November 16, 2019

Why Nigeria airports are not yielding revenue — Nnolim

Lagos Airport

…Proposes three models for effective airport management

By Lawani Mikairu

By Lawani Mikairu

The Chairman, House Committee on Aviation, Hon. Nnaji Nnolim, has expressed dissatisfaction with the state of the nation’s airports, describing them as “underdeveloped and underutilized.”

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Speaking during a presentation at the Nigeria Travels Mart Colloquium, 2019, with the theme: Airport Concessions and Options for Airports Development in Nigeria, Nnolim said Airports, all over the world, were viable sources for non-aeronautical revenue generation and many countries have adopted formidable and effective managerial models to tap huge revenue from their airports.

He, however, observed that Nigeria has not harnessed up to 10 per cent of the revenue potentials that could accrue from its airports because they are not developed to a certain standard.

“It is a glaring fact that our airports are not just underdeveloped but also grossly underutilized. In aviation today, the modern trend is that airports have become huge sources of revenue generation. Revenues accrue from both aeronautical and non-aeronautical sources, with non-aeronautical revenues now becoming the dominant sources of airport development, stability, and aviation sustainability.

“In Nigeria, we have not exploited even up to 10 per cent of the possible non-aeronautical revenues because our airports are not yet developed to the level of harnessing the revenue potentials available on the land side,” said Nnolim.

According to him, the airports, being the first point of call for international visitors, could create a negative impression in the minds of the visitors about the country because of their current state.

In charting a pathway for the development of the nation’s airports to become economically viable and sustainable, Nnolim suggested that the remittances from Internally Generated Revenues (IGRs) of the aviation sector should be retained for the next 10 years for the development of aviation infrastructure.

He said many have been calling for the privatization of the airports but noted that it would require empirical data and careful calculation to ascertain the right model(s) to adopt. He recalled that the first experiment on privatization of the second terminal of the Murtala Muhammed Airport, Lagos, has been “riddled with controversies leading to many court cases.”

He, however, noted that privatization of the airports would yield a lot of benefits as it would reduce public-sector investment, provide access to larger commercial sectors and allow airports to diversify services without the fear of government control and interference. According to him, this would lead to increased operational efficiency, as well as create new paid incentives for management and employees.

Alluding to reports of Nigeria’s Annual Airport Business Summit for 2017, 2018 and 2019, Nnolim observed that any attempt to privatize the airports stirs fear in the minds of the employees about “job loss.” He suggested that FAAN should be unbundled to address the fear of job loss and to pave way for efficient and progressive airport development and creation of an enabling environment that will attract private sector investments.

In line with the unbundling proposition, Nnolim suggested three models of management be constituted: “The first one is the Nigeria Airport Development Agency (NADA) which will have the capacity to process, supervise, monitor and forecast the development of airports in the country vis-à-vis the developmental needs enshrined in the Civil Aviation Regulations and road map”.

“Second is Airport Management Company Plc (AMC) which would be a public quoted company with less than 20 per cent shares held by the Federal Government of Nigeria, while the remaining shares should be sold to private bidders . The company shall also compete and bid for the management and operation of airports”.

“The third is Federal Airports Property Company Ltd. (FAPC) which would be the custodian of all federal airports lands and properties. By this, the government can invest in airport development but not in its operations; it can acquire land for airport development just like state governments, but must outsource the management to a competent company”.

He said this might be a bit challenging, owing to different opinions and mindsets of stakeholders but it is important to have functional airport services that will allow for the development of infrastructure and ensure effective management.

Earlier in his welcome address, the Chief Host of the Nigeria Travels Mart Colloquium, 2019, Mr. Simon Tumba, called on the Federal Government to consider a Public-Private Partnership model in its effort to change the face of airports in the country.

“For decades we have seen the state of our airports, especially our major gateways in Lagos, Abuja, Enugu, Port Harcourt, Kaduna and Kano. Over the last few years the Federal government has made investments to enhance the customer experience in these airports. Truth be told; we are lagging behind, despite the efforts of the Federal Airports of Authority /FAAN),” said Tumba.

He said the Federal government has approved N14 billion ($40 million) for the renovation of the Murtala Mohammed International Airport, Ikeja, but it is not enough for an emerging market like Nigeria, which has the potential to become a global aviation hub.

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He said: “The government needs to think out of the box! Our humble opinion in NTM is that the government should explore a Public Private Partnership (PPP) and Concession our airports carrying along the workforce at FAAN. With Nigeria’s God-given natural and Human Resources, and a solid leapfrogging plan and strategy, we should be aiming for a futuristic airport of $2-5billion.We have the population, the market and geographic position to make and realize such aspirations.”