On the 10th of March, 2021, the Federal Government kickstarted a $3 billion rehabilitation and reconstruction of the 1,443-kilometer (897-mile) Eastern Railway line that starts from the southeastern oil hub of Port Harcourt and terminates at the northeastern city of Maiduguri.
The rail line is expected to link Nigeria’s industrial and agriculture hubs, facilitating the easy movement of people, goods and services. When completed, it will connect Rivers, Abia, Imo, Enugu, Ebonyi, Anambra, Benue, Nasarawa, Plateau, Kaduna, Bauchi, Gombe, Yobe and Borno states.
According to Mr Rotimi Amaechi, the Minister of Transport, the Federal Government is expected to provide about 15% of the $3 billion rehabilitation and reconstruction cost, while the balance will be provided by a syndicate of Chinese financiers.
On the trade benefits of the rail line, the Minister disclosed in February that the government was in the process of acquiring land for the construction of the Bonny seaport, and was hopeful for a simultaneous commencement of the seaport and rail line construction projects.
“…the first thing to do is to address the insecurity. The moment we address the insecurity, it will encourage importers from Onitsha, Aba and others to use the Port Harcourt seaport or Warri seaport or Calabar seaport,” Amaechi said, while speaking on the importance of ports in diversifying the economy.
Export deficit and trade with Africa
Nairametrics recently reported that Nigeria’s trade balance plunged further by 14.3% from a N2.39 trillion deficit recorded in the third quarter of 2020 to a N2.73 trillion deficit in Q4 2020, while total imports stood at N5.93 trillion, a 10.1% increase compared to N5.38 trillion recorded in Q3 2020. Total export rose by 6.72% from N2.99 trillion to N3.19 trillion.
- Raw materials exported in Q4 2020 rose by 317.6% from what was recorded in Q3 2020, and was 122% higher than the value exported in Q4 2019.
- Exported energy goods increased by 13.3% in Q4 2020 compared to Q3 2020, but declined by 15.5% when compared to the value exported in the corresponding quarter in 2019.
In Q4 2020, Nigeria’s major export trading partners were India, Spain, South Africa, the Netherlands, and United States. Meanwhile, her major import trading partners during the period were China, India, United States, Netherlands, and Denmark.
Africa accounted for just 17.3% of all of Nigeria’s export trade for Q4 2020 valued at N551.1 billion, and just 3.2% of all Nigerian imports at N190.1 billion. To overturn this dismal outing in Africa, infrastructure that connects industrial and agriculture hubs to export locations is an absolute necessity.
The African Continental Free Trade Area (AfCFTA) is one of the biggest free-trade agreements in the world right now, with a potential market of 1.2 billion people, and a combined gross domestic product of $2.5 trillion.
According to a report by PricewaterhouseCoopers, Nigeria should consider fiscal sustainability in terms of focusing efforts on key areas where the country has the biggest impact such as rails and ports, in order to optimize the country’s resources through the implementation of public and private sector collaborative efforts, post-Covid.
Ms. Funmi Folorunsho, AfCFTA’s co-Chairman on transportation, disclosed earlier this year that Nigeria was ready and working and that the issue of infrastructure deficit was not unique to Nigeria. She explained that the United Nations Conference on Trade and Development (UNCTD) report for 2020 clearly stated that for the Africa free trade area to work, the infrastructure deficit had to be addressed.
The implementation of the African Continental trade deal will reduce the tariff barrier to trade with the continent for exporters of goods from Nigeria. With Nigeria’s intracontinental trade currently below 20%, added infrastructure is needed to maximize the coming trade with the continent.
Nairametrics interviewed Prince Nwafuru, an international trade lawyer at Paul Usoro & Co., and leader of one of the Commercial Dispute Resolution & Litigation Teams, on the impact of an improved transportation system on Nigeria’s trade.
Benefits of the Port Harcourt- Maiduguri rail line for farmers and Nigeria’s agriculture hub
Prince Nwafuru said, “There is no gainsaying the fact that the poor state of infrastructure remains the major bane of intra-African trade, particularly in the area of agriculture where most African countries including Nigeria, have competitive advantages.
“The Port Harcourt-Maiduguri rail will benefit farmers in many ways. When completed, the project will boost intra-Nigerian trade, making it faster and cheaper for the farmers in the North to convey their goods to the South. The reduction in costs will translate to some moderation in prices of goods. Relatedly, most of the farm products are perishable in nature and the more efficient the transport system, the easier these goods get to where they are needed. In the long term, it will help the farmers to scale up given the increased access to market.”
Would the reduced transport costs make Nigerian agricultural product prices cheaper for AfCFTA?
“Definitely,” he said. “The rail project will contribute to reduced costs and like I noted above, this will reflect on prices as well. It is sad to learn that it costs less to import a 40-foot container from overseas than to transport it from Lagos to Maiduguri. This alone should give you some idea of how the high cost of transportation impacts on the prices of goods. Now imagine the cost implication of transporting the same products to say Accra Ghana.”
Speaking on how Nigeria could maximize production from the proposed railway project, Mr Nwafuru stated that the project would not only maximize the movement of goods but also enhance the movement of people which would, in turn, enable service efficiency.
“Infrastructure plays a very big role in actualizing the objectives of the AfCFTA. With increased trade comes the challenge of logistics and transportation. Investment in the transport sector remains key to the promotion of trade within the AFCFTA. In addition to the movement of agricultural products, the rail system will aid the movement of persons across major cities in Nigeria. This will boost the efficiency of the service offerings and by extension, increase production. With a more efficient transport system, the movement of raw materials will be faster and this will help industries within the AfCFTA,” he said.
What other rail infrastructure would be beneficial for AfCTA trade?
“The Lagos-Cotonou route has a lot of vehicular traffic and needs a rail system to complement the road transport. The effort by the Lagos State Government to rehabilitate the Lagos-Badagry road and the construction of the light rail project has not gained much traction due to funding issues,” he said.
“The Federal Government should assist Lagos State in this area, given the importance of that route to the economy and actualization of the AfCFTA objectives. The Badagry route serves as the gateway to the commercial hub of the country. In addition, there should be a rail system from Enugu to Calabar passing through Abakaliki, Umuahia and Akwa Ibom. This will serve as a link between Nigeria and Cameroun. The absence of a rail network in the southeastern part of Nigeria has adversely affected the economy of the region,” he added.
The African Continental Free Trade Area will expose Nigerian producers to a potential market of over 1 billion people. For Nigeria to be an early pioneer in maximizing the trade deal, the implementation of infrastructure is needed to benefit the smooth transition of goods, people and services to export hubs. The proposed rail line, when completed, will make it faster and cheaper for the farmers in the North to convey their goods to the South for export through Bonny or Warri ports.
Other factors that are equally important to increased production include stepping up the fight against insecurity and increased investment in education.