China Eximbank provides $1.267 billion preferential buyer’s credit for Phase 2 (Lagos-Ibadan Section) of Nigerian Railway Modernization Project (Linked to Record ID#1844, #60767, #60850, and #195)844, #60767, #60850, and #195)

Project narrative

On August 18, 2017, China Eximbank and the Government of Nigeria signed a $1,267,317,586 preferential buyer’s credit (PBC) agreement for Phase 2 (Lagos-Ibadan Section) of the Nigerian Railway Modernization Project. The Federal Government of Nigeria made a counterpart contribution to the project worth $314,529,784.90. The PBC (loan) carries the following terms: 20 year maturity, 7 year grace period, a 2.5% interest rate, a 0.5% management fee, and a 0.2% commitment fee. It is supported by a Sinosure credit insurance policy. The final maturity date of the loan is September 21, 2037. As of December 31, 2020, Nigeria’s Debt Management Office (DMO) reported that the loan had achieved a 69.77% disbursement rate ($884.27 million) and the borrower had made interest repayments worth $29.82 million and no principal repayments to the lender. As such, the loan’s (principal) amount outstanding, as of December 31, 2020, was $884.27 million. Phase 2 of the project involved the modernization of a 156.65 km railway section from Lagos City, Nigeria’s largest port city in the south, to the northeast via Abeokuta and Ibadan. This section is part of a larger 1,313 km standard gauge railway that runs from Lagos to Kano and carries both passenger and cargo. Phase 2 also included the construction of a 300 meter link between the Apapa Port Complex and the Lagos-Kano Railway. China Earth Group Fuzhou Survey and Design Institute Co., Ltd. was the contractor responsible for the design of the project. China Civil Engineering Construction Company (CCECC) was the EPC contractor responsible for the implementation of the project and its work is being supervised by Italy’s Team Nigeria LTD. Nigeria’s Federal Ministry of Transport was the project ‘owner’. Construction began on May 5, 2017. The Government of Nigeria announced that it had achieved a 50% project completion rate as of January 15, 2019. The opening ceremony of the commercial operation of the Lagos-Ibadan Railway was held on June 10, 2021, and the Lagos-Ibadan section of the railway launched commercial operations. However, the second phase of this project encountered a number of problems and delays related to adverse weather, labor disputes, and the COVID-19 pandemic. However, by December 2024, Phase 2 was 'substantially completed.' The larger 1,313 km standard gauge railway modernization project — known as the Nigerian Railway Modernization Project and the Lagos-Kano Railway Modernization Project — that runs from Lagos to Kano has encountered a variety of problems and implementation delays. China Eximbank had previously agreed in principle to finance the other sections of the $8.3 billion project (as captured via Record ID#1844, #60767, #60850, and #195). However, it later decided not to finance the other railway sections. In February 2022, Nigeria’s Transport Minister Rotimi Amaech told reporters that ‘[w]e were waiting on the Chinese to give us the loans we applied for and till today they’ve not replied. […] They kept delaying us.’ Consequently, the Government of Nigeria sought funding from other sources, including Standard Chartered Plc and Chinese state-owned commercial banks. None of these funding sources ever materialized, which put President Muhammadu Buhari in a difficult political situation. Before the country’s election in 2019, the ruling party (All Progressives Congress) had promised to complete the Lagos-Kano railway before the next nationwide vote in 2023.