Rotimi Amaechi, the Minister of Transportation, at the inauguration of the governing council of the Chartered Institute of Transport Administration of Nigeria (CIOTA) in Abuja on Friday, of December 4 was quoted as saying: “Today I approved the charges on passengers from Lagos to Ibadan, we just transfer how we charged from Abuja. We charge N3,000 per economy seat, N5,000 for business class, and N6,000 for first class, the same is applicable to Lagos to Ibadan”.Just like a reaction of lightening to rain, reactions have trailed the statement of the minister. Many are asking why, considering the conventional notion that railway transport charges should be cheaper compared to road transportation, the fare should be higher since the cost of road transport from Lagos to Ibadan is not up to N3,000 despite the hike in fuel price. Rail has lower fuel costs compared to road transport, especially when shipping a high volume of freight. Rail also has less costs associated with drivers and typically has better costs.The Mombasa-Nairobi Standard Gauge Railway (SGR) is a 480 km-long line that connects the port city of Mombasa with the capital city of Nairobi, Construction began in 2013, and parts of it completed in 2017 at a cost of approximately USD$3.8 billion. An additional USD$1.5 billion extension to the tourist hub of Naivasha was completed in 2019. While the railway operates passenger services, its primary function is to improve freight transportation to and from the Port of Mombasa. It must be emphasized that China Exim Bank also “inspired” the $3.8billion loan to Kenya for this rail project just like it did for Lagos-Ibadan railway but with scary controversies engulfing the repayments of the loan.Interestingly, the repayment of the loan whose interest is 3.6% coupled with railway operations being handled for three years by a Chinese subsidiary. According to Quartz, a reputable online publishing platform, a report by Kenya’s transport ministry stated that in 2018, the railway made a loss of $90.3million in its first year of operation. Port authorities are diverting shipments to the new railway, said a Nairobi-based customs clearance agent. “You are made to pay for it whether you like it or not.” The outcries in Kenya is very similar to what we anticipate in Nigeria as Kenyans are dissatisfied about more expensive rates compared to road transport rates limiting the benefits to middle-class mostly.
and conventionally, it is believed that rail transportation is cheaper compared to road transportation amidst other economic advantages but above the economic cost of fuel allowing rail transportation to be cheaper, many observers have not considered the “subsidy” aspect of it especially as it operates in more advanced countries. For example, fullfact.org reported that UK government’s direct subsidy of the railways is around £5 billion per year, an increase of over 200% since “privatisation”. EU rail subsidies amounted to €73 billion in 2005. Subsidies vary widely from country to country in both size and how they are distributed according to European rail study. Prior January 2019, the government of Kenya used to pay subsidies on rail transportation specifically for children between the ages 3-11 specifically Mombasa-Nairobi Standard Gauge Rail.
In the light of above economic realities, Nigerians must view the statement of the minister beyond the prism of emotion. The options and solutions to achieving affordable railway services may have to involve renegotiating contractual terms with the Chinese company to allow for transparent and frugal operations cost so as not to run into loss. The federal government should initiate subsidies for railway services by converting taxes on railway revenues to subsidies. The weakest of the option is maintaining the “status quo” by limiting the enjoyment of the Lagos-Ibadan railway to middle-class.
- Mujib Dada-Qadri Esq, Abuja.