FEC reviews Ajaokuta-Kaduna-Kano gas project contract, approves $2.571 billion

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The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed has announced that the issuance of a sovereign guarantee to the tune of 85% of the Engineering Procurement and Construction (EPC) contract for the Ajaokuta-Kaduna-Kano gas project has been approved.

Ahmed explained that the contract, which was approved by the Federal Executive Council (FEC) during its weekly meeting, is not a new contract. It was rather revised at a cost of $2.571 billion.

Recall that in 2017, the Infrastructure Concession Regulatory Commission (ICRC) announced that $2.89 billion had been approved for the Ajaokuta-Kaduna-Kano gas project.

Ahmed’s words: “This is not a new contract; it was previously approved by the council in 2017 in the sum of $2.89 billion. The memo of today (yesterday) is at a revised cost of $2.571 billion, equivalent to a 10% discount of the original sum.

“The previous contract was a contractor financing model, the contract that has been approved today is an EPC lump sum contract with the NNPC required to pay 15% of the contract amount while the 85% will be provided by Cynosure of China in the form of loan facility with a sovereign guarantee.

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

(READ MORE: Government must develop investment-ready projects for gas infrastructure financing)

The minister also made known that the facility had an interest of 3.7% with a 12-year repayment period and three years moratorium period.

Why this matters: As stated by Ahmed, the project, when completed, would create employment opportunities, increase government revenue, encourage export and enhance the nation’s foreign reserves by reducing dependencies on imports. Basically, it would have a lot of positive impact on the nation’s economy, Ahmed said.

Meanwhile, the FEC also approved N538.1 million for the procurement of Birds Deterrent System for three Nigerian airports as well as N6.6 billion for the rehabilitation of Koton Karfe Bridge in Kogi State.