By Victor Ejechi | 18 October 2023

https://www.thecable.ng/fg-china-promises-to-refinance-abuja-kano-pharcourt-maiduguri-railway-projects

Comment:

This would be wonderful news but hard to believe would come to pass. China has been making such noises for quite some time but falling short on delivery. Our people too are too quick with their vuvuzelas broadcasting deals that have not yet been written talk less signed.

All I hear here is diplomatic niceties. Xi is having a BRI birthday party and may simply be serenading his guests. It wouldn’t be lost on him that our no.1 was too busy to attend.

Suffice that there are many other railway projects awaiting promised funds from China. Ibadan-Abuja $5.2bn, Lagos-Calabar $11.2bn, Abuja-Itakpe $3.2bn…which haven’t been mentioned in this discussion. There is also no Abuja-Kano project. Its Kaduna-Kano as part of the Lagos-Kano modernisation project with Abuja-Kaduna already built as phase 1 and Lagos-Ibadan as phase 2.

What needs to change to warrant a change by China in their disposition to new lending?

1. Our debt service to revenue ratio is in the 70 per centiles as against the WB benchmark of 22% for low to middle income countries such as Nigeria. This has already discounted the petroleum subsidy removal so scope for wriggle is limited. How do we plan to repay? On a wing and a prayer?

2. The business cases for the projects are not bankable given their provenances. This is not helped by the fact that the operating environment hasn’t changed much with the state owned railway company being practically insolvent calling the shots. It’s not lost on them that there is little hope of repayment coming from railway revenues.

3. Insecurity and repeated cases of theft and vandalism of railway assets does not encourage investment. The impact of one incident such as the Abuja-Kaduna train hijack and government’s tepid and indecisive response does not inspire investor confidence.

The post below 👇🏾by Eric Olander captures the prevailing covert China government sentiment towards financing African railway infrastructure. I am not sure what may have changed in the last few months.

https://lnkd.in/erF-GqZp

What is not lost on China is that, Chinese investors such as Sinosure lost over $1bn on Addis-Djibouti rail line lending, Afristar, the Chinese JV operator of Mombasa-Nairobi was kicked out and replaced by the Kenyan state owned railway company by the Kenyan courts, many African countries have needed debt rescheduling, even calling for debt forgiveness and so on etc. None of which have been assuaged by the global energy crisis, war in the Black Sea and the Middle East… So where will the appetite for new lending come from?

What is not helpful is that African countries seem to be relying on praying and fasting instead of moving boldly to reform their anachronistic railway systems.

Most only pay lip service to the imperatives of reform but have been reticent to move decisively to unbundle and create nimble and agile investable entities that can compete against the dominant modes.

The simple takeaway from this apparent piece of good news is, let’s make hay while the sun shines. Unbundle now!!