Now Reading:

FG Signs MoU on the Kano-Maradi Railway Infrastructure Project

Transportation	1079 VIEWS
Transportation
1079 VIEWS

PROSHARE
PROSHARE

Tuesday, January 12, 2021 / 8:28 PM / by CSL Research / Header Image Credit: Twitter; @MinTransportNG

Yesterday, the Federal Government signed a Memorandum of Understanding (MOU) with a multinational engineering & construction firm, Mota-Engil Group, for the construction of the Kano-Maradi standard gauge railway lines estimated to cost a whooping sum of US$1.96bn. This proposed project is coming onboard despite several criticisms from the public about its economic feasibility amid other critical infrastructural issues that is yet to be resolved within the country and a dearth of funds. We recall that in September 2020, the Federal Executive Council (FEC) approved the award of contract for the development of the project which is expected to pass through three states (Kano, Kastina and Jigawa) in the country to Maradi in Niger Republic.

The Kano-Maradi standard gauge line according to the Minister of Transport, Rotimi Amaechi is aimed at facilitating bilateral trade to position the country to become an economic hub for Niger. The rail line is also expected to help the country compete favorably with other coastal countries in West Africa in servicing the landlocked countries around Nigeria. The c.284km line will run from Kano to Maradi in Niger Republic, passing through Jibia in Kastina and Dutse in Jigawa. Information gotten from public documents shows that the project will take a completion period of three to four years and be arranged under a 14-year buyer credit and long-term commercial loans.

Railways in the past played a critical role in economic development of Africa's largest economy as it facilitated the transportation of passengers as well as goods and services efficiently. Unfortunately, years of neglect of both the rolling stock and right of way have seriously undermined the use of railway systems in the country. As a result, the stock of the country's existing narrow-guage railway network have become obsolete and insufficient to handle the modern day freight and passenger volume. That said, criticisms continue to mount the decision of the government to proceed with the Kano-Maradi railway project as many critics believe there are more economically viable projects that could be embarked on within the country especially amidst a paucity of funds which is gradually leading to a possible debt crisis in the country.

In our view, the Kano-Maradi railway project will provide support for the trade of goods and services especially with the recent operationalization of the African Continental Free Trade Area (AfCFTA) agreement as the provision of infrastructure is pivotal to the country's ability to benefit from the biggest trade bloc since the establishment of World Trade Organization in 1994. However, given the weak purse of the government, we are uncertain if the economic benefits of constructing a rail line to connect Niger and Nigeria will outweigh the cost of the project. We are also concerned about the downside risk of possible abandonment (given that the project will exceed the tenure of the current administration) considering Nigeria's past history of incomplete infrastructure projects, project delays and cost overruns by the Federal Government.