The MMA2 Imbroglio


What transpired during the recent public hearing organised by the National Assembly and the lawmakers’ disposition on the problems hindering development in the aviation sector were clear indications that the legislators are actually interested in the development of the aviation sector to ensure its contributes more to Nigeria’s economic growth.

This was confirmed on Monday when the Senate Committee on Aviation visited the Murtala Muhammed International Airport, Lagos to review the projects executed in tandem with the appropriations approved by NASS for the aviation agencies.

The Vice-chairman of the Committee, Senator Bala Ibn Na Allah said that collectively and individually many people have contributed to the poor growth of the industry but there should be a new commitment and resolve to do things better in order to grow and develop the industry.

He lamented the huge resources wasted in lame projects that were largely not completely executed and the inflated costs that allegedly were diverted to private pockets.

Industry observers have noted that a key way to resolve one of the major problems that have dogged the industry is to settle the issues concerning the concession of the Murtala Muhammed International Airport domestic terminal, known as MMA2, which was given to Bi-Courtney Aviation Services Limited (BASL) when Royal Sanderton, which won the concession bid was unable to execute the project within a given period. BASL came second to Royal Sanderton in the bid round.

What stoked controversy recently on the concession was a remark credited to the Minister of State, Aviation, Senator Hadi Sirika during his presentation at the public hearing organised by the House Committee on Aviation.

He spoke extensively on why the major airports must be concessioned and insisted that without bringing in the private sector to develop the airport facilities, Nigeria cannot overcome the decay of airport infrastructure, travellers may not be able to enjoy first class airport services as obtained in other parts of the world and that the present eyesore, which the airports constitute may not go away.

Sirika also spoke about the concession of the first airport terminal in the country – the Murtala Muhammed Airport Terminal Two (MMA2), Lagos, operated by Bi-Courtney Aviation Services Limited (BASL), owned by Wale Babalakin.

In his presentation, Sirika compared his planned concession of the airports to the concession of MMA2, which he alleged was not transparently done.

“The proposed concession would be transparent, unlike the Bi-Courtney concession that was not transparent,” Sirika said, thus re-awakening the old controversy over government’s concession of the airport through FAAN.

Also reacting to the alleged lack of transparency in the concession of MMA2 to Bi-Courtney, some industry stakeholders said the Minister must have voiced his personal opinion on a state matter, arguing that his statement was not in tandem with the views of his predecessors, one of whom, Chief Osita Chidoka, who declared openly last year declared that of all the airport terminals in the country, MMA2 was the best.

The conflicting positions of government senior officials on the concession of MMA2 are one of the reasons why many investors are apprehensive about investing in airport concession. There are companies that may indicate interest in the concession of the airports in Enugu, Calabar, Owerri and Port Harcourt, but they are waiting to see how government is able to manage the first concession under the present administration and how it settles the controversy over MMA2.

A former Director-General of the Nigerian Civil Aviation Authority (NCAA), Dr. Harold Demuren, recently expressed worry about the proposed concession. Speaking on ‘The Gains of Airport Privatisation and Concessions in a Dwindling Economy, Such as Nigerian, at an aviation stakeholders’ conference, organised by Check In Nigeria Limited in Lagos, Demuren who said he supported concession wholeheartedly, however, advised government to “review all existing issues and litigations which arose from previous concessions before getting into another concession agreement with new investors”.

He observed that the failure to resolve all the issues concerning the federal government and BASL has led to unending litigations. In one of the court cases, THISDAY gathered, the federal government was ordered to pay BASL N132 billion for breaching parts of the agreement. Demuren advised that this must be resolved first before government can contemplate another concession.

“I’m a bit confused about what government wants to concession. There are already existing issues and litigations in court with some of the airports, which should first be resolved if we want to get the best out of this”, Demuren said and advocated for good corporate governance, transparency and reduction of government interference in the activities of the aviation agencies.”

Going by all the documents Babalakin presented at the public hearing to support his claims that FAAN obeyed the letters of the agreement between his firm and government in the breach, Sirika’s claim may not be convincing. Babalakin told the lawmakers that it was incontestable that FAAN was, indeed, the party that blighted the concession by breaching major parts of the agreement and disobeying the orders of various courts and the arbitration committee with reckless abandon.

According to Babalakin, the uncooperative attitude of FAAN had stifled the development of more facilities in MMA2, including the hotel and conference centre, mono rail, fuel hydrant and a power plant, adding that only 30 per cent of the terminal was being put to use as FAAN and other regulatory agencies have refused to permit the operation of regional flights from the facility as approved. He pointed out that the Federal High Court had awarded damages against the federal government to the tune of N132 billion, with interest accruing in favour of Bi-Courtney till date.

Reacting to Babalakin’s allegations, FAAN, represented by its General Manager, Legal Services, Mrs. M. Alphonse, said at the public hearing that GAT was not covered under the concession agreement, even when the agreement says domestic flight operations from Lagos must emanate exclusively from MMA2. She also said the exclusivity under the concession agreement is “patently unreasonable” as it inhibits the development of other airport terminals in Lagos and is also anti-competition. Mrs. Alphonse further argued that FAAN was not a party to the suit instituted by Bi-Courtney and only became aware after judgment had been entered in favour of the company.

On exclusivity, Babalakin countered FAAN and observed that the exclusivity in the concession agreement envisaged an increase in passenger traffic and therefore included a clause that in the event of a need to expand or develop additional terminals, Bi-Courtney would be given a right of first refusal, which FAAN never respected.

Pitfalls in the concession of MMA2 to BASL should be a guide to the present planned concession of airports. Care should be taken to ensure that no other interests over rides that of FAAN in giving out the airports in concession because it is the agency that would bear the brunt of whatever infractions that may accrue over the transaction in future.