December 24, 2010 / 9:02 AM / 10 years ago

Nigeria borrows $900 million from Chinese bank

A high-speed train travels on the newly built Shanghai-Nanjing railway in Shanghai, July 1, 2010. REUTERS/Stringer

ABUJA (Reuters) - Nigeria has borrowed $900 million from Export-Import Bank of China (China Eximbank) to fund railway and security projects, the country’s finance minister said on Thursday.

The move comes despite concerns raised by Nigeria’s central bank governor over the rapid expansion of public borrowing and government spending, which is keeping inflation high in sub-Saharan Africa’s second-largest economy.

Nigeria’s budget deficit is expected to widen to 6.1 percent this year, it has spent billions of dollars of its windfall oil savings, and its foreign reserves have fallen 20 percent from a year ago.

Africa’s most populous nation will head to the polls for presidential, parliamentary and state governorship elections next April and the government is setting in place plans to improve the poor state of the country’s infrastructure.

“We have just obtained a loan of 900 million dollars from the Eximbank of China to finance two major projects, which are the Abuja to Kaduna railway project and the national public security communications project,” Olusegun Aganga said.

“500 million dollars is for the rail project while 400 million is for the execution of the security communication project,” he added.

Aganga said the loan was for 20 years with a 2.5 percent interest rate, although he hopes the security communications system will produce cash flow and the loan will be paid off within five to seven years.

President Goodluck Jonathan presented the 2011 budget proposal to parliament this month, proposing a cut in 2011 spending although recurrent expenditure — the cost of running government — remains high under the plans.

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