Dr Seinde Fadeni is the chairman, Nigerian Aviation Handling Company (NAHCO) PLC. In this interview with SHOLA ADEKOLA, he speaks on the financial results of NAHCO, the challenges of the past year and the outlook of years to come. Excerpts
WHAT are the highlights of the results announced at the Annual General Meeting (AGM) for the financial year to 2022?
I am pleased to report that our company, just like the industry, remained resilient, performing admirably and achieving some significant milestones, thereby delivering value to our esteemed shareholders. Our group revenue for the year 2022 was N16.7 billion, a 63 percent increase from the previous year’s figure of N10.2 billion. This was due to a combination of factors, including the increase in aircraft handling rates, onboarding of new routes by some loyal clients such as Qatar Airways expansion into Kano and Abuja routes; and Ethiopia Airlines addition of Enugu route to its destinations.
Air Peace’s commencements of Port Harcourt – Cameroon route; the expansion of our excellent services, improved efficiency in our operations and increased reliance of our clients on our ability to deliver, all contributed to the positive results. Our profit before tax is N3.8 billion, a 315 percent increase on the previous year’s figure of N925 million.
What are the reasons for quick recovery of Nigeria’s aviation sector, including the handling companies after the 2020 pandemic?
It is basically strategy with our stakeholders, especially our customers, and increase in our excellent service. So, it is just doing what we think is the right thing. No doubt about it that the tariff also helped us and for a long time, we have been charging less than other West African and African countries’ prices, which even made it possible to live up to expectations in terms of equipment and other things; to run the business, including our staff, manpower and commitments.
The quick recovery rates happened in almost every part of Africa and not just in NAHCO alone. In that year of COVID-19, Ethiopian Airlines declared a profit of over $1 billion and it was just strategy. When Emirates Airlines parked their planes, and they were using them for restaurants, Ethiopia turned their own planes to cargo. There was serious cargo movement; it didn’t stop, and we are part of the people that made money out of it.
So, it had an impact on us in the sense that all those periods we were working. And what we also did strategically is that some of our staff who were not essential workers, we made sure that they were at home, and we were paying them about 50 percent of their salaries. Because this is a skill organisation, we put so much money in training them. So, for you to get another set of people, it will take you a lot of time and resources to train them. So, what we did was ask them to stay at home, and we paid them. What we just removed was transport and some other allowances. It was just strategy and doing the right thing and making sure that we reduced our cost. That is why we were able to overcome these challenges.
What is the Cargo freighting by air and the future in Nigeria?
Cargo is more time-bound and it continues to happen all over the world. In fact, when it comes to Africa or these areas, you will find out that we are more or less in Nigeria compared to other places like South Africa and other countries like Ethiopia; our freight is so small. For example, in Nairobi, Kenya, every Boeing 737 plane leaves the city with flowers to Europe and other countries. At the end of the day, you just find out that the effect has not really got to Nigeria. However, I believe that the new administration wants to retool the economy and I believe that will also aid air cargo. Once there are activities and the economy is running well, everything will run smoothly.
President Bola Tinubu has also said that there is going to be a unified exchange rate. So, this has had a lot of impact on cargo importation whether it is sea freight or air freight. But, with these new economic policies, which we all know that by the grace of God, he will live up to, there is going to be an increase in cargo movement.
What are the challenges to your operations
Sometimes, there are multiple taxes. One of the major issues is that 95 percent of our equipment, if not 100 per cent, are bought through foreign currency.
We have not had good access to foreign currency. We can’t even try to take a loan because you won’t survive it. The interest rate is not good for any business in Nigeria. We are almost at 26 percent per annum. What do you want to do to make that kind of money to pay back?
Basically, those are the challenges. For example, what the Federal Airports Authority of Nigeria (FAAN) charges us is five percent on our revenue. It shouldn’t be five percent on our revenue, it should be five percent on our profit. Because if you are charging me five percent on revenue, that means you are also charging the money I paid to my staff. You are taking five percent on my staff and yet I am paying you.
If I want to take land from FAAN, my landlord, I will have to pay for it, yet you are taking five percent of my total revenue, not profit.
What has been the effects of forex scarcity on your operations?
Terrible, I could remember at a point in this country a dollar was N150. Some of our equipment are up to 700,000 Euros; some are up to 500,000 Euros.
So, the money you would have used to buy four equipment, you use it to buy just one. And the unfortunate thing is that it is not like you can even get it on the shelf; you have to wait for it. To even get the dollar is a problem; it is not that available. That is the problem. It is high and it is not available.
Is NAHCO benefitting from the free trade zone policy?
I won’t say that we have not benefited from it, but it has not got to where I expected it to be. Right now, we have some foreign investors who are coming to us. So, we want to really use the advantage of that free trade zone. The beauty about it is that Nigeria can act as the hub for West Africa and since it is just coming in and it is going out, then you don’t need to pay any customs taxes. We are working seriously on it; that is why I said I won’t say we have not benefited from it. However, it is not up to 20 percent of what I expected.”
Is there any plan to partner foreign leasing companies on equipment?
This is a fantastic idea and just like you rightly said, in abroad it is easy to do leasing and it is just like what happens in housing. I know some of the oil companies, Shell does not buy out rightly, they lease. In abroad you don’t need to buy a house, you mortgage because the interest on some of these things are very low. But, even if you want to do leasing in Nigeria on equipment, the guy goes to the bank, he takes money at 25 percent interest rates and then he leases it. How much does he want to lease it to you? So, these are some of the challenges.
But I also appreciate the fact that you said we should come together and form a leasing company, which can lease to both of us. We have also been speaking to ourselves about this kind of an arrangement. But the major challenge is what I have told you. If you want to lease and you take money from the bank at 25 percent interest rates, you buy the equipment and you give it to us, how much do you want to lease it to us? These are some of the challenges. It will kill us. To declare profit is a problem, but the thing is that you still have to declare profit for the stakeholders. By the time you turn the whole profit to dollars, how much does it become? All the shout about good profit, just divide it by dollar. Today, it was N770 to a dollar. So, it is basically about demand and supply, it is what is available that is what is driving it.
So, these are some of the things we also want to talk to the new government about.
Fantastic performance in 2022, how do you sustain the tempo in 2023?
I am very confident that we will do better than what we did in the past year in 2023, we are there already. We have our first quarter report, and I am sure we have it in the public. So, I don’t have any doubt that we will surpass what we did in the 2022 financial year.
And what we have also done is that we have tried to retool our system by cutting costs. We are trying as much as possible to make sure that there is no waste in the system. And for every kobo we earn, we want to see what it brings out from whatever we use it for. So, I am very confident that we will do better.
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