The Business Case For Nigeria’s New Railway Deal

Railway Ethiopia
Nigeria has Africa’s largest economy

AFRICANGLOBE – Last week, China signed its largest single overseas contract project – a $12 billion deal to build a 22-stop railway along the coast of Africa’s most populous country Nigeria. The facility will span 1,402 kilometres in length and link Nigeria’s economic capital, Lagos, in the west with tourist destination, Calabar, in the southeast.

The news of the deal was received amidst praises and high expectations that the project, once completed, will enhance economic development. At a time when the vast majority of news from the nation has centred around oil price instability and austerity measures, Nigerians are excited about this development which will ease transportation across both major cities.

Beyond the hype, however, there are three clear reasons that explain why this deal makes economic sense;

It is a significant boost to Nigeria’s infrastructure profile. In the wake of the oil crisis, cries have been louder than ever on the need for a healthy infrastructure base that can improve the business climate in the country and attract more foreign businesses to it, thus diversifying the economy. Before now, a number of global consultancies have decried the infrastructure gaps particularly in power and transportation. Lagos city, itself, has faced chronic traffic issues owing to the absence of the sort of mass transit systems found in other mega cities.

The railway is, therefore, a welcome development as it contributes to bridging the gaps in transportation across the southern region of Nigeria.

It will boost overall economic activity. With this new railway, which connects 10 Nigerian cities, new opportunities will arise for transporting cargo and inter-city trading. The terminal cities, Lagos and Calabar, are strategic coastal hubs, thus economic activities between them is sure to increase also. Improved trading across these cities will definitely have a positive impact on GDP, and this may position the entire region to play a more significant role in Africa.

It contributes to reducing unemployment. The project is expected to create up to 200,000 local jobs during the construction and about 30,000 fixed job posts once the railway is operational.

It will inspire the birthing of similar projects across Nigeria. People copy successes; and if this project is successfully completed, it is expected that other investors would be interested in setting up similar infrastructure in other regions within the country. Before this deal, railway construction sites had already been set up in Lagos and Abuja to boost intra-city transportation, so this is fast becoming a trend in Nigeria.

Commenting on the potential impact of the new project, a Nigerian businesswoman was quoted as saying; “In all civilized societies, efficient rail system enhances commercial activities and mass movement of people from one place to another. So, this implies that the rail project will also be beneficial to the economy of Nigeria.”

“It will also encourage and promote, in no small way, business among the local people. It is a laudable project; and, of course, the government should be commended for taking such a bold step to earmark that huge amount of money for the project,” she concluded.


By Emmanuel Iruobe