New Chinese Rail Freight Service Aims to Alleviate Nigeria’s Port Congestion, Slash Logistics Costs

China Civil Engineering Construction Corporation (CCECC), a leading Chinese construction giant, has officially launched its self-operated rail freight service connecting Lagos and Ibadan, marking a significant step towards easing the chronic port congestion in Nigeria. The service, which began operations in late March, promises to reduce logistics costs and improve the efficiency of moving goods across the country.

The rail service utilizes a cross-border transport model, departing from the Ajuba Bonded Terminal in Lagos, where cargo is transported to Apapa Port. After unloading, the train returns with imported containers, creating a smooth, bidirectional logistics chain that accommodates both imports and exports.

Experts Weigh In: Economic Benefits and Logistics

Challenges Frank Ojadi, a professor at Lagos Business School, emphasized the broader benefits of rail transport, stating, “The more cargo moved by rail, the better for the country’s productivity, efficiency, and overall cost reduction.” Nigeria’s dependence on road transport for logistics has long been a challenge, with trucks often causing congestion and delays on port access roads. Experts agree that rail offers a more efficient alternative.

Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), described the new service as a much-needed development. “The cheapest form of cargo movement, at least within the country, is actually by rail,” he noted, pointing out that excessive reliance on road freight has led to inflated production costs and contributed to rising inflation. He sees the rail project as a form of Foreign Direct Investment (FDI) that could substantially improve Nigeria’s logistics landscape.

Operational Hurdles and the Road Ahead for CCECC’s Rail Service

Despite the promising potential, there are concerns that the service’s current limitations might hinder its effectiveness. At present, the rail service terminates in Ibadan, but many goods from Lagos are destined for locations further north or east, potentially limiting the service’s reach. Yusuf also highlighted the importance of moving fuel by rail, as nearly all of Nigeria’s fuel supply is transported from Lagos ports, and shifting this cargo to rail could further alleviate logistics pressures.

While experts applaud the initiative, they warn that operational hurdles remain. Ojadi emphasized that for the service to be financially viable and reduce logistics costs, it must operate at full capacity, moving large batches of containers. “Rail is the right mode of transport for large-volume, low-value cargo, but it must carry at least 17 to 20 containers to make economic sense,” he explained.

However, this approach comes with trade-offs. Delays in gathering full loads could result in higher inventory costs for companies, potentially offsetting the savings from using rail. Moreover, experts caution that hidden terminal fees for loading and unloading containers at Apapa and Ibadan could erode the service’s cost-saving benefits unless these charges are kept low.

Despite these challenges, experts remain optimistic that with improved coordination and streamlined processes, the new rail service could play a crucial role in addressing Nigeria’s logistics challenges and boosting the country’s economic efficiency.