The intractable high cost of projects in Nigeria

There is no gainsaying that one of the major reasons for infrastructure deficit in Nigeria is the high cost of projects execution. Every project in Nigeria is believed to costs two or three times more than it costs in other countries.

The execution of railway projects in Nigeria presents a glaring example. While Nigeria is spending over $1.5 billion dollars to construct 156km standard gauge Lagos-Ibadan railway line, the Ghanaian government has concluded plans to begin the construction of a 340km standard gauge railway line at the cost of $2.2 billion. According to media reports, the project, which will soon take off, is being handled by the Ghanaian-European Railway Consortium (GERC).

From the foregoing, a simple calculation shows that the construction of rail line costs $6.5 million per kilometer in Ghana while it costs $9.6 in Nigeria. If this is the case, one can imagine how much Nigeria may have lost in the construction of long distance railway lines such as the Lagos-Kano, Calabar-Lagos, Port Harcourt-Maiduguri, and Kano-Jibiya-Maradi in Niger Republic.

In 2016, the Nigerian government signed a $1.5 billion contract with China Civil Engineering Construction Corporation (CCECC) to build 156 km standard gauge railway line between Lagos and Ibadan. Construction work on the project began in March 2017, and as work was in progress, in 2018, the erstwhile Minister of Transportation, Rotimi Amaechi, presented a request for cost overrun to President, Mohammadu Buhari. The cost overrun, according to the former Minister, was to accommodate variations not included in the original contract details. The request was eventually approved by the Federal Executive Council. With this review, the actual cost of the 156km Lagos-Ibadan railway may have hit $2 billion or more.

The cost of executing railway projects in Nigeria is a sad reminder that we have not been able to tame the monster of inflated contracts, kickbacks and corruption in our contract awards and execution. Despite the much vaunted fight against corruption, and what the Bureau of Public Procurement (BPP) claims to be doing, inflated contracts still rule the nation’s economic and political landscape.

It is only in Nigeria that upward review of contracts is the rule rather than the exception, making one to wonder if feasibility studies and due diligence are not carried out before the commencement of contracts. Either by acts of omission or commission, Nigerian negotiators sign contract agreements that leave the nation grappling with the short end of the stick.

One question that may be bothering the minds of decent Nigerians, which they will like to get an answer to, is whether the railway projects currently under execution all over the country went through the procurement process of the BPP. The Bureau was established by law to harmonize government practices and policies on public procurement and to ensure accountability, probity, and transparency in the procurement process. It is also supposed to establish pricing standards and benchmarks in government contracts. Under the law, it is the responsibility of BPP to ensure that procurement and disposal of public assets are carried out in a fair, competitive, value-for-money standards and practices. In sum, the Bureau has the responsibility of sanitizing the public procurement process by ensuring competitiveness, transparency, professionalism, and cost-effectiveness in the award and execution of government contracts.

But the persisting high cost of contracts in Nigeria raises doubt whether these functions are really being performed by the Bureau. The rate Nigeria continues to fritter scarce resources away in project contract awards makes one wonder if the agency has not been so compromised to the extent that its due process no longer counts. Surely, somebody benefits from these abnormal situations.

That every project in Nigeria bears twice or thrice the cost of similar projects in other countries, be it in Africa or elsewhere, is really mind-boggling. It is an aberration that has persisted since the end of the first republic.

Indeed, the cost difference in the execution of railway contracts in Ghana and Nigeria should be a cause for sober reflection and an opportunity to ask what is really wrong with us as a nation. Why must we always shortchange ourselves at every turn?

It is quite unfortunate that inflation of contracts has continued to be the bane of contracts and public procurements despite the ongoing fight against corruption in the country. By spending two or three times the actual cost on one project, other important projects are thereby denied the fund for execution. Hence the nation will continue to suffer infrastructure deficit.

A lesson for Nigeria in Ghana’s railway infrastructure development is the country’s ability to think ahead. While Nigeria will go back to China or elsewhere to shop for locomotive coaches and wagons for the railway project across the country, Ghana plans to establish assembly plants in at least two regions of the country for the construction of rolling stocks, which are necessary for a viable railway industry.

Besides, Ghana’s 340km railway project is being built on a build, operate and transfer (BOT) agreement. The GERC is expected to operate 24 passenger trains and six freight trains after completion of the 340-kilometre railway project. The concession period is 27 years during which the consortium hopes to recoup its investment. This is the kind of private sector investment Nigeria needs, but which is not possible even in this modern age, because of the non-repeal of the archaic Nigerian Railway Corporation Act that does not encourage private sector participation in the railway sector.

In this second term of President Buhari’s administration, it is expected that the problem of inflation and over-pricing of contracts will be expeditiously tacked as part of the anti-corruption crusade. The battle against corruption should be taken to new heights, as the fear that gripped public servants and political appointees in 2015 appears to have eased off.