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Nigeria: Federal Government to back $2.59 bln AKK gas pipeline with Sovereign Guarantee

Nigeria’s Finance Minister Zainab Ahmed said on Wednesday, that the federal government will issue a sovereign guarantee to back the bulk of a gas pipeline that is a core part of the government’s energy strategy.

The Ajaokuta-Kaduna-Kano (AKK) pipeline is a 614km-long natural gas pipeline currently being developed by the NNPC and forms phase one of the Trans-Nigeria Gas Pipeline (TNGP) project.

The sovereign guarantee will back 85% of the $2.59 billion pipeline cost, funded in turn by a loan facility from Chinese lender Sinosure. The loan has an interest rate of libor plus 3.7% with a 12-year repayment period and a three-year moratorium, according to Reuters news agency.

State oil company NNPC will cover the remaining 15% of the project’s cost, report noted.

“We have done an extensive review of this project and we are satisfied that the cash flows from the Ajaokuta-Kaduna-Kano gas pipeline will be sufficient to repay the facility,” Ahmed said. “This project is one of the cardinal policies of this administration and it is very strategic to national development.”

Early this year, the Nigerian National Petroleum Corporation has executed contracts for the engineering, procurement, construction, commissioning and financing for Lots 1 and 3 of the 40inch by Ajaokuta-Kaduna-Kano gas pipeline and stations with a consortium of indigenous and Chinese companies under a 100% contractor financing model.

Moreso, the construction of the Ajaokuta-Kaduna-Kano gas pipeline will commence in the second quarter of this year in order to supply additional natural gas within the country.

The planned pipeline will transport natural gas from Ajaokuta, in Kogi State to Kano, in Kano State, through several states and urban centers, as part of the Trans Nigeria Gas Pipeline.

The demand for energy and infrastructure in Nigeria is on an increase. For the next five years, the Africa’s largest economy is reported to require US$166 billion to provide energy and infrastructure for its growing population.

Nigeria has the largest gas reserves in Africa and the ninth largest in the world 202 trillion cubic feet of proven gas reserves plus about 600 Tcf of unproven gas reserves but only about 25 per cent of the reserves is being produced or under development.

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