The FGN is seeking $1 billion to continue on a gas pipeline which will cost about $2.8 billion after Chinese lenders failed to disburse cash as quickly as expected. China developed cold feet though it promised to furnish most of the funds.
A spokesman to NNPC reported that NNPC is building the 614-km (384-mile) Ajaokuta-Kaduna-Kano (AKK) pipeline, and was still negotiating with the Bank of China and Sinosure to cover $1.8 billion of the project cost.
There’s no cause for alarm,” the spokesman said but failed to reveal if NNPC will turn to other options. The company has approached other institutions, including export-import institutions, to continue work on the pipeline that will run through the middle of the West African country to Kano.
The estimated $2.5 billion to $2.8 billion for the project, which is central to PMB plan to develop gas resources and boost development in northern Nigeria, was initially thought to be funded by Chinese leaders.
The sources said the Chinese lenders would not agree to disburse the funds expected by NNPC, 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.
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.
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 a 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.
Minister of Transport, Rotimi Amaechi said that Nigeria was negotiating a mix of loans from Chinese and European lenders to fund railway projects. This was after reports that Nigeria had planned to rely primarily on Chinese banks.
As of March 2021, Nigeria had borrowed $3.7 billion from China, out of which it had paid back about $500million, leaving a balance of $3.2 billion. The AKK gas project is only one out of many that China has developed cold feet in funding. It is also holding its funds from going to Nigerian ICT Infrastructure Backbone project phase 2.
The project in 2018 was to cost $2.3 billion, with China fully funding it. However, no dime has been disbursed since three years ago.
Loan packages by China make up 10% of Nigeria’s total indebtedness estimated at $32billion by the Debt Management Agency.
The World Bank, IMF and development banks account for 54.7 per cent of the debt. Bilateral loans, including from China are about 12.4%.