By Lawani Mikairu

Domestic airline operators in Nigeria have consistently called on the federal government to make the aviation business environment more   friendly to enable the airlines render efficient and profitable services to the flying public. This call is now being heard by the government after seeing the depleted fleet of the few domestic airlines that are still in operation.

There is almost a consensus that the Nigerian aviation environment is one of the harshest in Africa . Nigeria Aviation fuel, popularly called Jet A1 , which constitute about 40% of the running cost of any airline , is the costliest in Africa. That is why most foreign airlines operating into the country go to neighbouring countries like Ghana to refuel after picking passengers in Nigeria.

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Aside the high cost   of aviation fuel, there have been allegations by both domestic and foreign airline operators that there are almost 37 sundry charges levied at airports in Nigeria. According to them, among the charges levied on airlines operating in and into Nigeria are: “the Cargo Sales Charge, five per cent Value Added Tax (VAT), Passenger Service Charge of N1000 per ticket on local route, Charter Sales Charge, Aircraft Inspection Fees, Simulator Inspection Fees, Landing Charges.”

Others they said include “ Parking Charges and Terminal Navigational Charge.   Enroute Charge, Fuel Surcharge, Airport Space Rent, Electricity charges, Apron Pass, ODC, Registration Fee, Service Recovery Charge, Processing Fee, Avio Bridge, Aircraft Registration and Processing Fee”. The airlines also pay “Toll Gate Fee, VIP Lounge, Trolley Service, Clearance Fee, Check-In Counter Charge”, amongst others.

All these have consequently increased the cost of operation of these airlines. The domestic airlines have argued that local airlines in other countries do not pay Value Added Tax, VAT, and most other charges they are compelled to pay. The federal government seems to have hearkened to the cry of the domestic airlines.

It has been said in several fora that assisting domestic airlines to overcome their operational challenges is in the collective interest of the country. In times of emergency and crises, domestic airlines have risen to assist the country. This was recently demonstrated by Air Peace airline who assisted the federal government to evacuate stranded Nigerians who were victims of xenophobic attacks in South Africa for free.

Recently, the Chairman of Airline Operators of Nigeria, AON, Captain Nogie Meggison   said   operators were “full of thanks to the government for graciously identifying with the pains of the Nigerian travelling public by extending its support for commercial airlines in the country and re-affirming the Zero Duty and VAT payment on the importation of commercial airplanes and its spare parts as a way of alleviating the cost burden and ensuring safe flight operations.”

Meggison revealed that the operators have received a letter from the Nigeria Customs Service informing them of the federal government directive that henceforth all aircraft spare Parts imported for use in Nigeria shall attract import duty rate of zero per cent (0%) and zero per cent (0%) VAT respectively.

According to the AON Chairman, part of the Customs letter read: “I am directed to inform you that by virtue of the Federal Government 2013 Fiscal Policy measures, Ref No. BD.12237/S.1008/T/11 dated 15th January, 2013. All Commercial Aircraft &its Spare Parts imported for use in Nigeria shall attract import duty rate of zero per cent (0%) and zero per cent (0%) VAT respectively.”

“I am further directed to inform you that the Honourable Minister of Finance letter Ref. No. BD/FP/TT/50/1/113 dated 20th March, 2015. Approval for the implementation of the ECOWAS Common External Tariff (CET) 2015 – 2019 and 2015 Fiscal Policy measures (National List) confirmed the extension of the 2013 Fiscal Policy measures.”

Airline operators had consistently urged the government to jettison its stance of charging VAT and duty on aircraft spares. Meggison noted that the unprecedented move was a welcome development and a strong testament to the commitment of   President Muhammadu Buhari led administration for feeling the pulse of the masses and making good on his promise to work assiduously to ensure that aviation doesn’t go out of the reach of the common man by giving it the attention it rightly deserves.

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“AON would like to thank the Federal Government of Nigeria for giving a listening ear to our persistent calls for the removal of Duty and VAT on the importation of commercial aircraft and its parts as is done in other parts of the world,” said Meggision. “This is a welcome development and we commend the government for showing maturity and understanding of the critical role that aviation plays in driving the Nigerian economy thereby supporting Nigerian airlines, promoting safety and sustaining jobs,” Meggison added.

This government gesture was extended specifically to commercial aircraft operators and not private jet operators who are required to pay   luxury taxes. The operators under the aegis of Airline Operators of Nigeria (AON) had on June 6, 2016 sought the assistance of the now Minister of Aviation, who was then Minister of State for Aviation, Hadi Sirika in tackling the myriad of problems confronting  carriers in Nigeria.

They highlighted their problems to include the constraints to “foreign exchange (Forex) access; availability, pricing and distribution of Jet A1; taxes on importation of aircraft and its spare parts as well as other multiple taxes including Value Added Taxes (VAT); obsolete infrastructure; upgrade  of airport  runways for 24 hours operations with navigational and landing aids; as well as 24hours customs clearance of spare parts for aircraft on ground (AOG)” among others.

Sirika had   assured them of his commitment to work closely with Airline Operators of Nigeria, AON. He said that he was not oblivious of their plight and challenges.  “The players in the industry are known. Their challenges are also known, at least to me. And I am trying and working hard to drive this through government for government to understand them. Our primary purpose in government and my duty as Minister is to promote, protect, and develop businesses,” he said.

It would be recalled that the Federal Government had after the crash of one of the domestic airlines in 2012 introduced zero duty policy on aircraft and spare parts. The policy was not fully implemented as the then   minister of aviation was alleged to have favoured selected airlines close to the Ministry of Aviation

Reacting to the zero duty policy on commercial aircraft and spare parts , a former Assistant Secretary General of Airline Operators of Nigeria (AON), Mohammed Tukur, was reported as saying that when airlines bring in their airplanes, they usually pay 10 per cent of the value of the equipment to Nigeria Customs and another five per cent as Value Added Tax (VAT), describing it as” killing for airlines”.

“Even for maintenance of aircraft and acquisition of spare parts like engines, which costs between $500,000 and $1 million depending on the size of the engine, the carriers are requested to pay 10 per cent of the value and another five per cent as VAT” Tukur was quoted as said .

Aviation stakeholders have called on the federal government to further assist the domestic airlines by pushing through the National Assembly the Fly Nigeria Act. The enactment of the act will compel government officials on official assignment to fly the local airlines going to their destinations. This will considerably boost the revenue of these local airlines as there is always large contingent to any official assignment or event outside the country.

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Happily , the current Minister  of   Aviation, Senator Hadi Sirika has promised during a stakeholder forum in Lagos that the Federal Government will aggressively pursue a fly Nigeria Act as part of plans to make Nigerian airlines including the new national carrier, Nigeria Air viable and competitive. He said that the Ministry will liaise, lobby and interact with the legislative arm of government to ensure passage of the Act aimed at curbing capital flight and protecting domestic airlines.

Sirika said, “As part of efforts to make airlines viable in Nigeria, the ministry is making moves to have the National Assembly pass a fly Nigeria act. This act will require that anybody travelling on a ticket bought with public funds must travel on a Nigerian carrier unless the route is not served by a Nigerian carrier. However, with your private funds you can do as you like. Many countries including America has such as Act.”.

Industry experts have always be calling on the federal government to introduce the Fly Nigeria Act as a policy to support local airlines .The experts under the aegis of Aviation Safety Round Table Initiative, ASRTI, recently made their position known in a communiqué issued after the first 2019 quarterly breakfast meeting held in Lagos.

The industry think tank body noted that Nigerian airlines and the industry as whole do not benefit from the many foreign airlines that airlift passengers out of the country and repatriate over 75 per cent of their revenues, noting that if the Fly Nigeria Act was introduced, foreign carriers would partner with local airlines in code-share and other arrangements and the indigenous carriers would earn some revenue from the partnership. “There is need to sign the Fly-Nigeria-Act legislation to help protect the Nigeria travel market for both local airlines and travel agents,” the experts said.

High interest rates Killing Nigerian Airlines

Stakeholders in the aviation sectors have also called on the federal government to intervene in the operations of the financial institutions like banks by enacting policies that will help the indigenous airlines to address the double-digit interest rates on loan obtained by the airlines from these institutions.

The industry stakeholders, who met recently in Lagos   noted that investment in “air transport comes with little returns on investment but need huge capital outlay”. They explained that therefore to fund such business, banks must adopt a long term, single digit interest loans that would support the industry. They contended that lack of such long term funds with low interest rates is impeding the growth of the industry, especially the airline sub-sector.

Speaking at the Lagos meeting, a former Director General of the Nigerian Civil Aviation Authority ,NCAA, Dr. Harold Demuren, said that the present interest regime of banks make it difficult for Nigerian airlines to borrow money and this has affected the acquisition and leasing of commercial aircraft in Nigeria.

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“The present interest rate regime in Nigeria is not good for aviation. Take the 20 something per cent interest, you can’t do any business with that. So we need to do something about that. And it is very interesting for me when I learnt about zero interest on money (Sukuk), that’s a good one.

I think the other people should copy it, we don’t need to quarrel, and we should also do our own, form another bank that would be zero interest, at least single digit interest. Then when you do that the big banks will lower their interest rate and that is good for Nigeria and SME companies can progress. I think that is what we should do” Demuren said.

Vanguard