The China Development Bank (CDB) has approved the release of a $254.76 million loan to Nigeria for the construction of the Kano-Kaduna railway project. This funding comes as part of China’s broader engagement with African nations through its Belt and Road Initiative (BRI), aimed at fostering infrastructure development and economic integration.

The announcement of the loan coincides with a scheduled visit by China’s Foreign Minister Wang Yi to Nigeria as part of his annual New Year tour of Africa. During the visit, Wang Yi is expected to meet Nigerian President Bola Tinubu and other senior government officials to discuss bilateral relations and future cooperation.

Project Overview: Connecting Kano and Kaduna

The Kano-Kaduna railway is a key segment of Nigeria’s broader railway modernization plan. This 203-kilometer standard-gauge rail line is designed to link Kano, a major commercial hub in northern Nigeria, with the country’s capital, Abuja.

Once completed, the railway is expected to significantly enhance the movement of people and goods in a region plagued by inadequate road infrastructure and security challenges. Armed banditry and kidnappings have made road travel dangerous, heightening the importance of a safer, more efficient rail network.

The total cost of the Kano-Kaduna railway project is estimated at $973 million, with the newly approved loan from the China Development Bank serving as a critical component of the financing required to complete the project.

Challenges and Delays in Funding

The Kano-Kaduna rail project has faced several delays, primarily due to funding issues. Initially, Nigeria’s parliament had approved China’s Exim Bank as the primary financier for the project in 2020. However, the bank later withdrew its commitment, causing a significant slowdown in construction progress.

China Development Bank’s intervention has revived hopes for the timely completion of the railway. The bank, in a statement, emphasized the strategic importance of the project, noting that it will “offer local residents a safe, efficient, and convenient mode of transportation” while promoting economic activity in the region.

Strategic Importance of the Railway

1. Economic Growth: The Kano-Kaduna rail link is expected to drive economic growth in northern Nigeria by facilitating trade and improving access to markets. Enhanced connectivity will enable businesses to transport goods more efficiently, reducing costs and delivery times.
2. Job Creation: The construction and eventual operation of the railway are expected to generate thousands of jobs, providing much-needed employment opportunities in the region.
3. Security and Accessibility: With frequent reports of armed attacks on highways in northern Nigeria, the railway offers a safer alternative for travelers and goods transporters. The project is seen as a critical step in addressing the region’s security and infrastructure deficits.

China’s Belt and Road Initiative in Africa

The Kano-Kaduna railway is part of China’s ambitious Belt and Road Initiative (BRI), which seeks to enhance global trade and infrastructure through investments in transport, energy, and telecommunications projects.

China’s Investments in Nigeria:
Nigeria, Africa’s largest economy, has become a focal point of China’s BRI in Africa. Over the years, China has extended significant loans to Nigeria for infrastructure projects, including roads, railways, and power stations.

Some notable Chinese-funded projects in Nigeria include:

• The Lagos-Ibadan railway, which was completed in 2021 and serves as a major transportation corridor between Lagos, Nigeria’s commercial capital, and Ibadan.
• The Abuja-Kaduna railway, operational since 2016, providing a crucial link between the capital city and Kaduna.
• Investments in the Mambilla hydroelectric power project, aimed at boosting Nigeria’s energy capacity.

Debt Diplomacy Concerns:
While China’s investments have brought much-needed infrastructure to Nigeria, concerns about debt sustainability persist. Critics argue that China’s financing terms may lead to excessive indebtedness for African nations, potentially undermining their economic sovereignty. Nigeria’s external debt to China currently stands at approximately $4 billion, making China one of its largest bilateral creditors.

Nigeria’s Broader Railway Modernization Plan

The Kano-Kaduna railway is part of Nigeria’s ambitious plan to modernize its railway infrastructure, which has long been characterized by outdated narrow-gauge lines and inadequate services.

Key Projects Underway:

• The Coastal Railway Project aims to connect Lagos in the southwest to Calabar in the southeast, fostering trade and tourism along the Atlantic coastline.
• The Port Harcourt-Maiduguri Railway Rehabilitation Project, expected to revitalize rail services between the oil-producing Niger Delta and the northeastern region, which has been devastated by the Boko Haram insurgency.

Funding Challenges:
Securing consistent funding for these projects has proven difficult, with Nigeria relying heavily on foreign loans and public-private partnerships to meet its infrastructure needs. The government has also explored innovative financing mechanisms, including leveraging oil revenues and issuing infrastructure bonds.

Implications for Nigeria-China Relations

China’s financial support for the Kano-Kaduna railway underscores its strategic partnership with Nigeria, a relationship that extends beyond infrastructure. The two nations have cooperated in areas such as trade, technology transfer, and capacity building.

During Wang Yi’s visit, discussions are expected to focus on expanding bilateral trade, addressing security concerns in northern Nigeria, and exploring new areas of cooperation, such as green energy and digital infrastructure.

Local and International Reactions

The release of the loan has been met with mixed reactions:

• Supporters argue that the project is essential for regional development and will deliver long-term economic benefits.
• Critics raise concerns about Nigeria’s growing reliance on Chinese loans and the potential risks of default, which could lead to asset seizures or unfavorable renegotiation terms.

Conclusion

The release of $254.76 million by the China Development Bank marks a significant step forward in Nigeria’s efforts to modernize its railway network. The Kano-Kaduna rail project, once completed, promises to enhance connectivity, boost economic activity, and improve security in northern Nigeria.

However, the project also highlights broader challenges, including Nigeria’s heavy reliance on foreign loans and the need for sustainable financing solutions. As China continues to play a pivotal role in Africa’s infrastructure development, careful planning and transparent agreements will be essential to ensure mutually beneficial outcomes.

The Kano-Kaduna railway stands as a testament to the transformative potential of infrastructure investment, but its success will ultimately depend on effective execution, long-term maintenance, and the ability to balance economic growth with fiscal responsibility.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

10^th January, 2024