The Federal Government’s declared ambition to accelerate building of new airports should refocus attention on the urgency to liberalise the country’s aviation sector. According to the Minister of Aviation, Hadi Sirika, the government plans to double the number of airports — from 31 currently — by the end of 2023 and spoke rosily of investing in existing and ongoing airport projects. Expanding the number of airports and infrastructure is a desirable outcome; achieving this however requires dogged and speedy implementation of the long-delayed goal of transiting from state control to a private sector-driven aviation industry.
Globally, since the 1950s, there has been a trend in moving away from direct government control of airports towards a greater role for the private sector. The main reason is that public investment usually responds to political cycles, more than technical or financial rationales. The current model of the federal and the cash-strapped states building unviable airports with meagre resources and loans has failed woefully. Only three of the federal airports are profitable. Eighteen of the 22 directly owned by the Federal Airports Authority of Nigeria reportedly cost the agency N65 billion in revenue losses in the six years to 2019. Moreover, previous audits and an assessment by the International Finance Corporation had found that most of the airports in the country were commercially unviable.
Though Sirika’s pronouncement was short on specifics, it raised concerns that the government’s commitment to its promise to concession its airports could once more be wavering. Under the programme, the two most profitable – the Murtala Muhammed International Airport, Lagos and the Nnamdi Azikiwe International Airport, Abuja — were, after many postponements, to be given out as concessions this year. Concessions of the two other international airports are billed to follow. In August, Sirika had announced that all government owned airports would eventually follow the PPP model. This is the right way to go.
Of the country’s 31 airports, 22 are owned and operated by FAAN, which also manages four others owned by some state governments, while the remaining are military and private airfields. Airport projects have been undertaken by many state governments motivated mainly by politics and vanity, and lacking sound economic considerations. These include Ekiti, Jigawa, Osun and Ebonyi states.
The government needs urgently to liberalise the entire aviation sector and allow the private sector to lead. It has neither the resources nor the managerial skills to turn around the sector. Of the N74.32 billion it was expected to remit to the government between 2014 and 2019, FAAN remitted only N8.86 billion. A $500 million loan from China to “remodel and rehabilitate” the airports in 2013 was spent without any visible impact. In fact, shortly after, one of the “remodelled” airports, Port Harcourt was adjudged the world’s worst international airport. Kaduna earned N716.7 million in three years and spent N4.41 billion. Mallam Aminu Kano Airport, Kano, collected N7.16 billion in 2017 to 2019, but spent N9.6 billion. The ones built by state governments are mostly idle.
The message should sink home: it is not the number of unviable airports that deliver a vibrant aviation hub, but the facilities and the enabling environment. Nigeria is losing out. If the doubling plan is anchored on continued state control of airports, it will only deliver more idle and loss-making airports, draining public resources that should otherwise be ploughed into essential social services.
Airports, by moving cargo and people, function as propellers of economic development and accelerators of growth in cities and regions, according to Bloomberg. It cited “time-sensitive manufacturing and distribution; hotel, entertainment, retail, convention, trade and exhibition complexes; and office buildings that house air-travel intensive executives and professionals” among the businesses it impacts. Airports facilitate the fast movement of man and materials, thereby fostering trade and commerce. Globally, the industry supports 87.7 million jobs, provides $3.5 trillion or 4.1 per cent of global GDP and conveys over a third of world trade by value, reported the Air Transport Action Group.
According to IATA, Nigeria’s air transport sector by 2018, directly employed 20,000 persons and supported 241,000 jobs in total in the tourism, hospitality and service sectors. In total, through the value chain, it contributes $1.7 billion or a mere 0.4 per cent to GDP. The sector contributes $7.4 billion or 3.5 per cent to GDP in South Africa, about $7 billion or 2.1 per cent to GDP in Egypt, where it supports over 602,000 jobs. The International Civil Aviation Organisation asserts that “international flight lifts communities out of poverty.”
Since Britain opened the way in 1987, many countries have chosen the path of privatisation through outright sale, concessions and PPP. The Airports Council International cites three waves of private sector participation from 2001 to 2014 with 51 per cent of the 100 busiest airports having private sector participation. Privatisation enabled a Nigerian-led investment firm to take control of three of the UK’s best airports. India has stepped up airport privatisation and hopes to add 100 new airports by 2030 through private local and foreign direct investment.
The airports should be denationalised. Increased commercialisation will bring about good profits and market-oriented management. As the national budgets and foreign aid tighten, the government has proved that it cannot deliver the infrastructure needed, run airports or airlines effectively, efficiently and profitably. It is imperative for the government to consider an immediate transfer of airport management or ownership as well, to the private sector. The President, Major General Muhammadu Buhari (retd.) and Sirika should move very fast with the concession programme. In this, they should avoid the corruption, cronyism and skewed legal framework that marred past privatisations and gives labour unions ammunition to oppose reforms. Only world-renowned operators with the necessary capital, expertise and investment plans should be shortlisted to participate in the transparent bidding process.
The liberalised environment should see FAAN reduced to a landlord only, while private operators run the industry. The regulatory agencies need to be radically reformed, funded and provided with cutting-edge technology and other infrastructure with the funds saved from running airports at huge losses. Priority should be on transforming existing airports to draw in FDI, create jobs and promote new airports in the long term.
