MMA2: Controversy over an Agreement

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On Sunday, the management of Bi-Courtney Aviation Services Limited (BASL) celebrated 10 years anniversary of the Murtala Muhammed Airport domestic terminal known as MMA2.

BASL built and is operating the terminal on Design, Build, Operate and Transfer (DBOT) arrangement. The terminal epitomises the first successful Public, Private Partnership (PPP) in the aviation industry. It was inaugurated in May, 2007 by the then President, Chief Olusegun Obasanjo.

Over the years, the terminal, which according to air travellers, is the best managed terminal in Nigeria, has been dogged by controversy over the tenure BASL would manage it before it is given back to government through the Federal Airports Authority of Nigeria (FAAN) and the conditions given in the agreement signed between government and Bi-Courtney.

The Chairman of BASL, Dr. Wale Babalakin noted during the anniversary that the agreement stated that no other domestic terminal would operate in Lagos during the tenure of BASL management and ownership of MMA2 and if any concession of another domestic terminal would be done during this period, Bi-Courtney would be given first option of refusal. Babalakin also noted that the tenure for the PPP arrangement was for 36 years, contrary to the reports emanating from FAAN that it was 12 years.

Since the controversy over the agreement 10 years ago, many investors have been expressing doubt over the ability of government to honour its own agreement.  Similar agreement was reached in 2006 whereby the Bureau of Public Enterprises (BPE) gave out in concession the Nnamdi Azikiwe International Airport, Abuja to a company that won the bid through due process under the supervision of the International Finance Corporation (IFC) as transaction adviser, but that concession was nullified by the in-coming Yar’adua administration. There were other such concessions in other sectors of the economy that were nullified by the government after  successful acquisition by the private sector.

All these, industry observers say, cast doubt on the credibility of the government to honour agreements. But there are allegations too that due to the insincerity of government officials  who preside over these transactions, they accepted lopsided agreements that tended to favour the private investors at the expense of government and the interest of the people.

For example, a FAAN source told THISDAY that what was written down and agreed upon was that the concession of MMA2 by Bi-Courtney would last for 12 years and not 36 years. But the source kept mum over the agreement that only the terminal should operate as the only domestic terminal in Lagos during the period of the concession.

“The former President, Chief Olusegun Obasanjo denied that it gave B-Courtney 36 years to operate the terminal. If it is true let them bring where that was written. It was a backdoor arrangement, which we knew. It is the usual act of impunity, which people who have access to the Presidency use to garner things unjustly to themselves and corner the wealth of the people,” the FAAN official said.

But when asked why the rest of the agreement was not honoured, the source queried: “How can government honour that agreement that for 36 years no other domestic terminal will be built in Lagos. Is that possible?”

But THISDAY spoke to some industry insiders who said that the initial 12 years FAAN is insisting the concession should last is a non-starter “because it is already two years to the 12 years and I can tell you that Bi-Courtney has not even recouped half of the money it spent on the terminal. The original projection was that all the airlines on domestic operation would operate from the terminal but FAAN aborted this part of the agreement, so over the years, Bi-Courtney has been bending backwards sourcing money elsewhere to sustain the operation of this terminal. I know this because I am an insider. You can go and ask around, infrastructure concessions all over the world take about 30 to 50 years. This is because it is meant to provide public service, so the charges are usually in small margins so for the investor to recoup his investment and even make profit, you have to give him a long term agreement,” the source said.

The source added that for government to attract the private sector to invest in public infrastructure, it should not only honour its agreements but also provide incentives to the investors, noting that for brazing the challenge despite all the discouraging signs that the Nigerian government may not be a good business partner, Bi-Courtney should have been encouraged at least by honouring the agreement it signed with the company.

Babalakin during the anniversary ceremony of 10 years of MMA2 explained: “MMA2 was built on a premise, which was that all domestic flights from Lagos state must come from airport operated by MMA2. It was signed. In furtherance and in obedience to this provision, as soon as MMA2 was ready, government closed the GAT (old domestic terminal called General Aviation Terminal) completely. One day we woke up and Arik airline began flying from GAT in deterrence of this clear provision of the law. The agreement provides that if there is a need to increase the capacity of MMA2 to accommodate domestic traffic, government hereby guarantees and assures that MMA2 will be the operator. So, they had anticipated that it was possible that somebody will try to break the law, even if you break that law, the agreement is the all revenues must come to us.

“When this happened, we complained. We now went into arbitration; this arbitration was by the federal government. The Attorney General of the Federation set up an arbitration panel of three members from Bi-Courtney and three members from the federal government. The arbitration unanimously was all in favour of Bi-Courtney, stating that one, the concession is for 36 years. Two all revenues from domestic traffic are for Bi-Courtney. Three, general aviation terminal in its entirety belongs to Bi-Courtney; four if there is a deviate person operating from GAT, he should pay directly to MMA2. This was the tribunal set up by the federal government. We had no choice than to go to the court, when this persisted.”