FG Approves $2.3 Billion for Coastal Rail Line Development
The Federal Government has approved the sum of $2.3 billion for the development of a coastal rail line that will run through coastal states in the country.
It was gathered that of the sum, $1.8 billion would come as a loan from China, while the Federal Government would provide $500 million as counterpart fund.
The Minister of Transportation, Rotimi Amaechi, who disclosed this during his valedictory press conference in Abuja on Thursday, explained that the rail line would transverse Lagos, Delta, Anambra, Benin, Rivers and Cross River states, with connections to the central rail line that goes to Abuja.
He said, “The government has approved for us to seek a loan of $1.8 billion to start work on the coastal rail. The coastal rail is from Lagos to Calabar. So we are taking the segment that starts from Port Harcourt to Warri to join the central line that goes to Abuja.
“And then another segment that starts from Benin to Onitsha. But as it is going to Onitsha, it will join the central line again at Agbor. The Port Harcourt-Warri line will join the central line at Warri. The Benin-Onitsha line will join the central line at Agbor. They are all part of the coastal rail line, which is about $11.1 billion.”
When asked to further explain the funding requirement for the coastal rail line project, Amaechi replied, “The project fund is $2.3 billion, but I said $1.8 billion because Chinese banks, if they approve, will be providing that while we will look for $500 million, which will be the counterpart funding.”
The minister also explained what should be expected in the central rail line, as he noted that the Federal Government had given approval for the project as well.
He said, “There are other projects that are considered for construction. The one that we just got approval for from the cabinet is the central line, which begins from Abuja through Baruo, Itakpe and Lokoja; that has been approved. With a seaport to Warri approved.
“However, in that case, the Federal Government is not borrowing any money; the SPV (Special Purpose Vehicle) will borrow the money. The Federal Government will contribute 15 per cent of the equity, the contractor will contribute 10 per cent of the equity and we will form an SPV that will borrow 75 per cent of the equity.”
Amaechi continued, “The Federal Government will give a sovereign guarantee to enable them to get a quick loan. In turn, the contractor will give us a performance guarantee. The performance guarantee means that since you have concessioned this project to me after the completion, I will run the seaport and the rail line in such a way that I will pay back in 20, 30 or 40 years time, depending on the agreement reached.
“So, the repayment of the loan will be done by the SPV, the Federal Government will guarantee the loan and in turn the contractor will give us a performance guarantee. If it works out, that’s a wonderful type of PPP and it was ingenious of the ministry to have done that.”