FG Targets $2bn FX Earnings Yearly from New Aviation Initiative

Muhtar Usman
Director General of the Nigerian Civil Aviation Authority (NCAA), Captain Muhtar Usman

Considers tough reforms to mobilise higher revenue

Obinna Chima and Chinedu Eze

The federal government has disclosed that it has taken steps to designate strong, viable indigenous carriers to operate international destinations in order to grow the country’s foreign exchange (FX) earnings by $2 billion yearly through ticket sales.

Also, given the country’s low revenue generation level, the government is considering what it described as tough measures to achieve higher revenue.

It said it has also certified local aircraft maintenance organisations to stop Nigerian airlines from taking their aircraft overseas for major maintenance checks.

Director General of the Nigerian Civil Aviation Authority (NCAA), Captain Muhtar Usman, told THISDAY that in all the recent Bilateral Air Service Agreement (BASA) Nigeria entered into, the government also made it clear that foreign airlines must have to partner domestic operators.

He said the government also designated Nigerian carriers to operate long haul destinations, just as he projected that in the next four years, Nigeria would save over $2 billion annually through the initiative when the policy is fully implemented.

This he said would enable the Nigerian carriers benefit from skills acquisition, fleet renewal and revenue generation.

“Nigeria needs very strong viable airlines to operate those routes. The government has done what it needs to do, designate the operators to operate those routes. I know airlines have been designated along the routes you mentioned such the United States, United Kingdom and some other countries both in the Middle and Far East. It is for the operators to explore it and operate because we have other international airlines coming from those countries.

“The caveat is always for that operator to meet the requirements for both countries they want to operate into. So nobody who has been qualified has been denied the opportunity to go. It is in the interest of Nigeria; that is why we have been promoting our operators to operate along those routes because we will be able to attract foreign exchange or at least conserve what we have instead of repatriating them through foreign airlines,” the Director General said.

He added that with viable and strong airlines, more jobs would be created in the sector, adding that it would promote competition, “which may help in stabilising the market and also bringing down the cost of air fares and also improvement of service.”

Usman said most of the BASA Nigeria had signed has partnership clause with indigenous carriers.

“Most of the bilateral air service agreements signed by Nigeria have those provisions in place, code sharing and so on. But the airline has to meet the requirement of the other airlines.

“So, it is meeting the requirements of both airlines to harmonise and operate. Provisions are always there for Nigerian operators to explore and indigenous carriers that were designated participated in most of the bilateral air service agreements Nigeria signed with these countries,” he added.

Usman stressed that the objective of government to approve and certify indigenous aircraft maintenance organisations was to encourage them to conduct major aircraft maintenance locally and in doing so save the country of over $1.7 billion annually, which is near the amount Nigerian carriers spend in maintaining their aircraft overseas.

Recently Aero Contractors and Seven Star Global received Aircraft Maintenance Organisation (ATO) certification from NCAA to conduct maintenance on Boeing and other aircraft types up to C-check. Aero has since been conducting checks on Boeing B737 classics.

Usman said the objective of granting them licence was to stop Nigerian airlines from taking their aircraft overseas for maintenance.

“Well, that is the essence; in fact we will hope that they can even go beyond C-check and up to D-check if necessary. At least the maintenance facilities will be able to do C-check so that we can conserve that foreign exchange taken overseas.

“This will also create employment and also grow experienced manpower in our country and within the region. Yes, we will continue to encourage and ensure that they meet and they continue to meet the certification that we have given them,” the NCAA boss added.

Mulls ‘Tough Reforms’ to Mobilise Higher Revenue

Meanwhile, given the country’s low revenue generation level, the federal government is also considering what it described as tough measures to achieve higher revenue.

Minister of Finance, Mrs. Zainab Shamsuna Ahmed, disclosed this while speaking on the topic ‘Revenue growth & Economic development: Expectations for 2019,’ at the Deloitte Nigeria 2019 Economic Outlook held in Lagos yesterday.

The minister reiterated that the government was planning higher Value Added Tax (VAT) and excise duties for carbonated drinks produced in Nigeria, “for which companies do not pay excise.”

According to her, “We still need to do more to achieve higher revenue outturn. Peer comparison on our ability to convert Gross Domestic Product (GDP) to revenue for capital and social investment- key drivers of sustainable economic growth -show that we have a lot to do to catch up. Nigeria must mobilise significant resources to invest in human capital development and critical infrastructure.

“Indeed, some reforms will be tough, but it must be done if we will look at the facts and be frank to ourselves. Given the low revenue to GDP ratio (currently at about seven per cent), we must pursue optimal revenue generation,” she added.

Speaking further, Ahmed said the federal government’s recently launched Strategic Revenue Growth Initiatives (SRGI) aims to boost revenue generation in order to meet “our targeted revenue to GDP ratio of 15 per cent as set out in the Economic Recovery and Growth Plan (ERGP).”

The minister noted that in 2018, the federal government recorded revenue of N6.9 trillion, which according to her was unsatisfactory.

She listed some of the key achievements of the federal government to include the Treasury Single Account (TSA) implementation, IPPIS implemented across several MDAs to improve public service productivity and increase government revenue and the establishment of Efficiency Unit to cut costs and block leakages.

“We will continue to ensure fiscal discipline and optimise some revenue improvement initiatives that have been achieved thus far. By prioritising revenue generation, the federal government intends to continue significant investments in human capital and critical infrastructure to sustain the growth trajectory.

“Our social investment programme has moved from 0 to 13.5 million in three years, which is the fastest in the world. On debt management, our debt level is sustainable but debt service is high compared to revenue collections, indicating the need to prioritise revenue generation. We have the capacity to service our debt,” Ahmed added.

She pointed out that global trends revealed slowdown in global economic growth that was exacerbated by global risks, which were discussion highlights at the recently concluded 2019 World Economic Forum in Switzerland.

In his presentation, the Minister of Budget and National planning, Senator Udoma Udo Udoma, confirmed that the government was considering the privatisation of some power plants, adding that the government does not want to increase its borrowing.

Owing to its decision not to raise the level of borrowing, Udoma said, “Capital expenditure has been reviewed downwtrillion he 2019 Budget.”

In his contribution, a senior lecturer at the Lagos Business School, Dr. Doyin Salami, pointed out that the direction of global interest rates is pretty much established presently, saying “they are headed up.”

“Nigeria cannot afford a situation where industrial capacity is as low as it is. Our industry must contribute a quarter or three quarters of GDP for us to grow,” Salami added.