Local contractors excluded from $20 billion rail projects By Kingsley Jeremiah  

The Federal Government is breaching its own local content policy in the construction of over $20 billion rail tracks across the country, as indigenous firms are being excluded from the execution of the projects.

If the extant policy, which provides that 40 per cent of such projects should be executed by local contractors, is followed, Nigeria would retain about $8 billion in its coffers and address unemployment and other social challenges.
The $8 billion, equivalent of N2.416 trillion, is about one-third of Nigeria’s 2017 national budget, and can almost fund the entire Lagos-Kano standard gauge railway projects estimated at $8.3 billion.

There are a number of other rail projects, 98 per cent of which were awarded to Chinese firms. They include: Kano State rail, $1.85 billion; Lagos Blue Line light rail, $1.2 billion; Lagos monorail, $1billion; and Abuja light rail, $841.64 million expected to be completed in October. Ogun and Oyo states are also working on some rail projects.

Assessing the scope of work, experts have insisted that Nigerians have the capacity to handle key aspects of the projects, especially laying of tracks, survey and design. They also expressed the fear that Nigeria would end up becoming a dumping ground for rail contractors engaged just to provide infrastructure without adequate manpower to operate and maintain it.
In the $1.5 billion Lagos-Ibadan end of the Lagos-Kano railway project alone, Nigeria would have saved about $0.6 billion, if part of the projects were handled locally, the experts said.

Already, anxiety is beginning to peak among Nigerians that the country may lose out on the other benefits accruing from the award of the contracts, saying that the money to be realised would have helped in salvaging the nation’s ailing economy, reduced poverty level and boosted local capacity development.

Defending the exclusion of indigenous firms, the Minister of Transportation, Rotimi Amaechi, told The Guardian that since China is financing the projects through the China Civil Engineering Construction Corporation (CCECC), the contractors have 100 per cent execution right of most of the rail projects.

Although he said government was in talks with the contractors to involve local firms, stakeholders who spoke to The Guardian, argued that the exclusion of Nigerians from the rail projects contravened the Nigerian Content Development Act 2010, which primarily guides operations in the petroleum sector but is gradually being introduced in other sectors.

So far, the Chinese contractor has declined commenting on the issue. When The Guardian visited CECC head office in Ebute Metta, Lagos on June 2, 2017, requesting public interest information on some of the projects, an officer directed this reporter to a project director known as Ronaldo who said he was not in the capacity to speak to the press. The organisation’s spokesperson, who was identified as Garvin, said: “For all our projects, we have our clients. We are only a contractor, if you need any information you should talk to them, we cannot give you any information because we are not the owner of the projects.”

Some experts lamented that China is taking advantage of the ailing state of the Nigerian economy to provide infrastructure loans, which do not come in cash but as projects executed by Chinese consortium and personnel. The model, many argued, deprives indigenes of the benefitting countries of the Chinese loans which are expected to be repaid with interest.
Already, work on the Federal Government-sponsored $1.5 billion Lagos-Ibadan end of the Lagos-Kano railway project, and other rail projects by Kano, Lagos, Oyo and Ogun states has been commissioned.

The government said it would use 20 per cent of the $30 billion to be borrowed from multilateral finance institutions to build railways.

While commissioning work on the Lagos-Ibadan railway project, Acting President Yemi Osinbajo had told journalists that the project alone would create up to half a million jobs. However, experts are concerned that the projects, basically financed and constructed by Chinese consortium are not being executed in compliance with local content policy, which seeks transfer of technology and building of indigenous skills to sustain projects.

“If government overlooked a holistic approach to building a sustainable railway industry, the huge sum invested in the sector could go down the drain,” Managing Director, Planet Projects, Biodun Otunola warned.

According to him, Nigeria has not accurately considered the social and economic benefits of the projects, especially in the locations of the rail lines. Otunola said failure to develop local capacity and involve Nigerian contractors may compound the country’s infrastructure woes.

Already, lawmakers, particularly from the South-East, have expressed worry that the standard gauge lines of Lagos-Kano, Kano-Kaduna, Lagos-Ibadan, and Lagos-Calabar excluded the region, alleging that the project executors had deviated from the original plan. According to them, the original plan links the South-East to other zones in the South-South, South-East, North-Central and North-East as well as some key cities such as Port Harcourt, Aba, Enugu, Makurdi, Lafia, Gudi, Jos, Bauchi and Maiduguri.

The Oba of Lagos, Rilwan Akiolu cautioned that except locals are involved in the execution of the projects, Chinese may remain the major beneficiaries.

The Chairman, Apapa Branch of the Nigerian Society of Engineers (NSE), Dr. Ombugadu Garba, said the Nigerian government is known for signing pacts without adequate consideration, and rarely implements the plans correctly.
Citing the many challenges confronting the power sector years after privatisation, Garba said: “Government rushes into agreements without proper consideration. Investment in excess of $20 billion is a huge sum of money that we must not joke with.

“We need transfer of core technology, otherwise we will keep going to the Chinese each time we have problems with the rail system. Nigerian engineers must be fully involved. We must have the knowledge of the technology at every bit of the contract. There must also be components for training and retraining of people.”

Also, a London-based Nigerian railway expert, who manages Jeerea Nigeria Limited, James Akpoviroro, expressed worry that government’s poor handling of the projects may leave Nigerians disappointed.

Akpoviroro, who admitted that China is crucial to the revival of the rail sector in Nigeria, however, said that the exclusion of locals from the execution of the projects and failure to build their capacity as well as initiate a robust maintenance plan may thwart expectations of taxpayers.

“There is no solid government’s say on the railway. There appears to be no indigenous expert advising government on what path to take, all they are doing now is to just see that the railway is running. We must realise that China is only loaning the money to us, we will pay back. It is very important for government to seek the involvement of locals at this point. Foreigners would leave someday, and if that happens, the system may collapse,” he said.

The Director of Rail, Ministry of Transportation, Mohammed Babakobi, who could not identify any local contractor involved in the projects, said government had planned for local manpower capacity development.

According to him, government has a plan to grow the local content to about 40 per cent, and is considering a transportation university that would give attention to the rail sector.

Babakobi disclosed that maintenance plan, building of local capacity and technical support for up to a period of five years were detailed in the contracts signed with the foreign contractors. He added that plans were underway for local assemblage of railway materials.

This Report was first published in Guardian