Access Bank on aviation resilience

Opportunities in lack of aviation hub in West Africa Growing population = Growth in flying numbers Investors take advantage in growing population Leverage on AfCFTA

THE CORONAVIRUS PANDEMIC, which crippled has economic activities across sectors of Nigeria’s economy, remains a major source of concern for different stakeholders across the economy. Aviation companies around...

THE CORONAVIRUS PANDEMIC, which crippled has economic activities across sectors of Nigeria’s economy, remains a major source of concern for different stakeholders across the economy. Aviation companies around the world are particularly feeling the brunt brought about by the pandemic. The effects of the pandemic on the sector include the halting of domestic and international flights across the world, with the Nigerian aviation industry by no means left out. Taking a deep look into an industry which is oligopolistic in its structure, recent data from the National Bureau of Statistics (NBS) revealed that the aviation industry in Nigeria contributes about 0.11 per cent of Nigeria’s total gross domestic products (GDP), while the industry is estimated to have a nominal GDP of N51.3 billion, and broadly characterized by resilience after the industry experienced two consecutive quarterly growths. However, figures from the International Air Transport Association (IATA) showed that the global aviation industry will lose $252 billion in the year 2020 as a result of the pandemic, with several airline ruptcy and slashing up to capacity. To this effect, the Nigerian regulated airline market is no exception to the losses, retrenchments, as well as flight capacity reduction as the industry is witnessing several lay-offs as well as pay-cuts. The recent reopening of airports across the country and the return of flights has come as a big respite for many, but the cancela big economic impact on the industry which is said to have lost $800 billion to the Nigerian economy while the pandemic has gulped almost $1 billion from the airline industry, this is according to Musa Nuhu, director-general of the Nigerian Civil Aviation Authority (NCAA). note titled “the Nigerian Aviation Industry Report 2020” to clients and customers, analysts at Access Bank highlights major reasons why the industry thrives despite the current activities. According to the analysts, the Nigerian aviation industry has thrived despite a stewing business environment as a result of Nigeria’s large population which provides a market base; all thanks to the central location of the West African nation to allow for easy accessibility of flight services to other parts of the world. Further to the enlisted strengths of the industry, as aptly delineated by the analysts, the high-income levels for airline operators given the luxury that comes with flying is another point for consideration as well as the growing globalization which prompts people to fly for either business or leisure. The industry, on the other hand, exhibits some form of weaknesses which, according to Access bank analysts, are the ageing fleet and underutilization of aircraft, high prices of aviation fuel and high cost of maintenance, limited access to foreign currency and high taxation in the industry as well as inadequate infrastructure which incapacitates the smooth operation of the aviation market. The threats experienced by the industry cannot be over emphasized as the pandemic as well as terrorist attacks in some parts of the country coupled with other force majeure is posing threats in the market. Not so fast to forget is the volatile nature of the Nigerian macroeconomic environment highly negates the industry’s growth despite witnessing positive growth in two consecutive quarters. Although, the industry thrives as the large population size of the country accounts for the large market base, the heightened aviophobia during this COVID-19 era has slowed down the growth pace of the industry as well as the level of corruption which has to a large extent continues to deter investments into the industry. Conclusively, positivity lies within the future of an industry which is highly opened to more entrants into the industry as well as investors who will take advantage of the nation’s ever-growing population which translates to growth in the flying population. The huge potentials of the industry to attract foreign investors can be capitalized on as the industry currently lack aviation hubs in West Africa while leveraging on the AfCFTA pact could mean real and more serious business for the industry.