Government looks to revive economy via spending on big infrastructure projects. Muhammadu Buhari, Nigeria’s president, is seeking approval from lawmakers to borrow nearly $6bn from the Export-Import Bank of China for railway projects, as his government seeks to revive a recession-hit economy through spending on big infrastructure projects.
Nigeria’s economy suffered its first contraction in 25 years last year, a sign of its near total dependence on revenues from oil exports. Mr Buhari’s administration hopes capital projects will create jobs and help the economy bounce back, and said late last year it would boost its foreign borrowing in 2017 to fund that spending.
The country sold a $1bn Eurobond that was almost eight times oversubscribed in February and has not ruled out going to the bond markets again. But the government is pursuing other options, as evidenced by the effort to borrow from one of Beijing’s policy banks.
The president asked the Nigerian senate in a letter to approve a $1.23bn Eximbank loan to upgrade part of the railway linking Lagos, the commercial capital, and Kano, the largest city in the north.
Eximbank had already approved that loan, the president wrote, adding that the bank’s approval of two other “railway modernisation projects” worth another $4.62bn was “imminent”.
He asked the senate to approve that borrowing in advance, writing that funds available under Beijing’s China-Africa Fund were “limited” and based on a first come, first served basis. Nigeria would risk losing out on the borrowing opportunity unless it signed the agreements as China approved the loans, he argued. “These projects form part of our overall plan to resuscitate rail transport across the nation and thereby drive inclusive growth,” he wrote.
The senate approved the $1.23bn loan on Wednesday, according to its official Twitter handle. The legislature did not announce its decision on the other two proposed projects.
One year ago, after Mr Buhari visited China, he announced he had negotiated a $6bn for infrastructure projects but did not give details. It was not immediately clear if the loan agreements mentioned in his letter this week were related to last year’s deal. Spokesmen for the president did not immediately respond to requests for comment.
China is also funding significant infrastructure spending in several other African countries, including Kenya, where Chinese money, and companies, are building a $4bn railway. Another Chinese-built east African railway opened this year linking the capitals of Djibouti, on the Indian Ocean, and landlocked Ethiopia.
Many countries on the continent suffer from inadequate or rundown infrastructure that hinders growth.