BRINGING THE NIGERIAN RAILWAYS BACK ON TRACK: CHALLENGES AND OPTIONS

BY

PROFESSOR ADESOJI ADESANYA HEAD, POLICY ENGAGEMENT DIVISION

PAPER PRESENTED AT MONTHLY NISER SEMINAR SERIES, HELD AT THE NISER CONFERENCE ROOM ON NOVEMBER 13, 2010

0 BRINGING THE NIGERIAN RAILWAYS BACK ON TRACK: CHALLENGES AND OPTIONS

Introduction

Rail transport has and continues to play a key role in the movement of goods and passengers in many countries around the world including . However, while rail transport continues to enjoy relative importance in terms of investment, growth and contribution to the national economy in several counties, it has suffered and continues to decline (in terms of modal share contribution) in Nigeria and other African countries. At a point in the , rail transport played a very crucial and significant role in its contribution to the Nigerian national economy.

According to Robinson et al (1961), Nigerian railway particularly was still playing a very active role in overland freight movement in the early years after 1960, to the extent that it accounted for approximately one-third of freight traffic. At some point in time, the Nigerian railways played a key role in enhancing colonial administration, by maintaining links between the central seat of colonial government in and other parts of Nigeria (Elechi, 1998). It also served as a major mode of transport used in facilitating the opening up of several mineral producing and agricultural areas. It was also major mover of freight and passengers across the country, especially where the rail lines traverse.

While the Nigerian economy has expanded over time (with occasional hiccups) and new centres of activities have emerged, the Nigerian railways have failed to respond to the potentially viable services and opportunities that exist. In other words, in the last three decades in particular, not much has been achieved in terms of structural transformation of the Nigerian Railways, so as to meet potential demand for rail services as well as the rapidly emerging challenges of economic growth and national development. By 1970s through to the early 1980s, both the volume of passengers and goods carried by the Nigerian Railway Corporation (NRC) had started to drop dramatically (Adesanya, 2002). Unfortunately too, the fortunes of the rail transport sub-sector have declined so precipitously due to the enormity of the problems and challenges that confront it. The effects of the poor performance of the rail transport subsector is already being felt seriously in the form of the undue pressure being mounted on the road transport subsector and the attendant huge damage to roads and loss of lives among other things.

Suffice it to mention that the Economic Transformation blueprint of Nigeria (Vision 20:2020 document) itself has noted that one of the supposedly key drivers of the economy at the bottom end of sectoral activities and which is regarded as practically dead is rail transportation (NPC, 2009:24). Given this situation and the huge opportunities that exist for the Nigerian railways to contribute significantly to the transformation of the Nigerian economy, it is critical to examine why the Nigerian railways have not woken up from its slumber despite the various efforts at resuscitating it. Therefore, bringing the Nigerian railways back on track is very important and how this can be achieved will depend on how well we are able to articulate the challenges that confront this mode of transportation and the options that are feasible and sustainable. This paper is structured into nine parts. The first is the introduction, followed by a general perspective on rail transport and its impact on development. The third section of the paper provides an overview of rail transport and national development in Nigeria. The challenges facing the Nigerian Railways are identified in the fourth

1 section, while the fifth highlights some of the key efforts made recently at resuscitating the Nigerian railways. International experiences with rail reforms are discussed in the sixth section, while the seventh to the ninth parts of the paper focus on policy options for moving the Nigerian Railways forward, policy implications and conclusions respectively.

Rail Transport and Its Impact on Development

In many countries, rail transport has and continues to play a catalytic role in bringing about socio- economic development. It contributes substantially to the movement of passengers and freight. Indeed, railways can provide the most cost-effective, affordable, energy saving and environmentally friendly form of transport, when traffic densities are high. When properly integrated with other modes of transport, economic levels of traffic can be consolidated to enable the railway to provide efficient services for high density flows of homogenous traffic carried over relatively long distances, including high volumes of containerized cargo or bulk freight such as oil, coal, steel or agricultural produce. Railway transport could be energy flexible and energy efficient, when electric traction is used.

Rail transport is also an important mode for passenger transport. Commuter traffic by rail for example is essential to keep cities accessible. Therefore, many cities, particularly in the developed world continue to develop various forms of rail transport (metros, Light rail transit, transport) in order to divert traffic to the rail and partly reduce congestion on city roads and so on. For example, in Europe, in 1998, 290 billion passenger-kilometers were generated (6 percent of all travellers) and 241 billion tonne-kilometers of freight (8.4 percent of the total, down from 21 per cent in 1970). Indian Railways (IR) is one of the largest railways in the world. Trains in India carry over 481 billion tonne-kilometres (BTKMs) and 695 billion passenger kilometres (BPKMs) of goods and passenger traffic respectively every year. IR also carries around 40 per cent of freight traffic and 20 per cent of the passenger traffic in the country (Government of India, 2009) and plays a key role in the Indian economy because it builds and maintains infrastructure assets like track, electric traction, signalling systems, telecom network, stations/terminals and, interestingly, it manufactures locomotives, coaching stock, wagon and components of rolling stock like wheel & axle. IR runs workshops to maintain its rolling stock and it is involved in ancillary activities like catering, tourism so on. In order to appreciate the level of contribution of rail transport to the economies of countries, Table 1 has been presented, in terms passengers carried and goods hauled. Developed countries certainly performed better that the developing countries in terms of the indicators shown. Table1: Railway Performance Indicators

Country Rail line (total route km) Passengers Carried (in Goods Hauled (million ton- million passenger-km) km) (20000-06) 3,572 929 1,471 Australia 9,528 1,290 46,164 Canada 67,346 1,430 445,689 China 62,200 666,200 2,170,700 Cote d’Ivoire 639 10 129 Egypt 5,150 40,837 3,917 France 29,286 76,159 41,898 977 85 242 Germany 34,218 72,554 88,022 India 63,465 575,702 407,398 Japan 20,052 245,959 22,632 Mozambique 3,070 172 768 Nigeria 3,528 174 77 Portugal 19,507 16,742 45,438 Russia Federation 85,245 177,639 1,950,900 United Kingdom 15,810 43,200 22,110

2 United States 153,787 47,717 2,589,340 Source: World Development Indicators (World Bank, 2008:330-302)

Railways have made varying degrees of impact on the development of the countries where they exist (Kolars and Malin, 1970). Rowstow (1960), for example, described railways as 'historically the most powerful single initiators of (economic) take off, being a main force in the widening of markets and a prerequisite to expanding the export sector’. Hilling (1996) also observed that in many parts of Africa, railways provided the really first alternative to human porterage, and brought with them some economic advantages. In East and , early rail lines were critical to the development of commerce, the expansion of commercial agriculture and the stimulation of settlement expansion. The 'line of rail' became the zones of economic activity, and the rail heads were the focal points for the expansion of settlements and economic input and output (O'Connor, 1965). Also, in Ghana, the Accra-Kumasi-Takoradi rail line clearly reflects a concentration of economic activities (Hilling, 1996).

In many countries around the world, freight is transported by train. This is largely because transporting freight by train is highly economic when freight is being carried in bulk and over long distances. In the United States, for example, the rail system is used mostly for transporting freight. In Romania and the Commonwealth of Independent States (CIS), a preponderance of rail freight tonne- km, in fact more than 90 per cent, moves by rail. China, United Kingdom and Russia among others depend heavily on rail for long distance movement of bulky commodities (Hilling, 1996).

The importance of rail transport in providing the stimulus for administrative control, regional growth and development are well documented. Economic growth, for example, followed the provision of rail lines into the cocoa belt of Ghana (then Gold Coast) in 1903 and the groundnut belt of Northern Nigeria in 1912 (Mabogunje, 1980). In Ghana, the completion of the first rail line in 1903, from the coast of Sekondi to the gold mining areas of Tarkwa immediately resulted in a sharp fall in land transport cost per tonne of imported goods from the mines to about 25.35 pounds to about 3.00 pounds (Hilling, 1996). Hogendorn (1968) also observed that within 18 months of reaching , the railway had so stimulated groundnut production to the extent that every available piece of land was planted with groundnuts. It was observed that the impact of the railway on the development of the Nigerian economy was such that it enhanced the exportation of groundnuts from about 10,000 tons in 1912 to an average of 40,000 tons per annum for the next decade (Onakomaiya, 1978).

The rail transport sector is also a key employer of labour. According to Galenson and Thompson (1994), China Railways had well over 3 million staff in the early 1990s, while Indian Railways employed up to 1.6 million people. In 1992, the Polish Railways employed 275,000. The Japanese National Railways employed 414,000 workers in 1980, and this number was reduced to 280,000 prior to its privatization and restructuring in 1987 (Fukui, 1992).

It should be mentioned here that all over the world, rail transport has continued to face stiff competition from road transport. Statistics, for instance, show that the relative share of rail transport (modal share) has declined considerably over the last 30 years in the European Union Countries. In 1970, rail accounted for 10.1 per cent of all the passenger-kilometers, while this figure dropped to 6.1 per cent in 1999. In most African countries, unfortunately too, the railways are not growing rapidly because they have not been encouraged or allowed to respond to changes in the

3 economies they serve. The railways have become a fiscal drain on the economy already short of resources, while longer range maintenance and capital needs are neglected, thereby further diminishing railways’ capabilities and the potential contributions to national development (Huff and Thompson, 1989). This is in terms of stimulating agricultural and industrial development, encouraging investment and movement of production factors, employment generation in the railway and support activities sectors, promoting national cohesion as well as encouraging interregional trade and commerce among others.

In spite of its benefits, the weaknesses of railway transport include inflexibility of operation (hence, its inability to provide door-to-door services), vulnerability to level of industrial activity, the image of inefficiency and unreliability, and it is usually vulnerable to industrial action due to its being a labour intensive and heavily unionized industry (Gubbins, 1988)

OVERVIEW OF RAILWAY TRANSPORT AND NATIONAL DEVELOPMENT IN NIGERIA

Following the laying of the first railway track in 1898, the rail network had expanded from the South- West (Lagos) to the North-East (Maiduguri), and from the South () to the North-West (Kaura Namoda). The Nigerian railway consists of 3,505 kilometers of single track route of 1,067mm (narrow) gauge and 277 km of the standard gauge (that is, the Itakpe- line). Railway in Nigeria still maintains a predominantly North-South orientation which makes a Port Harcourt bound rail commuter from Lagos traverse 1,820km as compared with only about 500km as the crow flies.

The primary reason for constructing the railways in Nigeria was to open up the hinterland for the exploitation of agricultural and mineral resources, as well as to provide leverage for strengthening colonial political administration (Jaekel, 1997). In fact, the motive for constructing the railway was partly administrative, in order to provide a link between the northern and southern parts of Nigeria, and partly economic, so as to enhance the evacuation of mineral resources and agricultural products from the hinterland to the seaports, for onward shipment to overseas markets in Europe (Elechi, and Jakpa, 1981). The flow of goods to the hinterland was also facilitated by the railway (Olanrewaju, 1986).

The existing Nigerian Railway Corporation (NRC) was created by the enabling Act of 1955 (as amended in 1990), after starting as a Government Department in 1898. The responsibilities of the NRC as spelt out in the Act establishing it include ‘carriage of passengers and goods in a manner that will offer full value for money, meet the cost of operations, improve marker share and quality of service, ensure safety of operations and maximum efficiency, meet social responsibility in a manner that will meet the requirements of rail users, trade, commerce, industry and the general public’.

The Nigerian railways during its heyday, contributed significantly to the export of products such as cotton, groundnut, hides and skin, tin and columbite, coal and so on, and all of the promote growth and development in the areas where they were produced (Onakomaiya, 1978). As a result of the oil boom of the early 1970s, the Nigerian Railway Corporation benefited from the patronage of Peugeot Automobile of Nigeria, Inland Containers Limited, Steel Rolling Mills, West African Portland Cement (now Lafarge), Flour Mills, Nigerian National Corporation and Cattle traders among others (Ayodele, 2000 and Adesanya, 2002). In addition, a sizeable proportion of the goods movement to and from the Nigerian seaports was by rail transport. More significantly, the rail transport sector contributed partly to industrial growth as well as interregional trade and commerce. It also

4 facilitated passenger movement and generated employment, while also contributing reasonably to National GDP.

To a considerable extent, the Nigerian railways met some of its responsibilities, in terms of their contribution to economic growth as well as promoting interregional and international trade, especially in the first half of the twentieth century (Robinson et al, 1961 and Onakomaiya, 1978). In the early 1970s, which coincided with the first phase of oil boom in Nigeria, petroleum products and containers became important components of rail traffic. In addition, a sizeable proportion of the goods movement to and from the Nigerian seaports was by rail transport Up the mid-1970s, the rail transport sector did not only stimulate industrial growth as well as interregional trade and commerce, it plays a key role in passenger movement, in employing people as well as contributing substantially to the GDP.

Given limited rail expansion activities, as at today, only a few state capitals are connected by the railways. Besides, only the Apapa and Port Harcourt major seaports are served by the railways (Okanlawon, 2006). In short, just 19 out of the existing 36 states are connected by the railway (Edward, 2001).

CHALLENGES FACING THE NIGERIA RAILWAYS

In this section of the paper, some of the critical challenges confronting the Nigerian railways are examined. They include the following:

Poor Funding and Huge Operating Losses

The deterioration in the railways has been partly a result of lack of sufficient budgetary provision by the Federal Government coupled with poor management by the Nigerian Railways Corporation (NRC). The Federal Government has disproportionately invested and allocation funds to this sector, in favour of the road transport sub-sector. This situation is traceable to government’s lip service and lackadaisical approach to addressing the problems facing the NRC (Filani and Adesanya, 2010). The rail transport subsector hardly gets up to one-fifth of the allocation to the transport sector. Indeed, the lack of necessary resources to keep tracks, rolling stocks and maintenance facility in reasonable working condition is said to have produced a serious deterioration of the railway system. (Draft National Transport Policy, 2010). In spite of generating relatively small revenue annum, its pension bills alone, which rose from N577 million in 1991 to N2.4 billion in 2009, has eroded into what is generated 9NRC Annual Report, 2009). Between 1995 and 2001 alone, its average operating loss was 13 per cent (and as high as 52 per cent in 1995). This proportion rose to 34.2 per cent between 2004 and 2008 (Five Year Financial Summary of NRC, 2004-2008).

Poor Response to Emerging Rail Transport Needs

The rail transport network remained has remained virtually static, with little accretion to the network since the early 1960s. This near stagnation in rail expansion has not allowed rail network to link principal urban centres or major growth points that have since emerged. Ironically, the Nigerian economy has expanded and new growth points have emerged after the completion of the Borno Extension (Kuru to Maiduguri line) in 1964. Unfortunately, rail lines remained as they were until the early 1990s, which could be referred to as the third phase of rail line expansion, when the Itakpe-

5 Ajaokuta-Warri rail line construction project began. It is a 277- kilometre standard gauge (1435mm) rail line. There is also the 19-kilometre standard gauge rail extension project from Eleme to Onne deep-sea port. (CBN Annual Report and Statement of Accounts, 1998:116).

Inadequate Locomotives and Rolling Stock and other Facilities

Rail transport under the NRC suffers from inadequate and poor condition of available locomotives and rolling stock. In 2004, out of a total of 3,987 wagons available in the system, 57.5 per cent were defective, while 36.6 per cent were fit and operational. The remainder was beyond economic repairs. Out of available stock of 683 coaches, only 34.6 per cent were fit for use. As for locomotives, about 70 per cent of the NRC fleet were have outlived their lifespan and usefulness. Consequently, the NRC is constrained with running just skeletal services. In other words, locomotive and rolling stock became grossly inadequate wagons to meet the requirements of clients. In addition, available railway communication and signalling systems remains terribly obsolete and inadequate, although inconclusive efforts have been made to modernise them. The existing track structure of the Nigerian railways still affects rail subsector performance. The track structure still consists primarily of jointed rails, whose weights vary from 30 kg/m to 40 kg/m, and the ballast cushion is up to 30 centimetres. The lightweight rails continue to limit the axle loads that they could bear, to about 12.5 tonnes to 20 tonnes. Whereas, for any meaningful impact, a more superior track structure with heavy continuous welded rails of up to 60 kg/m is needed to move heavier train loads (Babatunde, 1988).

Loss of patronage to the Road Transport Sector

The current imbalance in modal share between rail and road transportation emerged after the 1960s. Up until then, the railways carried over 60 per cent of the freight tonnage compared to its current share of less than 2 per cent. The highest number of passengers carried was 15.5 million in 1984 and the highest volume of freight was 2.4 million metric tonnes in 1977, and by 2000/1 traffic had fallen to 2 million passengers and less than 300,000 metric tonnes of freight. The railway now accounts for less than one per cent of land transport in the country. Between 2000 and 2010, the rail passengers carried annually were barely up to 2 million, while the tonnage of the freight or goods conveyed was not up to 170,000 tonnes in any year, during the period under examination (Figs 1 and 2). Whereas, in the early 1960s, close to 3 million tonnes of goods were conveyed annually (Table 2). The poor quality of rail service has made the NRC to lose the patronage of some of its principal clients, such as the Nigerian National Petroleum Corporation (NNPC), Larfarge Cement -Wapco PLC, Peugeot Automobile of Nigeria (PAN), Flour Mills and so on. In addition, it lost the patronage of passengers too.

Table2: The Operational Performance of the NRC (1963-2010)

Year Passengers Carried Passenger Revenue Goods Moved – Freight Revenue (‘000) (N‘000) Metric Tonnes (‘000) (N’000) 1963/64 11,288 N/A 2,960 N/A 1964/65 10,630 N/A 2,834 N/A 1965/66 11,621 N/A 2,884 N/A 1966/67 10,005 N/A 2,481 N/A 1967/68 6,916 N/A 1,868 N/A 1968/69 8,007 N/A 1,614 N/A

6 1970 8,942 4,676 1,311 18,438 1971 5,760.3 5,865.3 1350.7 15,960 1972 5,819 7,447 1,519 17,095 1973 5,131 6,906 2,129 18,025 1974 4,342 6,906 1,098 12,205 1975 6,755 11,003 1,612 14,724 1976 7,491 10,004 1,452 16,722 1977 6,740 10,822 2,375 17,172 1978 6,750 12,982 1,543 21,861 1979 8,606.9 15,316.4 1,129.9 18,530 1980 10,855.1 25,393.7 1,620.2 30,382.3 1981 9,972.7 22,871.4 2,116 44,493.5 1982 11,753 28,487 2,163 48,431 1983 13,012 31,333 1,619 36,636 1984 155,552 33,938 1,458 33,335 1985 11,709 37,527 1,182 34,247 1986 9,912 39,088 825 27,776 1987 7,407 36,510 353 15,632 1988 3,629 15,157 294 13,200 1989 6,520 24,318 270 18,155 1990 6,345 31,403 319 35,911 1991 3942 19,314 330 64,460 1992 1,747 17,015 204 42,743 1993 1,502 14,627 157 74,148 1994 1,438 35,967 142 121,317 1995 1,729 39,402 108 133,915 1996 1,784 39,560 138 161,350 1997 2,974 126,200 270 136,228 1998 3,060 138,200 1,513 375,200 1999 1,788 88,882 737 404,346 2000 2,610 142,920 116 155,865 2001 1,283 110,455 132 165,256 2002 987 101,017 98 132,908 2003 1,622 156,276 58 101,129 2004 1,731 206,772 62 62,575 2005 752 87,178 84 110,011 2006 708 84,322 41 108,948 2007 1,478 145,100 36 82,811 2008 1,996 233,513 47 78,600 2009 1,285 204,573 52 60,711 2010 1,514 205,241 138 81,822 Source: Nigerian Railway Corporation Annual Reports

Fig 1: Passengers Carried (2000 -2010)

7 Fig 2: Freight Carried (‘000 metric tonnes) (2000-2010)

Configuration of Track and Facilities Problem

8 The rail line is characterised by worn out rails, steep gradients, sharp and in some cases, reverse curves, leading to low speed of train, frequent derailments, poor turn-around time for wagons/coaches and even accidents. Lack of spare parts/equipment to undertake scheduled and/or preventive maintenance also constitute a key impediment to Nigerian railways productivity and performance. The effect of this on operations is a reduction in the number of operational trains and disruption of train services.

Weak Political Will and Commitment

Above all, the lack of commitment in implementing and meeting the timelines for plans and programmes, including those spelt out, in recent years, in the Master Plan for an Integrated Transportation Infrastructure and the 25 Year Strategic Vision for Nigerian Railway System is a major challenge to the resuscitation and development of the railways to a modern and efficient railway system.

Other Problems

Other problems and challenges facing the Nigerian railways include poor productivity (and its negative effect on staff morale), retention and maintenance of unremunerative routes, huge wage and pension bills - despite the reduction in staff strength of the NRC from about 45,000 in the 1970s to about 7,000 at the moment, and poor quality service (Elechi, 1998, Odeleye, 2000 and Adesanya, 2005).

Recent Efforts at Resuscitating the Nigerian Rail Transport Sector

In order reverse the spiralling decline of the NRC operations and services, a few measures have been taken in the recent past. The Rail India Technical and Economic Services (RITES), for instance, were contracted by the Federal Government for three years (from 1979) to overhaul and manage the services of the NRC among other things. The gains arising from the improvement of rail services after RITES had left could not be sustained (First National Rolling Plan, 1990 – 92, Vol. 1: 162).

The signing of a sino-Nigerian contract of US$528,697,000 with the China Civil Engineering and Construction Corporation (CCECC) in December 1995, for 36 months was also a move to rejuvenate the Nigerian railways (Odeleye 2000, and Adesanya, 2002). More specifically, the CCECC was to carry out necessary track surveys, repair and align rail tracks, eliminate sharp curves and renew existing sleepers with additional ballast. Other things expected of the CCECC included the supply of 50 locomotives, 150 coaches and 400 wagons. This particular intervention by the CCECC remained inconclusive at the expiration of the contract in 1998.

Another noteworthy initiative for restructuring Nigerian railways was suggested in the early 1990s, in which the NRC was to be restructured into four interrelated companies, namely: The Nigerian Railway Plc, Nigerian Railway Inspectorate Board, Nigeria Rail Track Authority, and Nigerian Railway Engineering Plc (FGN, undated). This proposal was not implemented.

9 It is important to mention the Federal Government’s plan of rejuvenating and modernising the rail transport sector by preparing the 25 years (2002-2027) strategic vision document for the Nigerian railways. The vision is geared towards ‘re-establishing the railway as a key driver in the transport sector, by transforming the Nigerian railway system from a non-performing and debt ridden corporation to a dynamic player in the transport sector through strategic investments, new policy initiatives, and by encouraging investment by the private sector’ (FRN, 2002). The Master Plan for an Integrated Transportation Infrastructure (MITI) that was prepared in 2002 is also expected to be a blueprint for coordinating and integrating all modes of transport and, by implication, will strengthen the growth and development of the Nigerian railways.

For proper coordination and overseeing the implementation of the railway reform process among other things, the National Council on Privatisation (NCP) established the Transport Sector Reform Implementation Committee (TSRC). The TSRC came up with a reform agenda that will culminate into the concessioning of the NRC through the following steps:

• Formulate and implement a new transport policy for Nigeria

• Enactment of a new Railway Act

• Creating a new legal and regulatory framework within the context of the proposed National transport Commission

• Restructuring of the NRC

• Divesting NRC non-core assets, and

• Introduction of private participation, by granting concessions for both freight and passenger operators.

In order to revive the ailing Nigerian railways, concessioning has been suggested (Khalidson, 2005 and FMT, 2006). This would involve segmental concessions of routes to two or more concessionaires. Under this arrangement, railway infrastructure will remain the property of the Federal Government, while the concessionaires are expected to lease the rolling stock and/or bring in additional rolling stock for their operations. The concessionaires are also expected to participate in the rehabilitation and maintenance of relevant infrastructure. The concessions were planned to be granted for between 25 and 30 years. The planned concessioning in the rail transport subsector is aimed at injecting private sector investment and expertise to rehabilitate the existing line and also expand the rail network to cover other parts of the country in line with the 25-Year Strategic Rail Development Vision In 2005, the Government approved the concessioning of the railways (FMT, 2006).

According to Chigbue (2005), the Nigerian railways would be divided into autonomous railways through the following concessions:

oConcession 1: Western Railway – comprising of the route from Lagos to Kaura Namoda, through Kaduna, including all branch lines along the route.

oConcession 2: Eastern Railway – consisting of the route from Port Harcourt to Maiduguri, including Kaduna to Kafanchan link and all branch lines along the route.

10 o Concession 3: Central Railway – comprising of the standard gauge route from Itakpe to Warri (through Ajaokuta), and

o Concession 4: Lagos Urban Rail Mass Transit.

It also should be mentioned that some form of partnership exists between Nigerian Railway Corporation and OANDO PLC to transport petroleum products from Lagos to Kano, after a Memorandum of Understanding (MOU) was signed in 2004. This entails rehabilitation of some NRC locomotives, rail tankers and so on, in order to facilitate the movement of OANDO’s petroleum products, in particular.

Concerns have been shown on how the improve people’s mobility with modern rail systems, of which light rail transit is one. Indeed, the Federal government intends to develop light rail transit system in the urban areas such as , Kano, Lagos and Port Harcourt. Efforts by the Lagos State government is worthy of note here. The Lagos Light Rail project is currently being sponsored by the Lagos State Government and supervised by the Lagos Metropolitan Area Transport Authority (LAMATA). The project, for which seven lines are being planned (Red, Blue, Green, Yellow, Purple, Brown and Orange), is to be under a concession contract to the private sector (that is, under a PPP arrangement). The concessionaire will provide railway equipment including electric power, signalling, rolling stock and fare collection equipment among other things (en.wikipedia.org). LAMATA is presently focussing on the 27 km Blue Line (Okokomaiko-Marina) and the 30 km Red Line (Agbado- Marina).

In November 2006, the China Civil Engineering and Construction Corporation signed an US$8.3 billion contract to build a new standard-gauge rail link between Lagos and Kano in the north. A second rail link is also being contemplated between Port Harcourt and Jos in the interior. Altogether, about 8,000 kilometers of standard-gauge rail lines are to be constructed.

Since 2009, the NRC has been rehabilitating the existing narrow gauge railway using conventional contracts. It has also purchased 25 new locomotives, in addition to refurbishing a few locomotives and rolling stock (coaches, vans etc). The signalling and communication system is also being upgraded at booster control base in the 7 District Centres and along the rail route.

Rail Transport Reforms and their Impact: International Experiences and Lessons Learnt

Several countries have introduced several reformatory measures in order to improve the operation of their railways across the globe. For instance, the former national Romanian Railways has been restructured recently into four companies:

• Rail Infrastructure Company (CFR) • Passenger Rail Transport Company (Calatori) • Freight Rail Transport Company (Marfa) • The Railway Information Systems (IRIS)

Interestingly, these companies are fully owned by the state. The main income source of the CFR is the Track Access Charge (TAC) levied on all the operating companies. The passenger company provides extensive passenger service at low tariffs, which are supported by the state through Public Service Obligation (PSO). The freight railway company, Marfa, is managed commercially and receives

11 no subsidies. Therefore, it has the freedom to set its fess and tariffs. The private operators now have 10-15 per cent of the rail freight market.

In the United States, the response to the problems of the railways included the creation of the National Railroad Passenger Corporation (Amtrak) in 1971 and a shift in focus to rail freight services by existing railway companies. Amtrak is wholly owned by the federal government for providing intercity rail passenger service. The Consolidated Rail Corporation (Conrail) was also formed through the nationalisation, reorganisation and subsequent privatisation of seven railways in the Northeast region of the United States. The Staggers Act of 1980, radically changed the ability of railways to market their products, in terms of both pricing (through substantial relaxation of rate making regulation) and quality (for which customers were willing to pay).

The results of the rail transport sector reforms in the United States have been outstanding, in that rail traffic has remained relatively stable after 1980, customer service levels have increased, labour and physical assets of rail companies have increased dramatically, and the profitability levels reached have not been seen since the turn of the century (Thompson, 1993 and Coyle et al, 1990). The main lesson to be drawn here is that concrete and well-thought out measures need to be taken to deal with inefficient rail operations and policies.

Rail Concessions in Africa With respect to the railways of Sub-Saharan Africa, many of them are said to be in a particularly parlous state, having been starved of investment and even basic maintenance funds for years (Huff et al, 1989 and Courier, 1998). In Africa, private financing of railways became a reality in 1995 with the affermage of the railway operations between Abidjan (Cote d'Ivoire) and Ouagadougou () (Thiam, 1998, and Mitchell and Budin, 1999). This is a type of concession contract in which the operator leases assets from the public authority, while the latter provides major investments (Guislain, 1997). This transaction has since been followed by a series of railway concession agreements between the private and public sectors in countries such as , Gabon, Madagascar, Zambia, Zimbabwe, Mozambique and Senegal/ among others (Table 3).

Table3: African Countries that Have Concessioned their Railways

Country/Countries Involved Concessionaire Year Burkina Faso/Cote d’Ivoire Sitarail 1995 Cameroon Camrail 1999 DRC Sizarail 1995-1997 Gabon Transgabonais 1999 Kenya/Uganda URC/KRC - Malawi CEAR 1999 Mali/Senegal Transrail 2003 Mozambique (Beira) 2004 WACEM 2002 Zambia RSZ 2003 Zimbabwe BBR 1997

Source: World Bank Transport Form: Rail Concessioning Since 1990.

12 Early results from privatisation transactions in the railway have so far been mixed. Given the weak investment and regulatory climate in many African countries, investment flows have been understandably limited in the first place. Additionally, the nature and size of the privatized transport operations and infrastructure have necessitated the abundant use of a range of incentives (financial, economic, commercial and regulatory) in order to secure private operators’ interest. These practices have raised many questions about the actual viability of the completed transactions given the scope of the ‘financial sweeteners’ granted to private operators to compensate for the weak investment climate.

Success Stories of Rail Transport Privatisation The British Rail In 1992, the British Government privatised the railway, by creating vertically integrated regional railway companies. There is a single national network operator, initially referred to as Railtrack. With the reforms, passenger numbers grew, new services were added to the timetable and new rolling stock was placed on order. Along the line, Railtrack ran out of money and administrators were appointed to take over the company in October, 2002 and renamed it Network Rail. One of its early decisions was to bring maintenance back in-house.

The current structure of the British rail is that, at the apex is Government (the rail division of the Department for Transport). There is also the infrastructure manager, Network Rail (that replaced Railtrack) and the train operators and their passenger and freight customers. The Office of Rail Regulation (ORR) carries out both economic regulation and safety regulation.

Through railway concessioning, the vertically integrated British Rail was unbundled into about 100 separate companies. The operations of passenger railways were transferred to 25 Train Operating Companies (TOCs) by public auction, for a duration varying between 7 and 15 years. The TOCs operate designated passenger train services on a franchise basis. In addition, three Rolling Stock Companies (ROSCOs) were created to own and lease rolling stock to TOCs. Network Rail owns the track, stations but not the trains or other train operator assets. Network Rail operates the network and maintains railway assets in accordance with best practice and its income comes mainly from passenger and freight operators who pay track access charges for access to the network (after track access agreement with Network Rail). The most obvious success of the railway has been passenger growth and freight growth.

Japanese National Rail (JNR) In Japan, there are more than one hundred private railway companies and the Japanese National Railways (JNR), which was by far the largest nationwide operator. The JNR controlled about 80 per cent of the 27,000 km of rail lines in Japan in 1980 (Fakui, 1992). However, the huge annual deficit of the JNR, which was about US$18 billion in 1985 and an accumulated deficit of US$286 billion, coupled with a drop in JNR's share of passenger transport volume from 55 per cent in 1955 to 23 per cent in 1985, and a precipitous decline in freight traffic from 52 per cent to 5 per cent over the same period, forced a change in its ownership and operating structure (Fakui, 1992). The former JNR was not only huge, monolithic and production driven, it also had 400,000 employees and five previous restructuring failures.

The reforms of JNR were undertaken in 1987. In 1949, the Japanese National Railways was established in 1949 as a ‘public enterprise’. In Japan, between 1960 and 1987, the share of

13 passenger traffic handled by rail sector went down from 51 per cent to 22 per cent, while that of freight traffic went down from 39 per cent to as low as 5 per cent. Consequently, the financial position of JNR rapidly deteriorated. After recording a deficit of 30 billion yen in 1964, debt continued to accumulate, to the extent that the Japanese government provided subsidies of 600 billion to 700 billion yen to JNR every year. By the end of fiscal 1986, the long-term liabilities of JNR had reached 25 trillion yen. The precarious position of JNR’s financial situation made it bankrupt. Some of the reasons why JNR went bankrupt included its organisational structure as a public corporation which was not equipped for competition. JNR was subject to government interference on budgets, fares, and personnel affairs. Construction of new lines proceeded without due regard for profitability and JNR had minimal managerial autonomy.

In 1987, the government of Japan took steps to divide and privatise JNR. Initially, the government retained ownership of the companies. By 2006, all of the shares of JR East, JR Central and JR West had been offered to the market and they are now publicly traded. The freight service had to survive in a competitive logistics industry. Therefore, by taking the necessary steps to set up a system with clear demarcation of responsibilities, the freight railway was separated from the passenger railways as an independent company. Its success factors included dividing the business into appropriate sizes for each company, creating mutual competitive consciousness between all operators, elimination of interference or reduction of government involvement, business diversification for improved corporate profits and flexibility in the business activities.

The key lesson from the JNR privatisation is that all the 6 companies have reduced the work force by about 25 per cent and reduced the long term debt obligations by as much as 40 to 50 percent. In addition, the seven JR companies have paid an annual average of about 260 billion yen to the government or municipalities for corporate tax, fixed asset tax, and other fees and charges. From the perspective of national finances, it can certainly be said that the JNR reforms were successful. In short, the privatization of JNR is a very good example of how to transform a heavily subsidized, loss making company into a profitable modern service provider transporting more passengers than ever before and competing on cost and service with other modes of transport.

A Failed Example of Rail Privatisation (Argentina Rail) Since nationalisation of the railway in 1948, the rail network in Argentina had been operated by the state-owned company Ferrocarriles Argentinos (FA), made up of six relatively independent divisions. Before privatisation began in 1990, FA ran a national network of about 35,000 km, employed 92,000 people and was losing more than US$1.0 billion a year with much of the track and many of the locomotives and rolling stock in poor condition.

The plan was to break up the network into segments and to grant concessions to private companies for their operation through competitive bidding. Freight and passenger services were separated and, since most of the intercity passenger services were not commercially attractive to the private sector, the government offered these to the provinces. The remaining passenger services in the city of Buenos Aires, including the five lines of the Metro, were potentially more viable and were treated separately.

Privatisation began with the granting of long-term concessions (30 years with an optional 10 year extension) to six companies for the operation of freight services. These companies were responsible for all operations and maintenance and for the implementation of the investment programme detailed in their bid. The fixed assets remained the property of the state and the operators had to pay for their use and to rent rolling stock. Freight tariffs were deregulated but were subject to state

14 approval. The concessionaires were expected to hire as many FA employees as were required and redundancies were financed by the government with the help of the World Bank.

In March 1991, the government separated the urban passenger rail services and metro operating within the city of Buenos Aires from the rest of the rail network, and to this end created the holding company ‘Ferrocarriles Metropolitanos S.A’. While the freight concessionaires were expected to make a profit, it was recognised that the operation of these services would require public subsidy. Concessions were granted to the bidder who would require the lowest subsidy.

The privatisation of Argentina's railways was considered to be a good business deal in the 1990s for the companies that began to run the train service with subsidies from the state. But a decade later, the private management of the passenger and cargo railway services through concessions had begin to show signs of dismal failure for both passengers and the public sector. The total network of railway lines shrank from 35,000 to 8,500 km, and the number of employees from 95,000 to 15,000. The state also did not benefit from the privatisation as it now spends the same amount on subsidies to the private companies that it used to spend on maintaining the railway lines.

The privatisation of Railways in Argentina has been a big failure and several important lessons can be learnt from the same. The most important lesson being that PPPs do not work where they are not driven by ‘value for money for the consumer’ philosophy but are used as a resource augmenting strategy by the Public Sector. Secondly, a holistic view has to be taken while privatizing the Railways and a piece meal approach is a recipe for disaster.

Policy Options for Moving Nigerian Railways Forward

Having examine the challenges confronting the Nigerian railways some policy options for moving forward are suggested in this section of the paper.

Improved Funding: In the short run, the financial situation of the NRC has to be drastically improved through better and sustained funding (through various sources including internally generated revenue). Recent but piecemeal efforts at running a few rail services as well as resuscitating the Nigerian railways are acknowledged, but improved funding for more locomotives and rolling stock, improved condition of workshops and so on must be provided. Indeed, the planned PPP model of development of this mode does not mean that government should totally abdicate its responsibilities to the private sector.

Enactment of the Railway Act

There is no doubt that a Railway Act that meets the current reality of the country is long overdue. Unfortunately, the Railways Bill that had been sent to the National Assembly for over five years has not been given the expeditious passage that it requires. This situation is considerably preventing interested stakeholders (apart from the NRC) from participating in running a system that is moribund and in need a new lease of life by way of additional funds from other stakeholders, including state governments, private investors and concessionaires. This step will make rail transport services to be modern and more vibrant in Nigeria.

Implementation of Existing Plans for Developing the Rail Sector

Without any iota of doubt, several plans concerning the rejuvenation and modernisation already exist, but of the will to implement them is extremely weak. This has drawn the rail transport sector

15 back by almost 50 years. Rapid action needs to be taken on them if there is really a genuine interest in revitalising this mode of transport. Nevertheless, there is the need to emphasise the need to extend the existing rail network to connect major seaports and the Inland Container Depots (ICDs) and Container Freight Stations (CFS) when completed (Table4). The East-West rail connection, which is long overdue, should be given priority attention.

Table 4: Proposed ICDs and CFSs

State Location of ICD (land allocation in hectares) Preferred bidder

Kano Zawachiki (200 ha) Dala Inland Container Ltd

Oyo Erunmu (102.26 ha) Catamaran Logistics Ltd

Abia Ntigha (in Isiala Ngwa) (106.49 ha) East Gate Inland Container Terminal Ltd

Plateau Heipang (138.37 ha) Duncan Maritime Services Ltd

Bauchi Galambi District (197.03 ha) Central Inland Terminal Ltd

Location of CFS (land allocation area in hectares)

Katsina Funtua (100ha) Equatorial Marine Oil and Gas Ltd

Borno Maiduguri (100 ha) Migfo Nigeria limited

Gombe Duku No preferred bidder yet

Sources: Nigerian Shippers’ Council (2004), Adams (2006), www.shipperscouncil.com

Promotion of Intra-Urban rail Transport Services This policy option is being made cautiously. First, on the ground that investors (apart from the NRC) can participate in rail services provision. Many cities in Nigeria are not well-served by one form of rail transport or the other (trams, light rail transit services etc). Unfortunately, several parts of individual Nigerian urban centres that the rail lines traverse are not served. To therefore benefit immensely from rail transport, large urban centres like Kano, Ibadan, Port Harcourt, Kaduna and so on, must begin to plan for the provision of intra-urban rail services. This is partly to ease the problem of severe vehicular traffic congestion that many of them currently face and will also make them healthy and environmentally friendly (Plates 1 and 2 show some forms of intra-urban rail transport services in the UK and Egypt).

Plate 1: Jubilee Line (London) Plate 2: Cairo Mero

Imposition of Stringent Sanctions and Punitive Fees on Heavy Goods Vehicles

16 As already noted, the poor situation of the rail transport sector has brought about a major shift to the road transport services, in terms of passengers and goods. Many of the trunk roads in Nigeria have also been destroyed by the heavy goods vehicles that hardly observe axle load limits. It is the responsibility of the appropriate authorities to monitor and impose severe fines on heavy goods vehicles that continue to damage Nigerian roads with impunity.

Strengthening of Local Capacity to Build Locomotives and Rolling Stock

As Nigeria strives to become one of the 20 leading economies by 2020, industrialisation as well as the development and strengthening of local capacity for the manufacture of relevant locomotive and rolling stock spare parts become imperative. In the 1970s and 1980s, there were plans by the NRC to establish a rolling stock manufacturing plant in Kaduna, in conjunction with Daewoo Corporation of South Korea. The NRC Diesel workshop in also met the specification for diesel locomotive manufacturing, according to the feasibility studies carried out by General Electric of the United States of America (Media Research, 1988). This step would not only create job opportunities, but would help in conserving foreign exchange that would have been used in procuring locomotives, widen the market for sales of train spare parts and in reducing down-time of locomotives and rolling stock.

Policy Implications

As it did in its hey days, the rail transport subsector can significantly contribute to the transformation of the Nigerian economy, as it has done and is still doing in several countries (see plate 3, which shows a double stacked container train, which can be a feature of modern rail transport in Nigeria). However, more determined steps and stronger political will need to be exhibited. Beyond mere addressing the prevailing 'rail transport problems', rail transport policy in Nigeria should be adequately responsive to the existing and future rail transport users' needs, in terms of supply and demand for rail transport services, especially in the light of emerging industrial and economic map of Nigeria among others. Furthermore, the attractiveness, extent of utilisation and operating profits, and the weight of railway problems on rail operations and management would be some of the critical factors that would determine the sustainability of the Nigerian railways; hence, the need for their urgent revival and bringing them back on track.

Incidentally, each mode of transport has some comparative advantages over the others, including the railways. For rail transport, its advantages lie in its huge loading capability and relatively lower transport cost, in respect of goods hauled over long distances among others. For these and other reasons, the dwindling fortunes of the railways need to be turned around quickly, so that the highways which have suffered considerable deterioration, partly because of the poor state of the rail transport subsector, can also be saved from further deterioration. Also, existing and potential clients, with improved rail services, can save considerable cost on goods haulage, if they are well connected to the railway network, while job opportunities would also be created through the expansion and growth in rail transport-related activities.

Plate 3: Double Stack Container train

17 Conclusion

This paper has tried to articulate the challenges that currently face the Nigerian railways. What is clear is that this transport subsector has suffered considerable neglect in the past, despite the huge potentials and opportunities that are available for turning its fortunes around for good. Indeed, the past neglect of the sector and its attendant consequences, which are now reverberating in the road transport sub-sector in particular (by growing cost of road transport services and unprecedented damage to the roadways) can be drastically curtailed if the suggested policy options are rapidly addressed. Nigeria must be more determined than ever before to deal with the rail problem head-on, with stronger political will and resolve. More importantly, the Railway Bill must be quickly passed into law, as a first step towards attracting and widening the space for other stakeholders including state governments and private sector investors in contributing to the development of the Nigerian railways.

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