Nigeria seeks to boost foreign investment in rail modernisation plans

Out-Law News | 12 Jun 2014 | 3:10 pm | 2 min. read

Nigeria’s government has said it remains committed to offering more ‘on-completion concession agreements’ to increase the level of foreign direct investment (FDI) in overhauling the country’s rail infrastructure.

Nigerian vice-president Mohammed Namadi Sambo said the government was renewing efforts to modernise the rail network. He was speaking at a ceremony on 9 June to mark the commissioning of several new air-conditioned diesel-powered railcars and six 68-seater air-conditioned long distance coaches. The new rolling stock was procured by the Nigerian Railway Corporation (NRC).

Namadi Sambo said infrastructure development was a “top priority” and formed part of the government’s ‘25-year railway strategic plan’, aimed at encouraging private sector investment for the renovation of the country’s existing narrow gauge railway lines and building new, standard-gauge lines.

Namadi Sambo said ongoing work on railway modernisation would continue “using a combination of funding” from the federal budget, in addition to “concessionary loans from partners”, such as the Export Import (Exim) Bank of China and other financial institutions.

Nigeria is China's third largest investment destination in Africa and China's accumulated investment in Nigeria reached $1.95 billion by the end of 2012, according to China’s state-run news agency Xinhua.

The China Railway Construction Corporation Limited said its $8.3bn rail network modernisation project in Nigeria is currently the company’s “biggest overseas project”.

In November 2012, the CCECC formally opened a ‘railway technology training centre’ in Abuja to help Nigerians develop the skills needed to support plans for rail and mass transit systems.

According to an Ernst & Young report on Nigeria issued for the 2014 World Economic Forum on Africa (12-page / 1.40 MB PDF), CCECC is the main engineering, procurement and construction contractor for the Lagos rail mass transit project. Phase one is a 27.5 km ‘blue line’ scheduled for completion towards the end of 2015.

Separately, the China Exim Bank is providing a $500m concessionary loan for the 186km modernisation of the Abuja-Kaduna rail line, which includes building 36 bridges and nine “fully-developed stations”, all due for completion in 2014. The remaining $374m for the project comes from the federal government of Nigeria. Track laying for the single standard gauge line was formally launched in July 2013.

In 2009, GE signed a company-to-country agreement with Nigeria to work with the NRC to provide rolling stock and training. NRC, previously known as the ‘Government Department of Railways’, has been in existence for 112 years. GE said the corporation runs unilaterally designed track systems made up of 3,505 kilometres of narrow gauge tracks and about 300 km of standard gauge tracks respectively.

Nigeria’s president Goodluck Jonathan told the World Economic Forum’s infrastructure summit last year that his government had increased the ratio of capital expenditure for road and rail infrastructure relative to current expenditure from the national budget by 8% in the previous three years. He said a “significant portion” of savings from reductions in subsidies on petroleum products had also been committed “to expand and improve road and rail infrastructure”.