Aviation business in the country recorded a novelty recently when a state-owned airline – Ibom Air – was inaugurated in Uyo, Akwa Ibom State. Two out of the three aircraft acquired for the fleet were on display to the self-adulation of the state governor, Udom Emmanuel, and the joy and pride of indigenes of the state who witnessed the ceremony. The government says it is driven by the desire to “lessen the problems currently encountered by numerous air travellers” to the state; provide jobs for the unemployed and “open up the state through land, air and sea” – a dream that seemingly has turned a reality.
But the fact sheet of success in the aviation sector in the country does not encourage such investment. It is a high risk capital intensive venture beyond the financial capacity of the state when viewed against its internally generated revenue profile. Akwa Ibom grossed only N18.5 billion between January and September 2018, according to the Joint Tax Board.
However, the state owes its riches to oil revenue, being the highest beneficiary of the Federation Account Allocation Committee monthly allocations. From media reports, the 63-to-90-seater Canadian-made Bombardier CRJ series cost a total of N49.6 billion. Undoubtedly, the state governor, Udom Emmanuel, dabbled in the airline business buoyed by the airport built by his immediate predecessor, Godswill Akpabio. Flight and passenger traffic to this airport is not in the Federal Airports Authority of Nigeria data, to help determine how busy it has been since inception and its viability. FAAN’s available most recent statistics are those of 2016.
Sufficient evidence indicates that the airline business has claimed the scalp of many private investors, leading to the extinction of over 40 local airlines. Among them are Bellview, Okada, Oriental, Concord, EAS, Harco, Triax and Savannah. Virgin Nigeria, owned by Richard Branson, ended operations due to opacity and corrupt environment. According to the Assets Management Company of Nigeria, one of the airlines hobbled by debt owed its trade and finance creditors a total of N375 billion in 2017, leading to the takeover of its operations.
Besides the Ibom Air initiative, other states are obsessed with building airports, which, upon completion, are usually handed over to FAAN for management, since aviation is strictly a matter in the Exclusive Legislative List. Bayelsa State has joined the league of such states as the first aircraft landed at its new airport on February 13. It was built by Governor Seriake Dickson. This brings the total to over 30 airports in Nigeria. Similar projects which were started during the oil boom years are ongoing in many of the states, but with the dip in the prices of crude oil in the international market since mid 2014, many of them will remain abandoned for a long while.
Instructively, only two airports are viable in the country, according to FAAN – Murtala Muhammed International Airport, Lagos and Nnamdi Azikiwe International Airport, Abuja. This means that the fad to own airports by states, just like every state owning a university, is a misplaced priority. At best, they are investments that serve only to massage the ego of these state chief executives. They simply cater for elite interest. To give these projects the gleam of economic relevance, some of them are categorised as “cargo airports.”
According to a Business Day report last week, states have invested a whopping N251 billion in non-viable airports, against the backdrop of infrastructural deficits in roads, hospitals, well-equipped schools and public transport. Among the states in this misadventure are Ogun, Nasarawa, Osun, Ekiti, Anambra, Abia, Jigawa and Zamfara.
If Ibadan airport, built in the 1970s, recorded 80,712 passengers traffic in 2016, which makes it absolutely unviable because of its proximity to Lagos, it smacks of waste of public funds for a neighbouring state like Osun, with just N7.5 billion in IGR from January to September 2018, to build its own airport. It is the same absurdity that Abia State is committing, being hemmed in by Imo, Port Harcourt and Enugu airports. More details from FAAN’s data show that Katsina Airport, in the period under review, had just 2,541 passenger traffic; Minna Airport 3,339 and Akure airport 4,309.
Having not gone too far, Emmanuel is advised to save the state from the looming fiscal trouble by finding private investors who will buy over the project. The whining of Airline Operators of Nigeria, which said that its members had 32 charges to contend with, and their international counterparts’ concern that Nigeria has the highest operational cost, globally, are a reservoir of lessons to tap from.
The country got its fingers burnt in the defunct Nigeria Airways. Attempts to reincarnate it in “Nigeria Air” recently have been put on hold as a core investor has not been found. The Minister of State for Aviation, Hadi Sirika, had planned $8 million for the airline’s start-up capital and another $300 million for its working capital and operations from 2018 to 2020. This is a clear indication that profit-taking from it for its survival in three years would be unlikely. The International Air Transport Association says that African airlines fly with 30 per cent empty seats, as against the world average of 20 per cent, which means less return on investment.
If job creation in his state is a strong factor in the airline venture, the governor can lure private capital to float petrochemical industries, for instance, through a slew of policies; and then buy equities, being the biggest oil producing state in the Niger Delta. To fund the Ibom Air from oil revenue, with the volatility of oil prices, which fell below $30 per barrel in 2016, is akin to building on quick sand. The state should retrace that step!
