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A light rail train, a project assisted by Chinese financing, arrives at the airport station in Abuja, Nigeria on July 12, 2018. The Nigerian transport minister has said that China has delayed funding two other recent railway projects. Photo: Xinhua

Nigeria says China has held off its pledged financing for 2 railway projects

  • Mu’azu Sambo, nation’s transport minister, says delay of more than a year has stymied construction of the Abuja-Kano and Port-Harcourt-Maiduguri railways
  • Analysts say Beijing’s reticence is part of a larger cutback on funding of costly and risky projects in Africa

China has yet to release financing for two major railway projects in Nigeria, a sign of a broader cutback on its commitment to costly and risky projects in Africa.

Mu’azu Sambo, the Nigerian transport minister, said that though China had agreed to provide 85 per cent financing for the construction of the Abuja-Kano and Port-Harcourt-Maiduguri railway projects, Chinese lenders had not yet disbursed the funds, more than a year since the projects were launched.

Nigerian Transport Minister Mu’azu Sambo said last weekend that the railway projects were continuing “but there is a challenge of the 85 per cent foreign loan yet to be secured”. Photo: Handout

Sambo said that Nigeria had paid 15 per cent of the project cost in accordance with the contract with the Chinese contractor. However, he said that the Chinese funding had not yet been provided, delaying the projects.

The two railways are part of multibillion-dollar railway projects across Nigeria, Africa’s most populous country with about 200 million people. The construction is mostly done by the China Civil Engineering Construction Corporation.

“The Abuja-Kano and Port-Harcourt Maiduguri rail projects are ongoing but there is a challenge of the 85 per cent foreign loan yet to be secured. We have been driving these two projects solely through appropriation, which is part of the 15 per cent which Nigeria is supposed to contribute,” Sambo said this weekend.


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“Until we have the 85 per cent component, the project will have to be continually funded through the appropriation.”

Neither the Chinese government nor the contractor has responded to the minister’s remarks.

Nigeria first raised the issue in February, when Sambo’s predecessor as transport minister, Rotimi Amaechi, said that the projects were delayed because of the withheld funds and that Nigeria was “stuck with lots of our projects because we cannot get money”.

“The Chinese are no longer funding,” Amaechi said then. “So we are now pursuing money in Europe.”

“The Chinese are no longer funding,” Rotimi Amaechi, then the Nigerian transport minister, said in February. Photo: AFP

In the months since, however, Nigeria has yet to secure any alternative funding from Europe or elsewhere.

According to Nigeria’s debt management office, as of June 30, Nigeria’s indebtedness to China stood at nearly US$4 billion – more than 83 per cent of its debt to other nations.

Nigeria’s funding difficulties indicate a wider trend of Chinese policy banks becoming more risk-averse, analysts said. Across Africa, China has provided hundreds of billions of dollars in loans to develop infrastructure as part of its Belt and Road Initiative.

But recently, lenders like China’s Export-Import (Exim) Bank and China Development Bank – which have previously financed mega infrastructure projects including ports, railways, power dams, highways, bridges, ports and airports – have taken a more cautious approach to lending amid debt distress in Africa, exacerbated by the Covid-19 pandemic.

Yun Sun, head of the Stimson Centre’s China programme in Washington, said that China had been cutting back on lending for some time. “Especially for countries already in trouble on debt sustainability, the Chinese have tightened up the wallet,” she said.

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“Exim Bank does not provide free grants, it gives out loans. If China is not certain that the loans can be repaid, the disbursement decision will not be supported.”

Christoph Nedopil Wang, director of the Green Finance & Development Centre at the Shanghai-based Fudan University’s Fanhai International School of Finance, said that China’s policy banks have adjusted their risk evaluations for overseas lending.

“Debt sustainability has become an even more important aspect of China’s international work, also based on the 2019 debt sustainability framework signed by multiple international finance ministries,” Wang said.

“This has made lending often more restrictive as ‘bankability’ of projects is increasingly important.”

Other funders, Wang noted, should be interested in such “bankable” projects. “If the project is less bankable, such as projected revenues are low or revenues cannot be guaranteed due to challenges in sovereign balance sheets, it might be necessary to re-evaluate and redesign the project accordingly,” he added.

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Beijing has also hinted at moving from mega infrastructure projects to smaller but profitable ventures under its Belt and Road Initiative.

Addressing a belt and road symposium last November in Beijing, Chinese President Xi Jinping said that high-quality “small and beautiful” projects, which are sustainable and improve people’s livelihoods, should be a priority in overseas cooperation.

China’s central bank has since issued new regulations capping external lending by the country’s banks.

Chinese lending to Africa peaked in 2013, the year Beijing announced the initiative. Further, at the Forum on China-Africa Cooperation in Senegal last November, Beijing signalled a continued shift towards trade financing and support for Chinese equity-based investment in Africa, rather than infrastructure loans.

During the session in Dakar, Chinese President Xi Jinping promised US$10 billion in trade finance to support African exports and another US$10 billion in credit lines for financial institutions – but did not say how much would go to bilateral project finance.

China’s President Xi Jinping giving a speech via video link at the opening of the Forum on China-Africa Cooperation in Dakar, Senegal, on November 29, 2021. Photo: Reuters

“Chinese lenders have historically been hesitant to lend to projects in Nigeria, which is perhaps understandable given the track record of previous infrastructure projects such as Ajaokuta steel mill and gas-fired power plants” that had stalled, Mark Bohlund, a senior credit research analyst at REDD Intelligence, said.

Bohlund said that Chinese lending to Africa has been on a downward trend for several years but the fall has been particularly sharp following the Covid-19 pandemic and Zambia’s default in late 2020.

“The increase in troubled Chinese loans follows the pattern of previous entrants into the bilateral lending market and would most likely have happened even without the Covid pandemic,” Bohlund said.

China has continued to disburse funds to large projects in Angola and Cameroon, he said, but these have to a larger extent become contingent on these countries remaining on track on debt-servicing payments.

“It is unlikely that new projects will be commissioned and or initiated,” Bohlund added.

Tang Xiaoyang, an international relations professor at Tsinghua University in Beijing, said he didn’t think there was a change of China’s lending policy, which supports financially healthy and economically productive infrastructure projects.

He said that the so-called promises were likely just verbal or informal communication. “If contracts are signed, Chinese banks and companies usually keep implementing them according to the terms and will pay the compensation if changes are needed,” Tang said.