CONFORMED COPY

LOAN NUMBER 1164 UNI

Project Agreement(Gombe Agricultural Development Project)

BETWEEN

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

AND

NORTH-EASTERN STATE OF NIGERIA

DATED SEPTEMBER 29, 1975

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CONFORMED COPY

LOAN NUMBER 1164 UNI

Project Agreement(Gombe Agricultural Development Project)

BETWEEN

INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT

AND

NORTH-EASTERN STATE OF NIGERIA

DATED SEPTEMBER 29, 1975

PROJECT AGREEMENT

AGREEMENT, dated September 29, 1975, between INTERNATIONALBANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called theBank) and NORTH-EASTERN STATE OF NIGERIA (hereinafter called NES).

WHEREAS by the Loan Agreement of even date herewith between theFederal Republic of Nigeria (hereinafter called the Borrower) and the Bank, theBank has agreed to make available to the Borrower an amount in various currenciesequivalent to twenty-one million dollars ($21,000,000), on the terms and conditionsset forth in the Loan Agreement, but only on condition that NES agree to undertakesuch obligations toward the Bank as hereinafter set forth;

WHEREAS by a subsidiary loan agreement to be entered into between theBorrower and NES, part of the proceeds of the loan provided for under the LoanAgreement will be made available to NES on the terms and conditions thereinset forth; and

WHEREAS NES, in consideration of the Bank's entering into the LoanAgreement with the Borrower, has agreed to undertake the obligations hereinafterset forth;

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

Definitions

Section 1.01. Wherever used in this Agreement, unless the context shallotherwise require, the several terms defined in the Loan Agreement and in theGeneral Conditions (as so defined) have the respective meanings therein set forth.

ARTICLE II

Execution of the Project

Section 2.01. NES shall carry out Parts A through H of the Project describedin Schedule 2 to the Loan Agreement through GOPMU with due diligence andefficiency and in conformity with appropriate administrative, financial andengineering practices, and shall provide, or cause to be provided, promptly asneeded, the funds, facilities, services and other resources required for the purpose.

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Section 2.02. (a) NES shall establish and maintain the Gombe ProjectManagement Unit to be responsible for the execution of Parts A through H ofthe Project, in a form and with powers, responsibilities, organization, resources,financial structure and policies as shall be satisfactory to the Bank and NES.

(b) NES shall, cause GOPMU to be adequately staffed at all times. Withoutlimitation or restriction upon the generality of the foregoing:

(i) NES shall, except as the Bank shall otherwise agree, makeavailable to GOPMU by secondment or otherwise, during twoyears from the Effectiveness Date, the services on a permanentbasis of at least 3 agricultural officers, 10 agriculturalsuperintendents and 48 agricultural assistants or experiencedagricultural instructors; and

(ii) NES shall employ, within GOPMU, duly qualified and competentpersons to the two positions of Farm Managers, and one positioneach of the Project Manager, Chief Accountant, Credit Manager,Chief Engineer, Chief Marketing Officer, Chief Technical Officer,Chief Administrative Officer, Seeds Officer, Animal HusbandryOfficer, Farm Management Advisor, Land Use Planner, RoadEngineer, Mechanical Engineer, Senior Evaluation Officer andWater and Soil Conservation Engineer, with qualifications andon terms and conditions satisfactory to the Bank and NES.

(c) NES shall, until the completion of the Project, transfer senior staffof GOPMU only after consultation with GOPEC.

Section 2.03. Except as the Bank shall otherwise agree, contracts for thepurchase of goods or for the carrying out of works for the Project and to befinanced out of the proceeds of the Loan, shall be procured in accordance with,and subject to, the provisions set forth in Schedule 1 to this Agreement.

Section 2.04. (a) NES undertakes to insure, or make adequate provision forthe insurance of, the imported goods to be financed out of the proceeds of theLoan relent to it by the Borrower against hazards incident to the acquisition,transportation and delivery thereof to the place of use or installation, and forsuch insurance any indemnity shall be payable in a currency freely usable by NESto replace or repair such goods.

(b) Except as the Bank may otherwise agree, NES shall cause all goodsand services financed out of the proceeds of the Loan relent to it by the Borrowerto be used exclusively for the Project.

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Section 2.05. NES shall furnish to the Bank, promptly upon their preparation,the plans, specifications, reports, contract documents and construction andprocurement schedules for the Project, and any material modifications thereof oradditions thereto, in such detail as the Bank shall reasonably request.

Section 2.06. NES: (i) shall maintain records adequate to record the progressof the Project (including the cost thereof) and to identify the goods and servicesfinanced out of the part of the proceeds of the Loan relent to it by the Borrower,and to disclose the use thereof in the Project; (ii) shall, without limitation uponthe provisions of Section 4.03 of this Agreement, enable the Bank's representativesto examine the Project, the goods financed out of such proceeds and any relevantrecords and documents; and (iii) shall furnish to the Bank all such informationas the Bank shall reasonably request concerning the Project, the expenditure ofthe part of the proceeds of the Loan so relent to it and the goods and servicesfinanced out of such proceeds.

Section 2.07. NES shall duly perform all its obligations under the SubsidiaryLoan Agreement. Except as the Bank sliall otherwise agree, NES shall not takeor concur in any action which would have the effect of amending, abrogating,

* assigning or waiving the Subsidiary Loan Agreement or any provision thereof.

Section 2.08. As soon as possible but not later than June 30, 1981, NESshall cause Gombe Local Authority and Tangale Waja Local Authority or anyother agency or agencies, as the case may be, designated for this purpose to maintainthe roads and water supplies included in Parts A, B and C of the Project andfalling within their respective jurisdictions in accordance with appropriateadministrative and engineering, and, wherever applicable, agricultural practices.

Section 2.09. NES shall establish and maintain the Gombe Project ExecutiveCommittee in a form and with membership, functions and responsibilitiessatisfactory to the Bank. Without any limitation or restric"ion upon the generalityof the foregoing, GOPEC shall be empowered to approve GOPMU's annual budgetsand monthly cash flow statements.

Section 2.10. Without restriction or limitation upon the provisions of Section2.01 of this Agreement, NES shall establish or cause to be established, a bankaccount to be used exclusively to make payments for the cost of goods and servicesrequired on the part of GOPMU to carry out Parts A through H of the Project.NES shall, when necessary, make arrangements, satisfactory to the Bank, with therelevant bank, to enable GOPMU to make withdrawals from time to time fromsaid bank account up to amounts the withdrawal of which shall have beenguaranteed by NES. Such amounts shall be determined by NES on the basis ofamounts allocated to the Project in its annual budget prepared after taking into

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account GOPMU's budget and estimated contribution of NES toward the cost ofthe Project in the light of GOPMU's budget and working capital requirements.The Project Account shall show, under a separate head, all revolving fundscomprising amounts disbursed to farmers and outstanding, amounts of sub-loanrepaid and interest and other charges paid or payable.

Section 2.11. NES shall continue its present subsidies to farmers on fertilizers.

Section 2.12. NES shall: (i) cause Northern States Marketing Board to payparticular attention to efficient produce buying within the Project area; and (ii)where necessary, encourage groups of farmers to operate as Licensed Buying Agentswithin the Project area.

Section 2.13. NES shall cause GOPMU to prepare GOPMU's annual budgets,in form satisfactory to NES and the Bank, and its monthly cash flow statementsand shall authorize GOPMU to operate, unless otherwise instructed in writing bythe Chairman of GOPEC, on the basis of such statements.

Section 2.14. NES shall ensure that any future ginning arrangement shallnot adversely affect present arrangements as to the production, marketing or ginningof cotton within the Project area.

Section 2.15. NES shall take all such action as shall be necessary to acquireas and when needed all such land and rights in respect of land (including butnot limited to land in forest reserve at Kumo) as shall be required for carryingout Part E of the Project and shall furnish to the Bank, promptly after acquisition,evidence satisfactory to the Bank that such land and rights in respect of land areavailable for purposes related to Part E of the Project.

Section 2.16. Except as the Borrower and the Bank shall otherwise agree,the lending policies and procedures for carrying out Part H of the Project shallbe as set forth in Schedule 2 to this Agreement.

ARTICLE HI

Financial Covenants

Section 3.01. NES shall cause GOPMU to maintain records adequate to reflectin accordance with consistently maintained appropriate accounting practices itsoperations and financial condition.

Section 3.02. NES shall cause GOPMU to: (i) have its accounts and financia-statements (balance sheets, statements of income and expenses and related

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statements) for each fiscal year audited, in accordance with appropriate auditingprinciples consistently applied, by independent auditors acceptable to the Bankand NES; (ii) furnish to the Borrower, the Bank and NES as soon as available,but in any case not later than four months after the end of each such year, (A)certified copies of its financial statements for such year as so audited and (B)the report of such audit by said auditors, of such scope and in such detail asthe Bank shall have reasonably requested; and (iii) furnish to the Borrower, theBank or NES such other information concerning the accounts and financialstatements of GOPMU and the audit thereof as the Bank shall from time to timereasonably request.

ARTICLE IV

Consultation, Information and Inspection

Section 4.01. The Bank and NES shall cooperate fully to assure that thepurposes of the Loan will be accomplished. To that end, the Bank and NES shallfrom time to time, at the request of either party, exchange views through theirrepresentatives with regard to the performance of their respective obligations underthis Agreement, the performance by NES of its obligations under the SubsidiaryLoan Agreement, and, in respect of the Project, the administration, operations andfinancial condition of the departments or agencies of NES responsible for carryingout Parts A through H of the Project or any portion thereof, and other mattersrelating to the purpose of the Loan.

Section 4.02. The Bank and NES shall promptly inform each other of anycondition which interferes with, or threatens to interfere with, the accomplishmentof the purposes of the Loan, the performance by either of them of its obligationsunder this Agreement and the performance by the Borrower and NES of theirrespective obligations under the Subsidiary Loan Agreement.

Section 4.03. NES shall enable the Bank's accredited representatives toexamine all plants, sites, works, properties and the equipment, records anddocuments relevant to the Project.

ARTICLE V

Effective Date; Termination;Cancellation and Suspension

Section 5.01. This Agreement shall come into force and effect on the dateupon which the Loan Agreement becomes effective.

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Section 5.02. (a) This Agreement and all obligations of the Bank and ofNES thereunder shall terminate on the earlier of the following two dates:

(i) the date on which the Loan Agreement shall terminate inaccordance with its terms; or

(ii) a date 20 years after the date of this Agreement.

(b) If the Loan Agreement terminates in accordance with its terms beforethe date specified in paragraph (a)(ii) of this Section, the Bank shall promptlynotify NES of this event.

Section 5.03. All the provisions of this Agreement shall continue in full forceand effect notwithstanding any cancellation or suspension under the LoanAgreement.

ARTICLE VI

Miscellaneous Provisions

Section 6.01. Any notice or request required or permitted to be given ormade under this Agreement and any agreement between the parties contemplatedby this Agreement shall be in writing. Such notice or request shall be deemedto have been duly given or made when it shall be delivered by hand or by mail,telegram, cable, telex or radiogram to the party to which it is required or permittedto be given or made at such party's address hereinafter specified or at such otheraddress as such party shall have designated by notice to the party giving suchnotice or making such request. The addresses so specified are:

For the Bank:

International Bank forReconstruction and Development

1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address:

INTBAFRADWashington,D.C.

For NES:

Permanent SecretaryMinistry of FinanceNorth-Eastern State PMB 1045Maiduguri, Nigeria

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Cable address:

SECFINMaiduguri.

Section 6.02. Any action required or permitted to be taken, and anydocuments required or permitted to be executed, under this Agreement on behalfof NES may be taken or executed by the Permanent Secretary, Ministry of Finance,or such other person or persons as the said Permanent Secretary shall designatein writing.

Section 6.03. NES shall furnish to the Bank sufficient evidence of theauthority and the authenticated specimen signature of the person or persons whowill, on behalf of NES, take any action or execute any documents required orpermitted to be taken or executed by NES pursuant to an' of the provisions ofthis Agreement.

Section 6.04. This Agreement may be executed in several counterparts, eachof which shall be an original, and all collectively but one instrument.

IN WITNESS WHEREOF, the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused this Agreement to be signedin their respective names and delivered in the District of Columbia, United Statesof America, as of the day and year first above written.

NORTH-EASTERN STATE OF NIGERIA

By /s/ Adamu SikaCommissioner for Finance

INTERNATIONAL BANK FORRECONSTRUCTION AND DEVELOPMENT

By /s / E. Peter WrightDirector, Country Programs Department

Western Africa Regional Office

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SCHEDULE 1

Procurement

PART I

Procedures

1. Except as provided in this Part I, procedures for procurement shall beconsistent with those of international competition described in "Guidelines forProcurement under World Bank Loans and IDA Credits" published by the Bankin April 1972, as revised in October 1972 (hereinafter called the Guidelines).

2. International competition will not be required for works included in PartsA, B and C of the Project and the same shall be carried out by the ConstructionUnit under GOPMU or through negotiated contracts with small contractors. Goodsnot included in Part II of this Schedule shall be procured through normalcommercial channels.

PART II

Bidding Procedures and Approvals by the Bank

With respect to all contracts for vehicles, plant, equipment, fertilizers,insecticides and farm tractors and implements estimated to cost the equivalent of$25,000 or more:

(a) Before bids are invited, the Borrower shall furnish to the Bank, forits comments, the text of the invitations to bid and the specifications and otherbidding documents, together with a description of the advertising procedures tobe followed for the bidding, and shall make such modifications in the saiddocuments or procedures as the Bank shall reasonably request. Any furthermodification to the bidding documents shall require the Bank's concurrence beforeit is issued to the prospective bidders.

(b) After bids have been received and evaluated, the Borrower shall, beforea final decision on the award is made, inform the Bank of the name of the bidderto which it intends to award the contract and the reasons for the intended awardand shall furnish to the Bank, in sufficient time for its review, a detailed reporton the evaluation and comparison of the bids received, together with therecommendation for award and such other information as the Bank shall reasonablyrequest. The Bank shall, if it determines that the intended award would be

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inconsistent with the Guidelines or this Schedule, promptly inform the Borrowerand state the reasons for such determination.

(c) The terms and conditions of the contract shall not, without the Bank'sconcurrence, materially differ from those on which bids were asked orprequalification invited.

(d) Two conformed copies of the contract shall be furnished to the Bankpromptly after its execution and prior to the submission to the Bank of the firstapplication for withdrawal of funds from the Loan Account in respect of anysuch contract.

PART III

Procurement of Goods referred to in of Part II; Supplemental Rules on BidEvaluation and Comparison

1. For the purpose of evaluation and comparison of bids for the supply ofgoods: (i) bidders shall be required to state in their bid the c.i.f. (port of entry)price for imported goods, or the ex-factory price for domestically-manufacturedgoods; (ii) customs duties and other import taxes on imported goods, and salesand similar taxes on domestically-supplied goods, shall be excluded; and (iii) thecost to the Borrower of inland freight and other expenditures incidental to thedelivery of goods to the place of their use or installation shall be included.

2. Goods manufactured in Nigeria may be granted a margin of preference inaccordance with, and subject to, the following provisions:

(a) All bidding documents for the procurement of goods shall clearlyindicate any preference which will be granted, the information required to establishthe eligibility of a bid for such preference and the following methods and stagesthat will be followed in the evaluation and comparison of bids.

(b) After evaluation, responsive bids will be classified in one of thefollowing three groups:

(1) Group A: bids offering goods manufactured in Nigeria if thebidder shall have established to the satisfaction of the Borrowerand the Bank that the manufacturing cost of such goods includesa value added in Nigeria equal to at least 20% of the ex-factorybid price of such goods.

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(2) Group B: all other bids offering goods manufactured in Nigeria.

(3) Group C: bids offering any other goods.

(c) All evaluated bids in each group shall be first compared amongthemselves, excluding any customs duties and other import taxes on goods to beimported and any sales or similar taxes on goods to be supplied domestically, todetermine the lowest evaluated bid of each group. The lowest evaluated bid ofeach group shall then be compared with each other, and if, as a result of thiscomparison, a bid from group A or group B is the lowest, it shall be selectedfor the award.

(d) If, as a result of the comparison under paragraph (c) above, the lowestbid is a bid from group C, all group C bids shall be further compared with thelowest evaluated bid from group A after adding to the c.i.f. bid price of theimported goods offered in each group C bid, for the purpose of this furthercomparison only, an amount equal to (i) the amount of customs duties and otherimport taxes which a non-exempt importer would have to pay for the importationof the goods offered in such group C bid, or, if said customs duties and taxesexceed 15% of the c.i.f. price of such goods and (ii) 15% of the c.i.f. bid priceof such goods. If the group A bid in such further comparison is the lowest, itshall be selected for the award; if not, the lowest evaluated bid from group Cshall be selected.

PART IV

Bidding Procedure, Approval by the Bank and Preference for Domestic Civil WorksContractors

1. With respect to any contract for civil works included in Parts D and E ofthe Project, invitations to bid need not be advertised in publications outsideBorrower's territory and the Borrower may grant a margin of preference of 7-1/2%to domestic contractors, as determined by the Borrower, in accordance with, andsubject to, the following provisions:

(a) Contractors shall be required to prequalify. The Borrower shall, beforequalification is invited, inform the Bank in detail of the procedure to be followedand shall introduce such modifications in said procedure as the Bank shallreasonably request. Applicants applying for preference shall be asked to providesuch information, including details of ownership, as the Borrower shall require todetermine whether according to the classification established by the Borrower andaccepted by the Bank, classification a particular firm or group of firms qualifies

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for a domestic preference. A list of prequalified bidders identifying those eligiblefor preference, together with a statement of their qualifications and of the reasonsfor the exclusion of any applicant for prequalification or eligibility for preference,shall be furnished by the Borrower to the Bank for its comments and the Borrowershall make such additions to or deletions from the said list as the Bank shallreasonably request before the applicants are invited to bid.

(b) Before bids are invited the Borrower shall furnish to the Bank, forits comments, the text of the invitations to bid and the specifications and otherbidding documents, together with a description of the advertising procedures tobe followed for the bidding, and shall make such modifications in the saiddocuments or procedures as the Bank shall reasonably request. The biddingdocuments shall clearly indicate the preference and the method that will be followedin the evaluation and comparison of bids to give effect to such preference.

(c) After bids have been received and reviewed by the Borrower, responsivebids will be classified into the following groups:

(i) bids offered by domestic contractors eligible for preference; and

(ii) bids offered by other contractors.

For the purpose of evaluation and comparison of bids an amount equal to 7-1/2%of the bid amount shall be added to bids received under group (ii) above.

(d) After bids have been evaluated, the Borrower shall, before a finaldecision on the award is made, inform the Bank of the name of the bidder towhom it intends to award the contract and shall furnish to the Bank, in sufficienttime for its review, a detailed report on the evaluation and comparison of thebids received, together with the reasons for the intended award. The Bank shall,if it determines that the intended award would be inconsistent with the proceduresset forth or referred to in this Agreement, promptly inform the Borrower andstate the reasons for such determination.

(e) The terms and conditions of the contract shall not, without the Bank'sconcurrence, materially differ from those on which bids wer- asked.

(f) Two conformed copies of the contract shall be furnished to the Bankpromptly after its execution and prior to the submission to the Bank of the firstapplication for withdrawal of funds from the Loan Account in respect of anysuch contract.

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SCHEDULE 2

Lending Policies and Procedures

1. Sub-loans to farmers shall take the form of disbursements in kind by theGOPMU to farmers participating in the Project of insecticides, sprayers, fertilizers,farm tractors and implements and other agricultural inputs, such disbursementsbeing financed for the respective farmer by a sub-loan agreement or agreements,as appropriate, between the farmer and the GOPMU. If the GOPMU shall determinethat it is necessary so to do, GOPMU may lend to farmers in cash for hired laborfrom the proceeds of the Loan allocated to Category II of Schedule 1 to theLoan Agreement, or from funds available locally, or partly from one and partlyfrom the other.

2. All applications for seasonal sub-loans and sprayers for amounts not exceeding14100 shall be approved by credit assistants at the village level after clearing thecredit worthiness of the farmer with the farmers group or association so authorizedto do. Where the beneficiary is a farmer's group or association such clearance shallbe obtained from the village authorities.

3. Except as provided in Paragraph 4 hereof, all applications for sub-loans foramounts in excess of N100 shall be approved by the relevant credit officer.

4. All applications for sub-loans for amounts in excess of N500 shall beapproved by the Credit Manager of GOPMU.

5. All sub-loans, except sub-loans for amounts not exceeding N500, shall bemade (i) on the basis of an approved farm development plan and (ii) in an amountwhich together with any amount or amounts under any prior sub-loan to thebeneficiary, and not repaid, shall not exceed in the aggregate the equivalent ofN5 ,000.

6. Interest rates on sub-loans shall be between 5 per cent and 9-1/2 per centper annum. Prior to the beginning of each planting season, a schedule of proposedlending terms shall be furnished by GOPMU to GOPEC which shall, in consultationwith appropriate Nigerian authorities and the Bank, apply the lending terms forthe said season.