NIGERIA MDG COSTING: Challenges and Prospects for the Water and Sanitation Sector

1. NIGERIA MDG COSTING: Challenges and Prospects for the Water and Sanitation Sector Presentation by Barth T. Feese, Office of the Senior Special Assistant to the President on Millennium Development Goals (MDGs) At the 1st National Water and Sanitation Forum held at Abuja Sheraton Hotel and Towers, 29th August – 1st September, 2006.

2. Nigeria MDG Costing: Water Forum • OUTLINE: • Introduction • What is an MDG-based PRS? • MDG Needs Assessment/Costing • Objectives, Methodologies & Current Efforts • Challenges and Prospects for Water and Sanitation Sector • Conclusion OSSAP-MDGs Nigeria MDGs Costing_Water Forum

3. Introduction • Preamble: • The Millennium Development Goals (MDGs) are a set of eight (8) time-bound, measurable targets that are meant to addressing extreme poverty in the world. • The Goals were agreed to by 189 nations at the Millennium Declaration in New York in Year 2000. • The MDGs aim to, by 2015, substantially mitigate the effects of absolute poverty, in its various manifestations, including: • i) income poverty and hunger, ii) poor access to education, iii) gender inequality, iv) child and vi) maternal mortality, vi) diseases like HIV/AIDS, tuberculosis and malaria, vii) lack of adequate shelter, water supply and promoting environmental sustainability, and viii) a global compact for development - the commitment of the international community to support the development efforts of poor countries through increased aid, debt relief and fair trade. OSSAP-MDGs Nigeria MDGs Costing_Water Forum

4. Introduction(Cont’d) • Background • The FGN is committed to achieving the MDGs and has taken steps to integrate the Goals into its development policy, planning, budgeting and implementation efforts. • Mr. President has inaugurated the Presidential Committee on implementation of the MDGs within the context of NEEDS, Nigeria’s PRS. • The Presidential Committee also oversees the channeling of the Paris Club DRGs into pro-poor projects and programmes under the OPEN initiative, Nigeria’s VPF, in a transparent and accountable manner in line with the on-going PER. • To provide technical input to the Presidential Committee, a Steering Committee was inaugurated by the Hon. Min. of Finance, and is chaired by the SSAP to the President on MDGs. The Office of the SSAP-MDGs (OSSAP-MDGs) is the secretariat for both the Presidential Committee and the Steering Committee. • The OSSAP-MDGs is also giving technical input to the Steering Committee in carrying out an MDG needs assessment/costing. OSSAP-MDGs Nigeria MDGs Costing_Water Forum

5. What is an MDG-based PRS? • Linking Planning, Costing and Budgeting • The question is: “what is required (investments, policies, institutions) to achieve the MDGs?” The UN Millennium Project lists four main stages in preparing an effective MDG-based PRS: • Conduct a thorough needs assessment (or costing) that compares the current situation with the MDG targets, identifying the various investments across sectors that will be needed, in terms of financial, human resources and infrastructure requirements. • Develop a long term (10 -12 year) framework for action (NEEDS) for achieving the MDGs based on the needs assessment. • Construct a mid-term (3 – 5 year) strategy (MTSS), based on the long term plan, which is attached to a Mid-Term Expenditure Framework (MTEF) that guides the annual budgeting process. • Institute a Public Expenditure Management (PEM) framework for monitoring and evaluating results in a transparent and accountable manner (OPEN). • Costing and budgeting helps the planning process by ensuring that goals set are affordable OSSAP-MDGs Nigeria MDGs Costing_Water Forum

6. What is an MDG Needs Assessment/Costing? • Whoand how many people need to be assisted in order to meet the MDGs? • Identifying the population in need • What needs to be provided to meet the MDGs? • Goods, services, infrastructure • How much will it cost and what are the human resource implications? • Local unit costs x population in need • Human resources required to meet each MDG OSSAP-MDGs Nigeria MDGs Costing_Water Forum

7. Objectives of an MDG Needs Assessment • Translate the MDGs into operational targets • “Localize” the MDGs, e.g., VDGs (Vietnam) • Develop a strategy for increasing “absorptive capacity” • Support the national policy dialogue and negotiations with development partners • Strengthen coherence between planning and budget processes and guide programming of expenditures • Provide a monitoring and accountability framework • Answer the question: “What would it take to achieve the MDGs?” OSSAP-MDGs Nigeria MDGs Costing_Water Forum

8. MDG Costing Methodologies Methodology Examples • Costings based on aggregate unit costs • GWP (2000) • Delamonica et al. (2001) (ii) Costings based on Incremental Capital-Output Ratio (ICOR) • AfDB (2002) • Devarajan et al. (2002) • Mbelle (2003) (iii) Costings based on aggregate input-outcome elasticities • Beltran et al. (2004) • Devarajan et al. (2002) (iv) Intervention-based needs assessments • Bruns et al. (2003) • CMH (2001) • EPRC (2002) • FAO (2002) • Sachs et al. (2004) OSSAP-MDGs Nigeria MDGs Costing_Water Forum

9. MDG Costing Methodologies (Cont’d) Examples of costing tools that have been used in Nigeria include: • The Marginal Budgeting for Bottlenecks (MBB) tool (Developed by UNICEF, The World Bank and WHO): Health Sector • The Planning Budgeting and Costing (PCB) tool (Developed by UNAIDS): Costing of NACA’s NSF on HIV/AIDS • The UN Millennium Project’s Costing Models, some of which have been modified and adapted for costing the MDGs in Nigeria. The Education model, for instance, has been modified to take into account nine years of basic education, instead of the six years of primary education envisaged in the original version. • Other available costing models are based on historical Incremental Capital-Output Ratios (ICOR) and poverty elasticities. However, these apply only to marginal changes in investment and are not very robust in predicting aggregate economic growth in relation to poverty rates OSSAP-MDGs Nigeria MDGs Costing_Water Forum

10. MDG Costing Efforts in Nigeria Some previous costing efforts undertaken in Nigeria include: • The FMOH, UNICEF and the World Bank (MBB costing tool): Additional investment in Health Sector-US$15.88 per capita per year (2004/5) • February 2006: FMOH, the World Bank and UNICEF MBB Training Workshop-Additional investment in Health Sector MDG 4, 5 and 6 estimated at US$4.72bn or UD$20.55 per capital. (Further refinement needed). • DFID/ World Bank Infrastructure study: A total of US$57.86bn will be needed over the 11 year period between 2005 and 2015, to provide roads, water and electricity. This translates into US$5.26bn annually or US$40 annually per capita. (UNMP and other tools used) • MDG-related expenditures required for Water and Sanitation (2005-2015) - US$17bn in total, or US$1.5bn per annum, and about US$11.53 per annum per capita. Water - US$7bn, Sanitation – US$10bn. Number of people to be covered by each service (water and sanitation): over five million each year. • World Bank study on Education PER in Nigeria (on-going) aims to, among other objectives, estimate the total cost of meeting the Education (MDG 2) • MDG costing efforts in other sectors, notably Agriculture (hunger model: MDG 1), Gender (MDG 3), Environment (MDG 7, Target 9), and Housing (MDG 7, Target 11) are at rudimentary stage. OSSAP-MDGs Nigeria MDGs Costing_Water Forum

11. 14 Intervention Areas to an MDG Needs Assessment OSSAP-MDGs Nigeria MDGs Costing_Water Forum

12. 1 Develop list of interventions 2. Specify targets for each set of interventions Iteratively refine estimates 3 Develop investment model, estimate resource needs 4 Estimate synergies across interventions 5. Develop financing strategy MDG Needs Assessment Methodology UN Millennium Project OSSAP-MDGs Nigeria MDGs Costing_Water Forum

13. 1. Develop List of Interventions Interventions are defined as “investments in goods, services and infrastructure” as distinct from policies and institutions For example, interventions for Water and Sanitation include: • Water Supply (household connections, public stand pumps, boreholes with hand pumps, protected dug wells). Urban vs. rural • Waste water treatment (Sewerage systems in cities, pour flush toilets, septic tanks, waste stabilisation ponds) • Basic Sanitation (Traditional safe disposal of excreta away from neighbourhood: pit latrines (or VIPs) in rural areas) • Integrated Water Resources Management (IWRM) • Hygiene Education and behavioural change programmes (Raising awareness on: hand washing, waste disposal, water storage) • Total Costs (Interventions to reach target population + Recurrent cost of people with current access)-Extension, rehabilitation & Operation • Provision of human resources (trained engineers, hydrologists plumbers and administrative support) OSSAP-MDGs Nigeria MDGs Costing_Water Forum

14. 2. Specify Targets for Each Intervention Specify coverage targets for interventions. What are Nigeria’s targets? • Increase the share of the population with access to clean water and sanitation from 40% (2005) to 70% by 2015 • Primary completion rate to reach 100 percent, gross enrolment rate to reach 107 percent by 2015 • Transition rate to secondary education to reach 80 percent by 2015 • Gender parity target to be achieved in 2005 OSSAP-MDGs Nigeria MDGs Costing_Water Forum

15. 3. Develop Investment Model—Estimate All Required Inputs UN Millennium Project Population Size Households reached by interventions Target coverage rates for: Water Supply Basic Sanitation Sewage Treatment Hygiene Education + TOTAL NEEDS Capital and recurrent costs per student Cost components for key interventions + Capital and recurrent costs per household + Infrastructure needs OSSAP-MDGs Nigeria MDGs Costing_Water Forum

16. 4. Estimate Synergies Across Interventions(Water and Sanitation) Interventions will have direct benefits and in some cases with positive externalities across sectors. These impacts should be accounted for in the needs assessment. Examples of direct benefits and synergies include: • Cross-sectoral synergies: Provision of piped water and kerosene cooking stoves to households allows young girls to attend school; availability of electricity allows boys more reading time; rural roads provide access to markets for farmers, thereby reducing income poverty. • Long-term sectoral synergies: Maternal education leads to higher enrolment of children • Immediate sectoral synergies: Prevention interventions (e.g. health) have rapid impact on incidence rates OSSAP-MDGs Nigeria MDGs Costing_Water Forum

17. 5. Develop Financing Model • Long-term (10 year) financing framework: • Share of needs that can be borne by households • Share of needs that can be borne by government domestic revenue mobilization • Gap in resource needs that will need to be externally financed • Scenario Analysis: • MDG-compliant strategy (meeting all needs) • Middle level (Slight increase in current budget envelop) • Current budget level (Business as usual) OSSAP-MDGs Nigeria MDGs Costing_Water Forum

18. Frequently Raised Issues • Distinguishing between policies and interventions. • Synergies between interventions: micro- vs. macro approach • Double-counting of interventions and cross-cutting issues • Marginal vs. Average costs • “Absorptive capacity” • Macroeconomic issues (e.g. “Dutch disease”) • Dealing with Target 1 (income poverty) OSSAP-MDGs Nigeria MDGs Costing_Water Forum

19. Key Drivers of Cost and Variation The key drivers of cost and variation* in a comprehensive country-wide needs assessment are: • Health interventions to combat infectious diseases and strengthen health systems • Large-scale infrastructure interventions such as for roads and energy services *as seen in MP needs assessment analysis (variations in cost depend on key assumptions made in the model: e.g., linearity and separability assumptions) OSSAP-MDGs Nigeria MDGs Costing_Water Forum

20. Building on Exiting Costing Efforts • Nigeria MDG costing exercise is on-going (WIP): • Anchored by the OSSAP-MDGs in collaboration with NPC, and BOF. • All-inclusive, consultative and transparent process of all stakeholders, with representation from Civil CSOs and OPS. • Develop MDG costing database based on costing efforts that have been made by the MDAs and IDPs. (Data sources: MDAs, NBS, IDPs, research, publications, States/LG). • Institutionalising MDG Costing • Capacity building: Training workshops for MDAs SCTs in the hands-on proficient use of spreadsheet costing tools. • Ensuring buy-in, sustainability and institutional ownership by MDAs • Replicating the successes and lessons learnt from Federal costing efforts at the State and Local Government levels, to be anchored by the NPC, in collaboration with the BOF and OSSAP-MDGs OSSAP-MDGs Nigeria MDGs Costing_Water Forum

21. Challenges and Prospects (Water and Sanitation Sector) Prospects for achieving the MDGs will depend on how far the challenges facing us are tackled. These challenges include: • Domestication of the MDGs: • Localise them (e.g., VDGs in Vietnam, NDGs in Nigeria?). • Seeing the Goals as homegrown, not a foreign acronym • Convert outcome targets into operational targets. • NEEDS integrates the MDGs as objectives but not as operational planning targets. What interventions, What coverage? What baseline? When? What scale up of resources? Water for all by 2010? • Baseline Data: Costing tools are “data hungry” • Availability and quality of baseline data: NBS, MDAs, Census, States. • Harmonisation of Costing Models and Needs Assessment: • Multiplicity among MDAs, IDPs, and the donor community. • Comparison of results and analysis across sectors difficult. • Underlying assumptions may differ according to the methodology being used. • OSSAP-MDGs is working with all stakeholders to streamline the costing tools being used so as to achieve harmony in the costing process. OSSAP-MDGs Nigeria MDGs Costing_Water Forum

22. Challenges and Prospects (Water and Sanitation Sector) • Absorptive Capacity: • States and Local Governments, also in crucial areas at the Federal level • Poor packaging and deliver of services, projects and programmes needed to achieve the MDGs. • Limited ability to carry out detailed, credible and verifiable costing of projects and programmes. • Translating funding into into services (PE efficiency). • Policy Coherence: • Lack of coherence in planning, budgeting and implementation processes results in government policies working at cross purposes (poor results in poverty reduction efforts) • Water and Sanitation Sector: Challenge is to build on the initiatives identified in the recently concluded MTSS exercise, but also integrate the results of the costing into the annual budgeting processes, thereby linking budget implementation (DRG spend) with national plans (NEEDS) in a coherent manner. • Federal/States Cooperation: • Constitutional issues; • Collaboration mechanisms: • Conditional grants as an entry point for gathering baseline data. (e.g., bore holes) executed at the state level, • Do a “poverty mapping” of Nigeria, they know where the challenges are. OSSAP-MDGs Nigeria MDGs Costing_Water Forum

23. Challenges and Prospects (Water and Sanitation Sector) • Funding Gaps: • Between 5-7 billion (US) Dollars or US$50 per capita, will be required as additional spend annually, to achieve the MDGs in Nigeria. • MDG costing will help in identifying the funding gaps • MDG Goal 8, ( 0.7% of GNP as ODA) • Nigeria currently gets just about $2 per capita annually in ODA, compared to other African countries which get up to $40. • Macro-Economic Framework: • Macro-economic stability, achieving sufficiency in domestic resource utilisation vs. reliance on foreign aid. • The “Dutch Disease” . • Positive externalities in production (Linkages, synergies) • Economies of scale/diseconomies of scale (Linearity) OSSAP-MDGs Nigeria MDGs Costing_Water Forum

24. CONCLUSION • Achieving the MDGs requires making long term (10-12 year) development plans or PRS (based on a rigorous needs assessment) that fully integrate the MDGs: NEEDS, SEEDS and LEEDS. • Operationalize PRS into 3-5 year MTSS and aligned with annual budgets through the Government’s MTEF; with an effective system of monitoring and evaluation (M & E) of pro-poor expenditures (OPEN). • MDG costing provides the link to annual budgets in the chain of MDG based planning; Costing is the foundation on which the planning and budgeting processes stand. • Need for a coordinated approach in the process of institutionalising MDG costing in the MDAs, and at all tiers of Government. • Costing of the Water and Sanitation Sector will allow for better planning, budgeting and utilization of resources, while identifying funding gaps for foreign financing assistance (advocacy tool). • Successful costing of the Water and Sanitation MDGs will depend on how the challenges faced towards achievement of the MDGs are confronted and resolved by all stakeholders, including domesticating the Goals, closing capacity gaps, achieving coherence between planning and budgeting processes, building a national database and finding a workable platform for engagement with the states. OSSAP-MDGs Nigeria MDGs Costing_Water Forum