BY ROWLAND ATAGUBA | Friday 8 May, 2015
However, from the progress made to date, it would appear that there have been significant departures from the prescribed strategy. For instance, the objective of the vision was to ultimately achieve a homogeneous standard gauge network across Nigeria, but it appears that a dual gauge network is now intended. Furthermore, the underpinning philosophy of the vision was that the government would partner with the private sector under PPP arrangements for its delivery. This would have necessitated the urgent repealing of the existing law to create an enabling environment for private sector ownership and participation but many years later, the law has not changed. The FG continues to progress with the implementation of the vision much on its own.
Notwithstanding, it is proposed to expand the network to provide modern standard gauge railway lines such as a high speed line between Lagos and Abuja, East-West connectivity from Lagos to Calabar now known as the Coastal Railway, Minna to Oturkpo and Minna to Kafanchan among others. The Central line from Warri to Ajaokuta and Itakpe is also to connect Baro to Abuja and on to Kaduna.
In 2003, NRC revenues were nearly N600m on the back of operating costs of N3bn, an operating ratio of 20%. The corporation was virtually bankrupt again spending as much as N5 for every N1 of revenue earned. In 2003 and 2004 the FG provided the NRC with subsidies of N3.9bn and N1.6bn respectively and its ballooning debt profile was by then in excess of N10bn. Obasanjo stopped funding railway operations and prepared the NRC for reform and privatization that never came.
As at July 2006, the NRC’s facilities were in such a state of dilapidation due to the lack of maintenance and spares that only 13 of its 225 locomotives were in serviceable condition and even those that were available could not be deployed for reasons as mundane as lack of working capital to purchase fuel. As at today, no more than 2 if any, out of the fleet of 225 locos are in service alongside the new purchases from GE and China.
President Yar’Adua came along in 2007 and almost cancelled the Obasanjo contract preferring instead to embark on emergency rehabilitation of the legacy narrow gauge infrastructure and the acquisition of new operations equipment. The rehabilitation contracts were commissioned under Jonathan which perhaps fuelled the impression which his government found no reason to dispel, that the achievements were as a result of Jonathan’s singular effort.
In 2009, the Yar’adua government resolved the outstanding issues with the contractor on the Ajaokuta- Warri and awarded the completion of a re-scoped contract to Julius Berger at N31bn with TEAM of Italy as consultants at N2bn over 40 months. An extension to this line which was awarded in 2003 as a variation to the original contract which was itself in limbo at the time takes it to Baro via Jakura from Eganyi to connect sources of other steel making raw materials. There is at present no credible evidence as to when this contract will be completed.
President Jonathan was to award the coastal railway contract from Lagos to Calabar in 2014 for $12bn to the same Chinese CCECC thus establishing Yar’Adua as perhaps the most frugal but effective in railway investments in recent times. He however managed to leave a mountain of abandoned railway initiatives which he inherited untouched. To date, the $8.3bn (N1.6trn) Obasanjo modernization contract has not been completed nor has the $12bn (N2trn) Jonathan coastal railway contract taken off due to funding issues.
Delivering the Strategic Vision for the Nigerian Railways:
Since 2009, when the NRC embarked on its current wave of spending, rehabilitating the fixed infrastructure, acquiring new locomotives and operations and maintenance assets, its results have remained uninspiring. In 2013, it reported freight hauled as 100,000 tons and 4.5m passengers. In 2012, it reported 180,000 tons of freight and 4.3m passengers. In 2011, it reported 340,000 tons of freight and 3.4m passengers. In 2010, it reported 139,000 tons of freight hauled and 1.5m passengers. Whereas it needs a threshold density of 2m tonnes per annum of freight to be viable and sustainable. It’s passenger business meanwhile could only ever earn it a pittance given its uneconomic fares.
If these results tell us anything, it is that the NRC is presently losing money hand over fist. As at today, the NRC is spending about N5 for every N1 it earns just as it did 12 years ago. It’s potentially profitable freight business which underpins railway viability and sustainability is already in decline while its loss making business is growing. This is clearly a paradox.
At the National Conference on Railways organized by the House of Representatives in January 2015, we discussed railway sustainability issues. It was clear that given the scale of demand for transportation in Nigeria, that government is incapable of providing the capacity on its own nor adequately manage the conflicts it bears as an operator and regulator of railways. So the railways need to be restructured. It needs to be separated into railway operator, regulator and asset owner. The railway operator will be one or more transport market operator(s). It will require minimum support for operations of unprofitable business demanded by government. Other than this, the government will provide the independent regulator and asset owner. So we will have a landlord tenant relationship between the government as asset owner and the market operator whom should be a concessionaire on a long tenor of say 25 years.
The tenor is significant because of the need to encourage private investment as typical railway asset lives are lengthy and recovery periods considerably long. The government must cede control of operations of railways and provide appropriate support for private operators to secure funding from external sources because of the lack of capacity in the domestic financial markets.
This in essence is the 25 year strategic vision for the railways. The blueprint or masterplan we adopted for the railways since 2002. Its implementation has been patchy, selective and poorly managed, costing much but delivering little economic benefit. The objectives of the masterplan are principally to restructure and reform the railway environment to provide a dynamic player in the transport sector, reduce government funding and create a viable market for railway products. Importantly for government is the impact a sustainable railway has for the transport sector and development of the economy. The implementation of the 25 year strategic vision has involved hundreds of projects with contract sums ranging from the mundane to the surreal, with figures in millions, billions and trillions. However, the conceptual integration of the selected projects into a strategic whole that is coherent and delivers the vision must be called to question. Delivery has also suffered delays given capacity issues with the government and its agencies in funding and project management.
TO BE CONTINUED