January 29, 2024/FBNQuest Research
According to the most recent report from the National Bureau of Statistics (NBS) on railway transportation, the total revenue generated from railway traffic increased by +45% q/q to NGN1.9bn in Q3 ’23. On a y/y basis, the sub-sector’s revenue growth more than doubled. It is worth mentioning that the total revenue figure comprises income generated from passenger fees, freight, and other sources.
Although all revenue segments increased q/q, the marked rise in the revenue generated during the quarter relative to the previous quarter was primarily due to income from other sources, which increased significantly from NGN18.7bn to NGN119.2bn.
The growth in the sub-sector’s revenue was also supported by increases of 53% q/q and 35% q/q in both passenger and freight revenues to NGN1.5bn and NGN286.8bn, respectively.
Although the NBS did not specify the reason for the increase in revenue, we believe that the improved railway revenue was due to restored passengers’ confidence in railway transportation because of concerted efforts by securities agencies to tackle escalating security concerns faced by the sector.
Security challenges remain the most significant limitation to the sector’s productivity. The persisting security concerns have resulted in passengers’ preference for alternative modes of transportation and frequent suspension of railway operations.
Consequently, the low turnout of passengers has resulted in weak revenue turnover in recent times, particularly considering the significant investment made by the federal government into the railway sector.
Returning to the data, significant q/q increases were recorded in the number of passengers and freight.
Specifically, the total number of passengers increased 25% q/q and 19% y/y to 594k. However, the rise in the volume of freight was more significant, more than doubling y/y and increasing by 46% q/q to 82k tons.
Looking ahead, we anticipate further expansion in the sector’s revenue turnover due to increasing public confidence in railway transportation because of continuous security efforts to tackle the security and vandalism concerns hindering rail traffic operations in the country.
