Stakeholders suggest best models for airport concessioning in Nigeria
Aviation sector stakeholders say that for airport concessioning to be successful in Nigeria, the Federal Government will need to adopt models that have worked in the best international airports around the world and honour legally binding agreements.
The stakeholders also advised that aviation safety facilities should be handled by government, while other segments can be concessioned out to private individuals.
This follows the announcement by Vice Preside Yemi Osinbajo two days ago, that the Federal Executive Council (FEC) has agreed that the Murtala Muhammed Airport, Lagos and Nnamdi Azikiwe Airport, Abuja, be concessioned.
In a Twitter post via @NGRPresident, Osinbajo said, “I am pleased to say that the Federal Executive Council has approved the concessioning of the Lagos and Abuja airports,”
“The best way to go is the concession, so as to save government unnecessary spending on the airports and eliminate corruption in the public sector of the industry. However, government must define which airport facilities it wants to concession.
“My take is for government to concession the terminal buildings, aprons, car parks, toll gates, amongst others without the runways and taxiways, which are necessarily facilities for air traffic control services and the concerns for the International Civil Aviation Organisation (ICAO) safety oversight, except they could be taking away with the aerodrome control services for the concession,” John Ojikutu, member of aviation industry think tank group, Aviation Round Table (ART) and Chief Executive of Centurion Securities told BusinessDay.
Experts say international airports such as Port Elizabeth International Airport in South Africa, Jomo Kenyatta International Airport in Kenya, OR Tambo International airport in South Africa and Bole International Airport in Ethiopia, were concessioned, taking into consideration the business environments in which they operate.
“Government should consider the clustering option, whereby a major airport will be taken along with other unviable airports within the zone,” Olumide Ohunayo, Head, Research, Zenith Travels said.
Ohunayo said this model will help reduce the liability of the Federal Airports Authority of Nigeria, (FAAN) while they concentrate on regulating, monitoring and securing the airports.
To support his position, he said Argentina took their 30 airports in totality, using funds from the viable ones to support the unviable ones.
Indians divided their airports into green field and brown field, in a bid to provide funds to support the unviable airports.
“Government will also need to first invite reputable international airport management companies who will achieve improvement in capacity, efficiency and safety of airport terminals,” Ohunayo added.
Wale Babalakin, Chairman Bi-Courtney Aviation Services Limited, had said at an aviation stakeholders meeting a few months back, that concessioning is the way for Nigeria to go, considering that government no longer has the capacity to fund the airports.
Babalakin explained that paring of airports nationwide across four regional structures, will make them viable.
“Government can divide the airports into four zones, comprising of Lagos, Abuja, Kano and Port Harcourt before offering them to interested concessionaires. Each zone should then be responsible for the growth of all airports within its jurisdiction,” he said.
BusinessDay’s checks show that in the past, the Federal Government had signed some agreements with investors and then failed to abide by the terms of the contracts.
The Federal Government a few years back, entered into an agreement with Bi-Courtney Aviation Services Limited, operators of the Murtala Murhammed Airport Lagos, terminal 2, (MMA2), that while the concession lasted, MMA2 would be the only terminal handling domestic flights.
Wale Babalakin is chairman of Bi-Courtney Aviation Services Limited.
Government however failed to comply with the agreement by building an alternative terminal,the General Aviation Terminal (GAT) for domestic flights to land and take off, while the concession was still effective.
BusinessDay checks show that only the four major airports in Lagos, Abuja, Kano and Port Harcourt are generating the revenues for running the country’s other 17 airports.
In 2015, Nigeria’s four major airports – Murtala Muhammed International (MMIA), Lagos, the Aminu Kano International Airport, Kano, the Nnamdi Azikiwe International Airport, Abuja and the Port Harcourt International Airport, generated over N32billion and the money expended on their maintenance was put at over N14 billion.
According to the National Bureau of Statistics (NBS), the Murtala Muhammed Airport (MMA) in Lagos remained the busiest domestic airport in the third and final quarters of 2016, and this airport accounted for 891,770 passengers in the third, and 909,851 passengers in the final quarter.
This represented 33.3% and 34.5% respectively. The share of domestic passengers accounted for by MMA remained broadly stable throughout 2016, with the highest share recorded in the first quarter of 34.6%, and the lowest recorded in the third quarter.
Abuja Airport, remained the second busiest airport in 2016, representing between 30% and 31% in each quarter of 2016. In the third and fourth quarters, there were 822,702 and 810,410 domestic passengers to travel through Abuja respectively.
Experts believe that these huge numbers will attract investors and concessionaires to invest in these airports.
Some stakeholders however say the likely conditions for the success of the current exercise is only when government resolves all the lingering issues, as well as tackles some of the regulatory and environmental challenges impacting negatively on doing business in the country.
“If government goes into this concession without resolving the other concessions, there will be a flurry of litigations. This needs to be fixed or dire consequences will follow.
“If Nigeria must get the best of investors, then they have to resolve the issues that are on ground, Harold Demuren, former Director-General of the Nigerian Civil Aviation Authority (NCAA), said.
Demuren asked that government engage the unions and be honest about it and provide them with facts and figures, as well as ensure they do not make pronouncements and go back on them.
Pat Utomi, professor, political economy and management expert, says that one of the biggest threats in the business environment in Nigeria is regulatory risk, adding that government and airline operators need to understand the importance of boundary setting and following rules.
“The business environment in Nigeria is full of uncertainties and people have the tendency of calculating the risks involved before making business decisions. We need to create a context in which regulators can protect the interest of consumers and stakeholders, in order to create a more enabling environment that yields consistent human progress.” Utomi added.
He noted that regulators and operators need to grow the aviation sector by ensuring that property rights are respected.
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