Despite heavy government funding, especially in the last decade, the Nigerian Railway Corporation (NRC) still operates at a loss, relying on loans to remain on the tracks, OLUSEGUN KOIKI and BENJAMIN ALADE report.

For two centuries, rail transportation has remained one of the most powerful catalysts for economic growth, industrialisation and national integration. Across Europe, Asia and North America, efficient railway systems move millions of passengers daily, transport vast quantities of freight and contribute significantly to national productivity.

In Nigeria, however, the story has been different. Despite billions of naira invested over decades and several railway modernisation programmes, the Nigerian Railway Corporation (NRC) continues to struggle financially.

The corporation is heavily dependent on government funding and borrowings to sustain operations, raising concerns about its long-term sustainability. Recently, its Managing Director, Dr Kayode Opeifa, admitted that the corporation was operating at a loss and had resorted to borrowing to keep trains running.

According to Opeifa, the high cost of diesel had made it almost impossible for the corporation to run its trains efficiently. Opeifa stated this while fielding questions from the workers who were led by the two workers unions – the Nigerian Union of Railway Workers and the Senior Staff Workers Union – at the second town hall, which held was held in Lagos.

Despite this challenge, Opeifa assured the workers that the management would continue to prioritise their welfare, stressing that their efforts had kept the corporation going.

He said: “The cost of diesel alone has almost made it impossible to operate our trains. We are running at a loss and we had to resort to borrowing to keep our operations.

“Let me assure you that the corporation would continue to prioritise your welfare. Without any doubt, your efforts have kept the corporation going. But you must appreciate our precarious financial position.”

Nigeria had its first railway line in 1898, which began in Lagos about 126 years ago, while the NRC was established by law and adopted its current name in 1955.

But, since its commissioning in 1955, 71 years ago, the NRC has been operating at a loss, while its financial books have remained hidden from the public.

Despite its long history of operation and previous huge investment, the corporation continuously relies on Federal Government financing for its sustainability through annual budgets and counterpart funding for Chinese-funded railway lines.

Direct federal funding to NRC between 2016 and 2026 was about N300 billion, while federal borrowings for rail development and infrastructure within the same period have exceeded N5 trillion.

This includes the Abuja-Kaduna, Lagos-Ibadan, Itakpe-Warri, Port Harcourt-Maiduguri, and Kano-Maradi rehabilitation projects, as well as several other ongoing projects.

Opeifa’s remarks have reignited a longstanding debate of whether Nigeria’s railway system can become profitable or continue to be a burden on public finances.

Since its launch, the corporation has struggled to generate sufficient revenue to cover operating costs.
Checks by The Guardian indicated that as far back as 1978, railway revenues covered only about 40 per cent of operating expenses and by 2004, the figure dropped to approximately 14 per cent.

Despite recent investments in standard gauge rail lines connecting Abuja-Kaduna, Lagos-Ibadan and Warri-Itakpe, revenue recovery was still significantly below sustainable levels.

But rail experts said that the challenge facing the NRC was not unique to the corporation.

Around the world, governments have grappled with the dilemma of balancing railway operations as a public service while ensuring financial sustainability.

Most railways across the globe rely on freight carriage, while the NRC still primarily concentrates on passenger movement, while trucks ferry cargo across the length and breadth of the nation.

The Managing Director of Bethlehem Rail Infrastructure Limited, London, Rowland Ataguba, in an interview with The Guardian, said the first step in understanding railway economics was to recognise that railways, all over the world, are established for different purposes.

According to him, governments typically set up and run railways as a social service focused on moving people and goods to stimulate economic development, while the privately-owned railways are generally commercial ventures designed to generate profits, particularly in freight haulage, mining and industrial logistics.

Ataguba noted that while profitability may not be the primary objective of public railways, it continued to remain an important measure of efficiency.

He added that railways are expensive to build, maintain and operate, stressing that tracks, signalling systems, locomotives, rolling stock and stations require continuous investment.

This, he said, led to many countries to adopt models that combine public ownership with private-sector efficiency.

He said: “While profit-making is not the primary objective of public railways, it is a useful measure of efficiency and sustainability. It is beneficial, even desirable, for a public railway to be profitable because that way, it can likely pay its way rather than become a drain on the public purse.

“On the other hand, a loss-making railway will become unsustainable if the promoter is unable to keep funding its losses or subsidising it, which is akin to the story of the NRC.

“In a situation such as with the NRC, the Federal Government, which is its owner and chief promoter, takes money that it derives from taxes and other revenue channels, which it would ordinarily use to procure other public goods or save and invest for a rainy day to plough into a poorly run railway, which can feel like a basket case.”

Ataguba emphasised that freight transportation represented the most lucrative segment of the railway business globally.

In countries with successful railway systems, freight operations generate the bulk of revenues while passenger services are often subsidised, he said.

Also, a rail enthusiast, Richard Adeleke, said that for Nigeria’s railway to be profitable, freight carriage should become the centrepiece of its reform.

Adeleke expressed that the NRC’s current business structure spreads the organisation too thinly across multiple activities.

He insisted that the railway needed to prioritise high-yield activities such as freight operations and asset management.

Adeleke pointed out that Nigeria’s industrial corridors, ports, agricultural belts and mining regions offer substantial freight opportunities that are still largely untapped by the rail system.

According to him, thousands of trucks currently move cement, petroleum products, agricultural produce, containers and solid minerals across the country daily, thereby placing enormous pressure on roads and increasing logistics costs.

He posited that a modern freight-focused railway system could capture a significant share of this market and place the railway on a profit track.

Adeleke added: “Japan, China and other developed railway systems are either publicly or privately-owned. Yet they are profitable and efficient. Nigeria can replicate any of these models, particularly by monetising the NRC’s vast land assets.

“Across the country, the NRC possesses thousands of hectares of railway land, much of which is still underutilised and continually vandalised to date. Efficient development of these assets could unlock significant revenue streams for the railways.”

Also commenting, Associate Professor of Marketing and Transport Services Researcher at Keele University, United Kingdom, Dr Emmanuel Mogaji, said railways are not always designed primarily for profit.

Mogaji emphasised that across the world, rail transport was often viewed as a public service that delivers economic and social benefits beyond ticket revenue.

According to him, from a service perspective, Nigeria’s railway system should be viewed as part of a wider transport ecosystem.

He said: “The focus should not be limited to tracks, stations, and train carriages. What matters equally is how the service is designed, delivered, managed and integrated with other modes of transport.

“My research on rail services in the UK highlights that passengers value reliability, assurance, responsiveness of staff, safety, accessibility and empathy, particularly for vulnerable travellers. These service quality dimensions often determine whether people choose rail transport.”

Mogaji, like others, said that countries such as Japan, China, and the UK had achieved relatively efficient rail operations through long-term investment, clear governance structures, strong accountability mechanisms and a customer-centred approach to service delivery.

He noted that for the NRC to become more financially sustainable, there was a need to rethink rail transport as a service ecosystem.

To achieve this, he noted it was important to involve relevant stakeholders, while the management also strengthened accountability, explored franchise or public-private partnership models where appropriate and improved customer experience, among others.

Besides, a rail expert, Segun Esan, said that the NRC last declared profits in 1964, but noted that the railway, since its inception in 1898, had been operating as one means of transportation that assisted the British colonial government in assessing the agrarian hinterland of the colony.

These products, according to him, were driven to the shores and finally to the colonialists, who used the products to drive their home economy.

“This tells you that the British never planned a railway system for the mass mobility of the citizens,” he said.

However, Esan said around 1955, when the NRC came on board, its operational outlook changed from goods/freight carrier for the British to passenger carriage, which was legislated and made possible through the instrument of law called the Statutory Act of Parliament of 1955, famously called the Nigerian Railway Act of 1955.

He noted that it was this Act that defined a railway as a transport outfit that could carry goods and passengers at fares/tariffs that are reasonable and affordable by the Nigerian people.

“From this point, the railway began services that were majorly social and not profit-oriented but existing on the financial backup from the Federal Government who owns the railway as a monopoly. It only declared profits once and last in 1964,” he said.

To make Nigerian Railway profit-oriented, he mentioned that so many things must be looked into, which included the political will to really run the corporation as a business.