Nigeria's gas producer has signed an agreement which releases the first slice of the largest private sector loan to sub-Saharan Africa.

Nigeria Liquefied Natural Gas (NLNG) won a loan totalling $1.6bn (�990m) from a multinational consortium of 26 banks - mostly from Europe and the United States - in December 2002.

The signing ceremony in Abuja covered the first $160m of loans from Nigerian banks. The bulk of the money is due to be released after a second ceremony in Paris on Thursday, a company spokeswoman said.

The loans are part of a $2bn project being undertaken by Nigeria LNG to reduce the amount of gas wasted by oil producers who burn off gas at drilling sites.

Earning, not burning

NLNG liquefies natural gas for export to Europe and the US.

The Nigerian Government has promised to reduce the amount of gas it flares in order to reduce global warming.

"It's a complex, highly technical business, but one that can produce the rewards in the long term. It's not a short-term business," said NLNG managing director Andrew Jamieson.

The firm's typical contract runs for 22 years, he added.

Successful experiment

Participation in the huge funding operation was "an experiment" for Nigerian banks, the managing director of one of NLNG's local financial backers told the BBC's World Business Report.

Toyin Aderi-no-kum, who heads Guarantee Trust Bank, said the transaction had tested Nigerian banks, adding that he was confident "transactions after this will give larger chunks for the Nigerian banks".

He said NLNG was viewed as a "first class" client by the banks.

"We honestly don't see any risk of defaulting here."

The firm's previous plants have been entirely financed from shareholders rather than through banks.

Nigeria LNG is jointly owned by Shell, TotalFinaElf, Agip and the state-controlled Nigerian National Petroleum Corporation.