Failed Concession of Nigerian Airports

The concession of the terminal facilities of four major airports in the country was one of the cardinal programmes of President Muhammadu Buhari’s administration, but few weeks to the end of his second tenure, the concession plan has remained elusive, writes Chinedu Eze

There are two programmes that would have transformed the aviation industry, if they were implemented by the Mohammadu Buhari’s administration.

The two programmes are the establishment of major Maintenance, Repair and Overhaul (MRO) facility and the concession of major airports in Nigeria. The first would have saved Nigerian airlines about $2 billion annually and the second would have made Nigerian airports competitive with modern, state-of-the-art facilities. But in the twilight of the Buhari’s administration, none of these programmes was actualised. The two programmes were part of the six programmes enunciated by the Buhari’s administration, which included national carrier, leasing company, Aerospace University and agro-cargo airports. The administration did not absolutely complete any of these projects. Almost all of them are work in progress. In fact, the establishment of MRO and leasing company was not thawed at.

The Minister of Aviation, Senator Hadi Sirika, explained when he unveiled the plane to establish these projects that he would adopt the public, private partnership (PPP), which might have attracted foreign direct investments to Nigeria.

Benefits

Many industry operators in Nigeria looked forward to the airport concession of the four major airports in the country, including Lagos, Abuja, Kano and Port Harcourt because they believed that it would eliminate the infrastructural challenges they face at the airports, which include obsolete equipment, absence of wifi and other IT driven facilities like quick check-in equipment and flight delays. They also believed that if the airport terminals were concessioned, they would have been more passenger friendly, savvy and also more business friendly.

Chairman and CEO of Air Peace, Allen Onyema, once told THISDAY that poor airport infrastructure is one of the problems causing the underdevelopment of the industry, remarking that airlines can never make ends meet with the state of our airports. He observed that airlines can never also get on-time departure 90 per cent of the time with the state of the nation’s airports infrastructure and urged government to channel its resources earmarked for aviation to infrastructure development of airport facilities.

“However, government may not have the resources to do this. I support federal government’s intentions to concession the airports. That is the way to go. Gatwick is not run by the British government, neither Heathrow, so the airports must be concessioned immediately. But they have to be done in such a way that people do not lose their jobs,” Onyema said.

The federal government announced that it would concession the terminals at the Lagos, Abuja, Port Harcourt and Kano airports. On October 27, 2022, the federal government announced bidders for airports concession. It disclosed four preferred and reserved bidders have been selected for the concession of the Nnamdi Azikiwe international Airport, Abuja, Murtala Mohammed international Airport and Mallam Aminu Kano International Airport. That announcement was stirred in controversy, which evoked on-going litigation on the concession.

PPP

Private public partnership (PPP) would have attracted reputable airport managers, if the concessions were transparently done. Obviously private sector operators would also prioritise effective management, human and physical capacity development and entrench performance culture – three foundational ingredients required to run modern infrastructure and deliver compelling experiences for travellers and indeed concessionaires operating within these facilities

In 2019 statistics, no Nigerian airport is in the five busiest airports in Africa. OR Tambo International Airport, Johannesburg, South Africa is the busiest airport in Africa, followed by Cairo International Airport, Egypt, Bole International Airport, Addis Ababa is the third, Cape Town International Airport, South Africa is the fourth, while Mohammed V International Airport Casablanca, Morocco is the fifth. Yet, Nigeria arguably has the highest number of indigenous travellers in the continent.
In 2018 statistics, Nigeria’s Murtala Muhammed International Airport, Lagos was the 11th busiest airport in Africa. Analysts indicate that Nigerian airports are not passenger friendly so people are not attracted to the airports and people who travel are largely on essential trips like business and not for leisure.

So, the Buhari administration would have enabled transformation of the aviation industry if it had completed the concession of airports terminal facilities before end of tenure.

Efficiency

Head of Business Development, Zenith Travels and the spokesman of Aviation Round Table (ART), Olu Ohunayo, told THISDAY that if the airport facilities were transparently concessioned, it would have had great efficiency in the management of the airports.

 “The benefits of concessioning airport far outweigh the present processes and management by the federal government. Concession has improved efficiency and we have seen some improvement in what is happening at Asaba Airport and how the management of the airport introduced holiday programmes, worked with other modes of transport to ensure thattransport facilitation within and out of the airport is good. So, a physical example is what is happening in Asaba. And also the Shell Airport in Warri, which was almost at the state of comatose. Again there are some other airports that have been concessioned and have failed. But under our own case and generally, concession improves and brings efficiency to airport operation and management which is the problem we have. I am an apostle of getting reputable airport management companies to manage airports. Let them come and restructure the Federal Airports Authority of Nigeria (FAAN), prepare the agency itself and its ancillary services, prepare it for concession as a public liability company that will yield profits.

“So that is what I want to see taking that big airport company out of FAAN, like the South African counterpart, that is what I am looking at. We should have a airport management company to take a 10-year management of FAAN to set up the staff, services and facilities, thereafter, prepare it as a public liability company that will go into the stock exchange and be owned by Nigerians. That is what I want to see and that is a possibility. We must all accept that the damage has been done to the staff structure in almost all the agencies by Senator Hadi Sirika. Almost all the agencies under Sirika are affected. A lot of people have been thrown into the system, both professional and non professional, he has distorted the staff strength and also affected both financial and operational efficiency of these agencies. So there is that need to bring airport management company to restructure FAAN and prepare it as an organization to make profit. It is a possibility, thereafter we can now begin to look at options that are available,” he said.

Ohunayo also added that he would rather want to see the state-owned airportsgo into concession while the ones owned by the federal government are taken over by an international management company to build that reputable strong company from FAAN. 

Right Business Model

The Managing Director of Flight and Logistics Solutions Limited, Amos Akpan, told THISDAY that different countries in the world have successfully found ways to run their airports on a business module that yield profits.

“They put in place organisational structures that enable performance and deliver results. They are functional and they deliver desired services to customers and make financial profits. They attract investments. Their airports do not limit their focus to servicing airlines. If the federal government through the Ministry of Aviation wants to get more value from Nigerian airports, let them put it clearly on the shoppers’ window. Investors can sniff out potential portfolios that will yield return on investment. They will negotiate and buy into the airports and make them competitive with performing airports worldwide. The professionals, the personnel, and the customers will benefit.

“What I see now is lack of transparency, no clear definition of the goal, no clear definition of the steps to achieve the goal. But we are offered very eloquent and bogus statements that seem geared for political correctness.

“For instance, they tout the concept, ‘aerotropolis’, which is their reason for demolition of existing structures. We need to see and contribute to the design as active enterprises existing on the ground. How does the intra-airport rail enable commuters from Ikeja access MMIA? The investor will be interested if this plan will enhance the hub status of the airport? We cannot just place the airports for concessions on the premise that there are land assets. It is difficult to attract genuine investors if what you offer is murky and unclear. I suggest that the incoming government should think through the process. Lay out a time frame for execution. Clearly state what they are offering; and clearly state their expectations for all to read and understand,” Akpan said.

Cost of Infrastructure Renewal

Four years ago, the African Development Bank (AfDB), disclosed that it would require about N1.5 trillion to modernize Nigeria’s 24 airports under FAAN management.

The then Senior Transport Engineer of AfDB, Dr. Patrick Musa, said the federal government had in 2017 approached the bank to invest in the country’s aviation industry, which attracted a survey of airports nationwide. Musa disclosed that that while the bank found the Lagos airport viable to invest in, it, however, identified lack of metro line and easy connectivity between the international and domestic terminals as major challenges to its potential.

Also, the Abuja and Port Harcourt airports were found viable with more opportunities to explore. Kano, however, has low traffic for sustainability, but could make up in revenue through the non-aeronautical services. AfDB observed that though the infrastructure deficit across other airports was huge, it was not exclusive to Nigeria, as the AfDB had since 2012 estimated that the continent required at least $90 billion yearly to fix major infrastructure.

With the failure of the Buhari’s administration to successfully concession the airports in eight years, the hope of the private sector committing funds to airport development in Nigeria has been temporarily dashed. So, everyone is looking forward to what the next administration will do.