China has been cultivating relations with Nigeria, Africa's top oil producer, as it seeks access to crude oil for its fast-growing economy. In separate deals, Chinese companies have pledged investment in Nigerian infrastructure in return for oil drilling rights.
A letter from Obasanjo to the Senate said US$1 billion of the financing facility would go towards building the first phase of a 2,600-MW hydroelectric plant. A further US$1 billion would go towards the first phase of a new standard gauge railway, linking Lagos area ports to the southwestern city of Ibadan, while US$500 million would be used to improve the rural telephone network in many areas.
Obasanjo wrote that funding the projects "with such a cheap facility would obviate the need to draw down on our external reserve, thereby enhancing the exchange rate of the naira."
Last year, Vice Governor Su Zhong of China's Export-Import Bank said the bank was willing to finance 100 percent of Nigeria's 2,000-MW Mambila and 2,000-MW Zungeru hydro projects, adding that Sino Hydro Co. of China was prepared to develop the projects.
In October, Nigeria's Federal Executive Council approved construction of Mambila in Taraba State. The council approved a memorandum of understanding between Nigeria and China following a visit to China by Obasanjo. Officials said the 3 billion naira (US$22.9 million) hydro project would be administered by the president's office in order to "fast track" its completion.
Originally proposed in the 1980s, Mambila has been proposed for a capacity of up to 3,900 MW.