FG’s airports concession plan in murky waters

As the Federal Government mulls concessioning four of the nation’s airports, SHOLA ADEKOLA reports that aviation workers’ doubt about the government’s sincerity may stall the process.

 

Introduction

The government of President Muhammadu Buhari, in its five years in the saddle of running the affairs of the entity called Nigeria has for the umpteenth time revealed its plans for the various sectors of the country’s economy.

Right from the onset of the administration, the government had announced plans to roll out some measures that would help transform the country’s aviation sector like other sectors of the country’s economy.

Leading this transformation of aviation crusade is the Minister of Aviation, Senator Hadi Sirika, who had announced government’s plan to concession four international airports cut across the country amongst other such transformation agenda up the sleeve of the Buhari government which formed part of the aviation sector’s roadmap. There are, however divergent views about the policy with some in support while many are against it for different reasons.

For some stakeholders, the concession of the airports is long overdue as a result of unlimited success stories of the concession of the Murtala Muhammed Airport’s private terminal, otherwise known as MMA2 being managed by Bi-Courtney Aviation Services Limited (BAsL) which has been termed a success story.

The minister who announced the concession plan almost five years ago had said the four international airports of the Murtala Muhammed International Airport, Lagos, Nnamdi Azikwe International Airport, Abuja, Malam Aminu Kano International Airport and the Port Harcourt International Airport fell under the first phase of the concession programme, adding that the second phase would see other airports fall in line.

As soon as the announcement was made public, the country’s aviation sector went haywire with the ever ready unions spitting fire over why the concession/privatisation of the airports would not be allowed to succeed.

While most people thought the government might have dropped the plan of concessioning the airports for over three years, there was a new turn to the news recently, when the minister of aviation announced that he had received the Outline Business Case Certificate of Compliance for the concession of Lagos, Abuja, Port Harcourt and Kano International airports from the Infrastructure Concession Regulatory Commission (ICRC).

“With these certificates of compliance, we will go-ahead to the Federal Executive Council for approval for the full business of concession to proceed and that will turn the airport terminals to their full potential in private hands as millions of dollars would be pumped into the airports.”

As soon as the minister announced the latest development, hell was let loose with the unions accusing the minister of daring to pursue the project which they termed anti- Nigerian and vowed to thwart the plan.

 

Benefits of concession

The Federal Government, right from day one of expressing its desire to concession the airports had come out to state that with the deep divided responsibilities thrown at it by the various challenges confronting the different sectors including health, education, maritime, energy, communications, transport and many others which have overwhelmed it, the government felt the only way to avoid getting drowned in the tumultuous sea  is to shed some weight through the involvement of private participation.

Prior to then, the function of managing the 22 airports of government across the country, which fell on the shoulder of the Federal Airports Authority of Nigeria (FAAN), was already becoming burdensome with government at the center falling short in its area of rendering required financial support for FAAN.

As the load of making the airports effective and efficient gradually weighed down FAAN, the result became manifested in the infrastructural deficits that rocked the airports as witnessed in the obsolete terminal buildings some of which were constructed as late as 1989.

As the deficiencies get deeper, air travelers and other airport users raised their voices of displeasure with the entire system with many laying the blames at the doorstep of government. Amongst the dissenting voices, few had genuinely advised the government to hands off the running of the airports for better efficiency and profits citing how such policy had turned around the fortunes of many government enterprises. Therefore, with huge decay and persistence of failure of government’s public enterprises such as the airports and with the poor profits in sharp contrast to the huge public fortunes sunk into them, government has no alternative but to let go of them.

 

Key players react:

For Group Captain John Ojikutu (retired), the Managing Director of Centurion Security Services and a member of Aviation Round Table, the government probably decided on concession and privatisation or outright sale because of the failed commercialisation of most public sector services and enterprises. There were public enterprises that were fully commercialised like the NLG and the refineries which were expected to operate as profit-making commercial ventures without any subvention from the government. These are expected to raise funds from the capital market for capital projects without a government guarantee and are expected to use private-sector procedures in running their businesses.

“There were other enterprises like FAAN and NAMA which were partially commercialised and were expected to cover their operational costs from their internally generated revenues (IGR). This category of enterprises enjoyed grants from the government to finance their capital projects, just as the Federal Government had done in the past for them with the N19.5 billion aviation intervention fund in 2007, the grant of about $200 million from the BASA fund for the refurbishment of some airports, and the $500 million loan from China for the redevelopment of the major international airports.

“Using the air traffic and passenger traffic statistics of 2014-15, the expected yearly revenue from FAAN in particular, whose facilities are planned for concession, is reported to be about N65 billion from both aeronautical (N61.5 billion) and non-aeronautical (N4.5 billion) sources. However, the revenue generated has not substantially impacted on the airport infrastructure and services. For instance, MMA alone that is reported to be generating about N2 billion monthly is worth more than N3 billion monthly or N36 billion ($100 million annually) in earnings from passenger service charge, aircraft landing and parking, on both international and domestic traffic and various concessions on non-aeronautical services within and around the airport. Unfortunately, the airport does enjoy up to five per cent of the revenue for the periodic maintenance of  the airport infrastructure and services. If MMA is given out for concession today in the global market, it could generate conservatively about N110 billion ($300 million). Today the total IGR earnings on the 20 international airports is less than N70 billion ($190 million).

“The problems of government enterprises in the sector are largely caused by the incessant huge debts of the domestic airline operators to the public operators and weak accountability of the regulator, particularly of the NCAA, which has the critical role to play in checking the excesses of both the airlines’ operators and the public operators FAAN and NAMA.”

According to Ojikutu, what has developed over the years in the industry is a mixed system, one of partial commercialisation, where the government injects subsidies or intervention funds into the public enterprises, and full commercialisation, where the government gives autonomy to some public enterprises in the sector. What the government plans to develop now, and what is developing worldwide, is privatisation and concession, where the government extends partnerships to private enterprises and investors to develop the sector. This is a concept that is being adopted by most developing countries whose aviation infrastructure is expanding fast but whose development funds are limited. Most countries are finding it advantageous to adopt the policies of public-private partnership (PPP), full commercialisation, and concession of public enterprises. These options offer government savings for other social sectors of the economy and reduce unnecessary costs and duplication of efforts.

Alhaji Mohammed Tukur, Managing Director of Afrijet Airlines, while expressing surprise at the opposition being displayed towards the concession by the aviation unions and others which he attributed to the coming 2023 politics, he said the concession and privatisation of public enterprises are the new global order, saying “let me be frank with you, even the unions are not complaining about concessions of the airports, Nigerians are not complaining about concession of the airports, the issue is if you want to move forward, you need to concession your airports for smooth running, not because Nigeria cannot run the country’s airports, but the truth of the matter is that all over the world now you find out that most of the airports are not managed by the government, they only regulate them and give them out in order to have all the benefits and Nigeria can generate a lot from this. The present minister of aviation has been able to clear this issue with the unions. If you remember five years ago, the minister at a stakeholders’ forum had tried to explain all the details and the committee set up and all of us were involved. There was no decision taken without the involvement of the airlines and stakeholders. We all agreed to the concession down to the floating of a national carrier that is exactly what happened. So, I never expected that at this time people will start raising issues about concession, it is because of the 2023 election.

“If you look at the arrangement of Bi-Courtney Aviation Services and the Federal Airports Authority of Nigeria (FAAN) you will agree with me that Bi-Courtney is one of the best terminal buildings in the country. I think what the Federal government needs to do is to continue with the programme and the minister should call for another stakeholders’ forum and ask for the concerns of those against the project, especially the unions. Are they going to lose jobs? No. If they are not going to lose jobs, then what is the problem?”

 

Why we oppose airports concession -Unions

Speaking about why the unions in the aviation sector are opposed to the concessioning of the airports, Sheri Ayuba Kyari, a union leader who took part in fighting for the final payment of the Nigeria Airways workers’ benefits, said “Well, as a labour leader, concession is tantamount to loss of jobs in our environment and especially with the recent liquidation of Nigeria Airways. Workers will definitely be apprehensive of the intentions of government and will seek the empathy of the public. And because of the manner in which Nigerian governments have handled privatisation, liquidation, concessions, etc in the past, most people have lost faith in the system. However, as an individual, I cannot support concession of the airports but will prefer reformation of the management of FAAN to be tilted to commercialisation where a government agency operates with the mindset of commercial business.

“I once suggested that there were many examples of these processes such as privatisation, commercialisation, concession, etc. The Indian approach was probably the best. People and organisations that were interested were invited and they created the ground-rules so that the country was not short-changed and all those who won, were not disadvantaged either. What do we see here? Apart from those in authority, very few people have an idea of what is going on. This suggests and points to the fact that there might already be those selected to pick these airports. The case of MMA2 is still fresh in our memory. Therefore, government should make the rules public and allow all those who are keenly interested to participate in the bidding. Looking at those companies that were liquidated, commercialised or concessioned, I think their performances have not been encouraging. We should understand that concession is asking someone to take a facility and operate on your behalf for a period of time but you are duty bound to be putting an eye to see if they are doing well. That means government is still likely to dictate the pace and if that be the case, the likelihood of lack of transparency will be there and revoking the agreement very likely with attendant legal implications at the detriment of the nation and its tax payers.”

Three of the aviation unions; the National Union of Air Transport Employees (NUATE), the Air Transport Services Senior Staff Association of Nigeria (ATSSSAN) and the Association of Nigerian Aviation Professionals (ANAP) are of the view that privatisation, of which concession is a form, has turned Nigeria into a huge theatre of the absurd.

According to them, “The Nigerian experience in privatisation leaves a very sour taste in the mouth, even for a person with no taste bud. Check it out: Ajaokuta Steel Complex, Steel Rolling Mills, NITEL, PHCN, and so many more. All are tell tales of squander and plunder, with nothing to recommend that method of business to any Nigerian government. In aviation, we have not been spared from concession foul odour. The story of the failed privatisation of the then national carrier, the Nigeria Airways which took the Airline’s life is still reverberating since 2004. The concession of MMA2 to Bi-Courtney remains the biggest example of how not to concession an airport. All ongoing concessions of economic activities of FAAN have only resulted in losses in revenue to the Authority. With all these at the back of our minds, why would the government choose to waste public funds in chasing shadows in the name of privatising airports when nothing whatsoever has changed about the Nigerian situation?”

 

Other options

As controversy over the government’s concession plan rages on the different stakeholders who are suggesting alternative options in place of concession or privatisation, have referred to the option of the Green Field concession, a model that empowers new investors deal on fresh ventures which includes construction of new runways, terminal buildings and so forth to be operated for a specified period of time and compete with the existing airports before handing them over to government, or that the Federal Airports Authority of Nigeria (FAAN) be corporatised in which the Federal Government shall retain 45 per cent equity share while the remaining 55 per cent is broken down for public acquisition.

 

Conclusion:

As the country awaits the next line of action based on the threats already issued by the unions to frustrate the concession plan while also awaiting the next step from the government that will kick-start the concession plans, many key players are prevailing on the government to call for another stakeholders’ meeting where each aggrieved group will be enlightened on the huge benefits inherent in the concession plan for the larger society while the meeting should also assure the workers and Nigerians of protection and above all the assurance that this concession will not only be made transparent but will stand the test of time.

 

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