BY ROWLAND ATAGUBA | Thursday 28 April 2016
The executive railway bill finally made its debut second reading on the floor of the Federal House of Representatives on 22 October 2015 sponsored by Hon. Gideon Gwani. Its path to the NASS had been tortuous and chequered, taking as much as 14 years for successive governments since Obasanjo to put an executive railway bill before the National Assembly. The bill was eventually sent to the 7th National Assembly by President Goodluck Jonathan in March 2015, in the twilight of his government.
Unsuprisingly, after much focus groups and inter ministerial committees, after much toing and froing within the executive arm, with the bill being tossed from one reviewer group to the other, then languishing over 14 years, it is no surprise that the outcome is that we have simply gone full circle and
we have gone full circle and arrived at where we are coming from. All the bad things that had been taken out in the earlier drafts of the bill have found their way back in.
A good place to start is to congratulate the Jonathan government for giving us an executive railway bill, late as it may be and regardless of its content, warts and all. It is a long overdue start and the Nigerian public can now contribute to the railway laws that would impact them. What are the positives and features of the new bill?
I, there is an executive railway bill at the National Assembly for better or worse.
II, the problem has changed name (PHCN). It is now known as the Nigerian Railway Authority (NRA). It is the successor in title to the assets and liabilities of the Nigerian Railway Corporation (NRC). It is owned by government, it owns railway infrastructure, can build railway infrastructure, can operate railway services, can grant concessions to private operators to provide railway services, it will regulate technical standards and safety on all railways including railways of states and local governments. It will enforce compliance with the Act. Indeed, no one in Nigeria can carry out the construction, ownership or operation of railways in Nigeria except with the express authorisation of the Nigerian Railway Authority. All just like the Nigerian Railway Corporation of now. The NRA should not licence or regulate state and local government owned railways. Neither should it operate and regulate nor provide infrastructure and regulate safety at the same time. All are littered with potential conflicts.
III, the Board is better professionalized with the infusion of three Executive Directors though the six part time directors should of necessity have railway experience and commitment as should the Chairman. There are other stakeholders that should be represented perhaps through the auspices of the six part time director provision. The organised private sector should be represented on the Board as should Labour and Railway Users.
IV, the role of the Minister is clarified. He is responsible for the formulation of policy for the railway sector, facilitation of international protocols and agreements with foreign entities, review of the records and performance of the NRA etc. Nowhere does it say that the Minister can award contracts for railway construction or the purchase of railway equipment. That role is reserved for the implementing agency, i.e. the NRA and private operators. Nowhere does it suggest that the Minister needs a parallel bureaucracy to carry out the functions of the NRA or its Board.
There is a need to also clarify the role of the NRA Board as Section 4 provides for a Board who “shall be responsible for policy formulation for the Authority”. Given the scale and scope of powers of the Authority and its dominance of the railway industry, it is understandable to consider the NRA and the railway sector as one and the same thus potentially causing conflict between the Minister and the Board’s roles.
V, a Railway Accident Investigation Unit is situated in the Ministry under the bill. Ideally this should be a unit under the NTC but with Chinese walls between it and any other branches. There is also a need to define what constitutes a railway accident and who should be investigating what. Better phraseology and legislative drafting is required in the conflict of interest provision as regards Accident Inspectors.
VI, the 25 year vision is recognised in the bill as the masterplan. Its position in national railway policy and procedure for amendment needs to be properly spelled out.
There are lots of bill housekeeping issues that disappoint especially given that it has taken all of 14 years to produce the bill. From mis-references to contradictions and significant errors for instance, where the Authority is referred to as the Corporation, or where it claims on the one hand that the Inspector of Railways would be appointed by the Authority while on the other claims that the Inspector of Railways would be appointed by the National Transport Commission. In one breath it says the NRA would licence operators, while in another it says the NTC would.
One of the objectives of the bill is to attract private sector investment. It started life in 2001 as a reformative bill during the reform activism of Obasanjo, it stalled during the Yar’Adua interregnum and was eventually delivered under Jonathan in 2015 by which time, with massive tinkering over time by civil servants had lost any semblance of reform in it. We are now left with an NRA with the same powers and reach as the NRC as an owner, landlord, operator, regulator, enforcer in chief and government. This is one of the major shortcomings of the NRC Act and has been carried forward into the new bill. The problem has only changed name indeed!
What may be apparent is that the private sector involvement in the development of this bill has been probably marginal. It is possible that this contribution may have been limited to the consultants at the BPE who produced the first drafts of the bill and perhaps some limited participation in focus groups. Notwithstanding, the civil servants seem to have since whittled away any diminution of their power with serial amendments. But it stands to reason that the organised private sector must be adequately consulted and carried along if the purpose is to attract their interest.
There is no gainsaying that the private sector will not be attracted to an environment in which the dominant player is the government with sweeping powers to potentially undermine their investment, sabotage and take over their business. That is what constituting the NRA as an operator, licensor and regulator portends for the private operator. A typical private investment in railway could be upwards of N350 bn without a hope of payback in 12 years. Such an investor needs certainty of regulation, sanctity of the courts, the appropriate institutional framework for railway investment and systemic integrity.
One of the contradictions and obstacles to growth and development in the railway sector has been the arrogation of too much power to a government agency that lacks the capacity to deliver on its mandate while limiting those with capacity who need a level playing field. A player in a game cannot also be the referee. The NRA should not regulate itself. It is anathema to reform and creates conflicts of interest. The NTC is better placed to be the safety regulator rather than the NRA. Neither should the Inspector of Railways be appointed by the NRA as the NRA should not be certifying itself as safety compliant. The Inspector of Railways should be appointed by the NTC.
The NRA should not operate railway services. It is impractical and too costly for the NRA to maintain standing operations ready to step in when a concession fails or is unable to be consummated. It creates the perception of an incentive for the NRA to undermine private operators.
Technical standards should not be determined and enforced by the NRA alone but a stakeholders forum chaired by the NRA, in which all the major operators, suppliers and stakeholders agree and implement railway standards across all rail products and services. This captures the drivers of change and efficiency, the innovators etc.
Ultimately, what we need and should aspire to is a railway industry quite dissimilar to what we have at present. We should aspire to a deregulated and contestable industry in which the barriers to entry are so low that entry and exit is free. The sunk costs are by and large absorbed by government in a structured and coherent way with market forces determining who wins and who loses. The NRC as we know it in brand new clothes and a new name will not change its fortunes. If we need reminding, it is a government agency that spends N5 to earn N1, has a share of less than 1% of its markets, cannot compete effectively with the versatile privately run roads sector, is technically insolvent, is a colossal waste and should not be tolerated. It needs reform not just a name change.
The NRA the industry desires is one that will hold government commitment to the railways and creates railway assets for concessions to private operators. We need an NRA that plays to the government’s strengths and negates its weaknesses. We don’t need an NRA that licences other operators including states and regulates them while competing with them. Ideally the Minister should award the concessions and licence private operators. Licences for states and local governments should be automatic save where there is inconsistency with the 25 year vision. The Minister should have no veto over states’ plans provided they don’t conflict with the vision. We don’t need an NRA that regulates safety when it should be accountable for its own safety record and proceedings. At best it should regulate the network code. We don’t need an NRA that competes with other operators when it should be supporting them. Indeed, we don’t need an Authority at all, what we need is an Agency that facilitates and promotes rail.
We also need a National Transport Commission that is an independent economic and safety regulator, not a toothless bulldog regulator of tariffs. It should also regulate competition and abuses of market dominance concurrently with the Competition Commission as it should investigate railway accidents.
The executive arm up to Jonathan has done a particularly poor job of the railway bill (and perhaps the other transport sector reform bills). It has apparently turned out to be one long exercise in government complacency and superciliousness. The onus is now on the National Assembly to turn it into a worthy document that would chart our future railway.
Rowland Ataguba 13 April 2016
Bethlehem Rail Infrastructure Limited,
London NW7 4RS
Rowland Ataguba is Principal Consultant of the CANAC-PSO Alliance and Chair of the Rail Work Group of the Nigerian Economic Summit Group (NESG).