The Lessons for Nigeria’s Railway and Mineral Sectors: Insights from the Lobito Corridor Investment

By Rowland Ataguba

Abuja, Nigeria – As Nigeria grapples with the challenges of developing its railway and mineral sectors, there are critical lessons to be drawn from recent developments, such as the Lobito Corridor investment. For years, Nigeria’s railway strategy has been riddled with inconsistencies, prioritizing passenger rail over freight and maintaining a Nigerian Railway Corporation (NRC) that consistently underperforms against international benchmarks. This has resulted in some of the worst operating ratios in the global industry, and there is an urgent need for a strategic overhaul.

Incoherent Railway Strategy

Nigeria’s railway sector has been plagued by an incoherent strategy that prioritizes passenger rail services while neglecting the crucial aspect of freight rail. This approach has limited the country’s ability to fully harness the economic benefits of its vast mineral resources. The NRC, burdened by an outdated mandate and civil service bureaucracy, has failed to deliver on its potential, leaving many critical infrastructure projects underutilized.

The Underdeveloped Solid Mineral Sector

Nigeria’s solid mineral sector remains largely artisanal and chaotic, with a significant portion of the resources untapped. Despite being one of the most resource-rich countries in Africa, Nigeria’s solid mineral sector is underdeveloped, contributing to insecurity and instability. Minerals such as limestone, barytes, and coal are being mined locally, particularly for cement manufacturing, but their logistics value chains have yet to meaningfully incorporate rail transport. This is due, in part, to the NRC Act, which establishes the NRC as a state-owned exclusive operator, regulator, and landlord, creating obstacles for private investment in railroads.

Legislative Challenges

Currently, two bills before the National Assembly require harmonization and stakeholder consideration to open up Nigeria’s railway space to private investment. However, significant challenges remain:

1. Government Acknowledgment vs. Implementation: While the government recognizes the need for rail reform and restructuring, vested interests continue to undermine efforts to implement these changes, whispering misleading information into the ears of political leaders.
2. Railway and Security: If the importance of rail transport in moving large volumes of bulk materials is not recognized, Nigeria risks a scenario where railways could fall into the hands of bandits. The lack of private investment in rail by legitimate miners and manufacturers, such as Dangote, BUA, and Lafarge, has led to unsustainable reliance on road transport, exacerbating the dilapidation of roads and increasing the risk of banditry and kidnappings.
3. Low Hanging Fruits in Rail Freight: The potential for rail freight on Nigeria’s narrow-gauge railway (NGR) is being squandered due to the NRC’s bureaucratic culture. As contracts worth billions of dollars are awarded for new railway projects, such as the $12 billion Lagos-Calabar line and the $5.2 billion Ibadan-Abuja line, the public is left in the dark about why these contracts are not being funded. The answer lies in the opacity of their procurement processes and the restrictive provisions of the NRC Act.
4. Unbundling the NRC: Unbundling the NRC is the only viable option for the government, but this must be done carefully to avoid the pitfalls encountered during the power sector’s privatization. Incompetent political patrons with little capacity must not be allowed to hijack these assets, as this would lead to a repetition of past mistakes.
5. Building Independent Regulatory Capacity: A robust independent regulatory body is essential to enable competition and ensure value for money. Without a credible regulator, private investors will remain wary of entering the sector.
6. Long-Term Rail Investment Strategy: Railway investment requires a long-term strategy, as the benefits take time to materialize. Politicizing rail investment, as seen during the Buhari and Goodluck Jonathan administrations, is counterproductive. Railway projects should not be used as political tools but as critical infrastructure investments.

Learning from the Lobito Corridor Investment

The Lobito Corridor investment demonstrates that there is significant appetite for rail investment in Africa. However, Nigeria must learn to get it right by transitioning from government as the primary investor to a co-investor and enabler. This requires unbundling the NRC, involving critical stakeholders, and partnering with credible development finance institutions for deal preparation.

Moreover, Nigeria must address the broader strategic challenge of value addition. Africa, including Nigeria, is still exporting too many raw materials while failing to develop the local industries needed to produce finished goods and create jobs. The Dangote refinery, for example, threatens the viability of some European competitors, highlighting that economic development in Africa is not a zero-sum game. However, Nigeria must anticipate and navigate potential international resistance to its efforts at self-sufficiency and economic diversification.

In conclusion, the lessons from the Lobito Corridor investment are clear: Nigeria must change its approach to railway and mineral sector development. By unbundling the NRC, building regulatory capacity, and involving credible partners, the country can unlock the full potential of its resources and ensure long-term sustainable development. The stakes are high, and the time for action is now.

Rowland Ataguba is the Managing Director of Bethlehem Rail Infrastructure Limited, a dedicated railway project management consultancy in London. Managing Director of PSO Project Management Limited, an infrastructure delivery consultancy in Nigeria. Managing Director of Bethlehem Rail Nigeria Limited. Chairman @ Corbegroup.