riding at the fares stage boundary. Ticket cancellations are collated so as to cross-check the sales data from the revenue manager.

Feeder Bus Service (Routes)

54. As outlined above and considered in the initial feasibility study the adoption of an open system that allows tributary services would represent the highest level of service to users and maximize operational efficiency. Nevertheless there is a need for feeder services where demand is not sufficient (or travel conditions are not conducive) to justify a tributary service. Key interchanges would be located providing an interface between feeder and BRT services. BRT- Lite definition was such that feeder services operated on service roads and interchange occurred at stops located bilaterally on the main carriageway; in the proposed LUTP 2, BRT extensions will seek to more formally integrate BRT and feeder services to enable more effective involvement of operators in BRT service provision, reduce conflict for passengers and vehicular traffic and improve operational efficiency.

55. Based on a preliminary analysis of residential and other key activity centers along the mass transit corridors, potential routes for the feeder bus service have been identified (see tables below) using the location of existing and proposed residential and commercial areas. The routes will provide direct connection between dense residential areas and the proposed stations. Other general characteristics of the feeder service including route length, bus passenger capacity and infrastructure requirement is also presented below.

BRT design elements for LUTP 2

56. The proposed project builds on the successes of LUTP with a focus on expanding the BRT network as part of the Lagos strategic plan. The selection of the pilot corridor to implement BRT scheme was based on the general criterion of hourly peak passenger bi-directional flows, and the need to provide an integrated public transport network. In the design of the BRT system, consideration was given to developing a high-quality bus system that is affordable in the local context while retaining as many of the most desirable BRT characteristics as possible. Key design elements of the proposed BRT are:

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(i) Continuous segregated BRT running lanes within the road median. This enables BRT to be uninterrupted by road side activity and will require road and bridge widening to maintain appropriate capacity for other traffic. Road widening will also prompt the need to refurbish the existing carriageway.

(ii) Bilateral stations will be provided to ensure that conventional, right side boarding, buses can be used. They will be of appropriate capacity according to forecast traffic flows and designed with respect to user needs analysis, facilitating the chosen fare collection method. Stations will require over-bridge access.

(iii) Stations will be open, consistent with BRT-Lite, but with the potential to migrate towards the accommodation of smart-card ticketing.

(iv) Direct services will be maintained although an interchange for feeder services will be provided at Oshodi and Obalende, and Ikorodu, and Mile 12. Service plan and infrastructure provision allows for flexible use of the infrastructure by services not originating within the study corridor.

(v) The Ikorodu terminal will accommodate vehicle lay-over, interchange between Danfo/Molue as well as other modes and BRT. It will be designed according to capacity requirement and user needs analysis allowing appropriate levels of passengers comfort and convenience.

(vi) Upgrade will be required to BRT-Lite stations to accommodate increased vehicle throughput. Within this project, allowance has been made for BRT-Lite upgrade between Anthony and Stadium inclusive. It is assumed that the proposed Oshodi-Mile 2-Obalende BRT will upgrade common stations between Alaka and the CMS terminal.

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Annex 2: Major Related Projects Financed by the Bank and/or other agencies

NIGERIA: Lagos Urban Transport Project 2

Bank-Financed Projects Ratings Latest Supervision (ISR) Ratings Implementation Development ID Impact Progress Objectives Lagos Urban Transport Project – P074963 Satisfactory Satisfactory Likely (Cr. 3720-UNI) Privatization Support Project – P070293 (Cr. Moderately Moderately Likely 3520-UNI) Satisfactory Satisfactory West and Central Africa Air Transport Moderately Satisfactory Likely Safety and Security APL Phase 2 – P100785 Satisfactory (Cr. 4364-UNI) Federal Roads Development Project – Moderately Moderately Likely P090135 (Cr. 4415-NG) Satisfactory Satisfactory Rural Access and Mobility Project – Moderately Moderately Likely P072644 (Cr. 4480-NG) Satisfactory Satisfactory

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Annex 3: Results Framework and Monitoring

NIGERIA: Lagos Urban Transport Project 2

Table 1: Results Framework PDO Project Outcome Indicators Use of Project Outcome (by End of Project) Information

Improve mobility along prioritized • Reduced travel time along BRT YR1-YR5: monitor results corridors. corridors. closely; lower measures may flag • Reduced household expenditure on high expectations or poor Promote a shift to more environ- transport along BRT corridors. enforcement. mentally sustainable urban transport • Increase in number of passengers modes. carried per standard bus per day. • Length of road network rehabilitated on Lagos metropolitan network. • Number of direct beneficiaries by gender. • Number of indirect beneficiaries by gender.

Global Environmental Outcome

Promote an incremental shift to • Increase in percent of trips made more environmentally sustainable by BRT among households owning urban transport modes among users cars or motorbikes. with relatively high carbon footprint. • Reduced CO2 emissions from vehicles along BRT corridor. Intermediate Outcomes Intermediate Outcome Indicators Use of Intermediate Outcome (by End of Project) Monitoring

Component 1: Institutional development and capacity building

Local capacity to manage transport Number of Transport Planning Units YR2-YR3: feed into preparation is enhanced. established and functioning. of follow-on projects.

Number of study tours and training Flag possible problems in programs, targeted at strengthening the implementation of the reform planning and implementation capacity program. in LAMATA and other state transport agencies.

Local capacity to carry out transport Updated travel demand and network Determine if additional resources supply and travel demand analysis is models, databases and other tools (such need to be allocated to model established (including capacity to as GIS) are available for use. development. estimate CO2 emissions of counterfactual scenarios).

LAMATA functions are LAMATA building completed. Flag impediment to corporate consolidated in permanent efficiency of LAMATA. headquarters.

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Kano pursues development of public Strategic conceptual transport planning Ensure strong role of transport network. framework for Kano developed. environmental sustainability in long range plans for Kano.

Component 2: Improvement of public transport infrastructure and enhancement of traffic management systems

Service area for BRT provision is BRT corridor developed along Oshodi- Monitor progress of works. greatly expanded. Mile2-Obalende.

BRT corridor developed along Oshodi- Monitor progress of works. Mile 12-Ikorodu.

Bus service vehicle kilometers per day Verify effective use of developed along BRT corridors. infrastructure.

Mobility for public transport users Average travel speed of public Verify and demonstrate speed along BRT corridors improves. transport services along BRT corridors. advantages created by BRT.

Percent of public transport users rating Verify and demonstrate reliability their service as highly or somewhat advantages created by BRT. unreliable.

Two-wheeler users and car drivers Percent of BRT users who report Monitor BRT use by motor show increased awareness of the having a car or two-wheeler available vehicle owners. mobility benefits of the BRT. for this public transport trip.14

Percent of two-wheeler and car owners Monitor attitudes toward BRT by who report having a somewhat or non-BRT using motor vehicle highly favorable impression of BRT owners. service.

Component 3: Improvement of Lagos State metropolitan road network

Improved efficiency of transport Average travel speed along resurfaced Gauge effect of road disrepair on network supporting the BRT and rehabilitated roads. travel time delay. operation.

Component 4: Project management and monitoring

Project benefits and co-benefits are Financial and technical performance of Verify compliance with fiduciary effectively monitored and project based on audits. requirements. quantified. Calculated CO2 emissions based on Self-explanatory. observed vehicle activity and fuel

14 Base year indicator based only on reported values from existing BRT-Lite corridor. 46

consumption measurements.

Appropriate safety indicators (to be Monitor a key co-benefit specified in first year of project associated with public-transport- implementation) along intervened based mobility improvements. corridors.15

Ambient concentrations of pollutants (to be specified during first year of Monitor a key co-benefit project implementation) along associated with public-transport- intervened corridors. based mobility improvements.

15 Indicator would be determined during the first year of project implementation because the indicator to be used is not just a question of technical appropriateness, but also one of practicability. The indicator will depend on what data is collected consistently across different institutions. 47

Table 2: Arrangements for results monitoring Target Values Data Collection and Reporting

Project Baseline YR1 YR2 YR3 YR4 YR5 Frequency Data Responsibility Outcome and Collection for Data Indicators Reports Instruments Collection

Average travel 120 120 120 120 100 90 Annually Traffic LAMATA time on surveys Oshodi-Mile 12-Ikorodu (minutes) Average travel 150 150 150 150 125 120 Annually Traffic LAMATA time on surveys Oshodi-Mile 2- Obalende (minutes) Transport share 20% 20% 20% 20% 15% 15% Annually Field LAMATA of household Surveys*; expenditure on Household BRT corridors survey Av. no. of pass. 500 500 500 500 700 800 Annually On-board LAMATA carried/standard survey bus /day along BRT corridors Length of road incremental 0 3 5 5 5 Annually Supervision LAMATA network missions rehabilitated (km) Number of incremental 200,000 200,000 Annually Supervision LAMATA direct (20%) (20%) missions beneficiaries (of which % of women) Number of incremental 500,000 500,000 Annually Supervision LAMATA indirect (20%) (20%) missions

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Target Values Data Collection and Reporting

Project Baseline YR1 YR2 YR3 YR4 YR5 Frequency Data Responsibility Outcome and Collection for Data Indicators Reports Instruments Collection

beneficiaries (of which % of women) Global Environmental Outcomes

Increase in 10* 10 10 10 15 20 Annually Field LAMATA percent of trips Surveys*; made by BRT House hold among surveys households owning cars or motor bikes CO2 emissions 1100.4 1100.4 1100.4 1100.4 1066.7 1066.7 One time Surveys, LAMATA from vehicles calculation traffic counts, along BRT and end of simulations corridors project (Kilotons 16 CO2) Intermediate Outcome Indicators

Institutional Development and capacity building Number of 2 2 2 3 4 5 Mid-term LAMATA Transport review Planning Units17 established and

16 The estimates are based on initial studies and exclude possible impact from a “switching” from two-wheeler motorized vehicles to buses. The base line will be developed further during the first year of project implementation. 17 Transport Planning Unit was referred to as Traffic Management Unit under LUTP. 49

Target Values Data Collection and Reporting

Project Baseline YR1 YR2 YR3 YR4 YR5 Frequency Data Responsibility Outcome and Collection for Data Indicators Reports Instruments Collection functioning Number of incremental Annually LAMATA study tours and training programs, targeted at strengthening the planning and implementation capacity in LAMATA and other state transport agencies. Updated travel incremental Data Travel Travel Mid-term LAMATA demand and collection demand demand review network for model model database models, calibration calibrated systema- databases and complete tized other tools (such as GIS) are available for use LAMATA Land Building Mid-term LAMATA building acquired completed review completed Develop a None Strategic Mid-term LAMATA conceptual Plan review transport completed planning framework for Kano

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Target Values Data Collection and Reporting

Project Baseline YR1 YR2 YR3 YR4 YR5 Frequency Data Responsibility Outcome and Collection for Data Indicators Reports Instruments Collection

Public Transport Infrastructure and Traffic Management

BRT corridor Feasibility Design Under Under 27 27 Mid-term LAMATA developed completed completed construction construction review along Oshodi- Mile 2- Obalende (km) BRT corridor Feasibility Design Under Under 22 22 Mid-term LAMATA set up along completed completed construction construction review Oshodi-Mile 12-Ikorodu (km) Bus service 150 150 150 150 200 200 Mid-term LAMATA LAMATA vehicle review service kilometers per reports, traffic day along counts improved corridors Average travel 10 10 10 10 15 18 Annually LAMATA LAMATA speed of public service transport reports, speed services along studies BRT corridors (kph) Percent of 20 20 20 20 50 60 Annually On-board LAMATA public transport surveys users rating their BRT service as satisafactory Percent of BRT <5 5 7 Annually On-board LAMATA users who surveys report owning

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Target Values Data Collection and Reporting

Project Baseline YR1 YR2 YR3 YR4 YR5 Frequency Data Responsibility Outcome and Collection for Data Indicators Reports Instruments Collection a car or two- wheeler Percent of two- TBD Annually Parking-lot LAMATA wheeler and surveys car owners who report having a somewhat or highly favorable impression of BRT service Road Network Improvement

Average travel 12 12 15 15 18 18 Annually Speed studies LAMATA speed along resurfaced and rehabilitated roads Financial and satisfactory satisfactory satisfactory satisfactory satisfactory satisfactory LAMATA technical performance of project based on audits Calculated CO2 None Measure- Activity Activity Activity Activity Annually BRT LAMATA emissions ment metho- measured measured measured measured (except in- operating based on dology use vehicle data; vehicle observed established; tests) counts; speed vehicle activity fuel surveys; road and fuel economy side origin to consumption measure- destination measurements ments taken surveys **; occupancy

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Target Values Data Collection and Reporting

Project Baseline YR1 YR2 YR3 YR4 YR5 Frequency Data Responsibility Outcome and Collection for Data Indicators Reports Instruments Collection

counts; in-use vehicle emissions & fuel-use tests (once) Appropriate None Indicators Annually Accident & LAMATA safety identified crime indicators along and database statistics from intervened framework police; user corridors established perception surveys Ambient Roster of Annually Ambient LAMATA concentrations pollutants to measurements of pollutants be monitored from air along established; quality intervened measurement monitoring corridors equipment stations procured

*Parking lot and service stations surveys will be used to estimate interim numbers. Final numbers will be adjusted based on household surveys. ** Roadside origin to destination surveys will be used to estimate interim numbers. Final numbers will be adjusted on the basis of results from household surveys.

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Monitoring and evaluation

1. The project includes a comprehensive monitoring and evaluation component based on qualitative and quantitative performance indicators for each subcomponent. These include transport, social, environmental, and capacity development indicators. This data would be used, in turn, to estimate project-related greenhouse gas (GHG) emission reductions in the project corridors. A mobile source inventory would be established and periodically updated, building on the baseline developed under the project.

2. The transport and social impact monitoring will be conducted by Lagos Metropolitan Area Transport Authority (LAMATA) on an annual basis. A number of studies were conducted as part of preparation, which will be continued during implementation to monitor the impact of project investments. The specific output of studies is the identification of attributes of adequate public transport, which would feed into the design of the Bus Rapid Transport (BRT) corridor. The analytical scope of attributes to be identified, evolve around four main attributes as listed below. These are the attributes, along which the travel diary form/questionnaire will be centered. There is dedicated monitoring and evaluation (M&E) unit in LAMATA with the responsibility to develop and conduct the studies.

Table 3: Monitoring and Evaluation Framework Attributes Dimensions Affordability Monthly spending on transport/users income Price or fare; Offer of benefits for public transport (e.g. bus-passes) or subsidies on fares; “Opportunistic cost of service” Availability Routes desired by users vs available services Length of wait, Traveling time, Reliability, Availability of services at night and on weekends Accessibility Walking distances to stations Availability of lighted, maintained foot paths in the vicinity of stations and terminals Secondary road connections between stations and neighboring communities Vehicles and bus stops adapted for vulnerable users (children, pregnant women, the elderly, disabled) Acceptability Safety inside vehicles for passengers and drivers Safety for passengers at stations and in access/egress Crew member’s attitudes (drivers and aides) Conditions of bus stops and shelters Cleanliness and condition of vehicles Comfort and capacity

3. The environmental impact monitoring strategy for this project aims at tracking the barrier removal activities that facilitate changes towards adoption of new transport patterns and behavior and calculating direct and indirect impacts of the project activities on GHG emissions reduction and sustainability of interventions from a climate change perspective. Progress towards the project objectives would be measured on a regular basis through the following actions:

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(i) Design and validation of the monitoring system in cooperation with the implementing agency and all stakeholders; (ii) Implementation of an automated data processing system that generates the relevant M&E information periodically; (iii) Periodic field data collection for input into the data processing system to generate the appropriate indicators; (iv) Collation of monthly and quarterly reports by LAMATA; and (v) Publication and circulation of quarterly progress reports by LAMATA to all project stakeholders.

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Annex 4: Detailed Project Description

NIGERIA: Lagos Urban Transport Project 2

1. The project has the following components:

2. Component 1: Institutional development and capacity building: This component focuses on capacity strengthening of Lagos Metropolitan Area Transport Authority (LAMATA) for continuing to provide an overall vision and a strategic planning basis for transport planning, regulation, monitoring, and administration and coordination of sector-wide management. This component would finance:

1.A: Training, study tours and twinning programs to provide LAMATA technical staff with knowledge of current developments and best practices in public transport systems delivery and strategic planning; support passenger transport operators (in goods and services) by developing their capacity to prepare business plan, enter into route service contracts, develop maintenance capability to improve safety and environmental standards.

1.B: Construction of LAMATA corporate head office to provide a functional and economically viable building with public transport control centre and equipments to improve institutional effectiveness and promote its sustainability.

1.C: Update of LAMATA’s planning databases and tools, including travel demand and network models, global information system files by activities such as transport demand, supply and performance data collection, surveys, and model development and upgrading.

1.D: This sub-component would finance administrative and operating costs for LAMATA, staff salaries, and other recurrent expenses.

1.E: Enhancement of general transport management through establishment of transport planning units (TPUs) in at least three local government areas and provision of technical and logistical support and training to sustain the operations of the units. This component would finance: (a) support to LAMATA to develop and implement legal, administrative, and procedural templates for the creation of these TPUs (including critical communications strategies); and (b) support to the TPUs themselves, once created, to carry out core tasks, including: (i) development of a local area traffic plan; (ii) development of a parking policy, implementation and management plan; (iii) development of traffic solutions to address accident black spots; and (iv) action on remedial works and planned maintenance on priority local roads. Sub-component (2) would also include the establishment of a training program for TPU personnel.

1.F: Studies and training to develop public transport delivery capacity in Kano. This sub- component will fund the development of a strategic implementation plan to jumpstart the planning and implementation of a bus-based mass transport system in this emerging megacity of 10 million people. It will also undertake a study to derive Kano-specific drive-cycles for deriving carbon dioxide (CO2) emissions factors and estimate the vehicle

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population, and provide Nigeria-based training for staff of the Kano State Transport Authority to strengthen their ability to undertake the planning and implementation of a bus-based mass transport system.

3. Component 2: Improvement of public transport infrastructure and enhancement of traffic management systems: This component focuses on the development of Lagos’ nascent Bus Rapid Transport (BRT) system [the first corridor of which was developed during Lagos Urban Transport Project (LUTP)], investing in infrastructure and hardware for two additional corridors, safety and also seeking to attract potential users through a communications and media strategy, and enhancing the consultation process. The component would also finance updated traffic management arrangements along the project BRT corridors as part of the overall system operation, and include: (a) revised road signs, to provide a warning and directional instructions that relate to areas of interaction between BRT vehicles and other vehicles along the corridor. They would be strategically located along the BRT corridors to provide information, improve lane discipline, and where necessary provide signs to alert drivers of a potential conflict; (b) intersection control, signal improvements; (c) carriageway markings, lighting, pedestrian crossing points, footbridges, etc. Key investments include:

2.A: BRT infrastructure construction and supervision, including interchange and traffic management, and safety for corridor from Oshodi to Obalende by way of Mile 2.

2.B: BRT infrastructure construction and supervision, including interchange and traffic management and safety for corridor from Oshodi to Ikorodu by way of Mile-12 (extension of LUTP / BRT-Lite corridor).

2.C: Mass transit alternative analyses studies.

2.D: Development of a background bus feeder system, stations and terminals, as a complement to BRT and urban rail investments.

2.E: BRT consultation, communications and media strategy.

2.F: Upgrade and rationalize system operation.

4. These components are described in more detail below.

Sub-Component 2.A: BRT infrastructure construction and supervision, including interchange and traffic management, and safety for corridor from Oshodi to Obalende by way of Mile 2

5. The proposed BRT corridor running between Oshodi to Obalende, via Mile 2 is illustrated in Figure 1 below. It is approximately 27 km in length and is divided into following links:

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• Oshodi to Mile 2, via Apapa-Oworonsoki Expressway • Mile 2 Junction • Mile 2 to Eric Moore Junction, via Lagos-Badagry Expressway • Eric Moore Junction (Badagry Expressway) to Lagos Island (Obalende) (via CMS) • Obalende (end of BRT line)

Physical characteristics

Sub-Component 2.A.1: Oshodi to Mile 2, via Apapa-Oworonsoki Expressway

6. The Apapa-Oworonsoki Expressway provides the main arterial link between Third Mainland Bridge and Tin Can Island, via Oshodi and Mile 2. Historically, it formed the outer ring-road in Lagos when originally constructed in the early 1970s. However, the geographical growth of Lagos over the past 30 years has resulted its role evolving into not only providing a high speed, high capacity highway link between these areas, but also providing local access into the surrounding residential, business, and industrial areas.

7. Oshodi is the location where the two proposed BRT corridors meet, and provides interchange with the proposed light rail transit (LRT) Red Line. The intersection is a grade- separated, partial clover-leaf junction and carries significant traffic. It is characterized by congestion that lasts throughout the day. The Oworonsoki Expressway is a dual three lane expressway, with dual two lane services roads. The parallel service roads, measuring approximately 7.5 meters in width, provide local access to the residential and industrial areas that are located adjacent to this section of the corridor.

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Figure 1: Proposed BRT corridor: Oshodi-Obalende

Sub-Component 2.A.2: Oworonsoki Expressway/Badagry Expressway Intersection (Mile 2)

8. The intersection of the Oworonsoki Expressway / Badagry Expressway, locally referred to as Mile 2, although in actual distance is six miles from Church Missionary Society (CMS) on Lagos Island. The intersection has been designed as a ‘free-flowing’ cloverleaf configuration, and allows unrestricted access across all permitted movements through the intersection.

Sub-Component 2.A.3: Badagry Expressway- Eric Moore Junction

9. Badagry Expressway, between Mile 2 and Eric Moore junction is currently configured as a dual three lane highway, and provides the main western arterial route into Lagos. By definition, the highway is an Expressway; however, the poor condition of the pavement and existing drainage, coupled with the adjoining land use of industry, residential and retail, constrain the operation of the Expressway. The Badagry Expressway also excludes any formal pedestrian

59 footbridges, and as a consequence pedestrians are required to negotiate two streams of main-line traffic when wishing to cross from one side of the carriageway to the other.

Sub-Component 2.A.4: Eric Moore Intersection (Badagry Expressway) - Lagos Island (Obalende)

10. East of the Eric Moore intersection BRT will pass over Eko bridge onto Lagos Island. Eko bridge is currently marked, in part, with a non physically segregated BRT lane that serves the Mile 12 to CMS BRT-Lite route. Physical BRT segregation exists alongside Marina to east of the BRT terminal and key interchange with ferry and proposed LRT services at CMS.

Sub-Component 2.A.5: Obalende

11. Obalende is located to the south east of Lagos Island and is characterized by a large bus terminal together with significant trading. As a bus terminal it provides significant interchange between BRT and Danfo for onward journeys on Lagos and Victoria Island.

BRT Concept

Sub-Component 2.A.1: Oshodi – Mile 2

12. Within this section the following BRT definition will apply:

• Bilateral segregated BRT lanes separated from road side activity by service roads. • Interchange at Oshodi with Danfo/Molue and the proposed LRT together with the potential to turn BRT services. • Direct access without interchange between Ikorodu Road and Oworonsoki Expressway. • Bilateral stations of appropriate capacity served by over-bridges and at-grade crossing to footway at road side.

Sub-Component 2.A.4: Eric Moore – Obalende

13. Within this section, the following BRT definition will apply:

• Segregated BRT way around Stadium to Eko Bridge avoiding Costain junction; • Upgrade in terms of capacity and user needs of BRT-Lite between Stadium and CMS. This will include stations and physical segregation of the BRT running way over Eko Bridge (subject to structural survey); • Upgrade of CMS (BRT-Lite terminal) to accommodate new BRT services and integrate effectively with marine transport and proposed LRT; • Part physical segregation and part on road priority between CMS and Obalende; and • New interchange/terminal at Obalende.

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Table 1: Estimated Costs for Oshodi-Obalende Estimated Infrastructure Item Cost (US$ million)

Rehabilitation of carriageway to provide BRT Lanes, based on bilateral configuration; 77.0 rehabilitation of service lanes

Provision of segregation kerbing (two-way), 5.0 carriageway markings,

Traffic Management, signal control, stops, 6.5 ITS

BRT Interchange, bridges, pedestrian 19.0 facilities

BRT Depot 5.5

Bus shelter and lay-bys 2.0

Supervision 5.0

TOTAL 120.0

Sub-Component 2.B: BRT infrastructure construction and supervision, including interchange and traffic management, and safety at Oshodi-Mile12-Ikorodu (AFD: US$100 million)

14. The proposed corridor, running between Oshodi and Ikorodu by way of Mile 12, together with other, related, BRT lines is illustrated in Figure 2. It is approximately 22.5 km in length.

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Figure 2: Mile 12-Ikorodu BRT extension

Physical characteristics

15. The Mile 12 terminal is located underneath the Mile 12 overpass. Passengers typically form a constant queue with BRT vehicles constantly dispatched from nearby lay-over leaving the terminal when full. The central location of the terminus, the constant vehicle movement, together with the congestion from idling vehicles creates an environment of conflict and confusion that is sub optimal operationally and tends towards a low level of service for passengers. The removal of a large part of the interchange occurring at this location by providing through services from Ikorodu will allow tensions within this area to be resolved.

16. Ikorodu Road passes over the Mile 12 terminus as a lane road of 10 meter width with median blocks dividing the carriageway.

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17. Mile 12 – Ikorodu: Between Mile 12 and Ikorodu the carriageway is a dual two lane road 15 meter wide with 1 meter median, no footways, lighting or service road. The southern 5 km and northern 4.5 km are urban passing through Majidun, Owutu, Agric, and Oluwu before entering Ikorodu. Within these sections, development is taken to the carriageway edge. The remainder of the route is rural. The route has 10 structures, five of which are significant bridges and five are culverts. A single signalized junction is located at Owutu.

18. Ikorodu: Ikorodu is a large settlement of 330,000 people. At its centre is a four arm roundabout that is highly congested and fronted by retail/residential development on each approach. The approach to the roundabout is similarly congested dual two lane road without footways. The appropriate terminal location is south of the central roundabout.

BRT Concept

19. The Ikorodu BRT extension will consist of:

• Continuous segregated BRT running lanes within the road median. This enables BRT to be uninterrupted by road side activity and will require road and bridge widening to maintain appropriate capacity for other traffic. Road widening will also prompt the need to refurbish the existing carriageway. No allowance has been made for the provision of service roads on account of lateral constraints relating to land ownership and wide-scale potential social and environmental impacts.

• Bilateral stations in the median. Bilateral stations ensure that BRT vehicles are able to interface with both median running (Ikorodu-Mile 12) and bilateral running (Mile 12 to CMS). These stations will be of appropriate capacity according to forecast traffic flows and designed with respect to user needs analysis, facilitating the chosen fare collection method. Stations will require over-bridge access.

• Stations will be open, consistent with BRT-Lite, but with the potential to migrate towards the accommodation of smart-card ticketing.

• The option to enable direct services will be maintained although interchange for feeder services will be provided for at both the Ikorodu terminal and the Mile 12 interchange. Service plan and infrastructure provision allow for services originating at Ikorodu to operate as express services, stopping service, service that stop short of CMS or that use the proposed Oshodi-Mile 2-Obalende BRT infrastructure in whole or in part.

• Mile 12 interchange will require alteration that will facilitate upgrade in order to accommodate the changing nature of demand and the passage of express BRT services operating over the Mile 12 over bridge.

• The Ikorodu terminal will accommodate vehicle lay-over, interchange between Danfo/Molue as well as other modes and BRT. It will be designed according to

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capacity requirement and user needs analysis allowing appropriate levels of passengers comfort and convenience.

• Upgrade will be required to BRT-Lite stations to accommodate increased vehicle throughput. Within this project allowance has been made for BRT-Lite upgrade between Mile 12 and Stadium. It is assumed that the proposed Oshodi-Obalende BRT will upgrade stations between Stadium and CMS inclusive.

Table 2: Estimated Costs for Oshodi-Mile 12-Ikorodu Estimated Infrastructure Item Cost (US$ million) Construction/rehabilitation of carriageway (7.3 meters) to provide BRT lanes, based on 53.8 median configuration

Provision of segregation kerbing (two-way), 4.0 carriageway markings,

Traffic Management, signal control, stops, 6.5 ITS

BRT Ikorodu Interchange, bridges, 22.2 pedestrian facilities

BRT Depot 5.5

Bus shelter and lay-bys 2.0

Supervision 6.0

TOTAL 100.0

Sub-Component 2.C: Mass transit alternative analyses studies

20. The studies will evaluate mass transit options for a number of high volume corridors as identified in the State master plan. The Lagos State Transport Master Plan has identified a number of mass transit corridors that require in-depth appraisal to ascertain the type and scale of mass transit system appropriate for each corridor. There is need to examine the choices between bus and rail based systems, including BRT, simpler application of bus priority schemes, light rail or metro rail systems. This component will finance technical, institutional, regulatory, legal, financial, and social/environment mitigation evaluations. For all prospective corridors, a preliminary financial analysis would be undertaken, thereby, determining the most financially viable solution. This will include an analysis of modal choices for each corridor. This analysis will in turn be used to finalize the location of the transit system necessary to effectively analyze 64 the mass transit demand. Options for attracting private investors would also be examined. The optimal allocation of risks and benefits of the feasible route and the potential role for the private sector to invest will be evaluated.

Sub-Component 2.D: Development of complimentary formal bus (feeder) system

21. This sub-component will finance development and implementation of a service and operations plan for improving passenger flow at terminals and other key stations, including origin-destination surveys, identification of new bus routes, and modal integration facilities. The potential routes for the feeder bus service have to be identified based on origin-destination surveys at terminal locations. The survey will assist with identification of the routes that will provide the most benefit to most users. The sub-component will include stations and terminals for the feeder routes and their development on the trunk alignment.

Sub-Component 2.E: BRT consultation, communications and media strategy

22. This component will finance BRT Consultation, Communications and Media Strategy, to support implementation of a public awareness strategy for the BRT system. The strategy would draw upon the household and travel surveys along the pilot corridor conducted during the preparation phase. The objective of the survey is to understand the preferences and behavior of residents, stratified by beneficiary groups, with a specific focus on: labor market access, access to services (health, education), economic opportunities (including firm location and impact on poverty, and productivity at the scale of an urban area).

23. The component would support the development of a framework for public feedback into all elements of design and operation and share specific needs of the users with policy makers and BRT operators. This framework will include stakeholder consultations, public relations, and media strategy. This component will also finance: (a) study tours for policy makers and operators to learn from similar experience in other parts of the world; (b) a media strategy to provide content and appropriate material for television, radio, and public billboards and facilitate media’s ability to promote the BRT concept; and (c) production of video clips to depict issues related to mobility in the city. The goal of video production is to develop a tool that will sensitize key urban transport policy makers to the multiple dimensions of the city’s urban mobility problem and suggest sustainable solutions. The short videos (10–20 minutes) will describe the purpose, methodologies, and expected benefits of the BRT systems and reform program to an audience of very senior policymakers.

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Sub-Component 2.F: Upgrade and rationalize system operation

24. This component will finance services and works to upgrade the existing service plan framework and rationalize the systems operation. The investments will be used to upgrade systems planning, develop a comprehensive management framework, and rationalize system operation. Once the BRT system is in operation, there will be a need to strengthen bus system integration, including the tributary bus operations feeding into the BRT corridor, strengthen real- time passenger information system, expand stations, and main terminals. This will improve run time of buses and provide greater acceptability for the public transport system, particularly among car users, thereby having a significant impact on reducing GHG emissions.

25. Component 3: Improvement of Lagos State metropolitan road network: The size of the road network in Lagos metropolis is over 5,200 km, of which the state roads are almost 3,000 km, while federal and local government roads account for the balance. This component is designed to improve the efficiency of the use of existing road space, reduce vehicle operating costs, enhance the operation of buses, and improving road safety for vehicles and pedestrians, by improving the quality of roads. The existing pavement management system will be used to monitor the structural performance of roads under LAMATA’s care as well as the BRT routes, thus enabling rationalization of maintenance interventions. This will evolve into a road management system upon which ultimately the state road network would be managed. The component includes the following elements:

3.A Routine maintenance: These are maintenance activities of road surface and drainage systems to be executed by small scale labor based contractors covering the 532 km of the Declared Road Network. A key objective of this sub-component is enhancement of job creation and poverty alleviation.

3.B Periodic maintenance and pavement management system: This component will finance bituminous overlays of 12 km of strategic roads which are degraded but structurally still intact to ensure that they remain in a maintainable condition. Such works are executed by medium scale contractors. This sub-component would also support the pavement management system to generate appropriate road management reports. Activities will include road data collection and analysis, capacity building including upgrading of the current system to a road management system.

3.C Rehabilitation: This component will finance repair works on 5 km of strategic roads in the metropolis identified to be structurally damaged. Such works are carried out by large scale contractors.

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26. Component 4: Project Management and Monitoring. This component would finance:

4.A. Technical assistance, equipment, vehicles, office equipment, and other operational support for implementation;

4.B. Institutional, technical, procurement, and financial audit;

4.C. Outcome monitoring of transport and social impact indicators, environmental impact indicators and capacity development indicators; and

4.D. Air quality monitoring along BRT corridors. This includes purchasing of new air quality monitoring equipment.

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Annex 5: Project Cost NIGERIA: Lagos Urban Transport Project 2 Project Cost (US$ million) Component BASE TOTAL LSG IDA AFD GEF COST COST* 1. Institutional development and 32.5 34.0 10.0 23.0 1.0 capacity building A. Training and twinning 5.5 5.5 - 5.5 - - B. LAMATA building 11.5 13.0 - 13.0 - - C. Transport model update 2.0 2.0 - 2.0 - - D. LAMATA operating cost 10.0 10.0 10.0 - - - E. Creation of TPUs 2.5 2.5 - 2.5 - - F. Support to Kano 1.0 1.0 - - - 1.0 2. Public transport infrastructure 194.5 236.5 - 133.0 100.0 3.5 and traffic management systems A. BRT infrastructure - 100.0 120.0 - 120.0 - - (Oshodi-Mile 2- Obalende) B. BRT infrastructure - (Oshodi-Mile 12-Ikorodu) 80.0 100.0 - - 100.0 - C. Mass transit alternative analysis studies 3.0 3.0 - 3.0 - - D. Development of complementary bus system 8.0 10.0 - 10.0 - - E. BRT consultation, communications, and media 1.5 1.5 - - - 1.5 strategy F. Upgrade and rationalize system operation 2.0 2.0 2.0

3. Improvement of Lagos State 39.0 50.0 25.0 25.0 - - metropolitan road network A. Routine maintenance 21.0 25.0 25.0 - - - B. Periodic maintenance and 10.0 14.0 - 14.0 - - pavement management system C. Rehabilitation 8.0 11.0 - 11.0 - - 4. Project management and 9.0 9.0 - 9.0 - - monitoring A. Technical Assistance, 2.5 2.5 - 2.5 - - equipment and other operational support B. Institutional, technical, 2.5 2.5 - 2.5 - - procurement, and financial audit C. Outcome monitoring 2.0 2.0 - 2.0 - - D. Air quality monitoring 2.0 2.0 - 2.0 - - TOTAL 275.0 329.5 35.0 190.0 100.0 4.5 * Total cost includes price and physical contingencies 68

Annex 6: Implementation Arrangements NIGERIA: Lagos Urban Transport Project 2

1. The Lagos Urban Transport Project 2 (LUTP 2) will be implemented by Lagos Metropolitan Area Transport Authority (LAMATA), which has been implementing the on-going LUTP. LAMATA is a corporate body with an independent board responsible for formulation, coordination and implementation of urban transport policies and programs in the Lagos metropolitan area. It was created by an act signed into law on January 13, 2002 and formally launched on December 2, 2003. The Law establishing LAMATA prescribes a 13-member Board of Directors for the Authority. The Board, which is fairly representative of the Authority’s stakeholders, comprises representatives of transport operators, transport unions in Lagos State, the organized private sector, the general public, local government areas, and transport-related Lagos State Government (LSG) agencies. The only full time member is the Managing Director, who heads the management team.

2. LAMATA is currently structured into five directorates and six units that report to the Managing Director. The Directorates are: Corporate and Investment Planning, Finance, Public Transport, Business Systems, and Road Maintenance. The Units are: Corporate and Legal Services, Transport Planning, External Relations, Environmental and Social Safeguards, Internal Audit, and Procurement. These directorates and units are equipped with modern information technology and other office hardware and have access to an adequate library and necessary software, including geographic information system. LAMATA staff remuneration and retention packages are pitched at private sector levels so as to attract, retain, and motivate high caliber staff that can assist LAMATA meet the challenge of transforming transportation in Lagos. The organization has also prepared and is implementing several policies designed to assure effective operations. These include an employee handbook, a financial management system manual, a procurement procedures manual, and various information technology manuals.

3. Responsibility for maintenance of the declared road network is transferred to LAMATA. All liabilities, assets and obligations of the government agency having ownership rights over the declared roads remain the liability of the government agency. The Authority prepares a rolling five year corporate investment plan, broken down into yearly action plans. The State government makes grants and loans available to the Authority as determined by the Governor. As per the requirements of the LAMATA law, the Authority submits an annual report of its activities to the Governor, including audited financial reports and investment plan. The accounts are audited annually by external auditors, appointed by the Board from a list of approved auditors provided by the Auditor-General of the State, and published in the State Government Official Gazette.

4. The recurrent and operating cost for LAMATA is financed by the Lagos State Government. Over the past few years, LAMATA has been able to raise additional resources from user fees (lease of depot, franchise fee, income from advertisement) and subventions from the state vehicle license fees, which are deposited into the transport fund and utilized for maintenance of assets.

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5. Coordination with other agencies and departments: (a) The State Ministry of Physical Planning is part of the Bus Rapid Transit (BRT) Steering Group18 and issues related to development of Marina area and Ikorodu are heavily influenced by the ability of the BRT to improve accessibility of the area; (b) to ensure smooth implementation of the BRT, the infrastructure construction is contracted directly by LAMATA and not through the Lagos State Ministry of Works and Infrastructure (LSMWI); (c) LAMATA works closely with the Lagos State Traffic Management Authority (LASTMA), which is primarily responsible for traffic management and enforcement; (d) the State has initiated a “Kick against indiscipline” initiative to help with public management within the BRT-Lite system, particularly at stations, terminals and right-of-way.

6. LAMATA will undertake procurement and financial management for activities to be carried out for the benefit of the Kano State Transport Authority. A Memorandum of Understanding (MOU) on disbursement under GEF shall be signed between the Lagos State Government (LAMATA) and Kano State Government (Kano State Transport Authority) outlining the activities to be carried out on behalf of Kano State.

7. Procurement. The procurement department located in LAMATA will coordinate all procurement activities and will ensure that all works, goods and services financed by the International Development Association (IDA) credit are procured in compliance with World Bank Procurement and Consultant Guidelines of May 2004, revised October 1, 2006. LAMATA will maintain close fiduciary control over the procurement processes and will prepare the procurement documentation to be issued for works, goods and services contracts, in close collaboration and consultation with the relevant technical departments. LAMATA will evaluate all bids for contracts financed by the credit, recommend contract awards and prepare and sign contract agreements with contractors, suppliers and consultants. The procurement department will be further strengthened for successful implementation of LUTP 2.

8. The Credit and Grant will be made available from the Federal Government of Nigeria (FGN) to the LSG (the credit will be on-lent and the grant will be on-granted to LSG), who will on-grant both to LAMATA pursuant to the Subsidiary Agreement which will be signed to this effect. The fiduciary obligations of LAMATA as the Project Implementation Entity are documented in the Project Agreements between IDA and LAMATA, and between IBRD and LAMATA. The fiduciary arrangements for components financed by the French Development Agency (AFD) are shown in Table 1 below.

18 The BRT Steering Group is set up to coordinate planning and implementation of the BRT. It is chaired by the Director of Planning, LAMATA and consists of representatives from LSMT, LSMPT, LSMWI, NURTW, and LASTMA. 70

Table 1: Fiduciary Responsibility and Process Flow (for Components to be financed by AFD) Process Process Description Preparation Reviewing Approving Comments Step Responsibility Responsibility Responsibility

1.0 Procurement of Contracted Services* 1.1 Procurement plans LAMATA WB WB With cc: to AFD for all components including LSG, IDA, AFD and GEF 1.2 TORs LAMATA WB AFD Sent With WB Comments to AFD 1.3 EOIs LAMATA WB AFD Sent With WB Comments to AFD 1.4 Advertising EOIs LAMATA Responsibility for advertising is with LAMATA, who can request the World Bank to advertise on their behalf (like for Bank funded components) 1.5 Evaluating EOIs for LAMATA WB AFD Sent With WB shortlist Comments to AFD 1.6 Finalizing RFPs LAMATA WB AFD Sent With WB Comments to AFD 1.7 Evaluating technical LAMATA proposals 1.8 Review technical LAMATA WB AFD Sent With WB evaluations Comments to AFD 1.9 Opening financial LAMATA WB AFD Sent With WB proposals and evaluations Comments to AFD (preparing combined evaluation, report, Negotiations, Minutes, and Draft Contract) 1.10 Submitting signed LAMATA To AFD, with cc: to contracts WB

2.0 Procurement of Contracted Goods and Works* 2.1 Procurement Plans LAMATA WB WB Cc: to AFD for all components including LSG, IDA, AFD and GEF

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2.2 P-Q Documents LAMATA WB AFD Sent With WB Comments to AFD 2.3 Prepare SPN LAMATA WB AFD Sent With WB Comments to AFD 2.4 P-Q Evaluation Report LAMATA WB AFD 2.5 Advertise SPN LAMATA WB Responsibility for advertising is with LAMATA, who can request the World Bank to advertise on their behalf (like for Bank funded components) 2.6 Review Bid Documents LAMATA WB AFD Sent With WB Comments to AFD 2.7 Bid Evaluation Report LAMATA WB AFD Sent With WB Comments to AFD 2.8 Review draft Contract LAMATA WB AFD Sent With WB Comments to AFD 2.9 Publication of Contract LAMATA Award

3.0 Contract Management, Implementation 3.1 Contract administration – LAMATA WB AFD Quarterly progress i.e. record of progress of reports prepared by work and payments under LAMATA and cc’d each contract to WB and AFD 3.2 Technical oversight of LAMATA WB AFD implementation, verifying completion of contracts 3.3 Preparing periodical LAMATA WB WB With cc: to AFD procurement progress reports 3.4 Preparing periodical LAMATA WB WB With cc: to AFD physical progress reports

4.0 Financial Management 4.1 Prepare annual work plans LAMATA WB WB Combined for the and budgets Project (including WB, AFD, GEF, LSG) and cc: to AFD 4.2 Monitoring actual LAMATA WB AFD expenditure and commitments against budgets

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4.3 Expenditure initiation – LAMATA Official memo 4.4 Verification, approval and LAMATA AFD authorization of expenditure invoices and supporting documentation 4.5 Vouching and verification; LAMATA AFD confirmation of eligibility of expenditure. 4.6 Check processing or LAMATA AFD authorizing payment transfer advice for payments from DA 47 Recording all project LAMATA financial transactions in the accounting system 4.8 Preparation of quarterly LAMATA With cc: to WB and and annual Financial AFD Statements, including cash forecasts Review of interim unaudited financial reports and audited financial statements by WB and AFD 4.9 Verifying bank LAMATA reconciliation 4.10 Maintenance of internal LAMATA financial controls over project activities 4.11 Technical, Financial, and LAMATA WB WB Cc: to AFD Procurement audit (TOR and acceptance of auditors) 5.0 Disbursements 5.1 Setting up Designated LAMATA AFD AFD will approve Account (segregated) the choice of the proposed Bank where the Account is to be set up 5.2 Withdrawal Applications LAMATA AFD 5.3 Engagement of External LAMATA WB WB Financed by WB Auditors credit; TOR approved by WB 5.4 Disbursement of Funds AFD 6.0 Safeguards 6.1 RAP LAMATA WB WB With cc: to AFD 6.2 EAP LAMATA WB WB With cc: to AFD

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7.0 Monitoring and Evaluation 7.1 Monitoring outcome LAMATA WB WB With cc: and inputs indicators from AFD 7.2 Air pollution monitoring LAMATA WB WB With cc: and inputs from AFD *Review of Procurement transactions will follow World Bank (WB) guidelines on prior review and post review. Findings and recommendations for Prior Review cases will be submitted to AFD who will be then responsible for issuing with its own comments the No Objection Letters to LAMATA and cc: to WB. LAMATA will submit requests to WB for activities subject to its review, with a copy to AFD; WB will provide comments to AFD, with cc: to LAMATA; and AFD will issue No Objections/comments to LAMATA, with copy to WB.

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Critical risks and possible controversial aspects

9. Key risks associated with the project and corresponding mitigation measures are as follows in Table 2 below.

Table 2: Risks and Mitigation Measures Risk Rating Mitigation measures Residual Risk Rating Political commitment to S Government buy-in demonstrated by its support for M introduction of a large scale LUTP by two successive elected Governors; as part Public Transport reform of implementation of LUTP, LSG has demonstrated program may be weak. ownership by introducing institutional, legal and regulatory reforms in the public transport sector; a user fees supported transport fund has been created to finance public transport investments. Multiplication of agencies S Establishment of LAMATA has been critical to M with overlapping respon- structural reform of the Lagos transport sector. This sibilities at federal, state, has helped in streamlining responsibilities, at and local government levels different levels in the LSG by clearly defining the may result in poor role and mandate of LAMATA as a planning and coordination. regulatory body. The LSG may not continue S LAMATA has been supported by two successive M to provide support to state Governors and is gradually entrusted with LAMATA. broader urban transport responsibilities, including regulating bus industry in the whole city, planning for strengthening and expansion of commuter rail, development of a transport strategic plan, etc. Sustainability of the S In the past year, LSG has restructured Motor M proposed reforms may be in Vehicle Administration to dedicate a part of the question due to weak taxes to the transport fund; LAMATA intends to revenue base and low cost achieve an expanded revenue base, improve revenue recovery. collection, and cost recovery, as well as successfully operate the transport fund. Effective enforcement of M LAMATA together with LASTMA has been very L the BRT corridor may not effective in successful implementation of traffic be achieved; could lead to management along the demonstration corridor— deterioration of operating enforcement reinforced by regulations and conditions, either due to implementation of penalty clauses; the proposed high level of traffic project would further strengthen the capacity of violations or encroachment institutions dealing with traffic management and by curbside traders and enforcement. street hawkers. By design, many of the S Key lessons from LUTP: use market knowledge to M existing operators will be integrate operators in rationalized bus system; build displaced from the on existing operational capacity, self-regulation, franchised route. As a 75

Risk Rating Mitigation measures Residual Risk Rating result, private bus sector flexibility, and retain cost-effectiveness. may not participate in initial stages and frustrate efforts Stakeholder buy-in is critical and LAMATA has to regulate the sector. demonstrated this understanding by working with the private sector during implementation of the Operators may be resistant demonstration project; a number of study tours and to shifting from self- discussion forums were organized for the bus regulation to contractual operators’ unions to benefit from the new obligations, law enforce- experience. ment. The contracts for operating the new BRT routes will be awarded through competitive bids.

The co-operation of the current controlling association (NURTW) has been sought in this regard. Union officials who are already fleet operators will be encouraged to join the pilot scheme, and provided with incentives for this purpose. Drivers and mates currently working in the corridor are offered training in order to adapt to the large buses that are now operated. Clearly this is a selective process, as the numbers needed will decline significantly in comparison with current practice. The reported high labor turnover will make this easier for a reduction in numbers. Owners of minibuses currently provided on daily hire will also be affected. An incentive for their migration will be provided by an intensive vehicle inspection campaign in the corridor. In addition, a properly structured social mitigation plan will be developed prior to implementation, which would include retraining programs, micro-credits, entrepreneurship classes, etc.

Additionally, the approach taken is to introduce competitive tendering on select routes while leaving existing operators a high degree of freedom away from the BRT corridors. Floaters, illegals, unaffi- S Initial pockets of dissent on demonstration project M liated operators may resist were met with government’s resolve to see change and try to cause successful pilot implementation and adequate trouble both at political and information, education and communication; an street level. effective communication strategy and user feedback system would be developed as part of project design.

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Risk Rating Mitigation measures Residual Risk Rating Traditional operators fail to M Formation of transport cooperatives to assist M develop the ability to bid knowledge dissemination and bid process education successfully. as part of the proposed project would build their capacity. Residents of adjoining S The concern of the residents will be addressed M properties may be affected through an intensive communications plan and a adversely especially during participation strategy developed as part of the the construction period; project design; residents along the corridor have been extensively consulted and a call center is set up Possible resistance from car to address any specific concerns. users who would see part of the road space taken out Implementation of BRT-Lite suggests that impact from general traffic. on ‘other traffic’ is minimal (and at times even beneficial for other traffic) because of improvements in traffic regulation and organization; in absence of exclusive lane for buses, part of the carriageway is used up anyway by numerous minibuses for parking, passenger pick-up, thus reducing the road width available for vehicular traffic. Interviews with car drivers reveal an appreciation for BRT and even willingness to park- and-ride. Project Financial Manage- S Practical, simple and sound financial procedures M ment may be weak. manual and training provided to the FM team. • Strong and robust systems and controls including institution of independent and effective internal audit function in the FAD and IAU. • Risk-based supervision and external audit. To project components Financing for procurement M The constraints have been overcome to some extent L of large good quality buses in the ongoing operation. The approach used is to is constrained and past provide security of repayment to the financier by: experience acts as a (a) providing the bank the initial lien on revenues deterrent to banks for their collected from services; and (b) having the involvement in the sector. participating operators to accept collective liability for all obligations. With the success of bus financing arrangements in LUTP, a number of other banks have come forward to provide the necessary financing. The detailed project designs S BRT is a flexible concept which has pre requisites M for the BRT would not be for success but can be designed within a budget. The finished until the first year estimated costs include sufficient high contingency of project implementation. to accommodate possible cost escalations. The This uncertainty can planned approach is to ensure that a robust and

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Risk Rating Mitigation measures Residual Risk Rating constitute a project risk if effective operational and service plan is integrated the final construction costs into the final physical design of the BRT. In are higher than those addition, the operations and service plan allows for estimated at appraisal. some flexibility in adopting an incremental approach to planned interventions with little impact on project outcomes. Construction delays or cost M With the implementation of LUTP, LAMATA has L overrun may jeopardize gained considerable experience and has further project completion strengthened its planning and monitoring capacity. To strengthen coordination with utility agencies, an inter-ministerial committee incorporating utility agencies has been set up and meets regularly for effective coordination during design. Overall Risk Rating S M H=High; S=Substantial; M=Moderate; L=Low

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Annex 7: Financial Management and Disbursement Arrangements

NIGERIA: Lagos Urban Transport Project 2

Summary

1. The financial management assessment, in line with the Financial Management Practice Manual (November 2005) of the Financial Management (FM) Board, has the objective of determining whether the implementing entities have acceptable financial management arrangements, which will ensure: (a) that funds are used only for the intended purposes in an efficient and economic way; (b) the preparation of accurate, reliable and timely periodic financial reports; and (c) safeguarding of the entity’s assets.

2. Financial Management will be handled by the Financial and Accounts Department (FAD) and Internal Audit Unit (IAU) of the Lagos Metropolitan Area Transport Authority (LAMATA). The FAD and IAU are already in place, they feature strong and robust systems and controls to mitigate fiduciary risks. The updated FM assessment for the on-going LUTP indicates that the FM arrangements are satisfactory for LAMATA. The FM arrangement will be strengthened with additional staffing and training. There is no outstanding external audit or interim financial reports (IFRs) under Lagos Urban Transport Project (LUTP).

3. The overall project risk from a FM perspective is moderate and the overall FM residual risk remains moderate if FM action plans (Table 2 in Annex 7) are satisfactorily implemented. The risk will be reviewed during supervision missions. Financial Procedures Manual (FPM) for the LUTP will be updated to incorporate the arrangements for the LUTP 2 as well as the related reporting arrangements, detail internal control framework and risk management strategy, and the chart of account and financial statements specific to the project. In addition, the internal audit units will carry out a regular risk-based review of the project’s FM activities. Regular supervision will also ensure adherence to implementation guidelines and that appropriate remedial actions are taken expeditiously.

4. The project has four components: Component 1: Institutional development and capacity building: This component focuses on capacity strengthening of Lagos Metropolitan Area Transport Authority (LAMATA) for continuing to provide an overall vision and a strategic planning basis for transport planning, regulation, monitoring, and administration and coordination of sector-wide management; and building capacity of bus operators. This component would finance goods, works, consultants’ services, training, and operating cost for LAMATA to carry out its functions and for goods, training and consultancy services for bus operators. The GEF will also finance studies and training to develop public transport delivery capacity in Kano. Component 2: Improvement of public transport infrastructure and traffic management systems: This component would finance BRT infrastructure construction and supervision, including interchange and traffic management, at Oshodi-Mile 2-Obalende, investments in Intelligent Transport Systems (ITS), and improvements in safety; pedestrian facilities; mass transit alternative analysis studies along five corridors; and development of bus feeder system including stations and terminals. The GEF component will specifically finance: a) BRT consultation, communications, and media strategy for better acceptance of the new approaches; and b) upgrade and rationalize system operation. The French Development Agency 79

(AFD) component will finance BRT investments along Oshodi-Mile 12-Ikorodu corridor. Component 3: Improvement of Lagos State metropolitan road network: This component would finance routine maintenance of the declared road network; periodic maintenance of about 12 km of strategic roads which are degraded but structurally still intact to ensure that they remain in a maintainable condition; and rehabilitation of about 5 km of strategic roads identified to be structurally damaged. Under this component, LAMATA will further enhance capacity of the Pavement Management System. Component 4: Project management and monitoring: This component would finance technical assistance, equipment, vehicles, office equipment, and other operational support for monitoring project progress and, on an ongoing basis, transport system supply, demand and performance; institutional, technical, procurement, and financial audit; project outcome monitoring in terms of transport (including safety), environment, social, and capacity development indicators.

5. The LUTP 2 will be implemented by LAMATA, which has been implementing the on- going LUTP. LAMATA is a corporate body with an independent board responsible for formulation, coordination and implementation of urban transport policies and programs in the Lagos metropolitan area.

6. Coordination with other agencies and departments: (a) The State Ministry of Physical Planning is part of the BRT Steering Group; (b) to ensure smooth implementation of the BRT, the infrastructure construction is contracted directly by LAMATA and not through the Lagos State Ministry of Works and Infrastructure (LSMWI); (c) LAMATA works closely with the Lagos State Traffic Management Authority (LASTMA), which is primarily responsible for traffic management and enforcement; (d) the State has initiated a “Kick against indiscipline” initiative to help with public management within the Bus Rapid Transport (BRT) Lite system, particularly at stations, terminals and right-of-way.

Country issues

7. Implementation of the Country Financial Accountability Assessment (CFAA) (2000) recommendations was confirmed in the January 2005 review. In addition, the 2006 Public Expenditure Management and Financial Accountability Review (PEMFAR) for Nigeria observed that the Federal Government of Nigeria (FGN) has made significant efforts to advance reform of the Public Financial Management (PFM) system since 2003. Major achievements so far have been: (a) the adoption of an oil-based fiscal rule that has greatly improved the quality of macroeconomic management; (b) launching of significant steps toward increased transparency of the budget process; (c) more efficient cash management; (d) procurement reforms; (e) updating the legal framework for PFM; (f) reallocation of budget resources in support of Millennium Development Goals (MDGs) related government functions; (g) strengthening monitoring and evaluation (M&E); and (h) introducing a more strategic longer-term focus in budget management. These have clearly helped to reduce waste of public resources, particularly on the capital budget and payroll sides. The impact of these early measures is also evident in improved fiscal and broader macroeconomic outcomes. There is, nevertheless, still a long way to go and PFM initiatives and reforms are stated in the Country Partnership Strategy (CPS) and National Economic Empowerment and Development Strategy (NEEDS), and further articulated in the 7- Point Agenda, which sets out policy priorities that will strengthen the reforms and build the

80 economy so that the gains of reforms are felt widely. These are supported under the Country Partnership Strategy [jointly developed by IDA, African Development Bank, United States Agency for International Development and United Kingdom Department for International Development (DfID)], and specifically through two Bank assisted projects – State Governance and Capacity Building Project (SGCBP), and the Economic Reform and Governance Project (ERGP).

Lagos State specific issues

8. The Lagos State Financial Accountability Assessment report was prepared in April 2003, following missions to Lagos State in October 2002 and March 2003. The report noted ongoing reforms by the State but assessed the overall risk to public funds as high. Recommendations were made to address some critical aspects of financial management in the State. In this regard, the Bank, through the Lagos Metropolitan Development and Governance Project is supporting the State to implement Public Finance Management Reforms. The project is financing: (a) an update of the public finance legislation; (b) consolidation of the Mid Term Expenditure Framework; (c) improve budget execution and treasury management; (d) consolidation of the Integrated Financial Management Information System for implementation by economic infrastructure and social service ministries.

9. A Public Expenditure and Financial Accountability (PEFA) assessment funded by DfID was undertaken between April and May 2009 in collaboration with the Bank. The Bank is also supporting a Public Expenditures Review that will provide an updated analysis on Lagos State fiscal performance. The PEFA provides an evidence-based snapshot of how the Lagos State PFM system is performing. Currently the State demonstrates strong performances in aspects of payroll controls, accounts preparation, and external auditing. Taxpayers pay directly into Treasury Bank accounts. The preparation and audit of annual financial statements is timely. However, the PFM system and procurement processes need to be further strengthened.

10. With due regard to the instruments being considered by the Bank to support Lagos State, an integrated fiduciary assessment (Procurement and FM) will be undertaken to identify current risks to public funds. The PEFA and the fiduciary assessment will propose recommendations for the State to adopt a comprehensive strategy for PFM reforms going forward.

11. In view of the above, the project will use the financial arrangements of LAMATA.

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Table 1: Risk Assessment and Mitigation Risk Risk Risk Mitigating Measures Incorporated Conditions Residual Rating into Project Design for Nego- Risk tiation, Rating Board or Effec- tiveness Inherent Risks

1 Country Level H The Country Partnership Strategy (CPS) None S that supports Nigeria’s NEEDS aims to Funds may not be used achieve improved transparency and in an efficient, accountability for better governance, which accountable and minimize opportunity for corrupt practices. transparent way. Reforms in budgeting, FM systems, Government’s periodic procurement and auditing are being budget reports are still supported. untimely and delays are experienced in the Robust financial management arrangements preparation of public have been established for the project and accounts and audit and these were designed to mitigate the country review by PAC. level risk. 2 Entity Level S The project will be implemented by None M LAMATA. LAMATA’s independent Board Weak institutional of Directors and BRT Steering Group will capacity to implement provide oversight functions. LAMATA is the project components familiar with Bank FM and disbursement and to effectively procedures and requirements after monitor progress and implementing LUTP successfully. embrace accountability for results. 3 Project Level M A Finance and Audit Committee of the None L Board will be established. Its function will Prior exposure to be to oversee the fiduciary work. implementation of Bank financed project. New Project staff would be trained on Bank procurement guidelines and financial management procedures. Control Risks

4 Budgeting M Budget preparation procedures will be Formats and M documented in the FPM. arrangements Failure to prepare for preparing comprehensive budgets, Budget execution to be monitored through quarterly IFR effectively monitor quarterly Interim Financial Reports, and already periodic budgets and monitoring of budget variances in IFRs. agreed at incorporate project appraisal. finances in budgets and Project budget to be synchronized carefully financial records. with state budget time wise.

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5 Accounting M Accounting and internal control procedures None M including chart of accounts established and Failure to appropriately documented in the project FPM. account for project funds and provide full Contract management software for effective and reliable supporting monitoring of contacts. documentation in a timely manner.

6 Internal Control S Functionalizing of LAMATA’s independent None M and effective internal audit and risk Lack of adequate management function. Internal Audit/Internal control policies and Project accounting and reporting guidelines procedures. and service standards will be included in the FPM and adhered to. 7 Funds Flow M Timely preparation and follow up of IFRs None M and withdrawal applications. Regular follow Delay in funds flow by up and pursue of counterpart funds from the way of delayed Lagos State Government. withdrawal applications and delay in the release of counterpart funds. 8 Financial Reporting M Computerized financial accounting system Formats of M will be used for reporting purposes (Project IFR and Delay in the submission reporting guidelines and timelines will be Annual of accountability reports documented in the FPM). IFRs will be Financial to government and to prepared in time to ensure report based Statements Bank, delayed disbursement. agreed prior finalization and to/at submission of periodic Implementation to be monitored by the appraisal. financial reports e.g. Finance and Audit Committee of the Board. IFRs and annual financial statements.

9 Auditing M Independent external auditors will be Format of L appointed based on TOR acceptable to IDA. audit and Delay in the submission TOR for the of acceptable audit auditor reports. agreed at appraisal. Overall FM Risk M M Rating

H-High S-Substantial M-Moderate L-Low

12. Strengths. The use of existing FAD and IAU in LAMATA is a significant FM strength in the project. The FAD is experienced in the implementation of Bank-assisted projects, the staff is trained in Bank fiduciary requirements, they are professionally qualified and the FAD is equipped with computerized FM systems and FPM. Quarterly financial monitoring reports prepared in the on-going LUTP are submitted timely and are of satisfactory quality.

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13. Action Plan. The plan below indicates the actions to be taken for the project to further strengthen its financial management system. The identified actions are meant to provide guidance during implementation and a road map without being directly covenanted.

Table 2: Action Plan Ref Action Date due by Responsible No. 1 Agreement of format of Interim Financial Ready at Appraisal to be LAMATA with Report (IFR), Annual Financial Statement agreed at Negotiations support and and External Auditors Terms of Reference. guidance of IDA task team. 2 Upgrade the Financial Management System December 21, 2010 LAMATA at FAD to enable financial reporting on multiple financing sources and update the FPM. 3 Appoint external auditor. Within 120 days after LAMATA Effectiveness 4 Engage an additional internal auditor and fill December 21, 2010 LAMATA vacant position, accountant for General Ledger. 5 Establish an Audit Committee of the Board. Within 12 months of LAMATA Board effectiveness of Directors

The overall FM residual risk for the project is rated Moderate.

Implementing entities and financial management

14. The FM will be provided by the FAD in the implementing agency. The FAD and IAU are already in place with computerized FM system and used for the on-going LUTP. The last supervision supported by the updated FM assessment indicates that the FM arrangements are satisfactory. The FM arrangement will be strengthened with additional staffing and training. There are no outstanding external audits or IFR.

15. Specifically, the FAD and IAU will be responsible for: (a) preparing activity budgets, monthly US dollar Designated Account reconciliation statements, bank reconciliations, expenditure control systems, accounting, internal audit, quarterly statement of expenses (SOE) Withdrawal Schedule, monthly financial reporting, quarterly IFRs and annual financial statements; and (b) ensuring that the project financial management arrangements are acceptable to government, IDA and donors, and they continue to be improved and updated through the life of the project. They will also forward the IFRs and annual financial statements to the Federal Ministry of Finance (MOF) and IDA.

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Planning and budgeting

16. Budget preparation will follow the state government procedure. Financial projections or forecasts for the life of the Project (analyzed by year) will be prepared on the basis of realistic estimates. On an annual basis, the project accountant (in consultation with key members of the implementing unit) will prepare a cash budget for the coming period based on the work program. The cash budget should include the figures for the year, analyzed by quarter. The cash budget for each quarter will reflect the detailed specifications for project activities, schedules (including procurement plan), and expenditure on project activities scheduled respectively for the quarter. All annual cash budgets will be sent to the Bank at least two months before the beginning of the project fiscal year. Detailed procedures for planning and budgeting will be documented in the FPM.

17. Internal control including internal auditing: Internal control comprises the whole systems of control, financial or otherwise, that have been established by LAMATA in order to: (a) carry out the project activities in an orderly, transparent and efficient manner; (b) ensure adherence to policies and procedures; (c) safeguard the assets of the project; and (d) secure the completeness and accuracy of the financial and other records.

18. The key elements to ensure a sound internal control system will include:

• Internal control environment; • Risk assessment; • Control activities; • Information and communication; and • Monitoring.

19. Project activities will also be periodically reviewed by the IAU of LAMATA. The Head of IAU will report to the Managing Director and will be responsible for evaluating the reliability of the accounting systems, data, and financial reports. At a minimum the unit will: (a) carry out periodic reviews of project activities, records, accounts and systems; (b) ensure effectiveness of financial and accounting policies and procedures, as well as compliance with internal control mechanisms; (c) review SOEs; (d) physically verify purchases and assets; and (e) carry out other functions as stated in the their approved charter. The Head of IAU will submit reports to the Managing Director with copies sent to the MOF, the Finance and Audit Committee of LUTP 2, the State Auditor General and IDA.

The Finance and Audit Committee

20. LAMATA is expected to constitute a sub-committee from among members of its Board to be known as the Finance and Audit Committee. The committee will be responsible for: (a) monitoring implementation of the risk management framework; (b) monitoring and ensuring timely implementation of recommendations made by internal and external auditors, project monitoring agencies and IDA supervision missions on various fiduciary oversight operations under the project; (c) overseeing the continuing efficacy of accounting and internal control

85 standards, policies and practices; and (d) overseeing the effectiveness of the internal audit functions.

21. The committee will be responsible for: (a) review and monitor quarterly interim financial reports; (b) review of annual operational budgets and financial performance; and (c) review and clearance of annual financial statements.

22. The mandate, composition and functioning of the Committee as sub-committee of the Board are expected to be reviewed and documented for formal approval by the Board. One to three persons who are non-members of the Board with appropriate qualification and experience may be co-opted into the Committee with a view to augmenting skills and strengthening the committee.

Accounting

23. International Development Association (IDA), Global Environment Facility (GEF), and French Development Agency (AFD) funds, when approved and available and counterpart funds will be accounted for by the project on a cash basis, augmented with appropriate records and procedures to track commitments and to safeguard assets. Accounting records will be maintained in dual currencies (i.e. Naira and US Dollars).

24. The Chart of Accounts will facilitate preparation of relevant monthly, quarterly and annual financial statements, including information on the following:

• Total project expenditures; • Total financial contribution from each financier; • Total expenditure on each project component/activity; and • Analysis of total expenditure into civil works, goods, training, consultants and other categories. Variances from the planned level of activities will be investigated and a remedial measure taken expeditiously.

25. Annual financial statements will be prepared in accordance with relevant International Public Sector Accounting Standards, comprising all sources of financing (IDA, GEF, AFD and counterpart) and expenditures.

26. All accounting and control procedures will be documented in the FPM and regularly updated by the Director of Finance and approved by the Finance and Audit Committee of LAMATA Board and shared with IDA and the Lagos State Government (LSG).

Financial reporting

27. Within LAMATA, the Managing Director will ensure that the Director of Finance prepare monthly financial statements, quarterly IFRs, and annual financial statements, on a timely basis. In compliance with government reporting requirements, monthly returns will be made available to the State Accountant General for incorporation in the government accounts, as described in the FPM. These reports and financial statements are outlined below. Calendar

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semester and annual reports are to be submitted respectively to: (a) MOF - for consolidation with the financial reports prepared by the State Treasury Office and State Finance and Audit Committee of LAMATA Board, and (b) IDA - for the purpose of monitoring project implementation.

28. Monthly reports: On a monthly basis, the FAD will prepare and submit monthly reports to the Managing Director. Details of the monthly report will be documented in the FPM.

29. Quarterly reports: The IFRs will be prepared by the FAD on a quarterly basis and submitted to Managing Director for review and signature. The IFRs will be submitted to IDA within 45 days of the end of each quarter. Reports in IFR will be documented in the FPM. Indicative formats for the reports are available in a Bank guideline called “Financial Monitoring Reports: Guidelines to Borrowers”. The format of IFRs have been developed and agreed at appraisal.

30. Annual financial statements: The annual Project Financial Statements, which will include all sources of financing with appropriate disclosures of each financing, will be prepared and submitted to the Bank within six months of the end of the government fiscal year by LAMATA. Details of the annual financial statement will be documented in the FPM.

Auditing

External audit

31. LAMATA will appoint a relevantly qualified, experienced and independent external auditor based on Terms of Reference acceptable to the Bank to perform the audit of the Project. Through a Memorandum of Understanding, the external auditor will include as part of the audit team, staff of the State Auditor General to build their capacity to carry out audit of bank-financed projects in the State. Adequate measures will be put in place to ensure that the joint activity does not undermine the timeliness and quality of the audit report.

32. The auditor will express an opinion on the Annual Financial Statements in compliance with International Standards on Auditing. In addition to the audit report, the external auditors will prepare a Management Letter giving observations and comments, and providing recommendations for improvements in accounting records, systems, controls and compliance with financial covenants in the Financing Agreement. The audit reports that will be submitted to IDA by LAMATA are as follows:

Table 3: Audit Reporting Audit Report Due Date Annual Financial Statements for LUTP 2 Submitted within six months after the end and related management letter. of each fiscal year.

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33. Financial management supervision plan. FM supervision will be consistent with a risk- based approach, and will involve a collaborative approach within the Bank’s team. The first FM review will be carried out within six months of credit effectiveness. This detailed review will cover all aspects of FM, internal control systems, overall fiduciary control environment and tracing transactions from the bidding process to disbursements. Thereafter, the on-site supervision intensity will be once a year based initially on the Project Appraisal Document FM risk rating and subsequently on the updated FM risk rating during implementation. Additional supervision activities will include desk review of quarterly IFRs, quarterly internal audit reports from FAD and IAU respectively, audited annual financial statements and management letters as well as timely follow up of issues arising, and updating the financial management rating in the Implementation Status report (ISR) and the Portfolio and Risk Management System. The Bank project team will play a key role in monitoring the timely implementation of the action plan.

Fund Flows and Disbursement Arrangements

Bank and IDA accounts

34. Project funds will consist of IDA Credit, government counterpart contribution, and GEF grant. Financing from AFD is expected to become available at a future date. When available, disbursement of AFD funds will be directly managed by AFD. Components to be financed from GEF, Counterpart and AFD financing are distinct and do not overlap with those financed by IDA. IDA will disburse the Credit proceeds and GEF grant funds through separate US dollar Designated Accounts (DAs) which will be managed by LAMATA. The specific funding, banking and accounting arrangements are as follows:

• A US$ DA to which the advance from IDA funds will be lodged.

• A current (US$ interest) accounts with bank X acceptable to IDA to which interest on the DA will be credited. Such interest will be accounted for as project “other income” and used for eligible project expenditure.

• A US$ DA to which the initial deposit and replenishments from IDA for GEF grant funds will be lodged.

• A current (draw-down) account in Naira with bank X to which draw-downs from the DAs will be credited once or twice per month in respect of incurred eligible expenditures, maintaining balances on this account as close to zero as possible after payments.

• Current (project) accounts in Naira to which IDA and GEF funds will be deposited.

35. All bank accounts will be reconciled with bank statements on a monthly basis with detailed review of copies of bank reconciliation statements and the relevant bank statements with expeditious investigation of identified differences. Detailed banking arrangements, including control procedures over all bank transactions (e.g., check signatories, transfers, etc.) will be documented in the FPM.

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36. Additionally, LAMATA will maintain an IDA ledger loan account in US Dollars/Naira/SDR to keep track of withdrawals from the IDA credit. The account will show (a) deposits made by IDA, (b) direct payments by IDA, and (c) opening and closing balances. The cumulative record of draw-downs from the IDA Credit will be reconciled monthly with the Disbursement Summary available from Client Connection and a summary of this included in the quarterly IFR.

37. LAMATA will be responsible for preparing and submitting to the Bank applications for withdrawal, as appropriate. Appropriate procedures and controls, which will be documented in the FPM, will be instituted to ensure disbursements and flow of funds is carried out in an efficient and effective manner. The withdrawal applications will be supported by a Bank statement and a reconciliation of the DA, and such other appropriate supporting documents for expenditures as may be required. Separate withdrawal applications will be submitted for IDA and GEF financing. Detailed disbursement procedures will be documented in the FPM and the disbursement letter to be issued after project approval. l applications will be submitted for IDA and GEF 38. Disbursement methods approved for the project will include advances, direct payment, reimbursement, and special commitments for LAMATA. The project will follow ‘report based disbursements’. The format of the quarterly IFR has been developed and agreed during appraisal. These will be attached to the FPM as an annex. The funds flow for the operation as described above is shown in Figure 1 below.

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Figure 1: Funds Flow Diagram

GEF

Sources of Funds IDA

State Government Budget

DA in US Dollars Bank Accounts (for IDA)

GEF in US Dollars

Joint Current (Draw Project ( Naira Counterpart Funds) A/C Bank Accounts down) Accounts in Naira for

IDA and GEF separately

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39. Reporting on use of credit proceeds. The supporting documentation for reporting eligible expenditures paid from advances made to the DAs should be quarterly interim financial reports (IFRs) in the agreed format. In addition, a summary of contract management information on contracts subject to Bank’s prior review will be requested. Further, copies of records evidencing eligible expenditures for payments against contracts valued more than certain thresholds may be requested for specific kinds of expenditures. These thresholds will be specified in the disbursement letter to be issues for this project. The supporting documentation for requests for direct payment should be records evidencing eligible expenditures (copies of receipt, supplier’s invoices, and documentary evidence of delivery of contracted goods, works or services). All supporting documentation will be retained by the implementing entities and must be made available for review by periodic IDA supervision/implementation support missions and internal and external auditors.

40. Designated account. The currency for DA will be United States Dollar and will be segregated from other financing partners. Considering the cash flow requirements and project design, a flexible ceiling will be determined for the operation, based on expenditure forecast as provided in IFRs based on Annual Work Plans and Budgets as approved by IDA. The first application should be made only after the Subsidiary Agreement has been duly executed between the Recipient and Lagos State, in form and substance satisfactory to the Association.

Quarterly Replenishment Applications

41. The DAs will be replenished through the submission of Withdrawal Applications on a quarterly basis and will include reconciled bank statements and other documents as noted above.

42. Disbursements by components. The table below sets out the expenditure categories and percentages to be financed out of the Credit proceeds. Allocations to disbursement categories have been made based on the project's work plans. Disbursements will be based on the work plans agreed annually with the Bank.

Disbursement Categories

43. The allocation of the Credit proceeds is presented in the table below.

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Table 4: Allocation of Credit Proceeds To be financed for Eligible Expenditures in each Category (IDA):

Amount of the Percentage of Expenditures Category Financing Allocated to be Financed (expressed in SDR) (inclusive of Taxes)

(1) Goods, works, 13,600,000 consultants’ services, and 100% training under Component 1, excluding 1D and 1F (2) Goods, works, and 100% 69,800,000 consultants’ services under Component 2, excluding 2B, 2E and 2F (3) Goods, works, and 100% 11,300,000 consultants’ services for the Project under Component 3, excluding 3A (4) Goods, consultants’ 5,700,000 services, training, and 100% Operating Costs under Component 4 of the Project (5) Unallocated 19,200,000 TOTAL AMOUNT 119,600,000

To be financed for Eligible Expenditures in each Category (GEF):

Amount of the Percentage of Expenditures Category Financing Allocated to be Financed (in US$ million) (inclusive of Taxes) (1) Goods, consultants’ services, and Training under $1.0 100% component 1F (2) Goods, consultants’ $3.5 100% services, and Training under components 2E and 2F of the Project TOTAL AMOUNT $4.5

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Conclusion statement

44. The Financial Management Assessment conclusion is that subject to the mitigation measures and the action plan to be implemented as per agreed time frame, the project has met the minimum FM requirement in accordance with OP/BP 10.02. The identified actions are meant to provide guidance during implementation and a road map without being directly covenanted. Further, this objective will be sustained by ensuring that strong and robust financial management arrangements are maintained for the project throughout its duration. Detailed financial management reviews will also be carried out regularly, either within the regular proposed supervision plan or a more frequent schedule if needed, to ensure that expenditures incurred by the project remain eligible.

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Annex 8: Procurement Arrangements

NIGERIA: Lagos Urban Transport Project 2

A. General

Country environment

1. Nigeria has been implementing a procurement reform program (PRP) based on the recommendations of the 2000 Country Procurement Assessment Review (CPAR). A review of the progress made on the 2000 CPAR recommendations as reflected in the 2007 Public Expenditure Management and Financial Accountability Review (PEMFAR) shows that implementation of procurement reform program has brought about substantial improvements in obtaining value for money in public sector expenditure. This has further introduced some level of transparency into the country’s procurement process. In this regard, the CPAR of 2000 has been a positive catalyst, because it supported the agenda of financial sanitation of the current Government. As a result of PRP: (a) collaboration between procurement and financial management has been strengthened considerably; (b) a Bureau of Public Procurement (BPP) and a procurement professionals’ cadre were established at the Federal level in 2006; and (iii) the Public Procurement Act was promulgated in Nigeria in June 2007 with a view to further reform and sanitize the public procurement system, which has often been the subject of abuse and corruption. The Act has further brought significant improvement in the existing procurement system in the public service and enhances transparency. The Act adheres to the principles of the United Nations Commissions on International Trade Law model, and outlines the principles of open competition, transparent procurement procedures, clear evaluation criteria, award of contract to the lowest evaluated tender, and contract signature. The legislative framework is applicable to all procurement categories (suppliers, contractors, consultants) and must be applied for all public funds regardless of value. The Act has provisions for exceptions to competitive tendering, which are the exception rather than the rule. Also, government has already prepared relevant implementation Regulations, Standard Bidding Documents (SBD) and Manuals for the Procurement of Goods, Works and Consulting Services, which describe the minimum contents of the tender and proposal documents. The essential elements are in line with internationally acceptable procurement standards. The Procurement Act also requires a complaints and appeals mechanism to be established to enhance accountability.

2. Procurement risk at the country level: The BPP has organized series of training and awareness workshops for the cadre of professionals with the current procurement processes. Currently, the government’s Procurement Reform Program is being supported with a substantial component of an IDA Credit [Economic Reform and Governance Project (ERGP)] focusing on procurement reforms. There are also three Institutional Development Fund (IDF) Grants, to assist the Federal government and two other states to address the weak procurement capacity in the public sector. The ERGP instrument has been used by the government to prepare the relevant procurement tools mentioned above. On the other hand, the government is also reforming customs practices to modernize and improve effectiveness, thereby enhancing private sector confidence in public procurement processes.

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3. Procurement risk in Lagos State: The implementing agency, Lagos Metropolitan Area Transport Authority (LAMATA), has a good experience in implementing Bank-financed Lagos Urban Transport Project (LUTP), including experience in implementing successfully contracts of works, goods and services. The roads contracts cover routine, periodic, rehabilitation, and recurrent maintenance both of which were successfully executed resulting to improvement in the traffic flow in Lagos. During implementation of the ongoing LUTP project, weaknesses identified were addressed by recruitment of appropriate staff, providing adequate guidance and capacity building initiatives.

4. The procurement staff will further receive additional procurement training on Bank financed procurement procedures from relevant training institutions, such as Lagos Business School, Ghana Institute for Management and Public Administration, Eastern and Southern African Management Institute, etc on a continuous basis. In view of the magnitude of work to be covered under LUTP 2, there is a need to further strengthen the procurement department.

B. Implementation arrangement

5. The overall implementation and coordination of the project will remain largely as those of the first LUTP project with operations being coordinated by LAMATA. Therefore LAMATA as project executing agency will have responsibilities for coordinating all procurement functions under the project.

C. Guidelines

6. Procurement under the proposed project would be carried out in accordance with the World Bank’s "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004, revised October 1, 2006 and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, revised October 1, 2006 and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Credit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame for different activities are agreed between the Borrower and the World Bank in a detailed Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

7. Procurement of works: Works procured under the Project would include Rehabilitation of Oshodi-Mile 2-Obalende and Oshodi-Mile 12-Ikorodu roads, recurrent maintenance, routine maintenance and office building. Procurement of works will be carried out using the Bank’s SBD for all International Competitive Bidding (ICB) or National SBD if agreed with or satisfactory to IDA. Minor civil works estimated to cost US$100,000 or less equivalent per contract, which are labor intensive, spread over time, and which do not lend themselves to grouping and, therefore, are unlikely to attract major construction firms and or foreign bidders, may be procured under shopping procedures as detailed in paragraph 3.5 of the “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, revised October 1, 2006

95 and the “Guidance on Shopping Memorandum" issued by IDA, June 9, 2000, Memorandum “Guidance on shopping” issued by the Bank.

8. Procurement of goods: Goods procured under the project would include office equipment, furniture; project vehicles; computers; accessories; software; communication; and office equipment. Procurement of Goods will be carried out using the Bank’s SBD for all ICB or National SBD if agreed with or satisfactory to IDA. Procurement for readily available off-the- shelf goods that cannot be grouped, or standard specification commodities for individual contracts of US$50,000 equivalent or less, may be procured under shopping procedures as detailed in paragraph 3.5 of the “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004, revised October 1, 2006; and the “Guidance on Shopping Memorandum” issued by IDA, June 9, 2000.

9. Selection of consultants: Consultancy services will include works design and supervision, Bus Rapid Transport (BRT) pre-feasibility, resettlement action plan study, environmental impact assessments, studies on comparative merits of different types of buses, social impact study, and ridership survey. These services will be selected using “Request for Expressions of Interest, short-lists, and Bank’s Standard Requests for Proposal where required by Bank’s Guidelines.” Short-lists of consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraphs 2.7 through 2.8 of the “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” Consultant Guidelines of May 2004, revised October 1, 2006. Research institutes, public training institutions, and non-governmental organizations may be hired to carry out specific researches, and training services in accordance with paragraph 1.11 (b through d) and 3.16 of the above Consultant Guidelines.

10. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works and goods procured, would be presented in the Project Implementation Manual.

11. Operating costs: The operating costs shall include staff travel expenditures and other travel related allowances with prior clearance from IDA; equipment rental and maintenance; vehicle operation, maintenance and repair; office rental and maintenance, materials and supplies; utilities and communication expenses; and bank charges. Operating costs financed by the project will be procured using the implementing agency’s administrative procedures that shall be acceptable to the Bank.

C. Assessment of the agency’s capacity to implement procurement

12. An assessment of the capacity of the implementing agency to implement procurement actions for the project was carried out in accordance with Procurement Services Policy Group guidelines dated August 11, 1998. The assessment reviewed the organizational structure for implementing the project and the roles of the key actors in project implementation. The detail assessment is in the project files. The assessment revealed that LAMATA has a good story of implementing the ongoing LUTP. The weaknesses identified during PPRs conducted on LUTP which include weak procurement capacity, poor documentation, inadequate procedures in selection of consultancy particularly using consultant qualification were all addressed. However, 96

at the time of the assessment, some key procurement specialists had resigned and the project will have to recruit additional qualified and experienced staff. The current procurement staff of LUTP has considerable work experience but will require further training.

13. The current procurement staff and the additional to be recruited will handle procurement under the proposed LUTP 2. They will work under the supervision of the Managing Director of LAMATA. All the current staff of the Procurement Unit under LUTP shall be retained as they have the requisite educational background, professional qualifications and experience but will require additional training on Bank procurement procedures and contract management. To address the capacity issue, a well experienced Procurement Consultant shall be recruited competitively to support the Unit. Also, it is recommended that since other technical experts get involved in procurement issues on daily basis, the project will need to send some of the key technical experts to attend relevant procurement training from time to time.

14. Overall, the reassessment indicates a Moderate risk rating for the project. Areas of improvement have been addressed above. The key issues and risks concerning procurement in the implementation of the project and action plan to address them were discussed with the project team. The corrective measures that will be put in place to address the issues and risks are reflected in Table 1 below.

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Table 1: Procurement Action Plan

Action Responsibility Due Date Remarks 1. Procurement Plan for the first 18 months LAMATA By Negotiations Completed. prepared and agreed with the Bank. 2 Recruitment of additional procurement LAMATA Process on- staff going. 3. Preparation of Project Implementation LAMATA By appraisal Completed Manual (PIM) including adoption of the and IDA Generic Procurement manual for Bank financed Projects in Nigeria. 4. Adoption of the Bank Standard Bidding LAMATA Ongoing First set of Documents for use under NCB in lieu of and IDA NCB bidding lack of National Standard Bidding document to Document. be prepared and reviewed by IDA. 5. Conduct Independent Technical review IDA First 18 months To improve Audit (separate from annual external after efficiency in financial audit). effectiveness; the use of and after 3 funds. years* 6. Organize Contract Management training LAMATA Not later than 19 To improve for new staff. months into project staff project contract implementation* management skills. 7. Provision of adequate office space for LAMATA Not later than 3 To keep proper keeping of procurement files. months into procurement project files safe and implementation* easily accessible. * The identified actions are meant to provide guidance during implementation and a road map without being directly covenanted.

D. Procurement plan

15. The recipient has developed an 18 months procurement plan for project implementation which provides the basis for the procurement methods. This plan has been finalized discussed and agreed between the Borrower and the Project Team during negotiations. It will also be available in the project’s database and on the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

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E. Frequency of procurement supervision

16. In addition to the prior review supervision to be carried out from Bank offices, the capacity reassessment of the procurement department has recommended one supervision mission to visit the field to carry out post procurement review every year.

F. Publication of results and debriefing

17. On-line (DGMarket, UN Development Business, and/or Client Connection) publication of contract awards will be required for all ICB, National Competitive Bidding (NCB), Direct Contracting and the Selection of Consultants for contracts exceeding a value of US$200,000. In addition, where prequalification has taken place the list of pre-qualified bidders will be published. With regard to ICB and large-value consulting contracts, the Borrower will be required to ensure publication of contract awards as soon as IDA has issued its “no objection” notice to the recommended award. With regard to Direct Contracting and NCB, publication of contract awards will be advertised on Client Connection and on LAMATA website due to cost considerations. All consultants competing for an assignment involving the submission of separate technical and financial proposals, irrespective of its estimated contract value, should be informed of the result of the technical evaluation (number of points that each firm received) before the opening of the financial proposals. The Project will be required to offer debriefings to unsuccessful bidders and consultants should the individual firms request such a debriefing. All post review contracts shall also be published at the Project’s website.

G. Details of the procurement arrangements

18. Goods, works, and non-consulting services

Prior review Thresholds

S/N Procurement Method Prior review Comments threshold USD’000 1 ICB (Works) >5,000 All 2 NCB (Works) <5,000 None 3 Shopping (works) <100 None 4 ICB (Goods) >750 All 5 NCB (Goods) <750 None 6 Shopping (Goods) <50 None 7 Direct Contracting All Values All

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(a) List of contract packages to be procured following ICB and direct contracting:

A: Works

1 2 3 4 5 6 7 8

Ref. Contract Estimated Procure- Prequal Domestic Review Contract No. (Description) Cost ment ification Preference by Signature (USD) Method (yes/no) (yes/no) Bank Date x1000 (Prior / Post) Component 1: Institutional development capacity building

1 Construction of LAMATA 10,500 ICB Yes No Prior February Corporate Headquarter 2011 Building Component 2: Improvement of public transport infrastructure and enhancement of traffic management systems

2 Construction of new 73,100 ICB No No Prior March 2011 carriageway, rehabilitation of existing carriageway, provisions of segregation kerbs and BRT Ikorodu Interchange 3 Construction of Bus 3,750 NCB No No Post January 2011 shelters, terminals and new pedestrian over-bridge along Oshodi-Mile 12- Ikorodu BRT Lane 4 Reconstruction of Mile 12 3,750 NCB No No Post January 2011 Over-bridge 5 Construction of new 109,000 ICB Yes No Prior July 2011 carriageway, rehabilitation of existing carriageway, provision of segregation kerbs and BRT Oshodi Interchange 6 Construction of Bus 7,350 ICB Yes No Prior July 2011 Shelters, Terminals and New Pedestrian Overbridge along Obalende-Oshodi BRT Lane

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7 Construction of feeder bus 8,000 ICB No No Prior July 2011 system, stops and terminal Component 3: Improvement of Lagos State Metropolitan road network

8 Rehabilitation of Aboru 11,400 ICB Yes No Prior February Pipeline Road and 2011 Royalty/Ogombo Road 9 Periodic maintenance 12,000 ICB No No Prior March 2011 contracts 10 Routine Maintenance (in 22,000 NCB* No No Post January 2011 various packages) TOTAL 259,600

*Even though budget is US$22,000,000, routine maintenance involves simple activities such as ditch cleaning, patching of potholes and grass-cutting and would normally not attract international firms. Hence NCB is most appropriate method of procurement.

(a) ICB contracts estimated to cost US$750,000 (Goods) and US$5,000,000 (Works and above) per contract and all direct contracting will be subject to prior review by the Bank. B: GOODS

1 2 3 4 5 6 7 8 Ref. Contract Estimated Procure Prequal Domestic Review Contract No. (Description) Cost -ment ification Preference by Signature (USD) Method (yes/no) (yes/no) Bank Date x1000 (Prior / Post) Component 2: Improvement of public transport infrastructure and enhancement of traffic management systems

1 Supply and installation of 750 ICB No No Prior May 2011 BRT Signal control (Oshodi- Mile 12 –Ikorodu BRT Scheme) 2 Supply and installation of 1,045.50 ICB No No Prior May 2011 BRT Signal control (Oshodi- Obalende BRT Scheme) Component 4: Project management and monitoring

3 Supply and installation of Air 650 NCB No No Post April 2012 Quality Equipment including Training, Laboratory analysis, Installation of one Control centre and one Ambient Control centre and a back-up

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B: GOODS

1 2 3 4 5 6 7 8 Ref. Contract Estimated Procure Prequal Domestic Review Contract No. (Description) Cost -ment ification Preference by Signature (USD) Method (yes/no) (yes/no) Bank Date x1000 (Prior / Post) 4 Procurement of vehicles 200 NCB No No Post March 2011 (Package 1)

5 Procurement of Office 50 Shoppin N/A N/A Post March 2011 furniture (Lots 1 & 2) g

6 Procurement of IT, 40 Shoppin N/A N/A Post November Stationery/Consumable (6 g 2010 Lots to be procured a lot per Quarter 7 IT equipment (Desktops, 50 Shoppin N/A N/A Post September Laptops, Monitors, Printers, g 2011 UPS etc. 8 Setting up of Transport 700 NCB No N/A Post January Planning Units in 3 local 2011 Govt. (This involves supply and installation of office equipment, supply of motorbikes, renovation and procurement of traffic signs, cones etc.) TOTAL 3,485.50

19. ICB contracts estimated to cost US$750,000 (Goods) or US$5,000,000 (Works) and above per contract and all direct contracting will be subject to prior review by the Bank

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Consulting Services

Prior review Thresholds

S/N Selection Method Prior review Comments threshold USD’000 1 QCBS >200 All 2 Single Source (Firms) All Values All 3 Consultant Qualification (Firms) <200 1st Contract 4 Least Cost (Firms) <200 1st Contract 5 Selection of Individual Consultant <50 1st Contract 6 Single Source Selection (Individuals) All values All

(a) List of consulting assignments with short-list of international firms. 1 2 3 4 5 6 7 Ref. Description of Assignment Estimated Selection Review Expected Comments/ No. Cost Method by Bank Proposals Contract (USD) (Prior / Submission Signature x1000 Post) Date Date

Component 1: Institutional development and capacity building

1 Consultancy services for 750 QCBS Prior December February supervision construction of 2010 2011 LAMATA Corporate Headquarter Building 2 Consultancy services for the 1,000 QCBS Prior January 2010 March 2011 extension of the strategic transport master plan and travel demand model to cover the Mega City Component 2: Improvement of public transport infrastructure and enhancement of traffic management systems

3 Consultancy services to 1,000 QCBS Prior April 2011 June 2011 undertake Mass Transit alternative analysis studies 4 Consultancy services to 500 QCBS Prior April 2011 June 2011 undertake complimentary Bus System Planning 5 Consultancy Studies for the 8,400 QCBS Prior January 2011 March 2011 supervision of construction of new carriageway, rehabilitation of existing carrriageway, provision of segregation kerbs and BRT Ikorodu Interchange

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6 Consultancy Studies for the 6,150 QCBS Prior April 2011 July 2011 supervision of construction of new carriageway, rehabilitation of existing carriageway, provision of segregation kerbs and BRT Oshodi Interchange 7 Consultancy services for the 500 QCBS Prior January 2011 March 2011 supervision construction of bus shelters and terminals and new pedestrian over-bridge along Oshodi-Ikorodu BRT lane. 8 Consultancy services for the 500 QCBS Prior January 2011 March 2011 supervision of reconstruction of Mile 12 Over-bridge 9 Consultancy service for the 600 QCBS Prior December February supervision of road 2011 2011 rehabilitation of Aboru Pipeline Road and Royalty/Ogombo Road 10 Consultancy service for the 600 CQS Post January 2011 February supervision of Routine 2011 Maintenance of roads (10 lots @US$60,000 per lot) 11 Consultancy service for website 5 CQS Post November December maintenance 2010 2010 12 Consultancy service for 5 CQS Post November December Antispam 2010 2010 13 Consultancy services for 14 CQS Post November December Sunsystem/Human Manager 2010 2010 Maintenance 14 Cnsultancy services for 10 CQS Post November December hardware Maintenance 2010 2010 15 Annual subscription for 1 30 CQS Post October 2010 November megabite internet bandwidth 2010 16 Software license: anti-virus 2 CQS Post January 2011 February License renewal 2011 17 Consultancy services for call 5 CQS Post October 2010 November centre Maintenance 2010 18 Consultancy Services for 400 QCBS Prior January 2011 March 2011 institutional, technical and financial audits

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19 Technical Advisors on public 300 IC Prior transport and technical assistance on traffic system measures 20 Consultancy service to 150 QCBS Post June 2011 July 2011 undertake Air Quality laboratory analysis data from 11 monitoring stations on LAMATA BRT Corridors 21 Technical Assistance to support 2,500 QCBS Prior March 2011 May 2011 TPUs 22 Master Plan for Kano 600 QCBS Prior March 2011 May 2011 Total 24,021

(b) Consultancy services estimated to cost above US$200,000 per contract and single source selection of consultants for All Values will be subject to prior review by the Bank.

(c) Short-lists composed entirely of national consultants: Shortlists of consultants for services estimated to cost less than US$200,000 per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

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Annex 9: Economic and Financial Analysis

NIGERIA: Lagos Urban Transport Project 2

1. A cost-benefit economic analysis was conducted for investments to support the Bus Rapid Transport (BRT) infrastructure component, accounting for 75 percent of the total financing. The investments in road maintenance and rehabilitation, accounting for 15 percent of the financing are spread over the city and past experience suggests that such investments provide significant benefits in terms of improving traffic flow and reducing vehicle operating costs and such investments are selected based on cost-effectiveness analysis.

Summary

2. Construction Costs are based on latest estimates, adjusted to estimated build date of 2010. The infrastructure requirements and preliminary construction costs are based on either length (km) or number of units required. It is assumed that the delivery of the infrastructure requirements can be achieved within the existing highway boundary, and therefore no land purchase costs have been incorporated.

3. The economic benefits of the scheme are quantified in terms of travel time saved by users. The scheme also has wider benefits relating to more efficient use of infrastructure and vehicle capacity. This leads to operating cost savings in terms of corridor service provision. The investments will also have a positive impact on pollution and air quality levels along the corridor and reduction in accident rate due to traffic channelization and improved management. The later benefits have not been quantified.

4. The inclusion of the wider economic benefits of the scheme in terms of consumer surplus (user benefits) and operating cost savings to provide a full economic evaluation of the scheme has a large impact on scheme performance. Based on travel time vehicle operating cost savings brings the benefit-cost ratio (BCR) for the scheme up to 2.1, with a net present value of US$208 million and internal rate of return (IRR) ranging from 15-17 percent. The results of the economic evaluation are presented in Table 1.

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Table 1: Economic Evaluation Oshodi-Mile 2- Oshodi-Mile 12- Obalende Ikorodu 1 Cost 1.1 Capital Cost $105 million $88 million 1.2 Operating Cost (per $10.2 million $7.6 million annum) 2 Benefits 2.1 Value of Time (per $11.2 million $16 million annum) 2.2 Operating Cost Savings $13.6 million $8.1 million (per annum)

3. IRR (base) 17% 15% 4. IRR (Cost +20%) 14% 12% 5. IRR (Savings -20%) 13% 11%

5. Road network improvement component: Ten road sections were subjected to a cost- benefit analysis, based on: (a) assumed life cycle of 20 years; (b) annual routine and five-year periodic maintenance cost; (c) annual traffic growth rate of seven percent. The benefits are based on savings in travel time and vehicle operating costs.

6. The NPV and benefit-cost ratio at seven percent traffic growth rate and 3.5 percent traffic rate are estimated to be greater than one.

Operational and Service Characteristics

Oshodi-Mile 12-Ikorodu

7. Demand Forecasts and Operational Analysis: Much of the demand entering the Oshodi- Mile 12-Ikorodu corridor originates from further to the north along the Ikorodu Road. The survey exercise undertaken for the original BRT feasibility study collected data relating to the origins and destinations of travelers using the corridor, and also screen line passenger flows at points along the corridor. The significant finding from these surveys in relation to Ikorodu trips was that trips originating from Ikorodu outnumber trips originating from Mile 12 by a factor over 2:1 (1948 trips were recorded with destination of Ikorodu compared to 899 for Mile 12, giving a factor of 2.167). The Table 2 below presents the relevant information collected from these surveys, and the process used in determining likely patronage for a service from Ikorodu.

8. Total bus passenger flows recorded travelling southbound past Mile 12 in the BRT Classic surveys stood at approximately 30,000 passenger trips in the morning peak period and 138,000 trips over the whole day.

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Table 2: Expected Demand on Ikorodu corridor TOWARDS CMS Original survey (06) BRT-Lite evaluation survey

7-10 Passenger flow all bus All bus passengers BRT observed patronage

Mile 12 30,763 4,680

Maryland 40,190 55,482 10,614

All day (6-8)

Mile 12 137,608 18,266

Maryland 221,737 212,163 47,423

9. Forecast Demand: The recorded boardings on BRT-Lite at Mile 12 in the three hour morning peak amount to 4,680 passengers. During the whole day, this number is 18,266. On the basis of the origin-destination survey data previously collected, it is predicted that there would be 2.167 times the level of demand from Ikorodu.19 This gives the following passenger forecasts passing Mile 12 towards Church Missionary Society (CMS):

Table 3: Passenger Forecast Passing Mile 12

Towards CMS Mile 12 Observed Forecast Ikorodu Total BRT trips trips trips

Morning Peak period (7-10) 4,680 10,141 14,821

All Day (6-8) 18,266 39,583 57,850

10. The total BRT trips forecast passing Mile 12 on the combined Ikorodu/Mile 12 services lies at just under half of total passenger trips as recorded in the original surveys. This reflects the likelihood that a proportion of trips passing Mile 12 will be destined for routes lying off the Ikorodu Road corridor such as Third Mainland Bridge, Iyana Ipaja or Ikeja, and hence may not choose to use the BRT system for these trips. Overall, the scale of the forecast demand therefore appears reasonable.

19 It should be noted that a proportion of the existing BRT demand is likely to have interchanged from Ikorodu to access the service at Mile 12. This might therefore be considered ‘double-counting’ when using this demand to derive Ikorodu trips. However, at present, the level of demand observed at Mile 12 is constrained by capacity. During peak hour, the average loadings recorded from the boarding figures is over 75 people per bus, signifying that the buses are leaving at close to capacity over the whole period. By providing a service from Ikorodu, it is expected that any released capacity at Mile 12 would be filled by suppressed demand. 108

11. Demand in the reverse direction towards Ikorodu is assumed to be the reverse of the towards CMS demand. Evidence from the BRT-Lite evaluation showed that Saturday demand levels represent 87 percent of average weekday demand, while Sunday levels represent 50 percent. Using these factors, the annual demand is estimated to be about 26 million person trips on Ikorodu corridor.

12. Forecast Revenues: Revenues generated by the service will be dependent on the demand levels presented above and the fare charged for journeys. Data was collected in the feasibility study in relation to average fares for many different journeys within Lagos. The data has been reviewed to determine a suitable fare for trips from Ikorodu. The fare structure for a new service from Ikorodu would ideally be consistent with that in operation along the existing BRT corridor. The current fares are 100 Naira for travel between two zones, with the zonal boundary at Fadeyi, and 50 Naira for trips within a single boundary either side of Fadeyi. The distance from Ikorodu to Mile 12 is similar to a typical two zone journey. The following fare structure has therefore been assumed for the Ikorodu service:

Table 4: Fare structure assumptions

From Ikorodu to Fare Assumption

Mile 12 and intermediate 100N stops before Mile 12

Zone 2 (northern zone) 150N

Zone 1 (southern zone) 200N

13. To determine the average fare paid, it is necessary to determine the likely destination of travelers from Ikorodu. To do this, origin to destination data for travelers from Mile 12 recorded in the original surveys has been used to supplement Ikorodu trip information, as it is reasonable to assume that this will reflect similar patterns. Applying this destination split to the fare assumptions outlined above, the average fare paid is calculated to be 162 Naira. Total annual revenue generated by the scheme is therefore forecast to be about US$33 million.

14. Operational implications: At a forecast level of demand of over 10,000 passengers during the morning peak three hour period, the service from Ikorodu must handle 3,380 people per hour in the peak. The length of the Ikorodu service is just over 35 km from end to end. Given this additional length, it would be unacceptable to expect passengers to stand for this amount of time. Therefore, the seating capacity of the bus should be used in determining the required service frequency to meet the forecast patronage levels. A bus service running at a one minute frequency in the peak period is forecast to adequately meet the demand for this service. Running at half the headway in the off-peak, and assuming eight hours of peak operation and eight hours of off-peak operation, the average load factor is demonstrated to lie within the seated capacity of the buses.

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15. Vehicle Requirement and operating costs: To operate a service from Ikorodu to CMS at a one minute frequency in peak periods, the peak vehicle requirement (is expected to be about 242 buses, including a 10 percent allowance for out of service vehicles (maintenance etc).

Oshodi-Mile 2-Obalende

16. The Oshodi to Obalende via Mile 2 corridor is somewhat unusual in that the route to Lagos Island is more circuitous than the other possible routes, either via Agege Motor Road or Ikorodu Road. The nature of the route has important implications on the likely target market for the service and hence the expected levels of patronage.

17. Evidence collected in the early stages on the BRT Line 2 feasibility study suggest that it is unlikely that the route will serve end-to-end trips, carrying passengers from Anthony or Oshodi all the way to Lagos Island. Even upon provision of a priority corridor along BRT Line 2, there are more time efficient options for travelers from these origins to access the Island, in particular via Third Mainland Bridge, or the existing BRT-Lite corridor.

18. However, the great attraction of the Anthony-Obalende route is in its orbital nature, allowing connectivity between northern and Western parts of the mainland without the need to travel down towards Lagos Island. It is expected therefore that the service will be popular as a means of accessing Mile 2 from northern locations such as Mile 12 and Ikorodu. The corridor will also provide direct access to Lagos Island from locations along the Oworonshoki Express Way such as Ijesha and Cele.

19. Peak hour flows in excess of 10,000 passengers are recorded in both directions on the Lagos Badagry Express Road and towards CMS on the Oworonshoki Express Way. Peak period flows of around 32,000-35,000 passengers towards CMS compared to peak period southbound passenger flows of 22,000 recorded at Mile 12 and 40,000 recorded at Maryland in the same set of surveys.

20. The patronage represents all passengers who are travelling by public transport (molue and danfo) past the two survey points. These travelers will form the main target market for the BRT system, as it has been observed that the large majority of BRT-Lite passengers have been abstracted from existing public transport modes.

21. BRT mode share of total public transport trips represents just under 50 percent of all public transport trips made. As discussed above, the Anthony to Obalende via Mile 2 line is likely to serve more than one market in terms of passenger movements. Firstly, there is the north to west movement arising from travelers from Mile 12 or Ikorodu who wish to access Mile 2 as a means of interchange to continue westward. Secondly, there is demand for Lagos Island which is likely to originate from along the corridor itself, with locations closer to Mile 2 such as Ijesha and Cele likely to generate a large proportion of this demand. For the purposes of the demand forecasts, these two markets are considered separately.

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22. The forecast trips in the morning peak period are expected as shown in Table 5:

Table 5: Forecast Passenger Trips in Morning Period

Inbound flow only To Lagos Island Anthony to Mile 2

Total Passenger Flow (7-10) 35,696 32,277

Abstraction predicted 45% 45%

Forecast morning peak trips 16,063 14,525

Peak Hour (1/3 morning peak) 5,354 4,842

All Day 64,253 58,099

23. All day demand estimates have been derived by applying an uplift to the morning peak trips (7-10) using the passenger profile observed in BRT-Lite trips towards CMS. These recorded that the peak three hours accounted for 25 percent of total daily flows. On the assumption of trip reversal, total flows will be twice the above amounts, giving an annual demand of 101 million person trips.

24. Forecast Revenues: Revenues generated by the service will be dependent on the demand levels presented above and the fare charged for journeys. The fare structure for a new service from Anthony to Obalende via Mile 2 should be in line with the fares charged on the existing BRT-Lite service. The current service operates a zonal fare structure, with two zones each with an internal fare of 50 Naira. Travel between zones costs 100 Naira. Adopting a similar zonal system for BRT Line 2 provides average fare paid of about 56 Naira. Total annual revenue generated by the scheme is therefore forecast at US$44.8 million.

25. With a peak vehicle requirement of 242 buses, plus a 10 percent allowance for out of service vehicles (maintenance etc), the total fleet requirement for service operation is 266 vehicles.

Economic Analysis

Assumptions

26. The assumptions underpinning the evaluation are set out below.

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27. Appraisal Horizon: Long appraisal horizons are typically used in western countries, with a 60 year appraisal period commonly used in the United Kingdom. However, the level of uncertainty in revenue streams, particularly with high discount factors, and the way in which the scheme might operate over this timescale makes this length of horizon unsuitable for the assessment of this type of scheme. A 15 year appraisal period has been chosen. This has been adopted as it is considered that with the provision of maintenance allowed within the costings, it is reasonable to expect that the infrastructure will be serviceable over this time period.

28. Annualization factor: Forecast daily demand has been derived from previous survey data. A factor of 331.24 has been used to take daily patronage and revenues to annual patronage, based on the assumption that Saturday patronage totals 87 percent of average weekday patronage, Sunday 50 percent of weekday patronage and 50 weeks make up the operating year.

29. Discount factor: A discount factor of 12 percent (in real terms) has been used to discount future cost and revenue streams. This reflects the likely rate of return which would be expected on investment in Nigeria, and at above 12 percent serves to significantly reduce the value of future costs and benefits.

30. Cost base: All costs and benefits are presented in 2008 prices (in US dollars). Therefore all prices are in real terms. The exchange rate used in conversion of Naira to dollars is 128Naira/US$. This was the rate in effect at the time of the construction of BRT-Lite. As cost values have been used from this time, the benefits (revenues) have also been converted to dollars using this exchange rate to maintain consistency.

31. Construction costs are based on latest estimates, adjusted to estimated build date of 2010. The infrastructure related interventions and preliminary construction costs are based on the condition of the roads and their length (km). It is assumed that the delivery of the infrastructure requirements can be achieved within the existing highway boundary, and therefore no land purchase costs have been incorporated. In addition, a percentage, equalling of 7.5 percent of the sub-total has been incorporated for design, management, contingency and diversion of utilities. Further, an allowance of 7.5 percent of the sub-total has been allocated for the upgrade of existing BRT-Lite infrastructure. It is assumed that the extension of BRT operation to Ikorodu will not require new depot facilities. For guidance, the requirement for infrastructure maintenance has been included. This has been derived at two percent of the sub-total, and is based per annum, over a 10 year maintenance lifecycle.

32. Economic Benefits: The economic case for a transport scheme is made on the basis of the societal benefits of the scheme in terms of time saved by users. The scheme also has wider benefits relating to more efficient use of infrastructure and vehicle capacity, allowing the smaller public transport vehicles to serve other markets where BRT may not be as appropriate. This leads to operating cost savings in terms of corridor service provision and also can have a positive impact on pollution and air quality levels along the corridor.

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33. The social benefits of the BRT-Lite scheme include: (a) significant journey time savings over the previously tortuous journeys along the route which often involved one or more forced interchanges; (b) cost savings as well, because the BRT fares are set at socially equitable levels, which generally undercut those in effect on danfos and molue; (c) providing an end-to-end service also avoids the cost penalty associated with forced interchanges. As such, the societal benefits realized by the implementation of BRT go far beyond the simple commercial efficiencies of the system. The scheme is shown to pay for daily operations but also infrastructure costs in just 15 years and the actual societal benefits on top of the financial performance would make positive impact of the scheme in economic terms significantly greater.

Oshodi-Mile 12 – Ikorodu

34. Value of time savings: If the 73,000 passengers per day saved an equivalent of 15 minutes (conservative considering the time spent on interchange in addition to the in-vehicle journey time savings) and an average of 25 Naira each through the preferential fares on the system, additional societal benefit would amount to 2 billion Naira per annum or US$16 million. This is based on a value of time for BRT passengers of 85 Naira as determined by the original BRT study (uplifted for inflation of five percent per annum).

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35. Some of the direct benefits of BRT are illustrated below.

Table 7: Benefits of BRT

Category Description

Economic ƒ Improved utilization and returns on investments ƒ Increased private sector investment in urban passenger transport services ƒ Increased revenue generation for local authorities ƒ More reliable product deliveries for producers and consumers ƒ Increased economic productivity from the urban area as a whole ƒ Reduced cost of road accidents, especially for urban poor ƒ Increased access and flexibility to employment opportunities Social ƒ Increased mobility and equitable access in the city ƒ Reduced accidents and illness ƒ Increased civic pride, sense of community, and user satisfaction ƒ Reduced travel time and resulting increased quality time with family ƒ Increased confidence in market regulation (through demonstration) ƒ Raised expectations for urban transport services and infrastructure Environmental ƒ Lower energy consumption per person/kilometer and reduced GHG emissions ƒ Reduced emissions of air pollutants [fine particulates, Carbon Monoxide (CO), Oxide of Sulphur (SOx), Oxide of Nitrogen (NOx)] ƒ Improvements in public health through reduced ambient air pollution ƒ Reduced noise levels and increased walkability Urban form ƒ Improved utilization of existing transport infrastructure ƒ Improved planning for new transport infrastructure

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Economic Evaluation

36. The inclusion of the wider economic benefits of the scheme in terms of consumer surplus (user benefits) and operating cost savings to provide a full economic evaluation of the scheme has a large impact on scheme performance.

37. Including the societal benefits brings the BCR for the scheme up to 2.1 with a net present value of US$208 million and IRR ranging from of 15-17 percent. The results of the economic evaluation are presented below. Table 6: Economic Evaluation Oshodi-Mile 2- Oshodi-Mile 12- Obalende Ikorodu 1 Cost 1.1 Capital Cost $105 million $88 million 1.2 Operating Cost (per $10.2 million $7.6 million annum) 2 Benefits 2.1 Value of Time (per $11.2 million $16 million annum) 2.2 Operating Cost Savings $13.6 million $8.1 million (per annum)

3. IRR (base) 17% 15% 4. IRR (Cost +20%) 14% 12% 5. IRR (Savings -20%) 13% 11%

Economic Analysis of road network improvement component

38. Background: The Lagos State Government (LSG) has identified 39 roads located in 20 local government areas for improvements and rehabilitation. From amongst these roads, ten roads were identified as being most critical and in need of repair based on a detailed condition survey carried out in August 2008.

39. The ten road sections were subjected to a cost-benefit analysis, based on: (a) assumed life cycle of 20 years; (b) annual routine and five-year periodic maintenance cost; and (c) annual traffic growth rate of seven percent. The benefits are based on savings in travel time and vehicle operating costs.

40. The net present value (NPV) and benefit-cost ratio at seven percent traffic growth rate and 3.5 percent traffic rate are given in Table 7. All road sections are economically justified with a high return.

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Table 7: Summary of Cost – Benefit Analysis (in million Naira)

S/N Road Name Cost NPV @ 7 NPV @ 3.5 B – C ratio B – C ratio % growth % growth @ 7 % @ 3.5 % rate rate 1 Aboru pipeline 1,802 4,448 3,247 2.5 1.8

2 Dopemu 465 8,507 6,671 18.3 14.3

3 Agbado 255 4,036 3,164 15.9 12.4

4 Achakpo 136 1,356 1,055 9.9 7.7

5 Apata Lisabi 262 5,750 4,521 21.9 17.2

6 Royalty 465 8,507 6,671 18.3 14.3

7 Ogombo 279 1,296 982 4.63 3.51

8 7th Avenue 302 3,989 3,101 13.2 10.2

9 Isolo 415 1,097 801 2.64 1.93

10 Adesina/Omilani, 521 10,652 8,372 20.4 16.1 Airways, Surulere

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Annex 10: Safeguard Policy Issues

NIGERIA: Lagos Urban Transport Project 2

A. Environmental assessments and resettlement action plans

1. Transport management, particularly, Bus Rapid Transit (BRT) on an existing six lane road, rather than urban roads, is the central investment of the project. Components 1 (construction of the Lagos Metropolitan Area Transport Authority (LAMATA) corporate head office), 2 (BRT infrastructure construction), and 3 (road network improvement) of Lagos Urban Transport Project (LUTP) 2, triggered OP 4.01 and OP 4.12, due to the planned civil works operations. OP 4.11 was triggered as the policy applies whenever OP 4.01 applies, i.e. whenever there is likely to be significant civil works, as earth works have the potential of exposing chance finds. The ESMF has made provisions for addressing potential chance finds of cultural heritage.

B. Safeguards related impacts

2. Although project operations and outcomes will be highly beneficial to the local communities, the execution of the civil works will have adverse environmental and social impacts. The Environmental Assessment (EA), Environmental and Social Management Framework (ESMF) and the Resettlement Policy Framework (RPF) reports identified some adverse environmental and social impacts (i.e. loss of vegetation, water, soil and air pollution, traffic accidents, increased malaria due to stagnant water in quarries). The reports indicate that the adverse environmental and social impacts are similar across the road civil works (BRT infrastructure and road rehabilitation) and can be mitigated through the implementation of environmental contract clauses. The environmental safeguards instruments prepared for the project include an Environmental Impact Assessment (EIA) and an ESMF. The social safeguards instrument is a RPF. The above safeguards instruments were disclosed in-country (July 20, 2009) and at the Bank’s Info-shop (July 21, 2009). The RPF estimated the number of project affected persons to 2,000 persons, they mainly use or own, kiosks, tables and shop stands in the right of way. Compensation costs will be covered by the Lagos State Government and implemented by LAMATA. A Resettlement Action Plan (RAP) and Environmental Impact Assessment (EIA) will be prepared after the detailed design of the BRT becomes available and prior to the road- upgrading civil works along the BRT corridor; as the physical impacts will then be known, and consequently, impacts on houses and structures along the BRT alignment.

3. The adverse environmental impacts identified in the EIA and the ESMF include: water and air quality, land and hydrology, vegetation, noise, dust. These impacts are limited and site specific. Adverse social impacts are also limited and site specific and they include: land acquisition, resettlement, health and safety. Mitigation measures to address the impacts were identified costed, by the safeguards instruments. Cost for resettlement/rehabilitation (compensation of project affected persons) will be covered by the Lagos State Government (LSG) and implemented by LAMATA. Cost for environmental mitigation measures, will be incorporated in the works contracts, including daily monitoring and supervision. Environmental protection clauses will be incorporated into the works contracts as well as social clauses, including Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome

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(HIV/AIDS) prevention. Compliance in the implementation of the clauses will be monitored by the environmental unit of LAMATA.

4. In addition, improving the environmental performance of the Lagos urban transport system, particularly, the performance of current vehicle park is one of the objectives of this project. The transport sector is a dominant source of local air pollutants (particulate matter, Oxide of Sulphur (SOx), Oxide of Nitrogen (NOx), Carbon Monoxide (CO), volatile organic compounds) that are often associated with poor health and other negative impacts. The

International Energy Agency estimates that the transport CO2 emissions from vehicles are projected to increase by a factor of 2.4, from about 4.6 gigatons in 2000 to 11.2 in 2050. The vast majority of CO increase will be in developing cities, due to increased motorization and vehicle use. To contribute to reducing the above air pollutants in Lagos, LUTP 2 will support a study on emissions from vehicle transport in Lagos, particularly along the BRT corridor.

5. Long-term adverse safeguard impacts. No long term or cumulative adverse impacts were identified in the EIA, the ESMF and the RPF. The civil works will be carried out on existing roads. The roads targeted for the BRT corridors are large and have limited encroachment in the right of way. The Oshodi-Mile2-Obalende corridor is 27 km in length, and has six lanes. The second BRT corridor, Oshodi-Mile 12-Ikorodu is 22 km long, and four lanes. The BRT will involve continuous segregated bus running lanes within the road median. Indirect long term adverse impacts that maybe induced by the project are related to the enhancement of the use of the road infrastructure, the impacts may include: (a) induced traffic; (b) compromised air quality; and (c) increased CO2 emissions. Under LUTP, the project funded the Lagos Air Quality Monitoring Study focusing on vehicle emissions, to establish baseline data, before the implementation of the project. Under LUTP 2, the air quality study will continue in the BRT corridor, in the aim to monitor impacts of the BRT system in reducing emissions from the public transport system.

C. Measures to minimize adverse safeguard-related impacts

6. From concept to design, LUTP 2 has considered alternatives and mechanisms to minimize adverse environmental and social impacts. Drawing from the experiences of LUTP, the BRT design was required to select road corridor that would induce limited environmental and social impacts. The selected BRT corridors fulfilled these requirements, likewise, the road to be rehabilitated. The BRT infrastructure will be implemented on an existing six lane road, and the road rehabilitation work will be carried out on an existing road with no change of alignment. At project operation phase, prior to the commencement of civil works, i.e. during contract mobilization, the supervision consultant will undertake a design review of the road alignment, and submit a right of way report, to confirm the design, construction obstacles, and suggest design changes with the aim of improving not only engineering efficiency, but also road safety and reduce potential adverse environmental and social impacts.

D. Participation/consultations

7. The LAMATA Act recognizes the need to engage civil society in validating major infrastructure investments and policy changes. LAMATA has established a database comprising about 100 general contact groups classified into 10 major categories – internal, government, 118 development partners, mass media professionals and institutions, civil society, transport associations, police, private sector, general public and United Nations/donor/bilateral agencies.

8. The design of LUTP 2 has been participatory at several levels. The stakeholders consulted for the preparation of this project include: Federal administrations; Lagos State administrations; local governments; donor community [French Development Agency (AFD)], transport unions, [National Union of Transport Workers (NURTW)], community based organizations (CBOs), community based facilitators, and non-governmental organizations. Public consultations were also held throughout the preparation of the safeguards instruments. All consultations focused on the viability of the project, identifying potential areas of conflict and common ground, between stakeholders.

9. Clearly, the results of the public consultations carried out confirm a solid support for the implementation of the project. Both Lagos State Government (LSG), transport unions, civil society, including CBOs, community based facilitators, and non-governmental organizations and vulnerable groups (e.g. elderly women and men, school children, and physically challenged persons) are in favor of the projects. LUTP 2 will continue to support the public consultations initiated under LUTP and particularly strengthen the partnership with transport unions and facilitate the dialogue between the general public and the transport unions.

E. Public consultation and communications strategy

10. Public opinion is an important force affecting the development and implementation of large-scale infrastructure projects. In order to engage the public and encourage ongoing support for the proposed urban transport reforms, a clear and consistent strategy for messaging was developed to communicate the value of the bus rapid transit program and its benefits to the city residents. Project success is founded in both operational excellence and perceived benefit/value to the target audience.

11. Background. The heart and soul of a successful project implementation is rooted in effective planning. The strategy objective was to identify and develop the building blocks needed to systematically and rationally market and communicate the new bus rapid transit service through its various stages of development and service launch. The main stakeholders identified for this study include: drivers’ union, market women associations, traders association, religious associations, opinion leaders, community based associations – landlords associations, residents along the corridor, car owners, current public transport users, media, commercial banks, etc. The external relations department in LAMATA has developed a directory of stakeholders with whom contact is made on a regular basis—information is shared, feedback is obtained, design modified to accommodate specific issues and users and affected persons consulted again in an attempt to calibrate the proposed design.

12. Strategy content: Key focus was on:

• Clarifying policy objectives; • Conducting key informant interviews; and • Proposing strategies and approaches to meeting organizational objectives.

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13. Through a series of key informant interviews and meetings, information was collected to garner input to identify communications needs and objectives for:

• Public awareness; • Customer education; • Key internal and external stakeholders; • Media relations; • Image and branding; • Construction support; and • Service launch marketing.

14. Some of the initiatives to obtain feedback include:

• Stakeholder consultative fora on LAMATA projects: Consultations are held with various stakeholders on new projects to get their inputs. Stakeholder meetings are called to inform communities benefiting from projects under LUTP. The essence is to get their buy-in for smooth implementation of the projects. Specifically, at the inception of any infrastructural improvement in the project, the Safeguards and External Relations unit holds discussions with landlords associations and the media, religious associations, opinion leaders, community based associations, transport unions like the NURTW and Road Transport Employers Association of Nigeria, the organized private sector, community associations, artisans, relevant government ministries such as Transportation, Environment and Physical Planning and Urban Development. Consultative meetings are held regularly with the stakeholders to disseminate information about the project and their feedback is taken into consideration during project design and execution. At another level is the Inter-ministerial Committee set up by LAMATA, which meets monthly with government ministries, agencies, and parastatals. There is also a sub-committee of the Inter-ministerial committee on safeguard matters. This sub-committee meets monthly with environmental-related ministries and agencies. Part of the committees’ function is to identify grey areas and areas of overlap in the responsibilities of each of the bodies in the committee. In addition, the Lagos Air Quality Monitoring Study witnessed the set up of two ad-hoc committees: the steering and stakeholders committees. Both committees included non-governmental organizations (NGOs), media houses, all relevant ministries and agencies that are involved in vehicle emission. They met several times and the report of the study had input from members of the committees.

• BRT Parliament: The BRT parliament is a forum established to discuss issues relating to the operations of the BRT System in Lagos. BRT parliament is held every six months with the direct participation of at least 2,500 people while more than four million people tune in to live telecast both on local and terrestrial television stations. The television viewers also have the opportunity of sending text messages via a dedicated mobile phone line. The messages are read and answers provided. One of the BRT parliamentary sessions was held to mark the first anniversary of the BRT operation and it was led by Lagos State Governor with the participation of NGOs, CBOs, NURTW, and road transport employers. Other stakeholders present were market women associations, traders

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association, religious associations, opinion leaders, community based associations, landlords associations, commuters, consultants, and contractors.

• Television programs: Two television programs are presently run by LAMATA (“BRT Half Hour” and “Lagos On The Move”). The two are primed at stimulating stakeholder buy in into LAMATA’s various projects aside from helping to generate patronage to the BRT scheme. They also serve as platforms to generate feedback from the commuting public as one of the television program runs live and allow call in. The two television programs have a combined audience profile of more than 25 million viewers both on local and terrestrial television stations. Three stations are engaged to broadcast LAMATA television program. “BRT Half Hour” is transmitted live every Sunday on LTV 8 and repeated on MiTV channels every Tuesday. Both stations can be received on Digital Satellite Television (DsTV), thus making viewership possible in the whole of West Africa and beyond where DsTV signals can be received. “Lagos On The Move is on three stations which have strong views and strong signals in most part of the country.

• Website management: There is a web counter on LAMATA’s site which enables them to monitor daily hits. As at the last count, more than 20,600 people had visited the site. The website is constantly updated to encourage traffic and as well as disseminate information to all stakeholders of LAMATA and outsiders.

• Customer Relationship Management (CRM) Platform: The CRM Platform was established in June 2008. More than 200 calls are received daily. The issues reported range from suggestions, complaints, observations, enquiries to appreciation. It is also a platform for data collection which enables LAMATA to improve service offerings to the commuters. A number of callers request for expansion of service to additional corridors. In addition, emails are also received. LAMATA has established a desk on customer relations with a direct telephone number where clients and other stakeholders can communicate with the project. The desk is managed by two well trained staff who report directly to senior management. Under LUTP 2, two additional mobile toll free lines will be created and made available to the public. In addition, association of landlords and landladies with properties along the right of way of the BRT, neighbourhood groups (especially during construction), NGOs, CBOs and other non-state actors will be consulted during preparation, construction, and operation phases of the project.

F. Strategy for current operators

15. There are a wide range of stakeholder groups currently involved in the commercial bus services being provided on the proposed BRT corridors. Each of these has their own vested interest in the continuance of the status quo ante, and separate strategies were developed for each as consequence.

16. However, the advantage of such stakeholder segmentation is that it has the potential to divide the overall strategy into a number of sub-strategies that will each only affect a limited number of individuals. By tackling these one at a time, it is possible to prevent a coalition of resistance forming with the potential power to block the reforms.

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17. Stakeholder analysis has identified the following interests, each of which were addressed during project design.

(i) Vehicle owners active in transport operations. (ii) Passive vehicle owners who hire out buses on a periodic basis. (iii) Commercial bus drivers, mostly hiring buses for a daily ‘deliver’. (iv) Mates (conductors) on those buses, mostly recruited by the drivers. (v) Unions managing the service through their control of the bus terminals. (vi) Touts (agbero) employed by the unions to enforce their control. (vii) Traffic enforcement agents, supplementing their incomes from petty corruption.

18. In each case the options for redeployment or reform were examined, incentives for the most appropriate action developed, and sanctions against compliance devised.

G. Assessment of capacity and commitment of client to address safeguard issues

19. During LUTP, the client has demonstrated a clear commitment and capacity to address safeguards issues. Under LUTP, the borrower built the foundation for sound environmental and social management within LAMATA. An environmental and social safeguards unit was established which has two sections, environment and social. The social section focuses on five activities: (a) social impact assessments; (b) occupational health and safety; (c) capacity building of local contractors and consultants; (d) monitoring and supervision of resettlement/rehabilitation; and (e) analytical work. The focus of the environmental section is: (a) environmental impact assessments; (b) occupational health and safety; (c) capacity building of local contractors and consultants; (d) monitoring and supervision of the implementation of environmental management plans; and (e) analytical work.

20. The environmental and social safeguards unit has two permanent staff who are complemented by consultants contracted on as needed basis. The environmental and social safeguard specialists are highly qualified, skilled and with practical field experiences in a range of safeguards issues. In addition, they have participated in several training programs in different countries (e.g. India, Ethiopia). Environment and social specifications are included in the bidding documents for contractors, and monitored regularly by the safeguards unit and through environmental consultants. Contractors are provided periodic safeguards training. The unit has also provided technical support to the Lagos Metropolitan Development and Governance Project. In addition, the unit provides guidance to the Lagos State Government’s environmental administration. Under LUTP, the Environmental Unit prepared key safeguards instruments including the Sectoral Environmental and Social Assessment; Procedural Manual on Environmental Assessment; EA; EIAs; RAPs. The implementation of environmental and social safeguards by the borrower under LUTP has been satisfactory.

H. References to mitigation plans in the project legal arrangements

21. The policy requirements of the three safeguard instruments (EIA, ESMF, and RPF) will constitute part of the body of reference texts to the credit agreement. Environmental and social clauses will also be incorporated into the works contract.

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I. Mechanisms to monitor the implementation of agreed mitigation plans

22. LUTP 2 will continue to support the environmental unit of LAMATA to implement the EIA, the ESMF, the RPF and subsequent EMPs and RAPs as need be. The work of the environmental unit is supported by the environmental laws of the Federal Government of Nigeria, the environmental laws of Lagos State, the EIA, the ESMF and the RPF. The project will also seek to strengthen the capacity of the environmental unit through training. Bank’s clearance and disclosure of EMP and RAP is required prior to commencement of civil works. Project progress reports will include progress in the implementation of environmental and social safeguard measures.

K. Supervision arrangements including staffing and resources

23. Under LUTP, the client laid the foundation for sound environmental and social management. The environmental and social safeguards unit was created. The two permanent staff of the unit will lead the supervision work and will be complemented by consultants to be contracted on as needed basis. Supervision and monitoring will be a continuous process. The day-to-day field supervision will be conducted by the Resident Engineer and documented in the monthly and quarterly progress reports, which will be subject to review by the LAMATA environmental unit.

24. Potential expropriation and compensation will be executed by local consultants under the lead of the LAMATA management and environmental unit. Periodic supervision will be conducted by the environmental unit, which will also continuously take stock of all potential expropriation and compensation reports and discuss them on regular basis. The Lagos State Ministry of Environment will carry out external monitoring.

25. LAMATA through the environmental and social safeguards unit, will regularly collect, compile and will submit to the Bank, on a quarterly basis, reports on the status of compliance with each of the EIA, the ESMF and the RPF/or RAP, giving details of: (a) measures taken in furtherance of such instruments; (b) conditions, if any, which interfere or threaten to interfere with the smooth implementation of such instruments; and (c) remedial measures taken or required. The reports will be part of the overall project monitoring system. LUTP 2 will continue to support the environmental unit to carry out these monitoring functions as well as to strengthen the capacity of the unit through training and logistical support.

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Annex 11: Project Preparation and Supervision

NIGERIA: Lagos Urban Transport Project 2

Planned Actual

PCN review 3/19/2009 3/18/2009 Initial PID to PIC 7/17/2009 7/16/2009 Initial ISDS to PIC 7/17/2009 7/16/2009 Appraisal 9/22/2009 9/24/2009 Negotiations 11/19/2009 11/19/2009 Board/RVP approval 6/29/2010 Planned date of effectiveness 10/29/2010 Planned date of mid-term review 6/30/2012 Planned closing date 6/30/2015

Key institutions responsible for preparation of the project:

Lagos Metropolitan Area Transport Authority

Bank staff and consultants who worked on the project included:

Name Title Unit Ajay Kumar Lead Transport Economist/Team Leader AFTTR Aisha Kaga Team Assistant AFCW2 Antoine Lema Senior Social Development Specialist AFTCS Amos Abu Senior Environmental Specialist AFTEN Anne Njuguna Program Assistant AFTTR Bayo Awosemusi Lead Procurement Specialist AFTPC Roger Gorham Transport Economist AFTTR Rajiv Sondhi Senior Finance Officer CTRFC Marjorie Mpundu Counsel LEGAF Akinrinmola Akinyele Financial Management Specialist AFTFM Justin Runji Senior Transport Specialist AFTTR Thomas Anang Siaw Procurement Specialist AFTPC

Bank funds expended to date on project preparation: 1. Bank resources: $40,000 2. Trust funds: 3. Total: $40,000

Estimated Approval and Supervision costs: 4. Remaining costs to approval: $5,000 5. Estimated annual supervision cost: $125,000

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Annex 12: Documents in Project File

NIGERIA: Lagos Urban Transport Project 2

1. Planning Bus Services and Drafting Franchise Documents Towards the Implementation of a Pilot Bus Franchise Scheme on the Iyana-Ipaja-Ikotun Corridor, LAMATA, August 2006 2. Lagos Bus Rapid Transit Study, Final Report, LAMATA, April 2007 3. Environmental and Social Management Framework – July 2009 4. Environment Impact Assessment for the Proposed Road Rehabilitation at Aboru Road under LUTP 2 Road Network Efficiency Improvement Program – July 2009 5. Environment Impact Assessment for the Proposed LAMATA Corporate Head Office – July 2009 6. Resettlement Policy Framework of Lagos Urban Transport Project II – July 2009 7. Interim Report – Resettlement Action Plan for Aboru/Pipeline Road Rehabilitation Project – July 2009 8. Comment on the Response to GEF Secretariat Review – November 21, 2008 9. GEF Secretariat Review for Full/Medium-sized Projects – November 19, 2008

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Annex 13: Statement of Loans and Credits

NIGERIA: Lagos Urban Transport Project 2

Operations Portfolio (IBRD/IDA and Grants) As Of Date 4/28/2010

Active Projects Difference Between Last PSR Expected and Actual Supervision Rating Original Amount in US$ Millions Disbursements a/ Development Implementation Project ID Project Name Fiscal Year IBRD IDA GRANT Cancel. Undisb. Orig. Frm Rev'd Objectives Progress P100122 Avian Influenza Emergency ERL (FY06) S S 2006 50.0 7.6 4.5 P083082 MSME MS S 2004 32.0 13.6 11.5 P096151 NG - State Edu Sector Project S S 2007 65.0 31.3 18.2 1.1 P070290 NG- Health System Dev. II (FY02) S S 2002 217.0 0.198 61.5 - 50.7 - 44.9 P069901 NG-Com Based Urb Dev (FY02) MU MS 2002 110.0 42.5 46.0 18.5 P090644 NG-Comm. Social Dev. (FY09) S MS 2009 200.0 168.9 27.7 P096648 NG-Commercial Agriculture Development S S 2009 150.0 146.7 11.1 P088150 NG-Econ Reform & Govern SIL (FY05) MS MS 2005 140.0 78.9 74.6 12.9 P106172 NG-Electricity and Gas Improvement S S 2009 200.0 206.9 0.0 P096572 NG-Fadama Development-III SIL (FY08) S MS 2009 250.0 193.3 48.1 P090135 NG-Federal Roads Development MU MU 2008 330.0 321.5 24.6 P073686 NG-GEF Fadama 2 Crit Ecosys Mgmt (FY06) S S 2006 10.03 3.9 2.9 P102119 NG-HIV/AIDS Prog. Dev. II (FY09) S S 2009 225.0 231.5 4.7 P106280 NG-Lagos Eko Secondary Education (FY09) S S 2009 95.0 79.4 - 6.9 P071340 NG-Lagos Metropolitan Dev & Governance MS MS 2007 200.0 167.0 74.2 P074963 NG-Lagos Urb Trans SIL (FY03) S S 2003 150.0 13.6 - 52.1 - 2.1 P097921 NG-Malaria Control Booster Project (07) S MS 2007 280.0 177.2 1.3 - 13.6 P086716 NG-Min Res Sustain Mgmt (FY05) S S 2005 120.0 39.0 33.6 - 3.3 P090104 NG-Natl Energy Dev SIL (FY06) MS MS 2006 172.0 65.5 57.4 P071391 NG-Natl Urb Water Sec Ref SIM 2 (FY06) S S 2006 200.0 124.0 81.9 P072644 NG-Rural Access & Mobility - Ph. 1 MS MS 2008 60.0 52.7 12.2 P074132 NG-S&T Educ in Post-Basic Ed (FY07) MS MS 2007 180.0 120.1 100.9 P074447 NG-State Governance & Cp Bldg TAL (FY05) S S 2005 18.1 8.9 8.8 8.7 P071075 NG-Urb Water Sec Reform 1 SIL (FY04) S S 2004 120.0 20.7 14.9 Overall Result 3564.1 10.03 0.198 2,376.2 549.3 -22.73

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Nigeria Committed and Disbursed Outstanding Investment Portfolio As of 3/31/2010 (In USD Millions)

Committed Disbursed Outstanding

**Quasi Partici **Quasi Partici FY Approval Company Loan Equi ty Equi ty *GT/RM pant Loan Equi ty Equi ty *GT/RM pant

2009 Abn mf bank 3.16 1.12000 1.171.12000 2005 Accion nigeria 0 1.29000 00.61000 2003 Adamac 11.560006.9411.560006.94 2007/09 Aef hygeia 6.210000 2.210000 2000 Aef safetycenter 0.30000 0.30000 2000 Cape fund 0 0.41000 00000 2009 Capic 0 10000 01.96000 6/8/2005Diamond bank18.18024.550018.18024.5500 0 Ecobank nigeria250024.160250024.160 2007 Eleme 6.17 0 15 0 0 6.17 0 15 0 0 1992 Fsdh 0 0.86000 00.86000 2008 Geometric 04000 00000 5/6/2004Gtb 56.79000056.790000 2006 Gtfp access bank 0 2.35 11.25 0 0 0 2.35 11.25 0 0 2009/10 Helios towers ng 50 0 53.46 4.58 101 37.5 0 53.46 2.78 90 2006 Ibtc 0 0 7.91 0 0 0 0 7.91 0 0 1981/88 Ikeja hotel 0 0.07000 00.07000 2007 Leadway 0 13.3000 013.3000 2002/07 Mtnn 0 16.75000 016.31000 2006/07 Socketworks 2.1 0 1.53 0 0 2.1 0 1.53 0 0 2007 Star paper 9.980000 9.980000 2010 Tantalizers 7 1.57000 00000 2006 Uba 0 20.91000 020.91000 2007 Updc 35.830000 20.830000 2004 Updc hotels ltd. 4.590000 4.590000

Total Portfolio: 236.87 72.63 113.7 28.74 107.94 196.38 57.49 113.7 26.94 96.94

* Denotes Guarantee and Risk Management Products. ** Quasi Equity includes both loan and equity types.

127

Annex 14: Incremental Cost Analysis NIGERIA: Lagos Urban Transport Project 2

Baseline scenario

1. The success of the Bus Rapid Transport (BRT)-Lite corridor from Mile 12 to the Church Missionary Society (CMS)/Marina has largely changed underlying conditions for urban transport planning in Lagos. While in the past there would have been a presumption in resource and policy priority for road expansion and “muddling through”, the BRT-Lite and the demand it has created for similar service elsewhere in the city has created an understanding among travelers in the Lagos area of how a sustainable transport choice can also substantially enhance mobility. A direct consequence of that changed expectation is the Lagos Urban Transport Project (LUTP) 2 project, to expand BRT service both to an additional (circumferential) corridor, and to an extension of the existing corridor.

2. In the baseline scenario, therefore, new BRT corridors would be developed (Oshodi to Obalende via Mile 2 and Oshodi to Ikorodu extension via Mile 12), and these would lead to more sustainable transport choices, primarily among travelers who would otherwise be taking public transport, using conventional danfos and molues. However, implementation of a comprehensive communications and media strategy, and extensive consultations with potential users and non- users would be unlikely to occur, because resources would be prioritized elsewhere. The resulting BRT network would still be effective at both improving mobility along the corridors and in promoting a shift toward environmentally sustainable modes among existing public transport users, but the potential for modal switching would not be maximized, because there would be no systematic effort to collect the information that affects choice riders whose travel decisions have the most potential to reduce or increase carbon dioxide (CO2) emissions – car and two-wheeler passengers – and because there would be no effort to target and market services to those potential users.

3. In addition, in the absence of the Global Environment Facility (GEF) funding, there would be no structured effort to facilitate the transfer of capacity and lessons learned from Lagos to Kano, the second largest city in Nigeria and an emerging megacity in its own right.

Global environmental benefits / Fit with SF-4

4. The project aims to improve mobility along specific intervention corridors, and, by so doing, encourage more sustainable choices by travelers on a day-to-day basis. The expansion of the BRT network from a single network to several corridors – including non-radial corridors – will help transform markets for mobility services; increased understanding of mobility needs by high-carbon-footprint travelers will further enhance this market transformation by expanding the scope and reach of market transformation. The project also aims to accelerate understanding of the mobility and environmental benefits of BRT among technicians and policy makers in Kano, Nigeria’s second city. In so doing, the project aims to reduce the lead time toward the development of effective BRT in Kano.

128

Incremental benefits of GEF funding

5. The underlying project itself is largely consistent with the objectives of GEF climate change funding in general, and Focal Area Strategy 7 of GEF-4 strategic programming in particular. The key project development objective (PDO) is promoting a shift to more environmentally sustainable urban transport modes; the Global Environmental Objective is to promote even more of a shift, specifically by facilitating more effective targeting and marketing of BRT services to users with larger carbon footprints than otherwise would be the case, and by expanding the geographic reach of the project to influence thinking in Kano as well.

6. An assessment of CO2 emissions reductions associated with one of the corridors being funded under the project was carried out by application of proportional reduction observed in the BRT-Lite corridor. (Sufficient data was unavailable to carry out the analysis for the Ikorodu corridor.) This analysis suggests annual CO2 emissions reductions for the single corridor on the order of about 2.4 kilotons per year, and a possible incremental reduction in CO2 emissions associated with the GEF activities in Lagos of up to 2.8 kilotons per year20. A detailed discussion of the methodology used and its advantages and disadvantages is presented in a sub-Annex to this Annex.

Results framework

7. Please see Annex 3 for the results framework and monitoring indicators.

Co-financing

8. A co-financing table is presented in Annex 5. Since the underlying PDO itself is consistent with GEF strategic program SS-5 of the GEF-4 Focal Area Strategy, most of the funding included in the project as a whole (US$329.5 million) can be considered to be co- financing toward the Global Environmental Objectives.

20 These numbers are not directly comparable. See Annex 15a for detailed explanation. 129

Annex 14a: Methodology used to determine ex ante indicative CO2 emissions reductions from the project

1. To develop a detailed estimate of the magnitude of carbon dioxide (CO2) emissions reductions that might be expected from the project would require a comparison of aggregated CO2 emissions from vehicles plying the streets of Lagos in a with-project and without-project scenario. Under ideal circumstances, such an estimate would require a well-calibrated and validated network transport demand model (to forecast traffic flows), and robust measurements of vehicular fuel economy by vehicle type, ideally using a modal model that takes into account road traffic conditions. The transport demand model, in turn, would ideally be specified in a manner such that changes in travel time could robustly capture changes in travel behavior at all junctures of the travel decision process – not simply mode share changes, but also changes in destination choice, departure times, and trip-chaining.

2. While the project is supporting a travel demand model for Lagos, the development of such tools for Lagos, as for any developing country city, involves millions of dollars, many years of incremental development, and a substantial amount of capacity building for staff and institutions. Consequently, the tools that would be needed to develop a proper assessment of CO2 emissions reduction – not only ex ante, but ex post as well, because there is always a need to construct a viable counterfactual, even throughout project monitoring – are not yet available for Lagos.

3. CO2 emissions reductions associated with the current project, then, are estimated using proxy measures, and should be considered as an order-of-magnitude assessment only. Because the project involves investment in a particular Bus Rapid Transport (BRT) corridor in city that already has some experience with BRT, measured reductions in CO2 emissions from the BRT- Lite corridor have been applied proportionally to traffic count measurements taken along the Oshodi to Central Business District (CBD) (circumferential) corridor. (Recent traffic counts are not available for the Ikorodu extension.21)

4. Traffic counts were undertaken along the BRT-Lite corridor one year before and one year after the opening of the BRT-Lite line. These counts showed a drop in average daily vehicular travel along the corridor of about 5,800 vehicles in the southbound direction, and about 4,900 in the northbound direction. These counts were manual, classified counts, so specific reductions in CO2 emissions can be associated with specific types of vehicles.

5. There is at present no reliable source of data on on-road vehicular fuel economy in Nigeria. Field research has been conducted in Nairobi, Kenya and Accra, Ghana, however, and the results of those research efforts have been combined to develop estimates of emissions factors for Nigeria. The emissions factors developed using this methodology appear to the Project Team to be on the low side, meaning that the resulting analysis is likely conservative. Lagos specific factors would be developed as part of project implementation. The emissions factors used for the analysis are as follows:

21 Because the existing BRT-Lite corridor ends at the beginning point of the proposed Ikorodu extension, and there are fairly recent traffic counts at this point, it was decided to focus project preparation resources on the large traffic counting needs along the circumferential route. 130

Table 1: Emission factors used in the analysis

Vehicle type Grams CO2 per km Car 343.52 Taxi 320.46 Danfo / Bus 489.13 BRT 1316.78

6. Based on these emissions factors and the reduction in traffic flow observed, a reduction in CO2 emissions of 13 percent, or about 24.7 kilotons per year, was calculated to have occurred immediately after development of the BRT-Lite corridor.

7. Traffic counts of along the Oshodi to Central Business District (CBD) corridor were carried out in April 2009. The results of these counts are presented below:

Table 2: Traffic counts along Oshodi corridor

Direction Daily vehicles Mile 2 to Lagos Island 9,300 Oshodi to Mile 2 16,000 Lagos Island to Mile 2 16,700 Mile 2 to Oshodi 22,900

8. Again, the counts were manual, so vehicle-specific CO2 emissions factors can be applied to them. The resulting CO2 emissions associated with this corridor were calculated to be about 307 tons per day. The proportion of traffic flow change associated separately with northbound (away from CBD) and southbound (toward CBD) vehicular travel as measured in the BRT-Lite 22 corridor was then applied to these flow numbers , and CO2 emissions recalculated, at about 298 tons per day. These calculations suggest that if BRT service along this corridor affects vehicular use in similar proportions as has been observed along the BRT-Lite corridor, the project will result in a reduction of CO2 emissions of about 2.4 kilotons in the first year for this corridor alone.

9. A number of caveats are in order regarding the above-outlined methodology.

(a) The assessment is for the Oshodi to CBD corridor; emissions reductions associated with the Ikorodu route have not been quantified. (b) The assessment includes only direct CO2 from vehicles. Indirect CO2 associated with behavioral change of travelers is not assessed, nor are other greenhouse gasses

22 For the purpose of this calculation, it was assumed that the level of BRT service on the corridor would be the same as that provided in the BRT-Lite corridor. 131

(GHGs), such as methane and nitrous oxide, nor other emissions with radiative forcing characteristics, such as particulates. (c) Emissions reductions are measured against a base year condition, not against a rolling baseline. Measurements against a base-year condition can be a useful indicator of short-term changes, but are not appropriate for quantifying long-term changes effected by the project. (d) Traffic counts data available did not include Okata (two-wheelers). Consequently, CO2 emissions reduction from potential mode switching from Okata to BRT is not taken into account. (e) The above analysis simply assumes heuristic repetition of observed patterns from one corridor to another, and clearly does not attempt to describe the underlying behavioral or economic mechanisms giving rise to the observed changes; it is possible that conditions along the corridors are sufficiently different that the underlying behavioral or economic responses would be different. (f) A number of potential sources of leakage are not taken into account in the above analysis, including:

i. Use of surplus bus capacity for vehicle kilometers travelled (VKT) not along the corridor (potentially reduces net CO2 emissions reduction); ii. Improved fuel economy of cars and buses operating along corridor because of ameliorated traffic conditions (potentially increases net CO2 emissions reduction, but this would probably not be substantial given current conditions along the corridor); and iii. The VKT associated with changes in trip routing to take advantage of time savings on BRT, such as VKT that would occur (and be measured) of the corridor (unclear direction of error).

10. To factor up to project-level CO2 emissions savings from the single corridor (for the purpose of setting target values in Annex 3), the following assumptions were used:

(a) BRT-Lite corridor base-year CO2 emissions (for the purpose of this project) were calculated on the basis of actual observed traffic flows in 2008

(b) To be conservative, it was assumed that base-year CO2 emissions along the Oshodi- Ikorodu corridor were only 75 percent of those calculated for Oshodi-Obalende corridor.

(c) Both Oshodi-Okorodu corridor and Oshodi-Obalende corridor should reduce CO2 emissions by the same proportion by project end (calculated Oshodi-Obalende proportions were used).

(d) Most of the CO2 emissions reduction available from the existing BRT-Lite corridor can be associated with the service already operating there. However, because of network effects, it was assumed that an additional reduction along that corridor, equivalent to 75 percent of those calculated for Oshodi-Obalende corridor, might be seen even in the existing BRT-Lite corridor. 11. These assumptions collectively resulted in an anticipated project savings of about 33 kilotons off of an estimated project baseline of about 1100 kilotons. These numbers will be 132

verified and adjusted during project implementation. Since this figure is based on an observed before-after count, this number can be interpreted as a one-year change following the introduction of new services. If extrapolated over an assumed project life of 20 years, this would mean an overall abatement of about 660 kilotons.23

12. To calculate CO2 emissions savings associated, specifically with the GEF activities in Lagos (subcomponent 2E), a slightly different approach was used. There, the target value of seven percent of BRT riders who report having a car or motorcycle available was used. A number of assumptions were used in the analysis including the following:

Table 3: Assumptions for CO2 emissions Category Assumed value

End of project daily BRT 350,000 network ridership

Motorcycle occupancy rates 1.8

Car occupancy rates 2.5

Car CO2 emissions factor 343.52 g/km

Motorcycle CO2 emissions 150 g/km factor

Average motorized trip 8 km distance in Lagos

Proportion of private 70% transport switchers being two-wheeler riders

13. Mode switching was assumed to occur only in year five of the project, but the calculated CO2 emissions savings were then annualized over the entire project. The result was a projected annualized CO2 emissions savings of up to 2.8 kilotons per year. It should be noted that this is for the entire network, not just one corridor, and assumes that passenger trips by public and private transport produce the same vehicular trip distance (probably an erroneous assumption, but there is not sufficient information to assume otherwise). It is not directly comparable to the estimated CO2 emission saving from the project as a whole, because that number does not include two-wheelers, and does not take into account network effects.

23 The figure shown is for order-of-magnitude purposes. Since a before / after change does not represent the likely ongoing reduction against a counterfactual scenario, actual emissions reductions evaluated against such a counterfactual is likely to be different, and possibly higher. These reductions (compared to counterfactual) will be estimated during project life based on methodology outlined in Annex 14b. 133

Annex 14b: Proposed methodology for estimation of CO2 emissions avoided from the project during project implementation

1. Avoided CO2 emissions will be estimated during the life of the project. This annex presents an overview of the methodology that will be pursued to effect this estimation. Modifications will be made according to real world conditions as warranted in practice.

24 2. The method is based on the ABC identity of CO2 emissions , presented in equation 1 below:

= Gs ∑ As BsCs b [1]

Where:

Gs = total CO2 emissions from transport in study boundary in scenario s; b = vehicle binning characteristics, such as mode, vehicle type/size, fuel type, etc.; A = vehicle Activity (vehicle kilometers of travel) in scenario s; B = energy intensity per unit of vehicle activity in scenario s (the “Brawn” of vehicles in the bin); C = lifecycle Carbon content of fuel used per unit of energy consumed in bin b in scenario s.

3. Two scenarios will be measured or estimated: with-project and without-project. The difference in Gwith-project and Gwithout-project would be the estimated CO2 emissions avoided for this project.

4. The A and B terms in the above equation can be further broken down into elements that can be measured and monitored from either a traffic or mechanical engineering point of view. The proposed breakdown for this exercise is as follows:

= [2]

= [3]

Where: T = number of passenger trips (by vehicle bin); D = average distance per trip (by vehicle bin); O= per kilometer vehicle occupancy (by vehicle bin); and 25 Im = average vehicle energy intensity when operated at vehicle engine load m (by vehicle bin).

24 ABC is proposed as an alternative to the more widely used Activity, Structure, Intensity Framework (ASIF) identity. Activity, Structure, Intensity Framework (ASIF) is considered to be a technically correct but awkward formulation for the purpose of policy analysis. In practice, the separation of (passenger travel) activity and modal structure is unnecessary at best and confusing to non-technical specialists at worst. 134

5. The monitored parameters that determine net CO2 emissions increases or reductions, then, are essentially differences between the two scenarios in the distribution of:

• passenger trips; • average passenger trip distances; • vehicle occupancies; and • average engine loads as a function of congestion, routing and scheduling.

6. Across different categories of vehicles (bins). The analysis will also require some base data on vehicle fuel economy and drive-cycles, by bin, to be gathered under sub-component 4D.

7. Aspects of the methodology to be resolved during implementation are what vehicle bin categories should be used, how the measurement boundaries should be established, procedurally how the measurements should occur, and what aspects of the counterfactual scenario need to be derived by simulation, and how that should occur.

25 Standardized drive cycles are traditionally used as a proxy for integration over engine modes, but newer generations of emissions and energy models address allow for more fine-tuned, modal disaggregation. 135

Annex 15: Country at a Glance

NIGERIA: Lagos Urban Transport Project 2

Nigeria at a glance 2/25/10

Sub- Lower Key Development Indicators Saharan middle Nigeria Africa income Age distribution, 2008 (2008) Male Female

Population, mid-year (millions) 151.3 818 3,702 75-79 Surface area (thousand sq. km) 924 24,242 32,309 60-64 Population growth (%) 2.3 2.5 1.2 Urban population (% of total population) 48 36 41 45-49 30-34 GNI (Atlas method, US$ billions) 177.4 885 7,692 15-19 GNI per capita (Atlas method, US$) 1,170 1,082 2,078 GNI per capita (PPP, international $) 1,940 1,991 4,592 0-4

10 5 0 5 10 GDP growth (%) 6.0 5.0 7.6 percent of total population GDP per capita growth (%) 3.7 2.5 6.3

(most recent estimate, 2003–2008)

Poverty headcount ratio at $1.25 a day (PPP, %) 64 51 .. Under-5 mortality rate (per 1,000) Poverty headcount ratio at $2.00 a day (PPP, %) 84 73 .. Life expectancy at birth (years) 47 52 68 Infant mortality (per 1,000 live births) 97 89 46 250

Child malnutrition (% of children under 5) 27 27 26 200

Adult literacy, male (% of ages 15 and older) 80 71 88 150 Adult literacy, female (% of ages 15 and older) 64 54 77 100 Gross primary enrollment, male (% of age group) 104 103 112 Gross primary enrollment, female (% of age group) 89 93 106 50

Access to an improved water source (% of population) 47 58 86 0 Access to improved sanitation facilities (% of population) 30 31 52 1990 1995 2000 2007

Nigeria Sub-Saharan Africa

Net Aid Flows 1980 1990 2000 2008 a

(US$ millions) Net ODA and official aid 34 255 174 2,042 Growth of GDP and GDP per capita (%) Top 3 donors (in 2007): Netherlands 3 4 0 344 12 A ustria 0 1 2 321 United Kingdom 5 25 23 286 8

A id (% o f GNI) 0.1 1.0 0.4 1.3 4 Aid per capita (US$) 0 3 1 14 0

Long-Term Economic Trends -4 95 05 Consumer prices (annual % change) 10.0 7.4 6.9 11.6 GDP implicit deflator (annual % change) 12.4 7.2 38.2 11.0 GDP GDP per capita Exchange rate (annual average, local per US$) 0.8 9.2 101.7 118.5 Terms of trade index (2000 = 100) 165 87 100 214 1980–90 1990–2000 2000–08 (average annual growth %) Population, mid-year (millions) 71.1 94.5 124.8 151.3 2.8 2.8 2.4 GDP (US$ millions) 64,202 28,472 45,984 207,118 1.6 2.5 6.6 (% o f GDP ) Agriculture .. .. 48.6 32.7 .. .. 7.0 Industry .. .. 30.5 40.7 .. .. 3.8 M anufacturing .. .. 3.4 2.6 ...... Services .. .. 20.9 26.6 .. .. 14 . 4

Household final consumption expenditure ...... General gov't final consumption expenditure ...... Gro ss capital fo rmatio n ......

Exports of goods and services 29.4 43.4 54.0 41.6 ...... Imports of goods and services 19.2 28.8 32.0 24.7 ...... Gross savings ......

Note: Figures in italics are for years other than those specified. 2008 data are preliminary. .. indicates data are not available. a. Aid data are for 2007.

Development Economics, Development Data Group (DECDG). 136

Nigeria

Balance of Payments and Trade 2000 2008 Governance indicators, 2000 and 2008 (US$ millions) Total merchandise exports (fob) 23,761 84,117 Total merchandise imports (cif) 10,953 36,885 Voice and accountability Net trade in goods and services 10,093 34,972 Political stability Current account balance 5,353 42,262 as a % o f GDP 11.6 20.4 Regulatory quality

Rule of law Workers' remittances and compensation of employees (receipts) 1,392 9,980 Control of corruption

Reserves, including gold 9,400 77,484 0 25 50 75 100

2008 Country's percentile rank (0-100) Central Government Finance higher values imply better ratings 2000 (% of GDP) Current revenue (including grants) 41.2 32.8 Source: Kaufmann-Kraay-Mastruzzi, World Bank Tax revenue 13.6 .. Current expenditure 29.5 21.2 Technology and Infrastructure 2000 2008 Overall surplus/deficit 6.3 3.6 Paved roads (% of total) 30.9 15.0 Highest marginal tax rate (%) Fixed line and mobile phone Individual 25 .. subscribers (per 100 peo ple) 0 42 Corporate 30 .. High technology exports (% of manufactured exports) 0.4 7.8 External Debt and Resource Flows Environment (US$ millions) Total debt outstanding and disbursed 31,355 11,221 Agricultural land (% of land area) 77 81 Total debt service 1,845 609 Forest area (% of land area) 14.4 12 . 2 Debt relief (HIPC, M DRI) – – Nationally protected areas (% of land area) .. 6.2

Total debt (% of GDP) 68.2 5.4 Freshwater resources per capita (cu. meters) 1,683 1,493 Total debt service (% of exports) 7.3 0.6 Freshwater withdrawal (billion cubic meters) 8.0 ..

Foreign direct investment (net inflows) 1,140 3,636 CO2 emissions per capita (mt) 0.63 0.81 Portfolio equity (net inflows) 0 -4,684 GDP per unit of energy use (2005 PPP $ per kg of oil equivalent) 2.0 2.5 Composition of total external debt, 2008 Energy use per capita (kg of oil equivalent) 715 726 IBRD, 211

IDA, 2,243 World Bank Group portfolio 2000 2008

IMF, 0 Other multi- (US$ millions) lateral, 535

Bilateral, 323 IB RD Short-term, Total debt outstanding and disbursed 1,625 211 Private, 453 7,456 Disbursements 31 0 Principal repayments 273 189 Interest payments 103 17

US$ millions IDA Total debt outstanding and disbursed 644 2,243 Disbursements 55 353 Private Sector Development 2000 2008 Total debt service 9 37

Time required to start a business (days) – 31 IFC (fiscal year) Cost to start a business (% of GNI per capita) – 90.1 Total disbursed and outstanding portfolio 16 622 Time required to register pro perty (days) – 82 o f which IFC o wn acco unt 16 559 Disbursements for IFC own account 4 84 Ranked as a major constraint to business 2000 2008 Portfolio sales, prepayments and (% of managers surveyed who agreed) repayments for IFC own account 1 180 n.a. .. .. n.a. .. .. M IGA Gross exposure – 108 Stock market capitalization (% of GDP) 9.2 24.0 New guarantees 0 7 Bank capital to asset ratio (%) 7.4 16 . 3

Note: Figures in italics are for years other than those specified. 2008 data are preliminary. 2/25/10 .. indicates data are not available. – indicates observation is not applicable.

Development Economics, Development Data Group (DECDG).

137

MAP SECTION

0° 10° MALI NIGER NIGERIA CHAD BURKINA LAGOS URBAN TRANSPORT PROJECT 2 FASO NIGERIA ° BENIN 10° 10 Niger PROPOSED CORRIDOR (IDA) LOCAL DISTRIBUTOR ROADS

Abuja Benue PROPOSED CORRIDOR (AFD) MAIN ROADS EXISTING CORRIDOR BUILT UP AREAS TOGO Area of GHANA map ACTIVITY AREAS LOCAL GOVERNMENT BOUNDARIES CENTRAL AFRICAN LAGOS STATE BOUNDARY REPUBLIC CAMEROON This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information EQUATORIAL 0 1 2 3 4 5 shown on this map do not imply, on the part of The World Bank GUINEA Gulf of Guinea Group, any judgment on the legal status of any territory, or any KILOMETERS endorsement or acceptance of such boundaries. SÃO TOMÉ CONGO 0° & PRÍNCIPE 10° GABON

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