Oiling the wheels of business. (Transport).

Nigeria's efforts to diversify and encourage greater foreign investment will come to nothing if the transport infrastructure, currently in a fairly dilapidated state, cannot be upgraded. NEIL FORD examines the government's options in this sector.

While a great deal of attention is rightly lavished upon improving water, power and telecommunications infrastructure in Nigeria, relatively little attention is paid to the transport sector. Yet a national economy without adequate transport links in a country as large and varied as Nigeria will always struggle to diversify. The government recognises this but realises that apart from the privatisation of port and air parastatals, it is virtually impossible to attract private capital into the sector. On the other hand, investment in so many other sectors is deterred by poor transport links, so can the government afford not to act?

The main target of the government's limited transport budget over the three years since the return of civilian rule has been the dilapidated road network. During 1999, 65 contracts for a total of 3,648km of road were awarded, worth N90.6bn to the contractors involved. Of these, 2,723km involved repair and resurfacing work and only 925km concerned new stretches of road.

Investment has slowed more recently and during the first three years of civilian rule, capital expenditure amounted to Nl84bn. According to federal government figures, a total of 4,146km of new road was constructed and 1,366km of road rehabilitated, while 153 bridges were built.

It is difficult to compare these figures with the situation prior to 1999, as the figures from the years of military rule are unreliable. But given a population of around 125m and territory of over 900sq km, the current construction and rehabilitation programme will not make a huge difference in the short term. Moreover, the situation is unlikely to change even during the next term of office. Important though road communications are, it is unsurprising that the government's current priorities lie elsewhere given the state of water and power infrastructure in the country.

The railway sector remains the transport industry's poor relation and there is virtually no private sector involvement. Although the South African government is convinced that rail investment can make a substantial contribution to the economy, there is no such belief in Nigeria. Despite this, over 3m passengers travelled a total of 527m km by rail in 2000, generating N150m in revenues. Any growth is likely to come in freight, where revenues of N480m in 2000 were achieved on 2.3m freight tonne km.

WATER TRANSPORT

Elsewhere, some effort is being put into developing inland waterways as an alternative to long distance road and rail transport. Given the length and capacity of the Niger and its tributaries, this seems a wise move. The National Inland Waterway Authority (NIWA) has issued a tender for the construction of new ports on the lower Niger, including those at Baro, Idah and Lokoja. NIWA has already bought sites in Aba, Ibadan, Jos and Ota for the construction of new dry docks. The plan for new river ports has been developed in co-ordination with the current process of dredging the river. Dutch firm Haskoning has been awarded a N8.3bn contract to make the river navigable.

Pre-inspection certificates have been abolished and tariff structures are being reviewed in order to make Nigeria more competitive with other regional ports such as Yaounde and the new $l00m container port to be built in Togo. However, although in theory the Niger could become to Nigeria in the 21st century what the Mississippi was to the development of 19th century USA, the development of inland waterways is perhaps not at the forefront of government thinking.

One of the main problems at Nigeria's international sea ports is their sheer sluggishness. While the average time to clear imports around the world is two days, this rises to 22 days at the port of Lagos. The government and NIWA are committed to achieving 48 hour turnarounds but there is a long way to go before that is achieved. Apart from anything else, the work culture must change.

The chief economic adviser to the President, Magnus Kpakol, said at the end of August that the Nigeria Ports Authority (NPA) would not be privatised, despite the fact that the organisation has been slated for privatisation. Indeed, NPA representatives have been seen at a wide variety of investment events around the world in an attempt to drum up interest in the company. Kpakol said: "We are not privatising the ports as some people have falsely reported. Instead, we are enhancing private. activity at the ports to make them more efficient. The government will always own the ports. We will allow concessions within the ports as a way of building or encouraging efficiency."

Kpakol's comments appear to support the view that the government intends to put contracts to run the country's international ports out to tender, without actually selling off the port infrastructure itself. If the privatisation of the operations of the NPA was to proceed along these lines, it would mirror many other 'privatisation' processes in Africa.

The adviser's words were probably aimed at a domestic audience, where trades unions have been up in arms about the likely job losses that would result from the wholesale sell off of the NPA. However, as a result of the over manning common in almost all Nigerian parastatals, widespread redundancies are likely. The NPA is currently under the authority of the Federal Ministry of Transport and controls eight ports: Port Harcourt, Delta Ports at Warn, Calabar ports, the Federal Lighter Terminal at Onne and four others in Lagos.

UP IN THE AIR

Kpakol also confirmed that the federal government was "going ahead with the sale of Nigerian Airways", but did not confirm whether the sale would continue to be managed by the federal government's privatisation agency, the Bureau of Public Enterprises (BPE).

Nigerian newspapers reported earlier in August that the Ministry of Aviation had agreed to sell a 49% stake in the state owned national carrier Nigeria Airways (NA) to British leasing company Airwing Aerospace. If the claim is true, then the joint venture would go against government policy. The BPE claims that it knows nothing about the deal and both it and the House of Representatives have asked the government to respond to the claims.

Nigeria Airways has long been listed for privatisation, but as with most privatisation processes in Nigeria, the timing of the sell off has yet to be determined. Restructuring the company has proved particularly difficult because the government discovered at the start of this year that former NA managers had awarded themselves shares in the company, reducing the government's equity holding. It is therefore possible that the government has seen the Airwing deal as a quick solution.

NA currently only has two planes in operation, down from over 30 in the early 1980s. The company has also been hit by a series of problems and scandals over the past two years. In 2001, fears were raised over the airworthiness of one of the company's aircraft, leading to the suspension of NA's Lagos-London service. Allegations of fraud then led to the dismissal of the chief executive.

A World Bank team advising on the privatisation of NA quit last May and a route sharing agreement on the Lagos-New York run with South African Airways was abandoned after a number of disputes. Then, following a federal government review into the future of the company, Nigeria Airways sacked around half of its 2,300 staff at the start of this year. NA staff have complained that they have not been consulted over the company's future and have threatened to make it 'ungovernable'.

The reduced services of NA have opened the way for a host of small, private, Nigerian operators such as Albarka, Bellview and Chanchargi to begin services. The main problem is that many of the private operators have yet to really establish themselves and their limited size does not allow them to benefit from economies of scale. Many are one or two plane outfits, although it should be noted that prices are low in comparison with internal flights in other African countries.

However, fears have been raised about the safety of many of the aircraft plying their trade in the country. In April this year, Kema Chikwe, the Minister of Aviation, argued that the sector's two regulatory bodies - the Nigerian Civil Aviation Authority (NCAA) and the Nigerian Airspace Management Authority (NAMA) - needed to be overhauled, partly in order to keep a tighter grip on the entry of new airlines into the market.

Then, in May, the death of at least 60 passengers as the result of the crash of a BAC 1-11 plane at Aminu Kano International Airport pushed the ageing state of many aircraft and other health and safety issues firmly into the spotlight. The Nigerian Civil Aviation Authority (NCAA) suspended all BAC 1-11 planes from operating in the country and according to a number of sources within Nigeria, safety regulations have been enforced much more stringently since the crash.

AIRPORTS MODERNISED

Most of the international airports managed by the Federal Airports Authority of Nigeria (FAAN) have been modernised. However, delays in the construction of the new terminal at Lagos airport have become the subject of a national scandal. The contract for the terminal was originally awarded to Nigerian firm Sanderton in 1986 but the contract was withdrawn and the deal ended up in the courts. The company eventually sued Lagos State government for N155m.

Incredibly, the same company was awarded the contract again in 2001, although the build-operate-transfer (BOT) deal has since been called off and the contract offered to another firm, Stabilini Visinoni. Once again, Sanderton is taking the state government to court over the loss of the contract and construction work on the site has been suspended.

The government is concerned that temporary facilities at the airport are unsatisfactory and it has ordered Aero Contractors, Bristow Helicopters, DANA, Shell and Skyline to stop using the airport from 1 August.

On a more positive note, air travel both within Nigeria and internationally is becoming more popular. British Airways and KLM have both introduced direct flights to Abuja and Nigeria's regional airports are likely to be used to a greater extent over the next few years. Whether any Nigerian companies will be able to take advantage of the growing market remains open to question.

While international and foreign investor attention on the Nigerian transport sector has been focused on the privatisations of NPA and NA, there are far more pressing problems and challenges for the majority of Nigerians within the country's domestic transport infrastructure. From a foreign investment point of view, the government has little incentive to overhaul the nation's road network, as few existing foreign investors outside the fuel sector rely upon the roads to do their business. And as the world has heard a thousand times, inadequate infrastructure is the greatest deterrent to increased foreign investment in Nigeria.

RELATED ARTICLE: OPEC FUNDING FOR ROADS

The OPEC Fund has extended loans totalling more than $57m for road rehabilitation projects in six African countries. A $5.8m loan agreement with the Republic of Benin will support an initiative to upgrade the 89km long Akpro-Kpedekpo Road. The Akpro-Kpedekpo road, situated in the southeast corner of the country, provides access to the two fertile provinces Oueme and Zou, as well as serving as a vital trade link to neighbouring countries.

A $9m loan agreement has also been made to Cameroon to help finance rehabilitation of the Abong Mbang-Bonis Road. The 103km road will be upgraded to a 7m wide, all-weather asphalt surface with 1.5m shoulders on either side. Two new replacement bridges, 50m and 30m in length, will be built to replace the existing Abong Mbang and Doume bridges.

Ethiopia is to receive $19.8m in loans to help upgrade the 171km Metu-Gore-Gambella Road, one of the country's most important west-east links passing through rich agricultural areas where a number of food and cash crops are grown.

Ghana's $6.67m loan agreement will serve to upgrade an 85km stretch of the country's Anyinam-Kumasi Road, an important stretch that forms an integral part of the corridor linking the capital city Accra with neighboring Burkina Faso and Cote d'Ivoire.

Malawi is to receive a $9.5m loan to upgrade 23 km of the Liwonde-Naminga corridor to bitumen. A new bridge will be constructed over the Nubuzi River, and an existing one repaired. The improved road will provide a swifter and more reliable route, not only within the district, but also to neighbouring provinces and to Mozambique.

Senegal will receive an $6.25m loan for road rehabilitation. Government has recently launched a rural recovery program, under which this scheme falls.

SOUTHERN 'COAST 2 COAST' ROUTE NOW OPEN

The idea of an efficient and fast transport route linking Maputo on the Indian Ocean with Walvis Bay on the Atlantic on the other side of Africa has fascinated traders, travellers and visionaries for centuries. Traders wanted a reliable way of shifting commodities in and out of the steadily developing southern African interior, travellers hankered after safe and rapid passage through this wild area, while the visionaries contemplated the profound economic development that could take place in the corridor created by such a road and rail system.

After nearly six years in the making, the 'Coast 2 Coast' initiative linking Mozambique, Swaziland, South Africa, Botswana and Namibia is open for business.

In terms of travel and tourism, the corridor has immense potential. Similar to Route 66 in the United States and the Explorer Highway in Australia, the 3,000km tarred highway offers a great diversity in tourist attractions -- a choice of game parks each unique in their own way, ghost towns from mining heydays and frontier outposts, desert adventures, hiking, shopping, historical sites, game fishing and beaches.

The 'Coast 2 Coast' initiative is a collaborative effort by the governments of the countries concerned and, from here on in, they want strong participation by the private sector in driving the corridor to its full potential. "We want the private sector to take over in time, and the way they can do that is by exploring ideas with us," says project manager, John Spiropolous. Referring to tourism possibilities, he says "there's a lot to be done in terms of upgrading service levels, providing new and interesting experiences, and putting in new buildings. We would like to bring the two sectors together in such a way that where there is a business plan, it will have a public sector investment component."

Spiropolous says channels are being opened for companies such as tour operators and "we are saying, if you have any ideas, let us know."

The five Tourism Ministries are exploring ways of standardising visa requirements that will allow visitors unfettered access to the various regions.The project hopes to attract 50% of visitors from the SADC region and the rest from the international market.

Mouth-watering alternatives

For traders, the link offers mouth-watering choices in maritime trade. While the route between Gauteng, South Africa's manufacturing hub, and Maputo has opened up alternative shipping options to Durban -- often congested and slow - it has also encouraged exporters and importers to cast their eyes to the west. By railing or road hauling their goods to the lightly-used Namibian port of Walvis Bay on the Atlantic ocean, they'll get their goods on board sooner and will cut eight days off the sea time from Maputo, seven from Durban and three from Cape Town to ports in the Americas and Europe.

The 'Coast 2 Coast' corridor is also a boost to regional trading, opening up the markets of the Southern African Development Community (SASDC). While the route itself takes in six SADC countries, it offers a wide range of access points along its length. And even though the free trade envisaged for the SADC has yet to find its full potential, the tariff-free gates are begin to swing open, if only creakily at this stage. A couple of years down the line, these routes into the SADC, and the way it is linked both by rail and road with Comesa, could be the beginning of the region's economic salvation.

To be taken as seriously are the visions of those who made 'Coast 2 Coast' happen in the first place. While trade and tourism will provide some of the region's life blood, it is the economic development that will take place as a consequence in some hitherto desperately poor areas that is the main prize. New tourism, manufacture and agriculture springing up alongside the tarred roads and rail tracks will be the ultimate reward.

Tom Nevin