• Running Cost May Gulp Over ₦40m Monthly
• Govt. Subsidy.
• Expert Want Openness, Transparency
• Model Not Sustainable, Experts Tells Government
• LCCI, MAN Seek Expansion Of Rail Networks’ Scope
• Customs Agents Want Rail Services Extended To All Ports
Despite coming on stream since July 2016, the Abuja–Kaduna Standard Gauge – the first operational standard gauge in the country is not yet a profit-making venture, necessitating the need for better monitoring commercialisation of operations to make it sustainable.
The Nigeria Railway Corporation (NRC) claims that the Abuja-Kaduna Railway Transport Service generates over ₦100m monthly, which is spent largely on diesel, security and on cleaners, while the Federal Government pays for track maintenance, staff salaries; among others.
However, some experts claim that the corporation may be realising more than ₦200m monthly from the services considering the number of seats on each coach and the soaring patronage that the route attracts. Over time, the actual figures generated by NRC from its operations have always been shrouded in secrecy.
With this scenario, the commencement of repayment of the $500m Chinese loan used for the construction of the rail tracks may take generations, hence the experts are stressing the need for the appropriate commercialisation of the service to ensure competitive pricing and sustainability.
According to the Managing Director of the NRC, Fidelis Okhiria, the Federal Government still pays 100 per cent of salaries and provides capital budget to maintain the tracks. The money generated from fares on the Abuja-Kaduna route goes into buying of diesel, payment of allowance to security operatives attached to the stations and the coaches, as well as payment to the cleaners.
On whether the Federal Government still subsidises operations of the route with about N49m monthly, he said, “I don’t understand what you mean by subsidy, but the government pays our salaries 100 per cent, gives us an annual capital budget to maintain the tracks. Unlike road transportation, maintaining railway and sustaining rail transportation is so capital intensive.”
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It would be recalled that at the commencement of the Abuja-Kaduna rail services in 2016 when it was generating N16m monthly and was incurring expenses to the tune of ₦56m, the Federal Government was reportedly subsidising the operations with over N40m.
However, with an exponential increase in the number of passengers, coupled with the acquisition of additional coaches and increase in fares from N700 to N1, 300 for the economy class, and from N1, 500 to N2, 500 for the business, the outfit declared that it recorded 400 per cent in its revenue generation.
Okhiria added that the NRC has been unable to break even due to several factors, including the high cost of procuring diesel and maintenance of the railway station buildings, added that the corporation was working hard to link its stations to the public power supply to drive down running cost.
On plans to repay the $500m loan, he said that was a government-to-government arrangement, stressing that the Federal Government was preoccupied with the provision of better transport service to Nigerians. Earlier on, the Minister of Transportation, Rotimi Amaechi, had directed the NRC to open an escrow account so that it can commence the repayment of the loans since evidence of commencement of repayment was part of conditions for accessing more loans.
Amaechi, who spoke during his valedictory service in his first term in office, instructed the Permanent Secretary Sabiu Zakari to see to it that the NRC MD opened the account and commences the loan repayment. He, however, stressed that more investment was required for the corporation to sustain itself. “We have to make enough investment; run the trains every hour before it can be sustainable, even though we would spend more. The situation now is not the same as when we had five coaches.
Then we could hardly buy diesel, but now that we have more than that, we can buy fuel to run the train. Then we were using the money we made from the narrow gauge to buy fuel.”
“We have been encouraging the private sector about investing in our operations, but many of them are interested in making money, and not investing in infrastructure. The government has been advocating for serious private investment in the sector and has expressed desire to give them the franchise. We have also been advertising that at many levels, telling investors that they can come with their coaches and we are ready to enter into a Memorandum of Understanding (MoU) with private investors, provide them with the franchise, while they pay the track usage fee.”
A development expert, Mr. Eze Onyekpere, is of the view that the current model employed by the government in running the country’s railway system is unsustainable, archaic and incapable of repaying the loans. He said: “Usually, when you borrow money, the money will be repaid with interest, but rather than rail track raising money to repay the loans, the government is subsidising the daily operation of the tracks, while the capital and the interests are still outstanding. So, what we are saying is that that model of financing is unsustainable. How are we going to repay this money from China.”
He said: “What is expected is a model where each track will pay for itself over a while. I am not saying you should charge N1m per trip, but let it be sustainable in terms of being able to pay for diesel for the locomotives, and officials that would be running the track.”
Simply put, “what I am asking them to do is to recover the cost of the train itself, the fuel, personnel cost such that when the train goes bad, it can be serviced from its proceeds and even buy another one. So, if the Federal Government has to increase the price, it should go ahead because there is nothing to pretend about.
“People are not paying taxes, so where will the government get money from to subsidise? If increasing fares is what will make the service sustainable, the government should go ahead. What I expect the government to do is build the railway tracks and concession them to the private sector, ask private investors to bring in the coaches and run them. The government should only pay for the maintenance of the tracks, while the NRC would have to regulate the movement of the locomotives because they cannot operate them simultaneously.”
MEANWHILE, members of the Organised Private Sector (OPS) have urged the Federal Government to expand the rail network to decongest the roads and aid the movement of goods and services across the country.Citing the high volume of heavy-duty trucks that criss-cross the country and the attendant effects on productivity, both in the manufacturing sector and in the services sector, they urged that rail networks should be expanded to attract investors.
Specifically, the Lagos Chamber of Commerce and Industry (LCCI) has said that the need for a functional and modern rail network cannot be over-emphasised, adding that it will facilitate the movement of people and goods and also reduce the cost of transportation, logistics, and freight.
While commending the progress made by the current administration in the development of rail transportation, especially in respect of the Abuja-Kaduna rail line, the Itakpe-Ajaokuta-Aladja rail tracks, the Abuja Light Rail system, and the success recorded on the Lagos-Ibadan section of the Lagos-Kano Railway line, the LCCI urged government to expedite actions on the ongoing rail projects across the country to ensure cost-effective logistics for investors across all sectors.
According to the Director-General of LCCI, Muda Yusuf, even though development was commendable, the pace at which rail infrastructure was sprouting up is very slow considering the need to deploy them in the movement of goods across the country.
He added that the government needs to develop rail tracks before it can attract investments in the sector.
LCCI’s immediate past president, Babatunde Ruwase said: “We plead that urgent measures be taken to restore the use of rail for the evacuation of cargo from the Lagos ports. It is worthy of note that containers are now being evacuated by the Nigerian Railway Corporation, but the process has been reduced to two or three trips per day, with a maximum of 80 containers. This process is being constrained by the bureaucracy at the ports. We believe that the NRC can do much more if the ports processes are streamlined.”
FOR the Manufacturers Association of Nigeria (MAN), poor economic infrastructure, bad roads, and poor rail transport systems rank fourth on the list of challenges affecting the productive sector. According to MAN in its latest CEOs Confidence Index (MCCI) shared with The Guardian, improved rail and transport infrastructure will help to address delay in clearance of imported raw materials and machinery that are not locally available by manufacturers, including the associated high and unwarranted demurrage, which often slow down manufacturing operations and increases cost of production in the sector.
THE National Vice President, Association of Nigeria Licensed Customs Agents (ANLCA), Kayode Farinto, says it is imperative to extend rail connectivity to all the ports in the country to ease evacuation of cargoes.
“It must not only be the Lagos port, TinCan Ports should also be connected. It is possible to do a kind of interconnectivity and put the rail line on water from Apapa to Tin Can Port. “Also, the rail link will reduce the congestion on Apapa road by at least 40 per cent, while also ensuring efficiency, reducing the cost of doing business drastically.
“Furthermore, since about 35 percent of cargoes are leaving Lagos port complex to the eastern and northern part of the country, rail connectivity will reduce the madness on our roads by about 40 per cent, enhance port efficiency, and facilitate increased turnaround of vessels, while the cost of doing business will reduce by more than 45 per cent,” Farinto said.
THE Group Managing Director, Sifax Group, Adekunle AbdulRazak Oyinloye, who added that the evacuation of cargoes has remained a major task for terminal operators in Lagos ports due to the deteriorating state of the roads, emphasised the need to fast track rail link to the seaports and consider a direct link to the Tin Can Port to increase efficiency and competitiveness.
According to him, lack of intermodal connectivity and bad roads were seriously affecting operations of terminal operators, adding that a number of the consignments that are delayed at the ports have no reason to be there if not for the bad road.
While lamenting that the nation has lost a substantial quantity of cargoes to neighbouring countries, he said with concerted effort, the country would recover its pride of place in the comity of maritime nations.”
ON his part, the Chief Executive Officer and Managing Director, ECM Terminals (Ecomarine), Adedayo Moruf Balogun, said all Nigerian ports were suffering from bad access roads because of the government’s failure to plan.He said as the country looked forward to the expansion of the ports, adjoining infrastructure such as road and rail should have been given serious considerations as well.
“But, our failure to address that aspect through proper planning is what resulted in the current problem and it has become a common feature of ports in Nigeria. What this means is that we must develop a template that allows us to expand seamlessly. The port capacity has improved, so there must be a commensurate development in supporting infrastructure, especially road and the rail network,” he said.
Noting that rail is a critical infrastructure that drives efficiency of port operations, particularly the transport logistics value chain, he added, “Ideally, every port must have rail connectivity. This is a very good business model that is in practice all over the world. If Nigeria as a nation has realised the need to revive the old rail and invest in the standard gauge as supporting infrastructure, it is a welcome development. So, we will urge the government to ensure the successful completion of the project.”
Giving the fact that the government’s resources are always so constrained, Balogun said the government should have looked critically into unbundling the Nigerian railway to allow for private sector participation, adding that this will hasten the development of the transport sector.He enjoined the various government ministries to work together as a team. “For example, the rail system is domiciled under the Ministry of Transportation, while the road network is under the Ministry of Works, and both rail and road are both critical to the evacuation of goods from the ports.
“In Calabar, we are having serious challenges such as the dredging of the water channel coupled with the bad roads. The Odukpani Junction to Itu-Ikot Ekpene road, which contract was awarded to Julius Berger has been under construction for years, but no meaningful progress has been made. So, we want to appreciate a more collaborative effort between the Ministry of Transport and the Ministry of Works to ensure speedy completion of the roads that serve as arteries in and out of the port,” Balogun said.
NAN