Nigeria seeks $1 billion for key gas pipeline as it awaits Chinese lending
Nigeria is seeking $1 billion so work can continue on a gas
pipeline costing up to $2.8 billion after Chinese lenders which had pledged to
offer most of the funds did not disburse cash as quickly as expected, three
sources close to the matter said.
It is the latest sign of falling Chinese financial support
for infrastructure projects across Africa, after years of major Chinese lending
for railway, energy and other projects.
A spokesman for state oil company NNPC, which is building
the 614-km (384-mile) Ajaokuta-Kaduna-Kano (AKK) pipeline, said it was still
negotiating with the Chinese lenders – Bank of China and Sinosure – to cover
$1.8 billion of the project cost.
“There’s no cause for alarm,” the spokesman said, without
saying whether NNPC was turning to other lenders.
But the three sources told Reuters the company was now
approaching others, including export-import institutions, to continue work on
the pipeline that will run through the middle of the West African country to
its northern economic hub Kano.
Chinese lenders had originally been lined up to fund the
bulk of the estimated $2.5 billion to $2.8 billion cost of the project, which
is central to President Muhammadu Buhari’s plan to develop gas resources and
boost development in northern Nigeria.
NNPC, which was funding 15%, said last year it had used its
own funds to start construction. The sources said the Chinese lenders would not
agree to disburse the cash NNPC had expected by the end of the summer,
prompting it to turn to others.
“They are looking at Nigeria as one loan, and right now,
they feel they are too exposed,” one source said.
Bank of China said it would not comment on specific deals.
Sinosure did not respond to a request for comment.
The Nigerian ministries of transport, finance and petroleum
also did not reply to requests for comment.
Chinese bank lending to African infrastructure projects has
fallen across the continent, from $11 billion in 2017 to $3.3 billion in 2020,
a Baker McKenzie report said in April.
With the continent facing an estimated annual $100 billion
infrastructure investment deficit, the loss of Chinese funding leaves a big gap
to fill.
Nigeria began building the AKK pipeline in June 2020, saying
it would help generate 3.6 gigawatts of power and support gas-based industries
along the route. The project was to be funded under a debt-equity financing
model, backed by sovereign guarantee and repaid through the pipeline
transmission tariff.
NNPC awarded engineering and construction work along three
sections of the pipeline to Oando, OilServe, China First Highway Engineering
Company, Brentex Petroleum Services and China Petroleum Pipeline Bureau.
Transportation Minister Rotimi Amaechi said this month
Nigeria was negotiating a mix of loans from Chinese and European lenders to
fund railway projects, after media reports said it had initially planned to
rely primarily on Chinese banks.
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