Nigeria has long sought to expand its commercial infrastructure to stimulate sustainable growth and diversify the economy away from long-standing over-reliance on oil extraction. The nation's leaders hope that participating in China's Belt and Road Initiative (BRI) will facilitate Chinese financing and construction of parts of that infrastructure and help to unlock economic potential. In a previous Tearline article, we examined one of these projects, the high-capacity Lagos-Ibadan Railway now under construction and its secondary effects on local economies. In this Tearline Article we look at another question inexorably connected to the value of the Lagos-Ibadan line: are the necessary companion developments in place? After years of work by the China Civil Engineering Construction Company (CCECC), a Chinese state-owned enterprise, the railway is scheduled to begin operating in June 2019. However, worsening traffic congestion in Lagos ports and skyrocketing transport costs may limit the expected contributions to diversification from this signature piece of infrastructure. Without more efficient rail and port interconnections at the sea-port end of the line, the expected benefits of the investment are likely to fall short, along with hopes for economic diversification.

Rail Infrastructure and Nigeria's Export Economy

Economic development in Nigeria has had ups and downs over the last decade, mostly as a result of the country's dependence on oil and commodity exports. More than 90% of Nigerian exports in 2017 and 2018 consisted of oil and petroleum products, and real GDP has declined since 2014 as oil prices have dropped (see graph 1). High hopes, promoted by Nigerian policymakers, have been placed on railway projects as a means of connecting inland areas to global markets. As part of an economic diversification agenda, the Lagos-Ibadan Railway seeks to connect the opportunity and resource rich interior to Apapa Port, the largest port in Lagos (see image 1), providing the means for diversified cargo including value added goods -- not just oil -- to pass from inland areas to global destinations.

Connected infrastructure networks, including rail-to-port transfer points, have the potential to improve speed and efficiency along inland rail corridors. Such improvements are badly needed in Lagos ports, as gridlock traffic and port processing delays have contributed to an expensive and unattractive environment for importers and exporters. Since 2014, import traffic in Lagos has declined more than 30%, as transport inefficiencies have driven shippers towards neighboring ports in Togo and Benin. Over the same period, export traffic from Lagos Ports has also flattened, raising concerns over the costs of inefficiencies weighing on Nigeria's export industries. Addressing concerns over shipping costs in Lagos will require a coordinated policy response in support of integrated port transit systems.

Nigerian leaders identified connectivity between the Apapa port and the intermodal shipping transport system as a priority for addressing export costs in Lagos. To this end, the government announced plans to expand a system of rail extensions in the Lagos port complex in November 2018. New proposed rail extensions are planned to connect five export terminals in the Apapa port to the standard gauge railway network with the goal of achieving seamless connections between shipping terminals and inland rail hubs.¹However, implementation of the ambitious plan to expand rail connections to all of Apapa's terminals has proven challenging. Expanding the planned connections from an initial 2.4 km to 6.4 km has been blamed for the Lagos-Ibadan Railway overrunning its USD $1.5 billion budget. Construction delays on the Lagos-Ibadan railway will likely delay commencement of operations along with the Apapa rail extension. The Apapa port extensions also require demolition of parts of the existing port layout, which depends on additional financing which has not yet been secured.

Modernization of Lagos' ports is complicated by their distance from important existing infrastructures. Lagos' second largest port, Tin Can Island, is difficult to integrate with the Apapa areas as it has no pre-existing rail capacity and is separated by a dense network of shipping infrastructure.²

The layout of Lagos' ports reflects the legacy industries they were designed to accommodate. Existing storage and terminal infrastructure near the Apapa rail extension was built to handle oil exports, while Tin Can Island Port supports processing of agricultural goods, vehicles, and light manufactured goods.³ Satellite imagery shows that the port terminals nearby (directly east) to Lagos' rail freight terminus facilities are ill-suited for the rapid transfer of consumer, agricultural, and light manufactured goods: oil tanks and oil pipeline infrastructure dominate this zone, hard-wiring it to petroleum import-export use, not handling of diversified goods.

While oil flows efficiently via pipeline directly to the terminals in the port, shipping containers carrying agricultural and manufactured goods must be laboriously offloaded at the Apapa rail extension, warehoused, then re-loaded onto trucks. From there, goods are transferred to ship loading sites within Apapa port or transported to Tin Can Island. Delicate high-value goods, such as fruits and other foodstuffs, are vulnerable to spoilage on trucks waylaid in standstill traffic surrounding Tin Can Island. The Lagos-Ibadan rail line may open the door to moving inland products and produce sound to port, but poorly integrated rail-to-port connections at the Apapa rail terminus make that of little use.

Ongoing Logistical Challenges

Currently, export goods arriving at Lagos by road are unloaded at private warehouses and inspected by a private customs contractor. Goods often languish in warehouses for up to three days after inspection while waiting for the inspection certificate required to pass through the port. From there, goods are re-loaded onto trucks and may spend up to 48 hours in transit to port terminals, largely a result of poorly-maintained roads and stand-still traffic congestion. The imagery of Tin Can Island shows severe traffic delays extending up to 7km from Tin Can Island's looping road system.

Roads around Tin Can and Apapa port typically become clogged with trucks transporting import and export goods. Efforts by the Nigerian Port Authority to address traffic congestion, such as secure off-road parking sites for trucks awaiting delivery, have fallen short of expectations to reduce transport delays. Traffic has become so severe that, in February 2018, the Nigerian Port Authority began running a barge service in Apapa port to facilitate the transfer of goods.⁴

With the Lagos-Ibadan Railway scheduled to begin operation in May 2019, the degree to which the railway can reduce transport costs in Lagos is now an obvious question that should have been addressed earlier. By channeling goods into a terminus at Apapa that is poorly networked to Apapa port or Tin Can Island, the rail line will amplify congestion problems. As of 2016, transport from warehouses to Lagos port terminals cost an average of $434/TEU for a 20-foot container, mostly due to traffic delays in the city. Apapa terminus to Tin Can Island shipment will remain reliant on truck transport and vulnerable to heavy costs.

Unlike the jammed roads servicing Tin Can Island from the east, recent imagery shows just mild congestion in the warren of streets dividing the Apapa and Tin Can Island port complexes. However, inadequate road infrastructure linking Apapa to Tin Can Island could quickly become jammed with traffic transporting goods from the Apapa rail terminus to Tin Can Island once the Lagos-Ibadan railway begins operation. Even with existing traffic delays on Tin Can Island, perishable agricultural goods from inland regions are vulnerable to spoilage during the truck transport phase. As a result, traffic congestion and associated delays are likely to remain key obstacles for inland export industries.

Evaluating Port Connectivity

Insights can be drawn from efforts elsewhere to ensure that expensive long-line railroads are not left stranded due to poor planning for "last-mile" issues at their port terminus. As a benchmark for connectivity improvement, we look at the Addis Ababa-Djibouti Railway in East Africa. Like the Lagos-Ibadan Railway, the Addis Ababa-Djibouti line was constructed by the CCECC and connects inland regions to a major regional port. Completed in 2016, the Addis Ababa-Djibouti Railway has drawn attention for its role in Ethiopia's initiative to expand exports to Europe and Asia by way Djibouti's ports, enabling the production and export of perishable and high-value-added products, such as cut flowers and coffee.⁵ In anticipation of port congestion associated with increased trade flows, the Djibouti Port Authority initiated an ambitious program of intermodal connections at the Port of Doraleh, including the construction of a direct connection to the Addis Ababa-Djibouti Railway, along with warehouse expansions, LNG and crude oil terminals, and container bunk ports.⁶

The imagery of the Doraleh Multipurpose Port is a stark contrast to Apapa port in Lagos. An emergent infrastructural complex in a previously sparsely developed area, construction, and expansion in Doraleh were much more straightforward than in Lagos. Djibouti's port area suffers from major congestion only in peak shipping seasons, whereas traffic congestion and shipping delays in Lagos are constant.

Replicating the Port of Doraleh's state-of-the-art infrastructure in Lagos is physically difficult, due to the dense network of existing warehouses and port terminals, and complicated with the institutional challenges of negotiating with myriad stakeholders. Rail extensions in Lagos to accommodate CCECC's new high-capacity standard-gauge rail in the Apapa Port Complex, required controversial demolition of warehouses and shipping terminals.⁷ Making remedial plans to deal with connectivity in time to handle the flow of goods arriving to the Apapa but destined for Tin Can or other shipping points would take years, at best.

Conclusion about this BRI project

The extension of the standard-gauge rail line to the Apapa port in Lagos is an important step towards modernizing and improving Lagos shipping infrastructure. However, the current freight terminus at the Apapa port is not enabled to relieve transport delays and reduce costs for Nigerian exporters. Under current circumstances, the Apapa terminal fails to address critical port congestion around Tin Can Island Port Complex and, short of extending the railway freight extension to support the diversified export infrastructure at Tin Can Island, undermines optimism about upstream diversification and economic development. Without both long-haul and last-mile connectivity, BRI projects like the Lagos-Ibadan line will fall short of helping Nigeria diversify from oil dependence. Long-term investments in transport infrastructure such as rail can be crucial for development, but the financing and capital project advantage China brings to a complex setting such as Nigeria is just one variable in a complex development equation.

References

1. FG to link 5 Lagos Port terminals with standard gauge rail. December 2018 https://leadership.ng/2018/11/22/fg-to-link-5-lagos-port-terminals-with-standard-gauge-rail/
2. Only 1 out of 6 ports in Nigerian seaports connected by rail. November, 2018 https://leadership.ng/2018/10/15/only-1-out-of-6-nigerian-seaports-connected-by-rail/
3. Nigeria Port Authority Handbook 2018/19 http://nigerianports.gov.ng/wp-content/uploads/2018/09/NigerianPortHandbook2018final.pdf
4. Lagos barge service helps ease road congestion. February 07, 2018 https://www.joc.com/port-news/international-ports/lagos-gets-first-barge-shipment-amid-road-woes_20180207.html
5. Ethiopia-Roads and Rails. December 11, 2018 https://www.export.gov/article?id=Ethiopia-Road-and-Railways
6. Djibouti Ports Sufficient for Serving Ethiopia. August 22, 2018 https://allafrica.com/stories/201808220207.html
7. Nigeria government to demolish parts of Apapa Port terminals for standard gauge rail. November 16, 2018 https://alternativeafrica.com/2018/11/16/nigeria-govt-to-demolish-parts-of-apapa-port-terminals-for-standard-gauge-rail/