With the release of N72 billion as its counterpart funding for the new Lagos-Ibadan rail project, the Federal Government has dug itself deeper into direct control of railways. It further cements its alliance with the Chinese who will provide the bulk of the N458 billion project funding. We welcome the renewed vigour in developing the vital sector but fault the strategy.
That strategy enmeshes the government deeper in a sector that requires massive infusion of private capital. The Lagos-Ibadan rail line is just one of several ongoing plans. The 156.65-kilometre standard gauge line is the first phase of a new 2,733km Lagos-Kano double line, also to be mostly funded by the Export-Import Bank of China that has just approved a loan of $1.27 billion. It is to be constructed by the China Civil Engineering Construction Corporation. A total of $11.11 billion is to be spent on the Lagos-Ibadan, the 1,402km Lagos-Port Harcourt-Calabar rail lines, while similar rail projects are on for Kano-Kaduna, Abuja-Kano and rail lines linking major seaports on Nigeria’s coast.
Nigeria’s deficit in railways is not in doubt. Globally, most railways in post-war period were vertically-integrated monopolies owned by the public sector. According to its website, the Nigerian Railway Corporation is 112 years old and it runs a unilaterally designed track system of 1,067mm cape gauge. Only 30km of its track distribution is in double track and that is within Lagos area. Nigerian Railway System actually commenced rail business activities with the construction of the first rail line from Lagos to Ibadan (193km) between 1898 and 1901.
By 1964 when the construction of the 640km Kano-Maiduguri rail line, then known as Bornu extension, was completed, the present core of the railway network had been put in place. With a land mass of 923,768 square kilometres and population of 170 million, the railway system is made up of 3,505 route kilometres and 4,332 track kilometres. In addition to this is the 19km 1067mm gauge extension from Port Harcourt to Onne deep seaport and the 277km standard gauge rail construction of 1,435mm from Ajaokuta to Warri. This is pathetically poor.
Nigeria’s backwardness in rail is emblematic of our wrong choices. Until recently, not one kilometre was built after the completion of the Kano-Maiduguri line in 1964. The neglect has resulted in over 90 per cent of passengers and freight being moved by road, with heavy duty vehicles clogging the highways, damaging the weak infrastructure and adding greatly to the cost of goods and services. Whereas, up to the early 1960s, rail accounted for over 60 per cent of freight tonnage, it dropped to less than two per cent by 2000. Data from the NRC showed that passenger tonnage peaked at 15.5 million in 1984 and freight at 24 million metric tonnes in 1977. By 2001, fewer than two million passengers used the railways, which barely carried 300,000MT of freight. Indian Railways, in comparison, has the world’s third largest rail system, carrying 23 million passengers and 2.65MT of freight on 19,000 trains per year, according to PwC, the global consultancy.
The major challenge of our rail sector is investment. The government simply cannot provide the humongous sums needed to upgrade rail, but needs to open up the sector to private capital, especially Foreign Direct Investment. The N213 billion provided in the 2017 budget will not even scratch the surface.
Since the mid-1990s, the government has been relying mainly on Chinese skills and capital to develop the sector with disappointing results. What impact did the first N50 billion package to “modernise” rail in the 1990s have? Subsequent upgrading contracts with the CCECC have only revived archaic sections of the NRC network where Lagos-Kano takes 30 hours and Lagos-Ilorin seven hours. These journeys take 10 and four hours respectively by road.
A well-developed rail infrastructure will contribute to productivity, economic activity and people’s well-being in many ways. But government cannot go it all alone. We have strongly canvassed the privatisation and liberalisation of our railway system in the form of striking a strong partnership between the public and private sectors. To attract private capital, foreign and local, the National Assembly should fast-track the repeal of the retrogressive Railway Act 1955 that gives the government monopoly over railways, and pass legislation backing the rail sector reform plan prepared by the Bureau of Public Enterprises.
Therefore, a strong policy framework is required to effectively build, maintain and manage the rail infrastructure. There is strong evidence that the privatisation and regulation of rail sectors in many countries have led to increased efficiency and reduced real prices for customers. Our policy on railways should be structured around a model that incentivises private operators to achieve productivity gains, with strict regulation enforced by an independent regulator.
But fraudulently handing over assets to the typical emergency Nigerian consortium will condemn us to misery similar to the ongoing disaster in the power sector. The Buhari government’s plan to concession rail assets, therefore, requires very strong institutional capacity to ensure absolute transparency. It would be disastrous if the concessions are powered by corruption and cronyism that destroyed previous concession arrangements.
We need to open up the system for investment by reputable global rail firms; General Electric, a United States-based multinational conglomerate, has already expressed renewed interest to invest in our rail sector. The target in granting concessions and issuing licences for new rail undertakings should be to attract global brands, but with significant local equity participation and strong local content regulations.
