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Nigeria can raise cash for financings in the oil-rich Niger delta, but not for more domestically pressing infrastructure work. Can the slew of funds set up for the region gives deals a push? By Natasha Calvert
Rich in natural resources and in need of infrastructure, Nigeria is a potential hotspot for investment. The Obasanjo administration, democratically elected in 1999, has initiated a number of economic reforms, encouraging private and foreign investment. With NLNG out in the markets as the country's largest ever project financing, and MTN Nigeria seeking debt to the tune of $445 million, Nigeria is on the map for financiers with emerging market appetite.
"Nigeria is moving forward in terms of attracting private sector involvement and financing," says Nick Howard, senior adviser, Emerging Africa Advisers, the principal fund management adviser for the Emerging Africa Fund. "There are signs that developers and sponsors are wanting to do business."
But caution is still the watchword. The projects in question have specific risk mitigants to provide lender comfort. Such credit enhancements do not extend to all projects and some sectors remain largely a no-go area for international lenders. The power sector in particular, despite needing a lot of new capacity, will have to see restructuring and de-regulation before substantial investment arrives. "Nigeria still has a long way to go," says one international lender. "There are still transparency issues." Uncertainty has been heightened pending a general election at the start of 2003.
LNG leads
Nigerian Liquefied Natural Gas (NLNG) is an integrated LNG scheme and the largest construction project in Nigeria. Sponsored by Nigerian National Petroleum Corporation (NNPC) (49%), Shell Gas (25.6%), Cleag Limited (15%) and Agip International (10.4%), it is located on Bonny Island, Rivers State. Initially, the plant will be fed from a dedicated field owned by Shell. However, it is anticipated that within a few years half of input will come from associated natural gas. This is gas currently flared by companies extracting oil.
Trains one and two are already in operation and the third is nearing construction completion. All three were funded on the back of shareholder funds. Four and five are to break with this tradition and opt for a non-recourse route, raising funds through special purpose vehicle NLNG Co....