ABUJA, March 4 (Reuters) - Nigeria will issue a sovereign
guarantee to back the bulk of a gas pipeline that is a core part
of the government's energy strategy, Finance Minister Zainab
Ahmed said on Wednesday.
The Ajaokuta-Kaduna-Kano natural gas pipeline aims to enable
Nigeria to develop gas resources that are often burned at the
well due to the focus on crude oil.
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.
State oil company NNPC will cover the remaining 15% of the
project's cost.
"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."
The government plans to develop gas-fired power plants along
the pipeline, and also to use it to encourage companies to
capture and sell gas rather than flaring it, which
environmentalists say creates a health hazard and contributes to
global warming.
Last month, Nigeria launched new regulations aiming to
encourage gas development and announced a $1 million grant from
the U.S. government to develop a power plant that would be fed
by the pipeline.