WHY WOULD THE FGN BORROW $35 BILLION TO DO RAIL PROJECTS, WHEN THERE ARE ALTERNATIVE/VIABLE PUBLIC PRIVATE PARTNERSHIPS ROUTES TO EXECUTE THE SAME PROJECTS WITHOUT BURDENING NIGERIA WITH SUCH HUGE DEBTS?

The total debt profile of Nigeria currently stands at over $64billion/N19.6trillion. Kindly note that the total debt profile of Nigeria at all levels grew by over N7.16trillion/$23billion over the last two years, with the external debt profile inching up from $9billion in 2015 to $15billion as at June 30, 2017. As at today, the FGN is almost insolvent as it is now borrowing funds to service existing debts. The debts services costs to total revenue ratio of the FGN is almost 80%.

Thus, it is bewildering, why the same government that is finding it hard to service existing debts now want to borrow additional $35billion to do rail projects across the country. Rail Projects that can viably/alternatively and transparently be executed under robust Public Private Partnership arrangements that benefits all stakeholder, without pushing Nigeria into the debt trap that Obasanjo exited us from in 2004.

There is no sane/rational explanation of this quest to burden Nigeria with such atrocious $35billion debt obligations, to execute such key infrastructure project under a rabidly corrupt Nigeria public sector platform when we have credible and proven PPP leaning ways to solve our rail transport business without burying unborn generations with piles of huge dollar debt obligations.

NOW LETS LOOK AT SOME INCONTROVERTIBLE FACTS.-FACTS WE NEED TO KNOW

1. Africa accounts for only 3% of world rail traffic.

2. South Africa accounts for over 60% of African rail networks

3. South African rail project is the most advanced in Africa and competes favourably with those of the advanced western countries.

4 Interestingly, SA rail network is entirely the narrow gauge system. The same network we currently have/operate in Nigeria and coveys over 170million tonnes freight cargo annually.

5. Do you know that the Netherlands with a population of 18million people and land mass of 33,800 square kilometre land mass has a rail route of 3,223km.

6. Do you know that the Netherland’s rail system carters for 438million passengers and 36.5million tonnes of freight cargo annually?

7. Do you know that the Netherland rail system is operated mostly under a private sector driven concessionary arrangements for most of its coach and train operations.

8. Do you know that the Netherland Rail system nets in combined annual revenues of over $14billion/N5.08trillion, net income for the operators of over $2.58billion/N936billion and employs over 186,000 Dutch citizens.

9. Do you know that no scientific evidence whatsoever exists that supports the notion that standard gauge system is more productive than the narrow gauge system.

10. Do you know that rail network productivity is driven mostly by market demand and railway management skills? In Nigeria the demand is huge, but the management skills are grossly lacking/inadequate in the Nigeria Railway Corporation (NRC). To worsen matters we are still operating under the moribund/obsolete Nigeria Railway Act of 1955

11. Do you know that the cost of doing a kilometre of a brand new standard gauge line system is averagely $3.25million per kilometre compared to $2.6million per kilometre that is required to do a brand new narrow gauge networks?

12. Do you know that the narrow gauge system has the same capacity as the standard gauge system to carry the same 60million tonnes of loads and passengers annually?

13. Do you know that the existing narrow gauge rail system in Nigeria can accommodate train speed of up to 160kilometer per hour if properly overhauled and modernized?

14 . Do you know that the new standard gauge rail system that the FGN installed between Abuja to Kaduna (covering 161kilometers), which cost a whopping $500million ($3.1million per kilometre) under the corrupt public sector platform, travels only at 60km/hr?

15. Do you know that to rehabilitate/modernise the existing 3120 kilometres narrow gauge system in Nigeria to world class standard will only cost us about $500,000 per kilometre? This simply means that it will take $1.56billion only to overhaul the whole existing Nigeria rail network of 3,120kilometer.

16. Have you asked yourself why, General Electric quickly agreed to invest $2billion to take over, revamp and modernise the existing 3,120 km Nigeria narrow gauge rail system?

17. Do you know that under a properly laid out and transparent Private Public Partnership arrangements, that the total cost of doing brand new narrow gauge rail networks across the following routes,; Lagos-Kano; Port-Harcourt to Maiduguri; Lagos-Ore-Benin-Asaba-Onitsha –Owerri-PH, ; and Lagos-Calabar Coastal routes, based on world bank standard cost template will never be more than $11.96billion/N4.3trillion . Under a worst case scenario, $15billion/N5.4trillion.

18 . Do you know that under a properly laid out and transparent Private Public Partnership arrangements, that the total cost of doing brand new standard gauge rail networks across the following routes,; Lagos-Kano; Port-Harcourt to Maiduguri; Lagos-Ore-Benin-Asaba-Onitsha –Owerri-PH, ; and Lagos-Calabar Coastal routes, based on world bank standard cost template will never be more than $14.6billion/N5.3trillion . Under a worst case scenario, $20billion/N7.26trillion.

19. Do you know that a properly designed and structured rail infrastructure revamp arrangement in Nigeria under a robust and transparent Public Partnerships Arrangements can create over 500,000 jobs, gross in revenues of over $20billion and Return on Investments of over $3billion for the stakeholders in the next 5-7 years? These numbers and growth indices can triple in the next 10-15 years.

WHAT ARE THE WAYS FORWARD?

1. Based on the verifiable facts and figures above, the FGN rather than burden Nigeria with such humongous $35billion debt burden to do rail project under the very corrupt Nigerian public sector driven arrangement, can start by amending the obsolete 1955 Railways Act to accommodate concession and PPP arrangements to fund the revamp an modernization of our rail system and infrastructure.

2. The FGN can through the Nigerian Sovereign Wealth Funds managers subscribe up to 30% of the shares of the Special Purpose Investment/Operating Vehicles to be set up to run and operate the whole value chains of the rail system from Network Management to Passenger /Freight Services. This 30% will amount to about $3.57billion/N1.29trillion equity contribution if they decide to go by way of doing only narrow gauge lines. If they decide to do standard gauge networks across all the identified networks and area coverage, their equity portion will amount to $4.38billion/N1.59trillion. Under the worst case scenarios they will be required to cough out $4.5billion/N1.63trillion or $6billion/N2.17trillion for the narrow gauge and standard gauge systems respectively.

3. The FGN can request the Chinese to own 30% of the projects through their equipment, technology & skills supplies and vendor financing arrangements. They can then request/invite our deep pocketed private sector top players like Aliko Dangote, Tony Elumelu, Jim Ovia, Mike Adenuga or any other interested best in class global rail operators etc. to subscribe for the remaining 40% controlling shares that will enable them operate the entities in such enterprising private sector driven manner.

4. The consultancy assignments/costs required to create/put in place the technical, financial and legal strategic framework/work plans for this project to take off will not cost the FGN more than $10-30million.

5. Under such transparent PPP arrangements, the FGN and Nigerians will not have to bother about the burden of debt repayments. The SPIVs will generate the funds that will be applied to repay the loans.

President Mohammadu Buhari and Osinbajo should seek for help. They should look beyond the current economic management team they cobbled together to satisfy political patronages and ask for the support and counsel of other knowledgeable and creative thinking Nigerians. We do not need to borrow any $35billion to do rail projects in Nigeria, unless there are other irrational and non-transparent reasons/considerations behind the planned borrowing. Most discerning investors and rail operators out there, looking at Nigeria’s demographics clearly understand that a properly designed and structured rail transport infrastructure/system in Nigeria backed with a World Bank guarantee against political risks is a cash-cow that cannot be missed.

This is my humble submission. Let us discuss.

Dr Nnaemeka Onyeka Obiaraeri, FICA

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