Power giant General Electric (GE) has withdrawn from the railway narrow gauge concession one year after it ought to have rolled out new wagons on the tracks. What is the implication of its withdrawal for the project?ADEYINKA ADERIBIGBE writes
The nation’s march to a modernised rail system, especially its centennial asset- the narrow gauge – appears halted as power giant General Electric opted out of the concession deal.
GE’s action ended speculation about its preparedness to take over the assets which the Federal Government has been showcasing as one of its poster projects.
GE said it was opting out of the concession because of its decision to remove transportation business from its portfolio. Its decision to drop transportation from its portfolio was to enable it concentrate on its core competence – healthcare and power generation.
In May 2016, the government announced GE as the preferred bidder for the project.
Under the agreement, GE was to inject $2.7 billion into the narrow gauge modernisation programme, including the tracks and provision of the rolling stock.
It was to introduce 20 locomotives and 200 wagons within the first 12 months of the takeoff of the temporary agreement. By the second year, it would strip the Nigerian Railway Corporation (NRC) of all its rail assets as it consolidates on the modernisation, while the corporation operate as the regulator.
Initially, a roll out had been fixed for May last year. Rather, what commenced were series of meetings by the Transaction Advisory Committee (TAC), government appointed consultants with the new operator.
The Minister of Transportation Mr Rotimi Amaechi changed the take-off date to December last year. Again it failed.
Amaechi had insisted private investors into the railway was in line with global best practices.
“While the government owns the rail tracks, investors are usually encouraged to own the rolling stocks, both passengers and cargoes.”
With its links to the nation’s productive centres, the narrow gauge will assist in the rapid development of the agriculture, mining and steel sectors and link same directly to the sea ports for export.
Again, the continuous rehabilitation of the narrow gauge network will no longer be at any cost to the government. Outside the 1,100 kilometres Western line, (Lagos-Kano narrow gauge track), regarded as the most lucrative route and the nation’s major rail backbone, which includes Lagos, Abeokuta, Ibadan, Ilorin, Kano, Funtua, Zaria, and Kaura-Namoda, the GE would also take over the Eastern line – Port Harcourt-Maiduguri route, which includes Port Harcourt, Aba, Umuahia, Enugu, Makurdi, Jos, Gombe and Bauchi to Borno State.
“The activation of the narrow gauge was meant to grow freight movement exponentially. We have over 30 million tons worth of freight on the Lagos-Kano route for which presently we are moving slightly above 1,000 tons. While the Port-Harcourt-Maiduguri route is currently moving nothing, we are anticipating 11 million tons on that route,” Amaechi had said.
That was why GE had opted for cargo as its preferred choice of line of trade. It proposed to move one million tons of freight in the first year and outstrip as importers are explore the new deal.
The new proposition is a departure from government’s projections, which had wanted to have more friendly passenger shuttle. Intercity shuttle, as presently run, is epileptic with the rusty coaches, driven by aging locomotives that take no fewer than 72 hours travel time between Lagos-Kano.
“This is absolutely unacceptable. The railway system will not be able to attract any quality passenger traffic with such tradition. We must look at fast-tracking things at the railway,” Amaechi said.
The journey of General Electric’s intervention in the nation’s rail sector started in 2009, when it signed a Country-to-Company (C2C) agreement with the Federal Government to support the financing, design and building of infrastructure and capacity across the rail, power and healthcare.
This agreement was renewed for another five years at the Head of States conference in Washington, DC in 2014, a deal which was inherited by the Buhari administration in 2015.
Under the agreement, company is to partner with the Ministry of Power to develop 10GW power over the next 10 years, assist the Ministry of Health to develop diagnostic centres across the country, and help the Ministry of Transportation in the modernisation and expansion of the nation’s locomotive assets.
On its website www.ge.com/africa the firm said “Its milestones in the transportation sector in the last five years include the modernisation and expansion of Nigeria’s locomotive fleet. Right now, GE is working with private sector participants to develop a locomotive assembly facility. That facility would modernise 30 old locomotive engines and assemble 170 new locomotives. The company is also acting on the order to supply locomotives to the Nigerian Rail Corporation (NRC) as part of the country’s fleet renewal programme.
GE however said its decision to walk away from the sector would have no adverse effect on the ambitious move to modernise the almost moribund narrow gauge sub-sector of the rail business which is already plagued by rotted fixed asset – rail tracks and aging rolling stocks -locomotives, coaches and wagons.
It claimed its exit would not affect the concessionning plan, as other consortia of firms in the agreement would continue the assignment. In a terse response to The Nation‘s enquiries, Yewande Thorpe, of GE Global stated: “GE will be transitioning leadership of the International Consortium, selected to execute the Nigerian narrow-gauge railway concession, to Transnet. This development is in line with GE’s decision to exit the Transportation business from its portfolio. Transnet has been a trusted partner of GE for several decades. We have confidence in their ability and that of the other Consortium members to execute on the rail concession project successfully. We will continue to offer our utmost support to the team as we remain committed to the sustainable development of Nigeria.”
In order words, GE would be transferring the concessioning to Transnet International is a member of a four- firm consortia led by GE, which had been holding series of meetings with FG’s Transaction Advisers over the take-over model of the narrow gauge. Other members are: APMT Ltd, and Sino Hydro.
While Transnet handles the modernising of the tracks, APMT handles the container cargoes, while Sino Hydro handles the operationalising of the locomotives that would be provided by the principal partner – General Electric.
But the process until this present impasse had been fraught with perceived irregularities. Twice last year, Amaechi had publicly complained about “GE’s inconsistencies,” alleging that the conglomerate had “been less than transparent in its dealings with the government.”
The GE swiftly denied such allegations, claiming it remained committed to changing the ugly narrative in the rail subsector of the transportation system. Its Executive, Business Development, (Transportation, Nigeria) Mr. Eyo Ekpo, told The Nation that the consortium was still “actively engaged in negotiations with the Federal Ministry of Transportation.
Ekpo, however, disclosed that in the last one year, GE and its consortium partners – Transnet, SinoHydro &APM Terminals, have not only negotiated in good faith, but have invested significant resources. “We have been transparent and diligent in meeting all requests from the government at no cost to the Federal Government,” Ekpo said.
According to him, both parties – GE (and its consortia) and the Federal Government, are at a critical juncture of the project and it expects all contractual agreements to be finalised and fulfilled by the parties before commencing project execution.
A top NRC source hinted that long before GE divested from transportation, it had thrown a number of hurdles before the transaction advisory committee which led to an impasse.
The source which preferred not to be mentioned, said: “While the concession agreement had covered Lagos to Kano, GE had insisted on shuttling between Apapa and EBJ (Ebute Metta junction). Again, while the Nigerian government would want full bouquet of services -passenger and cargo services, GE had insisted it would only run freight services. These are issues that are still being negotiated before GE threw in the towel,” the source added.
GE’s withdrawal may however have thrown the window open for fresh negotiations for new bidders. Mr Patrick Adenusi saw this possibility when he said, GE’s withdrawal might thrown spanner into the nation’s march into a modernized narrow gauge system.
According to him, when the picture becomes clearer, the National Assembly might pass a resolution requesting the executive government to begin the process for the award of the concession again in view of GE’s withdrawal from the deal.
Though Amaechi seemed to have foreclosed this possibility last week when he disclosed that the government would be willing to continue negotiation with the other parties to the concession agreement. But even if this is accepted would the consortia be willing to accept the government’s terms, or would they be insisting on working within Lagos alone or interested only in freight services as being championed by GE?
The reality: Nigerians may just have to wait much longer for the modernisation of the narrow gauge to materialise.
