Nigeria - Railways and public expenditure

[John Ashworth]

Railways and public expenditure
By Punch Editorial board
Published: Tuesday, 15 Jul 2008

Against the backdrop of the failure to provide for rail development in the 2008 budget, the Federal Government should come out with a clear agenda on how to revive the moribund transport mode. The Olusegun Obasanjo administration had conceived a 25-year rail vision to reduce excessive use of the roads. Part of the plan to actualise this vision was the award of a rail modernisation contract to a Chinese firm, China Civil Engineering Construction Corporation, at a cost of $8.3bn. But recent media reports indicated that this project was inflated by about $5.8bn.

In spite of the huge amount of money sunk into rail projects, the system remains a far cry from what it should be. From over 11 million passengers that used the rail system in 1964, the number of passengers plunged to about one million in 2003. This mode of transport, which helped to carry three million tonnes of freight in 1960 has declined dismally in importance. It now carries less than 10,000 tonnes per annum. It is sad that the nation has failed to expand or even maintain the rail infrastructure inherited from the colonialists.

The prostrate state of the railways has impacted negatively on the economy. Due to constant use, the roads are always in a state of disrepair, as heavy-duty vehicles and trucks carrying different types of goods destroy them soon after repair. Indirectly, this shoots up transport fares and freight charges because there are no functional alternatives to road transportation in the country. The high transport cost translates into high prices of goods.

As with many sectors of the economy, the comatose nature of rail transportation is due mainly to corruption. Contracts were awarded and mobilisation fees paid, but some of the contractors failed to carry out the jobs. Testifying at a recent Senate public hearing on Transportation, the Auditor-General of the Federation, Robert Ejenavi, reportedly said that a total of N124.9bn was spent on rail projects from 1999 to 2008. He cited a particular contractor who was mobilised with $250m, but curiously, $175m was paid into his foreign account while the balance of $75m was paid into his Nigerian account.

Another contractor was paid $1.5m, but there was no record in the Ministry of Finance indicating that the money was disbursed. Even the Nigerian Railway Corporation was said to be unaware of the payment. Owing to the abysmal failure of huge public investments to salvage the sector, it has been suggested that the rail system is being deliberately sabotaged by powerful men in haulage business who have hundreds of tankers and trailers.

But the main problem is the poor integrity of public expenditure, which is often seen by public office holders and cronies as another opportunity to extract rents and patronage. The existence of the Railway Act of 1955 has ensured that rail business is run as a federal monopoly. This Act precludes private investment in the rail system. In 2000, a Canadian firm indicated interest in building the Lagos-Abuja rail route. The FG scuttled this genuine intention. Yet, experience has shown that government hardly runs businesses effectively.

As a first step towards resuscitating the rail sector, the National Assembly should repeal the Railway Act. In most advanced economies, monopolies have effectively been checked through liberalisation.

In the United Kingdom, for instance, private companies handle rail transportation on franchise basis. Any company that wins the franchise for any route takes full control of that route for a given period. Through private sector participation, a 365-kilometre high speed rail has been built across the straits in Taiwan. The new rail infrastructure enables express trains to travel from Taipei to Kaohsiung in about 80 minutes, as opposed to about five hours by conventional rail.

The surest and swiftest way to have an efficient rail system is to open up the sector to competition and private investments.