Africa Growing Together Fund provides $20 million loan for Urban Water Sector Reform and Akure Water Supply and Sanitation Project (Linked to Umbrella Project ID#36104)

On May 22, 2014, the African Development Bank (AfDB) and the People's Bank of China (PBOC) signed an agreement for the Africa Growing Together Fund (AGTF) (see Umbrella Project ID#36104). The purpose of this $2 billion loan facility was to finance large development projects in Africa between 2014 and 2024. The AGTF is sponsored by the PBOC and the administered by AfDB. Then, on December 12, 2019, AGTF signed an $20 million loan agreement with the Government of Nigeria for the Urban Water Sector Reform and Akure Water Supply and Sanitation Project. On the same day, the African Development Bank (AfDB) issued a $104.2 million loan and the African Development Fund (ADF) issued an $57 million loan agreement to the Government of Nigeria for the same project. The borrowing terms of the AGTF loan are as follows: a 25-year maturity, an 8-year grace period, an interest rate of 6-month LIBOR plus a 0.80% margin, a 0.25% commitment fee, and a 0.25% upfront (management) fee. The total cost of the project is $222.9 million. Other project financiers included Ondo State ($36.9 million), the Federal Government of Nigeria ($2.5 million), and the World Bank ($2.3 million). The Urban Water Sector Reform and Akure Water Supply and Sanitation Project has the following objectives: (i) Provide sustainable access to safe drinking water and sanitation to the residents of Akure City and environs (which cover Ondo City and satellite towns of Idanre, Igbara-Oke, Ilara Mokin, Ibule-Soro and Ipogun); (ii) Establish institutional & organizational arrangements for sustainability of the water and sanitation services; and (iii) Strengthen Federal Government’s capacity to facilitate urban Water Supply and Sanitation (WSS) reform and performance improvements across the country. The expected project outputs are: a. A rehabilitated and expanded water supply system, and new sanitation facilities; b. Fecal sludge treatment plant for Akure City c. Ondo Water Corporation, with tariffs, management systems, and pro-poor measures implemented, and meeting full Operations and maintenance cost recovery d. Hygiene, sanitation and environmental health promotion undertaken, Fecal Sludge Management system operationalized, and a Sanitation and Waste Water Management plan developed with resources mobilized strategy. e. Scaled Urban Water Sector Programme in line with the National WASH action plan. The main project beneficiaries in Akure and environs are the 1.3 million residents (48% female) expected to live in the project area (the current population is 0.7 million) who will benefit from improved water services and sanitary conditions. The project was originally expected to be implemented between March 2020 to March 2025. However, the ADF and AGTF loans were cancelled in April 2020 at the request of Nigeria’s Federal Ministry of Finance, Budget and National Planning to create additional headroom that would allow the African Development Bank to provide COVID-19 Crisis Response Budget Support. The ADF and AGTF were then reapproved in 2021, and the project implementation schedule was rescheduled from March 2022 to June 2027.

Additional details

1. The AfDB project identification number is P-NG-E00-014. 2. The project’s economic rate of return is estimated at 30%, which is is significantly higher than the 12% opportunity cost of capital. An AFDB stakeholder analysis also confirmed that the benefits of the project would mainly accrue to the users of the utility, who are the project’s main economic beneficiaries. 3. The all-in interest rate (2.701%) was calculated by adding an 0.8% margin to the average 6-month LIBOR rate in December 2019 (1.901%). 4. The margin of 0.8% is calculated by adding the Funding Cost Margin (unknown) to the Lending Margin (0.8%).

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