Understanding the unbundling of the Nigeria railway system and other critical issues in railway development are highlighted in this Q&A with Rowland Ocholi Ataguba, a strategic railway delivery specialist based in the United Kingdom and a member of the Nigerian Railway Corporation Unbundling Committee under the Federal Ministry of Transportation.
He is the author of the ‘Memorandum for a Constitution Amendment to Transfer Railway from the Exclusive Legislative List to the Concurrent List’. This memorandum led to the passage of the Constitution Amendment 5th Alteration (No.16) Act, effecting the transfer.
Q. The free train rides over the Christmas period seemed to experience some hiccups. Do you know why?
A. The NRC has had a history of ticket racketeering and poor management which is not relenting.
Q. Why do you say that it is not relenting?
A. Well, is it? It seems to be one bad news story after another with the NRC. The other day it was that a train had run out of fuel in the middle of the forest leaving stranded passengers terrified. How about the depressing news of the millions of dollars that the FG is repaying to China Exim for railway loans while the railways earn a relative pittance? It baffles that its numbers just fail to add up as its record keeping can make a mockery of credible inventory management. For instance, in 2019, it sold 2.89m tickets and earned N2.41bn while in 2021 it sold 2.71m tickets and earned N5.76bn. A discrepancy of over N3bn for the same level of sales. In 2022, it sold 3.21m tickets, that’s half a million more tickets than the 2.71m in 2021, yet its earnings were more than a billion Naira lower at N4.55bn. To compound matters, there was a fare hike in 2022, so coupled with the higher volume of tickets sold, you would have expected earnings of about N7.9bn but not so the NRC, it was over N3bn less. These are the official sales records and take no account of those who travel without tickets and pay cash to bent officials.
Recall that during 2022 with the Abuja-Kaduna train hijack where the NRC couldn’t tell how many people were on the train. We’ve had so many broken promises from the NRC that they are not worth restating anymore. The new Minister flagged off a supposedly new container service from Apapa to Ibadan when he attended in Lagos last September with a promise that they would haul 3 container trains (or 90 TEUs) per day between A papa and Ibadan.
They even went as far as promising to commence hauls from Ibadan to Kano by December that just passed. Of course, they were never fulfilled. Considering that these levels of ambition are quite mediocre and insufficient to sustain the railway, it makes it even more depressing that they are not able to achieve them. The hallmark of a credible railway service is consistency and reliability. The NRC fails on all counts each time. So which shipper can afford to take it seriously? Typical of a state-run enterprise, there is no market driven pressure to deliver superior business performance. We just can’t go on like this.
Mobolaji Johnson Station, Ebute Metta Junction Lagos
Q. So where are we with the unbundling of the NRC, and how do we know that we will obtain the promised improvements?
A. The improvements are a given provided we stick to the script and learn lessons from previous experiences of reforming network industries. We will get improvements from NRC unbundling if we do right by ourselves and proceed with a sense of purpose and in all seriousness. As regards the status of the exercise, you may be aware that the committee is chaired by the Hon. Minister and we adjourned sine die when the Buhari government’s tenure elapsed last May. The new Minister has just settled in and has picked up the ball. So, you should expect to see a resumption shortly. A key component of unbundling is the passage of new legislation, and we should engage the National Assembly in due course to repeal and re-enact the NRC Act.
Q. There have been past efforts at amending the NRC Act. You were Chairman of TAC in the House of Reps and a member of the Technical Committee in the Senate. Nothing came of it then. How do we know if anything will come of it this time?
A. You are being uncharitable. Government’s resolve for railway reform has been deepening over the years, though the resistance from the NRC has remained. The last time that you refer to, the Railway bill was passed in the Senate and ran out of time at 3rd reading in the Reps. So, it was a near miss. We expect a resounding outcome this time around. Please understand that I am neither the spokesman for the Unbundling Committee nor the Minister. The views and positions that I express here are solely mine so help me God.
Q. Very well. Break it down for us. So, you pass a new law, and then everything turns up roses?
A. Not quite. There is a lot more to it. The law is the underpin but you must implement it diligently and this is where we have had challenges in the past in restructuring telecoms and power. There is going to be a significant disruption to the way the railway functions as a result of unbundling from which a better structured and vibrant industry will emerge.
We are separating regulation from operation and policy formulation from implementation. We may also separate the businesses into its passenger and freight components. So, we are spinning off 3 independent organisations from the existing NRC. We may create others anew such as the Rolling stock companies to further lower the barriers to entry.
We will also be inviting private investors to take up stakes in the national carrier as well as the infraco. This involves persuading investors that the opportunities are genuine, but the litmus test will be with the external environment in Nigeria. A lot of investors remain wary of our judicial environment and prefer to settle disputes and differences offshore.
Insecurity and law enforcement are also presenting perception challenges as well as our reputation for corrupt practices. These would be netted off the opportunities. Don’t forget that we are in competition for the attention of the investor with other emerging economies so our ease of doing business ranking matters. The independent railway regulator will be in the mould of the Nigerian Communications Commission and Nigerian Electricity Regulatory Commission, so there is a template to work off…
Q. Sounds very much like a job for the Bureau of Public Enterprises and National Council of Privatisation?
A. Yes, but remember that all the Ministries, Departments and Agencies in the executive arm are agents of the President and work cohesively to deliver a common vision. There will be a synergy of resources that coalesce to ensure desirable outcomes. The Federal Ministry of Transportation is the parent of the NRC and a major stakeholder. It cannot be uninterested in what becomes of its major parastatal. Many other stakeholders in and outside of government will play a critical role in the restructuring of the railway environment.
Q. So, will all of the existing NRC fit into the successor companies?
A. Broadly, yes, but non-core assets will be sold off and privatized, and there are quite a few of them. NRC has a wholly owned property company that will do much better in the private sector.
Some of its land will be retained in the infraco for future expansion of the railway and also to offer prime real estate opportunities to railway operators such as for major stations in City centres that can incorporate shopping malls, hotels, casinos, offices and high-end residential developments, etc.
This is the MTR rail+property model that can be replicated where conditions are suited. If you are familiar with great cities such as London, Paris, New York, you will be aware that they have some major stations that are transport hubs where different public transport modes meet. So, you will have metro and surface rail and buses converging and in cities like Lagos, Port Harcourt, Calabar, you may also have ferries. For freight, you will have intermodal terminals where transfers occur. These could be at seaports, dry ports or even airports. There would also be rail sidings to major industrial users or cargo destinations or transshipment points.
There are also other assets that are non-core that need to be disposed of, to declutter the NRC such as printing presses, foundries and factories.
Q. Would there be job losses as a result of unbundling?
A. I cannot fathom how. We are expanding opportunities in the industry and would therefore need more hands not fewer. I expect an explosion in employment. At the moment, the railways employ less than 20,000 direct and indirect workers. I expect to see these numbers quickly grow to about 100,000 in short shrift. The only job losses I can foresee are of the redundant docile who prefer not to work but are interested in racketeering opportunities and scamming the employer or consumers.
Those practices will disappear with the old NRC. There is a need to build domestic capacity of the local industry to provide rail construction and maintenance materials. It is a matter of great regret that we import materials which can be produced relatively easily in Nigeria. We need to reduce importation by creating jobs here and stimulating the economy.
Q. Critics see unbundling as a ruse to privatize the railways. They say that the elite are trying to sell high valued assets to themselves and their cronies. They point at NEPA and NITEL as examples of privatizations that have not really improved performance. Is that not the case?
A. It’s a cynical perspective undeserving of serious consideration. The NRC has been failing for many years. It is insolvent, consumes a lot of public resources and benefits only a few people.
At independence, its share of the transport market was 60% but its decline has seen this fall to under 1%. Nigeria is currently bleeding – because of mismanagement of development opportunities. We borrow money and misapply the proceeds and the cycle of underdevelopment continues.
We can’t go on like this. The issues of the elite privatizing assets to themselves are easy to deal with. It’s a matter of the political will to enforce extant laws on due process and anti-corruption. It is not sufficient reason for us to continue the haemorrhage.
Q. You could say the same thing for tackling the racketeering or corruption in the NRC, so you don’t have to unbundle?
A. No, ticket racketeering in the NRC is just a symptom of a deeper malaise. Unbundling is not just to deal with corruption which is opportunistic. It is to deal with an enterprise unable to compete in its market because of its structure. An enterprise that cannot make the best suited commercial decisions for its own very survival.
It goes beyond the corruption of its management systems. It is about repositioning an industry to take its rightful place in the logistics chain and as a stimulus for economic development for the benefit of all of us. The purpose of unbundling is to progressively reduce the burden of the railway sector on the federal budget by introducing policies and regulations that encourage investment in the sector by the private sector. To transform the NRC from a debt-ridden parastatal to a dynamic player in the transportation sector through strategic investments, new policy initiatives and by encouraging investments by the private sector. It is for these reasons and more that we must unbundle the NRC successfully and now.