NNPC Seeks $1bn Alternative Funding for AKK Pipeline, Awaits Chinese Lending

The Nigerian National Petroleum Corporation (NNPC) through the federal government is seeking $1 billion to continue work on the Ajaokuta-Kaduna-Kano (AKK) gas pipeline, a key project costing about $2.8 billion, after Chinese lenders, which had pledged to offer most of the funds, failed to disburse cash as quickly as expected, three sources privy to the matter told Reuters.

According to the report, it is the latest sign of falling Chinese financial support for infrastructure projects across Africa, after years of major Chinese lending for railway, energy, and other projects.

A spokesman for state oil company, Nigerian National Petroleum Corporation (NNPC), which is building the 614-kilometre (384-mile) pipeline, said it was still negotiating with the Chinese lenders – Bank of China and Sinosure – to cover $1.8 billion of the project cost.

“There’s no cause for alarm,” the spokesman said, without saying whether NNPC was turning to other lenders.

But the three sources told Reuters that the company had begun to approach others, including export-import institutions, to continue work on the pipeline that would run through the middle of the West African country to its northern economic hub, Kano.

Chinese lenders had originally been lined up to fund the bulk of the estimated $2.5 billion to $2.8 billion cost of the project, which is central to President Muhammadu Buhari’s plan to develop gas resources and boost development in northern Nigeria.

NNPC, which was funding 15 per cent of the project, said last year it had used its own funds to start construction. The sources said the Chinese lenders would not agree to disburse the cash NNPC had expected by the end of the summer, prompting it to turn to others.

“They are looking at Nigeria as one loan, and right now, they feel they are too exposed,” one of thesources said.

Bank of China said it would not comment on specific deals, even as Sinosure did not respond to a request for comment, the newswire claimed.

The Nigerian ministries of transport, finance and petroleum also did not reply to requests for comment.

Chinese bank lending to African infrastructure projects has fallen across the continent, from $11 billion in 2017 to $3.3 billion in 2020, a Baker McKenzie report said in April.

With the continent facing an estimated annual $100 billion infrastructure investment deficit, the loss of Chinese funding leaves a big gap to fill.

Nigeria began building the AKK pipeline in June 2020, saying it would help generate 3.6 gigawatts of power and support gas-based industries along the route.

The project was to be funded under a debt-equity financing model, backed by sovereign guarantee and repaid through the pipeline transmission tariff.

NNPC awarded engineering and construction work along three sections of the pipeline to Oando, OilServe, China First Highway Engineering Company, Brentex Petroleum Services, and China Petroleum Pipeline Bureau.

Minister of Transportation, Chibuike Amaechi, said this month that Nigeria was negotiating a mix of loans from Chinese and European lenders to fund railway projects, after media reports said it had initially planned to rely primarily on Chinese banks.