THE Federal Government has suspended the Nigeria Air national carrier, which was billed to commence operations in December. The indefinite suspension was due to investors’ withdrawal from the project. The project was to be financed through a mix of government budgetary provision, private equity debt arrangement and finance syndication from a consortium of regional and international banks. Government was to catalyse the venture and provide the enabling environment. The government had said it would provide only the finance needed to make it take off and that the national carrier would be an entirely private sector controlled organisation under a public-private partnership.
That the venture had to be suspended indefinitely did not come as a surprise. This is largely because a government that said it would have only five per cent stock in it had gone on to take landmark decisions on the matter. This could not have been reassuring to investors. Airline operators had naturally expressed concern over government’s funding of the airline, which they said would result in interference in its operations as a private company. Besides, public private partnership (PPP) is based on trust and the sanctity of agreements among parties. It is incontrovertible that going by the controversies surrounding PPP in Nigeria, it would be difficult for investors to trust the government. It will be recalled that the Virgin Group pulled out of an airline joint venture after three years, blaming its action on interference from local politicians and regulators.
The government is battling with recession. It is therefore ill advised for it to embark on a high risk capital intensive airline venture when the airline business is experiencing meager turnovers globally. According to the airline operators, setting up a national carrier will cost Nigeria at least three billion dollars because a single B777 Aircraft as of today costs about $320 million. The national carrier will need an additional cash injection of $500 million subsidy per year on average for the next 10 years to keep it afloat. This is clearly not affordable under the current economic circumstances of the country.
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Furthermore, the project had commenced in a very shady and non-transparent manner. There was so much opaqueness around it. The role of private investors in the entire process was not clearly addressed. The government went to Farnborough International Airshow in London to unveil the logo of Nigeria Air in July 2018 and selected 81 routes for the national carrier. This was done by the Minister of State for Aviation, Senator Hadi Sirika, even though the company was yet to be registered. The company was meant to start operation in December even though it had not been registered as a company. How do you unveil a logo for an organisation that is yet to be registered? Not a few people thought that Nigeria Air was a scam bound to unravel. Former Minister for Education, Oby Ezekwesili, argued that it was a misplaced priority that “for the sake of the country, must fail.”
Also, the thinking behind the project was apparently shallow. It seems that a few people merely considered it an opportunity to feather their nests from the public purse. Over N1.6bn has reportedly been expended on the failed project. This is not acceptable. Those who have spent Nigeria’s money on this failed project must be held to account. The government should concentrate on creating a friendly operational environment and policies that ensure the success and survival of private airlines instead of the current fixation on establishing a national carrier. It should engage the private sector with transparency on how to position Nigeria to take advantage of its market and geographical location as a natural hub for Africa. Creating a world-class air transport infrastructure could attract airlines and transform the country into a hub, making aviation a major contributor to Nigeria’s Gross Domestic Product (GDP) and thereby strengthening economic diversification.