Rail, energy to emerge next growth enablers post rebasing

If Nigeria could fix its collapsed rail and energy infrastructure, they could provide the next catalyst for rapid growth in the economy, similar to the huge impact that telecoms has made in the last 15 years, as captured by the recent GDP rebasing exercise.

“Rail transportation and Fuel/ Energy are the next growth giants. If we do not fix them, not much else will work, including manufacturing, industrial activity and agriculture,” said Ayo Teriba, CEO of Economic Associates, a risk analysis and research firm, in a presentation on ‘Economic outlook for 2015’, made in Lagos, yesterday.

“Much of our harvests still rot from a lack of transportation to markets, while most inland cities and trading activities declined as the rail lines stopped functioning.”

Enablers are sectors whose growth will influence others.

The National Bureau of Statistics (NBS), rebased GDP figures show a reclassification of sectors of economic activity from 33 to 46 sub-sectors, revealing many fast growing areas of the economy.

The new GDP data from the NBS showed that six major areas of economic output drove growth, including crop production, which contributed 21.5 percent, Trading (16.4 %), Oil and gas (15.6%), ICT (11%), Real Estate (7%) and Manufacturing (6.6%).

However, the major implication of the data is that growth has become concentrated by sectors, and regions.

Crops, trade, telecoms, oil and manufacturing are heavily concentrated in only two or three regions, while 73 percent of economic activity come from the six major sectors.

This could be corrected if rail and energy issues are tackled, Teriba said.

“Nigeria’s growth is structurally weak, with linkages weakened by poor energy supply and transport failures,” said Teriba.

“I do not know of any top – 10 country in the globe, in terms of population, without a functioning rail sector. Rail is about freight and most rail terminals fuel city growth. Once the rails collapsed, cities collapsed and industrial clusters failed.”

A turnaround of the railways should be private sector-led, as was done in telecoms, as opposed to Government which has inadequate funding attempting to revamp the sector, according to Teriba.

The Federal Government has recently resurrected the flagship Lagos-Kano rail service which took nearly three years instead of the planned 10 months, with China Civil Engineering Construction Corporation and Costain West Africa, a local company, splitting the $153m government contract.

The Lagos to Kano train moves at a speed of around 50km/h, meaning a trip usually takes 3 – 5 days to complete.

Completed under British rule 100 years ago, the Lagos-Kano route helped develop Nigeria’s agricultural and mineral economy.

The service declined soon after independence however, due to mismanagement and government neglect.

By the time it was shut in 2009, the number of annual passenger rail trips in Nigeria had fallen to 1.3m, down from 11.3m in 1963. The drop in goods moved fell from three million tonnes to 52,000 tonnes.

Regional inequality in Nigeria has become a huge structural problem for the entire economy that cannot remain ignored, as two regions in country continue to remain excluded from the growth process of the entire economy, according to Teriba.

These are the North-East and the South-East regions.

The six regions in Nigeria are the South-West, the South-South, the South-East, the North-East, the North-West and the North Central regions. Of these regions, the South-East and the North-East contribute the least to the GDP of the country.

The two regions have been marginalised as a result of the low investment drive to harness the natural endowments of these regions, and inaccessibility, Teriba said.

Despite the North-West and North Central being landlocked, there have been huge federal investments over the years in these regions, to drive agriculture, as a result of the large landmass, favourable conditions for agriculture and the necessity of preventing droughts in these regions.

This has resulted in excellent irrigation networks, infrastructural investments and investments in agriculture in these regions.

The South-West region of Nigeria is coastal, with its seaport being a huge driver of commerce since colonial times. The neighbouring countries are also coastal, aiding the growth of this region.

The South-South region is endowed with crude oil and is also coastal, thereby attracting federal investments into the region.As a result of national investments being driven by business interests, inequality has been deepened, with the rich regions getting richer and the poor regions getting poorer.

To address this, the Federal Government should take on an inclusive growth approach and tap into the natural endowments in the two marginalised regions; metals ores in the North-East and coal in the South-East, says Teriba.

In the same vein, a functioning, fast and efficient rail system between rich and poor regions would make these regions accessible and increase interconnectivity among all regions in Nigeria, thereby pushing commerce and creating economic growth spots in these pockets of exclusion.

PATRICK ATUANYA & YINKA ABRAHAM