FG seeks new economic frontiers on $41 billion rail modernisation investment
Nigeria’s quest to explore new areas of revenue generation and diversification of its economy from oil is gaining traction, as the country seeks new opportunities through massive investment into the rail sector.
Following years of neglect under prolonged and inept military rule, freight-rail capacity reduced to 15,000 metric tons a year in 2005, from three million tons four decades earlier. According to a transport ministry source, recent developments indicate that the Federal Government is determined to open up its rail system to private investors, following decades of government control.
Key projects include building a second railway line connecting the nation’s two biggest cities, the commercial capital, Lagos, and Kano in the north.
The 1,100-kilometer (680-mile) line will carry freight and passengers, even as government also wants to construct a coastal railway that connects Lagos to the eastern city of Calabar.
The two new railways are expected to cost $20 billion, with most of the funding coming from the Export–Import Bank of China, which has so far released $5.9 billion. China’s Civil Engineering and Construction Co. is building the project and both railways should be ready by the end of 2019.
Another $16 billion will be invested in additional rail routes to link up all the country’s interstate network to state capitals, with extension across the northern border into neighbouring Niger’s southern city of Maradi, according to Bloomberg.
Amaechi, Minister of Transportation, had told BusinessDay during a recent visit to the Nigeria Railway Corporation to inspect the $5.851 billion Lagos-Ibadan rail segment of the Lagos-Kano standard gauge rail (SGR) project, that the plan of the ministry is to go to every nook and corner with the project.
While reminding the Chinese Civil Engineering and Construction Company (CCECC) of the crucial need to deliver the Lagos-Ibadan project by December 2018 as contained in the Memorandum of Understanding (MoU), he noted that it was too early to share a timeline or funding details of other rail projects in the pipeline, as government is still talking to investors for this public-private project.
He added that government is also trying to complete a $3 billion line from Abuja to the southern oil hub of Warri by 2018.
With rail links to the existing and planned deep-sea ports, the country hopes to substantially reduce logistics costs and facilitate exports and imports.
“There’s no economic development or growth without logistics, and for logistics to be efficient, you have to deal with the issue of railways,” the minister noted.
Nigeria has witnessed a plunge in the price and output of oil, which accounts for more than 90 percent of foreign income and two-thirds of government revenue.
President Muhammadu Buhari’s Economic Recovery and Growth Plan, presented in March, seeks to boost agriculture and manufacturing by developing the country’s transport network and power infrastructure, with the rail sector among the priority projects.
Rotimi Amaechi, Minister of Transportation said in Abuja, that the Federal Government has started a $41 billion railway expansion to reduce dependence on oil and diversify its struggling economy by improving transport links to allow the movement of goods around the country and to ports.
As at the time of filing this report, General Electric Co of the United States is leading a group that is rehabilitating Nigeria’s 3,505 kilometers of century-old, narrow-gauge railways, linking the coastal cities of Port Harcourt and Lagos with the north.
The group, including SinoHydro of China, South Africa’s Transnet SOC Ltd. and the Netherlands’ APM Terminals BV will fund, revamp and operate the railways for a period to be decided in negotiations with the government, the minister said. They won the concession in May this year.
It plans to invest $2.2 billion, Sabiu Zakari, permanent secretary in the Ministry of Transport, said at the time. Nigeria will then have two links between Lagos and Kano, with the new Chinese-built one allowing trains to travel twice as fast as they can on the existing link.
Oke Maduegbuna, Managing Partner at Pete, Moss & Sam Ltd, a transportation and logistics consultancy, lamented that the country’s rail system was neglected for too long.
He said, “There’s a new awareness among government officials of the economic benefits of a good rail network.” The Abuja-based expert added that the new projects would succeed only if there is consistency in the planning and execution.