By Jeph Ajobaju, Chief Copy Editor
Abuja is scrambling for $1 billion to complete the $2.8 billion required for the Ajaokuta-Kaduna-Kano (AKK) gas pipeline as wary Chinese lenders foot drag on a project Nigeria hopes to pump gas across the Sahara to European markets.
Chinese lenders are feeling too exposed to Nigeria’s debt with warning from the African Development Bank (AfDB) that Nigeria and other African countries run the risk of defaulting on loan payments.
Nigeria, Kenya, Cote d’Ivoire and other African countries had raised more than $17 billion from bond issuances by early 2019, according to the World Bank.
Stealing and wasting loan funds
These countries must pay back the debts, even as most loans are obtained to be wasted or stolen outright.
In African countries, loans are not invested in infrastructure to yield returns to pay off debt. Where loans are invested, contracts are inflated to put the larger part of the sum in private pockets.
Debt amassed by federal and state governments in Nigeria notched N33.11 trillion in the first quarter of 2021 (Q1 2021) and N1.02 trillion was spent to service domestic and foreign debts, a 35.7 per cent rise on N753.7 billion spent in Q1 2020.
AfDB disclosed in its Strategy for Economic Governance in Africa document in May that the risk of debt defaults is increasing among African countries due to decline in economic output compounded by measures to curtail coronavirus.
“Declining economic output as a result of containment measures against COVID-19 and policy measures to stimulate the economies have heightened debt vulnerabilities,” AfDB said.
“Public debt now exceeds 50 per cent of GDP in nearly half of its regional member countries. Over the last decade, Africa increased its debt at a faster rate than any other region.
“The risk of defaults on debt, much of which is now non-concessional, has increased. At least 24 African countries have applied for the Paris Club–led Debt Service Suspension Initiative, which would free up resources to fight the pandemic.”
China’s edginess about Nigeria’s debt
Nigeria has agreed $5.6 billion loans with China for infrastructure projects. But as of March 2020, Beijing had disbursed $3.3 billion. With Nigeria already servicing the loans, $3.1 billion was outstanding as of then.
Expected financing from China has been delayed and Abuja seeks $1 billion to continue work on the AKK pipeline planned to link the Trans Sahara pipeline.
Reuters quotes sources in the Nigerian National Petroleum Corporation (NNPC) who said the corporation is still negotiating with the Bank of China and Sinosure to cover $1.8 billion of the cost.
“There’s no cause for alarm,” they added.
Reuters reports that the NNPC is looking for other financing sources after the Chinese lenders were originally lined up to provide most the $2.8 billion needed.
“Chinese leaders would not agree to disburse the cash the NNPC had expected by the end of the summer, prompting it to turn to others,” a source told Reuters, as quoted by Nairametrics.
“They are looking at Nigeria as one loan, and right now, they feel they are too exposed.”
Nigeria aims for African, European gas markets
Nigeria aims to sell gas across the Sahara and in Europe through the AKK gas pipeline being constructed to augment receipts from oil, the country’s main foreign exchange earner.
“The plan is if we can get it to Kano, then it can continue all the way to Algeria at the Trans-Saharan gas pipeline and then link up with the Algerian pipeline and then we move it to Europe,” Minister of State for Petroleum, Timipre Sylva, said in June.
“So, our gas can move all the way from the South to the European market. So, it is a very important piece of infrastructure and the president is very committed to it and it is very much on track.”
Sylva told the News Agency of Nigeria (NAN) that the pipeline is one of the legacy projects of the administration of President Muhammadu Buhari and it will serve as a development backbone along the Southern-Northern corridors.
“AKK gas pipeline is good for producers and the market because we have a lot of situations where gas is capped in the South and not produced because there is no market.
“But what we want to do now is to bring the gas across Nigeria, so that when you are now moving gas from South to North, all the people along that corridor can key into that pipeline.
“What that means is that people will have access to gas anywhere in Nigeria. It will also enable Nigerians to invest in a gas-based industry anywhere in Nigeria.
“This is also good for the producer because he now has incentives to produce more. Before now, the gas in the South was capped but with this backbone, anybody can produce and link up with the AKK pipeline.”
Elimination of gas flaring
According to Sylva – as the NAN story is reported by Premium Times – the AKK pipeline will eliminate gas flaring completely as it will absorb the remaining 8 per cent currently being flared.
His words: “Today as we speak on gas flaring, it is so much exaggerated. Gas flaring has been reduced to about 8 per cent. We have taken down about 92 per cent of flares.
“Gas flaring is no longer the major problem of our communities today. There has been a lot of monetisation on gas.
“All the gas that was going into NLNG was previously flared, all the gas going into the power plants was previously flared, and there is a lot of gas also being re-injected into the ground so that we don’t flare it.
“We also use some of the gas to spike crude oil, so we have found a lot of use for gas which brought flaring down to 8 per cent, but people still exaggerate it.
“Before now in my own community, I saw the flares in the horizon when I stood by the Atlantic, but today it’s no more.”
Sylva urged Niger Delta communities to tap into opportunities created by gas utilisation projects and stop complaining about the dangers of gas flaring which has almost been eliminated.
“Gas flaring is no longer a problem in the Niger Delta, 8 per cent of gas being flared cannot be the problem.
“If I don’t know what to do with my gas that is when I flare, but if I can monetise my gas, why should I burn it when I can make money out of it.
“In fact, it is in my interest not to burn my gas because it now has value. The problem with gas before was that it had no value because nobody was buying it.
“But now, if I can monetise it, I will be guarding it so that I can get some benefits from it.”