China Development Bank provides $629 million loan for Phase 1 of Lekki Deep Water Port Project

$629K USD

Funder	China Development Bank (CDB)
Recipient Organization	Lekki Port LFTZ Enterprise Limited
Country	Nigeria
Start Date	Oct 23, 2019
End Date	May 07, 2029
Duration	3,484 days
Number of Grantees	1
Roles	Recipient
Data Source	AidData Chinese Aid
Grant ID	`85628`

Grant Description

China Development Bank provides $629 million loan for Phase 1 of Lekki Deep Water Port Project On April 21, 2011, Nigerian Ports Authority (NPA) and Lekki Port LFTZ Enterprise Limited (LPLEL) — a special purpose vehicle and joint venture of Lekki Port Investment Holding Inc. (75% equity stake) that is itself jointly owned by China Harbour Engineering Company Ltd (52.50% indirect equity stake in LPLEL) and Tolaram (22.5% indirect equity stake in LPLEL), Lagos State Government (20% equity stake), and the Nigerian Ports Authority (5% equity stake) — signed a concession agreement for the Lekki Deep Water Port Project.

LPLEL was awarded a 45-year concession on a Build, Own, Operate and Transfer (BOOT) basis.

It is responsible, under the terms of the concession agreement to develop, finance, build, operate and, at the end of the concession term, transferring the Lekki Deep Water Port (located in the Lagos Free Trade Zone) to NPA. LPLEL will earn revenues through operations of the port. Upon completion, Lekki Port is expected to have a total of 3 container berths, 1 dry bulk berth and 3 liquid berths.

The port is projected to have the capacity to handle about 5.5 million containers and estimated to generate 200,000 direct and indirect jobs in the economy.

It is also expected to generate over $361 billion over the 45-year concession period with the Government of Nigeria earning about $200 billion.

CMA Terminals Nigeria, a subsidiary of French shipping company CMA CGM, which it jointly owns with China Harbour Engineering Company (CHEC), will operate the port once it opens in 2022, following the signing of a sub-concession agreement on September 30, 2019.

On October 23, 2019, China Development Bank (CDB) and LPLEL signed a long-term, $629 million commercial loan agreement for Phase 1 of the Lekki Deep Water Port Project.

📋 Loan / Grant Terms

💰 Loan Amountare unknown

However, it is known that the borrower purchased a credit insurance policy from Sinosure.

The proceeds of the loan (captured via Record ID#85628) were to be used by the borrower to partially finance a $679 million commercial (EPC) contract with CHEC, which was signed on May 11, 2012.

On the same day, CDB and Lekki Free Trade Zone Enterprise Limited signed a Sponsor Support Agreement, Completion Guarantee Agreement and the Tripartite Keep well Agreement as well as seven security documents. The total cost of Phase 1 is $1.043 billion.

CHEC made a $221,047,248 direct equity investment in Phase 1 of the project on March 30, 2020 (captured via Record ID#87054).

The first, $60 million CDB loan tranche was disbursed on April 29, 2021 after Lekki Free Trade Zone Enterprise Limited had satisfied all the conditions precedent for the release of the funds.

Additional debt financing was reportedly provided by Agence Francaise de Developpement (AFD), European Investment Bank, FMO, IFC, African Finance Corporation, DEG, Rand Merchant Bank, Standard Chartered, and Stanbic Bank. CHEC is the EPC contractor responsible for implementation. A formal groundbreaking ceremony took place on March 29, 2018.

Phase 1 construction activities commenced on June 15, 2020.

Then, in October 2020, construction of a 680 meter long quay wall commenced, with the driving of the first sets of piles underway. Speaking at the flag-off ceremony at the project site, the Chief Executive Officer of Lekki Port, Mr.

Ruogang Du, said that the commencement of piling of the quay wall, which is a major phase of the construction, symbolized a significant step towards the timely delivery of the project. In late November 2020, Mr. Rotimi Amaechi, Nigeria’s Minister of Transportation directed Dr.

Magdalene Ajani, the Permanent Secretary of the Ministry, and the legal department to document an agreement with the Lekki Port LFTZ Enterprise Ltd., to ensure that the port becomes operational in 2022. The Minister of Transportation gave this directive while inspecting the project.

In late March 2021, it was announced that the project had achieved a 48% completion rate and would begin commercial operations during the first quarter of 2023.

In early May 2021, Lekki Port LFTZ Enterprise Limited announced that construction of the Lekki Deep Seaport had reached a nearly 50% completion rate.

At that time, the 1,909 meter long core of the main breakwater was completed, and work on the quay wall and landside infrastructure has reached advanced stages. This milestone of the completion of the core of the main breakwater was achieved on April 29, 2021. The Managing Director, Lekki Port LFTZ Enterprise Limited, Mr.

Du Ruogang, affirmed that construction would be completed as scheduled (with a planned completion date of September 2022) and a targeted commercial operations date in Q4 2022.

He also affirmed that the container terminal operator – Lekki Freeport Terminal, a subsidiary of CMA/CGM — was ready to commence operations (under a bespoke sub-concession arrangement) once construction was complete.

In early August 2021, it was announced that the Lekki Deep Sea Port Project was moving forward according to schedule with 58.15% of the construction works having been completed. Phase 1 was ultimately completed when a project handover certificate was issued on October 24, 2022.

Upon completion, it was originally expected that Phase 1 would increase the port’s handling capacity by 1.2 million twenty-foot equivalent units (TEUs). Phase 2 is expected to more than double this total to 2.5 TEUs.

📋 Staff Comments

The Chinese project title is 中国港湾尼日利亚莱基港项目 or 尼日利亚莱基港项目 or 尼日利亚莱基深水港项目 or 尼日利亚莱基深水港项目.
AidData has coded this loan as collateralized due to the fact that CDB and Lekki Free Trade Zone Enterprise Limited signed several ’security documents’ on October 23, 2019.
The total project cost was put at $1.7 billion in March 2015, as previously reported by IJGlobal and at the time the timing of the project financing was in doubt due to a disagreement between the lead developer and the Government of Nigeria, acting through one of the stakeholders Nigerian Ports Authority (NPA). At that time, six lenders – a mixture of DFIs and commercial banks – had been lined up by Tolaram Group but government approval was delayed by the 2015 federal elections. Four years and two elections later, the port had received enough funds to bring the first phase into the construction period, China Harbour Engineering Company (CHEC) beat other 19 other bidders in the tender for the project’s first phase.
Legal counsel to CDB included Linklaters and Aluko & Oyebode. Legal counsel to the project sponsors included Allen & Overy and Templars.
The container operations of the port were sub-concessioned by Lekki Port LFTZ Enterprise Limited (LPLEL) to Lekki Freeport Terminals LFZ Enterprise, a subsidiary of CMA CGM Group (a world leader in maritime transport). Lekki Freeport Terminals LFZ Enterprise, a joint venture with China Harbour Engineering Company Limited (CHEC), will operate the container terminal pursuant to a sub-concession agreement signed in September 2019.
Given that CDB agreed to provide a loan to finance approximately 90% of the cost of the EPC contract, AidData assumes that the loan was issued in the form of a buyer's credit. This issue warrants further investigation.
According to the Government of Nigeria's Debt Management Office (DMO), the Federal Government issued a guarantee to Nigeria Lekki Port LFTZ Enterprise (the concessionaire and borrower) to cover $800 million (N245,200,000,000.00 converted at N306.5/$) 'in respect of the investment by the Concessionaire for the purpose of funding the construction of a Deep Sea Port at Lekki Lagos, Nigeria, on a Build, Own, Operate and Transfer basis, for a period of forty-five years, for and on behalf of the Nigerian Ports Authority.' The guarantee went into effect at financial close. For the time being, AidData treats this guarantee as a sovereign guarantee. However, this issue warrants further investigation. See https://www.dmo.gov.ng/publications/reports/dmo-annual-report-statement-of-accounts/3976-dmo-2020-annual-report/file and https://www.dmo.gov.ng/publications/reports/dmo-annual-report-statement-of-accounts/3672-dmo-2019-annual-report/file and https://budgetoffice.gov.ng/index.php/resources/internal-resources/policy-documents/mtef/2024-2026-mtef-fsp/download and https://placng.org/i/wp-content/uploads/2023/11/House-of-Reps-order-paper-Tuesday-21st-November-2023.pdf8. As of December 2023, the CDB loan for Phase 1 of Lekki Deep Water Port Project was included in the Chinese Loans to Africa (CLA) database and the China's Overseas Development Finance (CODF) database produced by Boston University’s Global Development Policy (GDP) Center. The CLA and CODF databases seek to only capture loans that qualify as public and publicly-guaranteed (PPG) debt.
According to the Government of Nigeria's 2024-2026 Medium Term Expenditure Framework and Fiscal Strategy Paper, 'NPA LEKKI PORT-Amount guaranteed is USD800 Million. However, only US$60 million has been utilised as at December 31, 2022.' See https://budgetoffice.gov.ng/index.php/resources/internal-resources/policy-documents/mtef/2024-2026-mtef-fsp/download

📚 Sources & References

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