The amendment of the Nigerian Railway Act by the National Assembly holds so much promise for investors and for Nigerians yearning for a modern rail transit service. ADEYINKA ADERIBIGBE writes on the opportunities waiting to be tapped in the sector.
The amendment to the Nigerian Railway Corporation Act took so long in coming and Nigerians almost lost hope of ever realising it. When it finally came penultimate Thursday, it almost went unnoticed.
Transportation and logistics experts have long canvassed for the amendment of the law because contrary to earlier assumptions, railroads are the backbone of commercial transportation.
It is argued that over 40 percent of all cargoes in the United States, (far more than what is carried by trucks, ships or pipelines), are transported by railway. Similar trend is reported to be the case in Japan, India and China, all, heavy train-user countries.
In the beginning
Established in 1900, the Nigerian Railway Corporation, a colonial creation, served a very basic need, which was to back up economic development aspirations of the colony by the British Government. The rail tracks measuring 3″by 6″ (1067mm), otherwise known as the narrow gauge, were thought of as the basics; needed principally to move the nation’s agriculture and extractive mineral resources from the production centres around the country to the ports in Lagos and Port-Harcourt. That explains why the Corporation developed only two major trunks – the Western and the Eastern line, from where produce, such as Groundnuts, Cocoa, Rubber, Cotton, Coal, Bauxite, Cement, and others are moved from the production lines to the ports.
Rather than further honing this colonial heritage upon independence, the discovery of crude oil changed the trajectory of the nation’s oldest corporation. The journey towards making the railway serve the purpose of being the backbone of mass transportation was reversed and marked by decades of neglect by successive governments, culminating in its bankruptcy in the 80s.
While the revival of the railway began late 90s, aggressive master plan to return it to its pride of place as the hub of transportation initiatives of successive governments actually began in the fourth republic, with the emergence of civilian administration which drew up a 25-year road map for the sector.
This began with the rehabilitation of old, worn out tracks and rolling stocks such as coaches and locomotives, and was followed by the reactivation of dead routes. The second phase was the expansion of the railway and introduction of modern coaches to run on new tracks, otherwise known as standard width or gauge of 56.5 inches or 4 ft, 8 1/2 inches (1, 435 mm).
Though the timelines for some of the targets elapsed due to inconsistencies in government policies and programmes, that the present administration not only delivered on the standard gauge tracks seven years after its scheduled delivery only last Monday are indications that government is determined to get it right.
With the passage of the NRC amendment bill, the Senate has removed the glass ceiling on opportunities hindering rapid development of the sector in Nigeria.
The expected involvement of the private sector, the lawmakers hoped, would greatly boost attempts by successive administrations to modernise the railway with the injection of fresh funds.
In May 2015, the Federal Government had directed the Bureau of Public Enterprises (BPE) to commence the privatisation of the Nigerian Railway Corporation and all its facilities across the country.
The step, according to the then BPE Director-General Mr Benjamin Dikki, remains the only way to “avoid the collapse and eventual shut down of the railways.
According to him: “The funding challenges facing the future of rail in Nigeria seems dependent on the efficiency and professionalism which the private sector can bring to bear on the railway.”
The railway reform, restructuring and privatisation programme, he added, is specifically aimed at achieving the provisional framework for private-sector led growth through expanded domestic and foreign investment which would improve NRC’s ability to provide adequate, safe, reliable and efficient rail services and reduce its dependence on the Federal Government’s budget.
The NASS repealed the obnoxious Act that put all investments in the nation’s rail track under exclusive list, with NRC as the supervising authority, but provided, aan appropriate market design and legal framework for the implementation of government’s reform programme for the railway sector; separate the roles of policy making, regulation and operation. The amendment provided a platform for the introduction of private sector concessionaires and promote competition in the provision of railway services nationwide under an atmosphere where the Corporation now functions as the regulator.
The Chairman Senate Committee on Land Transport Senator Gbenga Ashafa (Lagos East), said the amendment has removed all the impediments to an effective rail system in the country.
The lawmaker lamented abject neglect of the sector; declaring that, “until the inception of civilian administration in 1999, little or no investments were made in the Nigerian rail sector from the mid ‑1980s when the railway corporation was declared bankrupt.”
Expectations
According to Investopedia, an American platform for investments opportunities in rail transportation, the private sector remains the key to revitalise the rail system.
Railroads have better pricing power than their primary competitor, the trucking industry. The rail industry has only a few large companies that dominate the sector. By comparison, the commercial trucking sector is much more competitive. Because the level of competition is lower, rails are not under much pressure to lower prices. Keeping prices steady rather than reducing them to meet competitive pressure helps rails maintain solid profits.
The sector is also more efficient than some alternative freight haulers. Rails are able to link many cars in a single train and each train requires very few operators. Because of this, railroads are able to move the more quantity of goods with lower labour costs than commercial trucks.
Trains also use less fuel than trucks. As at 2014, transporting a ton of freight over 476 miles takes one gallon of fuel, making the railroad more fuel efficient than commercial trucks. Lower fuel expenses keep costs down and add to the bottom line.
Railroads perform better when they move more goods. When the economy and financial markets are strong, businesses transport more freight and railroads receive a hefty share of the increase in business activity.
In addition to other advantages, railroads also have a lighter carbon footprint than the trucking industry. Environmental Protection Agency (EPA) in a recent survey stated that hauling freight by rail cuts harmful emissions by about two-thirds, compared with transporting goods over the highway.
A rail transportation expert, Mr Adeolu Dina, said Nigeria should be prepared for job explosion before, during and after construction or at the operational stages of the railway. “Indian Railways employs about one million workers and I don’t see why Nigerian railway should not employ 400,000 workers at its peak.”
He said there is also vast investment opportunities in engineering and other anxillary service units, such as loading and haulage, adding that a revitalised railway can jumpstart the revolution in the nation’s comatose iron and steel industry.
A railroad logistics investor, Edeme Kelikume, said the key to the transformation expected in the railway sector is that the corporation has become a regulating authority and not an operator.
He said: “It is gratifying to note that the new Act has finally made the NRC a regulator of the involvement of investors into the railway sector. Similar thing happened in the telecommunications sector and the nation is happier for it. So maybe in the next one or two years, when the Act so passed by the legislature has been signed into law by the executive, and investors now have more time to distil it, we would see more activities that would ultimately be beneficial to the commuting public.”
Kelikume, the chief executive officer of Connect Rail Services Ltd, a firm championing the freighting of agricultural produce and solid mineral resources by rail, described the NRC as an elephant. “You cannot really get to exhaust the investment opportunities in the NRC. The much that would be done would depend on the level of competence of would be investors and which area of the business of railway it wanted to invest.
“If you take the earlier example of the revolution in the telecommunications industry, the railway, too, is a complete industry, with a large vista of opportunities, and what is available depends on the competence and capability of investors.”
There is the need for the modernisation of the railway which is still based on the archaic technology among others; areas to expect investors’ funds are the conversion of wagon bearings to roller bearings; conversion of train braking system from vacuum to air; conversion of AB coupler to more effective system; modernisation of track maintenance; improvement of ticketing system and manpower development and training to equip the corporation with workers that can face the demands of 21st century railway users.
Conclusion
The Acting NRC Managing Director, Mr Fidet Okhiria, at a forum early in the year, said the corporation was prepared for the challenges the new Act.
Largely, the corporation, he said, must shorn itself of civil service mentality and gear up to giving prime, timely, top-of-the- range service to passengers.
According to him, new divisions are being set up and new thinking introduced in line with the challenges that would push new demands on the corporation.
Among other areas the corporation may outsource to more qualified operators, according to him, are catering, cleaning, ticketing, beautification and branding of stations, marketing of its services in line with modern business trends, modernisation of tracks and refurbishment and replacement of old coaches with modern ones.
Okhiria said the way forward was for the Federal Government to continue to provide leadership in the sector as it opens the window of opportunities wider for private investors to play prominent roles in the system.