IFC in Nigeria: Review. Amitava Banerjee, Manager Miguel Rebolledo Dellepiane, Senior Evaluation Officer

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1 IFC in Nigeria: An Independent Country Impact Review. Amitava Banerjee, Manager Miguel Rebolledo Dellepiane, Senior Evaluation Officer

2 Independent Evaluation Group IEG Independent we report to World Bank/MIGA/IFC s Board (CODE) We share results with stakeholders Why do we evaluate? Accountability Learning Results/resource allocation Micro and Macro Evaluations 2

3 IEG: Independent evaluation Board Director-General, Evaluation (DGE) President World Bank Group World Bank Multilateral Inv. Guarantee Agency IEG-WB IEG-IFC IEG-MIGA 3

4 Outline of the presentation Country background Evaluation scope and data IFC operations and results Main findings Recommendations 4

5 World Bank Country Assistance Evaluation: Main Messages Improvement in overall outcomes (from ) in ensuring macro-economic stability and supporting an effective central government No improvements in engagement with state governments on issues of poor infrastructure and corruption Good outcomes in social services delivery and community engagement through individual programs No notable success in creating sustainable basis for non-oil growth Lack of a coherent strategy in bringing together institutions, policies, and investment programs for private sector development. 5

6 Three main messages for IFC Diversify areas of activity Formulate a clear country strategy Collaborate with the World Bank to help improve business environment 6

7 Background - Nigeria Key country in Sub-Saharan Africa Poor social and economic conditions for most of the population Difficult business environment leads to low private investment poor infrastructure limited access to credit economic volatility weak governance; legal and regulatory framework 7

8 Nigeria s business climate lags its peers 100 Pre-Ref orm Post-Ref orm Very Low Risk Low Risk Moderate Risk High Risk ICRG Rating (min=0, max=100) Very High Risk Nigeria ICRG Rating Resource-Rich Countries' Average ICRG Rating 8

9 Challenging business environment Successive Nigerian governments have achieved some notable reforms But Nigeria remains a difficult environment for the private sector development

10 IFC in Nigeria Evaluation scope and data IFC operations and results Main findings Recommendations

11 Evaluation scope and data Timeframe: Study population: 45 investment for $1.1 billion 39 advisory projects for $20 million Data sources: country mission (over 7 weeks), stakeholder interviews, local strategy consultant, AC Nielsen s client survey, IFC s and publicly available databases. 11

12 IFC operations and results IFC s re-engagement started in 1998 Strategic objectives multiplied Financial markets projects dominated the investment portfolio Corporate loans and on-lending to SMEs Trade guarantees Advisory services aimed mainly at improving the business environment 12

13 Prevalent finance sector projects F inanc e Infras truc ture G en. Manuf & Sv c s Chemic als O il, gas & mining Health & Edu Funds US$m illio n Sector 13

14 Volatile level of investments US$ $million * Fiscal Year By year of Approval * Amounts as of Dec

15 Business environment advisory prevailed $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 $7.6 $5.6 $4.0 $2.7 US$ million $ Infrastructure Value Addition to Firms Business Enabling Environment Access to Finance Environment & Social Sustainabillity Business Line

16 Advisory commitments peaked in 2006 million US$ $9.0 $8.0 $7.0 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 $0.0 $7.7 $4.1 $3.7 $2.0 $0.8 $1.0 $0.3 $0.3 $ * Fiscal Year 16

17 Five main findings 1. No clear formal IFC strategy in Nigeria 2. Low-risk model of intervention 3. Strong investment performance in financial sector 4. Weak performance in advisory services 5. Strong financial and institutional additionality 17

18 1. No clear formal IFC strategy in Nigeria Strategy not well articulated Reflected weaknesses in IFC s country strategy process Driven largely by the World Bank Lacked measurable objectives and expected development impacts Strategy not matched with resource allocation 18

19 2. Low-risk model of intervention IFC focused on few sponsors and narrow sector-product mix Few projects had more than three risk factors Nigerian clients were more critical of IFC s operations than clients worldwide decision making, lead times, implementation 19

20 Smaller number of risk factors in recent projects 70% jects with four isk factors 60% 50% 40% Percentage of proj or more high-ri 30% 20% 10% 0% Sub-Saharan Africa (FY ) Excluding Nigeria IFC ALL (FY ) Excluding Nigeria Nigeria (FY ) Nigeria (FY ) Number of Projects :

21 3. Strong performance in financial market operations Highest performance achieved in: Project business success Economic sustainability Private sector development Loan investment outcome Screening appraisal and structuring Role and contribution In contrast, poorest performance in: Environmental and social effects Supervision and administration 21

22 Strong development and investment performance in financial markets Development Outcome HIGH LOW 82.4% 1 5.9% 2 High development High development outcome Low IFC return 5.9% 4 Low development outcome Low IFC return LOW 88.3% outcome High IFC return 5.9% 3 Low development outcome High IFC return HIGH Investment Outcome 88.3% 22

23 4. Weak performance in advisory operations Satisfactory impacts achieved by 42% of projects, compared with 71% for the rest of Sub-Saharan Africa IFC was successful when the focus was the creation or the broadening of a particular sector e.g. bond market 23

24 Advisory performance lower than the rest of Sub-Saharan Africa 100% Percentage of projec cts with high ratings 80% 60% 40% 20% 0% 75% 85% Output achievement 80% 71% 67% 56% 56% Outcome achievement 42% Impact achievement 38% Efficiency 85% Development effectiveness Nigeria (n= 16) Sub-Saharan Africa (n=34) 24

25 5. Mostly financial & institutional additionality Longer-term financing prevailed within financial additionality Improvement of corporate governance dominant within institutional additionality This appears to be consequence of IFC s role in helping move banks towards international standards 25

26 Strong financial and institutional additionality 100% 90% 87% 85% 83% Proportion of projects 80% 70% 60% 50% 40% 30% 20% 61% 35% 38% 18% 30% 26% 10% 0% Financial Institutional Operational Nigeria (33) IFC, excl Nigeria (659) Sub-Saharan Africa, excl. Nigeria, (80) 26

27 Three recommendations for IFC 1.Diversify areas of intervention 2.Improve the country strategy development process 3.Give proper priority to the supervision of environmental and social (E&S) effects 27

28 1. Diversify areas of intervention Address challenges of poor infrastructure and dependence on oil sector Help enhance trickle-down effects of oil- driven growth. These would involve: Expand IFC s activities beyond present confines Close cooperation with the World Bank to improve the business environment Deploy more strategic and effective advisory services 28

29 2. Improve the country strategy development process Strengthen the country focus of IFC s strategy Formulate country objectives in terms of expected development impacts Link objectives with the allocation of resources 29

30 3. Give proper priority to the supervision of E&S effects Ensure sufficient resources are dedicated to supervision Fully integrate E&S supervision into the portfolio management process 30

31 IFC in Nigeria: An independent country impact review Questions? Comments? 31

32 IFC in Nigeria: An Independent Country Impact Review Amitava Banerjee, Manager Miguel Rebolledo Dellepiane, Senior Evaluation Officer

IFC s Approach to Risk

IFC s Approach to Risk INTERNATIONAL BANKING FORUM 2011 Brescia, 16-17 June 2011 Vittorio Di Bello Chief Credit Officer IFC World Bank Group Agenda IFC: Who we are, What we do IFC and Sustainability IFC