Niger - Agricultural Credit Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 2055 FILE COPY PROJECT PERFORMANCE AUDIT REPORT NIGER AGRICULTURAL CREDIT PROJECT (CREDIT 207-NIR) May 10, 1978 Operations Evaluation Department 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.  FOR OFFICIAL USE ONLY Project Performance Audit Report NIGER AGRICULTURAL CREDIT PROJECT (Credit 207-NIR) Table of Contents Page Preface Basic Data Sheet Highlights PROJECT PERFORMANCE AUDIT MEMORANDUM I. Summary Formulation 1 Implementation 1 Impact 1 Performance 2 II. Main Issues Similarity with Previously Audited Project 2 Bank's Interest in the Cooperatives 3 Significance of Rate of Return Analysis 4 III. Conclusions 5 PROJECT COMPLETION REPORT I. Background A.1 II. Preparation and Appraisal A.1 III. Objectives A.2 IV. Implementation A.8 V. Institutional Development and Performance A.15 VI. Impact of the Project A.16 VII. Rate of Return A.19 VIII. Conclusion A.19 Annexes 1. UNCC Accounts 2. CNCA Accounts Maps 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.  Project Performance Audit Report NIGER AGRICULTURAL CREDIT PROJECT (Credit 207-NIR) PREFACE This report presents the results of an audit of the Agricul- tural Credit Project in Niger for which the World Bank granted a credit of US$584,000 (Credit 207-NIR) signed in June 1970. The credit was closed in May 1976 after cancellation of US$44,000. The report consists of a project completion report (PCR), prepared by the Western Africa Regional Office in June 1977, and a memorandum prepared by the Operations Evaluation Department. The memorandum summarizes the PCR and comments on two issues deserving emphasis. Within the time permitted under its abbreviated review process, the audit is based on an analysis of the PCR, the appraisal report, the loan documents and initial correspondence in the files. On the basis of this review, the audit found the PCR conclusions to be acceptable.  PROJECT PERFORMANCE AUDIT BASIC DATA SHEET NIGER AGRICULTURAL CREDIT PROJECT (CREDIT 207-NIR) KEY PROJECT DATA Item Appraisal Actual or Expectation Current Estimate 1/ Total Project Cost (US$ million) 0.871 n.a.- Credit Amount (US$ million) 0.584 Disbursed )0.584 Cancelled August 30, 1977 0044 Repaid to Outstanding to ) 0.540 Date Physical Components Completed June 30, 1974 April 1976 Proportion Completed by Above Date (%) 100 52% Proportion of Time Overrun (%) - 30% 2 Economic Rate of Return (%) infinite negative2 OTHER PROJECT DATA Item Original Actual or Plan Revisions Est. Actual First Mention in Files or Timetable - Aug 13, 1965 Government' s Application Negotiatons July 1969 3/ March 1970 Board Approval June 16, 1970 Loan/Credit Agreement Date June 29, 1970 Effectiveness Date December 15, 1970 Closing Date Dec 31, 1974 4/ None 5/ May 14, 1976 6/ Borrower Republic du Niger Executing Agencies Caisse Nationale de Credit Agricole (CNCA) and Union Nigerienne de CreAit et de Cooperation (UNCC) Fiscal Year of Borrower January 1 - December 31 Follow-on Project Name None MISSION DATA Item Sent by Month, No. of No. of Year Weeks Persons Manweeks Date of Report Identification FAO/IBRD Dec 67 3 3 9 Dec 1967 Preparation ) Bank Oct 68 4 3 12 April 1969 Preappraisal ) Appraisal Bank Oct 69 1 4 1 May 1970 Supervision I Nov 70 1 1 1 March 16, 1971 Supervision II April 71 1 1 1/2 1 1/2 May 18, 1971 Supervision III Dec 71 4 1 1/2 6 Feb 7, 1972 Supervision IV May 72 2 1 2 June 6, 1972 Supervision V Feb 73 1 1 1 March 19, 1973 Supervision VI Dec 73 1 1 1/2 1 1/2 Dec 13, 1974 Supervision VII Nov 74 2 1 1 Jan 26, 1975 Total Supervision 14 Completion March 77 1 1 1 April 27. 1977 COUNTRY EXCHANGE RATES Name of Currency (Abbreviation) Communaute'Financiere Africaine franc (CFAF) Year : Appraisal Year Average Exchange Rate: US$1 CFAF 277.71 Intervening Years Average US$1 : CFAF 230 Completion Year Average US$1 : CFAF 235 1/ PCR para. 4.11. 2/ PPAR paras. 11 through 14. PCR paras. 3.10 and 7.01. 2/ First negotiation did not succeed in resolving issue of interest rate of farmer loans. 4/ As shown in Loan/Credit Agreement. 5/ The Bank failed to change the closing date while continuing disbursements. 6/ Final disbursement date.  Project Performance Audit Report NIGER AGRICULTURAL CREDIT PROJECT (Credit 207-NIR) HIGHLIGHTS The project was the continuation of a development program started in 1965 by the European Development Fund. The program aimed at preparing Niger for the progressive loss of the preferential French market for ground- nut exports as a consequence of France becoming a member of the Common Market. The main objective of the project was to increase groundnut, rice and cotton productivity to compensate about 400,000 farmers for projected reductions in producer prices. It provided mainly for medium and short-term credit, and extension services. The project failed to achieve appraisal objectives mainly because they were too optimistic, Government's pricing policies were inappropriate, institutions involved did not perform as expected and because of the excep- tionally severe drought of the early 1970s. Bank performance is characterized by initial hesitations to partici- pate in the project, and a limited follow-up of the project during implementation. The following points may be of special interest: - difficulty in separating pre- and post-project operations .from the ongoing program (PCR paras. 3.15, 4.03, 4.06, 4.11 (2)); - influence of price policy on farmers' attitude (PCR paras. 3.06, 3.07, 4.03, 4.04, 4.05, 4.16 (a)); - attempts to use funds for other than project purposes (PPAR, para. 4; PCR para. 5.03); - eliminating possible adverse effects of inappropriate procurement procedures (PCR para. 4.10); - deficiencies in appraisal analysis (PCR paras. 3.05, 3.12, 4.16); - adverse effects of climatic conditions (PCR para. 4.07); - limited Bank attention to farmer organizations (PPAR, paras. 9, 10); - the significance of rate of return analysis (PPAR, paras. 11-14; PCR, paras. 3.10 and 7.01).  Project Performance Audit Memorandum NIGER AGRICULTURAL CREDIT PROJECT (Credit 207-NIR) I. SUMMARY Formulation 1. In September 1966, the Bank identified a project which would be the continuation of a program started with the assistance of the European Development Fund. The program aimed at increasing productivity of ground- nut, cotton and millet production involving 400,000 farm families, to compensate them for the reduction in producer prices. This decline in prices was to follow Niger's loss of its preferential French market as a result of France becoming a member of the Common Market. The project was appraised in October 1968, but Board presentation was delayed to verify institutional arrangements and the appropriateness of Government's proposal to reduce interest rates on farmer credit. The project consisted of: (a) inputs such as improved seeds, fertilizers, insecticides, animal drawn implements, (b) marketing facilities and (c) expansion of the extension services. The Caisse Nationale de Credit Agricole (CNCA) would carry out the project with the Union Nigerienne de Credit et de Cooperation (UNCC), which managed a network of very efficient farmer cooperatives. Project costs were estimated at US$870,000 after the Bank halved Government's original proposal, which was viewed as too optimistic. Implementation 2. The project suffered from a series of setbacks. Input costs were allowed to rise more quickly than output prices, thus discouraging farmers from intensifying crop production or selling their product through Govern- ment channels. Farmers did not purchase implements because some of them were of poor quality, not well adapted to prevailing conditions and too ,expensive for the majority of farmers. An exceptional drought crippled production in three out of the seven project years. Furthermore, the new institution in which the Government had vested the main responsibility for project execution proved weak. Finally most trained extension agents in the Ministry of Agriculture were not assigned to project activities; only CFDT, a French semi-private firm specialized in cotton development, obtained adequate personnel to carry out its share of the program (PCR para. 4.08). Impact 3. Groundnut production marketed through Government channels decreased from 246,000 tons in 1968/70 prior to the project to 12,000 tons in 1976/77, cotton increased slightly from 10,500 tons in 1969/70 to 11,130 in 1975/76 (but decreased to 7,000 tons in 1976/77), and rice production is estimated - 2 - to have dropped during the drought years and returned by 1976/77 to the pre- project level of about 30,000 tons. 4. There is no data on the number of farmers participating, area cul- tivated, or yields, and only global figures on the value of inputs sold during project implementation are available (some of the equipment distributed during the project period was from existing inventories, while remaining proj- ect funds were used to purchase materials then stored for future use). In view of the poor performance of all crops, the economic rate of return, expected at appraisal to be infinite, is now estimated to be negative. Performance 5. The project suffered from a lack of support from all parties involved. Farmers are believed to have sold their products outside their cooperatives as a reaction against Government's low prices. While Nigerian groundnuts were sold in Niger during the sixties the flow of groundnuts has been reversed and it is rumored that a sizeable part of Niger's harvest is now marketed in Nigeria, where prices are higher. The Government also failed to give the project institutional support by assigning extension staff to non-project institutions and tasks. From the beginning the Bank was hesitant about participating in the project. In a memorandum to the Loan Committee, the then-Director of the Agricultural Projects Department indicated that his department felt uncertain about proposing the project. During implementation, supervision missions were irregular and the frequency was on average less than two missions per year despite the difficulties the project encountered. Disbursements and procurement remained largely unchecked. The poor project performance seems therefore to be the result, not only of exceptionally unfavorable weather conditions, but also, and primarily, (as indicated in the PCR) of insufficient commitments of all parties involved to succeed in the undertaking. II. MAIN ISSUES Similarity with Previously Audited Project 6. The Niger Agricultural Credit Project shows great similarities with the Senegal Agricultural Credit Projecti! (Credit 140-SE) previously audited by OED. Both projects are located in the Sahelian zonelV; they were exten- sions of programs started in 1965 with the assistance of the European 1/ Project Performance Audit Report No. 1319, of October 1976. 2/ Annual rainfall in the Niger project ranges between 300 and 800 mm, in Senegal between 450 and 900 mm. - 3 - Development Fund aiming at increasing yields of key export crops. They provided mainly for seasonal and medium term credit, to permit use of improved seeds, fertilizers and animal drawn equipment and supported strengthening of extension services. The projects differed mainly in the institution building effort, because contrary to the Senegal scheme there was no provision for strengthening existing organizations in Niger. 7. Similarities can also be found in the Bank's treatment of the proj- ects. The projects were identified and appraised at about the same time. In both projects, the Bank was initially reluctant to participate and super- vision could have been more thorough. The rates of return assumed in the appraisal reports were too high considering the known risks involved, and at the end of the project investment period no information is available on the number of project beneficiaries, reas receiving project inputs and yield increases achieved with these.- Both projects suffered from major institutional deficiencies, hence the only difference in project design (para. 6) is of limited importance. In both cases, inadequate attention to the impact of price policies and drought resulted in much lower ex-post rate of return estimates, than anticipated at appraisal. 8. It is, therefore, not surprising that several issues analyzed in the audit report of the Senegal project are also relevant to the Niger case: the Bank's uneasiness with the rate of return estimates, uncertainties about unproven technological packages recommended to farmers, the Bank's limited awareness of the Governments' institutional priorities, and the impact of pricing policies. The PCR of the Niger project gives an objective assess- ment of the performance regarding these problems. The audit has further comments on two issues: the Bank's changing interest in farmer organiza- tions and the significance of the rate of return analysis under specific conditions. Bank's Interest in the Cooperatives 9. The appraisal report mentioned UNCC's cooperative system, as an outstanding feature of the project proposal. In particular, the genuine farmer participation in cooperative management and the unique way credit, input distribution and marketing was organized to facilitate control of cooperative activities by illiterate managers on a low cost basis. The Bank's confidence in the project was closely related to UNCC's efficient cooperative system and CNCA taking over some responsibilities from UNCC was interpreted as endangering that efficiency. 1/ In the second-phase of the Senegal project an effort is being made to acquire this information. 10. During project implementation, however, the Bank's concern for the role of farmer groups seems to have vanished. There is little reference about continued success or any failures of the cooperatives in the supervision reports and none can be found in the PCR. Without specific information on the cooperatives, one can only assume that they have been seriously weakened by the drastic reduction in groundnut throughput. There are indications that with CNCA's takeover of some responsibilities, the system was necessarily becoming less efficient, and it would have been useful to know if this was the case or if the members' enthusiasm carried them over this difficult period. Past experience with farmer groups in Africa, organized as coopera- tives and/or credit societies, has been - with very few exception - rather negative. By uncritically transferring patterns tried out in different parts of the world, the founders or promoters of cooperatives seemed to have neglected socio-economic factors dominating the African rural setting. Because the economy of scale was considered most important in some cases, relatively large cooperatives were established which failed to give farmers the feeling of trust and individual care which they needed. In other cases, units too small to support the cost of managers, accountants and staff were established, leaving their members with returns below those obtainable from more efficient and flexible private merchants. At the time of appraisal the Niger cooperative system seemed to be unique because it catered to the specific local condi- tions. To improve confidence in the cooperative venture, individual units where members knew each other were established. Each unit was managed by the members, the lack of literacy being circumvented by introducing symbols for the simple bookkeeping procedures. The economy of scale was restored by loosely joining units to regional entities. Because of this outstanding pre- project performance, in the view of the audit, the Bank should have paid more attention to the cooperatives during implementation, and the PCR should have included an analysis of the cooperatives in its treatment of the project's institutional impact. Significance of Rate of Return Analysis 11. As indicated more clearly in the presentation to the Loan Committee, than in the appraisal report, the anticipated rate of return was infinite, since there was no year with costs exceeding revenues. Under conservative appraisal estimates, the rate of return was expected to fall to 20%. The PCR (para. 7.01) mentions flaws in this calculation: the inadequate time lag between input use and benefits accruing, and too optimistic yield assumptions. 12. In retrospect, the correct presentation of the ROR in the appraisal would have been to show the variation between close to 100% and negative; the higher limit of the range corresponding to the reasonable expectation that output (from the project area and imports from Nigeria) would continue to increase at the same rate as in the past; the lower limit reflecting - 5 - an average yield increase of 4% (instead of the 16% assumed for the higher limit). The wide range in the ROR suggested above and the infinite point estimate of the appraisal report are also related to the fact that the "project" was the continuation of an ongoing program with a large propor- tion of annual costs, which made the ROR very sensitive to changes. 13. To allow a wide range of the ROR may be more meaningful than sug- gested in the PCR. It shows that there is no firm guarantee that the project would succeed in helping farmers to overcome the main development constraints: i.e., pricing policies, efficiency of project organizations and erratic rain- fall patterns. An anticipated ROR range of 100 percentage points, would have been a useful indication of the uncertainties surrounding project outcome. The Bank's hesitation whether to participate in the project or not can be explained by the correct impression prevailing at the appraisal stage that project outcome was uncertain (the abnormally high and apparently attractive return seems to have contributed little to dispell the Bank's concern about risks involved). 14. Neither the infinite ROR calculated and used at appraisal, nor a more realistic wider range, as discussed above, seem to be useful indicators of likely average returns on project investments. Furthermore, the discussed wide range from negative to 100% renders comparisons with alternative invest- ment opportunities difficult. Whether the cost-benefit ratio is a more appropriate criterion of evaluating economic performance for this type of project, as recommended in the Operational Memorandum No. 2.21, and supported by the PCR, remains uncertain in view of the limited use of this method in Bank analysis. The PCR is correct, however, in calling attention to the need to review the significance of ROR calculations in this type of project. III. CONCLUSIONS 15. The Niger Agricultural Credit Project was a doubtful undertaking and although the likely risks involved may have been inadequately exposed at appraisal, the Bank was conscious of them and hesitated to support the project. During implementation, however, the Bank did not supervise the project closely enough to minimize the known and increasingly apparent risks. The reasons why the project received only limited attention by the Bank are not clear, perhaps, because the outcome of the project was pre- determined by price policies and institutional arrangements which the Bank had no powers to change, or because of climatic conditions which the project did not control, or because the Bank felt that the small size of the invest- ments did not warrant a disproportionate allocation of man-power. The lack of information on project impact and the role played by the institutions involved is to be deplored, because this project was one of the Bank's earlier attempts at promoting rural development. Lessons should have been drawn from this experience, in particular on farmer organizations and the limitations in such circumstances of a point ROR estimate as a criterion of economic performance.  NIGER AGRICULTURAL CREDIT PROJECT Project Completion Report Table of Contents Page I. BACKGROUND A.1 II. PREPARATION AND APPRAISAL A.1 III. OBJECTIVES A.2 General A.2 Production A.3 Farmers' Benefits A.3 Government Revenues A.6 Foreign Exchange Earnings A.6 Economic Benefit A.6 Institutions A.7 Project Coordinating Committee A.8 Special Covenants A.8 IV. IMPLEMENTATION A.8 Effectiveness and Start-up A.8 Physical Progress A.9 Procurement A.12 Cost and Financing A.13 Disbursements A.13 Special Covenants A.14 V. INSTITUTIONAL DEVELOPMENT AND PERFORMANCE A.15 Strengthening of UNCC A.15 Strengthening of CNCA A.15 Project Coordinating Committee A.16 VI. IMPACT OF THE PROJECT A.16 Production A.16 Farmers concerned by the Project A.18 Government Income A.18 VII. RATE OF RETURN A.19 VIII. CONCLUSION A.19 ANNEXES 1. UNCC Accounts 2. CNCA Accounts  NI GER AGRICULTURAL CREDIT PROJECT Project Completion Report I. BACKGROUND 1.01 The Agricultural Credit Project (Credit 207 NIR) was the first project in the agricultural sector and the third project overall finan- ced by the World Bank Group in Niger ; a first Credit of US$ 1.5 mil- lion had been granted in 1964, to finance road construction and impro- vement in Eastern Niger and a second credit of US $ 6.1 had been granted in 1968, for highway maintenance. 1.02 The Project was the continuation of a Government's producti- vity program based on provision of improved extension services, current inputs, credit and marketing frc'lities. It aimed at achieving sustained increases in farmers' income and in Government's revenues at a time of projected decreases in groundnut and cotton export prices. Its main objective was to ensure groundnut, cotton and rice production increases by improving yields. It covered the four-year period 1970/71 through 1973/74 and provided for (a) credit to farmers' cooperatives through the Caisse Nationale de Crddit Agricole (CNCA) for the purchase of farm implements and draft animals, seeds, fertilizers and pesticides and (b) scales to improve the operation of cooperatives. Project's objectives were also to strengthen the extension services of the Union Nigdrienne de Cr4dit et de Coop6ration (UNCC) and to guarantee continuation of technical assistance in training CNCA's local personnel. 1.03 The Association's credit of US $ 584,000 was on standard con- ditions with a term of 50 years, including a 10-year grace period it was signed on June 29, 1970 and was expected to be complet- d by June 30, 1974 .The closing date was December 31, 1974 ; it*was not offi- cially extended, although the Association continued diabursin. up to 1976. II. PREPARATION AND APPRAISAL 2.01 An agricultural credit project was identified by a Bank Group mission to Niger in September 1966. It was assumed that it would be implemented by the Union Nigdrienne de Crddit et de Coopdration, established in 1962, which was then responsible for promoting coope- ratives and supplying farm inputs and implements on credit. However, in September 1967 a decision of the Niger's Supreme Court severed UNCC credit activities, which were transferred to the newly established Caisse Nationale de Cr6dit Agricole. In November 1967 a FAO/IBRD mission prepared an agricultural credit project and in June 1968, the Government applied for an IDA credit to permit CNCA to develop - A.2 - its lending operations ; the project's total cost estimates, covering a four-year period from 1969 to 1973, was CFAF 903.34 million (US $ 3.26 million); IDA participation of CFAF 688.72 million (US $ 2.48 million) was sought and the balance was expected to be provided by the Fonds Europden de Ddveloppement (FED), CNCA resources and participating farmers. 2.02 An appraisal mission in November 1968 concluded that expected investments in agricultural machinery and purchases of inputs seemed overestimated : the projected use of 7,000 animal-drawn machinery units and 9,000 t of fertilizer during the Project period appeared excessively optimistic,in view of the modest utilization of these inputs during the preceding years. Also, CNCA's financial struc- ture needed strengthening before making it a viable institution ; particularly, its lending program was too limited in scope to permit recovery of its operating costs.Consequently, in consultation and agreement with the Government of Niger, the original project was substantially revised and total cost was reduced to US$ 871,000, including an IDA credit US$ 584,000 the difference being financed by CNCA and by participating farmers. The main emphasis was on agricultural extension services. It was agreed that CNCA's activities would be enlarged through financing marketing of groundnuts by the Socidtd Nig6rienne de Commercialisation de l'Arachide (SONARA) I/. 2.03 Negotiations started in July 1969, and were delayed pending Government decision about the strengthening of CNCA's finances. Following another Bank mission to Niger in November 1969, negotiations were resumed and agreement was reached in March 1970. 2.04 In summary,the long gestation of this project -- four years between identification and signing-- resulted from the weakness and lack of experience of agricultural development institutions in NIGER and unreliability of data on the absorptive capacity of the agricul- tural sector for credit, III. OBJECTIVES General 3.01 Because of the progressive loss of the preferential French market, particularly for groundnuts, as a consequence of France being a member of the European Common Market, the Government decided to improve agricultural productivity to compensate for losses that were expected to result from the projected declining export prices. 1/ SONARA is jointly owned by the Government and private groundnut traders. - A.3 - As acreage extension was not an alternative, since most land in the productive zone was already farmed, a program emphasizing productivity improvement was started in 1965 , was first assisted by FED under the 1964 Yaoundd Agreement, with FED providing about US $ 1.5 million for 1965-/0, for financing : (a) marketing facilities ; (b) inputs such as selected seeds, fertilizers, insecticides, animal-drawn implements ; and (c) subsidies for cotton spraying. The FED-financed productivity improvement program was limited to groundnuts and cotton ; however a rice productivity improvement program was supported through Government funds and Taiwan technical assistance. The IDA financed project was intended to continue these different programs with added institution building objectives. Production 3.02 The project area covered most of the groundnut producing areas and all of the cotton and rice producing regions ; the rural population of these areas was estimated at 2.5 million, of which 2 million in the densely populated regions of Maradi and Zinder. It was estimated that about 400,000 farm families lived in the project area, of which 25 % were expected to benefit from the project. It was assumed that : (a) 96 % of the participant farmers would cultivate each about 1 ha of groundnuts as a commercial crop in addition to 2 ha of millet as their staple food ; (b) about 4 % would grow 0.5 ha of cotton ; and (c) less than 1 % would cultivate rice as their commercial crop. 3.03 The incremental production attributable to the Project was estimated to be as follows over the project period : Year 1 Year 2 Year 3 Year 4 ------------------- tons ------------------- Groundnuts (shelled) 5,040 8,720 11,280 13,100 Cotton (seed cotton) 400 850 1,300 1,760 Rice (paddy) 80 300 640 980 It was assumed that the additional production of groundnuts and cotton would be exported,while the incremental production of rice would be used for satisfying growing domestic consumption. Farmers' Benefits 3.04 It was assumed that : (a) the participant farmers would be basically subsistence farmers, whose annual income, even after project, would generally remain below US $ 100 ; (b) the majority of them would only benefit from short-term credit for selected seeds, fertilizers, insecticides and improved extension services ; and (c) a limited number would benefit from medium-term credit, for cW-cultivation. Estimates of participant farmers' cash income were as follows - A.4 - Beneficiaries of Short-Term Beneficiaries of plus Medium-Term Credit Seasonal Credit only Groundnut Cotton Rice Growers Groundnut Growers Commercial Growers Growers (irrigated, Stage 1 1/ Stage 2 2/ Crops double-cropped) Area Cultivated Per farm (ha) 3 2 2 1/2 3 3 Of which Commer- cial Crops (ha) 1 1/2 2 1 1 Annual Net Cash Income -------------------------- CFAF----------------------- Before Project 12,980 4,550 21,650 12,980 12,980 After Project 30,220 28,550 76,850 20,220 Increment 17,240 24,000 55,200 3,240 7,240 Debt Service 4,640 9,410 18,225 - 1,600 Increment after Debt Service 12,600 14,590 36,975 3,240 5,640 WWWWW WWams mamamamn aam --------------------------- --- -------Us ------------------- 45 53 133 12 20 Incremental income for cotton farmers receiving only seasonal credit was estimated at CFAF 2,875 (US$ 10) if they used only improved seeds and insecticides, and CFAF 3,625 (US$ 13) if they used, in addition, fer- tilizers. Incremental income for rice growers receiving only seasonal credit for selected seeds and fertilizers was estimated at CFAF 15,500 (US$ 56). 3.05 It should be noted that the farm budgets for groundnut growers were wrong, as in the appraisal report the producer price of shelled groundnuts--CFAF 19/kg instead of the price of unshelled groundnuts-- about CFAF 13/kg--, was applied to optimistic yields expressed in unshel- led groundnuts. These yields were assumed to increase under the project from 800 kg to 1,000 kg per ha for farmers using only selected seeds 1/ Using selected seeds only. 2/ Using selected seeds and fertilizers. - A.5 - and to 1,200 kg per ha for farmers using selected seeds ,fertilizers and ox-cultivation. In any case, on the basis of the assumed yields, and correct prices, the income of groundnut growers would have been estimated as follows Beneficiaries of Beneficiaries of Seasonal and Seasonal Credit only Medium-Term Credit Stage 1 Stage 2 ------------------------ CFA ----------------- Annual Net Cash Income Before project 8,180 8,180 8,180 After project 23,020 10,220 13,620 Increment 14,840 2,040 5,440 Debt Service 4A640 - l6OO Increment after Debt Service -10,200 2,040 3,840 ------------------------US$---------------- 37 7 14 Also, as far as ox-cultivation was concerned, calculations were based on the assumption that each piece of equipment would be used by several farmers, so that the average investment per farm for ox-cultivation was set at the extremely low level of CFAF 17,700 (US $ 64). 3.06 The relationship between production of groundnuts and cotton and incentives to farmers was not analysed carefully enough. In pre-project years, the officially marketed production of groundnuts, which represented on the average 60/70 % of total production, 1/ and total production of cotton had been as follows : 1965/66 1966/67 1967/68 1968/69 1969/70 -------------------------- (metric tons)----------------- Unshelled Groundnuts 233,000 285,500 272,500 244,500 246,000 (Shelled (156,081) (191,307) (182,701) (163,731) (164,824) Groundnuts) Seed-Cotton 6,080 6,710 6,170 7,010 10,520 The decline in groundnut production which began in 1967-68, in spite of the FED financed productivity program, was caused mainly by the producer price policy : for the 1969-70 season the price was only about CFAF 13/kg for unshelled groundnuts, as compared with CFAF 15.5/kg in 1962-63, 1/ About 20 % of total production were kept for seeds and 15-25 % were absorbed by traditional oil-mills ; the marketed production included small quantities of groundnuts imported clandestinely from Nigeria, where producer prices were lower. - A.6 - and in constant terms the decrease was much more pronounced. As far as cotton was concerned, despite a decrease in price, from CFAF 32.6/kg for the 1965-66 season to CFAF 29/kg in 1969-70, the acreage planted had not been reduced (and had even been expanded in 1969), as a result of efforts of the Compagnie Frangaise pour le Ddveloppement des Fibres Textiles (CFDT), which was responsible for cotton development (see para 3.11). 3.07 It was expected that farmers were prepared to engage in new techniques and investments at increasing costs, in anticipation .of a negligible incremental income curtailed by declining produce prices while prices of inputs were rising,as most subsidies financed by the European Development Fund (FED) were discontinued, it was projected that producer prices would continue to be gradually decreased from CFAF 20 to CFAF 19/kg for groundnuts, from CFAF 29 to CFAF 27.5/kg for cotton and from CFAF 16.5 to CFAF 15/kg for paddy. under such conditions, appraisal estimates for increases in groundnut and cotton production were questionable ; estimates for increase in rice produc- tion were less doubtful, as most paddy was sold, through traditional channels, at prices considerably higher than on the official market. Government Revenues 3.08 Considering the projected decline in world market prices for groundnuts and the resulting decrease of the export tax from CFAF 2,250 to CFAF 2,000 per ton of groundnuts, it was expected that the project incremental production would generate, over the four-year project period tax revenues amounting to CFAF 76 million or US$ 274,000. The appraisal report did not take into consideration the impact of the projected increase cotton production on Government revenues. Also, apparently,no profits to the stabilization fund -- Caisse de Stabili- sation des Prix des Produits du Niger (CSSPPN) -- were expected. Foreign Exchange Earnings 3.09 Incremental foreign exchange earnings attributable to the project at full development were estimated at CFAF 460 million, or US$ 1.68 million,per year. Economic Benefit 3.10 Despite the projected decline in economic prices of groundnuts, cotton and rice, the calculated rate of return was more than 100%. However the calculation was incorrect as it allowed for no time lag between input use and resulting production. The appraisal report simply states that the rate of return was very sensitive to lack of yield response and delays in theacceptance of improved methods by farmers, and with (a) yield increases of only 8%, instead of the expected 16%, and (b) a delay in benefits by a full crop year, the rate of return would be reduced to about 20%. Had the appraisal report only taken into account, as would have been more correct, a lag in benefits of one year the rate of return would have been 87%. The appraisal report did not calculate a cost/benefit ratio which would have been a more appropriate measure for the project than rate of return ( as recommended in OPM 2.21 para. 12). - A.7 - Institutions 3.11 The institutions mainly concerned with the project were UNCC and CNCA. UNCC was responsible for preparing programs for input requirements, distributing inputs to cooperatives, organizing and supervising produce marketing ; also it was expected that UNCC would continue to provide extension services to cotton farmers and would expand such activities to groundnut growers. CNCA was responsible for financing cooperatives' short and medium term credit requirements under the project. 3.12 UNCC. The Division of extension services to cotton growers managed by CFDT under an agreement with the Government of Niger appeared to be strong at management level but weak at field level, as it employed seven section chiefs (including five expatriates), but only 50 extension workers, including 20 who were undergoing training in 1969/70. The project provided for the training of 50 additional extension workers ; consequently there would have been a ratio of one extension worker for about 140/150 ha or 350/375 farmers as the average acreage of cotton plots was about 0.4 ha, and not one field worker for 100 farmers, which was the target erroneously mentioned in the appraisal report (para 4.09). 3.13 Before project inception, responsibility for services to groundnut growers was shared between the Ministry of Rural Economy and UNCC. The Ministry was responsible for technical advice to farmers, but had only about 120 agents, scattered over the country and concerned essentially with administrative tasks. The UNCC Division for groundnut cooperatives had a staff of 99, including 17 expatriates ; this staff, weak at the field level, was only concerned with administrative assis- tance to cooperatives, for the marketing of groundnuts. It was assumed that, under the project, UNCC would take over from the Ministry of Rural Economy responsibility for extension services to groundnut growers, and the project provided for the training of 50 groundnut field agents. Consequently, upon project completion it was expected that there would be 50 extension workers for about 100,000 groundnut farmers, benefiting from the project or an unusually low ratio of one to 2,000. 3.14 For the 1,000 or so farmers growing irrigated rice, exten- sion under Taiwan technical assistance was considered satisfactory, and no strengthening was envisaged under the project. 3.15 CNCA. At appraisal CNCA had a staff of 15, including three expatriates ; its personnel was considered as well trained and qualified, considering the low level of CNCA activities. The CNCA's Director General was the Director General of UNCC, however, a Nigerian official was expec- ted to be trained to take over as Director General no later than 1973. Although CNCA's capital had been increased in 1969 from CFAF 67.4 million (US$242,700) to CFAF 117.4 million (US$422,750), the funding of CNCA appeared to be its weakest point and the Nigerian Government had agreed to increase its capital by another CFAF 50 million (US$180,000) before October 1970 (see para 4.01). To further increase - A.8 - CNCA's resources it had been agreed that the lending portion of the IDA credit, amounting to about CFAF 100 million (US$ 360,000) would be passed on to CNCA as equity, so that this would enable it to con- tinue its lending program beyond the disbursement period of the project. It had been agreed that the expatriate banking adviser attached to CNCA by the French technical assistance would be maintained for about two years, and the project provided for the appointment of an expa- triate banking expert for the two remaining project years. Project Coordinating Committee 3.16 As successful project execution appeared to depend upon close cooperation between the Government, CNCA and UNCC, a Project Coordinating Committee was set up, prior to effectiveness. It inclu- ded seuior officials representing the Ministries of Commerce and Industry, Finance, Rural Economy, the Commissariat Gdneral au Ddvelop- pement, CSPPN, SONARA, and the Directorsof CNCA and UNCC ; its chairman, the Minister of Rural Economy,was approved by the Association. Special Covenants 3.17 The Government committed itself to : (a) see taht IRAT would initiate soil inoculation tests with nitrogen-fixing bacteria during the 1971 groundnut season and continue these tests thereafter ; (b) see that cotton fertilizer trials be continued under the supervision of IRAT ; (c) see that the annual agreement between UNCC and CFDT providing for extension services to cotton growers be renewed, at least until June 30, 1974 ; (d) progressively eliminate all subsidies to rice farmers for nitrogen fertilizers no later than July 1, 1974 and (e) periodically review the support policies for rice and paddy and gradually reduce their "prices in a manner adequate to develop the potential domestic market". IV. IMPLEMENTATION Effectiveness and Start-up 4.01 In addition to the standard legal requirements, conditions of effectiveness were : (a) the establishment of a "Project Coordinating Committee ; and (b) the appointment of an auditor by CNCA. In a side letter, it was laid down that,as part of the arrangements intended to enable CNCA to mintain a sound financial position : (a) CNCA would expand its activities by participating, beginning with the 1970-71 crop year, in the financing by a banking consortium of the groundnut marketing operations of SONARA, until CNCA's annual share would amount to CFAF 250 Million and (b) CNCA's capital would be increased, by September 30, 1970, by an amount which would not be.Aess than CFAF 50 million. After the above conditions were met, the credit became effective on December 15, 1970. - A.9 - Physical Progress 4.02 The project's components and their financing were set as follows farmers CNCA IDA Credit Total ---------------------- CFAF Million -------------- I. Implements and Draft Animals Equipment, carts spares 5.0 - 49.7 54.7 Oxen 15.5 15.5 - 31.0 Sub-Total 20.5 15.5 49.7 85.7 II.Scales to Coope- ratives - 22.5 22.5 III Incremental Working Capital Fertilizer - - 9.7 9.7 Seeds - 40.0 - 40.0 Insecticides and Spray cost - 4.0 18.0 22.0 Sub-Total - 44.0 27.7 71.7 IV Technical Services CNCA technical assistance - - 17.8 17.8 UNCC : Additional extension personnel - 44.4 44.4 Sub-Total - - 62.2 62.2 TOTAL 20.5 59.5 162.1 242.1 ------------------us$------------------ 73 214 584 871 4.03 Equipment and Other Inputs. When the project started, farmers had no incentive to use equipments and other inputs provided for under the Credit. Adverse conditions were manifold : (a) as mentioned above, pars 3.03 and 3.06, producer prices were unattractive and the expected incremental income of groundnut and cotton growers was insigni- ficant ; (b) prices of inputs were rising (see para 3.07) ; (c) UNCC had - A.10 - already very large inventories of fertilizers, insecticides and imple- ments which had been financed before the start of the project by FED grants ; (d) the income of the groundnut farmers during the first agri- cultural season (1970-71) was adversely affected by the drought ; and (e) technical extension services to groundnut growers were quasi-inexis- tent. Most of these constraints continued to prevail in subsequent years and to hamper the progress of the project. 4.04 Producer Price Policy. During the four initial project year, 1970-71 - 1973/74, the Nigerian Government did not decrease either the producer prices of groundnuts and cotton as envisaged at appraisal, or the paddy price as stipulated in the Credit Agreement. However, in spite of rising world market prices, it maintained low producer priced for groundnuts and cotton in view of achieving marke- ting profits for the stabilization fund (CSPPN). Price for paddy also remained low, up to the 1974-75 season. Price development was as follows ---------------------------CFAF/kg ----------------------- Groundnuts Seed Cotton Paddy Unshelled Shelled 1st Grade 2nd Grade 3rd Grade 1969-70 13.3 20 29 20 - 16.5 1970-71 14.0 21 30 27 20 16.5 1971-72 15.3 23 30 27 20 16.5 1972-73 16.0 24 32 27 20 21.5 1973-74 18.5 28 37 30 24 30.0 1974-75 40.0 55 47 40 35 35.0 1975-76 40.0 55 47 40 35 35.0 1976-77 40.0 55 47 40 35 41.0 4.05 Price Policy for Inputs. During the project period there was a lack of coordination in Government measures. Subsidies on fertilizers were maintained ; they reached 35 to 65 %, depending on the type of fertilizers. Subsidies on insecticides varied, but were on the average between 20 and 30 %. By contrast, as far as animal-drawn implements are concerned, not only were they not subsidized up to 1974, but, contrary to expectations, the Government had not removed import duties, which varied between 20 and 30 % of the factory price. 4.06 UNCC Inventories of Farm Inputs. When the project started, UNCC inventories of fertilizers, previously financed by FED, were at such a high level that even in spite of detoriaration losses, theme were practically no purchases during the project period. There were quantities of farm implements in stock of poor quality and unsuitable to Niger conditions, as a result of inadequate specifications. Initially UNCC tried to supply farmers with these equip- - A.11 - ments, instead of procuring new implements under the IDA credit however, even after UNCC abandoned this policy, requests from farmers remained negligible : farmers implements purchased under the project amounted only to CFAF 393,000 (US$ 1,510) in 1971 and CFAF 531,355 (US $ 2,125) in early 1973, as compared to appraisal estimates of about CFAF 54.7 million (US $ 197.000). As far as insecticides are concerned UNCC inventories at the start of the project were equivalent to the needs of several years ; however, because stocks in hand deterio- rated, UNCC purchased under the project 30,000 litres of insecticides in 1973 and 40,000 litres in late 1975 at a total cost of CFAF 65.6 million or about US$ 296,000, as compared with appraisal estimates of US $ 165.000. Finally, it appeared that there was no need to procure scales for cooperatives, and not one was purchased under the project. 4.07 Climatic Conditions. Except for 1971, climatic conditions were unfavorable during the project period and Niger suffered, during two consecutive years, 1972 and 1973, exceptionally severe droughts ; consequently, in spite of limited compensatory governmental measures, farmers had extremely low income and were reluctant to become indebted, the more so as the majority of them -- the groundnut growers -- received practically no technical advice. 4.08 Trainig of UNCC Extgitton Agents. The training of exten- sion workers was the only project component that was implemented on schedule. However, in spite of lenghty discussions, the Government eventually did not give its agreement to the initially envisaged transfer of extension service responsibilities for groundnut growers from the Ministry of Rural Economy to UNCC ; consequently most of the extension agents trained under the project had to be assigned to the cotton Division of UNCC, and the situation compared as follows with appraisal objectives, as of the initial completion date, June 30, 1974 Y E A R 1970-71 1971-72 1972-73 1973-74 TOTAL Appraisal Staff Training Objec- tives Cotton - 10 20 20 50 Groundnuts 20 10 10 10 50 Total 20 20 30 30 100 Actual Assign- ments Cotton 6 24 29 26 85 Groundnutg 14 - - - 14 Others 1/ 8 5 13 Total 28 29 29 26 112 In addition, a few extension workers were trained in 1974-75, bringing the total number to 120. 1/ Irrigated rice cultivation, wheat, gum arabic. - A.12 - Credit to Farmers 4.09 As of February 28, 1977 credit granted by CNCA under the project was as follows : -------------------------- CFAF-------------- Amount Lent Amount Repayments Repaid/ Due Due Capital Capital plus Per Cent Interest I. Medium-Term Credit for Farm implements (1971 & 1973 Loans 1/ 831,960 1,082,685 771,516 492,453 64 % II. Short-Term Credit for Insecticides not (1976 Loans) 21,739,200 22,883,376 - 935,075 2/ relevant It should be noted that insecticides purchased under the project amounted to CFAF 65,617,176 (about US$ 296,135) ; however, the amount of loans to farmers, was less because insecticides wure subsidized at 100 % in 1974 and 1975. Procurement There were no major procurement problems under the project. However, according to the Project Agreement, the procedure for procurement of agricultural inputs was cumbersome : the procurement procedure could be started by UNCC, (under international competitive bidding for goods estimated to cost over US$ 20,000) only after loans had been granted by CNCA to cooperatives or individual farmers. This stipulation was apparently disregarded by the Association,as well as by UNCC and CNCA,for the purchase of insecticides, otherwise it would have been practically impossible to supply farmers in due time. Also, there was some embarrassment when a firm began to manufacture agricul- tural implements in Niger. The Credit Agreement stipulated that no withdrawal from the Credit could be made "on account of payments for goods produced in, or services supplied from, the territory of the Borrower" under categories I, II, and IV : this concerned agricultural equipment, fertilizers, insecticides and technical assistance to CNCA 3/. The Association was prepared to waive this clause in the case of equip- ments, but after this problem arose, there were no longer any purchase of implements. l/ There were 12 medium-terms loans to cooperatives, which benefited about 40 cotton growers. 2/ Advance repayments 3/ According to Annex 2 to the Project Agreement, it was however implied apparently inadvertently,that agricultural inputs could be produced or assembled in Niger. - A.13 - Cost and Financing 4.11 Considering the negligible amount involved, it is pointless to compare actual costs of farm implements purchased under the project withappraisal estimates. As far as insecticides are concerned the cost was US$ 69.300 as of December 31, 1974, the original closing date, and was in line with appraisal forecast (US$ 65,000). Additional purchases of US$ 228,800, were financed under the project, in 1976, to take advantage of the undisbursed balance of the Credit. Training cost of extension workers totalled US$ 224,200, as compared with appraisal estimates of US$ 160,000 ; however, as 120 agents were trained instead of 100, the unit cost exceeded appraisal estimates by less than 17 %. The cost of technical assistance to CNCA was only US$ 15,970 as compa- red with appraisal estimates of US$ 64,000, because : (a) up to December 31, 1973, the project technical assistant was provided by the French Caisse Centrale de Coopdration Economique (CCCE) at a subsidized cost ; and (b) subsequently no technical assistant was available to CNCA. Disbursements 4.12 As above-mentioned, paras 4.03 - 4.07 and 4.11, expenditures lagged behind estimates and at the closing date, Deceobor 31, 1974, disbursements were as follows : Available Amounts Disbursed Disbursed as .of Initial Revised / Initial Revised Credit Credit Amounts Amounts Cateaory ---------------- US$ -------------- 1. Agricultu- ral imple- ments 260,000 100,000 1,360 2/ 0.5 % 1 % II (a) Fertilizers 35,000 35,000 - - - II (b) Pesticides & spraying costs 65,000 165,000 69,324 106.6 % 42 III UNCC Exten- sion & Trai- ning 160,000 230,000 215,103 134.5 % 94 % IV CNCA Techni- cal Assis- tance 64,000 54,000 15,969 25.0 % 30 % Total 584,000 584,000 301,756 52 % 52 % 1/ According to a letter of the Association dated June 30, 1972. 2/ The Association disbursed US$ 1,360 in 1971 under Category I apparently it mistakenly disbursed about US$ 1,910 against Category II instead of Category I in 1973 (see para 4.06). - A.14 - Subsequently US$ 9,104 were disbursed for training of UNCC extension workers, and in early 1976, the Association agreed to reimburse the Nigerian Government for insecticides purchased in late 1975 amounting to US$ 228,806. Consequently the situation was as follows as of February 28, 1977 Available Disbursed Disbursed as Amounts % of Credit Category -------------US $ ------------- I. 100,000 1,360 1 % II. (a) 35,000 - - (b) 165,000 298,130 181 % III 230,000 224,207 97 % IV 54,000 15,969 30 % 584,000 539,666 92 % On April 12, 1977, the Association cancelled the undisbursed amount and informed the Government of Niger accordingly. Special Covenants 4.13 Despite discussions held with Government during supervi- sion missions, IRAT did not undertake Rhizobium inoculation tests because ot had not the necessary laboratory equipment, which was not provided for under the project. 4.14 Cotton fertilizer trials were routinely continued, however, they were not supervised by IRAT. 4.15 The annual agreements between UNCC and CFDT were renewed each year, as expected, and four experts financed by grants from the French Fonds d'Aide et de Coop6ration (FAC) have remained seconded by CFDT to UNCC, all four being assigned to the field. 4.16 As mentioned at para 4.04, the Government did not reduce the price of paddy. However, this appears justified as : (a) the official price of paddy, which was very low, was considered inadequate by farmers who sold 80 to 90 % of the marketed production through traditional channels at prices considerably higher than the official price 1/ (see para 3.07) ; and (b) consequently the Govern- ment-owned rice mills were not adequately supplied and incurred deficits because they operated much below capacity. 4.16 Subsidies to rice farmers for nitrogen fertilizers were not discontinued. The Government was not prepared to eliminate subsi- dies on all fertilizers and considered it would have been unpractical to have discriminatory fertilizer prices for rice growers. Also the 1/ Although the official price of paddy was substantially increased in 1974, this was not considered sufficient by farmers who have con- tinued to sell most of their production through traditional channels. - A.15 - Government considered that fertilizer subsidies encouraged improved techniques and compensated, to some extent, for the low official paddy price. V. INSTITUTIONAL DEVELOPMENT AND PERFORMANCE Strengthening of UNCC 5.01 The project's objectives concerned only the reinforcement of extension services. Extension agents recruited under the project received formal training for three months at the Institut Pratique de Ddveloppement Rural, at KOLLO, near Niamey, and underwent six-month probation period in the field. They were secondary school graduates, or drop-outs, generally without and agricultural background, who were not highly motivated to work in the field. Also, they were offered unattractive salaries, lower than those received by agents of the Ministry of Rural Development, who enjoy less demanding tasks. As extension services for rice were not concerned by the project and as the Government vetoed any transfer of responsibility for technical advice to groundnut growers from the Ministry of Rural Development to UNCC, the project marginally improved only extension services to cotton growers. The Government and UNCC considered the Association financed training program as moderately successful and recently obtained USAID financing for its continuation along the same lines. 5.02 During the project period, there was a certain lack of coor- dination between the different UNCC departments, which had a large degree of autonomy. This was all the more unsatisfactory as the Director was frequently on mission outside the country ; particularly the procurement policy and the management of farm inputs were frequently deficient. However, UNCC made substantial efforts to improve its accountancy, which was reorganized in 1972. Its financial situation was good during the period 1971/72 - 1973/74 ; it began to deteriorate in FY 1974/75 because of excessive credit granted by UNCC and slow recovery of claims ; this, in turn, has resulted in excessive UNCC indebtedness (see Balance Sheets and Profit and Loss Accounts at Annex I, Tables I and 2). Strengthening of CNCA 5.03 At the onset, a number of appraisal's expectations did mate- rialize : (a) a Nigerian Director General with banking experience was appointed in October 1970 ; (b) CNCA's capital was increased, by Govern- ment to the agreed level of CFAF 170 million ; and (c) participation of CNCA in the marketing of groundnuts by SONARA reached CFAF 300 million in the first project year, exceeding the minimum of CFAF 250 million agreed with the Association. In addition, a technician provided at no cost by CCCE on a part-time basis was appointed as General Controller to review and improve CNCA's organization. The accountancy of CNCA was reviewed with the assistance of an expert provided by CCCE, Also the financial situation of CNCA improved considerably during the first two project years, and was very good at the close of FY 1971-72. However, the financial situation began to deteriorate rapidly at the beginning of 1973, - A.16 - when the Government decided that deposits of Government-owned corpo- rations should be withdrawn. CNCA's management took no ieasures to deal with the situation ; on the contrary as CNCA's resources were dwind- ling, it increased considerably its lending activities. Consequently at the end of 1973 CNCA's situation was extremely critical and it survived only as a result of short-term advances granted by the Banque de Dfveloppement de la Rdpublique du Niger (BDRN). Reportedly, the Government and BDRN were expecting that CNCA would have to cease its activities so that they could be taken over by BDRN. At the same time, CNCA concentrated its financing on loans to Government officials, there were apparently irregularities, and in mid.1973 the accountant attached to CNCA by CCCE was deprived of control of financial opera- tions. Considering these developments CCCE severed its technical assistance to CNCA at the end of 1973. 5.04 However the downward trend was reversed in 1974. The Government revised its attitude vis-A-vis CNCA ; (a) it increased its capital from CFAF 170 million (US$ 0.75 million) to CFAF 370 million (US$ 1.6 million) ; and (b) authorized again Government-owned corporations to deposit funds at CNCA. Also the environment became more favourable to development of agricultural credit, essentially because improved extension services under regional projects in the Departments of Zinder and Dosso resulted in rapid expansion of ox-drawn cultivation and use of other inputs 1/. Loans to farmers for equipment, especially ox-cultivation, increased by 500 % in FY 1974-75 and 1,000 % in FY 1975-76 as compared with the average for the three preceding years/;iu the meantime loans to Government officials have steadily decreased. Consequently, althoug its mana- gement should be reinforced, CNCA has begun in recent years to fulfil a useful role in the financing of agriculture. Recently its financial situation has been adequate (see CNCA Balance Sheets and Profit and Loss Accounts at Annex 2, Tables 1 and 2). Project Coordination Committee 5.05 The Project Coordinating Committee met only three times under the Project. These meetings were of little consequence and played only an information role, as the interested Ministries and other institutions, with the exception of UNCC and CNCA, used to send representatives who had no voting power. VI. IMPACT OF THE PROJECT Production 6.01 For reason explained in Chapter IV the project had no impact on groundnut and rice cultivation, it had however, a limited impact on cotton cultivation. 1/ Under the Maradi Rural Development Project, credit is not channelled through CNCA, essentially because the project was appraised at the end of 1973, when its situation was most critical. 2/ However it should be noted that 15/20 % of these loans for ox-culti- vation were granted to former trainees of the "Centres de Formation des Jeunes Agriculteurs" (CFJA). Experience has shown that most of them default ; such loans should be, in the future fully guaranted by Government, so that they would not result in losses for CNCA. - A.17 - 6.02 Groundnuts. The expected increase in production did not materialize. Evolution of the officially marketed production was as follows: Initial Four-Year Project Period Agricultu- ral Season 1969/70 70/71 71/72 72173 73/74 74/75 75/76 76/77 (-n tons) 1/ Unshelled 246,000 194,250 215,550 163,700 38,200 134,700 5,600 12,000/13,500 Shelled (164,824)(130,136) (145,078)(109,676)(25,570)( 90,220) (3,758)( 8,000/9,000) Decline in production has been relatively less than one might assume on the basis of these figures because the volume rf officially marketed groundnuts.was not a constant proportion of actual production as : (a) up to 1971 - 72 there were uncontrolled imports from Nigeria, where the producer price was lower than in Niger, however, since the 1972-73 season, as the Government of Nigeria reinforced border control, imports become negligible ; (b) as the ratio of producer prices between Niger and Nigeria was reversed in recent years there were some uncontrolled exports to Nigeria during the two last seasons ; and (c) farmers try to keep the same quantities of groundnuts for seeds and for sales to traditional oil-mills whatever their production might be : for the last two seasons production is unofficially estimated at 80,000/120,000 tons of unshelled groundnuts, as compared with a negligible marketed volume. 6.03 Cotton. Evolution of production of seed cotton was as follows Initial Four-Year Project Period Agricultu- ral Season 1969/70 70/71 71/72 72/73 73/74 74/75 75/76 76/77 (m tons) 10,520 9,600 8,270 5,190 3,480 7,910 11,130 7,000 1/ Cotton production was particularly low for the 1972-73 and 1973-74 season this was an indirect consequence of the drought which affected Niger for several consecutive years ; becausi of the resulting severe shortage of food crops, many farmers planted sorghum in preference to cotton (the acreage planted in cotton had declined by about 50 % as compared with 1969-70). Also, up to now, because of the low producer price, farmers have had little incentive to improve cultivation techniques and to apply proper insect treatments. 1/ Priliminary results. - A.18 - 6.04 Rice. Official data on rice production have remained unreliable : production of paddy has apparently fluctuated between 30,000/35,000 tons (level reached in 1971) and 20,000/25,000 tons in the drought years ; in 1976 production reached about 30,000 tons. Farmers concerned by the Project 6.05 Extension Services to Cotton Growers. Extension services to the.-37,000 or so cotton growers were intensified under the project, the number of cotton extension workers was increased from 50 to about 110 1/. There are, at present, 97 extension workers for 14,500 ha of cotton rainfed cultivation, or an average of one for 150 ha cr 370 farmers ; however, the density varies between one for 25 ha (or 60 farmers) in the smallest district, to one for 330 ha (or 700 farmers) in the largest district. For irrigated areas, the density is much higher as there are 17 extension workers for about 660 ha and the ratio is one agent for about 40 ha or 100 farmers. 6.06 Cotton Farmers' Benefits. It is extremely difficult to quantify benefits derived by farmers from intensified extension services however, it seems realistic to assume that extension agents trained and hired under the project had a positive impact and that, otherwise, the decline in cotton production would have been more pronounced 2/. Although, in a few instances, farmers received from UNCC spoiled insecticides (because they had been too long in storage) increases in production, resulting from the use of insecticides, exceeded apparently, on the average, the cost of insect treatments to farmers 3/. There are no available data, concerning production and/or income increases achieved by the few farmers who used ox-cultivation under the project. Government Income 6.07 Marketing of Groundnuts. Since project inception world market prices were higher than anticipated at appraisal but these increases were not fully reflected in producer prices. As a conse- quence during the three first project years 1970-1971 to 1972-73, 4/ in addition to export taxes on groundnuts, which totalled about CFAF 490 million (US$ 1.90 million) there were substantial profits for CSP?N, which amounted to CFAF 4,355 million (US$ 17 million) ; also, during the same period, SONARA's net profits and income tax on SONARA's profits totalled about CFAF 1,000 million (US $ 4 million). However, no part of the generation of Government and SONARA's income is attributable to the project. 1/ About 90 were trained under the project but about 30 resigned or were dismissed. 2/ Extension services had practically no impact on cultivation of food crops. 3/ About 4,000 farmers used insecticides provided under the project. 4/ Subsequently, because of the decline in production, exports practi- cally ceased and there were no longer sizeable profits to CSPPN and SONARA. - A.19 - 6.08 Marketing of Cotton. During the period 1970-71 to 1976-77, the marketing of cotton resulted in: (a) export taxes,which totalles about CFAF 30 million (US$120,000); and (b) profits to CSSPN, which totalled about CFA 690 million (US$2.7 million). One might assume that extension services and insecticides provided under the project had a positive impact and contributed to reduce the decline in cotton production, however, it would be hypothetical to make estimates about the resulting export taxes and CSPPN profits. 6.09 Marketing of Rice. Under the project the volume of officially marketed paddy remained negligible and there was no impact on Government revenue. 6.10 Institution Building. This is the long-term objective of all credit projects but is very hard to measure - in this case as in others. From paragraphs 5.01 to 5.05 it is apparent that the project had little or no impact on CNCA,whose performance and position started to recover only when active supervision had ceased, and none on UNCC as a whole. The recruitment and training of extension agents was, however, rather successful and this is probably the only area where the project made a significant long-term contribution. VII. RATE OF RETURN 7.01 As stated in paragraph 3.10 the economic rate of return was wrongly calculated and in addition the yields assumed were highly optimistic. Thus the return quoted in the appraisal report of more than 100% was wrong on two counts. Furthermore it would have been more appropriate to use a cost/benefit ratio than a rate of return. Unfortunately no data at all is available on which to base a revised calculation which in any event would be fruitless for comparative purposes in view of the errors in the original calculation, the long time that has elapsed since the project was appraised, and the fact that Credit proceeds were applied very differently to the original expectations. In addition the "without project" situation is more than usually difficult to evaluate in view of the major political and climatic upheavals during the project period. In order to assess the project's impact it is necessary to examine each of the categories against which disbursements were actually made ( see para 4.12). At appraisal it was assumed that 72% of the Credit would be disbursed on agricultural implements (45%) and extension and training (27%). In fact extension training accounted for 71%, agricultural implement for only 1% and pesticides and spraying for 23%. Thus even assuming (generously in view of the production figures given in paras. 6.02 and 6.07) that the use of inputs had some positive impact on production, the project had no measurable impact overall and the rate of return is estimated to be negative. VIII. CONCLUSION 8.01 The odds were against the success of the project. Although ominous world market price projections proved soon to be incorrect a number of constraints prevented the project from achieving its main objective of increa- sing groundnut, cotton and rice production: (a) the overall project concept - A.20 - was not geared to conditions prevailing in Niger, as it concentrated on purely financial aspects of agricultural credit, without providing for specific well defined and structured actions aimed at improving production technology at the field level; (b) the key agency, UNCC, reinforced its extension services to cotton growers but contrary to the initial understan- ding was prohibited by Government from supplying agricultural extension services to groundnut farmers; (c) Niger suffered severe consecutive droughts; and (d) the Government hesitated too long to reverse the producer price policy designed at appraisal. Because of its various shortcomings, the project was an unfortunate undertaking and it should not have been prolonged by continuing disbursements after the closing date. NIGEX HM AGRICULTUML C!EDIT PROJECT TABE I PLOJlg COMPTION REPORT Union Nii&rienne de CrAdit at do Coopdretion (NCC) 1ALANICE SHEET ( CFAF'000) ASSETS 1969-70 1970-71 1971-72 LIABILITIES 1969-70 1970-71 1911-72 Cash on hand or in banks 3,907 60,312 185,478 Accounts payable 9,945 5,086 5,589 Accounts receivable 14,575 15,647 26,057 Short-term borrowing 61,850 47.681 101,597 Miscellaneous debtors 2,600 6,139 5,330 Miscellaneous creditors 33,244 25,655 48,941 Suspense Accounts 33,794 24,213 25,784 Government 55 914 509 Inventories 80,339 21,906 11,243 Suspense accounts 9,689 2,068 10,204 Securities and Guarantee Medium-term liabilities 43,616 28,004 15,610 deposits 3,119 3,307 5,138 Own funds Fixed Assets 252,901 229,352 195,965 Capitatl-/ 248,623 275,434 244,475 Loss of F.Y. 30,959 30,671 - Less Loses of prece- year (21,898) (30,959) (30,671) Eluipment subsidies 32,707 44,664 51,164 Provisions 4,363 1,000 3,000 Profit of FY - - 4,541 Total 422,194 391,547 454,995 Tetal 422,194 391,547 454,995 an .m acn=. . anaan ...nn. .n.s...... INCOME STATEMENT SCFAF-1000) COSTS INCOME Inventories beginning of FY 34,039 80,339 21,906 Inventories end of FY 80,339 21,906 11,243 Purchases 117,419 53,505 43,716 Sales 83,304 75,280 68,528 Personnel 98,568 96,380 100,259 Services 14,349 17,122 12,212 Taxes 688 557 607 Operating Subsidies 163,561 184,969 196,017 Supplies & Outside Services 47,001 42,086 39,340 Miscellaneous 6,3Q6 13,583 7,870 Transport and Travel 15,407 16,388 15,811 Financial Income 640 601 681 Miscellaneous costs 14,555 7,817 9,962 Cancellation of pro- Financial costs 9,006 3,936 1,259 visions, for doubtful Subsidies granted by UNCC 15,859 - - debts - - 7,789 Depreciation & Miscella- Operating deficit 35,412 23,715 - neous provisions 31,369 36,168 61,508 Operating profit - - 9-972 Total 383,911 337,176 304,340 Total 383,911 337,176 304,340 ..... .... ..... n....... nsa PROFIT 6 LOST STATEMENT ( CFAF'000) COSTS INCOME Opdrating deficit 35,412 23,715 - Operating profit - - 9,972 -SZpenses for previous years 2,191 1,629 5,409 Repayment of written- Ltease On sale of fixed off debts 5,255 2,080 - assets - 5,330 6,644 Transfer from reserves - 1,363 - Miscellaneous losses - 10,055 4,592 Income from previous Exceptional losses 317 -- years 1,138 2,750 Net Profit - - 4,541 Miscellaneous 568 3,865 3,767 -e-ot-Net losses 30,671 - totl )*92 40729 21,86 3i~2O40,729 21,186 - -.0aa - -- I-.4"YO NIGER ARMUI AGRICILTURAL CREDIT PROJECT TABLE 1 PROJECT CORFLETION REPORT Union Nigirienne de Crddit et de Co*lfration (UNCC) BALANCE SHEET (CFa '000) ASSETS 1972-73 1973-74 1974-75 1975-76 LIABILITIES 1972-73 1973-74 1974-75 1975-76 Cash on hand or in banks 346,366 378,635 345,714 267,530 Accounts payable 13,088 13,704 59,078 6,812 Accounts receivable 26,078 41,751 209,229 180,347 Short-term borrowings 193,205 185,319 256,184 280,!30 Miscellaneous debtors 15,432 10,648 71,848 160,833 Miscellaneous creditors 63,622 70,189 204,399 207,051 Provisions for bad debts ( 11,264) ( 11,264) ( 13,994) ( 13,994) Government 290 384 1,585 4,743 Suspense accounts 14,582 2,974 35,881 58,073 Suspense accounts 6,719 28,820 10,069 21,188 Inventories 7,279 27,192 39,308 26,329 Medium-term liabilities 2,234 - - - Securities & Guarantee Own Funds deposits 15,052 15,014 1,944 14,944 Capital 1/ 223,700 224,700 224,700 224,700 Fixed assets 165,463 145,277 146,215 146,393 Accumulated profit 4,541 8,941 10,865 16,884 Equipment Subsidies 57,664 65,664 65,664 65,664 Provisions 9,525 10,582 10,582 12,250 Profit of FY 4,400 1,924 6,019 633 Total 578,988 610,227 849,145 840,455 Total 578,988 610,227 849,145 840,455 INCOME STATEMENT ( CFAF'OOO) COSTS INCOME Inventories, beginning of FY 10,106 7,279 27,192 39,308 Inventories, end of FY 7,279 27,192 39,308 26,329 Purchases 38,916 67,131 114,556 119,967 Sales 35,438 33,832 50,426 70,973 Personnel 99,425 104,502 134,549 167,131 Services 15,373 8,087 19,230 21,387 Taxes 1,846 1,242 658 952 Operatine subsidies 255,774 251,226 323,470 378,191 Supplies and Services 79,925 77,823 86,077 97,019 Miscellaneous 8,051 12,122 6,749 10,812 Transport and Travel 15,393 12,742 19,313 23,916 Financial income 1,745 1,251 3,021 2,639 Miscellaneous costs 27,888 21,108 19,068 17,515 Operating deficit - - - 5,580 Financial costs 1,060 58 - - Depreciation 44,886 39,747 37,271 46,603 Provisions 3,784 1,471 2,730 3,500 Operating profit 431 607 790 - Total 323,660 333,710 442,204 515,911 Total 323,660 333,716 442,204 515,911 PROFIT AND LOSS STATEMENT ( CFAF'OO) COSTS INCOME Operating deficit - - 5,580 Operating profit 431 607 790 - Losses from previous years Repayment of written-off Inventories 1,137 - - - debts 444 1,914 843 - Other 614 2,534 588 47 Income from previous Exceptional losses 316 2 - years 8,070 142 - - Exceptional provisions 4,985 - - - Exceptional profits 2,507 1,388 4,976 Net profit 4,400 1,924 6,019 633 Miscellaneous - 414 - 6,260 Total 11,452 4,465 6,609 6,260 Total 11,452 4,465 6,609 6,260 1/ Capital varies accordIng to shares owned by Cooperatives. AINEX 2 NIGER TASL I AGIlIJLTURAL CP401T PADJECT PROJECT 03PLETION fPPRT Caisse Nationale de Credit !Uricole (CNCA) BALANCE 9EET jCFAF *'.16) ASSETS 196R-W7 1970-71 197-72 LIABILITIES 195-70 970-71 1971-72 Cash on hand or in banks 15,678 36,!D7 51,76 DeDo-sits 55004 15n,470 47,123 Deposits in banks - 130,0M 338,000 Central Bank rediscounting 27,000 - Marketing credit 385 3,227 2,12 Miscellaneous creditors 2,499 4,971 Short-term loans 185,522 22,936 47,107 Term deposits 40,000 - - Medium-term loans 102,253 135, X4 189,009 Sispense and miscallaneous accounts '9,167 13,629 7,023 Miscellaneous debtors 15,537 962 .7,974 Capital 170,000 170,000 170,000 Suspense and miscellaneous Government grant from 10A funds - - 35a accounts 37,007 5,092 7,773 Provisions 48,573 71,519 63,495 Bad and doubtful debts 46,169 62,715 48,361 Securities 4,23V 2,185 1,723 Profit, current FY - - 33.876 Fixed assests Sa2 792 Losses , Previous FY - 13,415 15,088 Gurrent FY 13,415 1, 674 - Total 4M 3 414 SB 0L3 Total 43LE,21 !44,5? 0913 INMME STATEMEXT INCOME tCFAF '000) Personnel 10,483 8,436 9,022 Interests and Comission on loans 3,381 35,359 27,110 Taxes 8 841 1 Miscellaneous - 516 1,102 Supplies and services 2,272 2,344 2,947 Interest on invested available Funds 614 2,553 7,966 Transport and travel I $ 28 193 Subsidies 13,851 -1,07 Misr,ellaneous costs 947 1, 52 1,199 rinancial costs 7,210 6,3a4 2,719 ceoreciation - 7 2 Provisions 17,S21 0,889 16,496 Operating profit 290 - 5,1M6 Operating deficit - 21,271 - £8 38,95 ',701 37,986 Tjtal 38,846 99,701 37,96- PROFIT ANO LOSS STATEMENT (CrAF M000) CDSTS INOOME Operating deficit , 21,27' - Operating pmofit 290 - Exceptional losses on assets 0 - eibrseMent or written-off l3ans 304 Lonses from previous years - - 796 Profit from previous years and write-Of of bad debts MI00 - miscellaneous - 1,014 2,-181 PrOvisions for bad debts 13,415 - 2B Transfer from provisions 2,005 aa,782 26,873, 1 provisions - 3,094 164 Net loss 13,415 1,674 3,863 Intal 37,710 2,6 1,86 ----------------------------m-----------------m---mm-------a---------------------------------------m------------m- NIGER ANNEX 2 AGRICULTURAL CRECIT PROJECT TABLE 2 PROJECT COMPtLETION REPOR Calese Nationale de Cr6dit Agricole (CNCA) BALANCE SHEET (CFAF '00j ASSTS 1972-73 1973-74 1974-75 1975-76 LIABILITIES 1972-73 -1973-74 1974-75 1975-7 Cash on hand or in banks 10,288 19,737 108,211 5D7,516 Accounts in banks 15,845 - - - Deposits in banks 1,863 129,864 103,631 315,687 Deposits 108,829 105,429 374,763 239,033 Marketing credit 106,086 221,864 705,475 498,75 Miscellaneous creditors 66,862 15,952 12,341 42,079 Short-terfn loans 104,655 84,8fD 135,110 285,115 Term deposits 51,000 338,934 684,755 1,237,276 Medium-terTn loans 231,100 423,083 487,436 572,667 Susoense and miscellaneous accounts 6,213 4,615 9,718 66,161 Miscellaneous debtors 16,62 6,393 3,457 5,654 Capital 170,000 370,000 370,000 370,000 Suspense and miscellaneous Government grant from IDA funds 2,155 2,802 14,062 14,082 accounts 5,385 1,404 678 Special Ovelopment Funds - - - 113,838 Bad and doubtful debts 51,806 62,296 62,133 70,701 Provisions 96,953 125,085 166,039 25,02S Securities 893 1,144 7 639 Profit, Current FY 12,499 21,984 19,68D 23,73 Fixed assets 1,462 3,706 14,516 22,875 Total 530,369 954,371 1,621,358 2,28D,013 Total 53),369 954,371 1,621,35B 2,290,013 INCOME STATEMENT (CFAF *000] COSTS INCOME Personnel 10,363 15,412 21,638 28,739 Interest and Commissions 40,664 46,911 53,719 5B,584 Taxes 3,934 3,925 4,019 5,090 Miscellaneous 1,853 2,173 1,528 1,216 Supplies and services 4,373 5,905 11,211 12,339 Interest on invested available funds 6,796 14,689 57,318 106,787 Transport and travel 2D 499 1,063 1,344 Subsidies 1,884 947 - - Miscallen2ous costs 1,626 2,147 4,512 6,038 Financials costs 4,613 3,956 32,262 99,2B1 Depreciation 449 1,173 3,337 5,852 Provisions 23,ED4 23,035 21,068 29,218 Operating prufit 2,215 8,708 13,455 18,716 Total 51,197 8,723 112,565 166,587 Total 51,197 64,72 112.565 166,587 PROFIT AND LOSS STATEMENT COSTS INCOME Exceptional losses 1 6 92 12 Operating profit 2,215 8,708 13,45 18,716 Losses from previous years 10 114 1,485 42D Reimbursement of written-off loans 281 6,424 155 4 Exceptional provisions - - - 5,091 Transfer from provisions 9,054 6,404 6,943 9,529 Profit from previous years and Net profit 12,499 21,984 19,6m 23,789 miscellaneous 963 56 684 1,033 Total 12,510 22,104 21,237 2,282 Total 12,510 22,104 21, 27 2,282 L l B Y A REPUBLIC OF NIGER AGRICULTURAL PRODUCTION 94 c All-weather roads All-wenther trocks Trocks without regular mointenonce Roinfoll lines (mm per yeor) Millet - Groundnuts Cotton Rice 17 Guezzom Sorghum Niebe Beans I-or NLC -Northern Irmit of crops Bilm AFRICA 200~ go M A L \ 300 350 to GAO 00 --o TANOUT so o souA- -- 500 -- ABER F EGUNGM Y--R 60- Tessooua ZlN ER- 60N-r ON MARADI SMotoa ye -l-- U--n-s o70 . A 30 L AKE CHAD ' u P P iE R 0'Z- 00 to KANO 9ol 6000 800 V OL TA...--- 80n 800 Goyro N l G E R IA Th , naep has bee prepjad bY the World Banks ~f(l ,dusiStoty fo, the co-nen,ance - of ihe read-, of the iop-i lo wht,ch it s attanhed Tht denorm,nahonnse nd th 0 BhNINuondea,- howen nn ton, hnap deo, ~nply nn tne p-r of the W~rd Bank and t- i B .2 eh$et61-e any1,digmont oo the fega/ stars f -ny t-or,y 01 any e~dornent n> acceptance of such boundanas  L IBYA + REPUBLIC OF NIGER + G+ AGRICULTURAL CREDIT PROJECT - MAIN ROADS - REGIONAL BOUNDARIES PROJECT AREA: x AREAS OF UNCC PRESENT ACTIVITIES 30/09/68 M AREAS OFUNCC 4 FUTURE ACTIVITIES /969-72 . ++ + 4. + Iférouanø BILMA + 4. + M A L I + AG DEZ‡ + In Goll :Z + y++Tilano TCHIN TABARADEN + + + ++ + N'Gourti xý Bani Bangouo Aaa --- --TN U Ayorou TAHOUA -KI BoAEi OUALLAM FI INGUE AKGURGM1 -- GOURE B5IRNI- N J ...--NIWI 'rX*+ OLOGA IDOGaNDOTCHIN T MAAN SO I + AY RNI-N'TAOURE MAG + MAINE-SOROA kR NIGERIA > 0 50 100 150 200 250 LOMETERS 11-,d d----- word.nd s rE B-N- E N /N d0 "'rE -l k ffi' PI'r I tZW1D-dR BENRIN N AUR