Business
How $3bn Port Harcourt-Maiduguri rail line will impact African trade
How much benefit in trade will Nigeria gain at the completion of the multi-billion dollar rail line?
On the 10th of March, 2021, the Federal Government kickstarted a $3 billion rehabilitation and reconstruction of the 1,443-kilometer (897-mile) Eastern Railway line that starts from the southeastern oil hub of Port Harcourt and terminates at the northeastern city of Maiduguri.
The rail line is expected to link Nigeria’s industrial and agriculture hubs, facilitating the easy movement of people, goods and services. When completed, it will connect Rivers, Abia, Imo, Enugu, Ebonyi, Anambra, Benue, Nasarawa, Plateau, Kaduna, Bauchi, Gombe, Yobe and Borno states.
According to Mr Rotimi Amaechi, the Minister of Transport, the Federal Government is expected to provide about 15% of the $3 billion rehabilitation and reconstruction cost, while the balance will be provided by a syndicate of Chinese financiers.
READ: FG signs contract for Kano-Maradi, Kano-Dutse railway project, contractor to build university
On the trade benefits of the rail line, the Minister disclosed in February that the government was in the process of acquiring land for the construction of the Bonny seaport, and was hopeful for a simultaneous commencement of the seaport and rail line construction projects.
“…the first thing to do is to address the insecurity. The moment we address the insecurity, it will encourage importers from Onitsha, Aba and others to use the Port Harcourt seaport or Warri seaport or Calabar seaport,” Amaechi said, while speaking on the importance of ports in diversifying the economy.
Export deficit and trade with Africa
Nairametrics recently reported that Nigeria’s trade balance plunged further by 14.3% from a N2.39 trillion deficit recorded in the third quarter of 2020 to a N2.73 trillion deficit in Q4 2020, while total imports stood at N5.93 trillion, a 10.1% increase compared to N5.38 trillion recorded in Q3 2020. Total export rose by 6.72% from N2.99 trillion to N3.19 trillion.
- Raw materials exported in Q4 2020 rose by 317.6% from what was recorded in Q3 2020, and was 122% higher than the value exported in Q4 2019.
- Exported energy goods increased by 13.3% in Q4 2020 compared to Q3 2020, but declined by 15.5% when compared to the value exported in the corresponding quarter in 2019.
In Q4 2020, Nigeria’s major export trading partners were India, Spain, South Africa, the Netherlands, and United States. Meanwhile, her major import trading partners during the period were China, India, United States, Netherlands, and Denmark.
Africa accounted for just 17.3% of all of Nigeria’s export trade for Q4 2020 valued at N551.1 billion, and just 3.2% of all Nigerian imports at N190.1 billion. To overturn this dismal outing in Africa, infrastructure that connects industrial and agriculture hubs to export locations is an absolute necessity.
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AfCFTA
The African Continental Free Trade Area (AfCFTA) is one of the biggest free-trade agreements in the world right now, with a potential market of 1.2 billion people, and a combined gross domestic product of $2.5 trillion.
According to a report by PricewaterhouseCoopers, Nigeria should consider fiscal sustainability in terms of focusing efforts on key areas where the country has the biggest impact such as rails and ports, in order to optimize the country’s resources through the implementation of public and private sector collaborative efforts, post-Covid.
Ms. Funmi Folorunsho, AfCFTA’s co-Chairman on transportation, disclosed earlier this year that Nigeria was ready and working and that the issue of infrastructure deficit was not unique to Nigeria. She explained that the United Nations Conference on Trade and Development (UNCTD) report for 2020 clearly stated that for the Africa free trade area to work, the infrastructure deficit had to be addressed.
READ: FG outlines steps to be taken by businesses to export to AfCFTA countries
The implementation of the African Continental trade deal will reduce the tariff barrier to trade with the continent for exporters of goods from Nigeria. With Nigeria’s intracontinental trade currently below 20%, added infrastructure is needed to maximize the coming trade with the continent.
Nairametrics interviewed Prince Nwafuru, an international trade lawyer at Paul Usoro & Co., and leader of one of the Commercial Dispute Resolution & Litigation Teams, on the impact of an improved transportation system on Nigeria’s trade.
Benefits of the Port Harcourt- Maiduguri rail line for farmers and Nigeria’s agriculture hub
Prince Nwafuru said, “There is no gainsaying the fact that the poor state of infrastructure remains the major bane of intra-African trade, particularly in the area of agriculture where most African countries including Nigeria, have competitive advantages.
“The Port Harcourt-Maiduguri rail will benefit farmers in many ways. When completed, the project will boost intra-Nigerian trade, making it faster and cheaper for the farmers in the North to convey their goods to the South. The reduction in costs will translate to some moderation in prices of goods. Relatedly, most of the farm products are perishable in nature and the more efficient the transport system, the easier these goods get to where they are needed. In the long term, it will help the farmers to scale up given the increased access to market.”
READ: Nigeria’s foreign trade rises to N9.12 trillion in Q4 2020
Would the reduced transport costs make Nigerian agricultural product prices cheaper for AfCFTA?
“Definitely,” he said. “The rail project will contribute to reduced costs and like I noted above, this will reflect on prices as well. It is sad to learn that it costs less to import a 40-foot container from overseas than to transport it from Lagos to Maiduguri. This alone should give you some idea of how the high cost of transportation impacts on the prices of goods. Now imagine the cost implication of transporting the same products to say Accra Ghana.”
Speaking on how Nigeria could maximize production from the proposed railway project, Mr Nwafuru stated that the project would not only maximize the movement of goods but also enhance the movement of people which would, in turn, enable service efficiency.
READ: Nigeria records highest trade deficit since 1981
“Infrastructure plays a very big role in actualizing the objectives of the AfCFTA. With increased trade comes the challenge of logistics and transportation. Investment in the transport sector remains key to the promotion of trade within the AFCFTA. In addition to the movement of agricultural products, the rail system will aid the movement of persons across major cities in Nigeria. This will boost the efficiency of the service offerings and by extension, increase production. With a more efficient transport system, the movement of raw materials will be faster and this will help industries within the AfCFTA,” he said.
What other rail infrastructure would be beneficial for AfCTA trade?
“The Lagos-Cotonou route has a lot of vehicular traffic and needs a rail system to complement the road transport. The effort by the Lagos State Government to rehabilitate the Lagos-Badagry road and the construction of the light rail project has not gained much traction due to funding issues,” he said.
“The Federal Government should assist Lagos State in this area, given the importance of that route to the economy and actualization of the AfCFTA objectives. The Badagry route serves as the gateway to the commercial hub of the country. In addition, there should be a rail system from Enugu to Calabar passing through Abakaliki, Umuahia and Akwa Ibom. This will serve as a link between Nigeria and Cameroun. The absence of a rail network in the southeastern part of Nigeria has adversely affected the economy of the region,” he added.
Bottom line
The African Continental Free Trade Area will expose Nigerian producers to a potential market of over 1 billion people. For Nigeria to be an early pioneer in maximizing the trade deal, the implementation of infrastructure is needed to benefit the smooth transition of goods, people and services to export hubs. The proposed rail line, when completed, will make it faster and cheaper for the farmers in the North to convey their goods to the South for export through Bonny or Warri ports.
Other factors that are equally important to increased production include stepping up the fight against insecurity and increased investment in education.
Business
FG explains why the loan for youth investment fund is limited to N300,000
At N300,000 per beneficiary, only 41,000 beneficiaries would be covered in the first tranche of N12.5bn.
The Federal Government has explained why it limited the loan amount for the current beneficiaries of the N75 billion Nigeria Youth Investment Fund (NYIF) to N300,000.
The government said that it had to place a limit of N300,000 for individuals and eligible businesses who meet the conditions and guideline in order to ensure that it gets to as many beneficiaries as possible.
This disclosure is contained in a statement signed by the Director of Press, Federal Ministry of Youth and Sports Development, who noted that the disbursement of the fund is being done in phases.
READ: FG launches application for N75 billion Youth Investment Fund at 5% interest, how to apply
What the statement from the Federal Ministry of Youth and Sports Development is saying
The statement explained that the ministry had received more than 3 million applications for the initial N12.5bn made available adding that at the current cap of N300,000 per beneficiary, only about 41,000 beneficiaries could be covered.
The statement from the ministry partly reads, “The Ministry of Youth and Sports Development has been following with interest the reaction of some beneficiaries of the NYIF, particularly those expressing disappointment at the N300,000 cap on disbursement under the first tranche of N12.5bn.
Firstly, the framework specified N250,000 as the maximum for individuals and eligible businesses that are critical can access up toN3m subject to meeting key criteria set in the guideline and conditions.
READ: FG upscales digital skills training, to train 500,000 youths
Considering the number of applications received, there was the need to ensure spread and enable more beneficiaries enjoy the facility.”
The ministry assured beneficiaries that higher loan thresholds would be possible once additional funds were available in subsequent phases.
The ministry in the statement also noted that it is ideal to start and gradually increase, considering that there are lots of first-time borrowers as well.
The ministry reaffirmed that NYIF was not a grant, but a loan, targeted at supporting the youth to start small businesses or to inject funds into existing small businesses.
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What you should know
- It can be recalled that the Federal Government had on October 15, 2020, launched the N75 billion Nigerian Youth Investment Fund, which was set up for investment in the innovative ideas, skills, and talents of Nigerian Youth.
- It is to also institutionally provide the Nigerian youth with a special window for accessing much-needed funds, finances, business management skills, and other inputs critical for sustainable enterprise development.
- The Federal Ministry of Youth and Sports Development is the lead implementation entity and is responsible for budgetary provisions and for funds mobilization.
Business
How FCT residents, businesses are adjusting to ease of lockdown
FCT residents are putting aside the pains of the lockdown period as they go about their daily lives and businesses in the typical resilient fashion that Nigerians have come to be known for.
On the 2nd of January, 2021, the Federal Government announced the guidelines for the extension of the eased lockdown (phase 3) by one month following the rising cases of coronavirus disease in the country.
The eased lockdown has since seen businesses reopen nationwide albeit cautiously and in line with social distancing and other government protective recommendations implemented. The most heralded of these recommendations, the use of nose masks in public places and social distancing, have been fairly adhered to although, in recent times, it would seem that many Nigerians are moving on from the initial dread that sparked full compliance with these directives in the heat of the pandemic last year.
As with many parts of Nigeria, life has gradually returned to normal in the FCT. On Tuesday, 2nd March 2021, the National Primary Health Care Development Agency announced the arrival of the expected COVAX Astrazeneca/Oxford COVID-19 vaccines, which today has seen Nigeria record 1,096,727 vaccinations, with the FCT recording 49,192 vaccinations as of April 18th 2021. Although vaccine apathy is still reasonably high, residents are warming up to the idea of getting the required shots to protect themselves and others against the virus.
READ: FCT Minister presents N299.96 billion as 2021 statutory budget
The FCT is typically a ‘Civil Service’ domain but this is not to say that there aren’t other businesses being conducted in the region. Nairametrics took a tour around the Abuja metropolis to get a general feel and assessment of business reopening in the region.
The first points of call were the banks which have maintained strict compliance with the enforcement of the use of nose mask and the admission of a limited number of people into the banking hall at a time. As with several other banks, at the Guarantee Trust Bank branch at AYA junction in Asokoro, customers are required to obtain a ticket from the bank security with a number written on it. Customers are admitted into the banking hall in order of the number on their tickets.
One customer, Mary, expressed displeasure at the turn of events, citing the discomfort and the amount of time expended in carrying out hitherto simple transactions. “It used to be uncomfortable at first, but since it for our safety, we have no choice but to adhere to the protocol,” she stated.
READ: Nigeria’s COVID-19 curve is flattening at a rapid pace.
In the area of transportation, ride-hailing services which had until last year enjoyed immense patronage, are also just beginning to pick up. Emmanuel a driver for a ride-hailing service confirmed that business has picked up compared to the first phase of the lockdown easing. He, however, lamented the effect that rising inflation was having on his daily income from the executive cab business.
“Honestly, I am happy that businesses are picking up but we still need support. The rising prices of things are not reflected in the fare that our passengers are charged. We have to service the car, pay for fuel, and other needs. Although we are happy to be back, we feel things can be better,” he affirmed.
Public transport, on the other hand, has long moved on from the days of enforcement of a limited number of passengers in vehicles and the compulsory masking up of all passengers. Neither the drivers nor the conductors of the buses boarded during this investigation were particular about social distancing or the use of masks. Many safety-conscious passengers were, however, observed to still use their masks while onboard.
Bus fares have largely remained the same as they were pre-covid. For instance, the fare for a trip from Karu Junction to Berger still ranges from N150-N200, depending on the time of the day.
Restaurants and food outlets including fast food grottos are also businesses that enjoyed immense patronage pre-covid but were forced to shut down or at best, streamline their services to strictly take-outs and online orders in the aftermath of the breakout of the pandemic. A trip to a KFC outlet at Area 11 in Garki, and a number of other food courts revealed that customers are not allowed entry without a mask. However, once inside, the mask could be set aside to place orders and eat meals.
In Gwarinpa, at the Rooftop Puzzles Restaurant and Bar, customers are required to sanitise their hands and wear a mask before entry, but once inside, are allowed to sit anywhere and be attended to by staff kitted in nose masks.
READ: CAC sets 3-hour time line for company registration in 2021
To conclude, life has pretty much returned to normal in the FCT and residents are gradually putting aside the pains of the lockdown period as they go about their daily lives and business concerns in the typical resilient fashion that Nigerians have come to be known for.
On the Legislative side of things, the FCT Minister has recently concluded plans with the FEC to boost infrastructure development in the city, with Nairametrics recently reporting that the Federal Economic Council has approved the sum of N82 billion for the completion and rehabilitation of infrastructure projects in the Federal Capital Territory. The projects range from the Federal Secretariat to the expansion of the outer Southern Expressway amongst many others.
