Revitalizing the railway infrastructure with indigenous companies

Following the efforts of Nigerian government to reactivate the country’s railway sector, a large chunk of the reconstruction of projects was awarded to foreign interests. Myke Uzendu in this report examines what federal government stands to benefit by patronizing indigenous concerns.

Since the return of democracy in 1999, the administration of President Muhammadu Buhari has made a very ambitious commitment in the construction, reconstruction and revitalization of railways across the country.
Some of the projects include a $6.68 billion contract Lagos Kano Standard Gauge Railway (SGR) line being handled by China Civil Engineering Construction Corporation (CCECC) which commenced in May 2018.
Another is the 1,402km SGR from Lagos to Calabar coastal line also handled by China Railway Construction Corp. Ltd. (CRCC) at the cost of US$11,117 billion. The project will link Lagos in the west to Calabar sea port as well as Port Harcourt, Uyo and Aba.
Also on track is the Kano, Katsina – Maradi SGR awarded to Mota-Engil Group multinational engineering and construction firm, a Portuguese company, at the cost of US$1.82 billion.
Others are the Lagos to Jebba – Apapa Port 488km handled by CCECC; the 464km Port Harcourt to Makurdi railway line handled by Eser contracting and industry company at the cost of N19.2 billion; the 554km Makurdi to Kuru rail line awarded to China Gezhouba Group Corporation (CGGC); the 1,442km Signaling, Port Harcourt to Maiduguri contract, awarded to Ansaldo, South Africa.
Also worthy of mention is the $3.2bn narrow gauge railway project of 2033 km from Port Harcourt to Maiduguri, that would traverse the Eastern corridor, South-South, South-East and the North-Eastern geo-political zones awarded to CCECC.
Other foreign interests and companies in the railway project include African Development Bank (AfDB), African Export-Import Bank (Afreximbank), Bank of China including Julius Berger Nigeria Plc and General Electric.
Few indigenous companies carried along in the railway project include Costain West Africa handling 678km Jebba to Kano rail project and the Zaria to Kaura Namoda 221km railway track rehabilitation awarded to Duluidas Nig Ltd. Metro Technical Services Ltd also won the 1.4km Port Harcourt Port reconstruction project just as the 640km Kuru to Maiduguri railway line was awarded to Lingo Nig Ltd.
It’s worthy of note that indigenous companies have not had a fair share of railway projects being churned out in the sector as a large chunk were handled by foreign firms. Most of the ancillary services in the railway project including procurement of coaches, software, scanners and telecommunication equipment were handled by foreign interests. Most of the raw materials used the construction of the rail tracks and other accoutrement were sourced from abroad even when they abound within the country.
Perhaps one of the lacuna being exploited by foreign interests in dominating this sector is the inability of the federal government to replicate the Local Content Act, 2010 already functional in the Oil and gas sector in the transportation industry.
Paragraph 3 (1) of the Oil and gas industry Content Development Act 2010 states, “Nigerian independent operators shall be given first consideration in the award of oil blocks, oil field licenses, oil lifting licenses and in all projects for which contract is to be awarded in the Nigerian oil and gas industry subject to the fulfilment of such conditions as may be specified by the Minister.
“(2) There shall be exclusive consideration to Nigerian indigenous service companies which demonstrate ownership of equipment, Nigerian personnel and capacity to execute such work to bid on land and swamp operating areas of the Nigerian oil and gas industry for contracts and services contained in the Schedule to this Act”.
As at June 2020, Nigeria’s total debt profile rose to N31.009 trillion ($85.897 billion) according to Debt Management Office (DMO). In this report, China’s component on the loan stood at USD3.121 billion (₦1,126.68 billion at USD/₦361). This amount represents 3.94% of Nigeria’s total public debt of USD79. 303 billion (₦28,628.49 billion).
As Africa’s largest bilateral creditor, China holds at least 21 per cent of African debt and nearly 30 per cent of 2021’s debt service.
Lamenting on the minor role played by local contractors in railway projects, the Managing Director of Metro technical Nigeria Limited, Mr Mike Okoye said that it was time Nigeria government tried to trust indigenous companies with more responsibilities.
He said that the federal government should make more commitment in building substantial stocks of indigenous manpower and engage more indigenous companies in social and physical infrastructure development. He expressed optimism that indigenous companies have the capacity to rehabilitate old and existing tracks.
“There are tracks Nigerians have constructed far back and it is no big deal for us to handle it because we have the resources and it will also save the country the cost of accumulating debts.

“As far back as 1993 down to the year 2000, our company was part of those companies who gave accurate data on railway construction of its first slippers.
“Some of these Chinese companies don’t know it but they bided for the contract and won. We constructed 15killometers from Iju to Ijoko road from 2006 to 2008 for track dualization.
“We also did the 61killometres between Zongoma and Gombe town and we also did the rehabilitation of rail from Ashaka branch in 2007, 2008 and 2009,” he said.
Furthermore, Mr Caleb Muyiwa Adelowo in a paper he delivered at the National Centre for Technology Management, hinted that developing an indigenous innovation agenda in most sectors including the railway sector of the economy in Nigeria would propel entrepreneurial inclinations and foster the creation of small firms as they are seen as flexible drivers of innovation.
Also, a Research Fellow and Head, Division of International Economic Relations at the Nigerian Institute of International Affairs, Lagos, Efem N. Ubi, said, for any plan to succeed there has to be political will across all spectrum of the industrialization programme, including planning, trade protection, development finance and public investment in strategic industries.
He said that a lot of people see corruption as the bane of Nigeria’s development and industrialization. He said that while endemic corruption has been a major impediment to Nigeria’s development, China, India and a lot of the newly industrialized countries of Southeast Asia have made significant strides in industrialization while still grappling with systemic corruption.
The benefits of engaging more indigenous companies to play more active role in the current transformation of the railway sector cannot be over emphasized. The economic trickle-down effect and contribution to the Gross Domestic Product (GDP) is very huge.
The major benefits of engaging indigenous companies in railway infrastructural development is that it will provide the driving force necessary to sustain economic growth in the country.
Indigenous firms have more preference for the use of local raw materials, indigenous manpower, technology and materials.
The basic objective of patronizing indigenous companies is that it is a catalyst for accelerated economic growth, enhanced living standards and gives the citizens hope and increased measure of control over its own destiny.
Investing more projects with local contracts will not only conserve the foreign reserve but also draw a measure of commitment from the contractor on project quality and life span.

Working with local companies will also boost the image of the country and also reposition local contractors to become bigger players at the international stage.

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