Image Credit: worldbank.org
January 29, 2024/CSL Research
Based on recent data from the National Bureau of Statistics on rail transportation, the total revenue generated from the rail transport subsector grew by 102.71% y/y in Q3 2023 to N1.9bn from N935m in Q3 2022 and 44.92% q/q, from N1.31bn in Q2 2023. Both quarterly and annually, the total revenue from rail transport clearly improved. The total revenue of the subsector is made up of income from passenger fees, freight (goods & cargos), and other receipts.
Revenue from passenger fees increased 35.27% q/q to N1.49bn in Q3 2023 (accounting for 78.6% of gross revenue during the quarter). Revenue receipts from other income surged by 536% q/q to N119.2m, while freight revenue amounted to c.N286.8m, an increase of 52.5% q/q from N188m in Q2 2023. In Q3 2023, passenger traffic grew significantly, up 25.36% q/q to 594,348 (vs 474,117 in Q2 2023).
The Q3 2023 GDP numbers indicate a notable 18.23% y/y growth in the rail subsector, an improvement over the 16.88% in Q2 2023 and -49.1% contraction in Q1 2023. Despite this growth, rail transport contribution to the transportation sector’s real GDP in Q3 2023 remained modest, accounting for less than 1% (0.64%), suggesting opportunity for growth.
Security concerns have been a major deterrent to revenue growth. Recall the federal government had suspended operations on the Abuja-Kaduna rail line in March 2022 due to security concerns. It appears passengers have begun to lose the fear of travelling through that rail line following some security measures that have been put in place. Operations resumed on the Abuja-Kaduna railway line in December 2022, and this may be contributing to the improving numbers.
We anticipate improved revenue from the rail transport subsector in 2024. The new blue-light rail which started operations in September 2023 at the nation’s commercial hub, Lagos should drive revenue growth. Again, the redline rail project, which is nearing completion, should also support revenue growth. Railways represent a sustainable and efficient means of transporting both people and freight, fostering economic growth, and concurrently mitigating greenhouse gas emissions. They offer an environmentally friendly and space-efficient solution for transporting substantial volumes of passengers and goods across the country.
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