According to Mike Powell, director in global project finance at lead arranger Credit Suisse First Boston (CSFB) in London: "The deal comes as a very strong statement in favour of Nigeria getting back into the international debt market. The financing has been the largest uncovered bank facility in the country in the last 10 years."

CSFB was lead arranger for the transaction which involves a $160 million 10-year term loan. Ten other banks have joined the deal as arrangers with talks of full syndication in the market by the first quarter of 2000: banks involved include ABN Amro, Banca Commerciale Italiana, Banca Nazionale del Lavoro, Paribas, Credit Agricole Indosuez, Credit Lyonnais, Deutsche, Fuji, Bayerische Hypovereinsbank and West LB.

The facility is priced at 300bp over Libor with a two-year grace period and will pay for the construction of two tankers to be built by South Korea's Hyundai Heavy Industries. Bermuda-registered Nigerian Liquefied Natural Gas Company (NLNG) is sponsoring the project. NLNG represents an international consortium made of Shell Nigeria (25.6%), Agip (10.4%), Elf Nigeria (15%) and Nigerian National Petroleum Corporation (49%) that is also behind the development of the $3.8 billion Bonny Island LNG plant, Nigeria's biggest single investment.

Once built, the two tankers will be used for the delivery of additional LNG coming from third train to be developed at the plant in Bonny Island. The first consignment of gas from the third train is expected by the fourth quarter of 2002. A number of gas companies across Europe including Spain's Enagas, Turkey's Botas, Gaz de France and Portugal's Transgas have signed a 20-year offtake contract for the delivery of Nigerian LNG. After more than a decade of talks previous to the development of the project, delivery of gas from the first two trains finally started at the beginning of October 1999 when the plant became operational.

Altogether, the Bonny Gas transport deal represents an interesting cross section between asset and project finance, with an offshore account structure secured on the vessels. Edward Brown, director in syndicated finance at CSFB in London, says: "We created a matrix looking at banks that had a relationship with the sponsors and experience in shipping transactions." The response from the market has been a high hit rate, with arrangers underwriting $35 million each and with a final take of $12 million. CSFB has very little left on its books from the original amount underwritten.

CSFB is not new to Nigeria having arranged a $330 million private placement for Mobil Oil in February 1996. The facility was arranged for the financing of Mobil's construction of an offshore gas rig and an onshore gas fractioning complex.

In September 1999, CSFB was appointed financial adviser to the consortium behind the development of the Chevron-led West African Gas Pipeline (WAGP) project. The development of WAGP is viewed as a key element in the development of the power sector across the region and particularly for Nigeria's neighbouring countries such as Ghana, Benin and Togo.

But what is the real likelihood of seeing more deals in Nigeria? Philip Fletcher, partner at Milbank Tweed in London says: "The positive response this deal has reached at syndication level gives an indication of the optimism present in the market about doing deals in Nigeria. The country is similar to other oil producing countries such as Saudi Arabia or Venezuela where the rise in the prices of oil and gas enhances the possibilities of doing more. Talks of privatization of Nigeria's electric and telecom authorities will attract more investors to the country. There is a renewed optimism following the end of military power." Unlike other oil producers in the region, Nigeria has a large population of about 110 million and immense infrastructure needs.

So far, limited or non-recourse finance for unstable African credits has been largely restricted to offshore deals such as oil and gas platforms. Conducting projects onshore implies undertaking bigger risks with fewer players in the market ready for that. Smaller countries in the region such as French-speaking Ivory Coast and Senegal have been more successful in attracting project finance deals than their larger neighbours.

But there is more to come from Nigeria. Dr Funmi Coker from the London office of the Nigerian Liquefied Natural Gas Company says: "It took a considerable effort to pull the transport deal together. But given the good performance of the LNG plant and the improvement in the local environment it is likely we will expand our operations without relying exclusively on equity financing. After the completion of the third phase we are planning the development of another two."

In the short and medium term, the next projects in Nigeria to hit the debt market are the financing for the $800 million Lagos 650MW power plant and for the Escravos gas fields jointly developed by Nigerian National Petroleum and US' Chevron. Gas from Escravos will be piped across the West African region through the WAGP.