Nigeria is seeking $1 billion so that work on a $2.8 billion gas pipeline can resume, according to three sources close to the situation. Chinese lenders who had pledged to provide the majority of the funds did not disburse cash as quickly as expected.
It is the latest sign of dwindling Chinese financial support for African infrastructure projects, following years of significant Chinese lending for railways.
A spokesman for the Nigerian National Petroleum Corporation (NNPC), which is building the 614-kilometer (384-mile) Ajaokuta-Kaduna-Kano (AKK) pipeline, said the company was still negotiating with Chinese lenders Bank of China and Sinosure to cover $1.8 billion of the project’s cost.
“There’s no cause for concern,” the spokesman said, declining to say whether NNPC was looking for other lenders.
However, three sources told Reuters that the company was now approaching others, including export-import institutions, to continue work on the pipeline, which will run through the West African country’s middle to its northern economic hub Kano.
The project, which is central to President Muhammadu Buhari’s plan to develop gas resources and boost development in northern Nigeria, had originally been lined up with Chinese lenders to fund the majority of the estimated $2.5 billion to $2.8 billion cost.
NNPC, which was funding 15% of the project, announced last year that it had begun construction with its own funds. According to the sources, the Chinese lenders would not agree to disburse the cash NNPC had expected by the end of the summer, forcing the company to turn to others.
“They’re looking at Nigeria as a single loan right now, and they feel they’re overexposed,” one source said.
The Bank of China stated that it would not comment on specific transactions. Sinosure did not respond to a comment request.
The Nigerian ministries of transport, finance, and petroleum all declined to comment.
According to a Baker McKenzie report published in April, Chinese bank lending to African infrastructure projects has decreased from $11 billion in 2017 to $3.3 billion in 2020.
With the continent facing an estimated annual infrastructure investment deficit of $100 billion, the loss of Chinese funding leaves a significant gap to fill.
Nigeria began construction on the AKK pipeline in June 2020, with the goal of generating 3.6 gigatonnes of power and supporting gas-based industries along the route. The project was to be financed through a debt-equity model, backed by a sovereign guarantee, and repaid through the pipeline transmission tariff.
Oando, OilServe, China First Highway Engineering Company, Brentex Petroleum Services, and China Petroleum Pipeline Bureau were awarded engineering and construction work along three sections of the pipeline by NNPC.
Transport Minister Rotimi Amaechi said this month that Nigeria was negotiating a mix of loans from Chinese and European lenders to fund railway projects, contradicting media reports that the country had planned to rely primarily on Chinese banks.