Niger - Maradi Rural Development Project

FILE COPY CIRCULJTNG COPY TO BE RETURNED TO REPORTS DESK DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use CIRCULATING COPY TO BE RETURNED TO REPORTS DESK Repon No. P-1719-NIR REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF NIGER FOR A RURAL DEVELOPMENT PROJECT November 25, 1975 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCY EQUIVALENT Unit = CFAF US$1.00 = CFAF 225 CFAF 100 = us$o.44 Fiscal Year: January 1 through December 31  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF NIGER FOR A RURAL DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Niger for the equivalent of US$10.7 million on standard IDA terms to help finance a rural development project. PART I: THE ECONOMY 2. The problems of economic development in Niger were set out in a report entitled "Economic Position and Prospects of Niger" dated May 1972 (AW-36a). An economic mission visited Niger in October/November 1973 but oving to the change of Government that occurred in April 1974, official comment of the new Government on the draft report could not be obtained. An economic updating mission visited the country in October 1975. Annex I contains country data. Background 3. Niger has been classified by the United Nations as one of the 25 "least developed" countries in the world. Like its Sahelian neighbors, it suffers from a number of serious growth constraints: a landlocked position result- ing in high transport costs; a small domestic market and limited marketing facilities; poor soils and unfavorable climatic conditions; lack of water and, so far, cheap energy; and a low level of education, particularly in the rural areas. 4. The economy shows the typical features of underdevelopment: agriculture and livestock together account for nearly half of GDP and provide the bulk of export earnings, making the economy particularly vulnerable to the vagaries of weather. Mining is still very modest (2 percent of GDP), but is expected, thanks to uranium, to play a growing role in the future. The share of industry amounts to little over 10 percent of GDP. Consumption has been unusually high, ranging between 95 and 100 percent of GDP, and domestic savings accordingly very low. Recent Economic Developments 5. GDP increased moderately up to 1971. Since then, mainly as a result of the drought in the Sahel, it has been decreasing at a rapid pace and cannot be expected to regain its 1971 level in 1975 despite a projected growth rate  - 2 - of 10 percent over 1974. The drought in the 1973/74 crop year severely affected agriculture and livestock: production of basic food grains declined sharply to about 750,000 tons -- 60 percent of what is considered a normal crop; export crops (groundnuts, cotton) also suffered, both through reduced yields, and a shift of land and labor to food crops; production of groundnuts, traditionally the largest export crop, declined 70 percent. As to livestock, surveys conducted in early 1974 seem to confirm that the size of the pre- drought cattleherd was almost halved. Accordingly, the income of the rural population has been sharply reduced, and the southward migration of the popu- lation accelerated, adding new dimensions to an already difficult economic situation. 6. In 1974/75, rainfall was more favorable and crop production recovered, benefitting also from the Government's timely decision to raise producer prices for several agricultural commodities. Recovery in livestock was very slow, as to be expected. Taken together, value added in the primary sector in 1975 is still estimated to be substantially below its 1972 level. 7. While reliance on foreign resources has remained important, the balance of payments has been in surplus since 1969 -- except in 1974 when falling agricultural exports and skyrocketing import prices resulted in a more than 100 percent increase in the trade deficit and an overall deficit of US$16.8 million. The overall surpluses have been made possible by the increasing inflow of foreign aid (largely grants) and direct foreign invest- ment related to the first uranium mine (SOMAIR), and by the gradual improve- ment in the trade balance thanks to growing uranium exports since 1971. Net foreign assets, which had doubled between 1969 and 1973, dropped to about US$45 million at the end of 1974, equivalent to three months of imports. 8. In contrast with a rather depressed real economy, the Government's financial situation has been relatively healthy in the last five to six years. Control of current spending and rising revenue, mainly from taxes on the "modern" sector, enabled the Government to generate increasing budgetary savings. Large receipts from uranium (CFAF 3-4 billion) are expected in FY1975/76 following an agreement on higher uranium export prices with the French Atomic Energy Commission. Whilst some of the major public sector enterprises are currently experiencing serious financial problems, the liquidity position of the public sector as a whole continues to be strong. Treasury deposits with the banking system reached CFAF 8.5 billion in September 1975, equivalent to about one third of current revenues expected in FY 1975/1976. Foreign Aid 9. During 1968-1973, Niger obtained commitments of an average US$40 million a year from its major traditional sources of aid: France, FED, Canada, the USA, Germany, IDA and the UN. About 90 percent of total aid disbursements in the last few years has been grants, and most of the remainder, loans on  - 3 - concessionary terms. Aid in the drought years 1972/73 and 1973/74, including emergency food shipments, was about double the annual average level of 1968/73. 10. External public debt is therefore still quite manageable. At the end of 1973, the total amount outstanding was US$116.7 million, of which US$71.3 million was disbursed. IDA's share of total debt outstanding was 16.1 percent. The ratio of debt service to exports of goods and non-factor services was 3.5 percent in 1973 and about 5 percent in 1974 (estimate), mainly due to the decline in exports. Government Policies and Development Prospects 11. At the time of the military take-over (April 1974), the previous government was preparing a ten-year "perspective" program. This has been abandoned, and the new regime is now preparing a three-year interim develop- ment program. No details are available so far, but the program's broad outlines can be summarized as follows: it calls for annual investment of CFAF 15 billion (US$75 million); highest priority is to be attached to the development of agriculture and animal husbandry -- the longer-run target being self-sufficiency in food grains; infrastructure is to be given lower priority than in the past; industry is to continue to be import-substitution oriented; mining is to gain momentum thanks to uranium, plans to develop a coal deposit and, possibly, petroleum exploitation (the discovery of oil in the desert north of Lake Chad was officially announced in June, but no indication of its importance was given). This general strategy seems to be consistent with Niger's development potential. 12. Shortcomings in project identification, preparation and implemen- tation have been felt to be major obstacles to timely achievement of plan targets. Now that the Government faces the problem of how best to use substantially greater resources than in the past from uranium exploitaition, appropriate project selection must receive increased attention. To meet this urgent need, the Government recently created a National Development Council in which all ministries concerned are represented. The Council is currently deliberating the organization of the unit which will be in charge of project identification, preparation and implementation. 13. Barring major new mineral discoveries, Niger's long-run development potential lies mainly in agriculture and livestock. Self-sufficiency in foodstuffs, development of export crops and modernization of the livestock sector can hardly be achieved without revolutionary changes -- for Niger -- where irrigation and application of advanced technologies are concerned. But the Government should also pursue more "conventional" development schemes aimed at increasing productivity, particularly of food crops, since arable land is becoming increasingly scarce and growth through extensive cultivation increasingly difficult. In the livestock sector, the Government's intention of reconstituting the herd to 80 percent of its pre-drought size seems to be appropriate in view of the limited pasture capacity. The Government also  - 4 - intends to, and should, take full advantage of the present situation to change the life pattern of nomadic livestock raisers, i.e. to induce them to settle down by introducing suitable credit and pasture management policies. 14. Undoubtedly encouraged by the reported discovery of oil, the Government will continue to promote mineral prospecting and exploitation. Besides uranium and oil, interesting indications of phosphate deposits have been identified. It is impossible at this stage, however, to say to what extent mineral exploitation can contribute to development, especially in view of the high transport costs involved. Even under favorable assumptions regarding this sector, the long-run prospects of the economy cannot be depicted as bright considering the constraints described in para. 3. Foreign aid (including technical assistance) will be needed for years to come and should continue to flow, for some time at least, on highly concessionary terms. 15. The Governnment's contribution to the financing of public investment projects can be expected to increase somewhat in the future, thanks to the new resources contributed by uranium exports and assuming that policies of strict budgetary control will be continued. Nevertheless, in view of Niger's desperate poverty it will be appropriate for external lending agencies to finance an exceptionally high proportion of project costs, including a sub- stantial amount of local costs. PART II: BANK GROUP OPERATIONS IN NIGER 16. To date the Bank Group contribution to Niger's development consists of six credits. Annex II contains a summary statement of these Credit as at September 30, 1975. The first, satisfactorily completed in 1969, was made in 1964 to finance a highway development project. The second, for highway main- tenance, was made in 1968 and is now also fully disbursed. A US$584,000 credit was approved in 1970 for an agricultural project. As of today, only US$224.000 has been spent. We have proposed (and Government has agreed) to cancel the remaining amount, since the same kind of activities provided for under this credit would be financed under the proposed credit. A US$6.5 million credit was made to Niger in 1972 to help finance a highway construction project which has proceeded satisfactorily. Work on the two roads concerned is in fact now completed. In October 1973, the Executive Directors approved a US$2.0 million credit to Niger within the US$14 million credit extended to the six. Sahelian countries for drought relief. Finally, a credit of US$5.0 was approved in 1975 for a Niamey airport project. 17. Recognizing the magnitude of the constraint of inadequate transport and communications on the development of Niger the Bank Group's strategy in the country has been so far concentrated mainly on the development of the internal transportation infrastructure, primarily roads. This strategy has complemented the efforts of the Government and other aid donors and has helped lay the foundation of a minimum infrastructure for the development of the productive sectors in the economy.  - 5 - 18. Bank Group assistance in the development of the transportation sector will continue, and a fourth highway project should be ready for sub- mission to the Executive Directors in the near future. However, future IDA lending, as the present project suggests, will be increasingly channelled directly to the two main productive sectors, agriculture and livestock, with a view to raising the income of the rural population. Possibilities in this direction include a project for the production of rice under irrigation, currently under preparation; and a livestock project currently being prepared by the Fonds d'Aide et de Cooperation (FAC). 19. Niger remains one of the countries in which external assistance is limited at present more by the country's capacity to identify, prepare and implement projects than by shortage of external funds. To alleviate this constraint, projects financed by the Bank Group in Niger will generally include elements of technical assistance and training of local staff. 20. The Bank Group, which ranks sixth in terms of volume of aid committed, about US$22 million, behind France, the Fonds Europeen de Development (FED), Canada, USA and Germany, and roughly on a par with the UN, has been a relative- ly small lender to date, providing only about 7 percent of total foreign aid committed to Niger during the six years ending 1973. PART III: THE RURAL SECTOR 21. The rural sector directly supports about 90 percent of Niger's population, the large bulk of these (80 percent) being members of farming families, the remainder being nomadic or semi-nomadic pastoralists. These rural people are characteristically poor. Per capita income was estimated in 1970 at CFAF 14,000 annually (US$60). This compares to CFAF 90,000 (US$325) for city dwellers. Moreover, income during the period 1972-1975 decreased significantly, perhaps by as much as 50 percent, as a result of the drought. 22. The potential of the sector for increasing total production and for improving the living standard of rural people is not promising. This is due primarily to the sector's dependence on rainfall which is both low in total amount and variable in distribution. Consequently, inadequate rainfall inhibits rainfed agriculture, which supports the great bulk of rural people, and, worse, threatens to depress production and income from time to time. During the drought period 1968-1973, for example, groundnut production dropped to about a quarter of normal levels, sizeable food imports were necessary and at least one-third of the nation's cattle were lost, seriously disrupting the economy.  -6- Government Strategy 23. In the rural sector, Government strategy is attempting, first, to introduce measures that maximize rainfed agriculture, including both crop and livestock production, and, second, increase the area under controlled irrigation. It is apparent, however, that, in the short run, improvement of rainfed agriculture remains the principal means to help the great majority of the rural population, and the present project is consistent with this approach. In the long run, however, the impact of such efforts will be weakened unless population pressure on the land lessens. It is probable, in fact, that in many areas excessive population may be irreversibly depleting natural resources. It is clear, in any event, that the problem of population growth should be given priority. So far, however, Government has yet to contend with this crucial issue. 24. Niger has about 55,000 ha that could be irrigated from the Niger River, and possibly another 100,000 ha from the water resources of the Lake Chad complex. Governmentsees irrigation as a cushion against the disruptive impact of drought and as a means for ultimate crop diversification which would, in turn, encourage new agriculturally-based industries, replace food imports and possibly generate new exports. Up to now, however, the costs of irrigation in Niger have been high; nonetheless, Government has embarked on a modest program of irrigation development of about 800-1,000 ha annually and has asked the Bank Group for help in financing this program. 25. Implementation of schemes to benefit large segments of the rural population is costly. Rainfed farming production programs, for example, typically involve capital costs, on a per family basis, of the order of CFAF 80,000 (US$360). Livestock programs are even more costly, at about CFAF 180,000, and irrigation, extremely expensive at about CFAF 1 million (US$4,500) per farm family. Moreover, significant recurring costs are asso- ciated with all such programs. A large volume of foreign aid notwithstanding, the costs of programs capable of assisting significant numbers of people, as well as of those essential for improving the country's limited social and physical infrastructure, are enormous, particularly in the context of the country;s restricted resources and very thin tax base. 26. To achieve development within its limited resources, Government has therefore initiated a policy of sponsoring community development and farmers' cooperatives. This effort seeks to mobilize the people themselves in contributing their labor to, for example, the construction of schools or in organizing themselves for the delivery and recovery of credit. Government has, in fact, achieved success with such programs, including teaching (outside of the formal school system) of reading, writing and counting in tribal languages, as well as organizing self-help in the construc- tion of simple village water supplies. Government is determined to pursue such programs as a feasible course of action likely to render benefits to a significant proportion of the rural community. This approach is practical, merits support, and would be so supported under the project described in this report.  - 7 - 27. Broad development policy is established by the Conseil National du Developpement (CND). CND is headed by the Vice-President of the Conseil Militaire Supreme, who is also Ministre du Developpement (MD). CND has its own secretariat, including a small group of specialists in economics, agronomy and planning, and is authorized to conduct its own studies. Although originally intended as a planning unit, solely responsible for making broad policy proposals for consideration by the Conseil Militaire Supreme, CND may be empowered by Government to directly supervise development projects (such as would be the case of the proposed Maradi Project). Within the framework of policy and strategy established by CND and the Conseil Militaire Supreme, the MD is responsible for detailed planning and is assisted by the planning units in the operational ministries, in the case of rural development, the Ministhe de l'Economie Rurale et du Climat (MERC). Role of Government 28. Government intervention in the sector is concerned with price fixing for principal commodities, especially export crops, and the subsidization of farm inputs and credits. Price fixing is of practical consequence only in the case of groundnuts, the single most important foreign exchange earner, and cotton, for which there are monopoly buying agencies: the Soci4te Nigerienne de Commercialisation de l'Arachide (SONARA) and the Compagnie Francaise pour le DAveloppement des Fibres Textiles (CFDT). Official producer prices for foodcrops tend to be important, for example, when Government's Office des Produits Vivriers du Niger (OPVN) makes purchases of grain for reserve storage or for distribution in deficit areas. Until 1974 the official producer prices paid by OPVN did not keep up with the sharp increases in the free market which resulted from the general shortage of food in the country, which in turn was a direct consequence of the drought. The present official producer price of CFAF 20/kg for sorghum is adequate and competitive with the free market prices. In the case of groundnuts and cotton, producer prices prior to 1974 were fixed at unremunerative levels. 29. In 1974, the new Government increased producer prices for cash crops significantly: 129 percent for decorticated groundnuts (from CFAF 24/kg to CFAF 55/kg), and 29 percent for first quality seed cotton (from CFAF 37/kg to CFAF 47/kg). The producer price for groundnuts now reflects the export value of the commodity and would have to be reduced in the future if the price pro- jections of the Bank's Economic Commodities and Export Projections Division materialize. It is unlikely, however, that Government could reduce groundnut producer prices in the immediate future, especially in light of the fact that it is obliged to take account of actions implemented in Nigeria, where ground- nut growers are subsidized, being presently paid CFAF 66/kg (20 percent more than in Niger). A relatively high price in Niger is therefore needed to reduce the risk of groundnut smuggling to Nigeria, a possibility which threatens the loss to Niger of official export earnings. By contrast, the present producer price for seed cotton is some 20 percent below the export value of CFAF 58/kg.  - 8 - 30. Government practices a policy of heavy subsidization of agricultural inputs. Fertilizer prices to farmers have been kept at CFAF 20/kg since 1972, while import prices of fertilizers have nearly doubled. Insecticides were given free to cotton growers in 1974 and will be sold for CFAF 450/liter in 1975. In 1975, the subsidy is 80 percent for fertilizers and about 67 percent for insecticides. In view of the very high cost of fertilizers and pesticides, all of which must be imported, and the generally backward nature of Niger's agriculture, subsidies appear necessary to encourage input use. Nevertheless, a subsidy of 80 percent for fertilizers appears unnecessarily high, especially in view of the expected decline in Government revenue from the sector. The Government has agreed that subsidies on fertilizers would be reduced nationwide to 50% by October 15, 1977 (see Section 4.04 of draft Credit Agreement). 31. Agricultural credit is provided by the Caisse Nationale de Credit Agricole (CNCA) which is wholly owned by Government and works closely with the Union Nigerienne de Credit et de CoopAration (UNCC), with which it has a common board of directors, and through whose agents it operates in the field. Total lending is low (at September 30, 1974, medium-term loans outstanding totalled only CFAF 423 million--US$1.7 million equivalent). Marketing and other seasonal credits have been running at about CFAF 300 million annually (US$1.2 million). In the past, interest rates have been around 10 percent compared with a central bank discount rate of 5.5 percent in recent years. Government is now considering an interest rate of 2-3 per- cent, which would involve a major subsidy. For the Maradi Project, interest rates would be 10 percent for both short and medium-term credit, a level which ought not to limit significantly the demand for credit. PART IV: THE PROJECT 32. A report entitled "Appraisal of Maradi Rural Development Project" (No. 881a-NIR) is being circulated separately. A credit and project summary, including a breakdown of costs, is contained in Annex III, and the project area is shown on the attached map (IBRD 10835). The project is based on a feasibility study done by the Fonds d'Aide et de Cooperation (FAC) and on the findings of an IDA appraisal mission undertaken in the fall of 1973. A change of Government occurred in 1974, and it was not until early 1975 that the new Government reached agreement with IDA on the general organiza- tion of the project. A second appraisal mission visited Niger in May 1975. 33. The project would be carried out over a three-year investment period, 1976-78 and would consist of: (a) provision of production packages - extension, applied research, credit, and input supply - aimed at the improvement of the productivity of groundnuts, millet and cowpeas grown in the areas covered by 15 selected Associations Locales de CoopAratives (ALCs);  (b) strengthening of cooperative institutions; (c) expansion of educational and training programs, including a functional literacy program among the project area community; (d) expansion of a training school for extension workers from a capacity of 40 to 100, and the provision of training scholarships for project personnel; (e) study of the optimum means of developing the irrigation potential of the Goulbi de Maradi; (f) pilot development of irrigation in the Goulbi de Maradi through exploitation of the Goulbi's underground water resources; (g) construction of 80 km of feeder roads to provide communications within a fertile but hitherto isolated sector of the project area; (h) planting of 500 ha of trees in fuel wood plantations; (i) improvement of livestock services in the project area and preparation of a livestock development project; (j) provision of credit for the purchase of livestock by pastoralists who lost their herds during the Sahelian drought; and (k) establishment of a project evaluation unit to establish and record the economic and social impact of the project. Project Execution 34. The project would be carried out by a Project Management Unit (PMU). In the case of its agricultural production components, implementation would be through farmerst cooperatives. The PMU would be headed by a Project Manager responsible for day-to-day project implementation. He would report to the Prefet, who in turn would be accountable to the CND. Coordination between PMU and other government activities in the Departement de Maradi would be assured by the Prefet who would be assisted by the Comite Technique Departemental (COTEDEP). PMU would have four sections: Administrative, Technical Operations, Cooperative Affairs and Community Development. The appointment of the heads of the four sections would be a condition of effec- tiveness of the proposed credit (See Section 3.03(a) (ii) of the draft Credit Agreement. PMU would be staffed with personnel seconded from the Ministere de l'Economie Rurale et du Climat (MERC), and the Ministere du Developpement (MD). A number of project activities would be "contracted," as for example with MERC--Service de l'Elevage--for the livestock sub-project; Service des Eaux et Forets, for fuel wood planting material supply; Ministere des Travaux Publics et du Tourisme, for the road sub-projects and Ministere de la Sante Publique et des Affaires Sociales, for the health sub-project. During their  - 10 - initial two to three months with the project, all staff would receive in- service training courses to acquaint them fully with project objectives and policies. Selected individuals would receive scholarships and fellowships for overseas training. All farm level extension workers would receive up to seven months training at the Centre de Formation des Jeunes Agriculteurs (CFJA) in Maradi. 35. Farmers' cooperatives in Niger are concerned mostly with crop marketing and still require Government assistance. Thus UNCC functions as a Government agency rather than as an autonomous cooperative organization. UNCC staff seconded to PMU's Cooperative Affairs Department would continue assisting cooperatives and ALCs, and would seek to establish for each ALC and its member cooperatives a schedule with specific targets for the training of cooperative members to take over increasing degrees of responsibility for the management of their societies. 36. The agency responsible for providing agricultural credit throughout the country, CNCA, has not had a very good record and only recently has been reactivated. For these reasons it is proposed that PMU would operate the credit scheme for participating farmers and employ the cooperatives as the delivery system for such credit. Farmers would be eligible for seasonal credits for fertilizers, fungicides, insecticides, improved seeds and live- stock vaccines; and short-term, 3 years credit, for crop sprayers and animal- drawn farm equipment. Medium-term credits, 5 years, would be provided for blacksmiths' equipment. Interest on all loans under the project would be at 10 percent, but no down payment would be required in view of the poverty of project area farmers. Detailed Features 37. The 15 ALCs that would participate in the project have been selected on the basis of their members' demonstrated acceptance of cooperative activi- ties and receptiveness to change. On the basis of necessarily crude data, it is estimated that the 15 ALCs would comprise 150 primary cooperatives, 750 villages and some 37,500 farm families. The ALCs and their member cooperative societies would be strengthened with trained staff, and would benefit finan- cially through being used as the channels for credit and input supply and through marketing project-induced production. 38. The project includes the expansion of educational and training programs among the project area community: principally, functional literacy courses which would be taught by farm level extension agents. The latter would double as functional literacy teachers during the season when agricultural activity is at a standstill. Participants would be taught reading, writing and simple arithmetic in Ilausa, the vernacular. Some 11,000 adults would participate, of whom 2,000 are expected to become fully literate. The health training program would be carried out under the supervision of the Ministere de la Sante Publique et des Affaires Sociales. About 100 first aid assistants and 100 midwives would be trained under the project.  - 11 - 39. Under the project, alternatives would be examined to determine the optimum means of developing the irrigation potential of the Goulbi de Maradi. Following this and provided that the selected alternative constituted a viable investment opportunity, a detailed feasibility study and plans for the irri- gated development of the Goulbi would be prepared. In the expectation that development of irrigation using groundwater is economic, the project provides for the development of an estimated 500 ha. 40. About 80 km of feeder roads would be built southwest of Maradi to facilitate project actions and generally improve communications in one of the most fertile areas in the Departement. A total of about 500 ha of fuel wood plantings would be made in the areas of the 15 ALCs. The objective would be to establish one plantation of about 3 ha in one out of every five villages. The livestock services of the Ministere de l'Economie Rurale et du Climat (MERC) in the Departement de Maradi would receive equipment, vehicles and finances to conduct routine vaccination campaigns and to treat calves, sheep and goats against internal parasites. About 750 destitute pastoralist families who lost everything during the drought would be provided herds to help reestablish their means of livelihood. A Project Evaluation Unit would be established to assist in measuring project results. Marketing and Pricing 41. Primary marketing of groundnuts would be by the cooperatives which would sell to Societe Nigerienne de Commercialisation de l'Arachide (SONARA). Marketing of cereals, cowpeas and vegetables would be through the traditional network of private traders to whom participating farmers would sell their products. Groundnut producer prices, as well as prices paid SONARA by groundnut crushers, are presently adequate. However, to ensure that prices remain acceptable, Government should establish a clear pricing and marketing policy. Objectives of the policy would be producer prices that provide adequate incentives to farmers, announcement of producer prices as early as possible and payment of economic prices by the groundnut processing industry. (see Section 4.05(a) of draft Credit Agreement). Project Costs and Financing 42. Project costs net of import duties and other clearly identifiable taxes are estimated to total CFAF 2,670 million (US$11.9 million) of which the foreign exchange component would be US$5.9 million or 50 percent. Con- struction costs of the irrigation schemes assume that the labor needed in these operations would be provided by the local communities and would be paid half the minimum daily wage for rural areas. Physical and price contingencies amount to CFAF 570 million (US$2.5 million) or 24 percent of base costs in- cluding taxes. 43. It is proposed that IDA make a credit of US$10.7 million to finance 90 percent of total projects costs excluding import duties and other identi- fiable taxes. The credit would cover the foreign cost estimated at US$5.9  - 12 - million, and 81 percent of local costs excluding import duties and other identifiable taxes. The remaining 10 percent of project costs, net of taxes (estimated at 10 percent of total project costs), or a total of US$1.2 million, would be met by Government. To ensure the efficient and timely execution of the project, assurances were obtained from Government that it would as a condition of effectiveness deposit an initial amount of CFAF 125 million into a Project revolving fund (see Section 3.04 of Credit Agreement). Retroactive financing by IDA of up to US$0.3 million is proposed to finance expansion of the extension workers' training center and to initiate the seed multiplication program for the 1976 cultivation season (see para. 4(a) of Schedule I to draft Credit Agreement). 44. As the project disbursement period is only for three years, and experience in Niger has shown that it usually takes up to five years for cooperatives participating in an intensive agricultural project to generate sufficient funds to pay for cooperative extension workers, it has been assumed that Government would finance all support services until 1984, after which cooperatives would have become entirely self-supporting. Thus, in addition to making a capital contribution to project investment of CFAF 563 million, Government would be required to allocate some CFAF 380 million annually subsequent to the third year of the project development period and until 1984 to maintain agricultural and other services needed to sustain project benefits. Cost of support services at the above level (equivalent to CFAF 10,000 per farm family) appears justified given the incremental value of production induced by the project of CFAF 44,000 annually per farm family or more than four times the cost of support services. Procurement and Disbursements 45. Orders or contracts for equipment, vehicles or chemicals with a value of more than US$50,000 would be obtained through international com- petitive bidding (ICB) in accordance with IDA guidelines. Such procurement is estimated to have a value of US$1.0 million. Contracts of less than US$50,000 would be procured on the basis of locally advertised competitive bidding procedures. Fuel, spare parts and items too small to warrant compe- titive bidding would be procured locally under procedures acceptable to the Association. Construction of the irrigation schemes would be by the pros- pective users. As there are no local contractors to build the roads, which are too small and dispersed to attract foreign contractors, the roads would be constructed by the Ministere des Travaux Publics by force account. Con- tracts exempted from international competitive bidding would aggregate no more than US$1.9 million. 46. Consultants providing technical assistance and carrying out the various required studies (US$1.1 million) would be recruited internationally according to IDA guidelines. 47. The IDA credit would finance 100 percent of the foreign exchange cost of vehicles and equipment; fertilizers, insecticides and other farm inputs; vaccines; PMU expatriate staff salaries and operating costs; and studies, auditors and scholarships; and 89 percent of all other project items,  - 13 - except the salaries of civil servants posted to the project, which would be financed 100 percent by Government. Disbursement of the IDA credit would be against import documentation and certified records of expenditures. For disbursements made against certified records of expenditures, documentation would not be submitted for review as a matter of course, but would be re- tained by PMU for scrutiny by Bank supervision missions. Any surplus credit funds, after completion of the project, would be used to develop further services to farmers. Benefits and Justification 48. The overall impact of the project, at full development in 1982, is seen as bringing up future average yields in the 15 project area ALCs to close to those obtained in the years of most favorable rainfall over the period 1967-1975. Yield increases are estimated to result in increments in annual production amounting to 18,100 tons of millet, 19,800 tons of un-shelled ground- nuts and 600 tons of cowpeas by 1982. New production from project-established irrigation schemes is estimated at 500 tons of seed cotton, 900 tons of sor- ghum and 7,000 tons of tomatoes and other vegetables. Project-induced live- stock production would amount to 18,700 tons liveweight compared with 15,700 tons without the project. 49. Farmers' gross income from crop production, at 1975 prices, exclud- ing any income from participating in either the irrigation or the livestock component of the project, would increase some 47 percent between 1976 and 1982, and net income per day worked would increase from an average of CFAF 179 to CFAF 298 by 1982. Net income from a 0.50 ha irrigated holding is estimated to amount to CFAF 67,000 by the fourth year of its development after payment of all direct expenses and provision for capital recovery. 50. The project's direct benefits would be the increased production it would generate which would result in higher incomes for some 37,500 farm families and 14,000 pastoral families. The economic rate of return from investment in the project is estimated at 39 percent over 25 years. 51. The technical risks attached to the project are not considered large, although one problem which cannot be eliminated or significantly reduced is that inherent in the climatic vagaries which bedevil Niger. The project's relatively high rate of return shows that its economic viability would not be jeopardized by the statistically unlikely recurrence of drought of the magnitude experienced in the period 1967-1974. 52. The project would have a number of secondary benefits not reflected directly in the economic rate of return calculations. Among these (a) the impact of the functional literacy and health training programs; (b) the demonstration effect of an integrated approach to rural development; (c) the planning of the development of the irrigation potential of the Goulbi; (d) the expansion of non-farm rural employment; and (e) the improvement of nutri- tion.  - 14 - PART V: LEGAL INSTRUMENTS AND AUTHORITY 53. The draft Development Credit Agreement between the Association and the Republic of Niger, the recommendation of the Committee provided for in Article V, section l(d) of the Articles of Agreement of the Association and the text of a Resolution approving the proposed Development Credit, are being distributed to the Executive Directors separately. 54. The draft Development Credit Agreement conforms to the normal pattern for credits for rural development projects. Features of special interest are referred to in paragraphs 30 and 43 of this report. The following are additional conditions of effectiveness; (i) the establishment of and initial deposit in the revolving fund referred to in paragraph 44; (ii) the establishment of the PMU; and (iii) that the heads of the four sections of PMU, referred to in para. 34, have been appointed. 55. I am satisfied that the proposed development credit would comply with the Articles of Agreement of the Association. PART VI: RECOMMENDATION 56. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachments November 25, 1975  Page 1 of 3 rages WOUNTRY DfATA- NlIGR AREA POPM1ATION DRNSITT 1,267,000 kaS =77-illion (e1d-1972)e 2-PrbSo rbcln SOCIA. DIDCATORS Reference Countries GNP PER CAPrITA US$ (ATLAS BASIS) /I 130 90 zb 100 120 /b 260 DEUOGR.A.RIC C_ru36de brth rate (per thousand) 52 / 52 d ~ S.Lp 19 .6 ~d Crude death rate (per thouaand) 27 Z 23 ~d 28 18 23 d~ Infant mortality rate (per thousan live birth.) 200 L11.42 /8 .156fZ Life espertancY at birth (years) 37 -LI. /d 39 h 18 41d/ Ppulation growth rate &3.02926 2821 PoPulation growth rate -h urbin Agc.Mucture (percent)15a ../ 1512 1-64. 53 ~ 52 a52 52 51. 65 and oer a~3 . ~ 31 Age deendweny ratio 31 3 a0. 0. 7370.. EoomIc dependency niti /4 1.6 /n 1.0 /anj 1.0 1.7 1.2 Urben Popul.tion a. percent of total 6h 8 /h 6 /i 13 / 29 /k Family plannings No.of ocoeptors cumulative (thoua. * No. Of uaser (% of narried wosnen) *.. ~IT!hbr force (thousands) 770 ~o 1, 900 / ~ 2,300 /~ 5, 100 /~ 1,700 Ls.as Percent age employed in agriculture 97 ac 91 a 88ai~ 80 6e 73 Percetage unepicyad .~. HN"r-9-0M R01n, moume received by highest 5% 23 L8 .27 a Percent of notional income receivd by highest 20% 1.2 / a i.- Percent of natienal inome received by lowest 20% 6 .10 a7 PerOe,,t of nation.al Incem, received by lowsot .0% 18. 21/. ad DISTHIBUTI OF.LAD OIeUNSRW % Owned by smallest 10% of ownrer... WuuaMcper phyicIa 71,000 / 58,260) 75,250 /~ 15,910 11,91.0 Population per nursing pereon 7, 500 /8~L 7,010 16,09M 8 190 211 Populatice per hospital bed 1880 ~ 2206.0 1,0 95 70 2, Per capita calorie supply ae % of requirntso 93 93 98 91 97 Per capita protein supply, total (geas. per da'y~L6 7!. 72 63 63 61. Of which, animal and palec. 1 " 1 ~ 2 Death rate 1-4. years /72 4/ 8/ I M k8 Prisar y school "nroll-ant ratio 6 1.37 25 /8 38 Lf.ah Adjusted secondary 8chool corolleent ratio 0.3 13 9 a is ~g - Teear of alhooling provided, firat and acoond level 11. ii 11 1 1 Vocational enrolleet as % f cc school enrollmeet 12 1 6 3 Adult literary rate % 4.L 6317i No. of pcrsons per room (urban) ...1.9 La 2 56 /6.v Poerent of occupied units without piped cater ...78 3 Access to electr ic ity (ac % of total population) ... 6 af 26 =.'f Percent of tural populatimn connected to electricity ,. . 0.0 RMdi receivers per 1000 pputionto 1 36 20 80 Lib 66 Zi Paascnger care per 100 pepleation 0.6 I,t 2/ 2 12y SUcctric peser cornsuption (kwh p.c. 3 li 32 87 Newsprint consumption p-c Ag per year 0.03 lao . o.o1..10 Noise, Figure refer either to the isteet perida or t.o acount of anviromcntal temperature, body weights, and thn latest y_ r. Latest periodo refer in Principle tao dietribution by age and can of natioenai populations. the yearn 1956-60 or 1966-70; the latest yearn i. pr. /6~ Protein atandard. (raquirceants) for all ecuntrice -s etab- clple to 1960 and 1970. liahed by UBDA Economic Research Service provid for a minimam /I The Per Copita GNP estimater ie at market pricen for alloweance of 60 geas of total protein per day, and 20 grace of yoa- othrr than 1950, calouloted by the bome conversion enimal and pulse protein, of which 2.0 greme should be animal tec.hniqu. os the 1972 World Bwnk Ailos. protein. Those etandardae are somewhat Iear than those of 75 12 Average soakr of daughters per ocean of reproductive prace of total protein and 23 grace of anica protein as a oge. average for the world, proposed by TAO in the Thirld Wdorld Food Po Ipulation growth mat.c or for the decodes ending in SUrvey. 1960 end 1970. /8 Some studies have euggated that crude death ratea of childrcn A8 Ratio of population under 15 and 65 and -oer to ppula- ages 1 through l4 say be used as a-fAirt approotation index of tion of agoe 15-461 for ago de,pendecy Ratio and to lbhor malnutrition. fcrce of age. 15-61 for economic dependency ratio; L8 Percentage enru,fledu of sor,respooding population of sechl age /5 FAO reference standards represent physiological re- an defined for each ooutry. ocirecants f or nocreal activity and health, taking *Re,cest Teakh .1.ins estimate for mid-1972 is 1..21 million. /a 1969; Lb 1972; /. 1959-60; /d~ 1965-70, UN 6ntinate; /o Eatimata; LL 5968; & 1960-72, Lb Defi-nition cot available; /i All t-anhzips and town planning areas, and all district centers; /8 Sirty-eight towne; Lk Cop-Vert region and the citien of Saint-Louis, Thiea, Koolack, Diourbel and Ziguicohor; /I Eaticate for dejure population, binned cc results of oneple eurvy; /- 1966; /n Ratio of populatlen under 15 and 65 and ovr to total labor force; E.tieate hosed cc the results of a sample survey and excludes labor force of Niamey City, nomad population end foreigners; 1973; /L 1972-73; /8 1962; Is Coverage of data incomplete; /8 1963; Lu. Government hospital establishments; Zi 196L-66; /. Not incl.ding private vocational. achools; /. 1965; ~' Public education only; /z Not including toaher training; /as 1967; 48b Urhan only; /8ji196.; /8d Households; /aa, Water-pPped inside; 8 Pecn ofdwel1iigs itb electricity; /.& Inside or Outside; /66 Unadjusted; /.I lower seco nd leval; 8l yeren over; /8k Population. LJ r n anSenegal has iew enolect.d Re an objective country since itie GAP is about three t"as that of Niger; both rounories are in the ,ase googmephical arva, ho aimilar production patterns (with the aene dominent crop -- groundnutn), ahar the ease moetary system and have ah..t the ease populatio-. TK .ojc R3 Octcber 8, 1975  ANNTEX. I Page 2 of 3 pages ECONOMIC INDICA'TOPS GROSS NATIONAL PRODUCT IN 1972 ANTUAL RATE OF GROT (, constant prices) FCFA Bln % GNP at Market Prices 109.5 100.0 Gross Domestic Investment 9.2 8.4 Gross National Saving 2.1 1.9 Current Account Balance -7.6 -6.9 Exports of Goods, 'BrS 19.8 18.1 Imports of Goods, I.FS 26.5 24.2 OUTPUT,. LABOR FORCE AND PRODUCTIVITY IN 1972 Value Added Labor Force V.A. ner Worker FCFA Bln S Mln % FCFA Agriculture, Livestock, Fishing 60.T 7379 Manufacturing 10.9 10.0 Construction 3.4 3.1 Services 33.1 30.5 General Administration (5.9) Other 0.5 0.5 Total/Average 108.7 100.0 GOVERNMENT FINANCE Central Goverrnernt FCFA Bln S of GDP r7'rr7n Q/ 197374 Current Receipts 12.99 212.0 Current Expenditure 12.19 11.8 Current Surplus 0.20 0.2 Capital Expenditures b/ 2.20 2.0 External Assistance 2.00 1.8 MONEY, CREDIT AND PPICES (IFS,' 1965 1970 1971 1972 1973 1970 1975 (April (Million FCFA outstanding end period) Money and Quasi-Money 6,722 9,596 12,135 12,896 15,504 20,315 20,951 Bank Credit to Public Sector (net) -1,046 -1,652 -2,324 -3,458 -3,402 -7,152 -8,o65 Bank Credit to Private Sector 8,644 10,047 9,738 10,677 12,464 20,973 26,938 Moncy and Quasi-Money as % of GDP . 9,4 11.1 121.9 - General Price Index (1964 - 0o0) c/ 10.O 125.9 131.2 144.0 160.9 166.3 179.4 Annaul percentage changes in: General.Price Index 0.7 4.2 9.8 11.7 7.6 Bank Credit to Public Sector -Bank Credit to Private Sector -0.2 -3.1 9.6 16.7 28.4 a/ Fincal year ending September 30. b/ Excluding,public debt servicing. c/ Consu=er price index, Niamey. October 3, 1975  ANNEX I Page 3 of 3 pages TRADE PAYMENTS AND CAPITAL FLOWS BALA;CE OF PAYMENTS MERCHANDISE EXPORTS (AVERAGE 1972/714) 1972 1973 1974 FCFA Mln % % (Billion FCFA) Exports of Goods, NFS 19.80 23.70 25.84 Groundnut Products 4,102 23.5 Imports of Goods, NFS 26.51 33.15 50.02 Livestock 3,550 20.3 Resource of Gap - 6.71 -_V?3 -24,10 Uranium Concentrates 6,16o 35.2 Factor Payments (net) - 0.35 - 0.27 - 0.44 Cotton 135 0.8 Private Transfers (net) - 0.76 - 1.6o - 1.76 Hides and Skins 160 0.9 Current Balance - 7.82 -11.22 2 Onions Direct Investment and Beans 1 3,371 19.3 Other Private Long-Term Other 3J3___9_ Capital (net) o.46 0.50 0.50 Total Recorded Exports 17,478 100.0 09.4 Inflow Unrecorded Exports (est.) 2,072 10,6 Outflow Total Merchandise Exports 19,550 1O0.0 Official Transfers (net) 10.44 15.60 19.80 Government Capital (net) 3.46 2.57 1.60 EXTERNAL DEBT, DECEMBER 31, 1973 Inflow US$ Mlri Outflow Public Debt, incl. Guaranteed 16.7 / Other Items (net) - 3.64 - 3.53 0.30 Change in Reserves 2.90 3.92 -4.18 DEBT SERVICE RATIO for 1973 Gross Reserves (end year) 12.04 13.29 12.27 r Central Bank Public Debt, incl. Guarantecd 3.5 Net Reserves (end year) 9.62 10.66 9.50 Central Bank IDA LENDING, AUGUST 31, 1975 US$ Mln Petroleum Products Imports - FCFA million 1,602 1,461 3,614 Outstanding and Disbursed 17.79 - US$ million 6.3 6.6 15.0 Undisbursed 6.02 - 1,000 tons - - - Outstanding, incl. Undisbursed 23.81 b/ Exports RATE OF EXCHANGE 1970-71 US$1.00 - FCFA277.71 1972 US$1.00 - FCFA252.21 1973 US$1.00 - FCFA220.70 1974 US$1.00 - FCFA24O.50 a/ Including US$45.3 million undisbursed. b/ Original principal amount (US$22.10 million) plus adjustment to reflect the devaluation of the United States dollar (US$1.71 million). not available not applicable October 3, 1975  ANNEX II Page 1 THE STATUS OF BANK GROUP OPERATIONS IN NIGER A. STATEMENT IDA CREDITS (as at September 30, 1975) Credit US$million Number Year Borrower Purpose Amount (less cancellation) IDA Undisbursed Tw credits fully disbursed 8.0 - 207 1970 Republic of Niger Agricultural Credit 0.6 0.3 231 1971 Republic of Niger Highway Development 6.5 0.4 441 1973 Republic of Niger Drought Relief 2.0 0.8 473 1974 Republic of Niger Niamey Airport 5.0 4.4 Total 22.1 5.9 of which has been repaid* Total now outstanding and held by IDA /1 22.1 Total undisbursed 5.9 * $17,158.88 repaid /1 Prior to exchange adjustment B. STATEMENT OF IFC INVESTMENTS (as at September 30, 1975) Nil C. PROJECTS IN EXECUTION Credit 207 - Agricultural Credit Project; US$584,000 Credit of June 9, 1970; Closing Date - December 31, 1975 Disbursements have been much lower than expected due to: lack of demand until recently due to the drought; the existence of large inventories of fertilizers and other inputs at the beginning of the project; Niger's poorly developed credit, input and extension delivery systems. We have proposed and Government has agreed, to cancel the remaining amount of this credit. Appropriate procedures are now being initiated to this end.  ANNEX II Page 2 Credit 231 - Second Highway Construction Project; US$6.55 million Credit of January 29, 1971 (as amended on November 26, 1973); Closing Date - December 31, 1975 Work on the Niamey-Tillabery road (115 km) and on the Magaria-Tinkim- Dan Tyao (28 km) has been completed. Detailed engineering for the Niamey- Baleyara road was dropped at Governmentts request since its construction was found to be premature. Detailed engineering on the Maradi-Djibyia road (49 km) was substituted in its place. The Zinder-Bande road study was extended to the Nigerian border as assurances were received by Nigeria that the connecting road Babura-Kunyia would be constructed. Construction of the roads will be included in the Third Highway Project. Credit 441 - Drought Relief Project; US$2.0 million Credit of December 7, 1973; Closing Date - June 30, 1976 The credit, approved on November 13, 1973, is one of six credits made to the six sahelian countries to help people in drought-affected areas to reestablish their self-sufficiency through redevelopment and improvement of their farms and herds. The Banque de Developpement de la Republique du Niger (BDRN) is serving as the intermediary for channeling funds to the different Government agencies who have responsibility for the execution of various sub-projects. Credit 473 - Niamey Airport Project; US$5.0 million Credit of May 24, 1975; Closing Date - December 31, 1976 This credit provides for improvements to existing facilities so as to enable modern, large body aircraft to operate safely and economically to and from Niamey Airport. The project provides for strengthening and lengthening the runway, strengthening of the taxiway, enlarging and strengthening the aircraft parking apron as well as the upgrading and relocation of the Instru- ment Landing System. Work began on the civil works portion of the project in May 1975 and is expected to be completed by September 1976. Due to cost increases and currency realignments, supplementary financing of up to US$1.0 million may be needed at a later date.  ANNEX III Page 1 NIGER - MARADI RURAL DEVELOPMENT PROJECT Credit and Project Summary Borrower: Republic of Niger Amount: US$10.7 million Terms: Standard Project Description: The proposed project, carried out over a three-year period, 1976-78, would comprise: (a) provision of production packages -- extension, applied research, credit and input supply -- aimed at the improvement of groundnut, millet and cowpeas production in 15 selected Associations Locales de Coop4ratives (ALCs); (b) strengthening of cooperatives; (c) expansion of educational and training programs, including a functional literacy program, as well as of a training school for extension workers and the provision of training scholarships for project personnel; (d) study for developing the irrigation potential of the Goulbi de Maradi and pilot development of irrigation in the Goulbi de Maradi through exploitation of undergrotund water resources; (e) construction of 80 km of feeder roads; (f) planting of 500 ha of trees in fuel wood plantations; (g) improvement of livestock services in the project area and preparation of a livestock development project, as well as provision of credit for the purchase of livestock by pastoralists who lost their herds during the Sahelian drought; and  ANNEX 3 Page 2 (h) establishment of a project evaluation unit to determine the economic and social impact of the project. US$ '000 % of Foreign Local Foreign Total Exchange Staff Salaries - Local Staff 2,090 0 2,090 0 - Expatriates 510 510 1,020 50% Buildings, Civil Works and Tree Seedlings 370 250 620 40% Roads Construction 370 390 760 51% Irrigation Fund 330 610 940 65% Equipment and Vehicles 140 570 710 80% Purchase of Animals 620 0 620 0 Vehicles' Running and Other Operating Costs 840 850 1,690 50% Incremental Agricultural Credit - Inputs 280 430 710 61% - Improved Seeds 170 50 220 21% - Farm Equipment - Blacksmith Kits 110 30 140 23% - Vaccine 40 10 50 25% Irrigation Development Surveys and Studies 0 620 620 100% Other Studies, Technical Assistance, Audit, Scholarships 0 490 490 100% Sub-Total 5,870 4,810 10,680 45% Physical Contingency 400 320 720 45% Price Contingency 990 810 1,800 45% Total Expected Project Cost 7,260 5,940 13,200 45% Less Taxes (1,320) 0 (1,320) Total Expected Project Cost Net of Taxes 5,940 6,070 11,880 50% Financfng Plan Local Foreign Total % of Total Project Costs ------in US$ Million ----- (net of taxes) Association 4.8 5.9 10.7 90% Government 2.5 - 2.5 10% Total 7.3 5.9 13.2  ANNEX III Page 3 Estimated Disbursements IDA Fiscal Year Cummulative Disbursements (in US$ Million) 1977 3.6 1978 8.1 1979 10.7 Procurement Orders or contracts for equipment, vehicles or Arrangements: chemicals with a value of more than US$50,000 would be obtained through international competitive bidding (ICB) in accordance with IDA guidelines. Such procurement is estimated to have a value of US$1.0 million. Contracts of less than US$50,000 would be procured on the basis of locally advertised competitive bidding procedures. Fuel, spare parts and items too small to warrant competitive bidding would be procured locally under procedures accept- able to the Association. Construction of the irri- gation schemes would be by their-prospective users. As there are no local contractors to build the roads, which are too small and dispersed to attract foreign contractors, the roads would be constructed-by the Ministere des Travaux Publics by force account. Contracts exempted from international competitive bidding would aggregate no more than US$1.9 million. Consultants: Consultants providing technical assistance and carrying out the various required studies (US$1.1 million) would be recruited internationally accord-' ing to IDA guidelines. Economic Rate of Return: The economic rate of return from investment in the project is estimated at 39%. Appraisal Report: No. 881 -NIR of October 2, 1975 Map: IBRD 10835  N I G3 E R MARADI RURAL DEVELOPMENT PROJECT Chadokori ' -1 SMALL IRRIGATION SCHEMES AND ROAD PROGRAM Irrigation schemes RN\ I_RN-30 National roads, paved Nationol roads, gravel National roads, earth \ ., , \ | ~~~~~~~~~~~~~~~~~~~~~~~~~~~~Project roads _,,, ~~~~~~~~~~~~~~~~~ ~~Project bridge ' \ <ibiri ._._. I~~~~~~~~~~nternrtional boundazries T. G.-ou EGidazn Sori ,>> \ hada \~~~~~~~~~~~~~~~~