Engines could soon begin to roll again along Nigeria’s decrepit rail network after last week’s decision of the Federal Executive Council to open negotiations with the global infrastructure giant, General Electric, (GE).
On the back of recommendations by the ministry of transportation which had sought, received and evaluated bids for the concession of the nation’s narrow gauge rail corridor, the cabinet considered the proposal along with an outline business case,
(OBC) and gave its nod but analysts say it is now that the real work will begin.
GE’s foray into operating and managing rail networks in Nigeria, its first anywhere in the world, this perhaps a measure of its commitment to Africa’s largest economy, could be a big win as it comes with very minimal investment by the government.
Nigeria is already committed to about $11bn in loans from China for the development of standard gauge rail corridors between Lagos and Kano and Lagos – Calabar, with the latter apparently designed to pass through major towns in the South East geopolitical zone. However, GE’s interest in Nigeria also comes with the local manufacture of crucial wagons needed to carry people and goods; and as the railway economy grows, the company will assemble locomotives in Nigeria too.
Officials at both the Nigeria Railway Corporation and the Presidency, say while the resolution of the cabinet represented a critical step forward, there is still much work to be done to build a viable rail sector in Nigeria.
According to them, the negotiations ahead will have to resolve tough issues of how the funding of the rehabilitation of the 3,500km of the rail corridor, now in a miserable state, will be handled along with questions around staffing, training, remediation of the serious environmental compliance lapses that NRC assets have suffered for many decades.
Officials disclosed to BusinessDay that the Federal Government, in its Request for Proposals (RP) to which GE responed, stated that a vital element of the concession is for the successful concessionaire to generate some minimum activity on the rail tracks in the course of 2017.
If nothing else, this will serve both commercial and political purposes in terms of sending as a signal to potential users, of the return of rail service. As the current administration begins to prepare for elections in 2019, it will also be a visible achievement the Buhari administration can show to Nigerians.
A key signal of the prospects of success of this concession will be the level of collaboration between the Federal Government and the GE Consortium, to finance the rehabilitation of fixed asset belonging to the Nigerian Rail. “Given the FGN’s funding challenges, financial markets eagerly wait to see how the FGN will meet its expected capital funding obligations during the life of the concession,” one economist told BusinessDay
Analysts believe that unless the FGN capital funding obligations are fully catered to, the GE Consortium will have a tough time raising the financing it requires to fund the acquisition of wagons, coaches, locomotives, equipment, workshops and working capital for passenger and freight operations, which will surely run into many billions of US dollars over the life of the concession.
In comparison with Nigeria, South Africa, where GE’s operating partner, Transnet, is the country’s rail, ports and pipelines operator, has in excess of 22,0000km of track, 4,000 locomotives and 15,000 wagons – all supported by a modern communications and control network, training schools, marshalling yards, depots and other assets needed to run a rail operation on that scale.
Transnet is currently in the process of regenerating and upgrading its locomotive fleet. It also has an engineering joint venture with GE that is assembling over 250 GE locomotives for Transnet. This joint venture has already achieved close to 50% local content and is aiming to achieve 70%; while also serving as a platform for massively expanding the South African supplier, training and vocational skills acquisition ecosystem.
Nigeria’s 3,500km of narrow gauge track was built almost entirely between 1916 and 1961 and today, is operating less than 30 functional locomotives and 200 wagons which manage to carry less than 100,000mt of commercial cargo annually.
Nigeria has relatively ill-equipped maintenance workshops, while it has no communication network worth the name, along the two primary rail corridors that run from Lagos to Nguru through Kano on the Western Line and PortHarcourt to Kaduna Junction along the Eastern Line and Kaduna, with a spur line from Kafanchan through Jos, Gombe, Bauchi and Maiduguri. These two corridors and spur are so run down today, that no train can safely operate at a speed in excess of 40km/hour on most parts of the line.
Federal government officials say Rotimi Amaechi, Minister of transportation, who hails from the oil rich delta and has been governor of Rivers State, is in a hurry to build a legacy because history will not forgive him.
According to one official, the minister has his work cut out for him. A reliable rail service requires a high degree of vocational skills, high engineering and service standards and cultural assimilation that today is 100% non-existent. No amount of locos bought ,or track built can take the place of eroded railway culture of engineering excellence and reliable commercial service.
The reality that the GE consortium must deal with after it has concluded its negotiations with the Federal Government is to find and train the right kind of Nigerians. If the issues outlined above are successfully tackled, the success of this concession is only a matter of time.
By our reporter
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