The European Investment Bank, the European Union's long-term lending institution, has signed loan facilities totalling USD 150 million (EUR 123 million) with Obajana Cement PLC, a subsidiary of Dangote Industries Limited of Nigeria. USD 110 million is guaranteed - for commercial risks only - by Eksport Kredit Fondsen (EKF) of Denmark for USD 70 million and by other international banks, including Fortis Bank, for the remaining USD 40 million.
These facilities are part of a USD 479 million financing package to Obajana Cement PLC with a consortium of major international and Nigerian financial institutions, including the International Finance Corporation (IFC), Africa Merchant Bank/Banque Belgolaise and Netherlands' Overseas Development Finance Company (FMO) as well as First Bank of Nigeria PLC in its capacity as arranger of the local banks' tranche.
The objective of the facilities is to finance the construction and operation of a new cement plant on a greenfield site with a capacity of 4.4 million tons per annum. The plant, located at Obajana (Kogi State) in the centre of Nigeria, will be dedicated to the supply of the national market. The project will create significant value-added by processing low value local materials into cement. It will substitute about 60% of current cement imports and save Nigeria over USD 500m a year in hard currency.
The project is also positive from an environmental point of view due to the use of natural gas in combination with modern cement production technology and is fully consistent with the Climate Change policy of the EU and the EIB to encourage climate-change friendly investments.
This financing provides the EIB with an opportunity to support private sector development in Nigeria and eventually contribute to poverty alleviation and gradual integration of ACP states in the world economy, two key objectives of the Cotonou Agreement. By providing appropriately structured long-term funding, EIB's contribution has been instrumental in completing the financing plan for this start-up project.
The EIB, established in 1958 by the Treaty of Rome, finances capital investment projects that further the European Union (EU) policy objectives. It also participates in the implementation of the EU's co-operation policy towards third countries that have co-operation or association agreements with the Union.
Financing in Africa, the Caribbean and the Pacific (ACP) is carried out under the provisions of the Investment Facility, set up by the ACP-EU Partnership Agreement, signed in Cotonou in June 2000. Under the Cotonou agreement the total financial aid available amounts to EUR 15.2 billion for 2002-2006, of which EUR 11.3 billion is grant aid from the EU member states, EUR 2.2 billion is managed by the EIB under the Investment Facility and up to EUR 1.7 billion is in the form of loans from the EIB's own resources. The Investment Facility is a revolving facility (loan amortizations will be invested in new operations), aiming at supporting technically, environmentally, financially and economically sound projects in the private or the commercially run public sector.