The recent appointment of a new Managing Director to run to the Nigeria Railways Corporation (NRC) is a welcome development. And perhaps, it couldn’t have come at a better time. The new helmsman Adeseyi Sijuade until his appointment was the client Project Director of the Lagos-Kano Railway modernisation project. He is a chartered civil engineer and holds a MBA degree from Loughborough University.
Mr Sijuade is coming into the NRC at a time when the nation’s railway is in state of comatose. It is suffice to say that he already has his work cut out. He expected to run a government agency – like many others - that has virtually collapsed due to corruption, mismanagement and ineptitude. He is also expected to lead a workforce with low skill base and weakened staff morale. Having said that, it is critical for him to make known his vision and aspiration for the NRC as soon as possible. Various stakeholders in the transport industry will want to know Mr Sijuade’s position on key issues currently affecting the railway industry, especially with the Railways Act Bill
The NRC MD was quoted in the media to have said he will make the rebranding of the corporation a priority. He noted the need to change public perception of the corporation for better. But really, what product does the NRC have to offer that it wants to rebrand? Is it the decrepit rail locomotives lying on the rail tracks across the country? Or is it the dilapidated NRC properties across the nation? Or may be it is the retired staff who have not receive their pension payments in years? There is no doubt that the public perception about the NRC is terribly bad. And this is primarily due to failure of NRC to deliver its primary product.
But will the appointment of Mr Sijuade bring about positive change in the nation’s railway sector? I do hope and pray so! But more importantly, the role of NRC in the planned future privatisation/concessioning of the nation’s railway needs to be resolved as a matter of priority. Up until now, neither the Minister for Transport or Mr Sijuade has been able to clearly articulate the institutional framework that will govern the proposed concessioning/privatisation. The proposed Railways Act Bill - which is aimed at sorting out some of the complexities in the railway sector – only offers very little.
For instance, we heard the newly appointed MD saying the decision to concession the operations of NRC did not translate into its sale. One can assume from the statement that only the rail operations arm of NRC will be concessioned to the private sector. So the questions are, will the ‘rail operation’ arm of NRC operate as a private company? How will such a company fit into the overall NRC model? Why does the government not consider selling off the entire “operational function” of the NRC to the private sector? What is the obsession of NRC with rail operations? Why not allow the private sector to operate railways and leave NRC as an umpire?
Ultimately, it is up to the government to decide what role the NRC will play in the post privatisation era. For me, it either has to be an operator - competing with other private operators – or just a rail regulator. It is unacceptable for an agency to perform the dual role of service provider and regulator. If the NRC is keen to remain a rail service provider, then it is only sensible that the rail regulator should be an independent body. It should be a statutory board operationally independent of government. If the NRC continues to provide rail services and also responsible for regulating other concessionaires, the question then is who will “regulate” the regulator? Although, the government is keen for private sector participation in the railway sector, it is clear that it doesn’t know what to do with NRC.
These are some of the key challenges Mr Sijuade will have to grapple with as he settles into his job. Some consider him as an outsider, who lacks the political clout required to turn things around. Given the necessary support by the Federal Government, I have every hope that Mr Sijuade will succeed. And I wish him best of luck!
Showing posts with label Rail concessioning. Show all posts
Showing posts with label Rail concessioning. Show all posts
Tuesday, August 18, 2009
Thursday, June 18, 2009
Railways Concession and N114 billion Investment
After spending two precious years of ‘studying and planning’ the Federal Government announced that the long awaited concessioning of the national railways will happen next year. Unfortunately, due to President Yar’Adua’s track record of non-performance, Nigerians are now apathetic towards such announcements. And why wouldn’t they be? This is the same President who told us that he will declare an ‘emergency’ in the power sector within his first 100 days in office. However, 750 days on, he his still talking about his deluded vision and agenda – which ironically has also been criticised by the nation’s number banker Lamido Sanusi.
The need for the rehabilitation of the national railways cannot be overemphasised. You will struggle to find a nation with similar population as Nigeria that does not have a functioning railway system. There is however a growing consensus within and outside the government, that the National Railways Corporation - which owns the monopoly on rail development and operation - is no longer ‘fit for purpose’. Hence, if we want a functional rail system, the need for private sector participation is inevitable.
The challenge however being faced by the government will be role of the NRC in the railways sector post- concessioning. As I noted in my piece on the proposed Railways Act Bill, the inherent conflict of interest in the role of NRC as service provider and regulator remains unresolved. For me, it is important that these two roles do not lie within a single agency. The reasons for this are well articulated in my piece titled ‘Railways Act Bill 2008’.
But from the announcement made by the Transport Minister recently, it seems under the proposed changes to the institutional arrangement, NRC will remain a service provider. Whether this continues under the current management or a private investor company, will depend on how success of the proposed privatisation. However, one thing that struck me in the government announcement, was the approval of N114 billion ($76.250 million) for the purchase of 25 C25 EMPD diesel-powered locomotives for the moribund NRC in ‘preparation’ for its concessioning in June 2010.
The question is, why invest N114 billion of taxpayers’ money in company that will be put on sale next year? What happens if the government cannot recover this investment in the proposed sale? How much is NRC actually worth? There is saying that, “an item is only worth what the buyer is willing to pay”. The government should have undertaken a due diligence to ascertain the worth of NRC before investing anymore funds in the corporation.
The NRC has been transformed from been a strategic national asset to a national liability – thanks to corruption! Available records of a five year financial summary of the NRC reveal that in 1999, the Federal Government allocated as much as N900 million to the NRC and N1billion in 2000. That figure increased to N2billion in 2001, but in the following year, that allocated fell short to the tune of a billion naira only to be increased again to N3billion in 2003. Therefore, in less than five years, the NRC had received close to five billion naira, without commensurate income generated from that huge investment.
To this end, investing N114 billion into what can be described as a ‘depreciating’ asset is waste of taxpayers’ money. The NRC should be privatised ‘as is’. The privatisation could either be a total ‘sell-off’ to the private sector, or a concession over a period of time. It is up to the private to assess the financial benefits the NRC offers and tailor their business plan to suit. The government N114 billion might just be government money gone into the drain.
The need for the rehabilitation of the national railways cannot be overemphasised. You will struggle to find a nation with similar population as Nigeria that does not have a functioning railway system. There is however a growing consensus within and outside the government, that the National Railways Corporation - which owns the monopoly on rail development and operation - is no longer ‘fit for purpose’. Hence, if we want a functional rail system, the need for private sector participation is inevitable.
The challenge however being faced by the government will be role of the NRC in the railways sector post- concessioning. As I noted in my piece on the proposed Railways Act Bill, the inherent conflict of interest in the role of NRC as service provider and regulator remains unresolved. For me, it is important that these two roles do not lie within a single agency. The reasons for this are well articulated in my piece titled ‘Railways Act Bill 2008’.
But from the announcement made by the Transport Minister recently, it seems under the proposed changes to the institutional arrangement, NRC will remain a service provider. Whether this continues under the current management or a private investor company, will depend on how success of the proposed privatisation. However, one thing that struck me in the government announcement, was the approval of N114 billion ($76.250 million) for the purchase of 25 C25 EMPD diesel-powered locomotives for the moribund NRC in ‘preparation’ for its concessioning in June 2010.
The question is, why invest N114 billion of taxpayers’ money in company that will be put on sale next year? What happens if the government cannot recover this investment in the proposed sale? How much is NRC actually worth? There is saying that, “an item is only worth what the buyer is willing to pay”. The government should have undertaken a due diligence to ascertain the worth of NRC before investing anymore funds in the corporation.
The NRC has been transformed from been a strategic national asset to a national liability – thanks to corruption! Available records of a five year financial summary of the NRC reveal that in 1999, the Federal Government allocated as much as N900 million to the NRC and N1billion in 2000. That figure increased to N2billion in 2001, but in the following year, that allocated fell short to the tune of a billion naira only to be increased again to N3billion in 2003. Therefore, in less than five years, the NRC had received close to five billion naira, without commensurate income generated from that huge investment.
To this end, investing N114 billion into what can be described as a ‘depreciating’ asset is waste of taxpayers’ money. The NRC should be privatised ‘as is’. The privatisation could either be a total ‘sell-off’ to the private sector, or a concession over a period of time. It is up to the private to assess the financial benefits the NRC offers and tailor their business plan to suit. The government N114 billion might just be government money gone into the drain.
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