People & Money

Lagos-Ibadan Train Service: Should Nigeria Build Railways For the Poor?

Nigerians do not have to wait for their income levels to rise or for the heavily indebted government to find the money to build or subsidise critical infrastructure like the train. As has happened elsewhere in the world, infrastructure services lift economic productivity and incomes, thus making them progressively more affordable.”

Several thousands of Nigerians ply the Lagos to Ibadan route every day by road but when the long-awaited Lagos-Abeokuta-Ibadan standard gauge train commenced commercial activity on Monday, only one person bought a seat for the trip in a hundreds-capacity passenger train.

According to the Nigeria Railway Corporation (NRC), the newly introduced service provides fully air-conditioned train services in the economy, business, and first-class categories, offering travellers comfort on the move. 

Regardless of the near-luxury the train service offers,  Nigerians have condemned the pricing as too high and ‘elitist’.

A seat on the train costs between N3,000 and N6,000 for the 100-kilometre trip according to an announcement by transportation minister Rotimi Amaechi. That means an economy return ticket to Ibadan costs one-fifth of the minimum wage (N30,000).

Many have taken to social media to knock the government for the fares seen as outrageous and imposed to allow only the rich to enjoy the service. Much of the backlash is down to the fact that the train fares are much higher than charges by commercial vehicles – travelling from Lagos to Ibadan by road typically costs about N1, 500.

The organised private sector (OPS), the Nigeria Employers’ Consultative Association (NECA), Lagos Chamber of Commerce and Industry (LCCI) as well as several other labour unions and civil society organisations (CSOs), have also joined in the call for a downward review of the charges.

The Nigeria Union of Railway Workers (NUR) dismissed pricing for the service as “unacceptably high”, holding that it could only attract patronage if it were “made affordable to the poorest of the poor.” 

Rail services should be a “cheaper alternative to road,” argues Chuma Oruche, Acting Director-General of the Manufacturers Association of Nigeria (MAN).

Also Read: Nigeria’s Derelict Roads a Barrier to Dangote Refinery

Welfare Vs Commercial Viability

Criticism of the pricing of the rail service is mostly based on the argument that high fares put public transport beyond the reach of those at the bottom of the income pyramid, meaning it cannot meet set social objectives.

“The rail service is supposed to feed into the mass transit programme of the Federal Government,” LCCI Director-General Dr. Muda Yusuf said. “We cannot have a situation where rail would be more expensive than road transportation. The lower part of the ladder is supposed to feel the impact of the service. The social aspect of pricing has to be given due consideration.”

Like Dr. Yusuf, many others have called on the government to give “social consideration” to the issue and claimed that charges for the rail service should not be higher than the alternatives because it is a “social service”.

The social argument has also seen some call for the government to subsidise the service with many holding that passenger mobility, unlike cargo, are subsidised all over the world. Rightly so, many countries, both developed and developing, spend billions of dollars in subsidies for their railways to make transport more affordable and because of the social and economic benefits that it brings. 

Developing countries justify public urban transport subsidies on social grounds, as a means to improve the mobility, and thus welfare, of the poorest. But available evidence from studies indicates that public urban transport subsidy policies do not make the poorest better off and current subsidies are for the most part neutral or regressive.

Subsidising the Lagos-Ibadan train service would put in further doubt the commercial viability of the project. There is already skepticism about whether it has the capacity to generate enough income to repay more than $1.5 billion in debt incurred for its development. The government has to service and offset the loans used to execute the project.

In 2017, Nigeria got a $6.1 billion loan from China Exim Bank for the construction of Calabar-Port Harcourt, Lagos-Ibadan, Lagos-Kano rail, and Lagos to Kaduna railway and another $1.5 billion counterpart funding for the Lagos-Ibadan project. 

Several other loans have been incurred since then to fund the development of the country’s railway system, all of which form part of Nigeria’s N31.08 trillion sovereign debt burden currently weighing heavily on its fiscal position. Almost a quarter of the N13.08 trillion budget proposed for 2021 would be spent on debt servicing.

Also Read: We Can’t Breathe: How African Countries Suffocate Themselves With Debt

Efficient Infrastructure Improves Productivity and Incomes 

Nigeria is not unique in having transport costs consume a huge portion of poor households’ income. Poor people spend more than a fifth of their income on transport in cities like Sao Paulo, Rio de Janeiro, Mumbai, Mexico City, and Manila. Yet, rail systems are at the heart of urban transport in each of these cities.

Weak transport infrastructure hinders the mobility of persons and goods in Nigeria, where roads are poorly maintained and a significant number unpaved. Not being able to move around with ease weighs down productivity and makes people poorer. 

Electricians, mechanics, carpenters, air condition technicians, etc. would buy parts more quickly and travel to complete more repairs and hence make more money if they did not have to spend so much time in traffic. They would be paying for the “expensive” transport services from more income.

The Federal Roads Maintenance Agency put the cost in man-hours lost due to bad roads and traffic delays in Nigeria at N1.02 trillion per annum. Infrastructure projects like the railway service hold the potential to make transportation more efficient, boost productivity, economic growth, and in turn raising household incomes.

A study finds that investment in transit can yield 49,700 jobs per $1 billion invested, and offers a 5 to 1 economic return. A new public transport service such as the Lagos-Ibadan railway will increase the productivity and incomes of the poor.

Nigerians do not have to wait for their income levels to rise or for the heavily indebted government to find the money to build or subsidise critical infrastructure. The economy is strangled almost at every point by abysmal infrastructure, and this is a major driver of poverty. As has happened elsewhere in the world, infrastructure services lift economic productivity and incomes, thus making them progressively more affordable.

Arbiterz will be watching to see if a sufficient number (to make the train service viable) of Nigerians who travel between Lagos and Ibadan will decide that paying double the bus fare for the comfort and reduced journey time on the train is a good investment.

The completion of the renovation of the Lagos-Ibadan expressway, a government-funded project which has taken forever, will be a factor. There will be a reduced incentive to pay for the more expensive train service if the renovated expressway cuts journey time below what it takes the train to travel between the two cities. 

Even if the completed Lagos-Ibadan expressway is tolled, fares might not rise anywhere near the cost of the journey by train given an array of network, operating, and overhead costs. The almost non-existent regulation of bus services and hence their very poor and often dangerous service but the much lower cost is also a factor relative pricing. 

All this may strengthen the argument of people who hold the view that Nigeria is not yet ready for passenger railway services as road transport will always be cheaper – investment should go into freight services. 

The ultimate lesson is that the Nigerian government should let the market decide what rail services the economy needs and can pay for rather than incurring expensive debts to build unviable railways. Railway assets and services remain a government monopoly.

Michael Ajifowoke

Michael is a budding media professional with more than two years of experience covering business, economy & tech. He spends his leisure reading about economics, finance, and international development.

Related Articles

Back to top button
Arbiterz

Subscribe to our newsletter!

newsletter

Stay up to date with our latest news and articles.
We promise not to spam you!

You have successfully subscribed to our newsletter

There was an error while trying to send your request. Please try again.

Arbiterz will use the information you provide on this form to be in touch with you and to provide updates and marketing.