Anxiety in NRC over plans to unbundle entity

By AYOOLA OLAOLUWA

There is rising tension among workers of the Nigerian Railway Corporation (NRC) over plans by the Federal Government to unbundle the loss making corporation, Business Hallmark has learnt.

While the government had before now not publicly come out to announce its intentions for the company, there have been rumours in the transport industry that plans are in top gear to hand over the railway business to private investors.

The railway workers worst fear was, however, confirmed in late January when the Minister of Transportation, Mu’azu Sambo, revealed that the Federal Government was indeed planning to unbundle the corporation.

According to the minister, the corporation cannot operate optimally in its current state, hence necessary reforms and unbundling.

Sambo made the revelation while addressing the management team of the Ministry of Finance Incorporated (MOFI), the body saddle with the task of carrying out a visibility report on the planned sale, in Abuja.

The minister said a cue should be taken from the reforms implemented in the ports which have brought great benefits, noting that such should be carried out in the railway sector.

“One of the things I would like to see as the minister of transportation, through MOFI is the unbundling of the Nigerian Railway Corporation.

“There is a committee set up to unbundle NRC and I will urge you to work with the existing committee.

“The NRC, the way it is currently, is the way the ports were prior to concession, prior to the reforms of 2005. Today, even the Nigeria Ports Authority (NPA) workers are happier about how NPA is today compared to how it was prior to the reforms.

“This means the reformed NPA is generating more revenues to support its operations and also support its workforce and its pensioners”.

BH reliably gathered from sources in the ministry of transportation that the government had been working secretly with the Ministry of Finance Incorporated and a committee to work out the modalities of speedily disposing off the railway corporation and its assets.

MOFI was incorporated in 1959 under the provisions of Sections 2 and 3 of the MOFI Act of as an asset holding company under the Federal Ministry of Finance.

The corporation is the sole manager of all Federal Government investment interests, estates, easements and rights.

BH gathered that some of the tasks MOFI is expected to carry out is the enumeration and valuing of NRC to ensure that its value is captured in line with current realities as well as taking over its assets in trust through a task force that will comprise representatives from the transport and finance ministries in order to create optimum value for them.

A source in the Presidency revealed that the government is concerned about the NRC’s inability to generate enough income to pay back the huge debts incurred from the Chinese government and international finance agencies towards the FG’s railway modernisation project.

“The present administration alone had expended $4.12 billion so far on the modernisation of the nation’s railway system

“The huge amount ($4.12 billion) is exclusive of the loan collected from China for the purchase of rolling stocks (locomotives and the coaches).

“By the time we add that to it, we will be talking of over $5billion in debts.

“Unfortunately, we are not getting commensurate returns from the investments. To worsen the matter, revenue generation have been falling, leading to government’s inability to effectively service the loans”, the Presidency source disclosed.

According to data obtained by BH from the website of the Debt Management Office (DMO), $2.5 billion of the debt was invested in the construction of the Lagos-Ibadan standard gauge, while the Abuja-Kaduna rail line gulped $1.5 billion.

The rehabilitation of the Warri-Itakpe standard gauge cost the nation $121 million.

A DMO source revealed that over 70 per cent of the investment in the railway modernisation projects were borrowed from the China Exim Bank, with the plan to repay with proceeds from the investment.

However, the railway investments had underperformed, forcing government to continually dip into the nation’s foreign reserves to meet up with the strict repayment plan.

Based on DMO records, the Federal Government had spend $548.67m (N246.11billion using the official exchange rate of N448.55 to a dollar) to service the debt between 2016 and 2022.

For instance, railway debt servicing gulped $19.99m in 2016. While the Nigeria Railway Modernisation Project gulped $11.37million, Abuja Light Rail Project gulped $8.26million.

Also, railway debt servicing gulped $21.53 million in 2017; $63.92 million in 2018; $74.25 million in 2019; $121 million in 2020; $122.92 million in 2021; $61.73 million in the first quarter of 2022; zero repayment in the second quarter of 2022 and the sum of $63.33million was spent on servicing railway debts in the third quarter of 2022.

The DMO is yet to release the figures for October to December 2022 and January to February 2023.

BH gathered that government officials are worried that the nation will soon run out of the ability to abide by the terms of the loans if the trend continued, hence the decision to hand over the NRC to private investors for efficient optimization.

Part of the plan is to unbundle the company into smaller and stand alone units to be taken over by successful firms.

For instance, the Lagos – Abeokuta – Ibadan, Abuja -Kaduna Warri-Itakpe standard gauges, as well as the Abuja Light Rail project will all be stand alone companies to be sold to private entities.

The planned unbundling and privatisation, it was learnt, is expected to be completed by the end of 2023.

However, the government’s resolve to forge ahead with the privatisation exercise is causing a storm in the railway industry, with NRC workers vowing to work against it.

President of the Nigeria Union of Railway Workers (NUR), Innocent Ajiji, while speaking on the matter, said the union resist moves to privatise the railway sector.

According to Ajiji, his members cannot work with private investors owing to fears of experiencing the same fate as that of workers in the power and telecoms sectors.

“From all indications, the government is thinking towards privatisation. When you check critically, there is no organisation that has been privatised in Nigeria that is working perfectly.

“Good examples are the National Electric Power Authority (NEPA), now Power Holding Company of Nigeria (PHCN) and Nigerian Telecommunications Limited (NITEL).

“So, how do you now talk about railways that provide huge manpower and training for workers to be managed by an individual? That is not possible.

“It is the Federal Government that owns the nation’s security, owns the railway and everything, yet it cannot protect the rail line, workers and even our passengers. So, how can an individual protect all these?

“We have advised them not to try that, and if they do, there are terms and conditions recognised by law that must be met, of which we must come back to the drawing table and discuss it. But if they go behind us to unbundle the sector, we will resist it with our last blood. That is our position.

The union boss also vowed that it will never work with private businessman.

“We cannot work with private organisations. Taking NEPA as a case study, it had about 66,000 workers when it was unbundled. But today, you will find out that NEPA is unbundled to so many quarters and so many people lost their jobs. That is what will also happen to the railway if unbundled.

“Leaving us to private individuals is like holding nothing in your hands, because they could wake up any day and sack you. Our job security would be threatened.

“The investor would only be concerned about how to make profits, which solely would be by attacking the personnel cost index through reduction of staff strength”, Ajiji noted.

However, the minister of transportation, while dismissing the workers fear of job loss as a result of the unbundling, assured that the exercise will result in a better environment and working conditions for them.

“I don’t want the NRC staff to see the unbundling of the NRC as a threat to their jobs. If we have a better performing NRC, then we are going to have better salaries for its workers, better working conditions for its workers, more revenue for the Federal Government and therefore the ability to even build more rail networks”, he assured.

Also speaking, a regional railway advocacy group, the African Railway Roundtable, assured railway workers that the planned unbundling of the corporation won’t lead to job losses.

The group argued that breaking the corporation into relevant sub-agencies is not the same as privatisation.

According the advocacy group’s Director, Olawale Rasheed, a recent statement by the minister of transportation minister was largely misinterpreted by the leadership of the NRC union.

“Beyond all threats and others, the government only re-emphasised the need for the unbundling of the corporation to ensure its sustainability.

“In this sense, the minister was only restating existing government policy to break the NRC into at least four groups in line with international best practices.

“Previous leadership of the ministry had set up an unbundling committee under the leadership of the then Minister of State for Transportation, Senator Gbemisola Saraki. The committee could not go far before the cabinet was dissolved.

“The terms of reference of the committee include studying and making recommendations for the unbundling of the Nigerian Railway Corporation into four separate companies namely operations, infrastructures management, regulations and marketing. There was never a place where the question of privatisation was raised.

“The minister only repeated what everybody knows that the Nigerian Railway Corporation cannot be the owner, operator and regulator at the same time, noting: ‘The private sector is the engine of growth. Let someone else operate your lines efficiently’.

“As it is, the 1958 NRC Act is an impediment to the growth and development of the sector.

“The law is not only antiquated but the NRC itself is a colonial structure incapable of meeting the needs and expectation of modern railways industry.

“How can NRC remain the operator, the regulator and infrastructure manager? It is not just unsustainable but against national interest.

“While I agree labour union should be part of the unbundling committee, it is important for the labour leadership to get the message right as running away from reform of NRC is itself an anti-labour stance”, Rasheed advised.
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