SKYROCKETING COST OF AIR TRAVEL

S.A. BELLO contends that government must ensure that consumers are not exploited through over-pricing

In recent weeks, the cost of air travel within Nigeria has become so high that it is mostly the super-rich that can afford it. In fact, during the last Christmas season even the super-rich were grumbling.

 The public reaction to the increase could be seen on the print and electronic media. A moderate rise in air fare can be justified considering the 250 percent devaluation of the Naira by the Cardoso-led Central Bank of Nigeria in 2024. The aviation industry in Nigeria has a large proportion of dollar-denominated cost inputs as a result of wet leasing and higher maintenance cost of tokunbo planes which constitute a large proportion of their fleet.

      Based on the above facts, the rise in fare is not unexpected, however, what is most unexpected and disturbing is the reaction of government to the sharp increase in price. In a recent news media report, the Minister was quoted as saying that government does not regulate the price of air travel in Nigeria. The Director-general of NCAA, the regulator, also said the same thing about a week ago based on newspaper reports. The latter as the sector regulator is expected to provide professional advice to the Minister in the area of aviation policy. The reason given by both of them is that the sector has been fully deregulated. However, even when a sector is deregulated, the regulator still has the responsibility for consumer protection. In this case, the administrators of our aviation sector seem to have left the consumers at the mercy of aviation service providers. This is not in accordance with international best practices in service regulation. While commending NCAA for its track record in aviation safety, there is much room for improvement in the area of customer care. Consequently, I think NCAA needs a bit of reminder on regulatory best practices in service regulation.

Firstly, even when a sector is deregulated, the regulator must insist on what is called Cost-Based Pricing in regulatory parlance. While allowing service providers to determine the price of their services, government must ensure that consumers are not unnecessarily exploited through over-pricing. Operational inefficiency, poor procurement policies, the insatiable appetite for windfall profit are factors that increase operational costs. These are eventually passed on to consumers through unjustifiable price increases. It is the responsibility of the regulator/government to protect consumers from such disproportionate 

price increases. In fact, the recent proposal by FCCPC to engage the airline industry on pricing is an indication that the regulator has abandoned one of its cardinal responsibilities.

Secondly, the regulator must be aware that there is possibility of collusion among service providers either by design or by default. The regulator must be able to detect any indication of such anti-competitive practices that can lead to price fixing. The economic theory that competition will take care of price control is not always true in practice. There are some airports in Nigeria that are serviced by only one airline. In such routes there is absence of competition and the regulator must step in to avoid customer exploitation.

Lastly, it appears there is no level playing field as far as regulation of services is concerned. Government control prices in some sectors while others are allowed to charge whatever price they want without any control. For almost five years government prevented telecom operators ( MTN, AIRTEL, GLO, etc) from increasing telephone tariff. Even when it eventually approved price increase, government only allowed fifty percent of the increase requested. Also NERC tightly controls tariff charged by electricity distribution companies. Why should government control the price of services in the deregulated telecom and power sectors while leaving the aviation sector to charge whatever price they wish under the guise of the same deregulation? All service sectors should be treated equally. All animals are supposed to be equal, but in Nigeria, it appears some animals are more equal than others – according to George Orwell in his classic satire “Animal Farm.” 

The Minister should direct NCAA to pay more attention to consumer protection by ensuring that tariff charged by airlines are reasonable, fair and justifiable. 

 Bello, former EC, NCC, writes from Abuja