Aviation: Slow growth despite opportunities
The aviation sector, one of the key sectors that drive development of economies around the world, is still in slow growth in Nigeria despite the huge advantages and opportunities the country has as the largest economy in Africa.
Nigeria’s rank as the 21st-largest economy in the world in terms of nominal GDP, the 20th-largest in terms of purchasing power parity and largest economy in Africa naturally puts the country in a position to become an aviation hub for Africa but it has failed to live up to this expectation and is currently losing traffic to countries such as South Africa, Ethiopia and Ghana.
The sector has continued to face myriads of challenges resulting mostly from seemingly unfavourable policies.
Despite recent successes recorded by the sector such as the implementation of the executive order, the federal government’s resolve to concession the nation’s airport, the certification of the Murtala Muhammed International Airport,(MMA1), Lagos and Nigeria attaining accident-free commercial aviation in 2016, the sector still faces some challenges.
Aviation fuel scarcity, shortage of forex for airline operators, poor facilities at the airports, multiple taxations causing several airlines to close shop and absence of Maintenance Repair and Overhaul have continued to militate against the growth of the sector.
Experts in this sector say thee forex blockage has caused an unparalled increase in airfares from Nigeria to other countries and the effect may stunt the growth of the industry. They add that airlines have increased fares to cushion declining sales and strains from the FX scarcity.
“Airline operators are required to change their tyres on a weekly basis, pay wear and tear fees on monthly basis and fix old engines when the need arises and this is often done outside the country and it requires dollars to foot the bills,” Nogie Meggison, Chairman, Airline Operators of Nigeria told BusinessDay.
Meggison said these routine activities are becoming very difficult for airlines as the cash is not made available.
Some airline operators told BusinessDay that the high exchange rate is taking a toll on domestic airlines’ operation because major checks are carried out overseas and payments for such services made in foreign currency, whereas they earn their revenue in Naira.
Over the years, the deteriorating state of infrastructures and services at the nation’s airports has continued to put Nigeria in a bad light as airports are major gateways to any country or geographical space.
Recently, power supply was disrupted for over 24 hours at the Murtala Muhammed International Airport,(MMA1) Lagos. Beyond the incident of blackout, which is not the first at an airport in the country, most of the facilities are in a state of disrepair. This has resulted in poor service delivery over the years.
Recently, the International Civil Aviation Organisation, (ICAO) had warned against these poor facilities and the attendant security implications on travelers and the country. Although the organisation in the past had had reasons to laud the improvements at some of the airports, the malfunctioning facilities have continued to endanger the safety of passengers.
In addition to these, airline operators have continued to groan over multiple taxation by the government. Nigerians are faced with 34 charges levied against them by government agencies and organizations in the aviation sector that have made the nation’s aviation sector rank among the highest taxed sector in the world.
A document by the Ministry of Transportation indicated that the charges and levies are apart from five percent Value Added Tax (VAT) paid into the coffers of the federal government through the Federal Inland Revenue Service (FIRS).
The levies according to the document are divided into aeronautic and non-aeronautic revenues and are added to charges collected from passengers as air tickets. Further investigations reveal that 21 of the charges are paid into the coffers of the Federal Airports Authority of Nigeria, (FAAN), six are paid into Nigeria Civil Aviation Authority, (NCAA) and the Nigerian Airspace Management Agency (NAMA) collects three, while Bi-Courtney collects four of the charges from the airlines that operate at its terminal.
The country is losing over $500million annually as a result of non availability of Maintenance Repair and Overhaul, (MRO) facilities in the country.
Allen Onyema, the chairman of Air Peace said establishment of MRO will save the country the stated amount. He disclosed that $3.7million was spent by Air Peace on one of its aircraft outside the country for maintenance, stressing that having MROs will lead to gainful employment of Nigerian engineers and reduce capital flights out of the country.
He explained that all over the world, airlines lease aircraft but only Nigerians purchase outright as a result of stringent conditions attached ranging from insurance to trust.
Success stories so far
Despite these huge challenges facing the sector, there have been few success stories which if leveraged on, could turn the sector around for a better.
First, Nigeria’s oldest airline Aero Contractors recently received certification from NCAA to handle C-checks on Boeing B737-300, B737-400 and B737-500.
Ado Sanusi, managing director, Aero Contractors said that a normal C-check cost between $1.8million and $2million outside the country, adding that performing it in Nigeria would reduce demand for foreign exchange as airlines will now pay in naira.
In addition to this, the NCAA recently approved FAAN as the certified aerodrome operator for the provision of required airport services, facilities, systems and equipment at the MMA1 in line with international standards and recommended practices.
John Ojikutu, Chief Executive of Centurion Securities said airport certification is a requirement and compliant to the Nigeria Civil Aviation Regulations (NCAR) Part 12.6.4, which carries obligations on the operator to continuously maintain standards and competence in operation and ensuring availability of skilled manpower in sufficient number for the periodic maintenance of the facilities and systems.
Experts also say the move of the government to concession the nation’s airports is a move in the right direction to improve the airport facilities and create revenue for the government.
In 2016, Nigeria attained accident free commercial aviation. Experts say this was possible because airlines were principally responsible for safety and intensified human capital development.
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