Lagos with an estimated population of 17million or 9million (whichever you believe!) is one of the so-called ‘megacities’ without a mass transit system. The population of state has grown significantly over the last few decades mainly due to urban migration. The high concentration of manufacturing, commercial and financial industries has continued to fuel the growth and traffic congestion in the city.
The Lagos Metropolitan Area Transport Authority as part of its effort to tackle congestion recently developed a Rail Master Plan, which proposes an extensive network of rail lines connecting most parts of Lagos metropolitan area. The urban rail system is proposed to be implemented through a Public Private Partnership scheme (PPP).
It is heartening to see for the first time – since the civilian administration of Alhaji Lateef Kayode Jakande – we will see a State Administrator with a vision of how to deal with the menace of traffic congestion in Lagos State. Much commendation should also be given to the Ex-Governor Asiwaju Bola Tinubu for setting up the necessary institutional framework that is currently driving the state's transport agenda.
Whilst I fully support the principle of delivering of transport infrastructure through Public –Private Partnerships, however if not properly negotiated it can leave the government out of pocket and not serve any public good.
PPP describes a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. PPP has been used as a mechanism to deliver major transport infrastructure (toll roads, light rail etc) in most parts of the western world. It is based on the principle of transferring investment risk to the private sector, and also on the notion that delivery and operation of infrastructure and services can be undertaken 'cheaper and smarter' by the private sector, thus providing cost savings to the Government coffers. However, this is not always the case, as there are examples of 'how not to undertake a PPP'.
With specific regards to the Lagos rail project, the private sector is expected to Design and Build the infrastructure which will be financed by the State government. The operation of the system is also expected to undertaken by the private sector (under a 25 year concession). In return, the private sector operator will be expected to provide rolling stock, maintenance depot, and control systems.
One major concern with the Lagos Rail Mass Transit PPP is the liberty that will be given to the private sector operator to set fares and collect revenue. If the private operator is given absolute control over pricing, this could impact on passengers negatively and consequently affect patronage. It is plausible to assume that the private sector will be keen to recover its operating cost, repay bank loans and also make a return on their investment. It is common knowledge that construction of rail system is an expensive expenditure and the maintenance cost (rolling stock, staff, etc) can be significant. This is the fundamental difference between investment in road and rail infrastructure. If the private sector operator is allowed to charge passengers the real cost of operating the service plus their profit margin, it is very likely that the fares will be set at a cost that will be prohibitive to commuters. This begs the question of - ' who will use the service'. I'm sure it's not the government's agenda to provide high-quality public transport system only for the 'middle class'. There is no where in the world where passenger rail service operates at a profit – that is cover its real cost. Even in a densely populated city like Hong Kong with a populaton of 7 million and an efficient mass rapid transit system - which carries about 3 million passengers a day. The Hong Kong transport authority makes more money from leasing air rights over train station than it collects from the fare box. Also as an example, the cost recovery on public transport in the state of Queensland, Australia is just 30%.
Public transport is a social utility that is needed to provide access to services, jobs etc and help encourage social inclusion. There are social equity issues that need to be considered in planning of transport systems. Provision of public transport cannot be allowed to operate in a totally deregulated environment. This is the reason why Government around the world subsidize public transport provision. While one could argue that public transport subsidy defeats the purpose of a PPP, I tend to believe that it is in the best interest of the Government to subsidise the rail service when it becomes operational. The subsidies should however be linked to service level agreement and minimum service standards that will be expected from the operator.
On the other hand, if the fare levels are set too low without Govt top-up, the operator will be running the services at a loss. This could result in the private operator going into administration. If this happens, Govt will either have to 'bail-out' the company or take over the operation of the service. This could come at a significant cost to the State.
The delivery and operation of the proposed urban rail network can result in a situation, where different companies will be operating rail services on different parts of the network (that is, Blue Line – operator A, Red Line – operator B). This then brings me to the second issue of 'integrated ticketing' across the rail network. I will note that this also has an implication of fare pricing. The principle of having an integrated ticketing system is great, as this provides seamless travel journey. In fact, the integration should not be limited to rail; LAMATA should be looking at integrating the BRT Lite service as well. Having said that, giving operators total control on fare pricing and expecting integrated service across the network flies in the face of reality, and can result in price fixing by train operating companies. For passengers to enjoy the benefit of having an integrated ticketing system, LAMATA will need to have some control pricing structure.
Lastly, the issue of track maintenance seems unclear from the project briefing documents. Considering that part of the new rail line will be utilising the existing Nigeria Railways Corporation rail corridor, then one will assume that the NRC will be responsible for maintaining its own tracks. However, will the private operator be responsible for maintaining the new tracks or will it be the Govt through NRC?
Anyway, I believe the authorities involved in the negotiation of PPP contract will be brave enough to make sure that the Govt is getting 'value for money' from the PPP. Also, the social, economic, and safety interest of commuters should be central to the contract negotiations.
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