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1 Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY Report No Public Disclosure Authorized Public Disclosure Authorized PROJECT COMPLETION REPORT FEDERAL REPUBLIC OF NIGERIA FOURTH NIGERIAN INDUSTRIAL DEVELOPMENT BANK PROJECT (LOAN 2299-UNI) DECEMBER 22, 1992 Public Disclosure Authorized Industry and Energy Operations Division Western Africa Department Africa Region 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.

2 CURRENCY EOUIVALENTS Currency Unit = Naira (N) 1983 US$1 = Naira US$1 = Naira US$1 = Naira US$1 = Naira US$1 = Naira US$1 = Naira US$1 = Naira 9.44 ABBREVIATIONS CBN - Central Bank of Nigeria EIB - European Investment Bank ERR - Economic Rate of Return FGN - Federal Government of Nigeria FRR - Financial Rate of Return ICB - International Competitive Bidding ICC - Industrial Credit Corporation of Ireland ICON - Investment Company of Nigeria Limited MIS - Management Information System NBCI - Nigerian Bank of Commerce and Industry NDIC - Nigerian Deposit Insurance Corporation NIDB - Nigerian Industrial Development Bank PCR - Project Completion Report SAP - Structural Adjustment Program SFEM - Second Tier Foreign Exchange Market SME - Small and Medium Enterprise FISCAL YEAR Government January 1 - December 31 NIDB January 1 - December 31

3 THE WORLD BANK W"hington, D.C U.SA FOR OFFICIAL USE ONLY Otfice of Diroctor-Goneral Operations Evalualtion December 22, 1992 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Federal Republic of Nigeria - Fourth Nigerian Industrial Development Bank (NIDB IV) Proiect (Loan 2299-UND Attached is a copy of the report entitled "Project Completion Report on Federal Republic of Nigeria - Fourth Nigerian Industrial Development Bank (NIDB IV) Project (Loan 2299-UNI)" prepared by the Africa Regional Office, with Part U contributed by the Borrower. It provides a satisfactory assessment of project achievements. The project outcome has been affected by adverse macroeconomic conditions (foreign exchange shortage, liquidity squeeze, drastic and frequent devaluations), and NIDB's less than prudent banking practices in project selection. NIDB has been marginally profitable, but its portfolio has been characterized by large arrears and its finances have required substantial injections of equity and debt conversion by Government. The overall performance of the project is rated as satisfactory with partial institutional impact. While project sustainability is rated as uncertain, it should be noted that NIDB, the major financial intermediary providing term financing to Nigerian entrepreneurs, has recently made an effort to reorganize, improve its policies, procedures, and work methods, and implement a restructuring and diversification program. An audit will be conducted on both NIDB Im and IV spanning a period of 15 years, with a view to ascertaining the prospects for NIDB's effecdveness in Nigeria's widening and more open financial sector. Attachment This document has a restricted distributlon and may be used by recipients only In the performance of their omcial dmslel Its contents may not otherwise be disclosed without World Bank authorization.

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5 PROJECT COMPLETION REPORT FOR OFFICIAL USE ONLY FEDERAL REPUBLIC OF NIGERIA FOURTH NIGERIAN INDUSTRIAL DEVELOPMENT BANK PROJECT (LOAN 2299-UNI) TABLE OF CONTENTS PREFACE... EVALUATION SUMMARY... i iii PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE Project Identity Background Project Objectives, Description, Design and Organization Project Implementation Project Results NIDB Operations Project Sustainability Bank Performance Borrower Performance Findings and Lessons Project Documentation and Data PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE The Nigerian Economic and Industrial Scene NIDB's Strategic Response Conclusion Annex A: Collection Performance Report for the Year Annex B: Provisions for Bad and Doubtful Debts - Guidelines for Making Provisions Annex C: Recommendations of ICC on Policies on Providing for Doubtful Investments Earlier Agreed Between the World BanklNIDB/External Auditors PART IH: STATISTICAL INFORMATION Table 1: Related Bank Loans Table 2: Project Timetable Table 3: Loan Disbursements - Cumulative Estimated and Actual Disbursements Table 4: Project Costs and Financing Table 5: Status of Covenants Table 6: Use of Bank Resources 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.

6 TABLE OF CONTENTS (cont'd.) ANNEXES 1. Action Program Outline of Development Strategy for 1983 Through Characteristics of Projects and Costs Approved Under Loan 2299-UNI Performance of Sub-projects Financed Under Loan 2299-UNI Sectoral Distribution of Projects Financed Under Loan 2299-UNI Geographical Distribution of Projects Assisted Under 2299-UNI Investment Cost Distribution of Projects Financed Under Loan 2299-UNI List of Cancelled and In-active Sub-projects Under Loan 2299-UNI Comparison of Portfolio Arrears of Over Six Months Comparative Income Statement for Comparative Balance Sheets Statement of Key Financial Ratios

7 - i - PROJECT COMPLETION REPORT FEDERAL REPUBLIC OF NIGERIA FOURTH NIGERIAN INDUSTRIAL DEVELOPMENT BANK PROJECT (LOAN 2299-UNI) PREFACE This is a Project Completion Report (PCR) for the Fourth Nigerian Industrial Development Bank (NIDB) Project in Nigeria, for which Loan 2299-UNI was approved in the amount of US$120 million equivalent. The Loan was appraised in September 1982, approved by the Board on June 2, 1983, and declared effective on April 6, It was closed on December 31, 1991 (against the original closing date of December 31, 1988). The final disbursements amounted to $118.8 million or 99.0% of the loan amount. This PCR has been prepared by the Industry and Energy Operations Division of the Western Africa Department (Preface, Evaluation Summary, Parts I and III). It is based, inter alia, on the Staff Appraisal Report; correspondences between the Bank and the Borrower; internal Bank memoranda; and information in the project file. The Borrower has prepared Part II of this PCR.

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9 - a11 - PROJECT COMPLETION REPORT FEDERAL REPUBLIC OF NIGERIA FOURTH NIGERIAN INDUSTRIAL DEVELOPMENT BANK PROJECT (LOAN 2299-UNI) EVALUATION SUMMARY Introduction 1. The Nigerian Industrial Development Bank (NIDB) was established in 1964 as a successor to the largely British owned Investment Company of Nigeria Limited (ICON). IFC assisted in the reconstitution of NIDB and purchased 25% of NIDB's equity. Following the indigenization decree of 1972 Government bought out all shareholders at par, including IFC. NIDB has received four direct loans from the Bank, the fourth (oan 2299-UNI) approved in 1983 being the one under reviewy Obiectives 2. The basic objectives of the project under the fourth NIDB loan were: (a) to continue the Bank's institutional support of NIDB, in particular through the implementation of an agreed Action Program (Annex 1) and a Development Strategy (Annex 2 ; (b) to support NIDB's efforts at mobilizing additional resources from the foreign capital markets; and (c) to transfer needed foreign exchange resources from the Bank to viable industrial projects in Nigeria. Implementation Experience 3. Project became effective on April 6, 1984, about ten months after the Board approval of June 2, Project start up was initially delayed as a result of late creation of "Managed Fund", the purpose of which was to separate Government behest subprojects from the NIDB portfolio (Part I, para 4.01). Project implementation was initially about two years behind schedule. By the original terminal date for subproject approval, December 31, 1985, only about US$30 million or one-fourth of the loan amount had been committed. At the request of the NIDB, this date was extended three times to finally December 31, 1988 (Part I, para 4.02). Disbursements were also slow and were significantly below the levels anticipated in the appraisal. The loan closed on December 31, 1991, after four extensions. Almost the entire loan amount of US$120 million was disbursed (Part I, para 4.03). 4. One of the main objectives of the project was to continue the Bank's institutional support of the NIDB. Due to the unexpected economic and portfolio problems in NIDB in the early years of the implementation, the institution building aspect of the project was delayed. Based on the Bank's support and financed under the project, in 1989 NIDB engaged Industrial Credit Corporation (ICC) of Ireland ' The experience with the first two loans is reviewed in PPAR dated October 10, 1977 (No. 1750). The third loan PCR was prepared on October 22, 1990 (No. 9084).

10 - iv - to conduct a strategic study of its operations and to outline a role for NIDB in the context of an open financial markets in the 1990s. In 1990, based on the ICC recommendations, NIDB was restructured. The study essentially recommended a more diversified outlook for NIDB operations through strengthening of its commercial activities and development of other viable commercial ventures, in addition to more efficient and financially self supporting development banking. Results 5. Generally speaking, NIDB's performance under the loan should be treated as mixed. While satisfactory progress was made in certain areas, more work in still necessary to be done in some others. The loan financed a total of 46 subprojects. The approved subprojects represented 36 new ventures and 10 expansion or rehabilitation subprojects. About 91% or 42 subprojects were fully owned by Nigerians. The project also achieved a fairly broad geographic dispersal. 6. Besides institution building, NIDB achieved, with varying degrees of success, most of the objectives set out for it at the time of appraisal, in particular: (a) upgrading management information system (Part I, para 5.06); (b) resource mobilization (Part I, para 5.07); (c) geographical dispersal of NIDB's assistance (Part I, para 5.08); and (d) maintenance of the interest rates at the minimum level of 13% and assumption of foreign exchange by the sub-borrowers (Part I, para 5.09). 7. NIDB has been able to maintain its lending operations with a consistent, although relatively low, level of profitability since its inception. However, in the Nigerian economic environment, as in many other countries that suffer from a system of price distortions, profitability alone cannot be considered sufficient to ensure sustainability in the long run. NIDB has undoubtedly achieved the basic function of transferring investment resources to industrial borrowers, but given the high level of arrears (58% of portfolio as at December 31, 1990 was affected), and the poor implementation record and performance of many subprojects, NIDB's capacity for project appraisal needed considerable improvement. In addition NIDB's interest accruals policy and possible under-provisioning of doubtful debts especially in the early years of implementation made its profitability somewhat illusory (Part I, para 6.09). While NIDB's existence is largely dependent on Government support, it must be stated to its credit that it has in the recent past diversified its operations through: (a) mobilization of domestic resources through debenture issue; (b) undertaking some commercial banking activities; (c) establishment of two subsidiaries to carry out leasing and management consultancy operations; and (d) commencement of implementation of the recommendations of the ICC restructuring program (Part I, para 7.02). Furthermore, NIDB, after a slow start has been intensifying its loan recovery efforts through improved supervision and debt collection practices. 8. In summary, given the adverse macroeconomic circumstances which prevailed during the implementation period, the project was successful in achieving most of its major objectives. Findings and Lessons Learned 9. NIDB has carried out its mandate under difficult economic and operational conditions. With continued Government support, it has been able to overcome many financial and organizational problems. A few lessons can be drawn from the experience of implementation of this project. EiM, the loan required sub-borrowers to assume the foreign exchange risks. Following the major Naira devaluation which started from September 26, 1986, the Naira equivalent of NIDB's portfolio of foreign currency sub-loans increased manifold. This situation made it virtually impossible for some of NIDB clients to service their debts. The 1986 devaluation, in particular, had a very serious consequence for

11 - v the NIDB subprojects which increased the Naira equivalent of their foreign exchange loans manifold. However, in 1987 the FGN decided to step in and provide a one time "safety net" by guaranteeing exchange rate of US$1 = N 1.57 for all disbursements made or letters of credit outstanding as of September 26, It should be pointed out that the FGN safety net was extended for the entire banking system which NIDB application was part of. The result was that the foreign exchange losses for sub-borrowers who had opened letters of credit up to September 26, 1986, were partly alleviated; (Part I, paras 5.11 and 10.03). This emphasizes the importance of having a reasonable balance between foreign currency and local currency loans. It is important to note that the macroeconomic conditions and stable foreign exchange in 1982/83 justified the design of the project to require assumption of foreign exchange risks by the sub-borrowers. The significant devaluations of the Naira, which occurred as a result of foreign exchange liberalization policies under SAP which started during midimplementation could not have been anticipated at the appraisal time. It seems the project would have had better results if the sub-borrowers could have repaid in Naira (without foreign exchange risk assumption) but with market based local currency interest rates. Second, institution building is a slow and continuous process, therefore, lack of discipline in following sound banking practices and inadequate commitmento continued staff training can affect the institution's effectiveness. NIDB has made limited progress in these areas and should continue its activities in this process (Part I, para 10.04). Third, NIDB did not maintain a reasonable balance between its developmental and commercial objectives (Part I, para 10.05). Finally, it is very important for NIDB to take a critical and deep analytical look at project appraisals before commitment especially when the economic situation is likely to change to such an extent that original assumptions underlying projections would no longer remain valid. NIDB should undertake a more thorough sensitivity analysis on all subprojects (Part I, para 10.06).

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13 PROJECT COMPLETION REPORT REPUBLIC OF NIGERIA FOURTH NIGERIAN INDUSTRIAL DEVELOPMENT BANK PROJECT (LOAN 2299-UNI) PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE 1. Project Identitv Name: Fourth Nigerian Industrial Development Bank Project (NIDB IV) Loan Number: 2299-UNI Regional Unit: Africa Region - Western Africa Department Country: Nigeria Sector: Industry 2. Background 2.01 One of the principal aims of the Nigerian Government after independence was to achieve higher rates of economic growth by breaking the patterns of colonial trade, by which primary raw materials were exchanged for manufactured goods. Since markets for many consumer goods had already been established among Nigeria's higher income groups, import substitution of consumer goods offered a ready means of industrializing and was pursued vigorously. Protection in the form of high tariffs and bans on imports of competing products was made readily available, as well as other incentives such as preferential treatment for imports of capital and intermediate goods. As the limits of the domestic high income market began to be reached in the 1970s, the pace of industrial output growth was sustained by using the same instruments of protection to substitute imports of consumer durables (e.g., motorcars), intermediate and capital goods and to establish industries that upgraded domestic raw materials and were considered to be of basic importance to Nigeria's economic development (e.g., steel, petrochemicals, etc). Since the investments required in these latter industries were large and were slow in coming from the private sector, the Government assumed the responsibility of promoting them and state investments in them were particularly large during the oil boom years when there were ample resources in the public sector. Many state sponsored investments were not adequately evaluated and have turned out to be financially unsuccessful By the mid-1980s, Nigeria's manufacturing sector exhibited three disturbing characteristics. Firstly, it was not generating foreign exchange for the national economy, on the contrary, it was a substantial net user of foreign exchange and had to rely on other sectors to generate its needs to purchase processed inputs and spare parts. Secondly, because of its high comparative costs, manufacturing was entirely dependent on the internal market for growth, particularly the urban market where services and construction activities had thrived on the expenditure of state oil revenues. This dependence became clear when Nigeria's economy began to contract as a result of the sharp fall in oil prices in the early 1980s. Both shrinking domestic demand and shortages of foreign exchange to purchase imports and spare parts, resulted in very low capacity utilization levels. Thirdly, the public

14 - 2 - sector had overextended its management capacity. Industrial enterprises in the public sector, as well as parastatals that were created to provide services to the community at large including the manufacturing sector (e.g., power, water supply and sewage services, etc.), were not performing their intended functions adequately or at acceptable cost and were, moreover, requiring substantial subventions from the state The Structural Adjustment Program (SAP) introduced in the fall of 1986 constituted a radical break with previous economic policies. The basic features of SAP that affected the industrial sector were: the introduction of the second-tier foreign exchange market (SFEM) and later merging both tiers into one FEM; reform of tariff and export policies; removal of all price controls to enable producers to operate profitably in the new environment; liberalization of interest rates; and initiation of a commercialization of public sector enterprises The manufacturing sector, although only about 10% of GDP, occupies a prominent role in the country's development goals and plans. The sector is expected to play a critical role in the structural transformation of the economy through diversification of the productive base, employment generation, and exploitation of key natural resources. It is also expected to play a catalytic role in the development of other sectors of the economy through backward linkages, skill formation and entrepreneurial development Nigeria has a relatively well developed financial system with an extensive and growing commercial banking network throughout the country. The Nigerian financial system has open entry under rather liberal rules and regulations. Nigeria's financial system is one of the more complex ones in the developing world. It comprises over 110 commercial and merchant banks, a few development finance institutions, over 100 insurance companies, 800 to 900 pension funds, seven stock exchanges and a number of other small specialized financial institutions serving inter alia small enterprises and rural borrowers. Monetary policy is conducted by the Central Bank of Nigeria which also supervises banks together with the Nigerian Deposit Insurance Corporation (NDIC). Capital market institutions, including the Securities and exchange Commission which directly supervises the stock exchanges, are ultimately regulated by the Ministries of Finance and Trade Although the level of commercial bank term-lending to manufacturing enterprises increased significantly during the later part of 1970s and early 1980s, this situation reversed with the growing domestic liquidity squeeze and foreign exchange shortage. Available data indicates that the manufacturing sector may have received less than its share of credit over the period During this period aggregate credit increased at an average annual rate of 14.8% compared to 17.1% for the government sector and 12.5% for the manufacturing sector. The NIDB remains the country's leading development finance institution and the primary source of term financing for predominately private industrial projects in Nigeria. Another development finance institution, NBCI, which concentrates on financing small and medium enterprises, has received a first line of credit (Loan 2376-UNI approved in December 1983) from the Bank for onlending to SMEs. Yet another loan (2995-UNI) for private sector SMEs was granted to FGN in 1988 which is administered by the CBN The project under review was implemented against a backdrop of sharply declining GDP ( N32.5 billion vs N27.9 billion) and falling levels of manufacturing outputs in real values in the country. It was only after 1986 that the economic trends in Nigeria began to show some improvement.

15 Project Objectives. Description, Design and Oreanization 3.01 Project Objectives: The basic objectives of the project were: (a) to continue the Bank's institutional support of NIDB, in particular through assistance in the formulation and implementation by NIDB of a comprehensive Action Program (detailed in Annex 1) as summarized below: (i) strengthening its organizational structure, recruitment and training programs; (ii) improving its management information systems and internal coordination; (iii) improving loan recovery effectiveness and reducing arrears; and (iv) reviewing its equity investments operations to determine their economic impact and profitability, and to set out objectives and strategy in this area. It would also implement a Development Strategy (detailed in Annex 2), the general thrust of which was to increase NIDB's contribution to the Nigerian economy by broadening its activities (including research activities); diversifying its operations and directing them toward priority subsectors; and broadening NIDB's resource base. (b) to support NIDB's efforts at mobilizing additional resources from the foreign capital markets; and (c) to transfer needed foreign exchange resources from the Bank to viable industrial projects in Nigeria Project Description: The Bank loan proceeds of US$120 million was expected to finance 100% of the cost of direct imports, 50% of domestically-procured capital goods, and 35% of local civil works. The last two percentages represent the estimated foreign exchange components. In addition, NIDB was to develop its apex lending role further, and was to devise guidelines and procedures satisfactory to the Bank for using a part of the Loan proceeds to finance subprojects through state-level and regional DFIs in Nigeria. Finally NIDB was to be allowed to use up to US$500,000 of the loan to finance the foreign exchange expenditures of technical assistance for its operations. To encourage NIDB's lending to the private sector, a ceiling of US$24 million (20% of the loan amount) was set for financing public sector subprojects The free limit whereby NIDB could review and approve subprojects on its own was increased from US$650,000 under the previous loan to US$ 1,000,000, and the aggregate free limit under the loan from US$15 million to US$40 million under the fourth NIDB loan. The expectation was that 45% of the number and up to 25% of the amount of subprojects financed would fall under the free limit. To ensure that loan proceeds go to a reasonably large number of subprojects, a ceiling on the size of the individual subloans eligible for Bank financing was set at US$8.5 million (equivalent to 7% the loan amount) At the time of appraisal, it was expected that subprojects to be assisted under the loan would be predominantly private sector projects selected with an emphasis on priority industrial subsectors (agro-industry, engineering industries, construction materials and other intermediate goods).

16 3.05 NIDB's interest rate at the time of appraisal was 13% per annum which was the maximum allowed under the prevailing guidelines from CBN. In addition, NIDB intended to introduce a one-time 1.25% appraisal and development fee. As part of the loan conditionality, NIDB agreed to a minimum interest rate of 13% per annum. NIDB was also to pass to sub-borrowers the foreign exchange risk Project Design: The conceptualization of the project at the time of appraisal (to mostly finance new and import substituting industrial projects, and to carry out an institutional and technical reform of NIDB) appeared to be appropriate, on the basis of the Government's commitmento industrial development as being one of the main pillars of Nigeria's long-term development. However, NIDB's appraisal capacity of sponsor's ability to implement subprojects and to contribute their share of the investment cost was over-estimated. Also at the time of appraisal it was not quite foreseen that NIDB had an immediate need to upgrade its portfolio and assets management capabilities to conduct adequate analysis of subproject implementation which led to high cost escalations which often were beyond the sponsor's capacity to manage. Given the macro economic framework prevalent at the time of appraisal, the project design also did not envisage the effects of the SAP which during project implementation resulted in significant and frequent devaluations of Naira. With the foreign exchange risk being assumed by the subproject sponsors, devaluation resulted in substantial increases to their debt in Naira terms, which most of them were unable to service. The above problems largely contributed to the limited success of the project. Based on the prevailing macroeconomic conditions and the outlook for the future, the Bank should have designed and insisted on a mechanism, whereby either (a) Government would have assumed the foreign exchange risk and the sponsors would have borrowed in Naira terms under market determined conditions, or (b) through a variable cost mechanism sponsors would have assumed the foreign exchange risk under a set of conditions commensurate with such borrowing (e.g. dollar or foreign currency interest rates which at the time were in the single digit range) Organization: The Nigerian Industrial Development Bank was established in 1964 as a successor to the Investment Company of Nigeria (ICON). It is Nigeria's only financial institution specializing in the provision of term finance (loan and equity) to medium and large scale industrial projects on a nationwide scale. At first its majority shareholding was privately owned: IFC 25%, CBN 25%, other Nigerians 1%, and foreign private shareholders 499%. Later, it became a wholly owned government institution under the indigenization policies of the mid-1970s. Since its formation NIDB has been an important source of development finance for Nigerian industry, particularly of long-term foreign exchange loans. To enable NIDB to play a key role in Nigeria's development efforts, the Government provided considerable support to its lending operations under the Third Development Plan and channelled N93 million in loans and N16 million in equity to NIDB from 1975 to NIDB's paid-in share capital, which at the time of the appraisal (September 1982) stood at N99.4 million has since increased substantially and stood at N397 million as of December 31, Bank Group's association with NIDB dates back to 1964 when IFC assisted NIDB's establishment and took 25% share in its equity; this investment was later sold to FGN when indigenization took place. Bank's lending involvement in NIDB started with a loan of $5.6 million (Loan 588-UNI) in 1969, followed by a second one of $6.2 million (Loan 705-UNI) in These loans provided much needed foreign exchange for industrial development during the period of post-war reconstructiony A third loan was appraised in 1973, but further processing was ceased, as the Government decided that it was in a position to provide NIDB with sufficient local and foreign resources from its own substantial oil revenues at a lower costs. This decision also affected to some A PPAR on these two Bank loans was circulated in October The report had concluded that NIDB performed satisfactorily as an intermediary in implementing these projects.

17 extent the close relations that had evolved between the Bank Group and NIDB, with the result that institution building deteriorated. At the same time considerable staff turnover took place due to comparatively low compensation paid by NIDB and the fact that its staff were in demand by other banks (other banks were starting to get into term-lending business and they needed people with some experience in the field). By the fall of 1977, however, it became obvious to the Government that it could no longer meet NIDB's resource requirements entirely on its own. Discussions were held with the Bank in September 1977, and subsequently the third loan of $60.0 million (Loan 1597-UNI) was approved in 1978 marking the resumption of a long-standing association between the Bank and NIDB. The current project (Loan 2299-UNI), which is the fourth NIDB loan, was approved in Project Implementation 4.01 Loan Effectiveness and Project Start-up: The project became effective on April 6, 1984, or about ten months after the Board approval (June 2, 1983). Most effectiveness conditions were met as had been planned except for the creation of the Managed Fund. Although the creation of Managed Fund was not a formal condition of effectiveness, the project was recommended by the Bank's managemento the Board for approval on the basis of government assurance that the Managed Fund would be created shortly after approval. The purpose of the Managed Fund was to seek funding for and separate certain Government behest subprojects from the rest of the NIDB portfolio as these subprojects had been identified by the Bank's mission to be one of the major causes of the NIDB's arrears problem The effectiveness date was extended three times because of delays in the implementation of the Managed Fund The project start up was also hampered by the delays in the Government's appointing a new board of Directors and problems in securing import licenses (up to 1986) for NIDB's subprojects. As a result of all the problems referred to above, the project implementation was about two years behind schedule. The original terminal date for subproject approvals, December 31, 1985, proved to be too optimistic as by that date only about US$30 million or one-fourth of the loan amount had been committed. The date had to be extended thrice, finally to December 31, By this final commitment date almost the entire loan amount had been committed (Annex 8) The actual disbursements under the loan were slower than appraisal estimates (see Table 3 in Part III). As of December 31, 1988, the original loan closing date, only about 53% of the loan had been disbursed. The closing date had to be extended four times and the loan was finally closed on December 31, The final loan disbursements were US$118.8 million or 99.0% of the loan amount. The slower than estimated commitment and disbursement under the project were attributable to a combination of factors: (a) general start-up problems in the beginning of the project (paras ); (b) inadequate staffing situation of NIDB due to uncompetitive salaries, which sometimes led to departure of good staff during the early years of the project implementation thus affecting NIDB's project processing capabilities; (c) slow internal bureaucracy within NIDB coupled with governmental red tape in the issuance of various permits and documents; (d) slow progress in the implementation of the Action Program under the project which, inter alia, had an effect on strengthening NIDB organization structure, training programs, and management information systems; this in itself had an impact on NIDB's marketing and appraisal capabilities; (e) Government's sub-optimal industrial policy, whereby, it undertook most of the country's investment in industries; and (f) devaluation of Naira at levels unsustainable to some of NIDB's clients. These factors combined with the unusually slow project implementation pace in Nigeria, affected the speed of disbursements under the project.

18 Part of the variance between the planned and actual implementation was due to economic conditions in Nigeria which could not have been foreseen by NIDB. However, NIDB could have avoided those resulting from institutional weaknesses to some extent. The appraisal report correctly identified and made reference to the project risks involving NIDB's institutional shortcomings which was to be remedied by the implementation of the Action Program (Annex I' and the development Strategy (Annex 2) under the project. However, what the appraisal report did not foresee was that inability of NIDB's appraisal staff to carry out intensive and in-depth appraisal and reappraisal of financial prospects of projects in the emerging difficult economic situation in the country which had the potential of making their financial projections unrealistic, and thus affecting the viability of the projects. Furthermore, NIDB quite often failed to thoroughly assess the ability of the project sponsors to invest their share of the project cost or to have adequate contingency planning for raising resources to meet cost overruns resulting from the slow project implementation, devaluation and inflation. Had these deficiencies been rectified in a timely way, some of the project implementation problems could have been resolved and the related deterrent to the quality of the portfolio avoided Procurement: Under the previous Bank loan NIDB procurement contracts above US$3 million and turn-key projects for contracts above US$15 million were subject to ICB. These limits were maintained under the fourth NIDB loan. For those procurement (local and foreign) not subject to ICB, NIDB's normal practice of requiring alternative quotations (usually three) was found satisfactory. 5. Project Results 5.01 Project Objectives: Generally speaking, NIDB's performance under the loan should be treated as mixed: most of the loan objectives set out at the time of appraisal were realized (some objectives had to be modified due to changing macro economic conditions). At the same time many subprojects faced implementation difficulties, including delays in commitments and disbursements NIDB approved a total of 54 subprojects, two of which were later canceled and six have been inactive with no disbursements. The details of the 46 financed subprojects comprising 36 new ventures and 10 expansion/rehabilitation subprojects are discussed below and presented in Annex 3. The majority of the subprojects (42) were fully owned by private Nigerian nationals. A substantial part of the subprojects were therefore privately sponsored, as it had been intended at the time of appraisal. Of the four non-private subprojects, two were wholly owned by Government and two were joint ventures with foreigners Institution-Buildins!: One of the main objectives of the project was to continue the Bank's institutional support of NIDB, in particular through assistance in the formulation and implementation by NIDB of a comprehensive Action Program and a Development Strategy, both of which are detailed in Annexes 1 and 2 respectively and briefly described in para The severe and somehow unexpected economic and portfolio problems of the NIDB, especially in the early years of the implementation, over-shadowed most of the institutional support aspects of the project. Part of the slow activities in this respect may be due to the fact that during this period the Government was contemplating to privatize NIDB by transferring at least 30% of its shares in NIDB to private investors. This did not materialize. However, supported by the Bank, NIDB later engaged Industrial Credit Corporation (ICC) of Ireland to conduct a strategic study of its operations and to outline what role NIDB should fulfill in Nigeria's more open financial markets in the 1990s. In spring 1990, based on the strategic study, and fully endorsed by the Bank, NIDB began restructuring its organization and activities. ICC recommended a more diversified outlook for NIDB operations through strengthening of its commercial activities and development of other viable commercial ventures, in addition to more

19 - 7 - efficient and financially self supporting development banking. With assistance from ICC consultants, NIDB implemented the restructuring on May 2, The new organization structure was put into place followed by a mass transfer of managers and staff into new positions The Government which had suspended the NIDB board in August 1989, appointed a new board comprising thirteen members on May 8, As part of the restructuring package, a Banking Procedures Guide was prepared and circulated to all banking managers and staff. The Guide set out in detail the procedures to be followed starting from screening of the subprojects, to their presentation to the board, and finally sending the letter of offer to client. To ensure that a project promoter will be in a position to contribute counterpart funds, NIDB made it mandatory that starting early in 1990 a deposit of 40% of the proposed equity be put in an interest bearing account. To improve the portfolio situation and to thoroughly review the non-performing subprojects, a Resuscitation Unit was set up in April NIDB's management effectiveness has been mixed over the years. There were changes in the composition of NIDB board and management during the implementation period of the loan under review. In some areas management and particularly the Chairman of the Board was very effective, particularly in obtaining Government's approval for a massive increase of its paid-in capital (almost 100% increase to N397 million) in In other areas i.e., strengthening NIDB's appraisal and supervision capabilities, improving cash collection practices, and introducing a credit risk management program, the management has been slow. The perception of NIDB in business circles varies. Many private sector Nigerians perceive NIDB as slow and having cumbersome procedures, while others characterize it as a fairly sound and flexible institution, particularly in view of its restructuring program (paras ) Management Information System: Within the framework of institution building, another component of the Action Program (Annex 1) included in the objectives of the project was to assist NIDB install a modern and effective management information system (MIS). The existing MIS was so cumbersome to use that management frequently had insufficient information to perform its tasks adequately and the data at its disposal was often internally inconsistent. After extensive delays - mainly due to lack of appreciation of the benefits of a modern MIS and also disagreement within NIDB on which departments should be responsible for running it -- consultants were employed and finished designing and partially installing a computerized MIS that will enable NIDB to carry its payroll, personnel records, investment and portfolio records and general accounting ledgers. After the conclusion of design phase in late 1988/early 1989, NIDB staff started loading data and additional personal computers were purchased. NIDB's MIS capabilities have improved when compared with several years ago, however, there is plenty of room for improvement in the operation and effectiveness of their MIS Resource Mobilization: With Bank encouragement, NIDB made efforts to mobilize foreign exchange resources from the foreign private capital markets but could not make much headway because of the country's balance of payments and external debt problems; however, in 1983 NIDB succeeded in obtaining a second loan of US$36.8 million equivalent from the European Investment Bank (EIB). More recently, in 1989, a third loan of ECU 50 million (US$61 million) was signed with EIB. The African Development Bank also approved, early in 1990, a loan of UA 80 million (US$104 million) to NIDB. In the area of domestic resource mobilization, NIDB successfully floated its first debenture issue for N 15 million (US$20 million) in 1983 on the local capital market; the coupon rate was 11.5% with maturity in 1995.

20 GeograRhical Distribution of NlDB's Assistance: In addition to increasing the number of its area offices to five (Kaduna, Akure, Aba, Bauchi, Lagos), NIDB also succeeded in achieving broader geographical distribution of its assistance in general and under the line of credit in particular. Subprojects in 17 states were financed under this loan (Annex 6). This compares to coverage of 14 states under the third NIDB loan. The dispersal achieved under the third and fourth loans show marked improvement over the previous NIDB records when about 50% of its portfolio was concentrated in Lagos alone. Under the loan, 30% of subproject were in Lagos, the remaining 70% spread over 16 states. NIDB still needs to diversify further and cover more states to attain a full national profile NIDB's Interest Rates and Fee Structure: At the time of the appraisal of the project under review the interest rate charged by NIDB was 13% per annum. The interest rate of 13% was the maximum allowed under the then Central Bank guidelines. Third Loan Agreement required that NIDB charge a minimum of 10.5% per annum. The fourth NIDB Loan Agreement required that on-lending interest to be a minimum of 13% per annum and that NIDB would pass through to sub-borrowers all the foreign exchange risks. In addition, NIDB introduced a one-time 1.25% appraisal and development fee. The high liquidity of the banking sector in the early 1980s in Nigeria resulted in generally low interest rates. The interest rates under the third and fourth loans, in the early 1980s, were considered adequate, when Nigeria had a fixed exchange rate and low inflation. The interest rate for sub-loans given from EIB line of credit has been 16% per annum; foreign currency working capital loans were charged 20% per annum. In late 1980s and up to 1990, Naira term loans were charged a floating rate, approximately 24% per annum; and working capital loans from funds raised from the local market were also charged a floating rate, which went up to 28% per annum. During , NIDB's net interest margin was about 4-5% which covered direct and overhead expenses. However, after the provisions of 4-7% of average assets, NIDB's net income from financial operations was negative. This negative net income had serious consequences which resulted, inter alia, on the Bank's recommendation for the NIDB's restructuring (para 5.03). NIDB's other income mainly from hard currency interest bearing accounts and rental income accounted for the narrow profits in 1986 and Partly because of the FGN safety net (para 5.11), and mainly due to increased other income, NIDB experienced improvement in its income but nevertheless 1990 showed a negative operating income. The end result was that there was not enough profit to adequately cover the credit risks and profits. On January 1, 1991, Government intervened by declaring a cap of 21% on the interest rates. The cap was removed on January 1, The capping of interest rates and its subsequent removal did not have much effect on the project under review as most of the funds had already been disbursed or committed. However, the capping hampered NIDB's other activities and created a strain on its already narrow interest margins. NIDB has been rather slow in adjusting its rates in the past. However, under NIDB's new management, which is more commercially oriented than the previous ones, it is expected that a more flexible posture will be adopted in this area in the future Subproject Results: The 46 subprojects financed under the loan covered a reasonably broad spectrum of industrial activities: eight subprojects in textile, seven in food and beverage, nine in chemical and allied, two in hotel and tourism, one in agro-allied, fifteen in manufacturing, and four in miscellaneous industries. Based on the limited data available, an estimated N 1,084 million or US$116.6 million was disbursed on these subprojects. A comparison of actual costs and appraisal estimates for a sample of 18 subprojects indicates that there was a cost overrun of about 47% during the implementation period. Based on the same sample, the average cost of individual subprojects rose from an estimated N48.1 million at the time of appraisal to an actual N70.7 million. It should me mentioned that many of the subprojects under the loan (especially those in textile industry) are operating successfully and are meeting their debt service requirements. Actual costs and other characteristics of the subprojects financed under the loan are presented in Annex 3.

21 Effect of Devaluation: Under the Bank loan, the subproject sponsors were to assume the foreign exchange risk. After a long period of almost constant exchange rate (1978 US$1 = N0.65, 1983 US$1 = NO.71), a major devaluation took place as part of the SAP in September 1986 (US$1 = N4.12). Since then, the Naira has devalued further. In January 1992, the official CBN exchange rate was US$1 = N9.50. All NIDB commitments thereafter were made at the SFEM rate of exchange which was much higher than the rate under the safety net, and was more in line with market rates. Although even at the favorable rate of exchange the debt service liability of those sub-borrowers more than doubled in most cases. For commitments made after September 26, 1986, the sponsors' liability to NIDB continued to increase significantly as a result of the progressive devaluation of the Naira (e.g., Naira devalued 169% from September 1986 through October 1987, for example) Implementation Delays: Almost all subprojects faced implementation delays ranging from several months to several years. A few subprojects were still under implementation in the latter part of The typical reasons attributed to implementation delays are: delay in obtaining import licenses for the plant and machinery (until 1986); promoters inability to contribute their equity as and when required and to mobilize resources to cover higher project costs resulting from inflation and devaluation; inability of contractors to mobilize on time; and delays in complying with legal formalities Capacity Utilization: The subprojects in operation are producing at levels ranging from 20% to 90% of their capacities. However, most of them are operating in the rage of 30-60% of capacity which, though unsatisfactory, is consistent with the capacity utilization rate of other Nigerian-owned projects in the sector. The high cost of imported raw materials and sponsors' difficulties in raising working capital from commercial banks due to credit restrictions are the main reasons for low capacity utilization. It should be noted that due to: (a) shortage of working capital which was restraining industrial production; (b) the increased risk associated with medium to long term lending in foreign exchange; and (c) lack of sufficient supply of term lending in the banking system, NIDB was prompted, based on the Bank's recommendation and support, to give serious consideration to and engage in term lending, inter-alia, for working capital purposes in the late 1980s Performance and Rates of Return: The ex-ante weighted average ERR based on NIDB's appraisal estimate was 25% ranging from a low of 12% (textile) to a high of 58% (cosmetics). Since no information has been provided by the NIDB for this PCR, and there is a shortage of adequate data from the subprojects, it is not possible to present any ex-post results. The ex-ante weighted average FRR based on NIDB's appraisal estimates was 40% ranging from a low of 18% (hotel and tourism and food) to a high of 100% (chemical). The related data which is retrieved from the Bank's project files have been presented in Annex Portfolio Performance: Out of a total principal outstanding including capitalized interest of N328.4 million at the end of 1990, accounts with arrears on principal and/or interest of six months or over accounted for N million, or 52.6% of the outstanding portfolio. The ratio is considerably higher than the one at the end of 1989 (18%). At the end of 1990, loans with total arrears of one year or more were N million (42% of the outstanding portfolio and 80% of total arrears) as compared to N48.6 million at the end of Of total NIDB arrears almost 25% are estimated to be over two years old. Comparative data on NIDB's arrears situation is provided in Annex 9 and is further discussed in paras 6.05 and The major reasons for these arrears are delays in financing of projects, and most importantly inability of sub-borrowers to meet their debt service due to devaluation of Naira. As a result of the above figures, NIDB has increased its provisions in the 1990 profit and loss account significantly to N40.9 million compared to N 16.4 million in 1989 (Annexes 10 and 11). The table in para 6.07 provides comparative analysis and the size of NIDB's annual provisions.

22 NIDB Operations 6.01 Operations: The main trends in NIDB's operations over the period are set out in the table below: Avplications- No na Approvals No. of Loansi Value Nm , Average Size Nm Equity - Nm Disbursements - Nm Loans Equity S ±L~ 22.9~ ~ Portfoliost No. of loans , Value Nmin , Average Size Nm C 2.3 No. of States covered by receiving approvals n.a Source: NIDB and Annual Reports 6.02 The number of applications received by NIDB has varied considerably since The pattern does not seem to have necessarily followed the macro-economic performance as a large number of applications was received in 1984 and 1985, the years in which there was poor performance in manufacturing output and GDP. The average size of the loans approved by NIDB which were less that N I million in 1983 and 1984 have increased rapidly since those years and have reached above the level of N7 million since The increase reflects both the domestic price inflation and the devaluation of Naira. Although the size of loans increased, the numbers approved in each year fluctuated, and in 1988 and thereafter fell sharply below the trend of previous years. One main reason for the drop in the number of approvals particularly in 1989 was the full commitment of all Bank loans with the NIDB. The extraordinary increase in the Naira value of loans approved in 1987 was partly due to significant devaluation of Naira (para 5.11) and partly to the financing of short-term loans for working capital (N31 million) from the EIB line of credit. These sub-loans were approved by NIDB to sustain its commercial operations (para 5.13). Disbursements though risen sharply in Naira terms, due to reasons stated above, fluctuated and declined annually from 1986 to 1988 in US Dollar terms.

23 Until the mid-1980s, the number of new projects approved considerably exceeded that of expansions or additional loans to clients for cost overruns. As shown in the table below, there has been a significant reversal of this trend, with loans for expansions and cost overruns exceeding those for new projects up to Most certainly one of the reasons for the reversal in trend in the period and part of the increase in the cost overruns was on the account of Naira devaluation in those years (para 5.11). There was no new subproject under the loan after 1989 as all available funds had been committed. New Proiects vs. Expansions New Projects Expansions/Cost Overruns Total While NIDB's area of operation is quite extensive, it generally operates in manufacturing, non-petroleum mining and hotel industries. In order to diversify its portfolio adequately, NIDB sometimes does not accept subprojects in these industries either because it already has a substantial exposure in them (hotels, breweries, and furniture), or adequate capacity exists in the country in these subsectors (paper conversions, cement blocks, candles). NIDB's portfolio has a heavy concentration in consumer goods industries including textiles, food, and chemicals. An analysis of the past few years data indicates that over 60% of the total approvals made by NIDB in this period have been to these three subsectors Quality of Portfolio and Arrears: The condition of NIDB's portfolio in the early years of implementation up to 1989 had remained in poor shape for the past several years. This state of affairs was mainly due to the following: (a) economic difficulties (inflation and devaluation) affecting the country; (b) the FGN's restrictive interest rate policies such as caps, limits, etc; (c) NIDB's weaknesses in marketing analysis, assessment of project costs, implementation and supervision schedules, and poor collection procedures; and (d) inadequate equity contributions and relatively poor project execution capabilities of Nigerian sub-borrowers. Annex 9 provides the arrears situation in brief on a comparative basis for years ended December 31, 1983, 1987 and An analysis of the NIDB efforts to collect arrears in 1990 suggests that there is an improvement in the size of principal affected by arrears (from N million in 1983 and N million in 1987 to N million in 1990). It appears that the improvement is mainly due to: (a) The authorization by the CBN in December 1987 that all NIDB's foreign exchange sub-loans prior to September 26, 1986 to receive the concessionary exchange rate of US$1 = N 1.57 when the market rates devalued to almost three times as much (para 5.11). Taking advantage of this opportunity, many NIDB sub-borrowers paid some of their arrears;

24 (b) (c) (d) rescheduling of a large number of sub-loans where implementation was considerably delayed often for reasons beyond the borrower's control; increases in the Naira equivalent of foreign exchange loans disbursed after September 26, 1986, at the current market exchange rates while the portfolio affected by the arrears (relating to pre-september, 1986 disbursed sub-loans) remained the same; and transfer of a portfolio of FGN-owned projects to a "Managed Fund" approved by the FGN in 1984 on which NIDB was to assume no credit risk (para 4.01). The improvement of portfolio quality and arrears levels, therefore, is not entirely due to collection efforts as the figures in Annex 9 appear to indicate Loan loss provisions have grown from 3.2% of the portfolio in 1983 to 11.5% in The table below summarizes the trend in the cumulative provisions for the years NIDB's policy in the past was not to make provisions unless an account went into liquidation or receivership category, which sometimes took two or more years after the borrower had stopped making payment of interest or repayment of principal. Following Bank suggestions, NIDB has started making provisions for losses on a more conservative basis. PROVISIONS FODOUBTFUL DEBTS ) Y : l I Lans NMm l8 869 Provisions Mm , 0: n % 2.7 % 28% 3.3% i 0 7l5% JA.5% Equty vetments Nm : i I Provisism :0.6 78t. \ % % 8.8% 16.4% 19.6% %.. Ttal hivetments Nm ; :-: : :i?i : 91.: Provisionm NM 3.8% W 3.6% 5.0%:, 4.6% % %.86% 11.8% 6.08 Financial Condition: A summary of NIDB's financial statements for the period are provided in Annexes 10 and 11. Key financial ratios for the same period are provided in Annex 12. Briefly, while in early to mid-1980s income from loans and debentures was the major component of total income, it has gradually accounted for a declining share of income. This reflects NIDB's efforts to diversify its income base in order to enhance profitability. Income from equity investment has been fairly stable as a percentage of total income at around 10%. Since it was established, NIDB has always shown profits although, as expected, its profitability has been substantially below that of commercial banks. Return on average total assets has increased from 1.1 % in 1983 to 2.9% in The significant rise of about 165% in net profits in 1988 and 48% in 1989 were mainly due to concessionary foreign exchange rates provided by the FGN (para 5.11). The 1990 net profit was about the same level as in The direct and overhead expenses as a percentage of average total assets which were around 3 % up to 1987 rose

25 to more than 4% in 1988 through Part of the reason for this increase was that employees received a substantial pay increase subsequento the revision of pay scales in The rise in the level of net profits from 1988 was due to interest savings and earnings from the injection of equity in cash and debt conversion by the Government (para 6.10), together with a significant growth in loan income and profits from letters of credit and foreign exchange business Earnings and Cash Flow: In the past several years NIDB's reported income, with interest accruals, has exceeded the actual collections by a substantial amount - in 1986 it was by about 50% and in 1989 by about 48%. Bank supervision missions have repeatedly pointed out to NIDB that its accounting policies in the areas of interest accrual and provisions for accrued interest on non-performing loans result in overstatement of NIDB's financial position. Some improvement has begun to show in the end 1990 results. Unless improved performance is maintained in the near future, NIDB's profitability, described in para 6.08 would not be sustained An analysis of the 1988 balance sheet indicates a large equity base as a result of the doubling of NIDB's paid in share capital. The Government increased its equity from N 199 million in 1987 to N397 million in 1988 converting its loan of N118 million into equity and injecting about N80 million in cash. This strengthened NIDB's financial structure considerably, with a debt equity ratio of an average 0.4:1 in 1988 through 1990, respectively, and a high capital adequacy ratio (equity as a percentage of risk assets) of over 100%. As pointed out earlier, unless NIDB is able to continue its more aggressive collection practices followed in the recent past, the improved cash situation that NIDB is enjoying at present due to the inflow of new equity funds would only be a short term gain. 7. Project Sustainability 7.01 NIDB was established with a mandate to provide term finance to medium and large scale enterprises, particularly in the industrial sector. During the early years it received assistance from a number of international and bilateral sources who participated in the company's equity and were represented on its Board. After NIDB became a wholly Government-owned institution in the mid-seventies, it received considerable support from the Government in the form of equity and loans to enable it to carry out its role. While NIDB has managed to maintain its marginal profitability, it has not until very recently been able to improve its capabilities adequately in the areas of supervision, loan collections and organizational co-ordination. These weaknesses have contributed to accumulation of huge arrears of principal and interest in NIDB's portfolio which would have impacted adversely on NIDB's viability had the Government not come forward with a massive injection of equity (para 6.10) While NIDB's sustainability so far, and in the future, should be considered to be largely dependent on Government support, it must be said in its favor that in recent years it has ventured out of its protective shell and is seeking to establish a niche for itself in the widening and more open financial market in Nigeria. Some of the measures taken are: (a) a successful debenture issue to mobilize resources from domestic market in 1983; (b) introduction of some commercial banking activities like issuance of letters of credit; (c) establishment of two new subsidiaries to undertake management consultancy and leasing operations; and (d) commencement of implementation of the accepted recommendations of the reorganization program which was supported by the Bank and carried out by the ICC in 1989 (para 5.03).

26 In a desire to give NIDB a commercial orientation the FGN has recently taken two important steps. Firstly, in May 1990, it appointed NIDB's Board with a membership of 13, of whom six represent the private sector and five represent the banking sector. Secondly, the FGN has been keen to divest about 30% of NIDB's shareholding to the private sector. Given these favorable developments, it appears likely that the Board and the management will be given adequate autonomy to conduct NIDB's operations without intervention from the Government except perhaps for broad sectoral policy guidelines In view of the fact that there is still a reluctance on the part of the commercial and merchant banks in Nigeria to provide medium and long-term finance for industrial development, except to their well-established investors, NIDB will continue to have an important role to play. It enjoys strong support from the Government and from some international institutions. The recent massive injection of capital and strengthening of management and staffing provide NIDB with a splendid opportunity to reorganize and establish for itself an important place in the financial market of Nigeria. However, it is difficult to say at this stage whether without Government support, NIDB would be able to mobilize resources to become fully sustainable institution in the long-run with a well-defined role in long-term lending. 8. Bank Performance 8.01 Through the fourth NIDB Loan, the Bank has made a positive contribution to the institutional development of NIDB, particularly on its financial viability. The Bank's strong support to NIDB during the implementation period of this loan resulted in the Government taking the necessary actions enabling NIDB to improve its salary structure (especially under the third NIDB loan), create the Managed Fund (for Government behest investments), and increase the share capital. Most importantly, the Bank initiated the restructuring of NIDB (para 5.03) by continuously supporting the effort and by drafting the consultants terms of reference as well as working with NIDB throughout the study and its implementation period. Table 6 in Part III presents the "Use of Bank Resources" on the project. Based on the table, a total of 165 weeks of staff and consultant time were spent on the supervision activities. The field supervision work represented 12 weeks or about 7% of the total. The Bank supported NIDB when EIB was in the process of granting a loan to NIDB. Also, the Bank agreed to NIDB requests to reallocate project funds for the purpose of its MIS development. On the negative side, the slow start of the project perhaps could have been improved upon by earlier and more intensive field missions. 9. Borrower Performance 9.01 Table 5, Part III provides information on the status of covenants and reviews performance of the borrower. Except for the delays in submitting audited accounts, and some minor changes made in operating policies, NIDB's performance was satisfactory. Conditions of effectiveness were met, though late by several months, and subproject appraisals began thereafter. However, because of subsequent slow commitments, terminal dates for subproject submissions and disbursement had to be extended three and four times respectively The borrower has had a poor collection record especially in the earlier parts of the implementation period. Another area of weakness which negatively influenced the borrower's

27 performance was that it maintained separate departments for appraisal and supervision with little exchange of personnel or contact of the staff in the course of day to day business. As a consequence, officers involved in project appraisal had little knowledge of practical problems affecting project implementation. This was reflected in their project appraisal reports which were overly optimistic in areas of market assessment and projections of implementation schedules and capacity utilization. However, this has now been rectified in the new organization structure which was put into effect in 1990 (paras ) NIDB's portfolio situation during the implementation period of the project was undoubtedly improved by the provision of concessionary exchange rate by the FGN (para 5.11). The FGN assistance not only helped improve the NIDB balance sheet and the related debt and equity ratios but it also had a favorable effect on collections and the ability of sub-borrowers to service their debt. The absence of the assistance could have had grave consequences on NIDB financial situation. 10. Findings and Lessons NIDB's performance under the loan has been mixed. During the implementation of the project Nigeria went through a series economic difficulties which severely affected NIDB as well as its clients. The situation also brought to surface the NIDB's weaknesses and inability to cope with the changing environment. The overall impact of these problems was that by 1990 NIDB's portfolio was in poor shape, and its financial position weakened as a result of arrears of principal and interest. It has taken a lot of commitment and hard work on the part of NIDB management to cope with this situation The Bank played an important role in assisting NIDB in this area. It supported NIDB vis-a-vis the FGN in setting up the "Managed Fund". It also formulated and implemented in the NIDB an Action Program (Annex 1) which involved, inter alia, (a) a comprehensive review of its portfolio affected by arrears; (b) an upgrade of its MIS; and (c) the restructuring of its organization, polices and activities so as to be able to meet the challenge of survival in a changing and competitive environment A few lessons can be drawn from the experience of implementation of this project. Firstly, following the major Naira devaluation which started from September 1986, the Naira equivalent of NIDB's portfolio of foreign currency sub-loans increased manifold. This situation made it virtually impossible for most of NIDB clients including sub-borrowers under fourth NIDB loan who had assumed the foreign exchange risk, to service their debts (para 5.11). The FGN subsequently decided to provide a one time safety net by guaranteeing a favorable foreign exchange rate to NIDB and the rest of the banking system. As a result, the foreign exchange losses of some of NIDB borrowers were partially alleviated. The FGN action was applicable to only those transactions which took place prior to September 26, The sub-borrowers after that date had to carry the foreign exchange risk in full and at the prevailing rates. The Naira devaluation continued in subsequent years making it almost impossible for some affected subborrowers to service their loans. It is perceived that the significant Naira devaluation during has by itself caused most of the unfavorable results in the NIDB operation. The macroeconomic conditions and the stable foreign exchange rate prevailing at the time of project appraisal (September, 1982) necessitated the assumption of the foreign exchange risk by the subborrowers. The emergence of SAP and the floating of Naira could not have been perceived in 1982 and early 1983 when the project was approved. The results of the project would have been

28 more favorable if the sub-borrowers would have had to repay in Naira (without foreign exchange assumption) but with market based local currency interest rates. It is, therefore, important that, in the future, NIDB maintain a reasonable balance between the proportion of its liabilities in foreign and local currencies. NIDB should consider, to the extent possible, hedging against foreign exchange risks Secondly, institution building is a slow and continuous process and any slackness or laxity in following appropriate and sound banking procedures and inadequate commitment to continued staff training, both formal and job-related, can affect the institution's effectiveness, as appeared in early stages of the project implementation. However, as from May 1990, when the institutional and organizational changes were implemented (paras 5.03 and 5.04) and as a result of the Action Program (Annex 1), some improvement in these areas have been achieved. Certainly, this is a head start and NIDB should seek to maintain the pace and continue its activities in this important area Thirdly, during the implementation of the fourth project (consistent with the results of the third project) NIDB was perhaps over-emphasizing its developmental role at the expense of commercial considerations and was, therefore, unable to maintain a reasonable balance between loans for new projects and those for expansion/rehabilitation; 80% sub-loans under the project were made for new subprojects and almost all of them experienced serious implementation delays. Sound and prudent banking principles became secondary to the developmental role, which was simply seen as transferring of investment resources to industrial borrowers without adequately ensuring that the funds lent would support commercially and economically viable activities which, in turn lead to sustained process of industrialization in Nigeria Lastly, NIDB experience under the fourth project suggests the importance of taking a critical and deep analytical look at project appraisals before commitment specially when the economic situation is likely to change to such an extent that original assumptions underlying projections would no longer remain valid (paras 5.05 and 5.12). Part of the consultants work carried out and implemented in 1990 (paras ) concentrated on this aspect of NIDB operation. some benefits should be expected to come as a result of this work. However, NIDB should undertake a more thorough sensitivity analysis on all subprojects. 11. Project Documentation and Data The Loan Agreement in the case of Loan 2299-UNI was quite adequate and appropriate for achieving project objectives in the key organizational and financial areas. The appraisal report of the project provided a useful framework for both Bank and NIDB for review of project implementation. However, NIDB did not provide information and data for this Project Completion Report within the prescribed time. The data are therefore predominantly based on the Bank's project files It should be mentioned that NIDB has a computerized data system which produces a fair amount of information on sub-borrowers accounts. However, the quality of the data has not been entirely reliable. Under the project (para 5.06) a basic MIS has been installed which has not yet become fully operational.

29 PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE 1. The Nieerian Economic and Industrial Scene 1.01 Pre Structural Adjustment Period (SAP): NIDB signed the World Bank Fourth Line of Credit in July, 1983, when Nigeria was already in the second year of a protracted economic recession. The gross domestic product (GDP) recorded negative growth rates for several consecutive years from The oil glut which started in the second half of 1981 highlighted the problems of Nigeria's over-reliance on a single export commodity. The sharp deterioration in the balance of payments and Government budget resulted in an acute external debt problem and a reduction in the volume of imported machinery and inputs. Existing manufacturing establishments suffered from low capacity utilization while new plants were slow to set up even when foreign exchange cover was not required as in the case of the World Bank Line of Credit because of difficulty in obtaining adequate import licenses Post Structural Adjustment Period: After the introduction of SAP in September, 1986, inadequate funding of the Foreign Exchange Market also prevented industries with enough local currency from purchasing enough foreign exchange for their operations. Such industries had recourse to the parallel market to meet part of their need with serious consequences for production costs in view of the wide gap existing between official and parallel market rates before March 6, The deregulation of interest rates and the resulting sharp increase in the cost of funds added other dimensions to the problems of industrialists The national economic environment became less and less conducive to industrial investment predictably because of the tortuous bureaucracy surrounding old and new industrial investment activities, the under-capacity operation and resulting poor financial performance of most existing industries Although foreign exchange bidding under SAP began the realistic adjustment of the exchange rate for the Naira, and facilitated access to foreign exchange, the persistent and upward shifts in the Naira exchange rate complicated financial planning and forced companies to maintain larger Naira resources than they used to require for the importation of inputs and spare parts as well as for meeting their foreign currency debt service obligations. This taken along with measures intermittently taken to squeeze liquidity in order to combat inflation made access to Naira credit difficult to industries The developments in Nigeria's policy environment during the period were such as to vitiate the traditional methods and tools used by NIDB and its sub-projects in assessing their needs, operational efficiency, returns and risks of investments. With the sharp fluctuations in exchange, interest and inflation rates, it was to be expected that the capacity of the sub-projects promoted during these changes to absorb and service the foreign currency loans would be suspect. The enviromment resulting from the changes was radically different from what was existing in the pre Structural Adjustment period. The fact that exchange rate fluctuations were continuously getting worse against the Naira and the cost of funds was generally unstable throughout the implementation period of the Fourth Line of Credit posed major problems to industrial clients with whom NIDB does business Effects on the Implementation of the Fourth Line of Credit: Therefore, the initial slow pace of implementation of the Fourth Line of Credit between 1984 and 1987 was mainly

30 because of the shortage of effective demand for term loans resulting from the negative impact on industrial investment decision-making of the difficult economic environment The cumulative effect of these developments was that industrial capacity utilization remained unusually low throughout the period of the implementation of the Fourth World Bank line. Most of the industries depended on imported spares and inputs despite the considerable success achieved in backward integration and local sourcing of raw materials. The constant decline in the exchange value of the Naira, the unstable cost of funds and rising inflation accentuated the instability and uncertainties of the investment climate. Industrialists became so obsessed with the fear of the exchange risk that only a few had the courage to contract foreign currency loans. The negative effect of the prevailing environment on NIDB's investment portfolio was such that loan recovery became rather low. However, NIDB has sanitized its portfolio and achieved a substantial improvement in loan recovery as shown in Annex A The improvement in the condition of NIDB's portfolio has been achieved through a more intensive effort to collect on arrears and follow-up on sick and problematic projects with the newly established Project Resuscitation Department (PRD) mounting prompt recovery action in hopeless cases The total portfolio of the bank as at 31st December, 1991 stood at N947 million made up of term loan of N903 million and equity of N44 million and spread over 322 projects. Out of this amount, N441 million representing 47% was affected by arrears. The total principal in arrears as at 31st. December, 1991 was N154 million. From this figure, N67 million (i.e. 43%) was in respect of projects already put into Receivership under PRD. This large amount arose because of the foreclosure of the problem projects with the total loan prematurely deemed to have fallen due. Furthermore, a sum of N21 million has since been realized from some of the affected projects between January and April, With regard to small and medium enterprises which are funded through the Area Administrations, the terms for servicing the debts have been observed to be rather stiff and this has contributed to the low recovery from these projects. Efforts are being made by Management to review the situation to enable the beneficiaries meet their financial obligations as and when due As far back as 1985, NIDB had been providing for doubtful investments on a project by project basis in line with the guidelines agreed between the World Bank, NIDB and our External Auditors and not when accounts are in receivership or liquidation. Annex B details the guidelines applied for provisions made between 1985 and The guidelines were reviewed by the ICC consultants and suggestions made for even more stringent provisions (Annex C) for precise cut-off point beyond which interest is no longer taken to profit and any unpaid interest already taken to profit is provided against, on project under implementation, on valuation of equity investments and on the responsibility of Management to decide level of provisions for principal arrears were applied from The fact that NIDB was able to implement the Fourth Line of Credit alongside other External Lines of Credit (EIB III and ADB I) is a testimony to the effectiveness of its restructured organization, the policy and operational adjustments and its new marketing strategy. Some of the credit should rightly also lie with the World Bank and the European Investment Bank whose matured observations, queries and suggestions which the NIDB closely attended to assisted in minimizing the effects of the adverse policy environment and investment climate.

31 NIDB'S STRATEGIC RESPONSE 2.01 NIDB learnt a number of lessons from the trauma of the policy environment, lessons which were destined to influence its future operations for the better. Among these lessons were that: (i) continued emphasis on traditional development banking is detrimental to commercial viability. (ii) sole reliance on the core activity of term lending could spell disaster in the prevailing circumstances, and (iii) the structure of NIDB could not adequately respond to the competitive forces of the increasingly dynamic financial services industry The first step taken by NIDB in response to the prevailing situation was to reorganize itself. This began with a critical appraisal of its corporate goals, structure and operations through a strategic study contracted to the Industrial Credit Corporation PLC of Ireland (ICC). the strategic study phase was concluded in 1989 and the implementation began in With the reorganization, NIDB's current corporate objectives are the following: (i) To become primarily a commercially oriented Development Finance Institution providing efficient and profitable industrial investment services. (ii) To generate a higher rate of return on shareholders' funds and to keep up with the trends of profitability in the financial sector The foregoing critical elements of the reorganization have been implemented: - setting up a new organizational structure; - orientation of management and staff to imbibe the new corporate ethos; - adoption of a corporate planning system; - establishment of a Corporate Planning Division; - grouping of headquarters banking activities on sectoral basis; - improvements in the Appraisal Process and Report; - increasing delegated authority to banking divisions; - establishment of new criteria for project selection; - improvement in customer responsiveness and delivery of service; - sanitization of investment portfolio through stringent provisions for doubtful debts;

32 establishment of project resuscitation department; - closer coordination of the activities of all commercial subsidiaries; and - improvement in the management information system In the interest of a healthy portfolio, NIDB has shifted its investment priority from start-up projects to expansion or backward integration projects sponsored by well-established companies which have good track records and the resourcefulness to withstand the shocks of a fluid policy environment. The large number of existing NIDB's prosperous client companies provides a good scope for fruitful investments in this respect. Green field projects are entertained only when the basic inputs are locally sourced or if the end-products have export potentials. This strategy, which actually predates NIDB's reorganization, has been paying off handsomely Out of 46 projects financed with the Fourth Line of Credit, 36 are green-field projects while 10 are on-going projects. However, the 10 on-going projects received more than half (US$61.6 million or 53.4%) of the total disbursements. The 10 include seven backward and forward integration projects in the textile sub-sector accounting for 51.8% (US$59.8 million) of the total disbursements under the loan. Almost all the 10 expansion projects are doing well and meeting their debt obligations to NIDB. They have also enhanced input-output linkages and reduced industrial import-dependence. Though few in number, the expansion projects have contributed immensely to the achievement of the objective of the Fourth Line of Credit Moreover, NIDB has improved the quality of its project appraisal by requiring promoters to show their commitmento the smooth and effective implementation of their project by depositing 12 1/2% of the estimated project cost up front in a co-signatured account before the commencement of the appraisal process. In addition, as a pre-disbursement condition, promoters are also required to contribute a sizeable portion of the on-shore costs to be met before the delivery of plant and machinery. These requirements have made for smoother and faster implementation of approved proposals funded through the EIB and ADB lines of credit Further, NIDB has institutionalized arrangements to sanitize its project portfolio through regular portfolio review. Approved projects are being more smoothly implemented and commissioned because problems earlier posed by insufficient counter-part funding have been neutralized. All projects in Headquarters Banking Divisions and Area Administrations are reviewed by-annually. The Project Resuscitation Department has become very active in handling problem projects. The critical importance of that Department's work is reflected in the fact that it reports directly to the Managing Director. By virtue of the depreciation of the Naira, loan recovery in cases of foreclosure has in most cases been multiples of the original investment. 3. CONCLUSION 3.01 Through the lessons learnt from the changes in the economic environment, a New NIDB has evolved which is in a position not only to survive but also continue to improve its performance in the increasingly dynamic environment. The profitability of NIDB has increased consistently in the past four years despite its making more provisions on its doubtful investment portfolio than required of licensed banks under the Prudential Guidelines which came into effect

33 in The Bank has over the years been prompt in meeting its debt service obligations on all its External Lines of Credit and is confident of its ability to maintain its high credit rating in the future. The strategic reorganization of NIDB has emphasized commercial orientation in its operations with prospects of improved performance in the foreseeable future.

34 NIGERIAN INDUSTRIAL DEVELOPMENT BANK LIMITED COLLECTION PERFORMANCE REPORT FOR THE YEAR 1991 ARREARS AT BEGINNING AIMOUNT FALLING DUE COLLECTION RECEIVED LOAN INrERzST ARREARS AT THE END COLLECTiON RATIOS JANUARY01, 1991 JAN. TO DEC JAN. TO DEC DEFERRED CAPITALIZ DECEMBER31, 1991 ACID TEST SOFTER NO. SUMMARY Of BAWING GROUPIAFIEA PRJNCWAL INTEREST PRINCIPAL INTEREST PRINCIPAL INTEREST PNCIPAL INEREST BASIS BASIS I AGRO ALLIED DIVISION 10, ,793 27,359 22,477 24, ,212 8, CHEMICAL DIVISION 29,198 19,444 31,509 25,688 33,882 27, ,689 26,825 15, M.E.C. DIVISION 9,341 14,7568 7,599 14,898 5,637 5, , A-F.M.U. 3,314 4,248 2,761 4, ,075 7,760 4.U4 4.U S P.RF DEPARTMENT ,628 32, ,441 4, ,430 89, LAGOS AREA ADMINISTRATION 4,047 5,416 5,352 7, ,035 8,872 8, SOUTH EAST AREA ADMIN. 9,138 9,221 9,032 11,314 2,280 7,084 4, , SOUTH WEST AREA ADMIN 6, ,938 5, , ,679 10, NORTH EAST AREA ADMIN 4,103 3, , ,781 3, NORTHWESTAREAADMIN. 4,126 5,264 1,263 5, , COMUERCIAL DIVSION , GRAND TOTALS FOR THE BANW , ,350 71,822 77,293 6, , I10 0 MADE UP OF: PROJECTS IN OPERATION 81,721 53, , , ,712 88, PROJECTS UNDER IMPLEMENTATION 16,266 12, , , ,456 13,241 30, PROJECTS WITH SUSPENDED INCOME 0 27,816 29,382 14, ,382 42, PROJECTS UNDER RECEIVERSHIP 21,722 7,359 2,802 3, , ,496 6, PROJECTS UNDER WINDING-UP 901 1, w , ,38 111, ,350 71,822 77,293 6,012 7, , ,

35 ANNEX B Page 1 of 2 NIGERIAN INDUSTRIAL DEVELOPMENT BANK LIMITED PROVISIONS FOR BAD AND DOUBTFUL DEBTS GUIDELINES FOR MAKING PROVISIONS Guidelines Set for 1985 Accounts 1. Interest (a) For *non-performing accounts, interest would be accrued into income and then fully provided for in the same year. (b) Interest in arrears from prior years through 1983 (1984 fully provided for), 25% was provided in 1984 accounts, 50% to be provided in 1985 (along with entire 1985) and balance of 25% in (c) Interest being only partly paid as and when due and progressively falling more into arrears (no principal being repaid) should be fully provided to the extent of such arrears. (d) Projects under implementation where interest is in arrears - if the management is convinced that the project will be profitable once it starts operating, interest in arrears can be capitalized but with the approval of management. (e) Where the project is not going to be viable, provide fully for the past interest in arrears, then appoint a receiver or wind up the company. Future interest not to be accrued. (f) In those cases where interest and principal are being regularly paid but less than full amount required (unless information dictates otherwise) no provision. All foreign risk to be reflected in provision. 2. Equity Investments (a) For projects in which interest and/or principal has been or is being provided, then provide for equity in full. (b) For those projects which are paying interest and/or loans but operating at consistent losses (e.g. 3 years), such that there is diminution in NIDB's equity, provide to extent of such diminution. 3. Loans - For non-performing loans (a) If assets (security) are remotely located or highly specialized such that ready market not obtainable, then fully provide. (b) If only partial realization appears likely either due to condition of assets cover which security exist, or change in economic conditions affecting market for that asset, then provide to the extent of foreseen loss on realization of loan. (c) For loans which have been delinquent with no principal payment for three years or more (notwithstanding interest payments) and if not already rescheduled, then provide in full,

36 ANNEX B Page 2 of 2 and if any eventual recovery from receiver, amount so provided can be written back into accounts. (d) In instances where accrued interest in arrears now approach or equate outstanding loan, then in addition to providing for interest in full, also provide for loan partially (at least 50%) or in full depending upon judgement of auditors. *Non-performing loans are considered for: (a) for interest purpose as those with no movement on interest during entire year. (b) for principal purpose see 3(c) above. (c) under implementation, see relevant guidelines above. Additional Guidelines Set for 1986 Accounts (a) For foreign loans of non-performing clients, provision is to be based on SFEM value of the investments rather than their book values. (b) For loans whose book values are already fully provided for, additional provision is to be made for the exchange differences arising from SFEM valuations. (c) All foreign exchange losses are to be fully provided for. (d) For projects in rural areas, if two years loan installments are in arrears, make 25% provision of loan outstanding. (e) Provision to be made for contingent liability where there are any. Additional Guidelines Set for 1987 Accounts Effective from September 1986, Central Bank of Nigeria granted NIDB the use of Settlement Rates for making repayment of all its off-shore lines of credit duly certified as at 26th September, In view of the above, income accruals of September 1986, December 1986, March, 1987, June 1987, September 1987 and December 1987 were re-worked at settlement rates, which gave lower income values. Arising from these, therefore, are the following additional guidelines: (a) For loans whose book values are already provided for using SFEM valuations, revalue at settlement rates and write back excess provision arising thereon. (b) For interest provision of 1986 based on billing at SFEM rate, write back over provision arising from reworking of accrued income on settlement rate.

37 ANNEX C Page 1 of 4 RECOMMENDATIONS OF ICC ON POLICIES ON PROVIDING FOR DOUBTFUL INVESTMENTS EARLIER AGREED BETWEEN THE WORLD BANK/ NIDB/EXTERNAL AUDITORS The policies for making provisions for investments are set out in the NIDB document "Guidelines for Making Provisions". Policies on Providing for Interest The treatment of interest in the accounts is that it is taken to income and provisions are made, as necessary, in accordance with the policy guidelines. The main features are set out below. "(a) if a loan is non-performing as regards interest, i.e. if there have been no interest payments during the entire year, interest is taken to income and then fully provided for in the same year. Where a project is not considered viable by management, provision is made for all accrued interest and further accrual of interest is suspended. (b) if interest is only partly paid and the level of arrears is getting progressively worse, provision is made to the extent of such arrears, (c) if management is convinced that a project under implementation will be profitable when operational, it may allow interest arrears to be capitalized rather than provided for, with the approval of management." The policy on providing for interest needs to be more precise; a firm cut-off point should be set beyond which interest is no longer taken to profit and any unpaid interest already taken to profit is provided against. The treatment of projects under implementation is not sufficiently specific. Policies on Providing for Principal (a) if assets constituting security are remotely located or highly specialized such that a ready market is not obtainable, then provide fully, (b) if only partial realization appears likely, either due to the condition of the assets over which security exists, or change in economic conditions affecting the market for that assets, then provide for the foreseen loss on realization of the loan, (c) if a loan is non-performing as regards principal, i.e. no principal repayments for three years or more (notwithstanding interest payments) and if not already rescheduled, then provide in full, (d) in instances where accrued interest in arrears now approaches or equates to the outstanding loan, then provide for the loan partially (at least 50%) or in full, depending upon the judgement of the Auditors. The policy in relation to providing for principal is not clearly stated and could be misunderstood. it appears from the policy as set out above that loans are reviewed on a regular basis in accordance with

38 ANNEX C Page 2 of 4 (a) and (b), but a more definitive review takes place when a loan becomes nonperforming as set out in (c). Three years is an unduly long period to allow principal arrears to build up before having a definitive review of the need for a provision. This is particularly true in projects which have already had the benefit of a principal moratorium. Clause (c) is open to the interpretation that if a loan is rescheduled, there is no need for a provision. this is not necessarily so. In (d), the prime responsibility appears to rest with the Auditors in deciding on the level of provisions. This responsibility should fall on management initially, with the Auditors' comments being taken into account in determining the final level of provisions. Policies on Providini for Equity: Equity investments are provided for in full where interest and/or principal provisions have been made on loans to invested companies. Otherwise, provisions for equity investments are based on an examination of the value of the underlying assets as shown by the latest available audited balance sheet. Where it is considered that a permanent diminution in value has occurred, provision is made. This policy appears reasonable but the basis of valuation of the investments should be broadened to take account of other factors including market value and trading performance. Treatment of Interest The treatment of interest, as set out hereunder, is intended to give a broad outline of the principles to be adopted. Detailed accounting procedures would be incorporated in a procedures manual, the preparation of which is part of the next stage of the assignment. It is necessary to classify loans to ensure consistent treatment of interest in the accounts. Various categories of loans could, with some merit, be suggested but, for the sake of simplicity, only three are proposed. These are set out below: (a) Under Implementation: This includes loans to those projects which are within the period allowed in the initial appraisal report/contract for the projects to be established, and which are being implemented according to plan. Capitalized interest on these loans, as set out in the initial appraisal report/contract, may be taken to profit as it accrues, so long as the projects are being implemented as planned. Beyond this point, the projects should generate sufficient funds internally to service borrowings and the loans become either performing or non-performing. All projects under implementation should be reviewed on a regular basis to confirm that they are proceeding along the lines previously envisaged. If the project requires re-structuring

39 ANNEX C Page 3 of 4 during the implementation period, the initial loan and any additional loan became non-performing. Non-Performing Any of the following characteristics would cause a loan to be classified as non-performing: - a project under implementation requiring re-structuring due, for example, to significant cost overruns, change in market conditions, technical difficulties, competitiveness in doubt; - interest remains outstanding for six months or more; - interest being capitalized on a loan (excluding the initial capitalization of interest for projects under implementation); - a provision for principal has been made; or - the project is under receivership or being wound up. Interest arising on a non-performing loan should be taken to profit only to the extent that interest is paid. Performing: Tlhis includes all loans not classified as Under Implementation or Non-Performing. Interest is taken to profit as it accrues. Guidelines for Makin2 Provisions on Equity and Loan Investment: (a) Provisions for Equity: - Where there is a diminution in the value of the equity investment due for example to trading losses, poor prospects for the project, reduction in net asset or market valuation, provision should be made to the extent of such diminution. A regular assessment of the value of the equity portfolio should be carried out to determine the level of provisions required. - Equity investments should continue to be provided for in full where interest and/or principal provisions have been made on loans to invested companies. (b) Provisions for Loans: Where there is a diminution in the value of the asset(s)/guarantee(s) representing the security for the loan or where, for any reason, the Bank is under-secured provision should be made against any anticipated loss on realization of the security. Foreign currency loans at market settlement rates should be closely monitored. The trading performance of the company should be taken into account in determining the level of

40 ANNEX C Page 4 of 4 such provision. If the prospects for the company are poor, the loan should be written down to the current estimated realizable value of the security. The portfolio should be reviewed regularly to determine the level of provisions needed. All reports for decision on existing loans should include a section assessing the adequacy of existing/proposed security. Factors that should be taken into account in determining the value of the security include the following: assets remotely located, highly specialized or technically obsolete such that they may be difficult to sell; the condition of the assets; change in economic conditions affecting the market for the assets; title defects; change in financial position of a guarantor; offers already received for the assets; and any other factors which would have an adverse impact on the realizable value of the security.

41 PART m: STATISTICAL INFORMATION TABLE 1: RELATED BANK LOANS Year of Loan Purpose Approval Status Comments NIDB I Meet the gap in NIDB's 1969 Closed PCR completed; (Ln 588-UNI) foreign exchange resources; Performance: satisfactory strengthen NIDB's institutional capabilities NIDB II Meet the gap in NIDB's 1970 Closed PCR completed; (Ln 705-UNI) foreign exchange resources; Performance: satisfactory strengthen NIDB's institutional capabilities NIDB III Provide NIDB with a 1978 Closed PCR completed. (Ln 1597-UNI) portion (about 20%) of its Performance: Overall foreign exchange resources mixed. While satisfactory needed to finance industrial progress was made in projects; facilitate NIDB's certain areas, external resource considerable improvemobilization efforts from ment were needed in other sources; further others strengthen NIDB's institutional capabilities SME I Provide line of credit to 1984 Problems PCR completed. (Ln 2376-UNI) NBCI to finance SMEs; Performance train federal and state level unsatisfactory. extension workers; carry out studies on the development of the smalland medium-scale industrial subsector Private SMIE II Stimulate productive 1988 After a slow Ongoing Development (Ln activity in line with start because 2995-UNI) Nigeria's resource of interest rate endowments, and generate issues, loan a sustained supply response has now been in private, productive SMEs modified and committments are rising. Currently no significant problems

42 TABLE 2: PROJECT TIMETABLE Item Original Date Actual Date Identification April 11, 1980 April 11, 1980 Preparation July 28, 1980 July 28, 1980 Initiating Project Brief February 19, 1981 February 19, 1981 Appraisal Mission September 8, 1982 September 8, 1982 Negotiations November 8, 1982 November 8, 1982 Board Approval June 2, 1983 June 2, 1983 Loan Signature June 27, 1983 July 28, 1983 Loan Effectiveness October 27, 1983 April 6, 1984 Loan Closing December 31, 1988 December 31, 1991 Date of Last Disbursement June 12, 1991 April 30, 1992 Comments 1. Loan Effectiveness Delays: The original date of loan effectiveness was extended four times from October 22, 1983 and finally April 6, The first extension was granted to allow the Federal Government to complete the legal opinion conditionality on Guarantee Agreement. The subsequent extensions were made to allow the Federal Government and NIDB to establish the "Managed Fund" which allowed the transfer out of NIDB a portfolio of Government behest subprojects. The establishment of this Fund was considered crucial for improving NIDB's portfolio quality and financial condition. Finally on March 30, 1984, the Government approved the creation of the Managed Fund and, consequently, the Loan and Guarantee Agreements became effective. 2. Loan Closing Date Delays: The original closing date was extended four times from December 31, 1988 to December 31, 1991, because the project suffered unexpected delays in its initial effectiveness stage and the commitments were slow. The purpose of last extension was to enable NIDB to disburse maximum balance of the loan.

43 Table 3: LOAN DISBURSEMENTS CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS (US$ Million) Estimated Revised Actual Actual Fiscal Year Amount Amount Amount as % of I Cumulative l--- 1 Estimate LOAN DISBURSEMENTS CUMULATIVE ESTI1ATED AND ACTUAL DI5BURiE4ENTS (use h411116ft) 1'c a 86 a7 88 au so n 2 Docb ot Fimal Disbursement: January Z Comments l. An extension of the closing date to December 31, 1991 was granted after receiving requests from NIDB that three subprojects were having implementation delays. The purpose of this extension was to enable NIDB to disburse almost the full balance of the loan. The final loan disbursements were US$118.8 million (or 99%).

44 Table 4: PROJECT COSTS AND FINANCING (NAIRA MILLION) AppraWsal Estimate a/ Actuals b/ Local Foreign Total Local Foreign Total cl C/ Total NIDB Requirement ,490.0 (on commitment basis) (a) IBRD Loan (b) EIB Loan (c) Commercial Bank (d) Local Bond Issue (e) FGN (loans and equity) (f) NIDB 10.5 _ (internally generated funds) ,490.0 a/ Average Exchange Rate in 1982 of US$1 - NO.70. b/ Average Exchange Rate of US$1 - N5.00. c/ Estimated AF41EITABLE4 21-Feb-02

45 Page 1 of 2 Table 5: Status of Covenants $cc ion Covenant Status of Compliance 3.01(a) Assistance to Borrower to finance productive facilities to contribute to the economic and social development of the country. In full compliance 3.01(b) Borrower shall carry out the project, Action In compliance with some Program, Development Strategy, and conduct delays. Operations on the basis of sound financial standards. 3.01(c) Borrower may choose to carry out parts of the Borrower chose not to carry project through other financial interrnediaries out. by October 31, (d) Setting up procedures and guidelines for the (c) In the abscnce of (c) above, above. not applicable. 3.01(e) Borrower to protect the Bank's and its own In full compliance interests to carry out the project. throughout the project cycle. 3.02(a) 3.02(b) Borrower to undertake to require the sub-loans or other investments entities to: (i) be operated in sound technical, financial and managerial standards; (ii) purchase goods and services at reasonable price with adequate maintenance and that they should be use exclusively for the project; (iii) inspect the site, equipment, works and plnts; (iv) require subprojects to buy insurance policies to cover against hazards; (v) obtain all information on sub-loans as Bank shall request; and (vi) suspend the sub-borrowers access to funds upon failure to comply with the above. Borrower undertakes to ensure that each subloan will have: (i) Interest rate of at least 13 percent per annum; and In full compliance. In full compliance. In compliance, though adequacy not fully known, In compliance. In full compliance, but usually latc. In full comnpliance. In full compliance. (ii) foreign exchange risk borne by the sub- Partially not complied (sec borrowers, Part 1, parm 5.11).

46 Page 2 of 2 Table 5: Status of Covenants Section Covenant Status of Compliance 3.02(c) Borrower to ensure that sub-borrowers (i) protect the interest of the Bank and Borrower (ii) comply with the covenants, and (iii) achieve the purposes of the project. In compliance. 3.02(d) Borrower and Guarantor to annually review the Though slow and sluggish interest rate policies and guidelines. but in compliance. 3.03(a) Borrower to furnish upon the Bank's request In full compliance but any information on sub-loans, usually late. 3.03(b) Borrower to provide within six months of the Withdrawal will continue last withdrawal all the relevant information on thru 4/30/92. the project for the purpose of PCR Borrower to inform the Bank of any action In full compliance. which will have the effect of assigning or of amending any material provision of the Govemment Agreements Borrower to establish that if it acquires a In full compliance. subsidiary, it will be subject to au agreements with the Bank. 3.06(a) Borrower to employ consultants to carry out the tochnical assistance components of the project. In full compliance. 3.06(b) Borrower shall provide to the Bank (i) details In full compliance. of studies, (ii) results of such studies Procurement of goods and services shall be In full compliance. governed by the provisions of: (i) Guidelines for Procurement under World Bank Loans and Credits; and (ii) goods and civil works equivalent to US$15 million or more and other goods and civil works equivalent to US$3 million or more shau be procured in accordance with Part A of the Guidelines referred to above. In full compliance to 4.10 Financial Covenants Except for delays in submission of audited accounts, in general complianee.

47 TABLE 6: USE OF BANK RESOURCES StageolProject Fiscal No. of Total 01 Which SpecialzatIon RaFting FRmarks Cycle Year Persons a/ Statf Wks In Field bi Representd at ci Status di Problems et A. Pro-appraisal LOF - Pro-appraisal OP. EC - Pre-appraisal OP. EC - Subtotal B. Appraisal through Board OP,EC - Approval EC,OT OP - Subtotal C. Supervision EC. OP, OT - F&M Supervision EC, OP,FA, OT - F&M Supervision 199e EC. OP. FA, OT 3 F & M Supervision EC, OP. FA, OT 3 F & M Supervision EC, OP, FA, OT 3 F & M Supervision EC, OP, FA, OT 2 F Supervision EC, OP 1 F Supervision 1990 a EC, OP, FA 1 F Supervision EC, OP, FA 2 F Proj. Completion Report FA - Subtotal TOTAL at Includes Consultants and reflects staffing for all missions within the year. bl Reflects limited and incomplete data due to insufficient information in the MIS and project files. ci Specialization: FA-Financial Analyst, EC-Economist OP-Operation Officer, LOF Loan Officer OT-Others dt Status: 1-Problem-Free or Minor Problems; 2-Moderate Problems; 3-Major Problems e/ Types of Problems: F-Financial: M-Managerial; P-Political; O-Others

48

49 ANNEX I Page 1 of 4 NIGERIAN INDUSTRIAL DEVELOPMENT BANK (Loan 2299-UNI) Action Program General Organization of NIDB 1. Organization Review. NIDB will undertake a review of its organization structure, with assistance from outside consultants, focussing particularly on the span of control and delegation of authority at senior management levels, with the objective of improving institutional efficiency and coordination between departments and between the head office and area administrations. The Terms of Reference for this review will be prepared in consultation with the World Bank. 2. Senior financial staff. Without waiting for completion of the above review, NIDB will appoint a head for its new Internal Audit unit and will recruit a replacement for its recently retired DGM who will be capable of strengthening is forecasting and resource planning activities. At least three of four additional accounting professionals will be recruited to fill other vacancies in each of the Finance and Internal Audit Departments. 3. Staff planning. After taking into account the results of its organization review (para. 1) and its staffing requirements, NIDB will reformulate a recruitment plan for the next three and five years, indicating the number and types of professional positions (e.g. financial analysts, economists, engineers and agriculturists and agro-economists) necessary to meet NIDB's operational needs over the period. 4. Training. NIDB will formulate a 3-5 year training program which will focus upon strengthening its staff capabilities in the areas of economic research and technical appraisal; financial, economic and market analysis, accounting and financial controls; and management information systems. In this endeavor the collaboration of a foreign institution with experience in development bank training and/or of foreign consultants, if necessary, will be sought. Appraisal and Research 5. Appraisal reports will include a section summarizing problems with existing projects in the same subsector together with the steps proposed for the project being appraised to avoid the same difficulties. External local consultants will be employed where appropriate to supplement NIDB's own technical appraisal capability. 6. In order to better integrate them with financial and technical analyses of projects, market analyses of individual projects will be performed by the Appraisal Department. The Research Department will still be responsible for setting out parameters for and reviewing market analyses, and will continue to undertake economic analyses of projects, but it will concentrate new efforts on subsector studies both in problem areas and in priority areas for identification of new projects.

50 ANNEX I Page 2 of 4 7. Because working capital shortages, particularly as regards foreign exchange, are constraining industrial production, NIDB will begin financing working capital for projects in priority industrial subsectors. Financial Matters and Management Information 8. NIDB will undertake a review of its equity investment operations in order to: (a) assess their performance including both economic impact and profitability; (b) outline its objectives and future strategy for undertaking new equity investments and making timely sales of shares from its portfolio. 9. Detailed resource planning and financial forecasting for a multi-year time frame (3-5 years) will be undertaken at least semi-annually. 10. With the assistance of external consultants, NIDB will prepare a comprehensive set of report formats for an improved financial and management information system, and in that context, will review possible applications of electronic data processing and mechanical accounting devices. Alternative software and hardware options will be evaluated, including the option of a pilot program that could result in immediate improvements in the accuracy, quality, and timeliness of management information. The Terms of Reference for this program of work will be prepared in consultation with the World Bank. 11. NIDB will take adequate steps to eliminate the existing foreign exchange risk on borrowings from CDC (London). 12. Beginning with the 1982 audit, NIDB will have its audit prepared in the World Bank's Long Form Format. Problem Projects and Arrears 1/ 13. Government behest projects. NIDB and government will work out detailed terms for and then implement the managed fund arrangement to which they have agreed in principle regarding 13 government projects in NIDB's portfolio, amounting to 185 million of loans and equity investments outstanding. An equivalent amount of NIDB's liabilities to government would be transferred to the fund. NIDB would continue to follow up these projects and make collections for a fee, but the risk of losses would be borne by government. 14. Private sector project. NIDB will constitute immediately (in any event not later than the end of February 1983) a special task force (including supervision, Finance and Legal staff) to carry out an account-by-account review and classification of problem projects according to (i) projects having implementation problems; (ii) willful defaulters (operating profitably but unwilling to make payments); (iii) projects operating unprofitably and unable to repay; (iv) projects no longer in operations (closed down); and (v) those under litigation or 1/ Projects having implementation problems or in arrears for more than 3 months.

51 ANNEX I Page 3 of 4 receivership. On the basis of the findings of the task force, NIDB will take any one or more of the following actions, as appropriate: - For projects under (i) above, the Supervision Department will reevaluate the project (including a detailed assessment of its implementation problems) to determine what remedial measures (including possible technical or management assistance, rescheduling and/or additional financing) are necessary, on the basis of which the task force will make recommendations to Management. For projects under (ii) above, NIDB's Legal Department will send out letters inviting these clients for discussions with the task force on their delinquent loans. If acceptable arrangements (to NIDB) cannot be worked out with the client for the repayment of the loan, or the client fails to respond to NIDB's letter, then within 30 days from the date of the meeting (or the intended meeting), NIDB will begin legal proceedings for the recovery of the outstanding amount(s). For projects under (iii) above similar action will be taken as for projects in category (i). For those projects where it determined that further assistance would not result in a return to positive cash flows and profitability, NIDB should assess the value of company's assets and begin immediate legal measures for recovery. If the assessed realizable value is determined to be inadequate to cover the outstanding loan, then appropriate provisions should be made for possible losses. For projects under (iv) above, NIDB Supervision Department should undertake similar steps as in (i) above in order to determine reactivation/rehabilitation possibilities, and necessary remedial measures. Should further assistance prove unfeasible, then, similar actions will be taken as in case (iii) above. For projects under (v) above, NIDB's Legal Department will proceed expeditiously and forcefully for recovery. Provisions will be made as necessary. 15. Beginning with the 1982 Audit, NIDB's auditors will make specific recommendations on portfolio provisions to be established, taking into consideration the recommendations of the task force. The task force will also propose for adoption by the management, overall collection targets for the next three years, which targets will be reviewed annually. The initial task force's report should be submitted to NIDB's management May 30, 1983, for action. 16. The above Problem Project Task Force should be reinstituted on an annual basis with shorter semi-annual updates. Its report should form the basis of a joint annual review of NIDB's portfolio by the World Bank and NIDB's management to be undertaken during World Bank supervision missions.

52 ANNEX I Page 4 of NIDB will take the following additional measures to improve future collections: (i) (ii) (iii) (iv) (v) (vi) Undertake joint analyses (involving Research and supervision staft) of problem subsectors (e.g. textiles, oil milling, leather, bricks, etc.) designed to recommend improvements in future NIDB supervision and appraisal work, as well as in government policies affecting the subsector. Establish a Loan Recovery Unit within the Finance Department responsible only for billings and collections. Establish Rehabilitation unit to assist clients with severe operating difficulties. Increase its penalty interest rate to at least 2% above the highest of the or original interest rate on a loan, NIDB's current interest rate, or the current commercial bank lending rate. Automatically revise its initial repayment schedule on loans (based on the date of plant commissioning forecast in its appraisal report) to take account of the aclui date of commencement of production. Later rescheduling of projects in operation should be agreed to only after NIDB attaches conditions designed to remedy the project's operating problems. In such cases the interest rate should also be revised to NIDB's current rate, if higher. Bill new and rescheduled loans on a quarterly rather than semi-annual basis.

53 ANNEX 2 Page 1 of 2 NIGERIAN INDUSTRIAL DEVELOPMENT BANK LIMITED (Loan 2299-UNI) Outline of Development Strategy for 1983 Through During the three-year period 1983 through 85, NIDB will endeavor to enhance the developmental impact of its operations and increase its contribution to the Nigerian industrial and financial sector, particularly in the specific areas outlined below: I. Financial Intermediation (a) NIDB will progressively intensify its assistance (both financial and technical) to state-level financial institutions with a view to: (i) (ii) helping strengthen these institutions and reaching out and financing more industrial projects in outlying areas so as to improve the geographic distribution of its portfolio as well as indirectly assist smaller enterprises. This apex activity is intended to complementhe operation of NIDB's branch network. (b) (c) (d) In addition to its present part ownership and involvement in ICON (Merchant Bank and Stock Brokers), NIDB intends to continue exploring actively with foreign partners, the establishment of a merchant bank to be located in one of the outlying states. To increase the catalytic role of its financing, NIDB will intensify its efforts at loan syndications and joint-financing of projects. NIDB intends to explore jointly with international and/or domestic partners, the establishment of a subsidiary or affiliate company to engage in the leasing business, focussing primarily, through not exclusively, upon industrial and construction equipment. This leasing activity would also focus on smaller entrepreneurs, whose financial conditions frequently do not enable then to acquire the necessary equipment through outright purchases, as well as those whose needs are only seasonal. II. Resource Mobilization 2. NIDB intends to diversify its resource base and gradually reduce its dependence on government and official funds, by mobilizing commercial resources from both the domestic and international markets. On the domestic market, NIDB envisages during 1983, issuing bonds for an approximate amount of N 15 million, to be followed by other issues as permitted by market conditions and as warranted by NIDB's resource requirements. On the foreign currency side, NIDB plans to star by actively exploring the Euromarket with a view to borrowing an approximate amount of US$15-25 equivalent in 1983, to be followed by increased future borrowings.

54 ANNEX 2 Page 2 of 2 III. Resource Allocation 3. NIDB will direct a greater share of its future financing to priority industrial sub-sectors such as intermediate goods, constriction industries. As a consequence, it is expected that during the planning period (3-5 years), the combined share of foods, beverages, hotels and other non-durable consumer goods in NIDB's financing will decline correspondingly. 4. NIDB will put greater emphasis on financing private sector project, whose share in NIDB's financing is expected to gradually rise (on an approval basis) from about 35% in the 1970s to not less than 75% by To enable it effectively to pursue the objectives set out in the preceding 2 subparagraphs, NIDB will further intensify its project promotion efforts among other things, through the more active involvement of its senior management in these efforts and the strengthening of the operation of the P & D Department. 6. In its future financing, NIDB will endeavor to expand its technical assistance to clients and prospective clients in the areas of project formulation, project design, choice of technology, engineering and project analysis. NIDB will also pay due attention to the economic merits, particularly foregoing objective, NIDB will strengthen its technical and research capability. IV. Consultancy Services 7. NIDB intends to explore, with the collaboration of foreign and/or local partners, the establishment of a private subsidiary or affiliate company to undertake a broad range of consulting services (engineering, managerial, financing and economic) to industry at large including NIDB's clients, as well as state level financial institutions. V. Economic Research and Policy Inputs 8. A. NIDB intends to strengthen its capability and intensify its activity in economic research with a view to, among other things, enable it to contribute to the formulation of government policies in the industrial and financial sectors, as well as identifying potential areas for NIDB's investments. 9. B. Specifically, NIDB plans, in cooperation with the World Bank, to conduct or take part in studies on a number of priority industrial sub-sectors including initially, intermediate goods, construction industry and agro-industries. VI. Organizational Arrangements 10. To enable NIDB to successfully implement the above Development Strategy, NIDB's management intends to carry out a review of NIDB's organizational structure and staffing with a view to strengthening them as appropriate. As a part of this effort short-term technical assistance, where needed will be sought from the World Bank and/or other international agencies.

55 NIGERIAN INDUSTRIAL DEVELOPMENT BANK LIMITED CHARACTERISTICS OF PROJECTS AND COSTS APPROVED UNDER LOAN 2299-UNI -II 1/ N L t 1,E - UL NOWSAWSTAANCE IL - (LOAN) OYS F Pr-DI: f LOCAL foffien NO. _, PBER SECTOR PRSKUCT SH IP -HI (%) P1RJ. LOitA CURWECY - O - YI2,EUY 1 LIUAN ENTEZPRtSE A-C0 FOOD Ice CreanMlk P 100 New Kaduna T MUSTAPHA MED & COI. CO. LTD. A-02 CHEMICAL lntuon Flul P 100 Exp Nige 10, , SLUPERTEX A-03 TEXTILE Waix Prints P P40 I f80 New Kaduna 39, ,890 7,971 4 SOFRESID SOFT DRtNKS A04 BEVERAGE Soft Drinks P Poo I Ft1 Now Benue 6, ,617 6 ATLANTIC TEXTILE A-OS TEXTILE Yarn P P40 I FoO Exp Lago 30,386 e GLOBE SPINNWN UILLSNKIERIA A-Ce TEXTILE Yarn P P40 I f80 Exp Lagos 44,421 2,479 21,368 16,197 7 DE-EASY UFE ELECTRONICS CO A-07 ELECTRONIC Transtornern P 100 New Ondu 4,260-1,099 1,.51 6 STAG INDUST. (NIl) LTD A-0O STEEL Filtrs P 100 New Ogun 12,206 3, ,700 9 AFPFINT LTD. A-09 TEXTILE Fabrics p P661 F46 Exp Lagos 44,421 2, , IOWE PHAARMACELUTICAL LAB A-o tchemical Inkiuton Fluld P 100 New Ino ,600 II JOELiZ HOTELS LTD. A-11 HTLS & TOUR Hotel ServI P 100 New Anambia 9,841 2,699-1, KADUNA CHEMICAL IND. PRODUCTS LTD. A-12 CHEMICAL Detergents P 100 New Koduna BEL-PAPYRIS LTD. A-13 PAPER Tssue Par P 100 New Lagos 24,782-1e,710 7, DUNLOP NIGERIA LTD. A-14 RUBBER Tire a Pt3/F37 Exp Lagos 264,900-80, NIIMA MANUFACTURING INDUST. LTD. A-16 CARPET Crpet P 100 Exp Abujla , UNITED SPINNERS NIGERtA LTD. A-1a TEXTtLE Yarn P 100 New Lagos 137,900 2, , NKO GLASS NDUSTRY A-17 CEFRAICS 91_ewore P PO0/F20 New Oyo 10,800 1, ,200 _ t CADBURY NIGERIA LTD. A-IS FOODIBEV. MaltlFoods 0 P6o0F40 New Lago CONTINENTAL INDUSTRIAL GASES LTD. A-19 NO. GASES Aol*tne/Orygon P 100 New Lago ,e91 20 AGRO-EDISLE OiL NDUST. LTD. A-20 AGRO ALLIED Edible Ol P 100 New Lagos LEASiNG CO. OF NIGERIA A-21 LEASN Leas, Aseets a 100 New Lagos 16, a 22 NIGERN LAMP tndustries LTD. A-22 LAMP Frcent/Tubealarnp a 100 New LagUO 66,14e 3,964 33, AMWA FOUNDRIES LTD. A-23 STEEL/IRON PVC Hoes P 100 New Kaduna 9, FOLA FISHING INDUSTRIES A-24 FP1mG Fish fot EXp. P 100 NeW Lsgos UNITED NIGER. TEXTILES LTD. A-26 TEXTILE FabriO Pu P42/FU6 New Kaduna , ALKEM PMG. LTD) A-26 TEXTILE Yarn P 100 New Lagos ,000 36,125 22,600 0 l"tl

56 NIGERIAN INDUSTRIAL DEVELOPMENT BANK LIMITED CHARACTERISTICS OF PROJECTS AND COSTS APPROVED UNDER LOAN 2299-UNI 'PROL O 4 P.-, QF90:- ' 'D.1L 4 NO. P ETJ ED T - our tip map (%, PR L I LOCATIO OS aw. CURb'R13:Y2 EQUITY b 27 OLIC INDUSTRtES B-01 CHEMICAL Poran. Bags P 100 New Ikno t KIUDL NAIL MFCTRI METAL Nab P 100 NSw Bauchli 1,4r leja HOTEL 8-03 HOTELlTOURS P Exp. -L- 3,670 *O JET INTL LTD B-04 FOOD Bakery Products P 100 Now Borno 97S ADAMS A6tRO B-06 MISC Anal Feeds P 100 Now Kuro AOOKO NKiGA LTD. B0it MANUFACTURE P O 33 AMMANM PAPER B-07 PAPER PROD. Teotb Rolk P 100 New Sokoto PEACOCK MOD tnteroor B-0a WDOD PROD. Furniure P 100 New kmn FtKOS CONFECTK)N 8-09 FOOD & SEVERAAE Bakery Product. P 100 New Lagos SANI CONFECTION B-10 FOOD Swt. P P06 I F16 New Plaeau SANZOR ANDUSTFIES B-11 METAL Nalb P 100 Now Imor 1, B. MACALS INDUSTRIES B-12 MANUFACTUtRE Candis. P 100 New Anarbra V YERWA CONSOLIDATED INDUST. B-13 BEVERAGES Soft Drlnk P 100 New Borno NAKGE PRODUCTS LTD. B-14 FOOD Dairy Producre P 100 New Gongoa I oo 41 AGUOU INVEST. LTD. B-16 MANUFACTURE Toilet PoleP 100 New Plteau ROLtSCO NIGEFtA LTD. S-14 MANUFACTURE TIbua Papers P 100 New Niger 1, , LAKE CONCRETE IND. S-17 misc. Dredging Seryvlo P 100 Exp Anambra 4, OLUFOAM PLASTIC IND. B-1 misc. Mtic. P 100 New Lagos f26 * 0 a 0 46 RtETZCOT 111GERIA CO LTD. B-19 RJBfSER BASE Auto Spar Pars P 100 New Ogun ,427 4t OLALOMI INDUST. LTD TEXTILE Carpet P 100 Exp Kwara 17,904-10, ASSOCtATED UEFCI AND INDUST. CO. B-21 CHEMICAL Polyurethane Fm Bilk. P 100 IExp Ino i65 76f 76a 48 UKOttADU INDUST. PROJ STEEL Machat. P 100 New kmo 6, DAO BASH BROTHERS LTD. B-23 STEEL Screws. F1wve P 100 New Ogur 6,f , NEW-SIp B-24 BEVERAGE Soft Drinkl P 100 New Lago 21.36Ea D 61 JACK-ROSS (NiGERA) LTD. -26 MtANUFACTURE Soapslperfumes P 100 New Ogun Z 62 OREDOLA OKEYA AOHESVE 4 CHEM. PRFO. 8-2 CHEMICAAL Adhelee. P 100 New Kwara 3,436 _, f6 f-d t-i 63 TOMLZAYl NIGEFIA ENTEIS'IISES LTD STEEL BuckleslNMal P 100 New NIger 4, , AGRO PROJECTS LIJITED B-26 CHEMICAL DrugehVtarnn P 100 New Kwara 9,190 1,763 3, TOTALS Iv P - Prive; a Government F. ForeIgn 2f Conveerd baeed on aerage 1967 Exchage Rase of S4.00INalre

57 NIGERIAN INDUSTRIAL DEVELOPMENT BANK LIMITED PERFORMANCE OF SUB-PROJECTS FINANCED UNDER LOAN 2299-UNI _OS-PLETI _I': C_ CM C:r- FOMNEIAL EOONOMIC WESTMENT (r400). MOOt ONTHS JOBS CIEATED :0)JOB UTTL Lfl IL P0l. FOA (%) IOt OLEMENTATiON If M - oiitn h - : o) () NO. PROJECT MDEF EST AT. Ea. T EST. ACT. E EST(AEl. AC. A DELAY EST. ACT. U j EaT. ACT. EST. ACT. 1 LAANI ENTERPRISE A e6_ MUSTAPHA MED & COM. GO. LTD. A lo 1e = = 10, SUPERTEX A-03 6e = 192 =_ 39, SOFRESID SOFT DRINKS A , ATLANTIC TEXTILE A , GLOBE SPINNI MILLSNIGERIA A-O , _ = 90 = _ 7 DE-EASY LIFE ELECTRONICS CO A = 60 =6 4, e STAG INDUST. (NKG.) LTD. A-oS ,20e 71 _ 9 AFPRINT LTD. A-O n 10 KtWE PHARMACEUTICAL L A-O ,644 6o I JOELIZHOTELSLTD. A = = s = = 104 = 12 KADUNA CHEMICAL IND. PRODUCTS LTD. A-12 So 60 0 I_ BEL-PAPYRUS LTD. A _ 24,782 5_ so 14 DUNLOP NIGERIA LTD. A , NIIMA MANUFACTURING INOUST. LTD. A = = 30, lea_ 203 as 1 UNrrED SPINNERS NIGERIA LTD. A-la _ 137, _ 6 17 NKO GLASS INDUSTRY A la so_ e0 16 CADBURY NIGERIA LTD. A o0 19 CONTINENTAL INDUSTRIAL GASES LTD. A _el 20 AGRO-ELNBLE OIL INDUST. LTD. A LEASING CO. OF NIGERIA A-21 16,792 'I _ == = == _ = 22 NERIAN LAMP INDUSTRIES LTD. A =5= 66,140 _ = 3_ 42 = = U164 so 23 AFEWA FOUNDRIES LTD. A = 9,716 I - = s o =_ FOLA FISHI INDUSTRIES A-24 4 _ 21 17, =. _ U 40 _ 26 UNITED NIGER TEXTILES LTD. A ,400 _ - _ 26 ALKEM (MO. LTD) A _7.026 e 136 _ 645 X 0

58 NIGERIAN INDUSTRIAL DEVELOPMENT BANK LIMITED PERFORMANCE OF SUB-PROJECTS FINANCED UNDER LOAN 2299-UNI CO9ILE11O COOT Pm CAP. CAP. F*:1A1CIAL EOONOUIC VNESTMENT ocot (WOOD) MONTHS JOBS CFEATE3 00 J (I: LmL UL I PRtJ. ROA ) DA ON r (W IMPLEMENTATION :: (- ) L '(N NO. P1JECT NL BER EST. ACT. EST. ACT. EST. ACT. LJN (-) () EST. ACT. DELAY EST. ACT. UIRDN (-) IO EST. ACT, Ear ACT. 27 OLD INDUSTIFES fl-ol _ KUDA NAIL MFCTAG D = = = = = = = KEJA HOTEL JET INT'L LTD i ADAMS ACRO 9-O _70 40 _5 32 ADOKO NIGEFiA LTD B-C0 4e 18 a 31 26_ 33 AMMANI PAPER i O0 37 t8 34 PEACOCK MOO INTERIOR B-0D ,573 62_ RUKOS CONFECTION B _ SANI CONFECTION sse SANZOR INDUSTRIES B ,_ B. MACALS INDUSTRIES l4 1a i 30 YERWA CONSOLiDATED INDUST ,376 be 26 a= 40 NAAGE PRODUCTS LTD , BAGUDU INVEST. LTD. i _ ROLISCO NIGERIA LTD ,160 _ = = 41= 1 25 = 90= 43 LAKE CONCRETE IND. B-i ,041 _ OLUFOAM PLASTIC IND. -18 ns FIETZCOT (NIGERIA) CO LTD ,327 _ OLALOMI INDUST. LTD _ so6 47 ASSOCIATED MERCH. AND INDUST. CO. B ,926 _ 41 = UKOMADW INDtST. PROJ , I is 49 DAO BASH BROTHERS LTD. S _ NEW-SIP , ACK-ROSS (GERIA) LTD OEDOLA OKEYA ADHESIVE & CHEM. PROC ,436 = = = 60 I =0 63 TOMiZAYn NIGERiA ENTERPRSES LTD ,8_ 2e 118b _ 64 AGRO POECTS LMITED (D _~~~oas 10i0 8:0:.,.8 ;0 r t^"l,lxt o _3._8 0 'I Converted baed on average 1967 xchange ratl of USSI - N4.00. Source: Ni11 Proqec Fil