Overseas Development Workshop Paper No

Institute

WORKSHOP ON
FINANCING THE RECURRENT COSTS OF AGRICULTURAL SERVICES
IN DEVELOPING COUNTRIES

3rd - 8th JULY 1983

RECURRENT FINANCING OF AGRICULTURAL SERVICES:

THE CASE OF NIGERIA'S AGRICULTURAL DEVELOPMENT PROJECTS

by

I. Adefolu Akinbode and J. Y. Yayock

Institute for Agricultural Research

Ahmadu Bello University
Zaria, Nigeria
 RECURRENT FINANCING OF AGRICULTURAL SERVICES:

THE CASE OF NIGERIA'S AGRICULTURAL DEVELOPMENT PROJECTS1

By

2
I. Adefolu Akinbode and J. Y. Yayock

1. INTRODUCTION

The concern for effective financing of agricultural

services in Nigeria dates back to the time development

planning received conscious attention. This, of course, is

logical and expected particularly since the success or

failure of any development effort depends largely on

effective financing and management.

Prior to 1961). when agriculture was transferred from

the exclusive to the concurrent legislative list, the

responsibility for public financing of agricultural services

in the country fell almost entirely on the then regional

governments. This was achieved by: (i) direct government

financing of agricultural services and (ii) government

Invited contribution at an International Workshop on

Financing the Recurrent Costs of Agricultural Services
in Developing Countries organized by the Overseas
Development Institute, London, July 3 - 8 , 1983.

Dr. Akinbode is Professor of Agricultural Extension at

the University of Ife, Ile-Ife and presently Visiting
Professor, Dept, of Agricultural Economics & Rural
Sociology, Ahmadu Bello University, Zaria;
Dr. J.Y. Yayock is Professor and Head of Department
of Agronomy and Deputy Director, Institute for
Agricultural Research/Faculty of Agriculture, Ahmadu
Bello University, Zaria, Nigeria.
 2

involvement in agricultural production through public

corporations (Tables 1 and 2).

This is not to say that the Federal Government was not

involved at all in financing agricultural services at that

time, but its contribution was minimal vis-a-vis its resources

(Table 3). The Federal Ministry of Economic Development at

that time housed some departments which had responsibility

for agricultural and related matters. These were later

brought together to form the Federal Ministry of Agriculture

and Natural Resources.

The bulk of domestic private investment was and still

remains in the hands of the country’s many small-holder

farmers. Some items of their recurrent investment such as

those for hoes, ploughs, axes and matchets, cannot be

obtained from import statistics. Not only are these

relatively minor items, but they also are not customarily

included in financial estimates. In addition, expenditures

by farmers on such inputs as fertilizers, pesticides,

herbicides and seeds are also usually excluded*

Notwithstanding these considerations, the investment created

by farmers in the production of food and cash crops as well
as those for livestock production must necessarily be the

largest single component of Nigeria's recurrent expenditure

in the agricultural sector, primarily because of their

sheer size and number.

 - 3 -

Table 1. Nigeria: Public investment in agriculture,

1958-67*

Period Value of Investment

(8*000)

1958-59 1*958
1959-60 1,820
1960-61 2,32l+
1961-62 3,728
1962-63 8,801+
1963-61+ 12,000
1961+-65 16,000
1965-66 20,000
1966-67 2l+,000

Table 2. Nigeria: Agricultural investment by public

development corporations, 1957*

ENDC** NNDC WNDC Total

Year (8 *000)

1957 290.2 i+l+5.2 151+.1+ 889.8

1958 3 U b .k 301.6 23.2 669.2
1959 316.8 209.2 78.2 601+.2
1960 1+16.8 157.2 79.0 652.0
1961 972.6 UI4-.8 895.0 1,912.1+
1962 1,075.0 53.1+ 109.6 1 ,238.0

*Sources Converted from Laurent, C,K, et al. (1969)

**ENDC Eastern Nigeria Development Corporation

NNDC Northern Nigeria Development Corporation
WNDC Western Nigeria Development Corporation
 After 19614- and with the commencement of active

participation by the Federal Government in agricultural

development, the expectation was that public investment in

agricultural sector would increase substantially relative

to its contribution to national development. Inspite of its

poor growth within the last decade, agriculture is still the

leading non-oil sector of the national economy which supports

approximately 65% of the population directly and provides

62 % of non-oil exports, about lj..5% of total exports and 23%

of the gross domestic products (Anonymous, 1979a). Whereas
it is generally agreed that the medium-term prospects for

overall growth of the Nigerian economy are bright, the long­

term prospects are believed to depend on the success of

Table 3. Nigeria; Public investments by government in

agriculture by regions, 1958-63* (IS’OOO).

Federal Regions
Year Total
West North East

1958/59 3i|-2 272 158 186 1,958

1959/60 1)76 67lp m 206 1,820
1960/61 352 3U-2 1,2 12 J4.I8 2,324
1961/62 272 370 1*572 1,5114- 3,728
1962/63 98 2,884 1,928 3 ,89^ 8 ,8014.

♦Source; Converted from Laurent, C.K. et al. (1969).

 - 5 -

efforts to diversify the economy and particularly the

improved performance of the agricultural sector. However,

this belief has not been matched by adequate resource-

allocation to the agricultural sector as evidenced by its

continued poor performance. During the Third National

Development Plan period between 1975-80, for example, the

capital expenditure on agriculture proposed by the Federal

Government and expressed as a proportion of the total

capital expenditure was only 5.5%. Similarly, the *

corresponding figures for the various States of the

Federation averaged 1L|..6%. As might be expected, actual

expenditures were even much lower, and estimated at about

l\.% for the Federal Government, 9.8% for the combined Federal

and State expenditures for the period. This level of

expenditure on agriculture compares poorly against the

percentage of total capital expenditure for the following

African and Asian countries:

Ghana 7%

Kenya 9%

Ivory Coast 29%

Zambia 12%

Tanzania 11%

Indian (State of Punjab) 67%

There seems to be a significant improvement in

resource allocation to agriculture at the federal level since

the beginning of the present civilian administration in 1979.

The operating policy is to allocate not less than 12% of

 - 6 -

total national capital resources to agriculture. In 1981

and 1982 actual capital allocation to agriculture by the

Federal Government averaged about 15>%. Similarly, while

improvements in resource allocation to agriculture have

been observed in some States, most have noticeable

decreases in proportion to capital allocation for

agriculture. In general, therefore, the situation is

still far below expectation particularly if the development

of agriculture is to be a reality.

The main aim of this presentation is to examine the

nature and problem of financing the recurrent costs of

agricultural services in Nigeria, particularly as

exemplified by some of the Agricultural Development

Projects (ADPs) in the country.

2. ESTABLISHMENT OF ADPs
It is the type of situation described above that led

to the search for an effective and efficient strategy, with

comparable budgetary reforms, for agriculture and rural

development in Nigeria (Akinbode, 1982d). The institu­

tionalisation of Agricultural Development Projects

(sometimes also referred to as Integrated Rural Development

Projects, IRDP) is one of the strategies which emerged as

a possible means of achieving increased agricultural

productivity. Thus, in 1973/714- the Funtu^'* (Kaduna State),

Gusau (Sokoto State) and Gombe (Bauchi State) ADPs were

designed as pilot schemes. This period also coincided with

the Sahelian drought which stagnated agricultural production

in the country. Faced with this situation, the Federal

Government of Nigeria in discussions with the International

Bank for Reconstruction and Development (World Bank)

concluded that although significant improvements in crop

yields had been shown to be technically and economically

feasible, little success had been achieved in making

available to the farmer the technologies needed to increase

production. Furthermore, it was recognised that poorly

organised and staffed extension services, inadequate

credit and marketing systems (including the network of

rural and farm roads) as well as an acute shortage of

adequately skilled and motivated manpower warranted major

remedial actions. The discussion with officials of the

World Bank led to the conclusion that;

"in the short term, at least, the quickest way of

improving farm production and incomes would be to

provide a concentration of support services to

areas of reasonable potential and dense farm

population. In such areas (it was postulated that)

farm sizes cannot increase and farmers, with

declining land fertility, are facing the problem of

maintaining, let alone increasing, production. Such

farmers are likely to respond well to any

improvements that may be offered to them.”

(Anonymous, 19 7 b ) •
 This reasoning provided the genesis of the first

three pilot agricultural development projects in Funtua,

Gusau and Gombe all of which became operational in 1975.

They covered a combined area of 1.8 million hectares

and had scheduled investment periods of five years.

A total of nine additional ADPs have since been added,

three of which are State-wide (Bauchi, Kano and Sokoto)

(Table Ip). Each of these projects aims at increasing

agricultural production and, consequently, farmer-incomes

by the development and provision of input delivery systems for

*

fertilizers, seeds, agricultural implements and other

agro-chemicals, low-cost agricultural feeder roads, water
supplies (for animal consumption and minor crop

irrigation), soil conservation works, farm service centres,

seed multiplication facilities, staff training facilities

and programmes, effective extension advice, credit and

marketing services, high level technical assistance and a

facility for longer-term physical and land use planning

(Slade, undated).

3. FINANCING OF ADPs
The various ADPs in Nigeria are jointly financed by

the State and Federal Governments of Nigeria and the World

Bank. The level of contribution from each source varies

from project to project. For example, the World Bank's

contribution varies from 29% in the Gusau ADP to lp5% in

Gombe, while the State Government's contribution also ranges
 - 9 -

Table 1*. Nigeria; Dates of loan approval, effectiveness

and completion of projects for completed and

existing ADPs.

Loan
ADPs Approval Effectiveness Completion

Funtua Dec. 19, 1971*. Jan. 5, 1976 July 1, 1982

Gusau Dec. 19, 1971* Jan. 3, 1976. July 1, 1982

Gombe Dec. 19, 1971* Nov. 29, 1976 July 1, 1982

Lafia June 9, 1977 March 3, 1978 Dec. 31, 1983

Ayangba June 9, 1977 March 3, 1978 Dec. 31, 1983

Bida March 20, 1979 April 23, 1980 June 30, 1985

Ilorin March 20, 1979 June 30, 1980 June 30, 1985

Ekiti-Akoko May 27, 1980 n.a.* Sept. 30, 1985

Oyo North April 29, 1980 n.a. Sept. 30, 1985

Bauchi Nov. 1980 n.a. n.a.

Kano Dec. 1981 n.a. n.a.

Sokoto Jan. 1*, 1983 n.a. n.a.

* n.a Information not available

 10

between 29% and l\$% of the total costs of projects (Table 5 ) .

The Funtua ADP seemed to have been exceptional. For

example, D'Silva and Raza (1980) reported that of the total

estimated cost of 836 million for the Funtua project,

819 million (or 6J%) was expected to be derived from the

World Bank, thus making its contribution by far the highest

compared to any of the other ADPs. However, on the whole

the contributions from World Bank, Federal and State

Governments sources average 35 > 25 and l\.0% of the total

cost, respectively.

Table 5. Nigeria: Actual funds contributed in support

of three ADPs for the five-year investment period
expressed as percent {,%) of total fund disbursed.

ADPs
Sources of Fund
Ayangba* Gusau** Gombe***

Workd Bank 29.9 29.6 1+1+.8

Federal Government 25.0 22.7 2k. 6

State Government 1+5.1 28.9 3 0 .2

Others 0. 0 18.8 O.I+

*Source: Anonymous (1983a)

' J "

**Source: Anonymous (1983b)

***Source: Anonymous (1982a)

 11

For sometime now, the World Bank has served as the

main source of external finance for agricultural development

in Nigeria. Prior to the on-set of the Third National

Development Plan period (1975-1980) most of the Word Bank 1

lending to Nigeria was mainly for such non-agricultural

projects as infrastructural development. For instance, of

the total sum of NLj.13.5 million (US #fc17.2 million) loaned

to-Nigeria by the World Bank between 1958 and 19714-, only

818..22 million (US #27.2 million) was for agricultural

projects, primarily for cocoa development in the former

Western and Mid-Western States. But since 1975, the bulk

of World Bank loans to Nigeria have gone to the agricultural

sub-sector (Table 6).

The first loan for agricultural development and

totalling Nip. 8 million (US #7.2 million) was signed in 1971

for the rehabilitation of cocoa in the former Western

Nigeria. Since then the Bank has lent a total of 8<#ijl4..5

million (US #962.0 million) to the Federal Government for

different agricultural projects (Table 7).

A discernible pattern in World Bank lending to . '

agriculture in Nigeria is the emphasis on small-holder

projects and a progressive shift toward an integrated

approach to rural development. As shown in Table 7, the

ADPs now account for over 79% of the agricultural projects

financed by the Bank.

The loan agreements usually spell out what the funds

from the various sources should be used for. Generally,
 12 -

Table 6. Nigeria? World Bank statement of loan/credit by fiscal year*

( u Millions )

Year Infra­
Year Total Project structure** Agriculture Oth e r * * *

1958 28.0 N i g e r i a n Railway 18.76 - -

1959-62 0.0 - - - -

1963 13.15 Apapa Wharf 9.05 - -

1961* 112.0 Transmission 20.10 - -

- Kainji Multipurpose 51*. 90 - -

1965 35.3 First E d u c a t i o n - - -

- N o r t h e r n Road 10.25 - 1 3 .Ut

1 966 29.3 A p a p a Road 11.38 - -

- W e s t e r n Road 8.06 - -

1967 0.0 - - - -

1968 0.0 - - - -

1969 20.2 K a i n j i Su p p l e m e n t a r y 9.69 - -

- NIDB I - - 3.81
1970 3U-98 Highway Rehabilitation 7.10 - -

- Transpor t R e h a b i l i t a t i o n 16.33 - -

1971 93.38 NIDB II - - i*. 1 1*

- R e h a b i l i t a t i o n programme - - 53.60

- Cocoa I - 1*.8 -

1972 119.6 Second Ed u c a t i o n - - 11.59

- Fifth Highway 17-62 - -

- Fourth Power 51.12 - -

1973 5U.o Third Education - - 36.18

197U 75.o Lagos Ports 36.85 - -

- C o c o a II - 13.1*0 -

173.0 F u n t u a ADB'- - 19.1*3 -

1975
- Gusau ADP - 12.73 -

- Gombe A D P - 1U.07 -

- O i l P a l m I (Bendel) - 19.76 - f

- Oil P a l m II (imo) - 12.73 -

- O i l P a l m III (Ondo) - 11.39 -

- Livestock Development - 1 U .07 -

1976 0.0
■ .... ....— — — ------
Continued pg. 13
 - 13 -

Table 6 (Continued)

Year Infra-
Year Total Project structure** Agriculture Other***

1977 62.0 Lafia ADP — 18.09 —

- Ayangba ADP - 23.1+5 -

1978 90.0 Oil Palm (Rivers) - 20.10 -

- IJIDB III - - 1+0.2*

1979 182.0 Bida ADP - 15.1+1 -

- Ilorin ADP - 18.09 -

- ARfflT - 6.03 -

- Forestry Plantation - - -

- Supply 61.61; - -

1980 286.3 Ekiti-Akoko ADP - 21.77 -

- Oyo-North /DP - 18.76 -
- Power V (Lagos) 67.00 - -
- Urban I - - -
- Sixth Highway 72.8 - -
*1
1981 Kano State ADP - 95.11+ -
- Bauchi State ADP 88.1+1+ -

- Agric. Technical - - -
- Assistance Project - 31.02 -
CO
_1
VO

Sokoto State ADP - 98.1+9 -

- Jfembilla ADP — 3U.81+ —

Total (ii million) 1+7 2 . 2 6 61+1+.51+ 171+.81+

♦Source s Oyaide (undated).

♦♦Includes transportation, water supply and ports.
♦♦♦Includes education, urban, industry, and post-civil war rehabilitation.
♦1 Only agricultural loan figure given for 1981 and 82.

Note; The foreign exchange conversion rate used in this and other tables
and throughout the presentation is S O . 67 = US 01.00.
the World Bank loan, which constitutes the bulk of the

foreign exchange component for capital development of che

projects, pays for capital development as well as salaries

of international staff. The Federal Government's

contribution partly finances capital development costs and

shares the costs of input procurement with the States.

The State Governments normally provide the operating

expenses as well as the salaries of local staff. It is

important to point out that often the release of the World

Bank's contribution of the fund is contingent on the

availability of local fund.

It-. PROJECT EVALUATION

Evaluation studies of the first (three) pilot ADPs

(Funtua, Gusau and Gombe) have clearly shown that these

projects did achieve significant farmer-impact and generated

high increases in agricultural production. As an example,

in 1979 crops valued at over i$38 million were produced in

the Funtua ADP area alone. It is estimated that at least

i#20 million of this annual production is directly

attributable to the activities of ADPs by improving and

intensifying agricultural extension, supplying improved

seeds, fertilizers and other agricultural inputs; the

development of feeder roads and rural water supply; the

promotion of improved farming technology generally as well

as improvements in farmers' access to credit and marketing.

The success story of the pilot schemes as well as other

ADPs under implementation has encouraged the Federal
 - 15 -

Government to adopt the concept as the core of its

agricultural development effort during the Fourth Naci^nal

Development Plan period (1981-1985). Under the Plan, the

ADPs are expected to he extended to all the existing (19)

States of the Federation by 1981j.. The World Bank has

acknowledged the success and cost-effectiveness of the ADPs,

and has encouraged the Federal Government to proceed with

this integrated approach to agricultural and rural development.

Table 7. World Bank loans for agricultural development to

Nigeria by type of projects, 1981-82*

Value As % of lending
Type of Projects (M million) to agriculture

Tree Crops 82.21 12.8

Rice Development 11.73 1.8

Integrated Rural Dev. (ADP)

include agric. asst. 509.7l+ 79.1
Agric. Manpower Dev.
(ARMTI) 6.03 0.9
Livestock Development 114-.07 2.2

Forestry Plantations 20.77 3.2

Total 6 I4J4..5 I4- 100.0

♦Source: Oyaide, (undated).

 1o -

It is estimated that World Bank loans to Nigeria for the ADP

and related projects during the 1981-1985 Plan period "ill

exceed M1.0 billion (US #1.5 billion).. Already, loans

totalling $3^7.9 million (US #519.3 million) have been

approved since 1981 and plans are at an advanced stage for

additional loans of over N301.5 million (US #1;50.0 million)

for the Kaduna and Borno ADPs as well as for fertilizer

procurement.

5. RECURRENT BUDGET AND CONTROL

Financial management and control are done by cost centre

allocation. By this approach capital budget and, in some

cases, fund for staff training and development are placed

under the control of Programme (or Project) Management Units,
while the operational votes are under the Zonal Project

Managers . Each cost centre is provided a monitoring report

of actual expenditure against the amount budgeted each

quarter; any variations have to be accounted for to

management. The detailed budget information is contained in

zonal budgets, the management of which is the responsibility

of the Zonal Project Managers. In other words, the zones

are autonomous as far as budgetary management and project
activities are concerned.

The budgeting process and budget structure are designed

to involve, train and assist senior and middle-level managers

1
This is now the situation with all ADPs that have gone
State-wide, each State being divided into four Zones.
 17

in planning, organizing, directing, monitoring and the control

of their particular activities and responsibilities. A

reporting system is designed to link physical performaxice

to the budget and actual expenditures. Thus planning,

budgeting, monitoring and'operations-evaluation are

integrated into one management information system in accordance

with the requirements of management, State Governments, the

Federal Agricultural Co-ordinating Unit (FACU) as well as

the World Bank. Budgeting is cost-control and effectiveness-

oriented; put in the words of an official of one of the ADPs,

"budgeting is designed to be loan-repayment-conscious, if

not profit-making-oriented".

6. PATTERN OF RECURRENT BUDGETS

A brief consideration of the pattern and nature of the

recurrent budget of ADPs is appropriate at this Juncture.

It is necessary to remind ourselves that when the ADPs started

in Nigeria there was abundance of money resulting from the

mineral oil boom. The projects did not, therefore, encounter
any problem during the first 2 - 3 years of their operation

with the State Government which is the main donor of

recurrent funds (Tables 8 and 9). In Gusau, actual

recurrent funding increased from 1^.3•h-0/0 of the estimated

annual cost during the first year to 8.0% in the second year.

These proportions declined in the third and fourth years to

about one third and picked up again only in the final year

1
Personal communication with officials of Kaduna State
Integrated Rural Development Project, 3rd May, 1983.
I

Table 8. Gusau ADPs Breakdown of annual budget by sources, 1975-80* (K'OOO)

Sources of Year 1 Year 2 Year 3 Year 24 Year 5 Total

funds E A RE A RE A RE A RE A RE A

World Bank 3,762+ 0 5 ,0 0 0 5 ,0 0 0 1,178 2,382+ 1,558 1,207 1,000 739 1,2500 9,330
(0.0°/) (100.0) (202.24.) (77.5) (73.9) ( 714. 6 )

Federal Govt. 5o o 50 0 2,000 750 1,331 3;i2o 1 ,32+2 1,680 1,900 1,020 7,273 7160
(100.0) (37.5) (231+.2+) (125.2) (53.7) (98.5)

State Govt. 2,305 1,000 3,750 3,000 2,815 1 , ^ 9 3,.067 1,000 2,250 3,050 1 ,24187 95099
(U-3.lt-) ( 80.0) (37.3) (32 .6 ) (135.6) (6U -0

Others 100 192 800 1 V396 0 828 0 2 ,5 2 1 0 1,000 900 5,937

(192.0) (17ij..5) (828.0) (2521.0) (1000.0) (659.7)

Total 8,869 1,692 11r,550 10‘,fll+6 5,3224- 7,2+71 6,167' 6,2+06 5,150 5,809 3l+,860 31r5
(214-.6) (87.8) (12+0.3) (103.9) (112.8) ( 90 . 24)

*Source: Anonymous (1983b)

**Figures in parentheses are the actual allocation (A) expresded as a percentage of
either the appraisal estimate (E) or the revised estimate (RE), as the case may be.

)
 Table 9. Gombe ADP: Breakdown of annual budget by sources, 1975-80* (N'000)

Sources of Year 1 Year 2 Year 3 Year It- Year 5 Total____

funds
E A E A E A E A E A E A

World Bank 3,361 76 2,582 1,529 2,508 k , k 7 6 2,517 2,838 2,81|.2 3,063 13,816 12,182
(2.3%)** (59.2) ( 186, 1].) ( 112. 8 ) (107.8) (88.2)

Statr: Govt 2,136 3,226 2 ,14.I 1,500 2,362 2,000 2,719 0 3,339 1,500 12,697 8,226
( 151. 0 ) (70.1) W.7) (0.0) 001.9) (61]..8)

1 Federal Govt 500 _ 750 2,360 - 8I4.O - 2,252 6,702

o\
( 100 . 0 ) ( 100 . 0 ) (100 .0 ) (100 .0 ) (100 .0 ) ( 100 . 0)
I

Import Sales 80 0 135 '6 226 -2 329 -35 k2Q 137 1,198 106
(0 . 0 ) (k.k) (-0.9) (-10.6 ) (-32 .0 ) (8.8)

Total 5,583 3,802 i+,858 3,785 5,096 9,031]. 5,565 3,61^3 6,609 6,952 27,711 27,2-16
(68.1) (77.9) (177.3) ( 65 . 5 ) (105.2 (98.2)

*Source; Anonymous, (1982a).

**Figures in parentheses are the actual allocation (A) expressed as a percentage of

the appraisal estimate (E).
 20

of the investment period. The data for the Gombe ADP show

a similar pattern (Table 9). This means that towards the end

of the investment period of the three enclave ADPs and about

the time the new ADPs were taking off (1980-81), financial

pressures had already set in the country.

In the phase of this declining financial resources

possible lines of action opened to Government Included:

(i) external borrowing, (ii) reduction in development targets,
(iii) increases in export or imoort substitutes, and

(iv) savings on the recurrent budget. With regard to this

last strategy, experiences have shown that it is the non-salary

and particularly the non-measurable and long-maturing elements

such as extension services which usually receive the first

and worst cuts (Tables 10 - II4-).

In the Funtua ADP, while salaries, wages and allowances

increased from 1 5 .3% of the actual recurrent expenditure in

1977/78 to 3k-. 3% 1978/79, farm inputs iecreased from

37.6% to 13.3% for the same periods. Oata for Gusau, Gombe,

Lafia and Ayangra ADPs also show similar trends (Tables

11 - 1l^_). The implication of this is that while the
developmental services designed to benefit the farm families

stagnate, extension services s ay fully manned. This

situation was confirmed to us "n our recent study of the
-1
IRDP of Kaduna State . It was reported that for the past one

year and more the project only got enough money to pay staff

Personal Communications, (May 3, 1983), 0£. cit.

 21

Table 10. Funtua ADPs Breakdown of actual recurrent expenditure by

major headings for two years and cumulative total* (ii-VOOi).

Major Headings 1977/75 1978/79 Jumulative T#tal

Vehicles, plant and

equipment U81+-7 (5.5%)** 1+82.7 (7.7) 3,321.1 (10 .3 )

Farm inputs 3,297.0 (37.6) 836 .I+ (13.3) 7,952.2 (21+.6)

Salaries and allowances;

a) Expatriate 11+3.U (1.6) 208 .1+ (3.3) 81+3.5 (2.6)

b) Local 1,197.0 (13.7) 1,91+1+.!+ (31.0) 5,296.6 (1 6 .1+)

Buildings, houses and

-ft
co
-d*
-d*
1 ,1+03.0 (22.1+)

0
construction materials 1 ,829.3 (20 .9) (32.1+)

•
Vehicles and plant
operating costs 929.1+ (>0.6) 676 .I+ (10 .8) 1 ,929.1 (6.0)

General service costs 883-U (10.1) 7 ,2 3 1 .1 (11.5) 2 ,51+5 .2 (7.9)

Total 8,76*.2 (1*0-0) 6 ,271+.1+(10 0 .0 ) 3 2 ,3 7 1 .9 (100.0)

♦Source; A n o n y m o u s , ( 19796 )

**Figures in parentheses are the component costs expressed as percentages

of the total for each year or the cumulative total, as the case may be.
T a b l e 11. G u s a u ADPs B r e a k d o w n of actual r e c u rrent a n n u a l expenditure b y m a j o r headings, 1975-80* (ii*000).

Year 1 Year 2 Year 3 Year 1+ Year 5 Acrued 198* Cumulative Total

Major headings
H%) S(°/o) »(%) m ) 8(%) »(%) H%)

Vehicle, plant
and equipment 531+(37.7/O'* 1,27l+(21.9) 812(26.9) 196 (38 .8 ) 93(11+.5) 299 (10 0 .*) 3 ,208 (2 7 .1+)

Farm inputs 15 8 (1 1 .2 ) 2,57*(1+1+.1) 196(6.5) 0 (0 .0) 0 (0 .0 ) 0(0.0) 2 ,92l+(2 5 .0 )

Salaries and
Allowances:

a) Expatriate i. 157(11.1) 225(3.9) 21+5(8.1) 38(1+7.1) 11+0(21.8) 0(0.0) 1 ,005 (8 .6 )

b) Local 160(11.3) 1+29(7.1+) 770(25.5) 63(12.5) ’ 292(1+5.6) 0(0.0) 1 ,7 11+( 11+.6)

Buildings, houses
& construction
materials 1+014(28.5) 1 ,265 (2 1 .7 ) 92l+(30 .6 ) 0(0.0) 0 (0 .0 ) 0(0.0) 2,593(22.2)

Evaluation Unit 3(0.2) 6 2 (1 .1 ) 7 2 (2 .1+) 8(1.6) 1 1 6 (18 .1 ) 0(0.0) 261(2.2)

Total (S'000) 1,1+16(12.1) 5,325(1+9.8) 3,019(25.8) 505(i+.3) 61+1(5.5) 299 (2 .6 ) 1 1 ,705 (10 0 .*)

^Source : Anonymous (1983b).

**Figures in parentheses represent the component costs expressed as percentages of the total for each year
or the cumulative total, as the case may be.
 - 23 -
/

salaries with little or nothing left for developmental work.

Another component of recurrent expenditure is the fund

for farm inputs which is classified under development

services. The data on the Funtua ADP has revealed that the

proportion of annual budget devoted to farm inputs declined

from about 38% in 1977/78 to 13% in 1978/79. A similar

trend was also observed in the Gusau ADP. These, in general,

are signs of problems in the recurrenc financing of the

projects.

7. PROBLEMS OF RECURRENT FINANCING

The singular most important problem of recurrent

financing of ADPs in Nigeria appears to be the inability

of both the Federal and State Governments to honour their

contractual obligation to adequately and consistently

finance the projects. Indeed, all the projects examined

reported cash flow problems. Numerous ADP reports often

emphasize the delays in the receipt of either Federal or

State contribucions. This problem is explicitly reflected

in one of the Quarterly Reports which states that the

financial situation "is in the doldrums and the State

Government is unable to pay its own share" (Anonymous,

1978). Subsequent reports further asserted a continued
deterioration of the position of the project to an extent

where it was stated that unless funds were forthcoming

from States and Federal sources, the project would be forced

to cut down on its level of activities (Anonymous 1979b).

Table 12. Gombe ADPs Breakdown of actual recurrent annual expenditure by major headings,
1975-80* (S' 000)

Year 1 Year 2 Year 3 Year 14 Year 5 Cumulative Total

Major headings
i’(%) 1l(°/o) H%) S(%) s(%)

Plant, vehicles and

equipment 295(29.1'-) ** 1 ,1419(2 7 .1 ) 637(10.2) 62 (1 .1 ) 94(1 .9 2 ,507 (1 1 .0 )

Buildings, houses and

civil works 3114(30 .9) 1 ,7 *14(3 2 .6 ) 2,559(U0.9) 2,2U9(U1.1) 8114(16.7) 7,61+0(33 .U)

Staff Salaries 2 1 2 (20 .9) 9142(1 8 .0) 1 ,557(214.9) 1 ,706 (3 1 .1 ) 2,10U(l43.3) 6,521(28.5)

Vehicle and Plant

operation 13(1.3) 158(3.0) 3514(5.7) 6 2 1 ( 1 1 .3 ) 513(10.6) 1,659(7.3)

General Services 1 8 1 (1 7 .8) 1416(8.0) 355(5.7) 3146(6 .3 ) 6 16 (1 2 .7 ) 1,9114(8.14)

Farm inputs 0 (0 .0 ) 5914(11.14) 798 (1 2 .0) 14914(9 .0) 7214(114.9) 2,610(11.5)

Total (S'000) 1,015(U.I4) 5,233(22.9) 6 ,260 (2 7 .14) 5,1478(2^.0) U,865(21.3) 22,851(100.0)

*Source; Anonymous (1982a).

**Figures in parentheses represent the component costs expressed as percentages of the total for
each year *r the cumulative total, as the case may be.
 - 25 -

Table 13. Lafia ADPs Breakdown of actual recurrent animal expenditure

by major headings, 1981-82* (if 000)

Cumulative
1981 1982
Total
Major headings

8 (90 if (%) S (%)

Vehicle plants and

equipment 1,182 (8.8/0** 729 (6.1) 1,911 (7.5)

Farm Inputs 699 (1+.9) 717 (6 .0 ) 1,376 (5.1+)

Salaries

a) International st;aff 571+ (It.3) 785 (6.6) 1,359 (5.1+

b) Local staff J+,193 (31.3) 5,163 (1+3.3) 9,356 (36 .9)

Buildings, houses and

materials 2 ,1+37 (18 .2 ) 370 (3.1) 2,807 (1 1 .1 )

Roads and culverts 1,0 10 (7 .5 ) 961 (8.1) 1,971 (7,8)

Other development 736 (3.5) 62# (5.2) 1,356 (5.1+)

Vehicle and plant

operating cost 1,2 3 2 (9 .2 ) 1,1+91+ (12.5) 2,726 (1 0 .8)

General Services 1,332 (9.9) 1,0 2 9 (8.6) 2,361 (9.3)

Farmers' credit 62 (0 .5 ) 65 (0.5) 127 (0.5)

Total (t+'OOO) 13,1+17 (52.9) 11,933 (1+7.1) 25,350 (100.0)

♦Source: Anonymous? (1981 and 1982c)

♦♦Figures in parentheses represent the component costs expressed

as percentages of the total for each year or the cumulative
total, as the case may be.
 - 26 -

Table Ik* Anyangba ADPs Breakdown of recurrent annual expenditure by

major headings, 1982 - 83** (S’000)

Cumulative
1982 (actual) 1983 (estimated) Total
Major headings

8 (%) 8 (%) 3 00 ...

Salaries, wages and

allowances:

a) Local staff 14,989 (6 1 .2 /i)':'■* U,9U7 (71.6) 9,936 (66 .0 )

b) International staff UU 6 (5.5) 20U (3 .0 ) 650 (I4.3 )

Motor vehicle and

plant operating costs 756 (9.3) 567 (8 .2 ) 1 ,3 2 3 (8.8)

General services 1,958 (2 I4.0 ) 1,193 (17.3) 3,151 (20.9)

------------ -------------

Total (S’000) 8,1149 (5U.1) 6,911 (1+5.9) 15,060 (100.0)

*Sour<;e: Anonymous, (1982b and 1983a).

**Figures in parentheses represent the component costs expressed as

percentages of the total for each year or the cumulative total, as

the case may be.

 - 28 -

b) Staff Recruitment and Salary Structure; One of

the reasons why negotiations for a loan agreement have not

been finalised in support of the Kaduna State IRDP is

reportedly related to, among other factors, the procedure

for appointing key personnel for the project. While the

World Bank insists on a recruitment procedure through

consulting firms using its own criteria, the State Government

is of the opinion that staff recruited through such means

would normally owe their loyalty to the World Bank rather

than to the project. Indeed, examples abound of cases when

project staff proceeded on leave without the knowledge of

the State Government which is a major partner and the

ultimate inheritor of the project.

Another implication of the rigorous enforcement of the

World Bank rules regarding the quality of management is

that the ADPs have had to depend heavily on expatriate

managers. While the conditions governing the loans permit

the payment of the going international salary and allowances

to the expatriate managers, Nigeria's establishment and

labour regulations do not permit her citizens with equivalent

qualifications and experience to be paid as much as their

expatriate counterparts. For example, a situation in which

a local staff who is next in rank to the expatriate chief

executive of an ADP earns less than 20% of the latter's

salary must undoubtedly be psychologically defeating.

c) Management, Staff Development and Transfer of

Projects; The general experience of aided-

programmes in Nigeria and elsewhere in the developing nations

 29 -

is that they often die a natural death as soon as the

donating/sponsoring agencies withdraw. This is an important

aspect of concern in recurrent financing of development

projects. Vital questions which come to mind in this
connection are:

i. To what extent are the local staff involved in

the planning, day-to-day implementation and

monitoring of the project?

ii. Do project agreements include the need for the

international staff to consciously train the

local staff attached to them as counterparts?

iii. How is this enforced and monitored? V A 1:

It should be emphasized that unless the strategy

of adequately training of local staff is enshrined in the

concept of ADPs and practised as such, the projects are

bound to fail whenever the international staff withdraw.

Equally important is the institutional arrangement for

the transfer of the projects to the local authorities.

Inadequate arrangement for the transfer could be a source

of major weakness that could result in a rundown of the

Project.

d) Unfavourable Terms for Loan Disbursement: The

inability of the recipient country to provide its share of

finances for operating costs is often compounded by some of

the terms under which the loans are disbursed. For example,
 30 -

the condition which concentrates the loans principally on

foreign exchange components can justifiably be viewed as

not being of direct' value to the receiving country while it

appears to favour the industrialized member countries. To

quote one example, although Nigeria now assembles tractors,

such loans cannot be spent on such locally-produced items

unless they offer a 20% price preference over imported ones.

As a member of the World Bank, it should be possible

for Nigeria to benefit more directly from the proceeds of

the loans she obtains by, for instance, covering some of

the local costs. The removal of some of the other

unfavourable conditions attached to the loans would likely

go a long way in achieving the aims and objectives of ADPs.

e) Lapses in Government Contributions; No one is

suggesting that either the State or the Federal Governments

can be absolved from the causes of the problems of

recurrent financing of ADPs. Probably as a result of

political pressures, there is the frequent temptation on

the part of governments do divert the funds meant for

agricultural project to often unrelated areas. It is for

this reason that the demand made by the World Bank to the

effect that State Governments' contributions be paid into

the Projects accounts before loan requests are approved

becomes tenable. Since adequate and timely funding of

projects is one sure way of guaranteeing their success, it

is desirable that State Governments should accept the proposal

for their contributions to be made directly from their annual

 - 31

subventions. With regard to the contribution frm the

Federal Government, the specified sums should be set aside

before funds are allocated to other projects in the annual

budget. This suggestion is not unreasonable because once a

loan is signed it is the recipient country that is the

eventual loser particularly, since the interest and other

charges on the loan would continue to be paid while the loan

itself would not be put to much productive use. Under ideal

situation, the World Bank component of the funds for ADPs

should be sought only after the receiving country must

have assured itself of the source(s) of its own share of

the contribution.

f) Continuation of Projects; Right from the feasibility

phase, the issue of continuous funding and effective

maintenance of the projects, even after the World Bank has

withdrawn, should also be seriously considered. For example,

the possibility of Local Government Councils and communities

taking over the maintenance of some of the services could

be seriously explored..

It is considered essential that the useful life span of

plants, buildings, equipment and machines as well as

schedules for their replacements should always be built into
the appraisal study.

g) Abrupt Withdrawal of External Support; There is

often the feeling that the withdrawal of the World Bank from

the project is probably to© abrupt, thereby creating a vacuum.

There have been suggestions to the effect that both the

 - 32 -

financial, physical and personnel contributions from the

World Bank might be spread over a period of more than the

normal 5 years to, say, 10-15 years. The logic, according

to this school of thought, is to have a peak of World Bank

involvement during the first 3~h years when the institutional

and infrastructural frameworks are being built and, thereafter,

gradually reducing its contribution. By this arrangement

it is hoped that sufficient time would be allowed for the

transfer of the projects to well-established local authorities.

However, the point needs to be emphasized to the effect

that no matter the period of physical presence of the World

Bank, the likelihood of creating a vacuum is high when it

withdraws ..its external support, unless, from the onset

there has been a deliberate policy in sufficiently involving

local personnel in the administrative and executive

management of projects.

h) Phased ADPs; The idea of establishing ADPs in a

phased approach as a means of removing some of the problems

of recurrent financing appears to fall in line with the

concepts of both the Federal Government and the Workd Bank.

Phased ADP will, in addition, allow States to progress

according to their individual ability. Specifically, the

concept of phased ADPs differs from the enclave ADPs in the

following respects;

i. The cost of the projects is to be shared on the

basis of 20, 20 and 60% for State and Federal

Governments and the World Bank, respectively.

 - 33 -

The contribution from the Bank is to be provided

through an' agricultural sector loan made to the

Federal Government for on-lending to States.

ii* Each State ADP will have a longer duration

comparising three consecutive 3-year phases with a

built-in provision for organizational continuity
at the end.

iii. There will be greater flexibility, with careful

planning, of the second and third phases in the

light of operational experience acquired during

the first phase.

iv. Future project activities beyond the first phase

will be conditional on the various parties meeting

their commitments.

i) On-the-Job Training; It is desirable that a local

counterpart staff should be attached to each World Bank

management and technical expert for the purpose of effective

on-the-job training. Indeed, this condition should be part

of the contract/loan agreement.

j) Inadequate Supervision of Projects; There should

be adequate representation of the host governments on the

policy-making and management bodies of the projects which

should be constituted with due regard to existing socio­

political circumstances.
CONCLUSION

From the points raised in this presentation and on the

basis of what other information we have been able to gather,

it is clear that ADPs were and are being established in

Nigeria in the desire to revolutionise agriculture and

develop the rural areas of the country. However, we

believe that the solution does not necessarily lie in the

multiplication of institutions without a thorough under­

standing of the possible causes of some of the shortcomings

and ineffectiveness of existing ADPs. It is not unlikely

that the current problems of recurrent financing of ADPs,

which both the Federal and State Governments are encountering,

emanate from the attempt to simultaneously sponsor many but

rival and sometimes wasteful agricultural programmes. If

the huge sumes of money spent on the Operation Feed the Nation
and which are being expended on the Green Revolution, Acceleratec

Food Production and other such programmes were made available

to the ADPs, the problem of inadequate internal funds for

recurrent agricultural services could have been minimal if

not eliminated.

Another issue which now seems to be a source of waste

and wrhich should require the urgent attention of States in

which the concept of state-wide AiDPs is being adopted is

the position of the Ministry of Agriculture. Even with the

deployment of all extension staff from the Ministry to

projects which have their own administrative end management

 - 35 -

structures, the former still retains its full complement of

administrative, accounting and secretarial support staff

even though it is left with little or no developmental

functions.

Finally, we wish to suggest that if the spirit of the

country's constitution, which places agricultural

development in the concurrent list, is seriously pursued in a

properly coordinated manner, the problems of recurrent

financing will be reduced. The responsibilities of the

three levels of government (Federal, State and Local

Governments) need to be clearly defined and agreed upon based

on the resources available to each.

Acknowledgement

The authors are grateful to the Overseas Development

Institute for making it possible for the se*op$ author to

participate in the Workshop and present this paper. Deep

appreciation is due to the various ADPs who willingly

offered every assistance during the course of our vists to

collect some of the data used in the presentation. Although

the opinions contained in the paper are those of the authors

and do not necessarily reflect the official stand of the

Institute for Agricultural Research of Ahmadu Bello University,

the Director is thanked for his support in its preparation.

 - 36 -

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Anonymous (19714-)-. Appraisal of Gusau Agricultural

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Anonymous (1978). Funtual Agricultural Development Project,

Quarterly Report. State Ministry of Agriculture,
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Anonymous (1979a). Agricultural sector reviewed.

International Bank for Reconstruction and
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Anonymous (1979b). Funtua Agricultural Development Project,

Quarterly Report. State Ministry of Agriculture,
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Anonymous (1981). Lafia ADP Quarterly Report. Ministry of

Agriculture and Natural Resources, Plateau State,
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Anonymous (1982a). Gcmbe Agricultural Development Project

Completion Report. Agricultural Projects
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of Agriculture, Makurdi, Nigeria.

Anonymous (1982c). Lafia ADP Quarterly Report. Ministry

of Agriculture and Natural Resources Plateau
State, Jos, Nigeria. (Oct. - Dec.).
 - 37 -

Akinbode, I.A. (1982d). A Critical analysis of the

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Completion Report. Agricultural Projects
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R.G. Saylor, (1969). Agricultural Investment
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Olatunbosun, D., (1967). Nigerian Farm Settlements and

School Leaver's Farms; Profitability, Resource
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CSNRD-9 Nigeria Institute for Social & Economic
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Oyaide, O.F.J. (undated). External Financing for Agricultural

Development in Nigeria; The Role of the World Bank,
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 - 38 -

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JYY/COE 29 June, 1983