Rallying For Railways in Nigeria

Proshare

Tuesday, August 07, 2018 /6:00PM / FDC

It is quite remarkable how Nigeria has witnessed tremendous growth rates without an efficient rail network. After the virtual collapse in recent decades of the colonial-built railway network, the government has ambitious plans to revamp it. However, it has only limited funds and expertise to achieve this itself. As a result, it has attempted to bring in the requisite funding and skills, often from abroad. While it is prioritizing railway uses, specifically the movement of people, and better access for tourist attractions, an upgraded railway network also has the potential to be a key en-abler of industrialization, playing a vital role in efficiently moving materials between mines, factories, and ports.

A track record of shared benefits

One of the most attractive features of rail is its ability to move a large number of people at once, which is very instrumental in driving productivity. This is at the heart of key railway investments currently in development in Nigeria. Of particular interest to the Nigerian government is the coastal railway project to link Lagos with Calabar, 1,402 km to the east, which is expected to be financed with a $12bn Chinese loan. West Africa’s first light rail transit was recently launched in Abuja, connecting the city center to the Nnamdi Azikiwe International Airport. The second phase of the project is under construction and is planned to link Abuja with satellite towns such as Nyanya, Kubwa, and Lugbe.

Another rail project in the pipeline is the Lagos-Kano modernization project, of which only the Kaduna-Abuja segment has been completed. Improved connectivity would contribute significantly to elevating the living standards of Nigerians anywhere in the country. A dependable rail service could encourage less road use, which would significantly reduce pollution levels, and has the potential to transform the culture of entire cities.

The migration in and out of Lagos on a daily basis is immense. The inadequate supply of housing and prohibitive rents has led to people com-muting from low rent neighboring states. These travels can stretch between two to four hours one way. With in-vestment in commuter rail net-works, the hope is to not only to shorten commutes but also free up road networks.

Railway stations also offer a myriad of attractive business opportunities to entrepreneurs. The retail sector can benefit significantly as rail stations be-come attractions in their own right with stores, restaurants and bars enhancing the travel experience. Users of the popular Marina car park have access to a dry-cleaning service that has a makeshift drop-off and pick-up point.

This type of service provision can be adopted more formally in any Nigerian rail station. A developing country that has adopted this station retail model is India, whose metro stations are being developed in line with today’s fast-paced consumer lifestyles. The country’s lauded Delhi Metro Line was established in 1995 with plans to expand the network further. Passenger satisfaction is high and discipline is ensured to keep the metro rail clean. Furthermore, the net-work has helped develop areas previously considered uninhabitable because of lack of access to transport systems.

Laying the track for success- Lessons from peers

Realizing this potential may seem lofty, given only 10% of Nigeria’s land commute moves by rail today. However, success in India and South Africa demonstrates it is not impossible. Not only does India boast of a robust commercial pairing with its railway network, it has taken very important steps to modernize the rail transport networks. In recent years, it has launched the Dedicated Freight Corridor (DFC), an ambitious program that involves the construction of two corridors: the Eastern Corridor from Ludhiana to Dankuni, covering a length of 1,839 km and the Western Corridor from Dadri to Jawaharlal Nehru Port, Mumbai, covering 1,499 km. These corridors promote a seamless movement of rail traffic.

South Africa, Nigeria’s economic rival on the continent, is another country to emulate. While rail lines only account for 7% of Nigeria’s landmass, they account for 19% of South Africa’s, allowing for 2.2 million South Africans to take advantage of their country’s extensive commuter rail net-work daily. The current train routes have the capacity to connect different regions to each other, for instance Durban, Pretoria, Johannesburg and the Eastern Cape Province. This level of inter-state connectivity should be an example for Nigeria as it would be a catalyst towards realizing considerable gains from investments in capital projects.

Bridging the funding gap

Following in the footsteps of countries like India and South Africa is ambitious, but with the right strategy, that need not be a bad thing. The key is in how the state and federal governments organize their financing. Given the failure of the existing, publicly-run network and the high costs of a new modern one, alternative financial arrangements and private-sector partners will be needed. Public Private Partnerships (PPPs) and loans from countries such as China have been listed as viable financing alternatives. Recently, pension funds have also come into the conversation, as they are rightly considered an untapped source of funding for infrastructure projects. However, there are quite a number of potential risks associated with PPPs.

For instance, private firms will be cautious about accepting major risks beyond their control, such as exchange rate risks. If they bear these risks then their price for the rail service will reflect this. Moreover, given the long-term nature of these projects and the complexity associated, it is difficult to identify all possible contingencies during project development. It is more likely than not that the parties will need to renegotiate the contract to accommodate these contingencies. It is also possible that some of the projects may fail or may be terminated prior to the projected term of the project, for a number of reasons including changes in government policy.

Land acquisition is also important. Ownership disputes have slowed down progress on procuring land for the projects, with the government having procured a miniscule proportion of the right of way (legal right to use land) along the planned route so far. Consequently, significant effort will be involved in recovering lost land from encroachers, and acquire any new lands required for the routes.

As the nerve center of economic activity in any country, transport infrastructure should remain a priority for any responsible government looking to reflate its economy. Funding is expected to re-main a big issue but should not serve as a deter-rent since the expected economic gains are significant. Investment in rail infrastructure would be a major driving force behind achieving inclusive and sustainable economic growth.

Overall, there are mixed prospects for a functioning rail network in Nigeria. Given that the state remains highly beholden to private partners for expertise and finance, a fully integrated infrastructure network is unlikely to materialize. After all, private sector players will prioritize the most profitable and viable opportunities. To this end, it remains particularly doubtful whether any will take up the challenge to build totally new rail connections.

 


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