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.
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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.
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