Why Nigeria’s Proposed Airports Concession Is Scary

By Kenneth Jukpor

Nigeria’s aviation industry has witnessed rapid changes both positive and negative which impacted significantly on its operations and management over the years. Since the first aircraft landed in the country about 90 years ago; the nation’s air travel sector has been beset by issues such as; deregulation of the sector, airport concession and high turnover of airlines, scarcity and high cost of aviation fuel, shortage of forex for airline operators, poor facilities at the nation’s airports, multiple taxation, absence of maintenance repair and overhaul (MRO) facility, among others.

Some of these problems have had far-reaching consequences on the nation economically as well as the perception of the country. For instance, the absence of MROs forces airlines to expend huge funds for the maintenance of their crafts overseas. This has serious negative effects on the growth and development of the sector, even as it heightens the forex quagmire in the country.

Despite the huge challenges, the aviation sector is seen as a key contributor to the economic growth, development and employment opportunities.

Experts posit that the next 50 years for the aviation sector in Nigeria is likely to be turbulent, dynamic and complex, as a new wave of political surprises, globalization, economic alignment, technological changes, innovations and human skills unfolds. The growth of the aviation sector would be guaranteed or marred by the infrastructural provisions and the current state of deficits is a challenge that has to be resolved speedily and appropriately.

The Nigerian government has provided more details of its plan to concession the four major international airports in the country.

The Murtala Muhammed International Airport in Lagos, which accounts for over 60 per cent of international flights in Nigeria; Mallam Aminu Kano International Airport; Port Harcourt International Airport and the Nnamdi Azikiwe International Airport, Abuja, are all to be concessioned to private managers, an official said.

Aviation Minister Hadi Sirika also allayed the fears of workers of the Federal Airports Authority of Nigeria (FAAN) of any layoffs during or after the concessions. Nevertheless, the concerns about concession and colossal sums budgeted for repairs have raised suspicion among industry observers.

While the Aviation Minister has stated in several fora that the recent approvals are to raise the standards of the air-travel facilities to an appreciable level before concessioning, economists have described the move as a waste of government’s scarce resources.

At the recent 3rd quarter Business Breakfast Meeting (BBM) organised by Aviation Safety Round Table Initiative in Lagos, Prof. Bamidele Badejo highlighted some of the challenges and prospects of aviation infrastructure financing.

Badejo, in his paper titled; “Financing Aviation Infrastructure Deficit in Nigeria using Private Capital: Challenges and Prospects,” noted that the major aviation infrastructure provider in Nigeria is the government through its annual budgetary allocation and appropriation to the aviation sector.

“When critically appraised, the government’s budget is allocated to numerous activities taking place in the aviation sector. Hence, it has been observed that the amount budgeted cannot cope or meet up with the infrastructure needs of the sector,” he said.

Besides government budgetary allocation, he identified other fiscal options including: bilateral and multilateral financing partners; equity finance, debt finance and bonds; Public Private Partnership (PPP) such as service concession, management contracting, long term leasing and strategic buy out. Nevertheless, he posited that all these options have not been able to tackle or address the aviation infrastructure deficit in Nigeria.

While he made a case for private capital to finance to address the nation’s aviation infrastructure deficit and accelerate the overall improvement in infrastructure growth, he noted that the move isn’t devoid of challenges.

“Private capital frees government in its effort to continuously be in search for fund which is scarce and not readily available to invest in the sector. It is better managed by the private sector practitioners who are business conscious and financially prudent. Bureaucracy of government is completely eliminated while over blotted staffing and application of quota system and Federal character in the engagement of personnel is removed. Competence and professionalism is put in the front burner,” Prof. Badejo said.

Meanwhile, he itemized some challenges of using private capital to include; absence of full disclosure of assets and liabilities, bankruptcy and insolvency, undue government intervention and fiscal policy summersault, poor operating environment created by government, legislative, regulatory and domestication irregularities, volatile economic environment e.g. foreign exchange instability, multiple and overlapping responsibility and legal lopsidedness, technology dynamics and changes.

According to Prof. Badejo, some proposed headway could be; to prepare a strategy or an action plan through which Private finance option could be evolved and integrated into government policy and plan for infrastructure development in the aviation sector, institutional and regulatory reforms to accommodate private capital injection, identify key aviation infrastructure that require urgent intervention and prioritise appropriately, create the enabling environment for private finance incursion and eliminate undue intervention and bureaucracy in the administration and management of the aviation sector.

When contacted, Group Captain John Ojikutu (Rtd), a former Commandant of the Murtala Muhammed Airport, Lagos recalled the events that transpired in 2007 when the Nigerian government was set to make infrastructure investment in the aviation sector that would have been sufficient.

His words: “At that time, it was believed that the multiple crashes witnessed between 2005 and 2007 were due to infrastructural deficits in the sector. The government decided to bring out funds to fix those infrastructural needs and it gave out N19.5billion to aviation agencies, including; Federal Airports Authority of Nigeria (FAAN), National Airspace Management Agency (NAMA), Nigerian Civil Aviation Authority (NCAA), Nigerian Meteorological Agency (NiMET). The unfortunate thing was that the money was mismanaged. FEC approved that the money be taken from the Central Bank of Nigeria at 2% but the politicians in the system would do otherwise.”

Ojikutu, who is also a security consultant and Secretary General of Aviation Safety Round Table Initiative (ART), observed that these chaotic events started in 2006 as the political system was heated ahead of the 2007 presidential elections.

“The approval had to come from the National Assembly, but the politicians were is such hurry that they went to private banks to borrow that same amount at 25% interest. These are some of the historical events that make me not to approve of any moves for concessions, loans or federal government funding. If we really wanted to concession the airports, we should have achieved it several years ago.”

“Two banks, UBA and Zenith bank fought over that transaction because one of the UBA bank chiefs was a member of the committee but when the money was collected, it was done through Zenith bank which wasn’t there agreement. It took the intervention of the president who decided that the money be shared between both banks. They shared that money and they took their 25% interest immediately,” he narrated.

Given this background of fiscal mismanagement that played out in 2007, Ojikutu expressed worry that the ongoing concession talks for the airports and strange colossal sums approved for repairs may be another form of desperate moves by political bigwigs ahead of 2023 presidential elections.

Concession is actually a good idea; but the airports that the government is still approving huge sums for the same airports to be given out for concession. “What are these monies meant for? Are they for aeronautical or non-aeronautical services? These are questions that are yet to be answered. The industry has to know what aspects are up for concession and it is important that we don’t concession aeronautical services,” he opined.

On his part, the Aviation Minister has assured industry stakeholders that there would not be any need to sell the country’s assets, but to concession them in a manner that would modernize the airports and have them operated to create more jobs as well as generate more revenue for the country.

“We will not sell the assets that belong to over 200 million Nigerians and the future generation of this country. We are not going to sell because those that were sold were lost, so, we in government believe that we should hold those assets for the Nigerian people in trust. We must make those assets better to provide the services that are needed. So, we said, rather than sell out rightly, we will concession,” he said recently.

Meanwhile, the President of African Association of Professional Freight Forwarders and Logistics in Nigeria (APFFLON), Mr. Frank Ogunojemite has lambasted the Aviation Minister for confusing the Nigerian public and investing the nation’s scarce resources on facilities that should be handled by concessionaires.

“It is not just a case of spending government fund on airports that is set for concession. There have also been projections for loans. Why do we have to waste resources this way? The Minister has to clarify these issues because Nigerians need to know the details of the concession and why tax-payers money is still spent to develop the airports,” he posited.