Actual Project Name : Sustainable. Project Costs (US$M US$M): Sector Board : Energy and Mining Cofinancing (US$M US$M): US$M):

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1 Public Disclosure Authorized IEG ICR Review Independent Evaluation Group Report Number : ICRR Project Data: Date Posted : 02/24/2014 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Country: Nigeria Project ID : P Appraisal Actual Project Name : Sustainable Project Costs (US$M US$M): Management Of Mineral Resources L/C Number: C4012 Loan/Credit (US$M US$M): Sector Board : Energy and Mining Cofinancing (US$M US$M): Cofinanciers : Board Approval Date : 12/14/2004 Closing Date : 06/30/ /30/2012 Sector(s): Mining and other extractive (50%); Central government administration (30%); Other social services (10%); Micro- and SME finance (5%); Vocational training (5%) Theme(s): Rural non-farm income generation (33% - P); Regulation and competition policy (33% - P); Pollution management and environmental health (17% - S); Micro; Small and Medium Enterprise support (17% - S) Prepared by : Reviewed by : ICR Review Group: Coordinator : Victoria Alexeeva Kristin Hallberg Soniya Carvalho IEGPS1 2. Project Objectives and Components: a. Objectives: The statement of objectives in the Development Credit Agreement is: "to assist the Borrower in the implementation of a strategy designed to: (i) improve governance and technical capacity in the solid minerals sector to enable the sustainable management of mineral resources; and (ii) establish a basis for poverty reduction and rural economic renewal in selected areas of the territory of the Borrower via the development of non -farm income-generating opportunities through artisanal and small-scale mining and via diversification away from oil sources of income ". The statement of objectives in the Project Appraisal Document's Results Framework (Annex 3, page 30) is essentially the same, while the statement of the first sub -objective (i) in the main text of the PAD (page 5) reads as " to increase the Government s long-term institutional and technical capacity to manage Nigeria s mineral resources in a sustainable way". b.were the project objectives/key associated outcome targets revised during implementation? No c. Components: Component 1: Economic Development and Livelihood Diversification in Artisanal and Small -scale Mining Areas (appraisal cost US$48.9 million; actual cost US$27.4 million). The key activities under this component included (i) analytical work to characterize the nature and extent of small -scale mining and associated socio-economic, community, gender and health aspects; (ii) community-driven pilot projects aimed to improve technical, environmental and social conditions of small -scale mining operations; (iii) rehabilitation and resuscitation of the Jos School of Mines located in Nigeria s Plateau zone; (iv) creation of a Small Scale Mining Unit at the Federal level with ASM satellite field offices; (v) improved access to credit and financing in particular for medium and small -scale mining operations; (vi) support for mining-related private sector trade associations and professional interest groups; and (vii)

2 the promotion of small-scale mining of specific commodities with emphasis on important substitution and sector development. Component 2: Strengthening Governance and Transparency in Mining (appraisal cost US$33.3 million; actual cost US$49.1 million). This component sought to address governance and transparency issues through the following activities: (i) revision and modernization of the legal and fiscal frameworks for mining; (ii) strengthening of public mining institutions to provide for transparent management of the sector; (iii) development of a computerized registry and mining Cadastre system in accordance with international best practice; and (iv) development of good environmental and social management practices within the mining sector. Component 3: Private Sector Development (appraisal cost US$26.8 million; actual cost US$30.5 million). The component was designed to support: i) restructuring of State-owned mining corporations: the Nigerian Mining Corporation (NMC) and the National Coal Corporation (NCC); and ii) strengthening of the geological infrastructure (geophysical, geological mapping and mineral assessments) as well as development of a national solid minerals information system to promote investment in the mining sector. Component 4: Project Coordination and Management (appraisal cost US$6.9 million; actual cost US$27.3 million). This component represented the anticipated overhead costs for implementing the project. These included the operating expenses of a Project Management Unit (PMU) within the Ministry of Mines and Steel Development (MMSD), which was to coordinate and manage project activities and functions, including procurement, monitoring and evaluation, financial management and record keeping, accounts and disbursement. The PMU was further responsible for coordinating project activities with other stakeholders, i.e. other ministries and institutions at the Federal and State levels, stakeholders from the public and private sectors, and civil society. d. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Project cost : Total project cost was US$136 million at closure, 6% higher than the appraisal estimate of US$127.9 million due to cost overruns. Financing : The World Bank Group contribution consisted of a credit of US$ million at closure, which slightly increased from the appraisal estimate of US$120 million as a result of the exchange rate changes. Borrower contribution : The Borrower contribution of US$7.89 million at appraisal increased to US$12.15 million by project closure. Dates: The project was extended by 23 months from the original closing date of June 30, 2010 to May 30, 2012 as a result of implementation delays caused by frequent ministerial changes and the release of counterpart funding (see section 9a below). 3. Relevance of Objectives & Design: a. Relevance of Objectives: High. The project development objectives were consistent with the Government of Nigeria's development priorities outlined in the National Economic Empowerment and Development Strategy (NEEDS) for the solid minerals sector, which was considered one of six priority sectors crucial for economic diversification away from oil dependence. The objectives are also relevant to the World Bank Group's FY Country Strategy for Nigeria at project closure, the core themes of which focused on governance and sustaining and accelerating non oil growth through promotion of private sector led growth. The objectives are also in line with the main priorities of the Country Strategies at appraisal and during implementation which aimed at improving economic governance, creating conditions for rapid private sector-led, poverty-reducing growth, particularly in the non-oil economy, and empowering local communities to play an active role in their own development. b. Relevance of Design: High. The statement of development objectives was clear. The project results framework indicated a clear causal chain between the activities financed by the project and the outputs and outcomes related to the attainment of the development objectives. For example, with regard to investments in the revision of the legal and fiscal frameworks for mining and development of a computerized registry and mining Cadastre system, the activities were expected to improve governance and technical capacity in the solid minerals sector. The promotion of small-scale mining of specific commodities and financing development assistance were meant to lead to the development of non -farm

3 income-generating opportunities through artisanal and small -scale mining. 4. Achievement of Objectives (Efficacy): (i) Improved governance and technical capacity in the solid minerals sector to enable the sustainable management of mineral resources : Substantial. Outputs In 2006 a Mining Cadastre Office, based on transparent, non -discretionary, publicly available procedures, was established in Abuja and granted autonomous legal status as stipulated in the 2007 Minerals Act. The mining cadastre system was audited by an international expert in In light of the growing volume of applications received by the Mining Cadastre s head office in Abuja, a regional Cadastre office was opened in Jos. The Mining Cadastre Office's operating budget is now fully funded through the Federal budget. A new Minerals and Mining Act was passed into Law by the National Assembly in 2007 and mining regulations were adopted in Environmental regulations were issued as part of the mining regulations. The 2007 Minerals and Metals Policy, which is embedded in the 2007 Minerals and Mining Act, also contains provisions pertaining to the fiscal regime for mining, notably royalty payments and deductions and exemptions to incentivize investors, which partly overlap with (but not contradict) other fiscal laws. As planned, an airborne geophysical survey of the entire country was completed in 2010, of which 56 percent were project-funded; (ii) about 3,600 geo-physical maps, including radiometrics, gravity and magnetics, were completed in 2012, as well as radio-metric, gravity and magnetic map interpretations; and geochemical maps of various scales were produced for 49 substances; and (iii) the National Geosciences Research Laboratory (NGRL) has renewed mineral analysis capabilities as a result of the project -funded refurbishment, staff training and twinning arrangements with specialist institutions in the UK and Canada. The project supported extensive capacity building activities about 2,000 staff from the Ministry of Mines and Steel Development s departments, the Mining Cadastre Office, the Nigerian Geological Survey Agency and the National Institute for Mining and Geosciences. In addition: (i) the Ministry headquarter office in Wuse II /Abuja, and the Zonal Offices in Jos, Sokoto, Kano and Kaduna were rehabilitated, refurbished and equipped with modern information and communication technology infrastructure, including the installation of an internet facility; and (ii) 50 vehicles were provided to facilitate field work and mine inspections; the vehicles were used as was evidenced through a tracking system of the MMSD to monitor their movements and locations. Outcomes The available data suggests that private investment in the Nigerian solid minerals sector increased over the lifetime of the project. The Mining Cadastre Office granted more than 10,000 mining titles during the project s lifetime, and the number of active licenses -- a proxy indicator for new private investment in the mining sector -- increased from 1,000 to over 6,300 over the project s lifetime (2,000 were mining licenses and more than 4,300 - exploration licenses). The original backlog of 3,000 mining title applications was cleared in 2005, and the final clean up was completed in July/August At project closing, out of a total of 14,110 applications that had been received during the project s lifetime, a total of 10,056 licenses had been granted by the Mining Cadastre Office as compared to the project target of 5,000 licenses. Licenses are processed on an ongoing first -come first-served basis, and about 1,000 licenses were being processed at the time of project closing, reflecting the high demand and turn-over of properties. The ICR reports that the system maintains its regulatory integrity and that licenses are revoked in the event that license holders fail to follow the stipulations. The names of revoked license holders are published quarterly on the Cadastre s website as well as in newspapers. The annual royalty collection value a proxy indicator for the annual increase in solid mineral production in the sector- increased by about US$7.7 million, from US$1.4 million in 2005 to US$8.8 million in 2011 in nominal terms. The (nominal) value of mining royalties collected in 2011 was more than six times the royalty revenues in The total official sales value of solid minerals (as a proxy for mineral production) increased from about US$35 million in 2005 to nearly US$129 million in At the time of closing, up to 60 international companies were exploring different mineral deposits in Nigeria. While the increase in solid mineral exploration and production is influenced by many other factors (such as commodity markets and global demand) in addition to project investments, the governance and transparency gains as well as the state of the art geodata helped enhanced investment activity.

4 (ii ii) Development of non -farm income -generating opportunities through artisanal and small -scale mining and via diversification away from oil sources of income : Substantial. Outputs A total of 245 grants amounting to about US$9 million were extended to 147 ASM cooperatives as well as 98 community entities. The ASM grants supported subprojects to enhance granite, sand, gravel and laterite quarrying, and nearly 85 percent of the community grants supported the construction /rehabilitation of classroom blocks and water schemes. A Lapidary school was established in Jos. 15 commercial cutters were trained in the gemstone and dimension stone industries as well as nine trainers who were expected to train 500 commercial cutters within the next five years. The National Institute of Mining and Geosciences was set up and rehabilitated. The project was addressing two levels of professionals - direct mining and geology professionals in pursuit of employment in Nigeria s mining sector, as well as accounting and finance professionals pursuing employment with financial institutions and Government agencies focusing on mining industry. The project supported mainstreaming mining related courses in business schools and universities. The practical post graduate instruction in NIMG has become operational; the first batch of 33 students graduated in late 2011, half of whom succeeded in finding relevant employment by the time of the ICR completion; a second batch enrolled in February 2012 and was expected to graduate in April. Outcomes About 251,500 miners who had previously engaged in informal and illegal mining became formally employed. The total number of jobs formalized including self -employment in number of communities using matching grants 25% higher than the targeted number of 200,000 jobs. The planned socio-economic survey was not carried out due to its overly complex design. A sample of 15 ASM cooperatives (out of a total of 147 ASM cooperative grant recipient entities) tracked over a 1.5 year-period experienced on average a 49% increase in cooperative income from about US$ 4,150 in 2010 to about US$6,160 at the end of At an average cooperative membership of 50 miners, this translates into an increase in annual income from about US$83 to about US$123 per cooperative member. Training in dimension stone quarrying (from primitive blasting to cutting of square slabs ) led to the opening of six new dimension stone processing plants. During the project s lifetime, 1,030 ASM licenses were issued, out of which 475 licenses had been certified as of project closing. This was twice the number the end of project target value of 200 fully compliant associations. The remaining 555 associations and cooperatives had received their licenses and were awaiting certification, given that the MMSD s ASM department was not able to keep with the high volume of license applications. Final Objective: Establishing a basis for poverty reduction and rural economic renewal in selected areas It is difficult to judge if the project has helped establish a basis for poverty reduction and rural economic renewal in selected areas as the collected data does not fully capture the results in terms of the actual increase of incomes and livelihoods among ASM operators and communities. While the data available was not statistically significant given the small sample and short time period (1.5 years), it showed a positive trend in terms of increased income in the selected ASM communities. 5. Efficiency: An economic and financial investment analysis was not carried out at appraisal. The efficiency assessment in the PAD was based on economic indicators that can be projected and compared, such as the estimated value of mineral exports, fiscal revenues coming from the sector, and the amount of new investment in the near future (PAD, p. 15). For example, according to the PAD, fiscal revenues were to increase to US$ 10 to $20 million per year. Revenue from royalties increased by about US$ 7.7million from US$1.4 million in 2005 to US$8.8 million in 2011 in nominal terms. While this indicator did not meet the projected value of US$ 10 to US$20 million per year, the (nominal) value of mining royalties collected in 2011 was more than six times the royalty revenues in Given that there was no medium or large-scale mining in Nigeria at the time of approval and that mining investments are influenced by many external factors and market conditions, it was difficult to get a realistic royalty projection at appraisal. The project experienced cost overruns during implementation, due to which the scope of some activities had to be

5 reduced or cancelled. Cost savings realized through these reductions were used to cover cost overruns incurred under other components. The reasons for the overutilization of certain disbursement categories included: (i) underestimation of the cost of the airborne geophysics surveys, whose actual contract value amounted to about US$23.5 million versus the budgeted amount of US$10 million due to a sharp increase in commodity and fuel prices associated with the global mining boom (the estimate was based on per line-kilometer cost at the time of appraisal; the sharp increase in cost of surveying resulting from the commodity boom affected all surveying projects globally); (ii) the addition of civil works, based on the incumbent Minister s directives, for the rehabilitation of MMSD headquarters in Abuja and regional office in Jos; (iii) increased funding requirements as a result of the decision to upgrade of the Jos School of Mining to the Nigerian Institute for Mining and Geoscience (NIMG); and (iv) the allocation of additional funding to promotional activities, training/workshops and operating costs in recognition of the strategic importance of the activities to the project s achievement of its objectives. Overall project actual cost was at closure was 6% higher than the appraisal estimate. Addressing the ratio of actual operating cost to total actual project cost (which is 21% under this project), the ICR says that this was "not an indication of administrative inefficiencies " (ICR, page 26). The project was also covering operating expenses of the Nigerian Institute for Mining and Geosciences, the Mining Cadastre Office, and the Nigerian Geological Survey Agency (for surveys) as well as for the Ministry (including utilities and maintenance) all of which were bundled into the operating cost category under project coordination component. At appraisal, it was assumed that these agencies operating costs would be charged to respective project components and corresponding disbursement categories. However, during implementation the Bank s Financial Management experts advised the Bank s supervision team to include these expenses as operating costs under Component 4 and its corresponding disbursement category. The project had a delay of 23 months in implementation due to exogenous factors. Efficiency is assessed as substantial. a. If available, enter the Economic Rate of Return (ERR ERR)/Financial Rate of Return (FRR FRR) at appraisal and the re-estimated estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal ICR estimate No No * Refers to percent of total project cost for which ERR/FRR was calculated. 6. Outcome: The project s objectives were highly relevant to the challenges of the mining sector in Nigeria. Design relevance is rated high. The project substantially contributed to improved governance and technical capacity in the solid minerals sector, as witnessed by the positive trend in the sector development. Development of non-farm income-generating opportunities through artisanal and small-scale mining and via diversification away from oil sources of income was also substantially achieved. Efficiency is assessed as substantial. a. Outcome Rating : 7. Rationale for Risk to Development Outcome Rating: The Government has demonstrated significant commitment to setting up mechanisms, such as the Solid Mineral Development Fund aimed at ensuring the availability of sufficient funding to sustain and expand project -funded investments and implementation structures, such as : (i) the retention of the PMU; (ii) the continuation of the small grants program and other ASM activities with the added support of several extension service consultants; and (iii) the operating budgets of the Mining Cadastre and the Nigerian Institute for Mining and Geoscience through the annual National Budget Appropriation. Project achievements, such as the data produced by the geophysical airborne survey, the institutions established with project support, the formalization of the artisanal and small scale mining operators and continuation of ASM activities are likely to be sustained. At the time of the project closing, the legal status of the National Institute of Mining and Geosciences (NIMG) was still pending. The NIMG bill had not been presented to the National Assembly for enactment in order to reconfirm the legal status of the Institute. The Institute however already received accreditation from the National Universities Commission. With regard to the ease of access by investors to geophysical survey data, there was still some risk that data would be kept less accessible than was intended.as was flagged in a number of implementation status reports and mission

6 Aide-memoires between 2010 and 2012, the access to geophysical survey data by potential investors needed to be streamlined. The bottleneck was mitigated through MMSD s publication of procedures to access data and the recent set-up of the Mineral Information Center tasked to assist investors and researchers with facilitating information access and promotion of Nigeria s mineral wealth. a. Risk to Development Outcome Rating : Moderate 8. Assessment of Bank Performance: a. Quality at entry: The Project was the first Bank-funded mining project in Africa following the World Bank Group s Management Response to the July 2001 Extractive Industries Review. The Bank s Management s response emphasized the need for selectivity in the Bank Group s involvement in the extractive industries, and for greater focus on the needs of the poor, and increased focus on governance and transparency, as well as environmentally and socially sustainable development. These principles were embraced by the project s focus on ASM activities and its intent to establish a rule-based system for the administration of mining rights as well as enforce the industry s compliance with sustainable development guidelines. The project was the first attempt to adopt a new governance centered approach to mining sector development. The background analysis was sound and project design reflected lessons learned from Bank -supported ongoing community development and capacity building operations in Nigeria and other countries in the Africa region. Government counterparts as well as representatives of the private sector, civil society and non -governmental organizations were consulted at an early stage of project preparation. The list of identified risks was comprehensive and the risk ratings were appropriate. A number of risks, which were not identified at the time of appraisal, could not have been foreseen, i.e., (i) the risk of implementation delays caused by the high turnover in high -level Ministry officials (during the 7-year life of the Project, eight Ministers and nine Permanent Secretaries had held appointments at the MMSD ) and bureaucratic delays; and (ii) security-related risks particularly in the Northern parts of the country, where some of the project areas were strongly affected by religious and sectarian violence and rioting in 2010 and As the ICR acknowledges, the scope of the proposed activities was ambitious. Some of the project activities were not implemented, such as the pilot projects and the socio-economic village survey, because their design was reportedly too complicated. The methodology for pilot projects was too complex and not a cost effective use of credit proceeds as was expressed by the Minister of Mines and Steel Development at the time (ICR, page 8). Also, some of the project activities, such as the airborne survey, were under-budgeted; the preparation team did not seem to have anticipated the extent of increases in the prices of goods and services, given that the minerals boom was already occurring at the time of appraisal. Under-budgeting for surveying and mapping was reportedly a common occurrence in similar projects implemented in other parts of Africa during the same time period. Quality-at at-entry Rating : b. Quality of supervision: According to the project review conducted as part of the Bank s Quality Assessment of the Lending Portfolio in October 2008, the quality of supervision by an experienced task team, with strong support from the country office was high throughout implementation. The Bank s supervision kept the project reasonably on track, and despite frequent changes at the top in the ministry (QUAL, 2008). Furthermore, the Bank intervened effectively at a critical juncture in implementation when the project threatened to go off -track due to political interference. The supervision team s firm stance and insistence on compliance with obligations outlined in the DCA and procurement guidelines during the time of political interference prevented the project from derailing. As a result, a significant portion of the envisaged scope of activities was accomplished. As the ICR acknowledges, the key performance indicators were tracked inconsistently during implementation. In the first seven Implementation Status Reports (ISRs) only two PDO indicators and four Intermediate Outcome indicators were tracked; the last five ISRs contained a set of four PDO and nine Intermediate Outcome indicators that were partially taken from the DCA and partially from the PAD. Quality of Supervision Rating :

7 Overall Bank Performance Rating : 9. Assessment of Borrower Performance: a. Government Performance: At the time of appraisal, the Government s commitment was inferred from its preparation of a new Minerals Act to replace the 1999 Minerals and Mining Decree, which was considered inadequate in terms of improving Nigeria s investment climate (PAD, p. 3). This action indicated a clear commitment of the Government during project design and preparation to implement the strategic action plan of the NEEDS Agenda related to the solid minerals sector reform. Despite strong Government support at the time of project design, at the end of the first 26 months of implementation the project was operating under its fifth Minister, who slowed down the implementation pace. The Government s commitment over the lifetime of the project was volatile, ranging from a high level of commitment and full understanding of project objectives and components and close cooperation to a lack of adequate attention of the Ministry to small scale mining, the Jos school for excellence, and hiatus in passage of the mining law (ISR 5, May 2007). This put the project at risk of not achieving its objectives as it caused the ASM component to be two years behind schedule (QALP, 2008). In addition, the release of counterpart funding was rated Moderately in six out of 15 ISRs, which contributed to further implementation delays. Government Performance Rating Moderately b. Implementing Agency Performance: Despite the above-mentioned multiple disruptions and considerable constraints, the Project Management Unit (PMU) functioned well. The PMU staff was commended for their dedication and perseverance given the exceptionally long working hours, private sector demands and overall challenges posed by implementation of this project. The PMU s capacity was reinforced during project implementation, e.g. through the recruitment of a Procurement Advisor, Project Management Assistant, Monitoring and Evaluation Consultant. The results of financial management and procurement post reviews were positive and audits unqualified. Implementing Agency Performance Rating : Overall Borrower Performance Rating : Moderately 10. M&E Design, Implementation, & Utilization: a. M&E Design: The project's indicators were appropriately linked with the intermediate objectives. The key performance indicators for the project development objective included : (i) 50% increase in per capita income for selected small -grants recipients; (ii) backlog of mining title applications at the MCO cleared; and (iii) number of artisanal and small-scale m ining associations and enterprises established and fully operational under a legal license. Some of the project s outcome indicators were really outputs, and some of the output indicators were really outcomes (i.e., the offices staffed and equipped; number of associations formed and operational; adoption of regulation indicators ). While the project's indicators included baseline data and measurable targets set at appraisal, some baseline values equaled zero. According to the PAD, most of the available information about the social, economic, and technological character of artisanal and small-scale mining in Nigeria, as well as its scope and extent, was anecdotal in nature... including the estimated value of Nigeria s minerals production" (page 31). At the end of the project, the volume of mineral production was estimated based on royalties collected. To measure poverty alleviation results, an extensive program of socio-economic profiling and baseline assessments was to be undertaken during the first year of the project. However, with reduction of pilot areas to two and a delay in start of the ASM components in general, the approach had to be revised later in the project; this still did not produce much reliable socio -economic data due to deficiencies of methodology used by the consultants and insufficient time to remedy the survey. b. M&E Implementation: During the first five years of the project s lifetime, the supervision reports partially monitored three out of five PDO

8 indicators. The full set of key performance indicators, which contained a blend of PAD and DCA wording of indicators was tracked for the first time in May In order to intensify monitoring efforts, an M&E expert was recruited in 2007 to assist in establishing an appropriate system to monitor and evaluate the performance of the project as well as preparing the necessary report on the progress of the project as well as the mid -term review. Of particular concern at the time was the measurement of the project s progress towards achieving part (ii) of the PDO, pertaining to poverty reduction and rural economic renewal. The task team was urged to track the outcome indicator of 50 % increase in per capita income in pilot project areas, as measured by village income surveys. given that it represented the most directly related poverty reduction outcome indicator. While baseline studies were completed for barites and gypsum, the socioeconomic profiling did not materialize. However, baseline and follow-up data has been collected diligently for the 245 small grants recipient entities, and an evaluation of the short -term impact on a sample of 15 ASM cooperatives was conducted in c. M&E Utilization: The M&E system was used to support recommendations or inform management decisions during the course of implementation. M&E Quality Rating : Modest 11. Other Issues a. Safeguards: This was a Category B project that triggered two safeguards policies OP4.01 Environmental Assessment and OP 4.12 Involuntary Resettlement. Environmental Assessment and Management : The ICR reports that "throughout project implementation, both environmental and social safeguard compliance were complied with and consistently rated satisfactory in supervision reports, and no major safeguards issues were observed during supervision missions " (page 16). Compliance with environmental and social safeguards was monitored by two Abuja -based Environmental and Social Specialists on the Bank s supervision team. With the Social Specialist s relocation in 2010, social safeguards oversight was transferred to a HQ-based Bank staff. From the PMU two qualified Environmental and Social Specialists /Safeguards Officers trained in environmental and social issues in mining projects as well as World Bank safeguard policies, carried out site visits at least five times per year. In addition to the diligent monitoring of compliance with safeguards policies through regular supervision missions, a one -week environmental safeguard implementation support mission was carried out in July 2010, and an independent environmental and social safeguards audit was conducted in Several minor safeguard concerns were observed during the July 2010 safeguards mission in relation to the small-grants program, which were promptly addressed. While the mission noted the small grants beneficiaries high level of awareness on occupational health issues, it noticed that some of the workers did not use ear musters and hand gloves, reportedly because of cost and discomfort. In 2010, a social and environmental checklist was prepared and used as mandatory documentation for small -grant applications (in case the check-list was triggered, adequate management plans were to be developed). Involuntary Resettlement : According to the PAD, it was anticipated that project activities would not lead to land acquisition, or the displacement of people. The project, however, could have result ed in the prevention of small-scale mining in parks or protected areas, and subsequently an initial decline in incomes due to the restricted access. Therefore, as a precautionary measure, a Resettlement Policy Framework (RPF) and a Process Framework (PF) had been prepared and approved, to address such situations with a view to identifying alternative sources of income and restoring incomes, while at the same time supporting the environmental preservation of parks and protected areas (PAD, page 21). The ICR reports that resettlement or restriction of access could have occurred in conjunction with the implementation of the originally planned six pilot projects, small grants program and civil works, but "the project was able to avoid causing any resettlement " (page 16). The 2010 safeguards mission revealed that some land acquisition documentation associated with involuntary resettlement for several grants was missing in project files. By the subsequent mission in September 2011 this shortcoming had been remedied. b. Fiduciary Compliance: Procurement: The ICR reports that "there were no cases of misprocurement under the Project "(page 17).

9 Procurement implementation was satisfactory except that the project did not comply with the requirement for publication of NCB contract awards. This shortcoming was remedied prior to the closing date. During implementation, two-thirds of the project s procurement performance ratings in supervision reports were mos tly satisfactory, and one-third of the ratings were moderately satisfactory or, in one instance, moderately unsatisfactory. The latter was related to a brief four -to -six- months period of political interference, which was beyond the PMU s control and did not have any adverse impacts on the project beyond this period. Several minor shortcomings were observed primarily during the early stages of implementation when a lack of attention to detail in preparation of procurement documents and poor filing was noted. To address these concerns, an additional Procurement Consultant was recruited in Sep tember 2006, and a filing procurement clerk was hired in April As a result, procurement performance improved considerably after December A procurement review undertaken shortly before the project closing date confirmed that all procedures were followed. The ICR also mentions on page 27 that out of total of 245 small grants sub-projects, there were four reported cases of misuse of funds, all of which were settled in court and the money was recovered. Financial management. The ICR reports that "all audits were unqualified, and no cases of misdemeanor or fraud were uncovered in the Financial Management system" (page 17). The Project s Financial Management performance was rated satisfactory in supervision reports throughout the project s lifetime, with the exception of two moderately satisfactory ratings at the beginning of implementation, for the following reasons: a 2006 Financial Management mission had pointed out the need to upgrade the project filing system and to pay the project s suppliers directly, rather than through an intermediary. Several remedial measures were taken in due course: the record keeping was revamped, receipts retiring was managed in a proper manner, and the project no longer issued payments through intermediaries. Secondly, deficiencies in the maintenance of the asset register were observed. Remedial action was promptly taken in the form of the recommended embossment of fixed assets. The final supervision mission in May 2012 concluded that the project did not have any material financial management accountability and internal control issues except for NGN81.06 million, which was trapped in the defunct Hallmark bank for over two years. As confirmed by the team s financial management specialist and reflected in the audit, these funds have since been released. c. Unintended Impacts (positive or negative): d. Other: 12. Ratings: ICR IEG Review Outcome: Moderately Risk to Development Moderate Moderate Outcome: Reason for Disagreement /Comments Relevance of objectives and design is rated high. The available evidence points to substantial efficacy. Efficiency is assessed as substantial. Bank Performance : Borrower Performance : Moderately Quality of ICR : Moderately NOTES: - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate. 13. Lessons: The ICR has identified a number of lessons, of which the most important are listed below :

10 Project design should be relatively simple when operating in countries with complex environments, limited capacity, and a weak country implementation record. Making the stability of Project Management or Coordination Units a covenant can be an effective means of avoiding adverse consequences of political interference in complex policy environments. When the project is supporting the start up and initial operating expenses of new institutions, it is important to build a plan for phasing out subsidies for operating expenses into project design. Government commitment is important for budgeting sufficient funds to cover recurrent cost in order to sustain project investments beyond the project closing date 14. Assessment Recommended? Yes No 15. Comments on Quality of ICR: The ICR is concise and outcome oriented. All the sections are covered with adequate detail. While the lessons are evidence based, the ICR would benefit from the analysis and more detailed discussion of the lessons. In particular, as it mentions on page 3 that "the project was the first attempt to adopt a new governance centered approach to mining sector development, which provided valuable lessons learnt for other projects that followed ". a.quality of ICR Rating :