The Program comprises of two components of activities that support Nigerian states to achieve the key result areas of the Program:

1. A performance-based financing component for state governments, which will be implemented using the Program for Results (PforR) instrument; and
2. A technical assistance (TA) component for states and selected national-level institutions, which will be implemented using the Investment Project Financing (IPF) instrument.

The performance-based financing component is open ex-ante to all 36 states and FCT in Nigeria. The FSP and OGP set of reforms are relevant to all states, as fiscal management and performance are weak across the board, and all states still face considerable fiscal pressures. There is a very strong consensus across FMoF and all states that out of fairness, relevance and need, no states should be ex-ante excluded from the Program. However, states must meet the annual eligibility criteria (EC) and achieve disbursement-linked results (DLRs) to access PforR financing. 

The technical assistance component will support all states based on need and demand (not performance), including states that currently do not receive any capacity building in program-related areas from ongoing World Bank or development partners.

The Program will support the full and sustained implementation of a strategic subset of reforms from the FSP and the OGP commitments that are implemented at the state level. The selected reforms are considered the most critical and impactful for strengthening fiscal transparency, accountability, and sustainability and contributing to the achievement of the PDO. The selected reforms form the basis of the eligibility criteria and the DLIs. The formulation of the DLIs are designed to address gaps in the FSP and OGP identified in the technical assessment carried out by the Bank during the preparation of the Program and strengthen the impact of the FSP and OGP programs. 

The duration of the Program will be four years with the program end date in December 2022. The PforR will cover the fiscal performance of states over four fiscal years: 2018 to 2021. Capacity-building activities will commence after program effectiveness and most are expected to be completed by the end of 2021. 

Implementing Agencies and Partners:

• The Nigeria Governors’ Forum (NGF): Because of NGF’s unique capabilities and extensive experience in organizing and delivering capacity building and learning activities to states, the NGF has been engaged by the PCU as a project management firm to support the PCU to implement specific capacity building and learning activities to states. The Forum will serve as the project management firm through a single source procurement process, under terms of reference acceptable to the Bank. NGF will develop and disseminate guidelines/knowledge “How to” notes, run technical workshops, provide customized, just-in-time, on-the-ground advisory services to individual states through mobile teams of experts, organize state peer learning forums and state exchange visits, and conduct state reform experience studies. NGF’s activities will be focused on content areas supporting states to achieve the EC and DLIs 1, 3, 4, 5 and 6.
• The Debt Management Office (DMO) will provide guidelines, templates and tools, run technical workshops, and provide customized, just-in-time, on-the-ground advisory services to individual states to help states achieve DLIs 7-9 under KRA 4 on debt management and sustainability. The activities will be led by the Strategic Programmes Department within the DMO which has a mandate to strengthen debt management at the state level and has supported states to set up their debt management departments (DMDs), adopt legislation and best-practices concerning public debt management, and has provided regular training and hands on support to the state DMDs since 2008.
• The Public Service Institute of Nigeria (PSIN) will design and deliver curriculum-based, structured face-to-face and then e-learning courses covering content areas related to the EC and DLIs 1-6.
• The Nigerian OGP secretariat will conduct advocacy visits, provide guidelines, templates and tools, run technical workshops, and provide just-in-time advisory services to individual states to help states to achieve DLI#2 as well as help states to implement the larger set of OGP action points.
• The Office of the Auditor-General of the Federation (OAuGF) will design and deliver structured face-to-face training courses to state auditors through their Training Academy to strengthen the quality of audited state financial statements, which are required for the EC as well as for the verification of DLIs. These activities will be carried out separately from those carried out under their IVA role and from the audit activities for the Program.

Performance-based financing (PforR) component

Performance-based financing (PforR) component with total resource envelope of US$700 million (equivalent): This component will provide performance-based financing in the form of grants on an annual basis to states which have been verified through the annual performance assessments (APA) as having: 1) complied with the annual eligibility criteria; and 2) achieved the annual disbursement-linked results (DLRs). 

• Eligibility Criteria (EC): For each year of the Program, states will need to publish on a timely basis the annual approved state budgets and annual audited financial statements. In years 3 and 4 of the Program, states are further required to align with international best practices through: (1) the use of the national chart of accounts/budget classification system, which is GFS compliant, to prepare the states’ annual budgets and thus foster comparability of budget classifications across the federation; and (2) states’ audited financial statements are prepared in accordance with International Public Sector Accounting Standards (IPSAS). To ensure that all states participating in the Program do so for at least 2 years, states need to achieve the EC by year 3 to participate in the Program.

• Disbursement-linked indicators and results (DLIs and DLRs): There are nine DLIs under the four key result areas (KRAs). Each of the DLIs has specific annual disbursement-linked results (DLRs) to be achieved by states for each year of the Program. Each DLR has a specific amount of performance-based financing attached to its achievement per state per year. The DLRs are defined in detail in the DLI verification protocol which has been established upfront, disseminated since September 2018 to all participating states and is attached as Annex 2. 

• The APAs will be carried out by the independent verification agent (IVA) for the Program, which is the Office of the Auditor General of the Federation (OAuGF). The IVA will work with a third-party external firm (contracted by FMOF Home Finance Department as the Program Coordination Unit (PCU)) to carry out the APAs using the detailed DLI verification protocol established for the Program. 

• States that have been verified through the APA to have achieved the EC and (at least some) DLRs, will receive a performance-based grant that is the sum of the values of all the DLRs achieved by them in that performance year. This will provide resources to the states to finance budgeted recurrent expenditures that are necessary for implementing the Program. 

Technical Assistance (IPF) Component

Technical assistance (IPF) component with a total resource envelope of US$50 million (equivalent): This component will support key state government institutions responsible for fiscal management to strengthen their capacity to achieve the EC and DLRs.

• The support will involve a mixture of modalities: curriculum-based structured learning; central and regional technical workshops; customized, on-the-ground just-in-time advisory support to individual states; peer learning forums and state exchange visits. The different modalities allow for training on areas that are common to all states as well as customized training to individual states addressing specific needs. 
• The capacity building support to states will be delivered through a set of in-country institutions: the Nigerian OGP secretariat (OGP); Public Service Institute of Nigeria (PSIN); the Debt Management Office (DMO); the Nigeria Governors Forum (NGF) and the Office of the Auditor-General for the Federation (OAuGF). 
• This component will also provide support to the HFD and the OAuGF to enable them to perform their respective roles of the PCU and IVA. A third-party external firm will be engaged by the PCU to work alongside the IVA to carry out the APAs.
• This component can also be used to provide support to the PCU to engage with other institutions to strengthen FGN-State policy coordination.

Eligibility Criteria (EC)

For each year of the Program, states will need to publish online on a timely basis the annual approved state budgets and annual audited financial statements. The increased availability of timely and credible fiscal data will enable state governments to improve fiscal management, facilitate demand-driven oversight of public finances by citizens and CSOs, and provide more reliable data for monitoring fiscal performance and risks by the FGN. There is a very strong consensus across states that these are the two priority FSP actions, requiring mostly behavioral change and achievable by all states committed to the reforms, and therefore appropriate to be the minimum common performance standard for all states participating in the PforR. In years 3 and 4 of the Program, states are further required to align with international best practices through: (1) the use of the national chart of accounts/budget classification system, which is GFS compliant, to prepare the states’ annual budgets and thus foster comparability of budget classifications across the federation; and (2) states’ audited financial statements are prepared in accordance with International Public Sector Accounting Standards (IPSAS). To ensure that all states participating in the Program do so for at least 2 years, states need to achieve the EC by year 3 to participate.

Eligibility Criteria (2018-2021) Table