“NRC generates revenue but will not make profit in its present state”—Esan

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Mr. Segun Esan is the secretary general of the Nigeria Union of Railway Workers (NUR). In this interview with newsgazette.com.ng, he raises some issues in the federal government’s proposed privatisation or concession of the Nigerian Railway Corporation (NRC). He says profit making from railway business takes some waiting, that the essence of railway anywhere in the world is to render social service to the teeming commuting public, that the corporation, though generating revenue cannot make profit in its present state and calls for its phased repositioning instead of privatisation in any guise

Why is it difficult, if not impossible, to transform and modernize the NRC networks?

It is not difficult to transform the NRC. And when you talk about transforming, you mean moving from the narrow gauge to the standard gauge. It is not difficult. Everything regarding true to type rail transportation is all a function of first, the law and second, the political will of the federal government. What I mean by transformation of the Nigerian railway resting on the political will of the federal government as well as a matter of law is that the Nigerian Railway is a creation of the law. If you want to do any form of transformation or you want to move the railway from where it is to another pedestal it is through the instrumentality of the law. For instance, you are talking of modernizing the railway but you are not looking in the direction of having a workable development policy for the railway. What we have been having are different remedial approaches from the federal government towards addressing the problems of the corporation. But if you really want to transform the railway to the level everybody wants it to be, then you have to take cognizance of the law establishing the railway into consideration.

It is believed that the privatisation of NRC will make it perform better. Therefore, privatization or concession of the corporation looks certainly on the cards. What are your views on this issue?

The privatisation experience we have had in Nigeria is not palatable. The Bureau of Public Enterprises (BPE) said not up to 40 out of about 400 federal government-owned institutions that have been privatised are doing well. So, why should we continue committing the same mistake and expecting different results?

And if you look at the recent chain of privatisation in Nigeria, which is the privatization of Power Holding Company of Nigeria (PHCN), you will discover that we have not seen much difference from where they were to where they are now.

Of course, the entire country had expected to have improved power supply and upgrade of facilities of the defunct PHCN. But it is still not working. And part of the reason for its not working is the Nigerian factor. It is out of this world for you to sell the generation and distribution points of power to one group. So, already, the privatisation of the power sector is dead on arrival.

And now coming to the railway, it is so vast, so enormous. It is a facility we inherited from the colonial administration and it is still predominantly manually operated. And the railway, all over the world is capital and labour-intensive. In fact, if the government had actually got it right in the Nigerian rail sector, it would have served as a major employer of labour. But that is not the issue now. The issue now is how do we see the privatisation of the railway? It is not likely going to make headway because of the subsisting Nigerian factor.

That aside, railway is capital-intensive. And to put together a kilometre of rail track, let’s say, a standard gauge, you are going to spend not less than $1 million. And the system that is already on the ground that the federal government is proposing diverse ways of privatisation and concessioning we don’t see it flying because we are yet to be convinced that there are some people or institutions that will come with their money and invest in a business that will not start yielding profit almost immediately. That is the railway for you.

All over the world, profit making from railway doesn’t happen immediately after investing in it. How many or institutions can wait for that length of time for investment to mature and start bringing profit? That aside, the risk we are about to take if eventually the railway is under private control is the possibility of jettisoning safety for profit motive. And in the railway business, the square root of rail business is SAFETY, SAFETY AND SAFETY. But the private sector, as we know, they are business men; they are coming to invest and start making profit. How do you strike the correlation between the essence of safety and the essence of the drive for profit? They are two contrasting issues.

How do you want to privatise or concession the railway? Do you want to privatise or concession into one or several hands. If you want to give it to so many hands, have you considered the damage we are planning to do to the advantages of the economy of scale? When you have a very big outfit broken into segments and given out, automatically you don’t expect it to be very strong, potent and powerful as it would have been when it was still whole. And the benefits of the economy of scale are lost. I think we are not being patriotic enough in the sense that I can’t be the owner of a property then I expect that when I put it under the care of someone else that the property will be well maintained. I think the best of care can always come from the owner of the property because the affinity is there and the owner will not want it to fold up. So, my fear remains that if I cannot take care of my property, is it someone else I want to concede it to that will take proper care of the property than I would have done?

The government cannot claim that it does not have enough funds to reposition the railway either by way of continuing with the existing rehabilitation work on the ground as well as gradually transform to standard and modern railway system. I don’t want to believe that government does not have the money and where the government does not have the money it is faced with diverse methodologies through which it can raise money without necessarily mortgaging the whole nation.

If you look at all these, you will agree with me that the railway can be taken proper care of if there is the political will. How best we can achieve that is to put a lasting development policy and keep very fanatically to it and drive it stage by stage.

Even when the British were here, the rail system they bequeathed to us was not done in a single attempt; it was not a one-year attempt that produced the present 3, 305 kilometres of the track of narrow gauge system that we have in Nigeria. It was done by installments; it was done gradually. In fact, the British colonial administrators were so well positioned, economically speaking, starting with 193 kilometres of rail track which started from Lagos and terminated in Ibadan. Some years after, they took it from Ibadan and drove it further over many years to everywhere we now have railway business going on. So, the federal government can borrow from that approach. Of course, everyone knows that rail transport system is very capital intensive and for that reason you will see the importance of putting in place a long term development policy and a strong and unwavering political will to drive the policy to fruition, not necessarily by either privatizing it or concessioning it to private companies to run for a certain number of years.

But even for a certain period of time, how are we so sure, how are we so convinced that as it is planned and we expect the benefits, so they will come? So that is why we are sounding this note of caution to the federal government to be extra sagacious in the way it wants to bring about the repositioning of the railway through the perspective of privatisation or concession.

What is the gestation period for any investor in the rail system to make profit or break even? 

It all depends on how you see it and what volume of investment you are bringing in. You must have a railway that is wealthy in locomotive power base for that is the basis of railway operation. You must have more than enough coaches and wagons to move passengers and move freight. What actually brings money to railway mainly is freight train service when you compare it to passenger service. But you can’t run one service. Apart from making profit, the very essence of railway anywhere in the world is to render social services to the teeming commuting public. And the reason is this: Railway is like the blood vessel in the human body that transports blood all over the body. If there is a certain part of the body that doesn’t have enough supply of blood, something will happen to that part of the body. It will either go numb or be completely paralysed. That is how the railway functions. Railway is like the blood vessel in the anatomy of the Nigerian state. And this blood vessel we now see is the railway which opens up towns, villages and hamlets. That is why you see in any railway environment you go, you see business activities going on there. So when you are talking about making profit, you can look in the direction of running goods train together with passenger train. But you cannot say because of profit you are going to leave the social aspect of the primary existence of the rail system which is rendering transportation to the teeming public.

As I said earlier, it depends on what volume of investment you are bringing in at a point in time. But no matter the volume of investment you are bringing in at a time, you don’t expect to start breaking even in railway until after about 10, 15, to 25 years. The reason is that before you can run a railway you have to keep the route that is the track, on which the train moves. That is why the rail is very capital intensive. For you to move a vessel you don’t need to have a waterway; for you to move an aero plane, you don’t need to own airspace; for you to own or run motor transport, you don’t have to own or tar any road. But for you to run a railway system, you must have a track, which of course, from time to time and when due you must maintain it so as to run your train to wherever you want. So, all these put together when you are investing you think of reinvesting into the initial investment you have made. Your wagons must be busy; the engines too must be maintained and with the narrow gauge system we run now you need a large army of workers. So all these put together when you are talking about profit you should equally be mindful that it is not something you are going to have on a platter of gold.

Has the NRC ever made and declared profit?

To be very honest, the system we have, they are making revenue but not up to the level they can declare profit. The only time the NRC made and declared profit was in 1964. And with the current economic situation, it is even more challenging to break even or declare profit. The dollar to the naira now is in the neighbourhood of N500. And you need to buy your lube oil; you need to buy your diesel, you need to buy your brake plugs; you need to buy so many things, the whole of the service support. And all the movable facilities we use in the Nigerian railway are sourced abroad and they are a function of the exchange rate regime. So, when you look at that vis-à-vis what it actually takes to declare profit you see that the Nigerian railway though it is making some earnings it is not up to the level that it can conveniently assume the global centre stage.

Is it a rocket science to transit from the narrow to standard gauge?

That is the subsisting phenomenon. We can’t continue to be permanently kept in the past. The narrow gauge we are running is the very first technology in railway business. To tell you how old the system is, if we have to order for locomotive engine that will be used on the Nigerian railway track we don’t buy it off the shelf. Whichever country we go to buy the locomotive will have to go to the drawing board and build for us to our specification. The reason is that those countries we are going to source our movable facilities from are no longer where we are. They have moved ahead; they are not even using the standard gauge, some countries are on wider gauge which is more balanced than the standard gauge. But standard is very much everywhere round the globe. That is why we are very appreciative of the fact that it is part of what the government has considered in implementing, that is, gradual gravitation from the narrow gauge system to the standard gauge system. And they have started rectifying that by starting the Abuja-Kaduna standard rail gauge. They have completed and flagged it off and it is running though exclusively between Abuja and Kaduna. Before Abuja-Kaduna, we came up with the Ajaokuta-Warri-Itakpe axis of standard gauge. That one was exclusively to serve the iron ore producing areas. But in the rehabilitation which started in 2010 we were fortunate to get the Warri-Ajaokuta-Itakpe standard gauge rail line re-defined by way of taking it from the exclusively iron ore moving rail system to both freight  and passenger-carrying rail system. Aside that, we have equally seen the budgetary allocation and the readiness of the federal government to construct the Lagos-Calabar rail line. That is the approach we have been clamouring for which we know even in better economies and better climes that is how they build their railway system. They do it by installments.

 

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