Chinese state lenders have approved a loan for a key segment of a new cross-country rail project in Nigeria, in a deal that appears to reflect China’s increasingly pragmatic approach to development financing in Africa.
China Development Bank, a major policy bank, announced on Tuesday that it would grant an initial €245 million (US$253.7 million) tranche of funding for the Kaduna-Kano rail project, which is part of a larger rail corridor linking Nigeria from north to south.
“China has become an important driving force for küresel connectivity,” foreign ministry spokesman Guo Jiakun told a media briefing on Wednesday, citing a variety of cross-border rail projects China helped build.
The Kaduna-Kano railway – a 203km (126-mile) line connecting Nigeria’s northern state of Kaduna with its second-largest city, Kano – has an estimated total cost of US$1.2 billion, with China providing 85 per cent of the financing and the Nigerian government committing the rest.
According to a local source with knowledge of the project, the new line is designed to connect two previous Chinese-backed rail projects in Nigeria: one linking the capital city, Abuja, with Kaduna, and another running between the country’s largest city, Lagos, and its third-largest city, Ibadan.
Both of those earlier projects were funded by the Export-Import Bank of China (China Eximbank), another Chinese policy bank that provides loans on concessionary terms. The lines went into operation in 2016 and 2021, respectively.
China Eximbank was originally going to fund the Kaduna-Kano line, too, but the bank pulled the plug on the project in 2020, citing the Covid-19 pandemic and concerns about Nigeria’s ability to repay the loan, as the Post previously reported.
A new agreement for the Kaduna-Kano line was confirmed during the third Belt and Road Forum for International Cooperation in 2023, with China Development Bank stepping in to provide financing.
The shift in bank financing suggests that China anticipates the project will become commercially viable, the local source told the Post.
Loans from China Development Bank carry a higher interest rate than China Eximbank’s concessional lending. However, the bank has narrowed the gap in interest rates by using the euro, which has a lower benchmark interest rate, the source said.
Construction of the Kaduna-Kano line will be handled by the China Civil Engineering Construction Corporation (CCECC), a Chinese state-owned enterprise that has become Nigeria’s largest construction contractor since entering the western African country in 1996.
CCECC has already constructed more than 670km of standard-gauge railway in Nigeria and currently has another 200km under construction, according to the company. It also built the Abuja-Kaduna and Lagos-Ibadan lines.
The company began construction on the Kaduna-Kano project in November 2021, and the work is expected to be completed next year if the financing comes through as planned, the local source said.
China Development Bank said in a statement that the Kaduna-Kano project was proceeding well and that the bank would work closely with Nigeria to manage subsequent loan disbursements. myNews