Nigeria Freight has the capacity to provide Investment is intended to boost economic growth and meet strong passenger demand.
priority of investment between long- distance express and urban mass transit systems, freight and passenger services. From a legal perspective, the most
pressing issue must be a major overhaul of rail legislation to permit transition from the Nigeria Rail Corporation Act 1955 to a properly regulated system permitting private sector participation, likely to be based on up to three regional concessions.
Public-private partnership (PPP)
structures have been adopted in many parts of Africa to deliver new or rehabilitated infrastructure. Supported by bodies such as the World Bank and the OECD, PPPs involve long-term contractual arrangements under which private sector investment and expertise is enlisted to finance, build and operate a project. A PPP requires a careful allocation of risk, and must offer financial rewards that are perceived as sufficient both in terms of quantity and security to attract private sector involvement. The task is far from straightforward as the high- profile Croydon Tramlink and London Underground PPP failures have shown. For Nigeria, a likely structure is one in which railway infrastructure remains under the control of the federal government, while concessionaires provide rolling stock and operate services. Track access charges during a 25-30 year concession would provide funds for the expansion, rehabilitation
24 Freight
Any business case for large-scale investment in rail must give significant weight to the extent and security of income from freight. While demographic and economic modelling might produce impressive projections for passenger traffic and revenue, the largely casual nature of inter-city passenger travel means that revenue streams remain both contingent and precarious. Shorter-distance commuter traffic might be more predictable, and somewhat less vulnerable to economic pressures, political or mechanical disruption. However, for predictable, legally enforceable and therefore fundable income streams, potential rail investors are far more likely to look to freight. This matters because it directly affects both the regulatory and contractual shape of a revived rail sector, and the physical aspects of the infrastructure.
and maintenance of infrastructure. However, well-advised concessionaires would undoubtedly seek assurances that track access terms include provisions to suspend access charges, or guarantee compensation for direct and consequential losses, in the event of infrastructure failure or disruption. This model would not provide risk-free funding, and would require close attention to the likely income streams.
the crucial contractual underpinning for large-scale rail development. Operators’ access to the network is generally based on contracts that impose a traffic commitment throughout the term of the agreement. This translates, in investment terms, to a legally enforceable income stream. Freight access agreements also commonly impose stringent safety requirements and operating rules. From a regulatory perspective, there is ample scope for standardisation through the adoption of model agreements and criteria-based general authorisation regimes. Freight also brings specific regulatory challenges. As well as containerised freight, the federal government’s 2010 policy document highlighted bulk freight such as oil, coal, steel or agricultural produce. Transport of hazardous substances, particularly using infrastructure that is to any extent shared with passenger traffic or likely to affect settlements, requires close regulation together with well- developed and robust incident response and disaster recovery planning. These issues must figure prominently in any risk assessment or business case evaluation for rail investment. They feed directly into the contractual allocation of risk, insurance and reinsurance requirements and, in all likelihood, into the requirement for a state role as insurer of last resort. The infrastructure requirements for
freight and passenger also diverge. Freight must be integrated with both sea transport and internal road and rail distribution networks. On the ground, that points towards the development of large-scale intermodal freight terminals, preferably with access to a developed rail distribution network but also to road haulage. While export of raw material and commodities might be largely or even entirely served by rail, imports and distribution inevitably require road links as goods approach the “last mile.”
In contrast the primary need for passenger traffic is direct access to city centres, whether for commuting or inter-city transport. Quite apart from the inherent logistical differences, safety requirements dictate as much separation as is practical between freight and passenger services and facilities. This, in turn, strongly suggests that investment in rail for freight and passenger services would likely rest on substantially different bases, and to proceed at significantly different rates. Given the well-documented
IRJ July 2013
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