Nigeria: Stakeholders Canvass Diversification of Railway Financing Sources

*Toyin F. Sanni Lists Financing Options

*NRC MD, Okhiria Explains Corporation Plans


* Read Details of Submissions by Panelists 


Amidst fears of debt trap, stakeholders at a webinar organised by the Xcellon Infrastructure Roundtable have advised against Nigeria’s over-dependence on China to fund her railway projects, canvassing unbundling of the Nigerian Railway Corporation among other recommendations.

In a communique issued by the organisers of the event where Nigeria’s Transportation Minister, Hon Rotimi Amaechi was the keynote speaker, the statement noted that  ” a fair majority of large-scale Infrastructure projects (especially, railway, airport terminals and ICT), have been funded via Chinese loans, accounting for 85% of project funding, while FGN provides counterpart funding for the remaining 15%.

“Taking into cognizance the fact that Nigeria’s debt stock is about $90billon and growing, with a debt-service burden that is steadily rising, the need to explore broader Infrastructure financing options by Nigeria is quite urgent and imperative”, the statement opined.


Other recommendations of the webinar whose theme was the financing options for Lagos-Calabar railway line include the following: that the impact of railway project on real estate and communities can be a strong economic stimuli; that the NRC  should  pro-actively publicize and promote its business friendly stance in regulating and developing the sector; that there is a paramount need to understand that the Railroad is not just another project but also a nation builder and a massive driver of economic development.

Other recommendations include that the Nigerian Railway Corporation is more than willing and looking to welcome both Local and Foreign Investors to work hands-on with this project; that the LCL line is key to boosting economic development of the region; that drawback on major projects was due to lack of continuity; and that a proper framework structure should be set in place for the operations and maintenance of the railroad.

RT Hon Chibuike Rotimi Amaechi, the Honorable Minister of Transport was the keynote speaker and was duly represented by Freeborn Okhiria the Managing Director of the Nigerian Railway Corporation.

The panelists include:• Chidi Izuwa, Director General of the  Infrastructure Concession Regulatory Commission, • Bongo Adi, Senior Lecturer, Lagos Business School, • Toyin F. Sanni, Managing Director, Emerging Arica Group, • George Etomi, Chairman Board of Trustees (proposed Walter Ollor University), • Andrew Nevin, Chief Economist, PWC.Moderator• Dr. Chamberlain S. Peterside, CEO, Xcellon Capital Advisors.


Below is the summary of presentations of speakers at the event. 


Toyin F. Sanni (Managing Director, Emerging Africa Group).  

According to a presentation by Toyin, the 2019 Global Competitiveness Report shows Nigeria’s efficiency in terms of train services at 1.8 0ut of 7 points, ranking Nigeria at 98 of 141 countries.

The National Integrated Infrastructure Masterplan 2015 shows that about 75 billion dollars would be required for investments in railway over the long term.

 • A case study of the Lagos-Calabar standard gauge rail line was discussed, which indicates that the Lagos-Ibadan line is nearing completion. It is designed to link up with Kano and support the transportation of cargo from the Lagos ports.

• The economic impact of the LCR Line was also discussed, and clearly shows a potential multiplier effect on business activities in the region.

• 2 major project funding options available to Nigeria were enumerated, namely; The Standard Project Financing Structure, which is essentially access to non-recourse lending, and Equipment Trust Certificates – Bond Structure.

• Key success factors of the project identified is for FGN to explore and tap a diverse pool of funding options, both locally and around the world.

• Possible financing sources and challenges of PPP options discussed, include the unpredictability of market environment; dearth of long-term capital in the domestic market; and inability to access local pension assets which currently stands at over N10trillion.The strategies and approaches from other African countries on similar projects were pointed out as case studies, like the Gautrain in South Africa, Skytrain in Ghana, the Mombassa – Nairobi standard gauge line in Kenya.

• The Speed of implementing similar rail projects across other African countries is quite commendable and worth replicating in Nigeria.

Freeborn Okhiria (Managing Director of the Nigerian Railway Corporation)

The Lagos-Calabar Railway Project, its route, and possible cost of implementing it.The Coastal rail is expected to take off either from Lagos and end in Calabar or take off in Calabar and end in Lagos, linking up with the Warri-Itape, the Kaduna-Kano from Itape, that is linking the South-South to the North.

There is also a segment from Benin through Sapele Warri, Port Harcourt, Aba, Uyo, Calabar, etc. This captures through Abia State, Cross Rivers, and Calabar, with then again, the Lagos-Benin route, covering through Shagamu, Ijebu Ode, Ore, and Benin city and many more. A policy for state capitals to be captured in the routes was implemented.

The total distance to be covered is about 738km. Due to the topography of the routes, several bridges would be constructed to aid easy passage.

Feasibility studies carried out (although subject to review), estimates the cost of the LCR Line project at $7billion. If the Abakaliki to Onitsha route is not included, the estimated cost would be about $5.5 billion according t the presentation by the MD of NRC.

Aside from easing the bulk transportation of goods and passengers, this project in question will be a catalyst for job-creation and to boost business activities in the region.

A PPP arrangement to link Warri port to Abuja via Itakpe and Ajeokuta in a standard guage line was signed off in late 2019 with CRCC of China. Based on that arrangement the FGN is set to provide a sovereign guarantee plus 15% counterpart funding, as well as guarantee to make up any revenue shortfalls in course of operations.

The NRC is looking to welcome both local and foreign investors willing to partner in various aspects of the project, including laying fiber optic cables among the rail routes; building gas powered electricity plant to run the trains and deploying freight rail wagons in the existing rail lines to move both wet and dry cargo in large volumes..

Andrew Nevin (Chief Economist, PWC).  

According to this presentation, Dr Nevin was of the view that the Lagos Calabar Rail (LCR) Line isn’t just another public infrastructure, but a key nation-building project. Especially considering the geography, demography of Nigeria, long term economic growth won’t crystallize without this kind of rail project. It is therefore mission-critical for the success of Nigeria. The population of Nigeria based on projections is said to peak in the year 2067 at which time it will become the 2nd most populous country in the world. With such a projection comes the emergent need for critical rail lines that have the capacity to transport large volume of goods and teeming passengers.

As he pointed out, there are several elements to recognize in the railway infrastructure ecosystem:-• The regulation;• The owner of the rail tracks;• The owner of the passenger rail wagons and freight cars;• The operators of the rail lines.

Further more, from a financiers viewpoint, he said, the regulatory architecture of how the various players fit together is particularly very crucial huddle to tackle. The need for a strong and level playing field being put in place for an efficient operating and maintenance system can’t be overstated. That system will determine investor appetite and attract incremental investments in the sector. Long term investors would want to be assured of achieving their target return on investment.

“When you make railway system work efficiently, you drive up real estate value in all the routes where there are passenger stations.”.

Nigeria is potentially wealthy in terms of property and land value, it just needs to unlock the “dead capital”,according to Dr Nevin.
In Summary:
I. The LCR project is a pivotal asset that can help the country achieve high single digit or even double digit GDP growth in the longer term.II. It will be a massive driver of economic progress and advancement in the regions involved.III. The most critical issues from his perspective is to get the regulatory framework right and transparent.IV. Think about the overall impact of this project on real estate value along the routes and how the FGN can capture that value in the funding mechanism, as state and local governments can also all harness tax revenue. George Etomi (Founder George Etomi & Partners)

George opened his presentation by stating that two key questions investors ask prior to entering into a new territory or project are:How do I get In? andHow do I get out when I need to?

It therefore vital to create favorable legal structure that is both transparent and welcoming to investment. This all starts with how the laws are carved, complied with and interpreted.

Whether it is the PPP or other project funding models (debt or equity), the issues and challenges remains the same. In most international loan agreements the clause that requires the government to waive sovereign immunity remains standard. Attempting to circumvent that clause as a means of avoiding contractual obligation is always frowned at in arbitration and dispute resolution hearings.

“The Sanctity of contract is the hallmark of business”. Many setbacks faced by Nigeria in implementing large infrastructure projects is as a result of the willful disregard of obligations, especially by successive administrations. He cited an example of the failed Lagos metro line project initiated in the 1980s by then Governor Lateef Jakande.
The lack of continuity in policy implementation and discipline to follow through on laid down plans raises the political risk profile and lowers the credit rating of the country.

The average foreign lender or investor in Nigeria must weigh their risk reward metrics.

Political will therefore is perhaps the most important trait Nigeria must exhibit to make sure laudable projects succeed.In recapping, the legal and regulatory framework is the growth engine of private sector participation in PPP in any project.

Bongo Adi, (Senior Lecturer, Lagos Business School).

According to Dr Bongo Adi a clear distinction between financing and funding has to be established first and foremost.Financing Infrastructure has to do with the compounding of the present value of future cash flows that have to be invested upfront.

Funding has to do with the revenue creation which pays for the infrastructure.He cited a World Bank research which said that if financing is the only problem of rail projects then perhaps we shoudnt be considering PPP.. Considering the dynamics of the railway sector in Nigeria, we have the below infrastructure (which is mainly the tracks) and the above ground infrastructure (which are the passenger wagons and freight/cargo cars). It is tough to attract private investors in the below infrastructure because it doesn’t have the same economic value as the later. But a question to ask is, if the Abuja-Kaduna and Lagos-Instant standard guage rail lines were procured publicly, why is the PPP being considered for the Lagos- Calabar Line?

Eventually such questions are bound to arise in probably cause concern amongst shareholders.
The Lagos-Calabar Rail Line could become the busiest corridor from all indications as well as the most economically viable based on the projected volume of cargo and passenger trafficIt could therefore unleash the prospects of the regions along that axis.

According to Dr Adi, it might be a smart policy step to engage and coopt existing private sector operators in the road transportation business to leverage their experience and capital base to invest in the rail transportation value chain.

Another consideration is to align single purpose projects like the Abuja-Kaduna-Kano (AKK) pipeline project into the railway value chain whereby both liquid and dry cargo can be moved in large volumes,he said.


Over a hundred participants from different countries including UK, USA, Nigeria, Germany, and Canada were present at the Xcellon Infrastructure Round Table webinar that took Participants at the Webinar that consisted of industry stakeholders (from both the private and public sectors), raised pertinent questions, ideas, and solutions to the financing options for the Lagos-Calabar Railway Line.

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