Document of

The World Bank

FOR OFF0CLAL USE ONLY

4/,OV 3/f A ^

RqoK No. P-5072-UNI

MEMORANDUM AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

OF US$14 MILLION

TO THE

FEDERAL REPUBLIC OF NIGERIA

FOR A

NATIONAL SEED AND QUARANTINE PROJECT

OCTOBER 23, 1989

i documnt ha a rsticted distibution oad may be sed by recpins ony In the perfomna ofthei official &dtis. Its contents may not otherwise be discosed without WwSorl&Dn authorzation.

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CURMENCY IQUIVAIENTS

Currency Unit * Nairs (N)US$1.00 - (N)7.0a (100 XOBOS) - US$0.143

WEIGHTS AND )KSURlES

Unless otherwise stated all weights andmeasures.used in this report are metric.

1 metric ton (a ton) - 2.205 pound (lb)1 hectare (ha) - 2.47 acres (ac)1 kilometer (km) * 0.62 miles (mi)1 meter (a) - 3.28 feet (ft)

ABBREVI&TIONS AND ACRONYMS

ADP Agricultural Development ProjectPASCOM FaPmurs Supply CompanyPDARD Federal Department of Agriculture and Rural DevelopmentFGN Federal Government of Nigeria

JENAllRD Federal linistry of Agriculture Water Resources andRural Development

RS?T Federal Ninistry of Science and TechnologyNSC National Seed CouncilNSS National Seed ServicePQS Plant Quarantine Service

FISCAL YEAR

January 1 - December 31

FOR OmCIAL UE ONLY

NIGERI

NATIONAL SEED AND Q_UARANTINE PROJECT

LOAN AND PROJECT SUMt2ARY

Borrowers Federal Republic of Nigeria

Beneficiary: Federal Republic of Nigeria (FGN).

Amount: US$14 Million equivalent

Terms: Payable over 20 years, including five yearsof grace, at standard variable interest rate.

Financint Plant IBRD USS 14.0 millionFederal Government US$ 4.9 millionNational Seed Service US$ 0.5 millionPlant Quarantine Service USS 1.2 million

TOTAL: US$ 20.2 million

Economic Rateof Return: 411 (Seed Component only)

Staff AnnraisalRenorts No. 7763-UNI

IBRD Numbers: 21454, 21457, 21458

This document has a esiced distibution and may be used by recipients only in the performanceof the officia duties. Its contents may not otherwise be disclosed without Word Beak authornzation.

IENORANDIM AND FECOHHENDUION OF TUE PR$SIDENT OF TERINTEUNATIONAL BANR FOR RRCONSTRUCTION AND DEVELOPMENT

TO TEM EXECUTIVE DIRECTORS ON A PROPOSED LOANTO THE REPUBLIC OF NIGERIA FOR A

NATIONAL SEED AND QUARANTINE PROJECT

1. The following memorandum and recommendation on a proposed loanto the Federal Republic of Nigeria for US$14 million is submitted forapproval. The loan would be for 20 years, including five years of grace,at standard variable interest rate. The loan is to strengthen the seedsub-sector and the Plant Quarantine Service.

2. Background. Reliable provision of good quality seed of improvedvarieties is crucial for continued growth of Nigerian agriculture. TheGovernment in 1975 established the National Seed Service (NSS) which hasmade some progress in producing improved seed. Other agencies involvee inseed production include the Bank financed Agricultural Development Projects(ADPs), State Seed Multiplication Units (SSMUs) and some private companies.The current total production of such commercial seed of different cropsfrom public sector agencies is estimated to be about 13,500 tons, enough toplant only a small proportion of total cultivated area ranging between 0.1X(millet) to 5S (rice). The private sector, which concentrates on the muchmore profitable hybrid maize seed, produces about 1,200 tons per annum,enough to plant about 32 of the maize area. Thus, substantial increasesover present level of use can be foreseen if the quality of seed andappropriateness of variety could be improved.

3. Recent research in Nigeria has led to the release of improvedvarieties of several crops, e.g. maize, rice, soybean, cassava. However,Nigeria is unable to fully benefit from these developments as the manypublic sector agencies involved in seed related activities, operate withouta clearly defined strategy or coordination; the relative roles are poorlydefined; and key operations suffer from inadequate funding. The pricingpolicies of these agencies are not conducive to the growth of the privatesector. Legal framework, mechanisms for quality improvement andcertification are not in place, resulting in production of poor qualityseed at all stages of multiplication.

4. The Plant Quarantine Service (PQS) of Nigeria has the responsi-bility to minimize the risk of inadvertent introduction of pests andpathogens; provide seed health inspection service and assist to meetquarantine requirements of importing countries. However, due to weakorganization and management, lack of well-trained experienced staff, andinadequate and erratic funding by the Government, this service is run-downand unable to perform the key functions adequately.

5. Rationale for Bank Involvement. The seed industry in Nigeriais at a critical stage. The publ'c sector agencies require a cleararticulation of their long-term roles and responsibilities and the privateseed sector needs a favorable institutional and policy environment forfuture growth. The Bank's support would help to achieve these changes.Similarly, Bank's assistance would rationalize PQS activities and reorient

resources on areas presenting the highest risks in a reliable and timelyfashion.

6. Proiect Obiectives. The project aims to increase theavailability of quality seed of appropriate varieties through policy reformincluding market oriented pricing of seed, seed legislation, and effectivecertification and quality control arrangements. It would rationalize theroles of seed industry institutions and encourage greater private sectorparticipation. The PQS would be strengthened and its work programsprioritized to enable it to effectively provide essential services.

7. Proiect Description. The organization and management of theseed industry would be improved through: (i) defining the medium-term seedsector policy framework; (ii) enactment of seed legislation; (iii)establishment of a National Seed Council (NSC); (iv) rationalization ofroles and responsibilities of NSS, ADPs, and Farmers' Agricultural SupplyCompanies (PASCOMs) aimed at minimizing their direct involvement in seedproduction and distribution, and introduction of sound commercial practicesincluding cost recovery; the emphasis of NSS's role would be on thepromotion of the seed sub-sector, provision of technical support to ensureadoption of improved seed by farmers, coordination of breeder andfoundation seed supply, seed certification, seed quality control, and humanresource development for the seed industry; (v) encouragement of theprivate sector participation through policy changes, access for privateseed enterprises to breeder and foundation seed of publicly bred varieties,freedom to develop their own research capability, freedom to selltruthfully labelled seed and assistanc3 to a few "pioneer" seedentrepreneurs in establishing small-scale seed enterprises and supportingothers in preparing proposals for possible financing by lendinginstitutions. The project also provides for the: (i) upgrading andrehabilitation of facilities for the most vital stages of breeder andfoundation seed production processing and storage; and (ii) technicalassistance in policy formulation, and seed industry development. In thecase of PQS, changes in organization and management would be introduced andits activities would be focussed on areas presenting the highest risks.This would require selective upgrading of facilities for pre- and post-entry quarantine operations. The technical know-how and managementcapability of the PQS staff would be enhanced through training andtechnical assistance. The project would strengthen export inspection andcertification services provided by PQS to facilitate internationalacceptance of Nigeria's current and future agricultural exports.

8. The total cost of the project is estimated at US$20.6 millionequivalent with a foreign exchange component of US$11.5 million (56? oftotal cost). A breakdown of costs and financing are shown in Schedule A.Amounts and methods of procurement and disbursement, as well as thedisbursement schedule are given in Schedule B. A timetable of key projectprocessing events and the status of Bank Group operations are given inSchedules C and D, respectively. Three maps of Nigeria are also attached.The Staff Appraisal Report No. 7763-UNI, dated October 23, 1989, is beingdistributed separately.

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9. Actions. At negotiations IBRD obtained assurances from FGNthats (i) By December 31, 1992, all foundation seed handled by the NSSwould be produced through contracts with private seed growers and seedfarms owned by NSS would be phased outt (ii) By January 31, 1993, thefeasibility of making Seed Production Section of NSS, a fully autonomousoperation vith private sector participation would be investigated; (iii)Private sector seed enterprises would have access to breeder and foundationseed of publicly bred varieties and would be free to import seed for use inthe development of new varieties and/or seed production; (iv) Criteria forselection of up to 10 'pioneer* private small-scale seed enterprises to beassisted under the project would be developed by the NSS, and agreed withthe Bank; this assistance, to be paid back in full by the participants,would not be in the nature of a credit component, and funds recovered frominvestors would be utilized for promoting the seed industry; (v) BySeptember 30, 1993, a fully autonomous seed certification service would beestablished; (vi) Working capital to finance breeder and foundation seedoperations and reserve stock funds would be maintained in two separate bankaccounts to be administered by NSS; (vii) Introduction of the second andthird stages of the pricing policy for foundation and certified seed wouldbe implemented by the public sector agencies by December 31, 1991 andDecember 31, 1992 respectively; and (viii) The second and third stageincreases in the seed certification charges would be implemented byDecember 31, 1992 and December 31, 1995, respectively. Conditions of LoanEffectiveness would be: (i) PQS would review and rationalize the number ofsapport staff to be consistent with the workload of the service andprepare a staff development plan to update technical qualification of staffinvolved in enforcement of quarantine regulations; (ii) FMG would pay onehalf of their first year's contribution in advance into the respectiveaccounts of the NSS and the PQS; (iii) The first stage of the pricingpolicy for seed handled by the public sector agencies would be implementedto recover seed procurement prices paid to contract growers and theprocessing costs incurred by the participating public sector agencies; (iv)The first stage of certification charges would be introduced to recover atleast 25S of direct operational costs of providing this service; and (v)Separate special bank accounts would be operated for revenues from seedcertification services, foundation seed sales and quarantine services.Additionally, some of the coiditions of disbursement would be: (i) againstthe research category, the NSS and the National Root Crops ResearchInstitute would enter into an agreement with a suitably qualifiedinstitution for the development of rapid seed yam multipication techniques;(ii) against PQS Stage II category, PQS would enter into arrangements withreputable Nigerian and/or foreign organizations to permit them to test and.screen certain categories of imported materials for diseases, pests andweeds subject to PQS standards and monitoring before commencing the secondstage rehabilitation of the Pre-entry Technical Support Services; and viii)against PQS Stage II, the performance and volume of work undertaken by thefirst set of Pre-entry Inspection Station and Export Certification Unitswould be reviewed after they have been in operation for at least one year,before establishing additional Centers/Units during the second stagerehabilitation of the Port Inspectorate Services.

10. Proiect Benefits. The project would enhance the role of thepublic sector in providing technical support and undertaking regulatory

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functions. It would also result in increased participatior by the privatesector in seed production and marketing. The introduction of cost-efficient seed pricing and management practices by tl,e public sectoragencies would reduce dependence on Government subventione. Availabilityof good quality seed would result in increased crop production. especiallyby saml1holders. The main benefits of the PQS component would be tominim-.ze potential threat to Nigerian agriculture from inadvertentlyintroduced pests, diseases and noxious weeds; enhanced support to cropimprovement and breeding programs through timely and speedy c-arance ofexotic germplasm; s-'pport to the emerging seed industry by fa litating theImportation of seed% of improved varieties for local selection andadaptation; and assistance to exporters of agricultural produce in meetingthe phytosanitary requirements of importing countries.

11. i_sks. A delay in implementation of policy-related actions forthe seed component could reduce the effectiveness of the much neededcoordination between Research Institutes, NSS, ADPs and PASCOMs and alsoinhibit a strong response from the private sector. This risk is notable bythe need for coordinated action in major seed producing states to sustainthe new policy framework. The Government's commitment to speedyimplementation of policy changes and need for effective coordination wouldbe reinforced through the creation of the National Seed Council (NSC) andadoption of the seed sector policy statement. In parallel, during thepreparation phase, the NSS has developed a broad consensus behind thepolicy reforms and this process is to be continued through the proposednational workshops and the activities of the NSC. In-addition, the Bank'sown agreements with the individual states also reflect these policyobjectives. To minimize funding constraints, the Bank's disbursements arebeing focussed on the crucial operations of breeder and foundation seedproduction. Furthermore, to enhance the medium-term sustainability of theISS. it is proposed that operational expenses be recovered throughintroduction of user fees.

12. The main risk with the quarantine component is the unprepared-ness of the PQS staff to effectively manage a service based on the conceptof biological risk assessment. This risk would be minimized bycomprehensive in-country and overseas training program for PQS staff. Thetechnical assistance support to PQS would help build up management capacityand update operational procedures.

13. Recommendation. I am satisfied that the proposed loan wouldcomply with the Articles of Agreement of the Bank and recommend that theExecutive Directors approve the proposed loan.

Barber B. ConablePresident

Attachments

Washington, D.C.October 23, 1989

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Schedule A

NIGERIA

NAT12OAL SEED AND QUARANTINE PROJECT

ESTIMATED COSTS AND FIF'.CING PLAN

Estimated Costs: Local Foreizn Total------ US$ Million------------

Seed Institutional Reform 0.9 1.7 2.6Seed Quality Control andCertification 1.1 1.4 2.5

Seed Production, Processing andStorage 1.7 1.9 3.6

Seeds Training 0.8 1.1 1.9Seeds Variety Testing andRelease Support 0.7 0.7 1.4

PQ: Institutional Reform 0.4 0.6 1.0PQ: Training 0.4 0.7 1.1PQ: Port Inspectorate Services 0.9 0.9 1.8PQ: Post Entry Tech. Support

Services 0.7 1.0 1.7

Total Base Costs 7.6 10.0 17.6Physical Contingencies 0.6 0.7 1.3Price Contingencies 0.9 0.8 1.7

Total Costs aJ 9.1 11.5 20.6- _

a/ Of which US$1.2 million represents duties and taxes.

Financing Plan:Local Foreign Total------------US$ Million-------------

IBRD 2.5 11.5 14.0FGN 4.9 - 4.9NSS 0.5 - 0.5PQS 1.2 - 1.2

Total 9.1 11.5 20.6

Estimated Disbursements:

IBRD Fiscal Year: FY90 FY91 FY92 PY93 !XM n95

Annual 1.6 2.8 2.8 3.3 3.2 0.3Cumulative 1.6 1.4 7.2 10.5 13.7 14.0

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Schedule BPage 1 of 2

Amopnts and Method of Procurement('s$ million) 1/

Project Element Procurement Method TotalICB LCB Other

-__-------(US$ million)------------

Civil Works - 1.9 - 1.9(1.7) (1.7)

Technical Assistance - - 1.9 1.9_ _ (1.9) (1.9)

Training - - 2.5 2.5(2.5) (2.5)

Research - - 0.7 0.7(0.7) (0.7)

VehicleslMAchinery and 5.0 1.7 (0.8) 7.5Equipment (5.0) (1.0) (0.8) (6.8)

Incremental LocalSalaries/Allowances - - 1.0 1.0

Operation/Maintenunce - - 3.2 3.2

Incremental Working Capital - - 0.2 0.2(0.2) (0.2)

Reserve Stock - - 0.3 0.3(0.3) (0.3)

Other Costs 1.4 1.4

TOTAL 5.0 3.6 12.0 20.6(5.0) (2.7) t 6.3) (14.0)

1/ Includes physical and price contingencies. Figures in parenthesesrefer to fi.nacing by IBID.

Schedule BPage 2 of 2

NIGERIA

RATIONAL SEED AND QUARANTINE PROJECT

Summarv of Disbursement S8hedule(US$ Million)

Amount of Loan I of ExpenditureCategory Allocated to be financed

1. Civil Works 1.0 1001 of foreign &902 of local

2. Vehicles, Machinery/ 5.0 1002 of foreign &Equipment 902 of local

3. Technical Assistance 1.7 100l

4. Training 2.3 1001

5. Seed Research 0.6 100l

6. Incremental Working Capital 0.2 1002

7. Reserve Seed Stock 0.3 1001

S. PQS Stage II 1/ 1.6 1001 of foreign &902 of local for

civil works

9. Unallocated 1.3

Total: 14.0

1/ Covers financing of Civil Works and Vehicle, Machinery and Equipmentpurchases for the Stage II upgrading of Post-entry Technical Support andPort Inspectorate Services of PQS.

Schedule C

NATIONAL SEED AND QQARANTINE PROJECT

Timetable of Key Project Processing Event

(a) Time taken to prepare Nine Months.

(b) Project prepared by: FA0ICP with Govern. Assist.

(c) Preappraisal Mission July 1988

(d) Appraisal Mission January 1989

se) Negotiations July 1989

(f) Planned Date of Effectiveness January 1990

Cg) List of Relevant PPARss

3975 PPARs Nigeria - Funtua, Gusau and GombeAgricultural Development (Loans 1092/1099/1164)

7315 PPAR: Nigeria - BIDA Agricultural Development(Loan 1091)

9

Schedle D

Page 1 o 2

A. ThE STABS OF AM GOWPOPIRATION1 IN DlU1

STATEMIW OF SAIC LOANS AM IDA C6MTS

(As of Saptber g0, to)

Amount In US mlli IIonLeon or (lar( Cancellation)Cedwit PianoINuber Year Serros Purps San 1 IDA Udabre

Ton loan and 26 credlt. fully disbursed 100.72 445.91

1842-1K es Ghan Water Supply TA 1J.00 1.49187O as owns Eneg ProJect 11.00 0.72149-OH 64 Gowns Second Ol Palm 26.00 12.611504-OH U Chae Accra Diletriot Rehab. 22.00 0.92lOOl-H eS Ghsa Road RMab. & Msintra_e 40.00 9.21A011- eS Ghan Road Rehab. A Msntemanmc 10.00 1.68162S1-O s Ghana Power Systm Rbhab. 21.00 2.0116s8-OHW t Ghana Ifealth a ducation Rahb. 15.00 0.201072-OH a Ghana Inutril Sector 2.60 0.61!018O1 a Gliana Industrial Sor * 2S.00 0.001074-OH o ohsn Porte Rahabl itatioe 24.50 6.811744-OH 0. Ghana Education Sector Adj. J4.50 10.01175t0 6? Ghana Northern Grid Entengies 6.10 0.897m7-OH 87 ahan Sn.: 84.00 1.48

£025-O4H 7 Ghana SAC I 01.00 8.22£023-i-OH o Ghana SAC I 16.00 14.801778-OK 67 Ghan Strwc. Adj. Inst. Support 10.00 6.691sOl-OH 8or hana Agriculteral S1ce. Rabab. 17.00 14.211019-OH 0 chasn P trolum Rnt. A Dist. 10.00 14.101047-OH 87 Ghana Public En"trprise TA 10.50 0.641854-OH s Ghana Cocoa Raaboilitatioo 40.00 80.721058-OH a Chana Tronepoort Rabi I ltation 60.00 52.471674-OH a Ghan" Priority lathe 10.40 8.091011-OH U Gha" Filancial Sector Adust. 100.*0 44.01i921-OH es Ohs Mining Sector R_heb. 40.00 81.00i011-1-OH so Ganaf Finacial Sector MJuat. 0.0 0 .611948-OH s0 Ghan Telecomnlecaloa. t 19.00 14.071976-H 1J so Ghan Fort R.a. mJ9agmet 80.40 89.0410W-OH 1/ so Ghan Private SM C". v0.00 28.45200-OH so Ghan SAC 1I 120.00 60.092089-4H 1/ so Ghara Water Scor Rehab. 25.00 24.622040-OH 1/ 60 abana Rural Pitane 20.00 19.892061-OH 1/ 9Q0 Ghan Fifth Poor 40.00 86.65

TOTAL 169.72 1402.01 549.44of whtic Me been repaid 06.22 9.02

TOTAL nam hold by Sb1V and DA 98.50 1408.60

Amomob sold O.10of which rpeId 0.8U

TOTAL undsbrsed 0.00 $49.44 549.44

1/ Not yet effective a* of September 80, 1900.

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Sewulo D

B. S?ATIENST OP ZPC IVRSTWMIT

(A of S_pt..ta gO, ISM

Investment Ps.al Tppm ofNubcr year Obilpre et_os Lose 5EIty Total

-U 9 Imillion-

7mO 34 Asbwat Goldtlld Inni ng. - 27.5Corp.

914-40 KNO e*IA Ofl oil 4.5 4.9 I/Eaploeratlo

978-4 1 CanaIa AV ining - 0. 0.oSWoam Ltd.

T7 o Canadiss R iogu. M-ing 0.4 0.4

TOa gros cimalte 17.5 .5 83.0

Los eacOl lotion, t.mimstiose,rop.symetVW sadaels 1.6

Total omltmats now bold by IPC 17.5 5.5 81.4

Total ndiorood - - 10.4

1/ U*1.6 aIliIon *s writte off.

N I G

BURKINA FASO / \*KASItNA

X {X / f 5 0 K I ) T OX \ + ;

.~~~~~~~~~~~~~~~~~~~~~~~siW FEDERAL V

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NIGERIA~~~~~~~~~~~

NIGERIA CHAD

NATIONAL SEED AND QUARANTINE PROJECTLocation of National Seed Service Headquarters and

g j ) ~~~~~~~Regional Office 2

BURKINA N I G E RFAS , 5,0,

\4 \ | \ SOKOTO KANO 6 0 _ l ' -

BENIN aA f-UAn au e

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NATIONAL SEED AND QUARANTINE PROJECTatio~tin of Plant Quarantine Stations k

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BE.NIN 9 u L r } <, ,; t~~~~~~~~~BA CH,IU

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