Business Day, a leader in the Nigerian press, has published details about a US$1.1 bn set of loan agreements
signed recently with China Eximbank. This information has all the hallmarks of accuracy, including information about the signatories of the agreements and, more importantly, their actual terms.
Several things are interesting about this for watchers of China-Africa finance.
$500 million will go to one of the projects, the Abuja light rail system
, which is already 25 percent complete (by China Civil Engineering Construction Corporation, CCECC). According to one report, construction allegedly began in 2006
. Chinese finance for the light rail has been under discussion at least since then. A 2008 World Bank study of Chinese involvement in African infrastructure, Building Bridges
, listed the Abuja project in its list of "distressed" Chinese finance commitments more than four years ago. It's not clear whether there was ever a firm, signed commitment to finance the Abuja project before now. In any case, no Chinese finance arrived
. And the World Bank study also listed China Guangdong Xinguang International Group as the contractor, with the project's total costs at $2 bn (Chinese finance was said to cover half of that). This current project is expected to total $800 million. Are these the same project? If so, why the contractor switch?
Second, as Business Day notes, "the terms of the facility are concessional, with 20 years term and seven years grace at 2.5 percent [fixed] interest." China Eximbank can provide either concessional loans (you hui dai kuan) or preferential export buyer's credits (you hui mai fan xin dai) or regular export sellers or buyers credits (these are generally at LIBOR-plus a margin). These terms are a bit higher than recent concessional loans to some other countries, which tend to be at 2 percent, but the 20 year term reflects normal practice for the concessional loans. Preferential export credits tend to be shorter term (around 15 years). Since the preferential export credit office was merged with the concessional loan office several years ago, it's not clear how separate these instruments are in China Eximbank's practice. The subsidy for concessional loans comes from the foreign aid budget (and makes these loans parallel to ODA). The subsidy for preferential export credits comes from another budget (and as export credits, these loans would not qualify as ODA, no matter how concessional).
Nigerian readers: what's the back story here?