ANNEX 4 TO THE NIGER BASIN WATER CHARTER, ON COST AND BENEFIT-SHARING IN RELATION TO COMMON INFRASTRUCTURE AND INFRASTRUCTURE OF COMMON INTEREST
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PREAMBLE
The Republic of Benin, Burkina Faso, the Republic of Cameroon, the Republic of Chad, the Republic of Cote d'Ivoire, the Republic of Guinea, the Republic of Mali, the Republic of the Niger, the Federal Republic of Nigeria,
States party to the present Annex 4 to the Niger Basin Water Charter, relating to cost and benefit-sharing in relation to common infrastructure and infrastructure of common interest;
HAVING REGARD TO the Act Regarding Navigation and Economic Co-operation between the States of the Niger Basin, signed in Niamey on 26 October 1963;
HAVING REGARD TO the Agreement concerning the River Niger Commission and the Navigation and Transport on the River Niger, signed in Niamey on 25 November, revised in Niamey on 2 February 1968 and 15 June 1973 and in Lagos on 26 January 1979;
HAVING REGARD TO the Convention creating the Niger Basin Authority, signed on 21 November 1980 in Faranah, revised on 29 October 1987 in N'Djamena;
HAVING REGARD TO the Paris Declaration of 26 April 2004 on Management and Governance Principles for the sustainable development of the River Niger Basin;
HAVING REGARD TO the Niger Basin Water Charter, adopted by Decision No. 2 of the 8th Summit of Heads of State and Government of the Niger Basin Authority and signed on 30 April 2008 in Niamey;
HAVING REGARD TO Decision No. 1 of the 9th Summit of Heads of State and Government, held on 14 September 2010 in Abuja, relating to the transfer of some functions of the Contracting Authority to the Niger Basin Authority;
HAVING REGARD TO Resolution No. 1 of the 30th Ordinary Session of the Council of Ministers, held on 30 September and 1 October 2011 in N'Djamena, relating to the adoption of Annex No. 1 to the Niger Basin Water Charter, on the protection of the environment;
HAVING REGARD TO Resolution No. 5 of the 33rd Ordinary Session of the Council of Ministers, held on 16 and 17 December 2014 in Niamey, relating to the adoption of Annex No. 3 to the Niger Basin Water Charter, on prior notification of planned measures and on assessment of notifications;
Bearing in mind the importance of common infrastructure and infrastructure of common interest for the sustainable development of the Niger Basin and the harmonious development of national economies, given the advantages the States can obtain from cooperation on common infrastructure and infrastructure of common interest;
Bearing in mind the scope of and issues relating to common infrastructure and infrastructure of common interest in terms of sub-regional solidarity and integration in the context of the community of interests binding the Authority's member States;
Considering that the Authority's member States are resolved to share the costs and benefits relating to common infrastructure and infrastructure of common interest, as a major focus of their cooperation strategy;
Convinced that only mutually agreed, transparent and rational rules for cost- and benefit-sharing can strengthen the bonds of trust between the States and prevent possible disputes in relation to the development of common infrastructure and infrastructure of common interest;
Resolved to promote cost and benefit-sharing in relation to the development of common infrastructure and infrastructure of common interest in the Niger Basin;
Have agreed to adopt the present Annex to the Niger Basin Water Charter, on cost and benefit-sharing in relation to common infrastructure and infrastructure of common interest, hereafter referred to as 'Annex No. 4 on cost and benefit-sharing in relation to common infrastructure and infrastructure of common interest in the Niger Basin'.
CHAPTER I. GENERAL PROVISIONS
Article 1. Definitions
For the purposes of the present Annex, the terms below are defined as follows:
Actor: service-country is the service shared by all the countries benefiting from a given use. For example, if the environmental impact associated with the implementation of a project affects three different countries, three actors are considered: Environment Country 1, Environment-Country 2 and Environment-Country 3
Authority: Niger Basin Authority
Water Charter: Niger Basin Water Charter
Distribution key: the element used to determine how the total amount relating to each common infrastructure work or infrastructure work of common interest is to be shared among the various States involved in its realisation in that they finance the share of the cost attributed to them
Coalition: a group of States or service-countries cooperating on the realisation of common infrastructure or infrastructure of common interest, each State nevertheless aiming to maximise its individual gain
Council of Ministers: Council of Ministers of the Niger Basin Authority
Marginal contributions of an actor: the 'additional added value' of the pay-off for a coalition created by the participation of the actor concerned
Common costs: costs common to all uses and services, such as the cost of a dam
Separable costs: costs that are specific to a particular use or service
Total service cost: separable cost of a particular service plus the fraction of the common costs attributable to it
Total project cost: all the common costs plus the sum of the separable costs
Impact: any alteration to transboundary waters, the environment, the economy or social behaviour resulting in part or in whole from investments made or services provided under the project
Common infrastructure: infrastructure that the member States of the Niger Basin Authority have decided, by act of law, is their joint and indivisible property
Infrastructure of common interest: infrastructure in which two or several Niger Basin Authority member States have an interest and which they have mutually agreed to manage jointly
Actor's share according to Shapley: it is equal to the weighted average of all the additional added-value gains obtained by the formation of all possible coalitions involving the actor
Project: any common infrastructure or infrastructure of common interest constructed in the Niger Basin that may be subject to cost and benefit-sharing between two or more Niger Basin Authority member States
Risk: a potential danger, foreseeable to a greater or lesser extent, inherent in the development of the project and the implementation of its activities
Services: the development of uses associated with the construction of a dam. These uses can be divided into five main categories: (i) water resource, such as river regulation and flood control; (ii) environment, such as ecosystem restoration, environmental goods and services, and diverse impacts; (iii) energy, (iv) agriculture, for example animal husbandry or fishing; and (v) transport, such as river navigation.
Service-country: a service from which a specific country benefits
Use: the use of water resources for a given sector
Shapley value: mathematical formula used to calculate the fair share attributable to each player participating in a cooperative game in which the players are free to communicate with each other and to conclude agreements
Article 2. Purpose
The present Annex determines the cost and benefit-sharing model applicable to any common infrastructure and infrastructure of common interest realised in the Niger Basin.
Specifically, it aims to determine:
the principles to be followed by the States in terms of cost and benefit-sharing in relation to common infrastructure and infrastructure of common interest;
the determinants of the rule for cost and benefit-sharing in relation to common infrastructure and infrastructure of common interest;
the methodology used to determine the rule for cost and benefit-sharing in relation to common infrastructure and infrastructure of common interest.
Article 3. Scope
The present Annex applies to cost and benefit-sharing in relation to all common infrastructure works and infrastructure works of common interest realised in the Niger Basin.
Article 4. Principles
When developing common infrastructure or infrastructure of common interest, the Authority's member States shall act in accordance with the following key principles.
Principle of good faith: when discharging their obligations in terms of cost and benefit sharing in relation to common infrastructure and infrastructure of common interest, the States shall cooperate in good faith in order to fulfil the objectives of the present Annex.
Principle of consultation and coordination: the States engaged in the realisation of common infrastructure and infrastructure of common interest shall regularly consult and coordinate in order to harmonise their respective positions and reach decisions by consensus.
Principle of equity: the States shall benefit from a fair distribution of the total cost of a project among the different services and actors. The costs of the infrastructure are distributed in accordance with the increase in benefits produced by the project, that is, the increased benefits generate a surplus enabling each player to pay back its part of the project costs.
Principle of non-discrimination: the rules for cost and benefit-sharing shall apply to all the Authority's member States in the same way, without regard for any difference other than the objective parameters used to assess the costs and benefits.
Principle of solidarity: the States shall cooperate with regard to cost and benefit sharing in relation to common infrastructure and infrastructure of common interest, in the framework of the community of interests by which they are bound in managing the shared water resources of the Niger Basin.
Article 5. Conditions of cooperation
The conditions to be met for the promotion of beneficial cooperation among the Authority's member States on cost and benefit-sharing in relation to common infrastructure and infrastructure of common interest are as follows:
(i) stability: cooperation among the States in connection with common infrastructure and infrastructure of common interest must limit the risk of States engaging in stand-alone initiatives and prevent defections or failures to discharge the obligations incumbent on the States;
(ii) rationality: each State's individual motivation for agreeing to cooperate assumes that the cost attributed to the State within the cooperation arrangement is less than or equal to the stand-alone cost and that the pay-off of cooperation is higher than the gain it can obtain by acting on its own, without coordinating with the other actors;
(iii) freedom: the States are free not to cooperate with each other in cases in which they gain less from cooperation than they would from acting on their own;
(iv) neutrality: in cases in which cooperation among all the States benefiting from the services of common infrastructure and infrastructure of common interest offers possibilities for mutual benefit that could not be realised if each State acted on its own, the States must refrain, in the exercise of their interests and prerogatives, from taking suboptimal decisions by refusing to cooperate, so as not to cause harm to the other States;
(v) optimality: to avoid the risk of defections from the cooperation arrangement between the Authority's member States, all the benefits of cooperation are subject to the sharing rule, such that no State can enhance its gain without diminishing that of another State.
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CHAPTER II. DETERMINANTS OF THE COST- AND BENEFIT-SHARING RULE
Article 6. Parameters for calculating the sharing rule
Cost and benefit-sharing is based on the transparent assessment and estimation of the following factors:
(i) the size of the coalition of States engaged in the development of common infrastructure and infrastructure of common interest;
(ii) the typology of the actors from each State involved in the development of the common infrastructure or infrastructure of common interest;
(iii) the typology of the risks associated with each project;
(iv) the typology of the costs used to calculate the distribution key for each project;
(v) the typology of the benefits used to calculate the surplus to be shared by the States.
Article 7. Economic efficiency of the sharing rule
The sharing rule must provide for efficient cost and benefit-sharing, which is defined as follows:
(i) the separable cost incurred by the addition of a service should not be higher than the benefit it provides;
(ii) the sum of the total costs attributed to each service should not be higher than the sum of the total benefits provided by each service;
(iii) the total costs attributed to a project should not be higher than the cost of a multi-purpose alternative providing equivalent benefits.
CHAPTER III. DISTRIBUTION KEY FOR COSTS AND BENEFITS
Article 8. Determining the distribution key
The key used to share costs and benefits among the States involved in the development of common infrastructure and infrastructure of common interest shall be determined using the Shapley value, which is equal to the weighted average of the marginal contributions of each service to the generation of the surplus of each of the possible coalitions.
Article 9. Methodology for determining the distribution key
The key used to distribute costs and benefits shall be determined using the step-by-step approach described below.
1. Determining the typology of costs: the costs considered when calculating costs and benefits are contained in the feasibility studies and the detailed preliminary design studies carried out for major hydraulic infrastructure projects or in specific studies conducted in the Basin and comprise notably:
(i) project planning and study costs;
(ii) investment costs;
(iii) operation, maintenance and replacement costs;
(iv) external costs;
(v) incremental costs;
(vi) stand-alone costs.
2. Determining categories of use: the main categories of use that the realisation of major works helps to develop are:
(i) water resources, encompassing the benefits associated with the drinking water supply, river regulation and flood control;
(ii) the environment, comprising environmental goods and services;
(iii) agriculture, including irrigation farming, fishing and livestock raising;
(iv) hydropower;
(v) water transport.
Each category comprises one or more uses.
3. Determining the services: a State can benefit from one or several services related to the development of one or several uses.
The services cover all the uses shared among several States.
4. Categorisation of costs: the two categories of costs to be taken into account when implementing an infrastructure project are common costs and separable costs.
5. Distribution of costs among the various services: the common costs are distributed among the various uses on the basis of the following considerations:
(i) each use bears a fraction of the common costs;
(ii) the sum of the fractions borne by each use is exactly equal to the total common costs;
(iii) the fraction is calculated using the Shapley value, which postulates that the benefit of cooperation is higher than the benefit of acting alone in that the share of each actor engaged in the cooperation arrangement is equal to the weighted average of the actor's marginal contributions to the generation of the surplus of each of the possible coalitions;
(iv) the cost attributable to each use is ultimately equal to the sum of its separable cost and its fraction of the common costs.
6. Distribution of costs among the different actors: the common costs are shared among the different service-countries using the following parameters:
(i) each service-country bears a fraction of the common costs;
(ii) the sum of the fractions borne by each service-country is exactly equal to the total common costs;
(iii) the fraction is calculated using the Shapley value, which postulates that the benefit of cooperation is higher than the benefit of acting alone in that the share of each actor engaged in the cooperation arrangement is equal to the weighted average of the actor's marginal contributions to the generation of the surplus of each of the possible coalitions;
(iv) the cost attributable to each State is ultimately equal to the sum of its separable cost and its fraction of the common costs.
7. Distribution of costs among the different countries: the cost of the project attributable to each country is calculated as the sum of the costs of all the services from which it benefits.
The costs attributable to each country consist, on the one hand, of the common costs allocated using the sharing rule in accordance with the Shapley value and, on the other, of the costs strictly attributable to each service, or the separable costs.
8. Calculating the cost and benefit distribution key
The distribution key is given as a percentage representing the relative weight of each country in terms of its contribution to the total cost of the project.
A technical paper comprising all the tools needed to calculate and regularly monitor the distribution key is appended to and constitutes an integral part of this Annex.
CHAPTER IV. ADOPTION, PUBLICATION AND MONITORING OF THE IMPLEMENTATION AND REVISION OF THE DISTRIBUTION KEY
Article 10. Adoption of the distribution key
The key for distributing the costs and benefits of each common infrastructure work and each infrastructure work of common interest is adopted by decision of the Council of Ministers following prior recommendation by the Technical Committee of Experts.
Article 11. Publication of the decision on the distribution key
The Executive Secretariat shall take appropriate steps to ensure publication of decisions by the Council of Ministers on the key for distributing the costs and benefits among States for each common infrastructure work or infrastructure work of common interest.
It shall inform the member States of those decisions within seven (7) days of their adoption.
Article 12. Monitoring application of the distribution key
The Executive Secretariat shall verify the application of the decisions on the key for distributing the costs and benefits of each common infrastructure work and infrastructure work of common interest, using the information provided by the member States, and shall inform the Council of Ministers accordingly.
The member States of the Niger Basin Authority shall monitor the cost- and benefit sharing decisions that they apply and shall forward the relevant information to the Executive Secretariat.
Article 13. Revision of the distribution key
When the cooperation arrangement between the States is thwarted by factors substantively modifying the conditions and principles of cooperation, the Executive Secretariat shall take appropriate measures to ensure that the distribution key is reviewed and a new key adopted.
The distribution key may be reviewed at the initiative of either the Niger Basin Authority Executive Secretariat or a member State of the Authority.
CHAPTER V. FINAL PROVISIONS
Article 14. Amendments
Any member State of the Niger Basin Authority may put forward amendments to the present Annex.
Proposed amendments to the present Annex shall be sent to the President of the Council of Ministers, who shall communicate them to the member States of the Niger Basin Authority within sixty days of receiving them and no fewer than thirty (30) days before the meeting at which the proposed amendment is to be examined.
Amendments enter into force on the same conditions as the present Annex.
Article 15. Entry into force
The present Annex, on cost and benefit-sharing in relation to common infrastructure and infrastructure of common interest in the Niger Basin, shall enter into force upon adoption by the Council of Ministers.
IN WITNESS HEREOF, THE PRESENT ANNEX 4 TO THE NIGER BASIN WATER CHARTER, ON COST AND BENEFIT-SHARING IN RELATION TO COMMON INFRASTRUCTURE AND INFRASTRUCTURE OF COMMON INTEREST IN THE NIGER BASIN, WAS SIGNED
Done in Conakry on 31st March 2017 in one original copy (French and English, the 2 versions equally valid).
Signed:
For the Federal Republic of Nigeria
Minister of Energy and Hydraulics
For the Republic of Chad
Princip I Advisor to the Embassador
For Burkina Faso
M. Serge Modeste D. TRAORE Director General of Water Resources
Director General of Water Resources
For the Republic of Guinea [signed]
For the Federal Republic of Nigeria [signed]
For the Republic of Chad [signed]
For the Republic of Cote d'Ivoire [signed]
For the Republic of Mali [signed]
For the Burkina Faso [signed]
For the Republic of the Niger [signed]
For the Republic of Benin [signed]
