Multi-modal transport links to boost Nigeria’s competitiveness

Nigeria’s transport network has expanded in recent years to accommodate a growing population. The transport and storage sector was valued at N2.6trn ($6.9bn) in current basic prices in 2020, down from N3trn ($8bn) in 2019, according to the National Bureau of Statistics (NBS). This was reflected in a lower contribution to GDP, at 1.8% in the fourth quarter of 2020, down from 2.1% during the same period the previous year but higher than the 0.8% recorded in the third quarter of 2020. One of the most significant challenges facing the sector is meeting the needs of both large coastal cities and rural inland communities in order to fully unlock the country’s economic potential. This is especially the case with mining and agriculture, both of which are expected to benefit from two large-scale projects: the Lekki Port in Lagos and the Kano-Maradi rail line in the north of the country.

Although transport networks have historically been underfunded, the government is prioritising their development, as enhanced connectivity is key to supporting growth in non-oil sectors such as manufacturing and agriculture. This will help the country diversify its sources of income away from oil, and connect rural and underserved communities to commercial centres. Moreover, planned intra-city mass transit projects are expected to improve the quality of life for Nigeria’s 102.8m urban residents.

Oversight & Structure

Transport activity in Nigeria is overseen by the Federal Ministry of Transport, which includes dedicated bodies such as the Nigerian Airspace Management Agency, Nigerian Ports Authority (NPA), Nigerian Railway Corporation (NRC), Nigerian Civil Aviation Authority, Nigerian Shippers’ Council and the Federal Airports Authority of Nigeria (FAAN). Development plans for the sector are incorporated into the Nigeria Integrated Infrastructure Master Plan (NIIMP), a 30-year roadmap established in 2014. The NIIMP covers all segments and aims to enhance multi-modal networks, as well as improve institutional, legal and policy directives. It laid out specific objectives to be met in short-, medium- and long-term intervals, including airport upgrades, highway refurbishment, and the expansion and rehabilitation of railway lines.

The NBS separates the transport and storage sector into six segments: road, rail and pipelines, maritime, air, transport services, and post and courier services. All segments experienced steep declines in activity in the second quarter of 2020 after lockdown restrictions were imposed in late March of that year in Abuja, Lagos and Ogun to slow the spread of Covid-19. This limited the movements of more than 25m people, while other states imposed similar health measures. The segments that saw the largest quarter-on-quarter contractions were rail (63.3%), air (54.4%) and road (51.5%). Air transport was hit by a drop in both domestic and international demand, given that many countries entered into lockdowns in the spring of 2020 after the World Health Organisation declared the Covid-19 outbreak to be a global pandemic. The downward trend persisted into the third and fourth quarters of the year, with the only segment recording positive growth at any point after March being postal and courier services, which saw expansions of 1% and 1.7% in the third and fourth quarters, respectively. Overall, the transport and storage sector shrank by 22.3% in 2020, reversing the 13.9% and 10.7% expansions in 2018 and 2019, respectively.

Roads

Nigeria’s roads and highways form the backbone of the country’s transport network, as these arteries handle 90% of all passenger and freight traffic, according to the NIIMP. As it is the largest segment – contributing N2.4trn ($6.4bn) to GDP in 2020, down from N2.7trn ($7.2bn) the year before – the government is focused on both servicing existing roads – many of which are in poor condition or unpaved – and constructing new ones. Towards this end, the 2021 budget earmarked N168bn ($451.2m) for the construction, rehabilitation and dualisation of roads. The package also set aside N54bn ($144.2m) for building and renovating bridges, and N4bn ($10.7m) specifically for the rehabilitation of a mainland bridge in Lagos.

One key project is the rehabilitation and expansion of the 35-km Apapa-Oshodi-Oworonshoki-Ojota Expressway in Lagos, linking the city’s largest port to the Ojata district. As vehicle ownership is on the rise, traffic is common in the country’s most populous city. In January 2021 Funso Adebiyi, director of highway construction and rehabilitation at the Ministry of Works and Housing, told local press that the first phase of the project was set to be completed in April of that year, with the entirety of the expansion delivered in December. Nigerian conglomerate Dangote Group began work on the expressway in 2018, and the overhaul is the artery’s first since it was built in 1978, with the group adding 10 lanes and repairing connections with other roads. Another priority project was the 43-km Obajana-Kabba link in Kogi State. Completed in January 2021, it is Nigeria’s largest concrete road and links the north and south of the country. As concrete is more durable than asphalt, it is less susceptible to potholes and, as such, requires less maintenance.

The government has worked to attract private partners and investment to carry out and finance key projects. For example, the Dangote Group received a 10-year tax rebate worth N73bn ($194.9m) for the Apapa-Oshodi-Oworonshoki-Ojota Expressway as part of a government programme to offer incentives such as tax breaks to private companies to help execute necessary roadworks. Moreover, in May 2020 the government issued its third sukuk (Islamic bond), worth N162.6bn ($434.1m), to fund infrastructure projects such as road rehabilitation (see Financial Services chapter).

Rail

Improving rail links is also central to the NIIMP, with the master plan noting at the time that the network “needs to be almost completely rehabilitated or rebuilt”. The longer-term vision is to expand routes to a create multi-modal system linked with facilities such as ports and airports. The prioritisation of rail development has continued, with the 2021 budget earmarking N71.2bn ($3.2m) for the construction and N11.6bn ($31m) for the rehabilitation of railways.

The NRC is responsible for rail services across the country – both for freight and passengers – with little participation from the private sector, as most intercity rail routes are not commercially viable. According to the latest data from the NBS, the rail system carried 2.6m passengers in 2017, 3m in 2018 and 723,995 in the first quarter of 2019. Revenue generated from passenger tickets amounted to N1.2bn ($3.2m) and N1.9bn ($5.1m) for 2017 and 2018, respectively, and N520.8m ($1.4m) for the first three months of 2019. In terms of cargo, 141,186 tonnes were moved in 2017 for a revenue of N374m ($999,000) – figures that grew by 132% and 32%, respectively, in 2018. Some 54,100 tonnes were moved by the rail system in the first quarter of 2019, generating revenue of N102.6m ($274,000).

In August 2017 the federal government announced a $41bn programme to expand the rail network. The two headline projects unveiled at the time were a second railway connecting Lagos in the south to Kano in the north and a railway spanning the coast, from Lagos to Calabar. Work on both projects was ongoing as of early 2021. Moreover, in January of that year construction began on a new line linking Kano to Maradi, in neighbouring Niger. The 387-km line will pass through Kazaure, Daura, Katsina and Jibiya, and a 93-km branch from Kano to Dutse will facilitate traffic from Jigawa State. The second Lagos-Kano line is intended to connect with the new Kano-Maradi artery, eventually creating an uninterrupted network across Nigeria.

Port

The Lagos-Calabar rail line is envisioned to link all six of Nigeria’s seaports: Apapa Port and Tin Can Island Port in Lagos State; Onne Port and Port Harcourt in Rivers State; Warri Port in Delta State; and Calabar Port in Cross River State. According to the most recent data published by the NPA, inbound tonnage across all ports expanded from around 9m tonnes in 2016 to 10.4m in 2017 and 10.9m in 2018, with the first quarter of 2019 recording 2.8m tonnes. Outbound tonnage over the same period also rose, from 2.1m in 2016 to 2.3m in 2017 and 2.4m in 2018. Nigerian ports shipped out some 487,000 tonnes in the first three months of 2019.

One notable maritime project is the Lekki Port, located in the Lagos Free Trade Zone. Slated to be Nigeria’s first deepsea port and the deepest such facility in sub-Saharan Africa, work on Lekki began in March 2018 and is targeted to be complete in 2022. The port will help meet rising demand for containers in Nigeria, the compound annual growth rate of which is forecast to be 12.9% between 2016 and 2025. It will also create 170,000 jobs and bring the government $200bn in revenue, according to Lekki Port LFTZ Enterprise, the port’s developer. This would leave the city with a capacity shortfall of 5.5m twenty-foot equivalent units (TEUs) by 2025. The deepsea port will have a capacity of 2.7m TEUs per year, with three container berths, three liquid berths and one dry bulk berth. The draught will be 16.5 metres with a 600-metre turning circle.

Lekki Port LFTZ Enterprise is a joint venture between the Lagos State government, the NPA and Lekki Port Investment Holdings, a group of investors including China Harbour Engineering Company and Singapore-headquartered holding company Tolaram Group. Unlike in rail, the private sector plays a notable role in the port segment. The privatisation of port operations began in late 2003, and today the private sector is active in areas such as cargo handling, warehousing, the development and maintenance of port structures, safety and security within the terminals, and towing, mooring, bunkering and repairing ships.

Air

The air transport industry was particularly affected by the pandemic, as many countries closed their borders at various points throughout 2020 to reduce the spread of the virus. Nigeria’s aviation segment entered the pandemic in a relatively strong position, according to FAAN. Arrivals to Nigeria’s 30-some airports totalled 8.8m in 2019, while 8.7m departures were logged. This represented a 7.4% increase from the 16.4m total passenger movements recorded in 2018. Meanwhile, cargo traffic grew in 2019 – from 164.9m kg in 2018 kg to 174.9m kg – while mail by air rose from 47.3m kg to 55.6m kg. The domestic terminals of airports in Abuja and Lagos accounted for 25% of passenger movements and 30% of aircraft movements each in 2019, while Murtala Muhammed International Airport (MMIA) in Lagos handled 81% of all cargo.

Priority aviation projects in the 2021 budget include N10bn ($26.7m) for a second runway at Nnamdi Azikiwe International Airport (NAIA) in Abuja, N1bn ($2.7m) for a new terminal building at the airport in Enugu, and N900m ($2.4m) for extending and repaving the runway at MMIA. Laying a second runway at NAIA follows the December 2018 opening of the new international terminal. The terminal is the first in the country to be connected to a rail system, with Abuja’s light rail train taking passengers to the city centre.

Urban Transit

Urbanisation and the country’s burgeoning population and has placed a strain on cities’ transport networks. The number of residents in Lagos has increased by more than 3% annually between 2017 and 2020, when the population reached 14.8m. This trend is expected to continue, with the city’s population forecast to reach 20.6m in 2030, according to UN projections. Meanwhile, the population of the capital Abuja was around 3.4m in 2020 after expanding by roughly 6% per year between 2017 and 2020 – leading to an estimate of over 5.1m inhabitants in 2030.

The authorities have prioritised rail mass transit in urban centres to address this growing demand. The NIIMP targets the introduction of rail mass transit in all Nigerian cities with a population of 1m or more by 2043, starting with the cities of Abuja, Lagos, Kano, Kaduna and Port Harcourt. Notable projects include the first phase of the light rail system in Abuja – the first such rapid transit system in West Africa – which began operations in July 2018. The long-term goal is for the system to cover over 292 km in six lines, but as of early 2021 the 45-km line running from NAIA to the centre of Abuja was the only operational route. Meanwhile, work continues on the first section of the Lagos Rail Mass Transit system, called the blue line. In February 2020 the project’s contractor, China Civil Engineering Construction Corporation, completed the beam bridge for the sea-crossing portion of the line.

Outlook

Demand for transport is set to rebound in the second half of 2021 as the economy reopens, vaccinations against Covid-19 are administered and the African Continental Free Trade Area is in force (see analysis). The most significant gains in the coming years are expected in the road and port segments, with urban rail projects progressing more slowly. As Nigeria is the most-populous country on the continent, investors continue to see notable potential in the transport sector, but have traditionally been deterred from investing in other areas of the economy because of concerns about infrastructure capacity. As such, redoubled cooperation between the public private sectors to develop multi-modal nodes will be important to the sector and wider economy’s development.