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AfDB: Nigeria country strategy paper (draft)

Tunis: This Country Strategy Paper proposes a strategy for supporting Nigeria’s development efforts over the period 2012-2016 and is anchored on creating a sound policy environment and investing in critical infrastructure. This strategy is aligned with the long-term development agenda of the new administration as outlined in the vision 20:2020 and anchored on the Government’s Transformation Agenda (TA:2011-2015). It is also aligned with the Country Partnership Strategy (CPS) (2011-2013) - jointly prepared by the World Bank, African Development Bank (AfDB), United States Agency for International Development (USAID) and the Department for International Development (DFID); and with the Country Assistance Framework (CAF) currently being developed by the donor community in Nigeria.

Nigeria’s long term aspiration is to be among the top 20 economies in the world by the year 2020 (Vision 20:2020). The primary objectives are to: (i) create an enabling environment for sustainable economic growth; (ii) diversify the Nigerian economy; (iii) create employment opportunities; and (iv) reduce poverty.

Whereas Nigeria has both strengths and opportunities to realize its aspirations, including abundant resource endowments, it is also faced with many weaknesses and challenges that are impeding progress. These include mismanagement of oil resources, an infrastructure deficit, limited capacity for policy formulation and implementation, high unemployment, high poverty level, and non-inclusive growth. Infrastructure deficit, particularly the erratic supply of power, has been identified as the most binding constraint on real sector growth. Recent Public Financial Management (PFM) diagnostic reviews and the Bank’s fiduciary risk assessment indicate that the fiduciary risk at both the federal and state levels is high.

  • For these reasons, the Bank’s CSP is based on two strategic pillars: Pillar I-Supporting the Development of a Sound Policy Environment; and Pillar II–Investing in Critical Infrastructure to Promote the Development of the Real Sector of the Economy.

Pillar I is proposed, not least, because of the valuable lessons learnt from the AfDB’s operations in Nigeria. A fundamental lesson is that the quality, availability and timeliness of policy advice and analytic work are crucial for government effectiveness at any level of development. Hence, the Bank would step-up its efforts to deliver high quality policy advice through targeted analytical and advisory work (non-lending activities). Specific areas of focus would include assessments of public financial management reforms and oversight institutions, resource mobilization, fiscal federalism, private public partnerships, leveraging Nigeria’s huge domestic and regional markets, financial intermediation, gender mainstreaming and regional integration, among others.

Pillar II is proposed to support the delivery of key investments in cross-sectoral growth enhancing sectors, such as power or transport, and in specific growth sectors such as agriculture. Environmental sustainability of Bank operations will be critically assessed for green growth. Critical infrastructure development and promotion of inclusive and green growth are in line with the Government’s Transformation Agenda, the Bank’s Long-Term Strategy, and the Regional Integration Strategy for West Africa (2011-2015). The Bank will ensure synergies with other Development Partners’ (DPs) interventions and continue to participate in donor coordination/harmonization meetings.

Given the huge financing needs of the country, the relatively small size of Nigeria’s ADF 12 allocation (UA 194 million of which UA 65.04 million has been earmarked for 2012) and the overall Sustainable Lending Limit (SLL) for Nigeria, it is fundamental for the Bank to use its resources strategically for optimal impact. To remain a relevant partner and to become the preferred partner of Nigeria, it is imperative for the Bank to use its full range of operational sovereign and non-sovereign instruments to implement this CSP. This will include project lending, Private Public Partnership (PPP) arrangements, Partial Risk Guarantees (PRG), capacity building, economic and sector work and budget support.

The Bank will play a catalytic role by using its position to leverage third-party investments in the form of co-financing, and a facilitating role by mobilizing other investors, including emerging partners such as BRIC countries. The Bank’s strategic focus for sovereign and non-sovereign operations will be aligned with both the key pillars of the Bank’s Private Sector Development (PSD) strategy and Nigeria’s growth drivers. Accordingly, the Bank will provide support in two main areas: (i) knowledge and advisory services to facilitate public-private dialogue and PPPs, and (ii) selected and targeted investments in power and in agriculture value chains with infrastructure components.

There are four potential risks: project implementation risk; security risk; fiduciary risk; and vulnerability to external shocks, including climate change.

On implementation risk, executing agencies will be assessed on their capability to implement the projects and programs with existing or strengthened capacity, and appropriate recommendations made. The Bank will also support governance and institutional reforms to enhance project execution and will use consultancy services where necessary. In terms of security, there is no indication of Bank projects being threatened by the security situation, apart from the suspension of supervision missions in troubled areas. The Authorities have tightened up security in vulnerable areas. The Bank will provide financial assistance for agricultural development to boost youth employment and non-lending activities for the development of a sound policy environment. The fiduciary risk will be mitigated by strengthening the country’s procurement and public financial management systems while vulnerability to external shocks will be mitigated by supporting lending to areas that diversify the economy away from the oil and gas sector, such as agriculture.

The major issues for country dialogue include: (i) implications of Nigeria graduating to an ADB-only country status; (ii) mobilizing alternative resources for infrastructure development; (iii) promoting competitiveness, green and inclusive growth; (iv) the Federal Government’s view on Bank’s engagement with the states; and (v) Nigeria spearheading regional integration in West Africa.

  • Executive summary to: FEDERAL REPUBLIC OF NIGERIA  COUNTRY STRATEGY PAPER 2012-2016, African Development Bank.  Readers can access the 55 page draft CSP, dated December 2012, here.
27 December 2012
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