Is China making a cautious return to African infrastructure funding?

After three years in the financing wilderness, Nigeria has struck a new deal with a different Chinese lender for its stalled rail project

Observers say CDB’s commercially based terms are in contrast to Eximbank’s blend of concessionary and non-concessionary loans

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Nigeria has secured financing for the next section of its railway modernisation plan, three years after the Export-Import Bank of China withdrew support. Photo: Reuters

Published: 6:00pm, 8 Apr 2023

Nigeria has turned back to China, after trying and failing for three years to secure alternative funding for its railway modernisation project, which stalled when the Chinese lender withdrew its support.

The West African nation approached Standard Chartered Bank last year for a loan to replace the Export-Import Bank of China (Eximbank) funds. The then transport minister Rotimi Amaechi suggested Nigeria was also looking to Europe to plug the gap.

The Chinese policy bank withdrew its funding for the 203km (126-mile) Kaduna-Kano section of the railway in 2020, citing the Covid-19 pandemic and concerns about Nigeria’s ability to repay the loan.

This time around, Nigeria has courted China Development Bank (CDB), which was endorsed by the Nigerian parliament this week as the project’s new financier, at a revised cost of US$973 million.

Previous estimates put the cost of the Kaduna-Kano section at US$1.2 billion, with the Nigerian federal government committing US$380 million.

Nigeria’s Senate on Tuesday approved the lower chamber’s change of financier to the project, with CDB to advance a 15-year loan at interest of 2.7 per cent plus the six-month Euro Interbank Offered Rate.

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