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Chinese firms take over Nigeria’s rail construction sector

by Nathaniel Akhigbe

March 12, 2017 | 7:46 am
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…push Julius Berger, Costain to backseat
 
Chinese construction firms are the new brides of the All Progressives Congress-led Federal Government as they slowly but steadily spread their influence and tentacles in Nigeria’s rail construction sector, while old names like Costain West Africa and Julius Berger sit on the sidelines.
In August last year, China Railway Construction Corporation (CRCC) received the approval of the Federal Government to construct a rail line in Kano at the sum of $1.85 billion. The rail, with a total length of 74.3 kilometres, is expected to travel at a speed of 100 kilometres per hour.
CRCC is a state-owned construction enterprise with headquarters in Beijing, the Chinese capital. It was the second-largest construction and engineering company in the world by revenue in 2014 and second-highest in accounts payable by market capitalisation as of 2015.
Notably, the first light rail project being constructed in Lagos by the APC-led state government is also being handled by China Civil Engineering Construction Corporation (CCECC), a subsidiary of CRCC.
Already, CCECC’s business activities are available in over 40 countries and regions where more than 20 overseas subsidiaries have been established. With its performance and services, the company was listed among the world’s top 255 international contractors for years and ranked consecutively among the first 70 in recent years by the Engineering News Record (ENR).
Last Tuesday, with the groundbreaking ceremony for the Segment II Lagos-Ibadan Rail Project, with extension to Lagos Port Complex, Apapa, CRCC began yet another stride in the nation’s rail construction sector.  
At the ceremony, Acting President Yemi Osinbajo recalled that President Muhammadu Buhari had, during his visit to China in January 2016, reopened negotiation on the Chinese support for the project under the Lagos-Kano modernization project.
According to Osinbajo, the ceremony held at the Nigerian Railway Corporation compound, Ebute-Metta, marked the commencement of government’s plan to move speedily to improve transport links with Lagos, Nigeria’s national economic nerve-centre and major port, and other state capitals across the country.
The rail line spanning 156.65 kilometres, according to Fidet Okeria, managing director of NRC, is a standard gauge double lane that will co-exist with the old narrow gauge rail line.
The Export-Import Bank of China will provide loans for the railway construction connecting Lagos and Calabar expected to cost $11.1 billion and the one connecting Lagos and Kano to cost $8.3 billion.
In 2006, before the Beijing summit of Forum on China-Africa Cooperation (FOCAC), China and Nigeria signed a contract costing $8.3 billion to build a 1,315-kilometre railway between Lagos and Kano, the biggest international project taken on by Chinese enterprises at that time.
What happened to Costain?
Costain West Africa, once a household name in Nigeria’s construction industry in the pre- and post-Independence era, seems to be sitting like a victim beaten into corner as the Chinese continue to get the lion’s share of government’s rail deals in this new dawn.
Even before the current administration, many analysts in the sector had termed Costain “a shadow of its former self”, as its men were hardly seen working on sites, while the Chinese worked day and night in various rail projects.  
In June last year, the Federal Inland Revenue Service (FIRS) sealed the office of the construction giant in Lagos for allegedly being indebted to the tune of N2 billion in Company Income Tax (CIT), Value Added Tax (VAT), and other taxes.
Earlier in May of 2016, the National Council of the Nigerian Stock Exchange (NSE) approved delisting of Costain, CAT Construction Group Limited, and 16 other companies from the market.
Costain was incorporated in Nigeria as a Private Limited Company in June 1948 with Costain Group UK as its subsidiary. It took over the various works being undertaken then by John Holt and Company (Liverpool) Limited’s building department. 
The company engaged in the development and deployment of business solutions and technologies to sustain market share in the West African region. It operates in five business segments – the Civil Engineering segment, which is engaged in building a range of infrastructural projects, such as roads, bridges, dams, railways and airports; the Homes segment, which is active in the home construction sector; the Furniture and Joinery segment that produces furniture and joinery; the Oil and Gas construction segment, which provides engineering, construction and installation to oil and gas field developments, and the Rail Construction segment.
The former construction giant has executed a wide range of building and civil engineering projects throughout Nigeria for private organizations, as well as for federal and state governments for nearly seven decades.  
Progressively, Costain went public on March 13, 1974. Its shares were quoted on the NSE subsequently, and it was also the first construction company to be quoted on the NSE.
The trouble with Costain  
As at 2009, before things started falling apart for the company, records put its total employees at 1,942, ranking it as one of the highest employers of labour in the construction industry in the country at the time.
Shoreline Energy International Limited, a closely held firm with Nigerian interest, acquired controlling interests of Costain Group Plc UK in Costain West Africa Plc, making it the new owner of the construction firm, report suggests.
Shoreline already has substantial investment in Nigeria. In 2005, its subsidiary, Shoreline Power Company Limited, acquired the manufacturing arm of ABB Nigeria, ABB Electrical Systems Limited, making it the only Original Equipment Manufacturer (OEM) for ABB products in sub-Saharan Africa.
Some of the projects that Costain had successfully accomplished include: West African Gas Pipeline Company Limited in Joint Venture (JV) with DBN Delattre-Bezons Nigeria (Lagos Beach Compressor Station for Nigeria-Republic of Benin-Togo-Ghana Gas Pipeline); Tamburawa Water Treatment Plant, Kano in JV with PCI of South Africa; Chevron Estate Complex Lekki, Lagos; Shell Trustees 1 & 4 Estate, Abuja; Ogunpa Channelization, Ibadan, Oyo State; Delta State Government House Complex Development at Asaba; Warri City Stadium, Warri; initial construction, renovation and refurbishment of Rivers State Secretariat, Port Harcourt; QIT-Qua Iboe Terminal Facilities Ibeno for Mobil Producing Nigeria Unlimited; NLNG Lay-down Project in Port Harcourt; Shell Trustees Elelenwo Estate, Port Harcourt; renovation of Jebba-Kano rail tracks for Nigerian Railway Corporation; remodelling and renovation of Akanu Ibiam Stadium Main Bowl; Luxury Residential Apartments, Ikoyi, Lagos, among others.
A senior staff of the company, who pleaded anonymity because of his position, told BDSUNDAY that the family of Ayodeji Karim, one-time CEO of the company, acquired Costain in 2008.
“They have been managing the company from then trying to stabilize it. They went into IPO in 2008 during which they realized money,” he said.
He said thereafter business at the company became stable and the company had been doing well until mismanagement set in.
“Overtime, we started noticing a deviation from the normal norms of paying salaries as and when due. We told the management to address the issue because workers needed to be paid their salaries so that they could perform optimally,” he said.
What became more worrisome, according to him, was that the workers noticed since 2010 the company stopped remitting pension contributions of its workers.
Amechi Asugwuni, expert in the sector, told BDSUNDAY that Costain’s problem, to the best of his knowledge, had to do with mismanagement.
“It is one thing to have a company and another to manage and sustain it,” he said.
Asugwuni said Costain in the past did well and was actually a force to reckon with in the industry and because of that it got a lot of projects and executed them. However, mismanagement ruined everything.
“When you have mismanagement problem it affects your chances of winning contracts because nobody would want to put money in that direction knowing fully you may use that money to pay debts,” he said. Another turning point for Costain was winning the tender to rehabilitate a section of the existing Lagos-Kano passenger rail track, the 638km line connecting the cities of Jebba and Kano. One of the largest projects the company has taken on in the last 10 years, the deal was said to worth US$300 million.
Julius Berger
Like Costain, Julius Berger Plc appears satisfied with its current workload and past achievements in Nigeria as the railway deals signed so far under the current administration ignore its presence in the country.
Since its construction of the Eko Bridge in Lagos which was its pioneer project in 1965, Julius Berger has played a pivotal role in the development of Nigeria’s industrial and civil infrastructure.
The company’s core competencies cover all project phases, including planning, design, engineering, construction, maintenance and operation, for infrastructure, industry and building projects. The company was listed on the NSE in 1991.
Some of the company’s projects in Nigeria include Tin Can Island Port; Ajaokuta Steel Plant; Itakpe-Ajaokuta-Ore railway; Abuja International Airport phase II; Central Bank of Nigeria head office; National Assembly phase III; Multiple projects, Escravos GTL plant in southern Nigeria; Bonny Liquefied Natural Gas facility.
The German incorporated company, despite losing out on rail construction deals in this dispensation, remains the leader in Nigeria’s construction sector, according to experts.

by Nathaniel Akhigbe

March 12, 2017 | 7:46 am
  |     |     |   Start Conversation

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