Nigeria’s ambition to revamp its old and dilapidated rail network and connect major economic hubs across the country has suffered a setback as GE has pulled out of the consortium that was going to invest $2.0 billion into the deal.
“The development is in line with GE’s decision to exit the Transportation business from its portfolio” Babatunde Oso, GE Transportation leader in charge of Sub-Sahara Africa said in an emailed response to BusinessDay enquiry.
General Electric had in May this year announced plans to cut down its business units. It announced a $11-billion deal to merge its transportation business with train equipment maker Wabtec, which resulted in GE exiting its transportation business, the unit that has been negotiating with the federal government since 2015 to revamp the country’s debilitated railway lines.
GE had initially proposed to invest US$2.0 billion in the deal which could have significantly improved the way cargoes are moved across the country, saving time and money and significantly boosting intercity commerce and productivity.
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GE was initially the lead in a consortium, which has China’s SinoHydro, a leading infrastructure construction services corporation, South Africa-based Transnet, a leader in transportation and logistics infrastructure management and APM Terminals, a global port, terminal and intermodal inland services provider as members. But GE in August 2018 announced that it was dropping its lead role in the consortium to Transnet.
This resulted in the Federal Government entering into another round of negotiation with Transnet to forestall any stoppage of the rehabilitation of the combined 3,500 kilometres decaying narrow gauge lines across the country.
A top official of Transnet had told BusinessDay on the sidelines of FT Africa summit held in London in October that Transnet had formally written to the Ministry of Transportation and had gotten approval to lead railway rehabilitation work.
The Transnet top official had also confirmed that the Federal Ministry of Finance had already issued a $45-million standby credit for the interim phase of the railway rehabilitation project to take off in November.
Out of the $45 million, about $19 million was to be given to Transnet to bring in about 200 flatbed wagons to move containers from the Apapa ports, while another $20 million was to be given to Chinese Sino for the rehabilitation of the railway tracks up to Ilorin in Kwara state and the balance of $6 million was to be given to GE to rehabilitate 10 coaches. JP Morgan was supposed to monetise the US$45 million standby letter of credit so that the interim phase of the work could begin.
However, the Transnet official had also warned that plans for the interim phase of the rehabilitation work to take off in November could be delayed if the repairs to the tracks are not completed before November.
He said that there would be no need to bring new wagons into the country if the tracks are not reliable. ‘‘We would not want new wagons to be brought only for them to derailed”
It is already November and BusinessDay can confirm that the repairs on the railway tracks remain undone. BusinessDay could not confirm if JP Morgan failed to monetise the US$45 million letter of credit guaranteed by the Ministry of Finance, hence the delay in the whole project.
But GE’s exit from the deal means Nigeria will now have to seek new partners for the railway rehabilitation programme. Sources familiar with the railway industry have told BusinessDay that for most of the last 15 years, the Nigeria Railway Corporation, NRC, has not had a single commercial freight contract. Heavy containers that could easily be moved by railway, are transported mainly by road, resulting in excessive load on the country’s already inadequate road network and consequently increased wear and tear.
A significant amount of cattle and other agricultural goods come from the north down to the south while manufactured goods including cement and salt as well as imported goods and petrol move from the south to the north and none of that goes by rail.
Sources familiar with the matter told BusinessDay that the very slow approach of the government is what has now put the whole project in jeopardy. If the government had moved fast when GE was still keen in the project in late 2015 and early 2016, cargoes would be moving by rail now, sources in the railway industry have told BusinessDay.
“The government was not committed enough to getting the project over the line when GE demonstrated significant interest” a player in the railway industry told BusinessDay.
Former GE CEO, John Flannery, had visited Nigeria twice to iron out details of the deal, in the space of one-year stint at the helm, which lasted between August 2017 and October 2018.
Even though, Oso, the GE official who spoke to BusinessDay said that his organisation remains committed to the sustainable development of Nigeria, analysts say Nigeria will regret this missed opportunity to rehabilitate its old narrow gauge lines if the consortium falls apart. The deal was supposed not to cost Nigeria a kobo as the investment was to be covered by the consortium which received a sovereign guarantee that any certified investment made would be refunded if the concession does not get to financial close as envisaged.

Speaking with BusinessDay on telephone Tuesday evening, Edeme Kelikume, managing director and chief executive of Connect Rail Services Limited described the pulling out of GE from the deal as gradually bringing the entire narrow gauge concession process to a dead end.
He expressed doubt on the readiness of Transnet, which is publicly owned South African rail organisation, similar to Nigeria Railway Corporation, in stepping into the big shoes of GE. He said GE was looking for a perfect and hitch-free concession deal which was not forthcoming, even though the Federal Government was willing to make it work but was slow in closing a deal.
MIKE OCHONMA AND LOLADE AKINMURELE
