*As NNPC allegedly seeks $1bn to continue work
By Teddy Nwanunobi
There are indications that the Chinese are frustrating Nigeria’s aspirations to boost the domestic utilisation of its gas.
Valuechain reports that Nigeria, on June 30, 2020, made an audacious statement, when President Muhammadu Buhari launched the construction of the $2.8 billion 614-kilometre (384-mile) Ajaokuta-Kaduna-Kano (AKK) Gas Pipeline.
Chinese lenders had originally been lined up to fund the bulk of the estimated $2.5 billion to the $2.8 billion cost of the project, which is central to Buhari’s plan to develop gas resources and boost development in northern Nigeria.
But the Chinese lenders, who had pledged to offer most of the funds, are delaying to come up with the fund.
This delay may have allegedly forced the Nigerian National Petroleum Corporation (NNPC) to seek for the sum of N1 billion to continue work on the project.
Reuters claim that sources close to the massive project said that cash was yet to be disbursed as quickly as possible.
This 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.
According to Reuters, the spokesman for the NNPC, which is handling the project, 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.
The sources, however, said that the NNPC was approaching others, including export-import institutions, to continue work on the pipeline that will run through the middle of the country to its northern economic hub, Kano.
NNPC, which was funding 15 per cent, had said last year that 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 federal ministries of Transport, Finance and Petroleum Resources 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 up by sovereign guarantee, and repaid through the pipeline transmission tariff.
NNPC awarded engineering and construction works along the 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 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.
Valuechain also reports that, if completed, the AKK Gas Pipeline project is expected to boost Nigeria’s electricity generation capacity, by adding 3,600MW of power to the national grid, and providing electricity in the northern part of the country, with supply from the south.