FG okays $2.571bn loan for Ajaokuta-Kaduna-Kano gas pipeline

Per Second NewsMarch 5, 2020411

…NNPC to pay 15 per cent of the sum

A foreign facility of $2.57 billion has been approved by the Federal Government for the Ajaokuta-Kaduna-Kano gas pipeline.

The loan classified as a sovereign guarantee to fund, is for engineering procurement and construction (EPC) contract for the project.

The approval was part of the fall-outs of

the weekly Federal Executive Council (FEC) meeting held at the State House, Abuja, on Wednesday.

Briefing journalists at the end of the meeting, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said the approval was sequel to the presentation she jointly made with the Minister of State for Petroleum Resources, Chief Timipre Sylva, which sought the council’s approval for the facility earlier approved by FEC in 2017.

She said the approved sum was a revised lower cost of the facility with 10 per cent discount from the initial sum of $2.89 billion approved in 2017 by FEC.

Only 15 per cent of the sum would be paid by the Nigerian National Petroleum Corporation (NNPC) while the balance of 85 per cent would be footed by a Chinese company, China Shure, Ahmed said.

She said an extensive review of the project had been done and it had been found that the project would have the capacity to repay the loan, adding that the facility will only attract 3.7 per cent interest rate with 12 years repayment period and three years moratorium.The minister explained:“The memorandum was seeking council’s approval for the issuance of a sovereign guarantee to the tune of 85 per cent of the engineering procurement and construction (EPC) contract for the Ajaokuta-Kaduna-Kano project which we call AKK.

“This is not a new contract. It was previously approved by council in 2017 in the sum of $2.89 billion. The memo of today is at a revised cost of $2.571 billion equivalent to a 10 per cent discount of the original sum.

“The previous contract was a contractor financing model.

“The contract that has been approved today is an EPC lump sum contract with the NNPC required to pay 15 per cent of the contract amount while the 85 per cent will be provided by China Shure of China in the form of loan facility with a sovereign guarantee.

“This is a facility that has an interest rate of plus 3.7 per cent with a 12 years repayment period and three years moratorium period.

“We have done an extensive review of this project and we are satisfied that the cash flows from the Ajaokuta-Kaduna-Kano gas pipeline project is sufficient to pay the facility itself.”

Describing the project as one of the cardinal policies of the federal government, she said “it is strategic for national development with a lot of prospects that will be beneficial to the country.”

It will boost industrialisation, spur industrial growth, create employment, increase revenue, encourage export and reduce import, Ahmed stressed.

On other benefits the project, she said it would be environmentally friendly, eradicate gas flaring, and reduce carbon footprint, among other benefits.

“It will also improve the health of the communities of the oil producing areas where gas flaring currently takes place. It will also reduce the carbon footprint and comply with the climate control treaties that Nigeria has committed to.”

On the effect of the outbreak of Coronavirus on the slidding prices of petroleum products, she said the 2020 budget might be reviewed.

“The government is studying the situation; a midterm review would be carried out later, and if the revenue target is negatively affected, we will have to do some revisions in the budget by way of budget adjustment.

“Crude oil production per day is now 2 million barrels and some times, 2.1 million barrels per day production volume is recorded which will cushion the effect of the price fall.”