US embassy cable - 04LAGOS1279

UNCLAS LAGOS 001279 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ELTN, ECON, NI 
SUBJECT: REVIVING THE NIGERIAN RAILWAY SYSTEM 
 
1. (U) Summary: Odu'a Investment and Lemna 
Incorporated, a U.S. firm, recently signed a memorandum 
of understanding (MOU) to build a $361 million light 
rail system.  Opponents have charged that the MOU 
violates the Nigerian Railway Corporation (NRC) Act 
1955. Its proponents seek to amend the law to ensure 
private development of the rail system, given the 
moribund condition of the state-owned NRC. Should the 
law be amended, rail transport could attract huge 
investments, as did the telecoms sector. End summary. 
 
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Odu'a and Lemna Inc. Sign Memorandum of Understanding 
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2. (U) Odu'a Investment, a Nigerian conglomerate owned 
by the five southwestern states, recently signed a 
project memorandum of understanding (MOU) with Lemna 
Incorporated, an American firm.  The project aims to 
restore rail transportation between Lagos and Ibadan by 
2006, at a cost of $361 million (N48.7 billion). 
According to Remi Omotosho of Odu'a, during peak hours 
the `Lifeway light rail' project could move 36,000 
passengers an hour both ways, following establishment 
of connections at Abeokuta and Sagamu, both in Ogun 
State. 
 
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Exclusive Legislation Invalidates MOU 
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3. (U) The Odu'a-Lemna MOU endorsed by the governments 
of Lagos, Oyo and Ogun States, is being contested. Its 
opponents charge that it is invalidated by the Nigerian 
Railway Corporation (NRC) Act of 1955, which restricts 
the construction or extension of railway lines to the 
state-owned NRC. The Act vests authority `for 
observance of specific and uniform standards in the 
operation of railways' in the NRC, and has been the 
source of the Corporation's monopoly status. A 
provision of the Act nevertheless permits the Transport 
Minister to give consent to `persons other than the 
Corporation to construct or operate a railway within 
Nigeria'. This provision was basis of the ongoing 
construction of the Ovwian/Aladja-Ajaokuta railway at 
the Ajaokuta Steel complex. 
 
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Stakeholders Resolve to Review the Act 
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4. (U) Omotosho claims that the process of amending or 
repealing the law will begin in July following a 
stakeholders' conference.  Whether such action will 
occur is arguable. A. Abubakar, NRC Managing Director, 
suggested it may not since, he said, Odu'a had not 
consulted the Corporation before the MOU was signed or 
officially sought the Ministry of Transport's consent. 
According to Abubakar, the NRC has forwarded a bill to 
Obasanjo to create a Nigerian Railway Commission in 
order to regulate the rail transport sub-sector. He 
said the bill, which may be sent to the National 
Assembly soon, would, if enacted, lay the groundwork 
for an imitation of the GON's feat in the telecoms 
sector, as private operators would provide the bulk of 
rail transportation. 
 
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Comment 
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5. (U) The time is right for the NRC's monopoly to be 
broken, given its moribund state. The Corporation has 
less than 4,000 km of narrow gauge tracks and a large 
fleet of obsolete engines and haulage carriages.  The 
NRC's upgrade would require billions of dollars to be 
fully operational, making it unattractive to 
prospective investors. But the GON's political will to 
privatize the railway sub-sector may have weakened, 
given the failure of Chinese and Indian management 
teams at the NRC to turn the corporation around.  The 
Canadian Consultancy that replaced them does not appear 
to have had more success. Besides, much of Nigeria's 
freight is transported by trucks and trailers, some of 
which are owned by political allies of the ruling 
political party; these transporters can be expected to 
oppose anything that might mean losing market share to 
an efficient rail system. The light rail project might 
nonetheless be the best means to turn the sector around 
were the NRC to become a regulator. In that event, rail 
transport could attract huge investments, as did the 
telecoms sector these last three years. End comment. 
 
KRAMER