The Minister of Transportation, Saidu Alkali, has disclosed that China has committed to funding the Ibadan-Abuja and Kaduna-Kano sections of the Lagos-Kano railway under the Belt and Road Initiative.
Alkali made this announcement during a recent interview on TVC News, where he discussed the achievements in the transportation sector during his first year as Minister of Transportation.
The Minister noted that most of the ongoing rail projects were awarded under an EPC+F (Engineering, Procurement, Construction, and Financing) model. This model requires 15% counterpart funding from the federal government, with the remaining 85% expected to be sourced through loans.
Alkali, however, said securing funds from banks has been challenging, as financial institutions perceive significant risk associated with railway projects and are hesitant to proceed with the loan arrangements. Consequently, China was approached to help fund some of these projects.
The Transportation Minister further disclosed that the loan for the Kaduna-Kano rail project was approved and signed by the Minister of Finance, Wale Edun. He noted, however, that a few additional procedural signatures are still required before the funds can be disbursed.
The administration of former President Muhammadu Buhari initiated several rail projects to enhance connectivity across Nigeria, including the Ibadan-Abuja and Kaduna-Kano sections of the Lagos-Kano railway.
These projects were based on an EPC+F (Engineering, Procurement, Construction, and Financing) arrangement, requiring the government to provide 15% counterpart funding, with the remaining funds sourced from financial institutions.
Before the construction of the $1.2 billion Kaduna-Kano rail project began in 2021, the Chinese Exim Bank showed interest in financing the project but eventually withdrew, failing to provide the necessary funds.
In July 2021, the Minister of Transportation under President Buhari, Rotimi Amaechi, announced that the federal government had committed $280 million to the Kaduna-Kano rail project, with an additional $100 million to follow shortly.
After the Chinese Exim Bank’s withdrawal, the China Development Bank (CDB) was announced as the new financier for the Kaduna-Kano railway modernization project in April 2023.
Despite funding challenges, experts remain optimistic that if China’s commitment to finance these projects is realized, the resulting transportation infrastructure will benefit businesses, reduce road accidents and pressure, and contribute to the country’s Gross Domestic Product (GDP).