Nigeria’s N100bn rail freight market hobbled by infrastructure deficit as operators carry only 0.2% of potential

The size of the Nigerian rail freight market has been estimated at N100 billion with a capacity to move over a 100 million metric tons of goods annually.

Edeme Kelikume, managing director, ConnectRail Services Limited, an indigenous rail haulage, infrastructure and logistics support firm, gave the estimate in an exclusive interview with businessamlive in Lagos.

Kelikume specifically see a huge investment potential waiting in the Nigerian rail haulage business for investors to tap into if the regulatory environment is liberalized and private participation is given fillip.

“There are growing mobility needs of multinationals and SMEs in the country and the market size of rail freight could be conservatively put at N100 billion, as it has a potential of moving about 100 million metric tons in a year,” he said.

However, due to infrastructure constraints over the years and an apparent lack of regulatory support, operators could only move about 200,000 metric tons in a year of an otherwise market potential of over 100 million tons.

While acknowledging the rail policies of the current government, Kelikume said the rail sector could perform better if the industry is supported by guarantees, in terms of traffic, for a short period of time as well as liberalising the sector for more private investment.

“We do not need the US model nor the UK model to make rail to run efficiently in the country. What we need is government to provide operators with guarantees in terms of traffic and not financials,” he said, explaining that such guarantees could come in form of assuring and guaranteeing operators that they could move set target of tons annually.

He said certain types of goods could be legislated to go by rail alone and not moved on the highways so that rail operators who have invested could get the necessary traffic to run their businesses, while keeping the highways free from heavy duty trucks and accidents.

Other benefits of rail haulage, according to him, include bulk and instantaneous movement of goods to desired destination as a train could carry more than 800 tons at once, which is equivalent to 27-trailer load of goods.

The ConnectRail CEO equally sees the 1955 Railway Act as impeding development in the industry. He therefore called for amendments, especially section 29, which makes it unlawful for any person without the consent of the Railway Corporation to construct or operate railway for public carriage of passenger or goods.

For him, railway being in the exclusive list for too long has hobbled the market as infrastructure deficit and lack of regulatory support has stunted growth, which has made operators perform sub-optimally at 0.2 percent of a 100 million ton potential.

He, however, sees a window for private participation in the sector in the Railway Bill, which would allow states and private proponents to establish greenfield railway infrastructure, adding that when private sector participation is guaranteed, there would be spin-offs in the area of trading of locomotive drivers, fabrication of coaches, track construction, which would engender employment.

He specifically called for a funding structure in the country that could make indigenous participants to have access to funding and compete against investors from China or India where there specific structure s to raise financing for rail investment.