All aboard: Liberalisation of the rail sector is gathering steam

The resumption of traffic on initial lines in the southwest of Nigeria from 2011 was a sign of the efforts by an administration intent on liberalising the rail sector. After decades of false starts, the country is finally making progress on upgrading its narrow-gauge rail network and laying new standard-gauge lines.

A necessary step on the way to concessioning to private sector operators, much of the modernisation work has been awarded to Chinese contractors. Just as urban light-rail projects are set to ease passenger traffic congestion, the Nigerian Railway Corporation’s (NRC) upgrades have already relaunched limited freight haulage, with more to come. In 2011 the Ministry of Transport resuscitated the 25-Year Strategic Rail Vision with the Bureau of Public Enterprises. The strategy involves rehabilitating 2733 km of track, upgrading signalling equipment and purchasing new wagons. Funding for the upgrades has been provided for in successive NRC budgets since 2010.

LIBERALISATION: Part of this modernisation is the amendment of the 1955 Railway Act – awaiting the National Assembly’s consideration in 2012 – which would end the NRC’s monopoly over train operation and provide for concessioning to private firms. “The review of the Railway Act would allow the private sector, state and local governments to participate in ownership and operation of railways,” Idris Umar, the minister of transport, told local press in May 2012.

The legislation would establish a Nigeria Rail Transport Regulatory Commission as the body in charge of private concessions, while a Nigeria Rail Road Corporation would be carved out of the NRC to manage existing tracks and build new ones in partnership with the private sector. Once the bill becomes law, the government intends to award 25- to 30-year concessions in the Western, Central and Eastern regions.

BACKING: To make such concessions attractive by the time they are tendered, the NRC embarked on upgrades of the network. These began bearing fruit with the resumption of the first routes in the south-west.

Despite a history of fiscal mismanagement, the NRC’s first upgrades are starting to show. Allocations for capital expenditure by the NRC have risen above the N20bn ($128m) mark in the past four years’ federal budgets – N20.7bn ($132m) in the 2009 budget, N31bn ($198m) in 2010, N29.6bn ($189m) in 2011 and N20.3bn ($130m) in 2012. A first priority has been to rehabilitate existing narrow-gauge line, with the Ministry of Transport claiming in 2012 it had awarded contracts covering 90% of the network.

MOVEMENT: State-owned China Civil Engineering Construction Corporation (CCECC) completed work on the $78m Lagos-Jebba narrow-gauge line in February 2011. CCECC has won a number of contracts by under-bidding rivals, but concerns that its lower fees and faster construction times have sacrificed reliability have not hindered contract awards to the firm.

The Lagos-Ilorin narrow-gauge line restarted freight services soon thereafter, transporting cement from Lafarge WAPCO’s Lagos factory to Ilorin once a week, returning with 160 tonnes of cassava per train for export to Asia – the frequency was raised to twice-weekly in early 2012. “I am confident that this will reduce the cost of cement, traffic jams and accidents on our roads,” Adeseyi Sijuwade, the managing director of the NRC, told local press in late 2011. The NRC hopes to resume fuel haulage on the Lagos-Kano narrow-gauge line by 2013 for the first time since 1980, following rehabilitation efforts. The Akere bridge in Niger State was repaired in the first half of 2012, removing a key obstacle to traffic. The Ministry of Transport also expects to resume freight connections for cement from Ogun to northern states, and wheat from Lagos’s Apapa port to Kaduna and Kano, by 2013.

Having re-established the western corridor, the government hopes traffic on the eastern narrow-gauge line from Port Harcourt to Maiduguri can restart by the end of 2013. The N66.7bn ($427m) contract for restoring the 463-km line was awarded to three firms in April 2011. Turkey’s Eser Contracting and Industry won the $123m contract for Port Harcourt to Maikuri; state-owned China Gezhouba Group is charged with the $157m upgrade of the Makurdi-Kuru lines with junctions to Jos, Kafanchan and Kaduna; and local contractor Lingo Nigeria was tasked with the $147m upgrade of the Kuru-Bauchi-Gombe-Maiduguri lines. The 2012 budget allocates $104m to the NRC for rehabilitation of the Jebba-Kano, Port Harcourt-Makurdi-Kaduna, Kuru to Maiduguri and Zaria as well as the Zaria-Kuru-Namoda lines.

STANDARD GAUGE: The 2012 budget raised spending on the next three priority projects – $25m for Abuja-Kaduna, $20m for Lagos-Ibadan and $21m for Ajaokuta-Warri – while the Subsidy Reinvestment and Empowerment Programme allocated $15m for the Abuja-Kaduna line, $14m for Port Harcourt-Maiduguri and $2.5m for the Jebba-Kano route, an extension of the existing CCECC-built line.

The most advanced standard-gauge project is the 186-km Kaduna-Abuja line, launched in 2009 and 35% complete by mid-2012. The $875m construction contract was awarded to CCEC, and should be ready for freight and passenger traffic between the cities from 2014. The project was backed by $500m in concessionary loans from China’s EXIM Bank and $350m in government funding. Once completed, the standard-gauge line will be used for passenger traffic, while the narrow-gauge track will be dedicated to freight and will run at lower speeds of up to 100 km per hour.

LOCAL LABOUR: The contract for the 360-km Lagos-Ibadan dual-track standard-gauge line was awarded in August 2012 to CCECC, in a deal worth $1.49bn.

CCECC is the largest rail contractor in Nigeria, claiming its use of local labour has been the determining factor in its success in bidding for government contracts. The line should be commissioned within three years, with further contracts expected to extend the standard-gauge line to Ilorin, Minna and Kano.

Finally, work on the standard-gauge 216-km Ajaokuta-Warri line in the central corridor should be complete by March 2013. Though conceived in 1987 to carry products from Delta Steel in Warri to Kogi State’s Ajaokuta, a dry-up in funding halted work. The project was re-scoped to include passenger traffic in 2009 and was awarded for $211m to domestic construction firm Julius Berger in November 2009. By mid-2012 the Ministry of Transport had commissioned feasibility studies for projects to develop the standard-gauge, higher-speed network nationwide.

With proposals for more routes – such as a 1000-km line from Yola to Calabar – emerging, Nigeria shows no lack of ambition in developing an alternative to its congested road network. Implementation will be key in avoiding past mistakes, but the administration will need to demonstrate success in upgrading tracks if its liberalisation drive is to be a success. Support in the form of a speedy passage of new rail legislation through the National Assembly would not go amiss.

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The Report: Nigeria 2012

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