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Aviation Sector Investments: The opportunities, oppressive forces and stumbling ‘BUTs’

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Nigeria, Africa’s most populous country with a population estimated at over 200 million is a logical destination for aviation investments for many reasons. Regardless of whether opportunities are sought in cargo handling, airline or passenger services, the need for these services is going to grow.

Besides a robust population figure dominated by youths, the challenges posed by insecurity and decaying road infrastructure, the growing middle class and a demography increasingly becoming conscious of efficiency in product delivery logistics and personal time management, are some of the reasons why investing in the aviation sector may present some exciting prospects.

The National Bureau of Statistics (NBS) reported that in the first quarter of 2021, the number of domestic passenger movement (arrival) across all airports was at 1,274,350, while departure stood at 1,247,797. These numbers are lower when compared with figures recorded in the first quarter of 2020 at 1,595,810 (arrival) and 1,531,688 (departure) due to the impact of COVID-19 pandemic. Similarly, arrival in second quarter 2021 stood at 1,375,002 and departure at 1,381,696. These figures are higher when compared with the same quarter of 2020 which was reported at 1,225,557 and 615,243 respectively.

For international travel…

The statistics on international travel places arrival figures in Q1 2021 at 212,977 while passenger departures stood at 222,453 in the same quarter. Similarly, second-quarter 2021 recorded 220,171 (arrival) and 232,501 (departure).

The growth rate of foreign movement of passengers in the second quarter of 2021 was 5,852.18% (arrival) and 1,338.48% (departure) showing better performance of the sector.

Where are the opportunities?

Infrastructure gaps

There are only five designated international Airports in Nigeria, one each in Abuja, Lagos, Kano, Port Harcourt, and Enugu. For a population of over 200 million, this figure is pretty dismal. Worse, of the five international airports, only Lagos and Abuja are the busiest. That is not all.

Recently, the minister of Aviation, Hadi Sirika announced that the nation would soon concession the international airports, assuring Nigerians that the country isn’t selling her assets but concessioning them in a manner that would modernise the airports and have them operated to create more jobs as well as generate more revenue for the country.

If there were no investment opportunities in this aspect of the aviation sector, there would be no need for this major step towards engaging the private sector to give the assets a facelift.

Muyiwa Lucas, an Aviation consultant, explained that the government has no business in business, adding that there are investment opportunities in the airports that several private investors can turn around.

“The government should give them up to someone who would operate them and make them better. It will become more profitable, passengers will enjoy better services and the industry will grow exponentially. After an agreed period, the assets can be returned to the government. 

“The airport terminal buildings are indeed crying for investors touches, as they would generate revenues from non-aeronautical resources, while all other facilities at the airports and existing concessions, outside the airport terminals, also present great opportunities as well,” Lucas said.

Cargo operations

The spokesperson of the Nigerian Civil Aviation Authority (NCAA), Sam Adurogboye, in an exclusive interview with Nairametrics, disclosed that there are several areas in the aviation sector where investors can pitch their tent. Some of these areas are the Cargo & Agro-allied terminals, Aviation leasing, Hangar/Maintenance, Repair and Overhaul (MRO), Ground handling support services and ICT Support Services among others.

He stated that Nigeria has maintained a high level of safety with no accidents involving commercial aircraft recorded in recent times, referencing the activities of the Accident Investigation Bureau (AIB). Although he acknowledged that there is still more progress to be made, he stated that the air travel safety level maintained so far is a positive for Nigeria and a major attraction to investors.

“There are more investments opportunities in the sector. We are currently treating and vetting about 23 applications. More are still coming to operate in Nigeria because they know and believe that there are several opportunities in the sector.

“Most importantly, a lot of them have seen the way safety issues have been tackled in the sector recently. These are the factors that must have boosted investors’ confidence in the Nigerian airspace.

“It’s a good thing to desire to come onboard. The process is a black and white thing. What you need to do in one phase to go to second, second to third, you fulfil it and the team that is in charge works accordingly. It is not by the Director-General at any particular time. It’s a team of engineers, airworthiness inspectors, medicals, etc. It’s a team and nobody can influence the other’s decisions,” Mr Adurogboye said.

Hurdles ahead

Like other sectors, the Aviation sector also has its challenges, which some operators believe could scare investors away from participating. One of such hurdles curbing the sector’s growth is access to cheap credit.

Capt. David Olubadewo, Managing Director, Starburst Aviation Limited and a Nigerian based in the UK, explained that most of the airlines and other industry stakeholders could not access cheaper loans because banks believe that the sector is too difficult to invest in.

“But that is wrong. It is not different from other sectors. We are all in it to make a profit at the end of the day. I don’t obtain loans from Nigerian banks, because I will end up with a 25% loss or more, but that is not happening in the UK where I pay far less interest rates.

If I take such a loan in Nigeria, it means I am -25 percent (interest rate) in red, and by the time you get to the top, you are owing millions. I cannot approach any of the banks to give me local money to do business in Nigeria. If I can go through that, you can imagine the experiences of the airlines.”

The Chairman, West Link Airlines, Capt. Ibrahim Mshelia lamented that the Nigerian aviation industry is battling too many oppressive forces, including processes that lead to the acquisition of Air Operator Certificate (AOC).

Mshelia observed that a situation where an operating airline was compelled to renew its AOC every two years was anti-progress and a setback to the commercial airline business in Nigeria.

He said, “With the lopsidedness in the procurement procedures and the operational limits of AOC holders in Nigeria, there is an urgent need to amend our Act and policy in this area, to empower the civil aviation to also break down the certification process of our commercial operations.

“The word AOC has been so over-valued like a village masquerade that appears once in five years. This is not supposed to be so. Operation specifications in this regard are the masquerade and not the certificate.”

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