Due Process and ICRC’s Defence of Nigeria Air’s Launch

In the last few weeks, the ministry of aviation and indeed the erstwhile minister overseeing the ministry, Senator Hadi Sirika, have received flaks over the purported launching of the country’s national carrier, Nigeria Air. Kasim Sumaina writes that the intervention of the Infrastructure Concession Regulatory Commission, which was involved in the process, may have thrown more light as to the decisions that culminated in the ‘launch’.

A number of questions have recently trailed the launch of the national carrier, after an aircraft bearing the logo of Nigeria Air was sighted at the Nnamdi Azikwe International Airport, Abuja.

A few days after the inauguration of the national carrier, the House of Representatives Committee on Aviation called for the suspension of the establishment of project. It also called for the prosecution of those involved in its unveiling by the  previous administration, describing the exercise as a fraud.

However, contrary to the widespread allegations of secrecy and non-compliance with rules guiding the execution of public-private partnerships, the Infrastructure Concession Regulatory Commission (ICRC) has absolved the former minister, Sirika and the ministry of any wrongdoing in the establishment of the national carrier.

The commission, in a recent memo to the National Assembly asserted that all due processes were followed and relevant approvals got by the ministry of aviation.

The report quoted the commission as indicating that the Ethiopian Airline has 49 per cent; MRS Oil and Gas Limited, 15 per cent; SAHCO, 15 per cent; Federal Government, five per cent while 16 per cent had yet to be allotted.

“The ICRC memo also indicated that the proposal was turned down five times by the Federal Executive Council (FEC,) under the Buhari administration before it was eventually approved the sixth time,” part of the report stated.

According to the ICRC, the national carrier project was initiated by the ministry of transportation in 2016 as part of the ‘Aviation Sector Roadmap’, which was approved by  Buhari.

The project, it said, was structured to be implemented as a public-private partnership initiative, for which the its regulatory guidance was sought.

“The ICRC said it provided the required guidance for the implementation of the project in line with the requirements of the ICRC Establishment Act 2005 and the National Policy on public/private partnerships.

“Following the guidance provided, the following milestones were achieved: constitution of project steering committee and a project delivery team to guide the implementation of the project.

“Appointment of a transaction adviser – this was done in compliance with the Bureau of Public Procurement (BPE) Act. Lufthansa Technik was first procured but later changed to Airline Management Group/Traniero after obtaining FEC approval.

“ It also involved the development and submission of an outline business case by the airline management group in 2018.

“The structure involved the federal government holding 5 per cent equity, while the remaining 95 per cent is held by private partners (the foreign partner who is required to have undertaken at least 10 years scheduled international operations) will hold a maximum of 49 per cent, while the Nigerian partners hold a minimum of 46 per cent,” it stated.

The ICRC pointed out that  its Certificate of Compliance to the OBC confirmed the viability and creditworthiness of the project.

Speaking on the reason why FEC rejected the proposal five times, the ICRC noted that the federal government wasn’t willing to make any financial contribution to the project.

“This was due to the insistence by FEC that the federal government will not contribute any funds to the take-off of the airline as was initially structured. FEC requested that the project should be fully privately financed since it’s viable and bankable,” ICRC Director General, Joe Ohiani, noted.

The ICRC said after 10 weeks of advertisement, only Ethiopian Airlines consortium submitted a bid and that the project proceeded to the negotiation stage, based on Section 5 (a) of the ICRC establishment Act 2005.

Essentially, the section states that if after advertisement in accordance with Section 4 of the Act, only one contractor or project proponent applies or submits a bid or proposal, or only one contractor or project proponent meets the prequalification requirements, the ministry, agency, corporation, body may undertake direct negotiation without competitive bidding for any contract.

On the reason why the documents were yet to be signed, the memo noted: “Several preparatory meetings were held as a prelude to negotiations between the ministry of aviation and other government stakeholders before engaging with the Ethiopian Airlines consortium.

“The commission thereafter requested the implementation of the following before negotiations: the consortium to be a Special Purpose Vehicle; consortium to sign a shareholders’ agreement/updated consortium agreement; the 16 per cent un-allotted shares to be fully allotted in compliance with CAMA 2022 and transparency principles; and project to adhere fully to the requirements of the request for proposal document,” it stated.

The memo indicated that negotiation was thereafter convened to discuss the issues highlighted for the consortium to implement but had to be suspended when it was observed that members of the consortium were working at cross-purposes.

This, it said, was based on the observations that the consortium had not agreed on their structure and function and some members were not privy to the documents under consideration.

Furthermore, it stated that the consortium had not met on their own and had informed the meeting that the technical adviser to the ministry had been the one calling for all their meetings and guiding their interactions.

 “The consortium was thereafter requested to meet and resolve all their issues and present a common position for the purpose of negotiations and executing the PPP agreement with the government.

“They were unable to resolve their issues and sign the shareholder’s agreement as requested. This led to a letter of complaint from SAHCO expressing its concerns and not accepting the shareholders’ agreement as presented,” ICRC stated.

It said that Ethiopian Airlines responded with justification for the issues raised, but explained that efforts to mediate through physical meetings and correspondences towards ensuring the signing of the shareholders’ agreement were ongoing.

“A meeting of the government representatives was thereafter convened at the ICRC to harmonise the position of the government before engaging in any discussion with the private proponent.”

It said the meeting agreed that every member of the consortium would be required to sign the PPP agreement individually as well as the shareholders’ agreement.

It added that the meeting further agreed that the 16 per cent un-allotted shares must be fully allotted; that the project must have duration to comply with the requirements of the ICRC Establishment Act and that all clauses that allocate financing and regulatory risk to the government must be reviewed and adjusted appropriately.

The ICRC said it wrote a regulatory position to all members of the consortium on April 17, 2023, with a review and highlighted issues that needed to be addressed and corrected before the shareholders’ agreement could be signed.

According to the commission, some of the issues included that the ministry of finance incorporated should hold the 5 per cent federal government’s equity and sign the shareholders’ agreement on behalf of the government as well as full allotment of the 16 per cent un-allotted shares in the consortium recognition and valuation of the Bilateral Air Services Agreements as part of Federal Government’s contribution to the project.

It was also to provide clarity on the status of local airlines currently operating regional and international routes, in view of request for total rights over all the existing BASAs; and “the deletion of the clause that waives sovereign immunity by Nigeria.”

The ICRC added that the ministry convened a negotiation meeting on April 18 and 19, 2023, at the ministry but could not proceed as representative of the Federal Ministry of Justice cited a court order restraining any action on the project.

According to the report, the next step was for all shareholders to sign the shareholders’ agreement and that negotiation should resume and be concluded once the court order was lifted.

On the next step, the ICRC report said that: “Full Business Case to be prepared and submitted to the ICRC for review and issuance of certificate; presentation to the FEC for approval; vetting of draft PPP agreement by ministry of justice; and contract execution.”

Reacting to the report, a trade union leader in the aviation sector who preferred to be anonymous  said he had followed the process of the Nigeria Air project from the beginning and was convinced that the right things were being done.

Bur he said the project faced a lot of sabotage by people who, for reasons known to them, wanted to ensure that Nigeria Air does not see the light of day.

The unionist said that because of the sensitive nature of the issue, the ICRC memo had exonerated the former minister’s position that the process leading to the establishment of the national carrier has been transparent in all ramifications.

Also, an aviation expert who craved anonymity ‘because of the intimidation going on in the industry on those who spoke in favour of the Nigerian Air, said Air Peace and other local airlines were simply afraid of competence and capacities ET will willing to the Nigerian aviation industry.

Speaking on the recent claim on Arise TV, by the Chairman/CEO of Air Peace, Mr. Allen Onyema where he stated that “without SACHOL on the deal, Nigeria would have been in trouble” and that “The leadership of the entire management, the CFO, the CEO, all the management positions will be Ethiopians while the deputies will be Nigerians.”

But the source said that the submissions from the federal ministry of aviation and the ICRC confirmed that negotiations were still ongoing and there was firm agreement reached on the structure of the airline.

“This includes the management composition and other fine details that the were required to smoothly run the airline. So, where did Onyema get that from?, he queried.

The expert also indicated that the ex-minister was not a party to what each shareholder was negotiating and had no powers to decide who got what.

“The ICRC was to midwife every step of the way like they’ve done on the project since inception,” he said.