BusinessDay
NigeriaDecides2023

What are the big questions about Nigeria’s rail line to Niger?

Since Independence, Nigeria and the Niger Republic have continued to maintain a bilateral relationship with each other as both countries have a sizeable number of ethnic groups that share similar values and cultures which has led to an increased rate of trans-Sahara trade over the years.

According to the World Bank, as at the year 2018, Niger Republic’s major trading partners for imports were China, France, Thailand, the United States and Nigeria, while for exports, its major trading partners were Thailand, France, Switzerland, Malaysia and Nigeria.

According to a report by Britannica, the agricultural sector is the major economic driver of the Niger Republic’s economy; however, it is a landlocked country with a relatively low GDP and Human Development Index, which makes it rank among the least developed countries in the world.

A research by the Islamic Development Bank revealed that Niger is one of the poorest countries in the world, while the country was also ranked 187th out of 188 countries based on the United Nations Development Program’s report. Niger is also an oil-producing country, and it is even quite interesting to realise that unlike Nigeria, the country has its own petroleum refined at Niamey, its capital city.

In the year 2021, the Nigerian government revealed its plan to construct a 284km rail line to Niger Republic. According to Rotimi Amaechi, Nigeria’s minister of transport, this project will cost the country about $2 billion and will be funded by Nigeria through borrowing from external sources.

The decision to continue with this project has resulted into different reactions from Nigerians who continue to see this as a not-too-necessary project, especially considering the fact that Nigeria has other pressing needs where the funds can be better utilised.

In reaction to this, the Nigerian government has come out to reveal many reasons why Nigeria needs to get connected with the Niger Republic through rail line construction.

Such reasons include the facilitation of trade and commerce with other sub-Saharan African countries, to enable easier trans-border movement and also to help Nigeria benefit from Niger Republic’s crude oil refinery.

Facilitating a boisterous trans-border trade through a functional railway system will be a good step for a large economy like Nigeria but not without taking a look at some challenging issues which the Nigerian government might need to consider before taking the giant stride.

Does Niger Republic have any competitive edge over Nigeria?

The major challenge facing most African countries lies in the fact that their industrial development trajectories have been largely dominated by raw materials, with very little effort to improve their value chains.

In the words of Akinwumi Adesina, African Development Bank’s president, “Africa’s massive natural resources have not translated into wealth because of its limited industrial manufacturing, which has consequently made the continent to export raw materials and import finished goods, thereby throwing their economies into perennial swings as these countries continue to be at the mercy of international price volatility.”

According to the United Nations, most African countries do not trade with themselves because they only produce a handful of products which is dominated by primary goods, while the African Development Bank revealed that African countries do not trade much with each other, thus they have been unable to take full advantage of the economies of scale that comes from international trade due to the fact that exports are heavily concentrated on primary commodities.

One major issue that might need further consideration lies in the fact that both economies are highly dependent on primary sector activities, which mainly involve agricultural production, crude oil exploration and mining.

For instance, a report by the Observatory Economic Complexity (OEC) revealed that Niger Republic’s top exports are gold, petroleum products, oily seeds and ore, while its top imports are machinery, cars, ammunition and rice.

On the other hand, Nigeria’s main exports, according to another report by OEC, are crude petroleum and natural gas, while its top imports are refined petroleum, cars, telephones, and wheat.

One major issue about this revelation is that the two countries seem to be producing the same goods, while they also appear to be in need of the same goods, thereby limiting the extent to which they can actually trade with each other.

Low trade volume between the two African countries

According to Nigeria’s minister of transport, one major reason why Nigeria will benefit from the rail system is to facilitate trade and commerce between the two countries. However, there is one important question that needs redress: is the volume of trade that voluminous and beneficial to the Nigerian economy to warrant the construction of a railway?

According to a report by Trading Economics, Nigeria’s import from Niger as at the year 2020 was $922,940. The main products exported from Niger to Nigeria were electricity, tobacco and cement, while the same report revealed that Nigeria’s total export to Niger in the same year was $18.18 million – the largest components of this trade consisted of articles of minerals, stones, tobaccos, fruits, chemicals papers, and beverages.

Another report by Trading Economics revealed that Nigeria’s export to Niger Republic is less than 1 percent while Ivory Coast, Togo and Ghana had 2.6 percent, 1.7 percent and 1.1 percent respectively.

Some of the fundamental reasons responsible for the low volume of trade between the two countries can be traced to the fact that both countries do not have a common means of exchange.

While Nigeria uses the naira, Niger Republic trades with the West African CFA Franc.

Also, the two countries do not have a uniform official language, thereby serving as a barrier to official transactions and activities. Both countries do not produce enough food for themselves.

Garuba Shehu, senior special assistant to Nigeria’s President, was quoted in a media report as saying: “The objectives of the railway line is the harnessing of raw materials, mineral produce and agricultural produce.”

However, one major issue lies in the fact that both economies are still lagging behind as far as food security is concerned.

According to the World Bank, 42 percent of children in Niger are suffering from malnutrition, while 20 percent of its total population cannot meet their basic food needs even as the country has been faced with climatic issues of desertification, and rising temperature since the year 2000.

Nigeria, on the other hand, has also been battling with the issue of food security as malnutrition and hunger remains major challenges facing the Nigerian populace.

According to the Global Hunger Index (GHI), Nigeria, with a score of 28.3, ranks 103rd out of 116 countries under consideration while another report by Borgen Project revealed that Nigeria is one of the most food-deficient countries in Africa, which implies that Nigeria has a high level of hunger.

According to a report by Statista, about 21.4 percent of the population in Nigeria is exposed to hunger. This implies that both countries might not be able to engage in voluminous trade as the government expects because they both have not catered for the needs of their respective economies.

Does Nigeria really need to depend on Niger’s refinery?

Another justification the Nigerian government has come up with is that Niger has a functional refinery and excess petroleum products, which can help Nigeria’s petroleum products deficit; therefore, constructing the rail way will help in the logistics angle of transporting the products to Nigeria.

However, Nigeria might not need Niger Republic to refine its crude oil upon the completion of the Dangote refinery, which is expected to begin operation by the third quarter of 2022.

The Dangote refinery will have the capacity to process about 650,000 barrels of crude oil in a day, thereby making it the largest single-train refinery in the world.

The huge project, which has been described by Nigeria’s Akinwumi Adesina as Africa’s growth accelerator, is expected to meet the country’s daily petroleum products requirements and even have surplus for export.

This means that Nigeria would not have any need to export its crude oil to Niger Republic for refining.

Another issue coming from the angle of petroleum production is that exporting Nigeria’s crude oil to Niger Republic would amount to a race to the bottom because Niger would not sell the refined products to Nigeria for free, thereby defeating the country’s desire to break loose from the cycle of fuel subsidy removal.

Rising insecurity

Just like Nigeria, Niger Republic has also become vulnerable to terrorist attacks as its porous borders with Nigeria have continued to enable the influx of arms and the movement of terrorists across the Sahel region.

According to a report by Brookings, Nigeria’s border with Niger still largely remains porous and poorly policed by the Nigerian Custom and Immigration Services, thereby increasing the potential spread of terrorist activities into the country.

Some days ago, the media space went into a frenzy over the attacks by bandits on an Abuja-bound train which led to the loss of lives and property, while many survivors got wounded.

For a facility that will cost Nigeria billions of dollars, it will be a waste of the nation’s resources and a smear on Nigeria if the project gets destroyed by terrorists.

This implies that the decision to begin the construction of railway system to Niger Republic at a time when Nigeria is finding it difficult to curtail the acts of insurgency might amount to a futile adventure if the two countries do not first deal with incessant attacks by terrorists.

The Nigeria-to-Niger rail line looks good on paper, but will the current realities make the project achieve its socio-economic goals? The fact that the funds to be used for this project will be borrowed from foreign sources is a major implication that the burden of the debt will be on Nigeria.

With Nigeria’s high public debt, which many have seen to be largely unsustainable, especially for the future generation, it is left for the Nigerian government to make sure that the railway project, when completed, actually achieves its socio-economic aims and objectives while also ensuring the generation of a substantial amount of revenue for Nigeria.

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