With records indicating that there has been persistent decrease in passenger traffic in Nigeria, both on domestic and international destinations, Chinedu Eze writes on how this is affecting Nigeriaâ€™s pivotal role in West and Central Africa, as the country with the highest passenger movement
When the Single African Air Transport Market (SAATM) was conceived many years ago, Nigeria played a major role in the actualisation of the policy because, as it stood to benefit hugely from a liberalised airspace in the continent. Everything was going for Nigeria then because its now defunct national carrier, the Nigeria Airways Limited (NAL), was traversing the whole of West and Central Africa with substantial load factor to European destinations, Asia, and the United States.
But by the time SAATM was ratified by the African Union early this year, Nigerian airlines felt threatened. They feared the policy could allow other African airlines to erode their domestic market dominance.
The fear of the domestic airlines may not be misplaced because during the period SAATM was conceived, Nigeria had a robust air travel market with a national carrier and other private sector driven airlines that competed effectively. The country also had a huge travelling population, recording the highest passenger traffic outside North Africa.
But today, the country has no national carrier, the number of airlines has shrunk from 32 to eight, and passenger traffic has also shrunk from 17 million to 13 million per annum, at a time the population of the country is projected to be about 180 million.
Â Economic Implication
Aviation consultant and Chief Executive Officer of Kitari Consult, Ali Magashi, said the aviation industry contributed $0.3 billion to Nigeriaâ€™s GDP in 2016, which indicated a drop from $0.7 billion in 2015. This means that as passenger traffic is depleting, airlines are shrinking along with the number of aircraft in operation, the aviation industry would lose funds, the number of people engaged in the sector would reduce, and the overall economic status of the industry would decline.
Records show that 15, 233, 00 passengers passed through the Nigerian airports in 2016. This was close to the passenger traffic record in 2015, which was 15, 222, 187, and in 2014, which was 15, 335, 772. But it drastically depleted to 13, 704, 215 in 2017.
What this means is that the sector would contribute less to the GDP. Subsequently, there may be massive job losses and more airlines would go under. Ultimately, Nigeria may lose its hub position to another country in West Africa, as countries, like Senegal and Ghana, are poised to develop their aviation sectors and play a leading role in the continent. They have built modern airports and initiated robust and dynamic policies capable of attracting international carriers to their destinations.
The advantage Nigeria has over these countries is high passenger traffic and the country is losing it.
Magashi said in a report he presented recently in Lagos that there were 23 airports in Nigeria, 19 of which are owned by government and managed by the Federal Airports Authority of Nigeria (FAAN). He said this depicted an industry with high government involvement.
He also said 75 per cent of passenger traffic came from three airports, which are Lagos, Abuja and Port Harcourt. Magashi noted that Nigeria had very small airline capacity because many people found it easy to establish airlines with little capital outlay that they could not sustained over time.
The airlines provide small numbers of aircraft, which currently are about 42, with air fares that are relatively high, making it difficult for a large section of the population to travel by air.
Magashi said economic regulations required a paid up capital of N500 million for domestic operations, N1 billion for regional operations, and N2 billion for international operation, â€œwhich is insufficient.â€ He added that currently, only eight airlines were in operation, with two others accounting for 89 per cent of the seat capacity.
However, the International Air Transport Association (IATA) said the aviation sector in Nigeria had contributed $8.2 billion to Nigeriaâ€™s economy and supported over 650, 800 jobs. This was disclosed by IATAâ€™s Regional Vice-President, Middle East and Africa, Muhammad Ali Albakri. He said over the next 10 years, passenger volumes were projected to grow more than seven per cent, exceeding the global average by a healthy margin. For Nigeria, this means an additional 7.9 million passengers would be recorded annually. This, he said, would create significant opportunity to accelerate economic growth, boost prosperity, and support development.
Nigeria hopes this optimism would become reality. IATA may be projecting from the potential of the growing Nigerian population. It may not recognise the debilitating effect of factors such as poor airport facilities, low aircraft capacity, and operational hiccups, like poor supply and high cost of aviation fuel, high insurance premium on aircraft, outrageous taxes by government agencies, and government policies that tend to give advantage to foreign airline operation at the detriment of local operation. These are impediments to the realisation of the aforementioned projections.
Industry stakeholder and former director of Medview Airline, Lukeman Animaseun, noted that limited capacity had hurt the growth of the air transport industry, saying many factors have contributed to this. They include lack of incentives by government and the disposition of airline operators to operating small instead of accepting other investors to partner with them to enjoy economy of scale. He also talked about the owner-manager syndrome.
Animaseun said there were many cities in Nigeria with no scheduled flights even when they have airports. Air travellers only travel to destinations that have flight service and use other means of transport to other destinations. According to him, more passengers will travel by air if many cities in Nigeria are connected by air. And more people will also travel by air if airlines have more operating aircraft, which means that air fares would be lowered to rates that would be easily affordable for the lower middle class. For example, when Aero introduced promo and lowered its online ticket to about N9, 000, many Nigerians who hitherto never travelled by air took that advantage.
The shrinking aviation market means that there would be job losses, reduction in operating funds, aviation fuel marketers would lose substantial part of their market, and Nigeria would no longer be a beckoning market for aircraft leasing, aircraft insurance, and aircraft maintenance. This would also affect aviation handling companies, which would now serve fewer clients and may be forced to downsize their workforce. It would affect aeronautical and non-aeronautical revenues, as FAAN would record less income, and also hurt agencies, like the Nigerian Airspace Management Agency (NAMA) that would rely more on charges from over fliers than the revenues from international and local airlines that operate in Nigeria.
During a public hearing in Lagos on the Single African Air Transport Market, before it was ratified by the African Union in February, other Africans that attended the event kicked when Nigerian airlines expressed opposition to the liberalisation of the African airspace. They reminded the domestic operators that Nigeria had the highest number of airlines registered to participate in the market.Â
But when they called the names of the airlines, it dawned on all that some of the Nigerian airlines in the list had ceased to exist. Nigerian airlines have had an average lifespan of 10 years.
The Airline Operators of Nigeria (AON) opposed SAATM because of current realities. The executive chairman of AON, Captain Nogie Meggison, identified factors that could prevent Nigerian airlines from benefiting from the policy.
However, Minister of State, Aviation, Senator Hadi Sirika, noted that Nigeria spearheaded the open sky policy, which is the Yamoussoukro Decision.
The reasons AON highlighted for opposing SAATM are also the reasons why Nigeria has a shrinking air travel market. Meggison noted the adverse effect of the Nigerian governmentâ€™s unclear and constantly changing policies that threw out domestic airlinesâ€™ feasibility studies, saying, â€œGovernment should come out with a clear policy that will position Nigerian airlines to take full advantage of the open skies.â€
AON also noted that Nigerian airlines suffered from high bank interest rates, which start from about 28 per cent. But many African carriers enjoy access to cheap funds provided and guaranteed by their governments at a maximum of about two per cent. The body also noted that Nigerian airlines paid VAT while most African carriers donâ€™t pay both in their various countries as well as here in Nigeria, adding that this is already a deficit of five per cent on a small margin industry from the start for Nigerian airlines.
â€œAirlines in Nigeria donâ€™t have access to forex. We only get allocation per percentage of our bids, which takes an average of six months. Most of the African carriers are subsidised and being funded by their government,â€ Meggison said.