July 8, 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 114.7%% y/y in Q1 2024 to N2.11bn
from N983.87m in Q1 2023 and 12.1% q/q, from N1.89bn in Q4 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), pipeline, and other receipts. Revenue from passenger fees rose 33.1% q/q to N1.42bn in Q1 2024 (accounting for 67.3.6% of gross revenue during the quarter). Freight revenue amounted to N607.3m, an increase of 43.5% q/q from N423.2m in Q4 2023.
In addition, revenue generated from the movement of goods/cargo via pipeline stood at N59.1m in Q1 2024 while revenue receipts from other income declined by 93.5% q/q to N25.4m. In Q1 2024, passenger traffic grew marginally, up 0.5% q/q to 675,293 (vs 672,198 in Q4 2023).
The Q1 2024 GDP numbers indicate a notable 66.63% y/y growth in the rail subsector, an improvement over the 10.39% in Q4 2023 and -49.1% contraction in Q1 2023. Despite this growth, rail transport contribution to the transportation sector’s real GDP in Q1 2024 remained modest, accounting for less than 1%, highlighting potential growth opportunities.
Security concerns have been a major challenge to revenue growth, as evidenced by the Federal Government’s eight-month suspension of the Abuja-Kaduna rail line in March 2022 due to security issues. Since the resumption of operations on December 5, 2022, measures have been implemented to safeguard the infrastructure, passengers, and their property, which may be contributing to the improving passenger number.
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 is expected to 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 quantum of passengers and goods across the country.
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