Nigerian Airport as Investment Haven
The federal government’s plan to concession airport facilities, has elicited interest from global airport managing companies which see Nigeria as an investment haven, writes Chinedu Eze
Since the Minister of State for Aviation, Senator HadiSirika made public, government’s intension to concession the four major airports in Nigeria, interested investors have started jostling for investments in the aviation sector despite the fact thatthe authorities have not released further information on the proposed programme.
Shortly after the aviation stakeholders’ meeting where Sirika disclosed federal government’s plan to concession the airports, a major airport management company in Turkey, TAV Airports Holding visited Nigeria and inspected the MurtalaMuhammed International Airport, Lagos, after which it indicated interest in bidding for the airport.
Besides TAV, some indigenous investors are already getting ready to invest in the airports. But how ready is government to kick off the programme?
According to industry experts, the first step government should take in the concession programme is to carry out pre-concession feasibility study to know the actual value of the airports that would be concessioned. Also, the government should ensure the concessioning bill is presented to the National Assembly for legislation and enactment into law.
The Framework
Industry consultant and CEO of BelujaneKonsult, Chris Aligbereasons that the government should go to the National Assembly to develop a framework for the concessioning, which would be enacted into law. The framework, according to him, will state how the investment should be protected and how the investor can repatriate his investment; if it is a foreign company, the equity shareholding, which could be as high as 75 per cent for airport concession because the investor is coming to develop the airport facilities.
The framework will also determine the period of concession, level of equity participation, utilisation of local manpower and all these would be enacted into law.
“That will be the fundamental framework for concessioning; every other things that will be done must genuflect to the framework,” Aligbe said.
Private Sector Funding
Looking at the management of the airports over the years and why there has been so much decay until recently as well as the apparent reality that government presently cannot invest hugely in airport development, former General Manager, Business Development of the Federal Airports Authority of Nigeria (FAAN) and presently the Head of Aviation, Orlean Invest Africa Limited, Nuhu Imam Adam said with concise policy on concession and well guided concession of airport facilities, government would no more be bordered by funding of airport infrastructure; it would now have to contend with other social services like provision of health, education and others. At the same time, the airports would have efficient facilities; they would become customer oriented and also yield revenue to government.
Nuhu said the economic situation in Nigeria and the challenges before government have made it inevitable that government should divest some responsibilities that could be handled by the private sector in a win-win situation in the aviation industry, noting that engaging the private sector has become the vogue in the world.
He said government adopting concession that will encourage private participation has become inevitable and indispensable because over the years, government seemed to have exhausted all possibilities to effectively manage and grow the airports. Nuhu noted that despite the continued growth of passenger traffic over the years, the airports were not being expanded to accommodate the passenger growth because there was no consistent programme or policy enunciated to capture such progress in aviation development in the country.
He said therefore that concession of four major airports, including the Murtala Mohammed Airport, Lagos, the NnamdiAzikiwe International Airport, Abuja, Port Harcourt International Airport and Aminu Kano International Airport which would belong to the first phase of the federal government’s plan for aviation sector development is a welcome course correction on the right path of change.
However the government must not delay further on policy framework for the concession.
Efficiency
Nuhu said concession would drive efficiency because the investors would strive to ensure they run sustainable business geared towards profitability while at the same time providing efficient service and meeting government’s specified targets. He added that the private sector has the ability to introduce operational effectiveness and improve financial performance, skills that could be lacking in government driven enterprise. According to Nuhu, airport managers all over the world have the potential to improve airport amenities; thereby increasing non-regulated revenues.
He observed that one of the major challenges faced by FAAN aside the undue political pressure and interference was the failure of the management over the years to plug revenue leakages and the personnel lacking the intrinsic drive to explore novel and innovative ways to generate revenue through non-aeronautical sources. He said that when concessioned, the companies that would take over the airports would plug revenue leakages in the airport’s services by implementing systems that track data and measure each service line by a unique set of key performance indicators, with each service line having its own actors responsible for a failure to meet key performance indicators.
Nuhu said Nigeria is largely import dependent so the airports serve as a gateway to markets, and typically return earning from charges imposed on cargo movement.
“In cases of perishable exports, such as agricultural produce, airports equipped with cargo handling facilities profit off the growth in agriculture from its host state, thus a concessionaire of such an airport in a country experiencing increased investment in agriculture is sure to enjoy a unique position that may thrive even as currency pressure on its local legal tender rises, since exports under such conditions are cheaper in the global marketplace. The diversification of Nigeria economy into non-oil export is an opportunity to invest in airports,” he said.
He also observed that a typical airport concessionaire has access to numerous tax benefits since it provides a key social service, which is crucial for economic development. Thus, the concessionaire may request for tax benefits in order to free up more capital for growth, expansion and development during the period of the concession.
Obsolete Facilities
One of the major challenges airlines in Nigeria face is obsolete airport facilities. The government has failed to provide the funds or judiciously utilised available funds to continuously update the airport infrastructure. The idea of concession or private, public partnership (PPP) has been muted for a long time but government lacked the courage to embark on the programme until the experimental action with the concession of Lagos airport domestic terminal to Bi-Courtney Aviation Services Limited that built and is managing the terminal.
It is the view of many industry observers that the experiment with MAA2 has shown the success of PPP but if government intends to permanently have the private sector to invest in airport development, it must have a legal framework, legislation and policy that subsist succeeding administrations and not tailored to suit the whims of a government that berthed it.
Airline operators have asserted severally that they constantly face constraints in their daily services to passengers. These include poor and slow facilitation in terms of inadequate facilities that may not enable one airline to board passengers in two or three aircraft at the same time; the inability of two or more airlines to move their passengers to the airside at any of the busy airports simultaneously; lack of avio bridges, inadequate personnel for security checks and so on.
It is also expected that after the first four major airports have been concessioned, government would also give out the rest for concession and the concessionaires would explore both aeronautical and non-aeronautical revenue sources and these would lead to maximum utilisation of these airports which inevitably would become busier and attract more users and more travellers. Expectedly, this would lead to creation of more jobs and more business opportunities.
State Owned Airports
It is also expected that the airports built by state government would either be abandoned or be given out to private investors who would create businesses in them. Many of those airports are grossly underutilised, which goes to confirm that many of the governors that built the airports at huge cost at the expense of other social amenities that would benefit the generality of the people, did so for the parochial interest of the elite and for the boost of their ego. They remain a flagrant misplacement of priorities.
Speaking about the concession of airports and the fate of state owned airports, the Managing Director of Medview Airline, AlhajiMuneerBankole said: “We are in support of it. That is the way to go because government may not be able to provide the funds that will improve airport facilities and modernise them so that they would be like any other international airports elsewhere. This will enable government to deploy its funds to other essential needs like education, hospitals and others.
“Most airports in the world are privatised. They want to privatise the major airports first because that is where the money is, so that the investors will be encouraged to invest in other airports after the major ones. Most of the governors who built airports did not think deeply before embarking on the projects. They should have consulted with the airlines. They should have considered the viability of such airports before embarking on building them. They should have partnered with us before starting the projects.
“What the government would probably be looking at is how to generate revenue. Government is looking for where money is coming in. Look at this airport terminal (MMA2), it is good facility and it is making money. It was built by a private organisation.”
Many stakeholders are of the view that government must not develop cold feet but launch the air transport sector into a new firmament with PPP, where the private sector would take up the challenge of providing modern airport facilities.