Nigeria's Aviation Industry Losing Millions Of Dollars To Administrative Unconsciousness

Feature Article Nigeria's Aviation Industry Losing Millions Of Dollars To Administrative Unconsciousness
DEC 6, 2023 LISTEN

In this report, ODIMEGWU ONWUMERE examines the obstacles that Nigerian carriers encounter in their progress, particularly due to the stringent managerial strategies and rental conditions. Nigerian aircraft pay a credit expense of 26%, while foreign carriers do so at a rate of only 2%. Consequently, this situation has created a terrifying work environment for administrators and airport workers, resulting in unfavorable conditions.

Nigerian flight attendants went on strike for two days on April 17, 2023, blocking the streets leading to the Lagos airport's domestic terminal. As they protested against wages and working conditions, this caused traffic delays and disrupted trips.

Global spectators anticipated that the strike would have serious ramifications for Nigeria, the biggest oil maker in Africa. They argued that a lack of foreign currency frequently causes fuel shortages in the aviation industry, posing challenges for international airlines and forcing local flights to be grounded.

Passengers were forced to walk to the terminal as a result of the traffic jam caused by the striking workers' shouting of offensive language. However, international flights remained unaffected, and the situation was closely monitored from a distance by army and police personnel.

The Secretary General of the Association of Nigerian Aviation Professionals, Abdulrasaq Saidu, accentuated the need to free avionics laborers from the control of imperialistic flying administration. Different affiliations addressing pilots, engineers, control tower administrators, and other air terminal staff were challenging neglected compensation, the public authority's inability to lay out a lowest pay permitted by law for the business, and the proposed expulsion of specific flight organizations' workplaces in Lagos to clear a path for air terminal extension.

The observers noticed that the workers issued a threat to prolong the strike until the end of the month if their grievances were not attended to. Prior to this, the laborers had also blocked the main highway leading to the airport in Nigeria's capital city, Abuja, causing travelers to abandon their vehicles and resort to using motorcycles to reach the terminal buildings.

Huge Challenge For Operators
Since attaining autonomy on October 1, 1960, Nigeria has seen massive changes in its flight industry. It has extended to incorporate ground transportation and cargo organizations, as well as cooking organizations, homegrown and worldwide carriers, among others. Already, the business was essentially restricted to Nigerian aeronautics courses, with the public transporter being the super open transporter.

This improvement likewise helped more modest associations. Be that as it may, Nigerian carriers have as of late communicated worries about the difficulties they face in renting airplane, for certain lessors expressly declining to rent to Nigerian aircrafts.

Local operators are unable to acquire long-haul aircraft as a result, which also significantly raises the price of wet leasing. Moreover, the utilization of wet-rented airplane frequently serves momentary requirements and accompanies their own cockpit group, keeping transporters from fostering the abilities of their own specific staff.

Voicing Concern
At the Federal Airports Authority of Nigeria (FAAN)-organized National Aviation Conference (FNAC) in Abuja, the airline operators of Nigeria (AON) voiced their concern. In a paper, Barr Allen Onyema, who is also Pioneer/Head of Air Peace and Vice President at AON, stated that leasing aircraft is a difficult option due to the stigma associated with it.

He emphasized the difficulties Nigerian airlines face in achieving success, particularly in light of the stringent leasing conditions. Nigerian airlines pay a loan fee of 26% while foreign airlines do that at a rate of 2%.

Onyema stressed the importance of equipment leasing and proposed that the government create a program to assist banks in limiting the number of companies that lease equipment. Nigerian aircrafts face challenges such as high loan fees, expensive operational costs, multiple charges, lack of familiarity with local financial institutions, and issues with foreign exchange.

Due to fluctuating exchange rates, effective planning is difficult, especially since ticket sales are in naira and aviation costs are in dollars. Insurance payments increase due to the perception that Nigeria is unsafe. Despite this, international airlines continue to provide support to Nigeria. Additionally, most airport shops remain closed until 6 p.m., posing difficulties for travelers who have flown for seven hours to find them.

Disorganization In The Sector Drowning Business

Nigeria had previously established an aviation industry before gaining independence. Nigeria Airways Limited took over from the West African Airways Corporation (WAAC) in 1971 and operated until 2003.

Nigeria Airways was renowned for proudly flying the Nigerian flag across continents such as Africa, Asia, the Americas, Europe, and Oceania. Today, a lack of a strong air transport system, disorganization, inadequate facilities, insufficient security measures, deterioration, and political barriers are hindering the growth of Nigeria's aviation sector.

Based on the data, the Centurion Law Group, which operates from Johannesburg identified "institutional, structural, and regulatory challenges" that hinder growth and discourage investment. The Vice President of the AON expressed concerns about the various obstacles faced by the aviation industry in Nigeria. These challenges have made it challenging for most airlines to sustain their operations beyond the initial ten years. Despite making up only 0.5% of Nigeria's GDP, the aviation sector has not been able to achieve its maximum capability.

Despite the lack of infrastructure and other obstacles, checks have revealed that Nigeria's strategic location and population should naturally position it as a hub in the region. However, Nigeria presently lacks airports that provide sufficient travel facilities for convenient transportation to other African and international destinations. Consequently, Nigeria is lagging behind other regions due to its insufficient infrastructure.

Aviation Sector Holds Significant Sway On Economy

Nevertheless, experts argue that the civil aviation sector holds significant sway over the global economy. The Organization for Economic Co-operation and Development (OECD) maintains that it plays a crucial role in ensuring the efficient operation of global supply chains, reducing trade-related expenses, and boosting tourism.

Furthermore, it rapidly contributes to and connects with local and international advancements by complementing and replacing alternative modes of transportation. As per the worldwide air transport association, the airline industry provides employment for 87.7 million individuals, transports one-third of the value of goods and services, generates $111 billion in tax revenue, and accounts for 4.1% of GDP.

Nigeria is not involved?
According to the IATA, the aviation industry is responsible for supporting millions of jobs and contributing $63 billion to the economy of Africa. In South Africa alone, it generates over $12 billion, employs 490,000 individuals, and accounts for 3.5 percent of the country's GDP.

In Egypt, the aviation industry supports 602,000 jobs, adds $7 billion in value, and contributes 2.1% of the GDP. However, in Nigeria, the aviation industry only employs 241,000 people and contributes $1.7 billion to the country's gross value, which is equivalent to only 0.4% of the GDP, says the source.

Indiscipline Mar Progress
Experts suggest that privatizing international airports to reliable global operators, as many countries have done, would be a reasonable solution due to the public authority's lack of necessary resources and discipline to overhaul the system and carry out large-scale infrastructure projects. This approach could result in significant benefits.

They agree that the new regulation change by the Nigerian civil aviation authority, which requires domestic airlines to have a minimum fleet size of six aircraft by January 2025, needs to be thoroughly examined. They also believe that the vague approach taken by the Muhammadu Buhari administration at the end should be investigated.

Additionally, they think that issues related to airlines, such as fees and charges, should be resolved. They suggest that regulatory organizations should undergo reform, improve efficiency, implement changes and policies based on merit, and eliminate corruption.

In Poor Condition Discouraging Investors?

Investigations have shown that Nigeria's airports, despite their high fees, are in a state of disrepair, which deters both investors and tourists. These airports are poorly maintained, disorderly, and plagued by corruption. The absence of shelters and spare parts poses challenges in acquiring foreign currency for airline operations, leading to insufficient aircraft upkeep.

It was noticed that the shortage of aviation fuel results in increased costs, and the airlines' high debt levels, poor customer service, and inadequate maintenance efforts have also made their partners unhappy.

Effectively Transformation Needed
Stakeholders have called upon Festus Keyamo, the Minister of Aviation, to effectively lead the sector towards transformation. This is in light of the fact that Nigeria has 23 registered domestic carriers, but the majority of them are facing operational difficulties and only a small number operate consistently. The aviation sector in Nigeria requires substantial changes to tackle longstanding problems and create a dynamic atmosphere.

They believe that having a fleet of at least six aircraft is necessary for newcomers, while existing participants must either increase their fleets to six or collaborate with others to meet this requirement. However, it was pointed out that the intention of the NCAA rule is to improve capacity, efficiency, and competition, but it only barely addresses these objectives.

Even though the industry is currently encountering significant and persistent challenges that call for extensive planning and substantial reforms, Keyamo and President Bola Tinubu have been urged by stakeholders to spearhead these initiatives.

This is because a well-functioning aviation sector in Nigeria should be driven by the market and under private control, without the regulatory body imposing limitations on fleet size for private businesses.

Experts assert that privatization, exemplified by Adebayo Ogunlesi's successful revival of airports in the United Kingdom as the Head of Global Infrastructure Partners, is the preferred option. Spain, Qatar, and Singapore have also chosen to privatize unprofitable airports.

  • Onwumere writes from Rivers State. He can be reached via: [email protected]
  • Data sources: aljazeera , punchng , RadioNigeria , ThisDay