Nigeria: Will businesses be a casualty of toll resumption in Lagos?

By Temitayo Lawal
Posted on Wednesday, 27 April 2022 15:24

Lekki toll gate in Lagos, Nigeria. (Photo: SA 4.0 via Wikimedia Commons)
Lekki toll gate in Lagos, Nigeria. (Photo: SA 4.0 via Wikimedia Commons)

The reintroduction of Nigeria's Lekki-Ikoyi Link Bridge toll in Lagos could damage local business profitability say business owners.

The Lagos State government in mid-March announced via a newspaper advert that it was going to resume toll collection at the Lekki-Ikoyi Link Bridge. It said this was to enable them to service the loan liabilities of the Lekki Concession Company (LCC), the agency managing road infrastructure and services along the Lekki Peninsular of Lagos.

Lekki is one of the affluent areas of Lagos Island where many businesses and high net worth individuals reside.

But activists and Lekki residents vehemently opposed the move because they believe that the government is testing the waters to eventually resume full toll activity at the Lekki Toll Gate, the ground zero of the 2020 #EndSARS agitations against police brutality where protesters were shot.

They maintain that the toll gate should remain a memorial site. The government has since postponed toll collection indefinitely to continue the engagement.

Meanwhile, traffic congestion has eased along the axis due to the absence of toll activity. Although an unintended consequence, businesses wonder if these gains may be reversed if government wins the battle and tolls are reinstated.

Relief

Some business owners and managers tell The Africa Report that the traffic congestion along that corridor has significantly reduced, positively impacting their businesses.

Abimbola Idrees, owner and creative director at 20 Fingers Nigeria, a small-scale fashion design institute and tailoring brand located at the Ajah tail of the Lekki-Epe expressway, tells The Africa Report that the commute time has reduced by about three hours and that his business has benefitted from this.

Productivity has improved because employees can commute freely and achieve more. For example, people moving from Lekki to Victoria Island before couldn’t do more than two trips in a day even if they needed to.

The congestion was due to a combination of bad internal roads and the tolling on the expressway. This greatly affected our delivery time. Now that the tolling is gone and we only have to contend with bad internal roads, we are now relatively punctual and the delivery costs have significantly reduced,” he says. He adds that the saved time and costs have been instrumental to the efficiency and expansion of his business.

It is estimated that small-scale businesses lose between N600,053.90 ($1,444.45) and N5,400,478.20 ($13,000) to traffic congestion in Lagos annually, according to Danne Institute of Research based in Lagos.

Meanwhile, the costs to medium-scale and large-scale businesses are colossal – they lose between N4,620,532.10 and N29,402,608.90; and N33,002,661.70 and N149,413,255.00 respectively.

Gbenga Adebowale, Country Manager at Vertiv Nigeria, a multinational providing equipment and services for data centers, also tells The Africa Report that a journey that took him about an hour when the road was tolled now takes him about ten minutes.

He explains that this has had tremendous impact on employee productivity and business bottom line.

“Productivity has improved because employees can commute freely and achieve more. For example, people moving from Lekki to Victoria Island before couldn’t do more than two trips in a day even if they needed to. Employees also used to get to work fatigued and were eager to leave hours before close of business because of the traffic congestion caused at the toll gate,” Gbenga says.

“All this affected the bottom line because employees did for two to three hours, the job that was to be done for, say, seven hours. It was thus difficult for businesses to efficiently achieve their targets and employees were not happy because they knew they weren’t operating optimally,” he says.

Way forward

Commissioner for Transportation, Frederic Oladeinde, has warned that the continued closure of the toll gates could repel foreign capital – much needed for infrastructure development – as it signals to private investors that the state cannot guarantee the sanctity of their contracts.

With all parties unyielding, one solution that ensures inflow of capital for infrastructure to the state and also benefits businesses as well as ensures justice for the dead and injured is a well-defined tax for residents and businesses in the axis to offset the debt.

Nevertheless, the government remains reluctant to implement this measure. The transport commissioner, while appealing to stakeholders, recently implied that it wasn’t an option as the percentage of taxpayers in the state was already small. He said that of about 25 million Lagosians, only six million were on the tax register and only 4.2 million actively paid tax.

Furthermore, not all users of the toll roads live or have businesses in Lekki. To stratify this pool of the road users for taxation purposes may thus be chaotic and unsustainable.

“The problem is that government has not been transparent,” says Gbenga.

“The government should tell us how much it makes daily from toll, how much the roads cost, how much it has repaid and how much is left. The opacity has led to mistrust between the government and the people. I understand the need for infrastructure and the need to pay for it, but the government must be transparent first,” he says.

The government hasn’t proactively disclosed how much it made from toll when it was in operation but has consistently claimed that the Lekki Concession Company (LCC), the firm in charge of toll operations, is indebted to local and foreign funders. It put the company’s foreign debt at $31.1mn and local debt at N11.6bn.

The government had in 2014 acquired all the private equity in the company and since controlled it.

In January 2020, the ministry of transportation in partnership with the LCC had test ran a suite of e-payment options at a section of the Lekki-Ikoyi Link Bridge. It was yet to be fully deployed or generally accepted before tolling activity was stopped. How this process can be optimized and scaled should feature prominently in government’s engagement with residents and businesses if a lasting solution is sought.

“A tolling system in a commercial state like Lagos that cannot ensure a free vehicular movement is counterproductive” says Gbenga.

“If toll collection must resume, government must deploy world-class technology that will ensure that cars only drive through and not have to stop for payment. Government is in charge of vehicle registration. They can facilitate a process to link plate numbers to bank accounts for them to deduct from source.”

Commercial capital

Lagos is a $136bn economy – it would be the fifth largest economy in Africa if it were a country. This coupled with its small size (1,171 km²), large and growing population (over 20 million, 85% metropolitan) and inadequate transport infrastructure has made traffic congestion a regular sight.

Lagos roads only stretch 9,326km while daily demand for trips is estimated to be around 20 million, according to Danne Institute for Research. The state is yet to perfect an intermodal transport system that optimises water transportation. The intra-city railway system, although with some progress made recently, is yet to be fully formed two decades after it was conceived.

With the resulting overreliance on roads, the number of cars per kilometre of road in Lagos is 264 as against the world average of 11 cars per kilometre. This congestion costs the state about N4tn annually.

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