The Nigerian rail sector’s total revenue soared by 81.2% q/q to N1.69 billion in Q4 2022, primarily due to increased passenger traffic and other revenue sources.
However, y/y revenue dipped by 16%, largely as a result of lost revenue from the prolonged suspension of the Abuja-Kaduna route’s rail operations. Despite the sector’s growth, its contribution to the transportation sector’s real GDP remained at a meager 0.03% in Q4 2022.
The high level of insecurity in the country poses a significant challenge to the rail sector’s growth and patronage, despite the government’s efforts to integrate rail transportation into the Nigerian transportation system.
Revenue Performance and Sources
The rail sector’s total revenue rose by a staggering 81.2% q/q to approximately N1.69 billion in Q4 2022, with a 27.3% q/q increase in the previous quarter.
On a y/y basis, the total revenue dropped by 16%. The revenue is composed of income from passenger fees, freight, and other sources.
A surge in passenger traffic, which more than doubled to 1.34 million in Q4 2022, fueled the robust q/q growth in total revenue.
Additionally, passenger revenue and revenue from other sources grew significantly by 61.4% q/q and 224% q/q, respectively, while cargo transportation revenue increased by 64% y/y.
Factors Influencing Revenue Growth
The resumption of operations on the Abuja-Kaduna railway line in December 2022 contributed to the q/q increase in total revenue.
On the other hand, the y/y revenue decline resulted from the long suspension of rail operations along the same route due to security concerns.
Despite the rail sector’s 3.8% y/y growth in Q4 2022, it accounted for a mere 0.03% of the transportation sector’s real GDP during the same period.
Prospects and Challenges for the Nigerian Rail Sector
In 2023, we expect a boost in the rail sector’s revenue, as the federal government has introduced various security measures to tackle the security challenges faced by the sub-sector.
Railways provide an eco-friendly and effective means of transport for both passengers and cargo, fostering economic development while curbing greenhouse gas emissions.
However, the country’s high level of insecurity is quickly becoming a significant barrier to patronage, despite the government’s attempts to incorporate rail transportation into the Nigerian transportation system.
Recent attacks on the Abuja-Kaduna rail line have instilled lasting fear in many Nigerians, further hindering the sector’s growth potential.