FG: Why $2.7bn Railway Concession Talks with GE Stalled

• South African firm, Transnet, to take over
• Weather hampers completion of Lagos – Kano line

Chineme Okafor in Abuja

The Minister of Transportation, Mr. Rotimi Amaechi, has clarified that the federal government did not sign any agreement with General Electric (GE) on the planned $2.7 billion deal to concession and rehabilitate Nigeria’s narrow gauge railway, stressing that the American company was still negotiating with the federal government when it backed out of the deal.

Speaking Thursday during an interview on the ‘Morning Show’ of Arise News Network, a broadcast arm of THISDAY Newspaper, Amaechi said GE did not abandon the railway deal on account of Nigeria’s economy.

According to him, GE was no longer in the business of transportation and had to hand over its interest in the deal to another firm.

Amaechi said prior to GE backing out of the deal, it had not signed any concession agreement with it or any of the firms involved but was still negotiating with them.

“General Electric did not pull out. One thing that thrives heavily in Nigeria is rumour, I don’t know where you got that information, no concession agreement has been signed, none. We have been negotiating, there is no way you will get a concession agreement in one year,” Amaechi said.

He explained, “What happened is that most of their business activities, they have dropped a lot of (them), I don’t know if it includes energy, transportation and all that. When they found out that they couldn’t continue in that line of business…because they were no longer in transportation business, the next company took over the lease, they didn’t pull out, it has nothing to do with our economy, they were excited about this thing.”

Amaechi revealed that GE had told him that they had for 11 years approached successive administrations in Nigeria to do the railway concession but the company was not successful because previous administrations wanted to award contracts for the railway while that of Muhammadu Buhari, preferred the concession model.

He stated that South African firm, Transnet SOC Limited, which deals in pipeline, port, and rail construction would now take over from GE, adding that a Special Purpose Vehicle (SPV) would be set up with Transnet and other firms to do the job.

Amaechi explained further, “I said I wasn’t going to award any contract because railway is too expensive. The total investment is supposed to be $2.7 billion, which is N1 trillion. No government can pull out N1 trillion to rehabilitate the entire narrow gauge.

“Now, the South African company has continued, they want to do the rehabilitation, we are at the point of setting up the SPV before we can sign the concession agreement.

“Have we finished negotiations? The answer is yes; the problem we have is that they want another six months to get their ministers in South Africa to give them approval to set up an SPV and we can’t sign without that because there are four companies involved.

“The four companies will form an SPV with which they will come to the table to sign. Each company, especially the one in China, say they will need six months to be able to convince their government to go into the concession. We are good to go, we are waiting for our partners,” he added.

The minister also talked about the status of work on the Lagos-to-Kano rail line, stating that bad weather and not lack of funds had contributed to the slow pace of work on the line.

According to him, “The weather is the problem, unlike the past government that could not pay counterpart fund, this time we paid 100 per cent counterpart funding. The president insisted that we must pay 100 per cent and get going.

“The problem at this time wasn’t funding, it was the weather – the rain was heavy and the construction of railway is like construction of roads. We are already laying tracks; our target is to get to Ebute Metta by February.”

He noted that the line had not experienced any Right of Way (RoW) challenges in Oyo; Ogun; and Lagos States.
Amaechi added that contractors were working out how to deal with RoW in Lagos, which he said was built up with gas and water pipelines to deal with.

He said about three bridges would have to be demolished and replaced with new ones in Lagos to accommodate the rail lines.

He said the government subsidises the Abuja-Kaduna rail system with N40 billion monthly.
According to him, the route generates only N16 million and requires N56 million for maintenance.

Amaechi further revealed that the government was talking with the Russians, Chinese, and Americans to fund construction of the Lagos – Calabar rail line.