December 29, 2023/CSL Research
Based on news report on Nigeria Railway Corporation (NRC), railway debt servicing cost exceeded revenue significantly in the first half of 2023. While the government spent US$38.59m (N29.98bn at N777/US$) on servicing debt for loans obtained to build the Nigeria Railway Modernisation Project (Idu Kaduna Section) and Nigeria Railway Modernisation Project (Lagos–Ibadan Section), the total railway revenue was N2.292bn according to data from the National Bureau of Statistics. In H1 2023, a total of 915,842 passengers travelled via the rail system, a 33.4% decrease from the 1,375,492 passengers reported in H1 of 2022. In the same vein, total revenue generated declined by 22.8%, from N2.967bn to N2.292bn. Though we realise some of the new projects such as the new blue-light rail which started operations recently at the nation’s commercial hub, Lagos, will boost revenue, we believe more needs to be done to drive revenue generation if profitability is the goal.
On revenue categories breakdown, only revenue generated from cargos grew y/y by 102.2%, reaching N369.3m in H1 2023 vs N182.7m in H1 2022. Revenue from passengers and other receipts dipped by 30.2% to N1.87bn from N2.68bn in H1 2022 and by 50.9% to N52.9m from N107.7m in H1 2022 respectively. Q3 2023 GDP numbers showed that the rail subsector grew by 18.28% y/y, an improvement over the contraction of-29.91% y/y in the corresponding quarter. In terms of contribution, rail transport accounted for less than 1% (0.13%) of the transportation sector’s real GDP in Q3 2023, which suggests more can be done to maximize the subsector’s contribution.
Looking ahead, to improve revenue generation to help service associated loans, the Federal Government needs to implement earlier communicated security measures to address the security challenges faced by the sub-sector. We recall that the FG suspended the Abuja-Kaduna rail line operations in March 2022 due to security concerns. Railways are a climate-smart and efficient way to move people and freight and promote economic growth while cutting greenhouse gas emissions. They are a clean and compact way to move millions of passengers and millions of tons of goods across countries. That said, the high level of insecurity in the country is a major bottleneck to patronage despite the FG’s efforts to integrate rail transport into the Nigeria transportation system. Decisive and effective steps to address these security concerns are pivotal to improving the fortunes of the subsector
