Nigeria takes first step to open railways to private sector

A first step that could cause the long awaited revolutionary shake up in Nigeria’s antequated railways is now being taken by the federal government, with a number of bills now before the National Assembly ,one of which passage is primed to see the entry of the private sector in the running, ownership and management of the railway systems.

If all goes well and the National Assembly applies the required speed needed for this revolutionary intervention, it will be the first time in the 117 years of the country’s railways that this will be happening.

“ The private sector urgently needs to get involved in the rail sector – it’s a key driver for the economy, and the multiplier effect on the Nigerian economy will be significant. 

“The government does not have, and cannot invest the necessary cash required to optimse capacity in the rail sector, in order for it to fulfil the logistics requirements of the Nigerian economy – travel from down south to up north. 

“ If the rail lines worked effectively, they could move produce from the “food basket” of Nigeria, down to the South, where there is more consumption and to the ports – which would drive the exports of agricultural produce. It would cut the costs of food significantly, it would reduce transport costs and this would feed into the inflation figures , helping to reduce inflation,” said Chuka Mordi, an investment banker and Co-Managing Director of CBO Capital, who recently made an attempt to push investment into the sector.

Businessday understands that the National Assembly is now considering the bill, which primary aim is to reform the rail sector and ensure private sector participation.  It seeks the repeal and re-enactment of the Act governing the Nigerian Railway Corporation.

The set of bills before the Assembly, which target the reform of various components of the transport sector were approved by the Federal Executive Council (FEC) mid February and have just been transmitted to federal lawmakers. The bills had been on the table at FEC since 2014 after they were processed by the Bureau of Public Enterprises (BPE).

Receipt of the bills was announced on the floor of the House of Representatives March 12, where they were shortlisted and gazetted by the National Assembly for first reading at a date to be fixed when the legislators return from elections recess.

The NRC bill seeks to repeal the Nigerian Railway Corporation Act Cap N129 LFN 2004 and enact the Nigeria Railway Authority Act, to provide for the establishment of the Nigerian Railway Authority, the introduction of private sector participation in the provision of rail services, the regulation of the railway sector and for matters connected therewith.

It also provides for private operators to own, construct and operate railway lines in tandem with the provisions of the proposed Act, adding that the 25-year strategic vision for Nigerian Railways may be amended from time to time.

Section 27(1) of the proposed bill provides that “the Government of a State, Federal Capital Territory and Local Government may, subject to the approval of the Authority, construct Railway infrastructure for the provision of Railway Services within its area of jurisdiction.

Section 29(1) provides that “the holder of a Licence issued by the Authority may enter into agreements with other persons for the provision of Railway Services and Railway infrastructure, whether by means of a concession, joint venture, public-private partnership or other means.

Meanwhile, poor governenment management and funding of the rail system over the years have led to deficient performance and erratic service delivery in the movement of goods and commuters by train in Nigeria.

The effect has been  a decline average of 89.15% in freight or cargo services and passenger traffic in the past 55 years.

Part of the problem has been attributed to the failure of government  to transit from narrow gauge to standard gauge, as a result  of lack of strategic funding.

This information is contained in the 2013 National Integrated Infrastructure Masterplan, produced by the National Planning Commission and approved by the Federal Executive Council in 2014.

The contract for the modernisation of the railway (double track) was awarded in November 2006 at a cost of $8.3 billion and no significant results have been achieved, says the report.

It further states that the abysmal drop in the haulage locomotive and passenger movement since 1960, many years after many countries have transited from narrow gauge to standard gauge, has adversely affected national integration and slowed down balanced economic development of the country.

Industry watchers say that the cost of this failure include road congestion and disrepair across the nation, as a result of overuse, as well as higher transportation cost for goods and commuters because of the near absence of the cheaper rail mode of transport.

Other fall-outs are high accident rates and congested cities, whereas cheap and efficient rail transport is said to encourage people to live in more affordable and peaceful satellite towns, while working in the busy cities and commuting by train.

The report states that successive governments since the nation’s independence, have neglected the rail sector which is  key to any country’s political and economic development.

It further observes that the country’s rail infrastructure and facilities comprise of 3,505km of narrow gauge rail line, and 827km of narrow gauge sidings and loops, 255km of standard gauge rail line and a large quantity of rolling stock, infrastructure, station buildings and other property investments.

Other infrastructures include a 715 km of branch lines, 280 railway stations and 267 railway outstations, including 353 bridges across the entire track length.