As Controversies Rock FG’s Concession Plan


Chinedu Eze writes that since the federal government declared that it would concession terminal facilities in four major airports in the country, the plan has been fraught with controversies and fierce resistance from labour

On November 22, 2006, the International Finance Corporation, the private sector arm of the World Bank Group, reported that it has successfully concluded an advisory mandate that mobilizes private management expertise and capital for improved operation of Abuja’s Nnamdi Azikiwe International Airport.
The IFC advised the Nigerian government on the selection of a concessionaire to operate and manage the airport for the next 25 years.

According to the IFC, “The winning bidder, confirmed today by the Nigerian government, was the Abuja Gateway Consortium (AGC), which changed its name from ‘The Naira*Net Consortium.’ AGC is a special purpose vehicle that was established between domestic and international companies with the Airports Authority of India as the contracted airport operator. In concluding the transaction, IFC benefited from the donor support of DevCo, a multidonor program affiliated with the Private Infrastructure Development Group and supported by the U.K.’s Department for International Development, the Dutch Ministry of Foreign Affairs, the Swedish International Development Agency, and the Austrian Development Agency.

“The winning bidder will pay an initial concession fee of $10 million and variable annual concession fees of 18.1 percent of gross revenues as part of its contract to operate and manage the airport. The net present value of total concession fees paid to the Nigerian government is estimated to be $101 million over the concession term.”

What is noteworthy about the report above is that the federal government under the Late Musa Yar’adua administration nullified the concession. THISDAY reported then why the concession was nullified.

“The Minister of State for Aviation, Mr. Felix Hyat yesterday (17 April, 2008) told the Senate Committee on Federal Capital Territory (FCT), probing the sale of Federal Government houses and other related matters, that President Umar Musa Yar’adua cancelled the concession agreement on the Nnamdi Azikwe International Airport to Abuja Gateway Consortium due to lack of action plan by the consortium.
“Hyat said the cancellation of the concession was based on his submission to the President. The concession was packaged under the administration of former President Olusegun Obasanjo.”

Not a few were aghast that the concession was nullified despite the fact that it was supervised by IFC. But industry analysts however posited that the federal government must have taken its decision based on what the former Minister of State said above but expressed the worry that the Nigerian government has a penchant for rebuffing agreements.

The Abuja airport example and other similar concessions and agreements that were nullified by government at different times were the reason why many investors are said to be sceptical about investing in Nigeria, especially in the area of infrastructure. Nigerian airline operators support concession because they believe that the concessionaire would upgrade facilities and modernise the airport, which would enhance their operations, but they always emphasised on the transparency of the concession process.

The Minister of Aviation, Hadi Sirika had variously assured that the concession programme would be transparent and workers of the Federal Airports Authority of Nigeria (FAAN) would not lose their jobs. The government also said it would concession only the terminal facilities in Lagos, Abuja, Kano and Port Harcourt, but some industry stakeholders insist that those viable airport terminals should not be concessioned because they provide the revenues that serve as mainstay of FAAN’s operations.

Secretary General of Aviation Round Table (ART) and the former Commandant of the Murtala Muhammed International Airport (MMIA), Lagos, Group Captain John Ojikutu (Rtd.) said that it is not only the facilities at the four major airports that should be concessioned but all the federal government airports.
He also said that each major airport should be concessioned with three other airports.

“First, don’t concession only the four airports but all the federal airports; secondly, each of the four international airports must go for concession with at least three others of the remaining. Thirdly, concession must be done for the non-aeronautical services and facilities such as the terminals (passengers/cargo) with associated aprons and associated car parks. We must however ensure the real or actual values or worth of each terminal based on the airports traffic figures and services rates,” Ojikutu said.

Babalakin’s Experience
In a press conference last week, the Chairman of Bi-Courtney Aviation Services Limited (BASL), Dr Wale Babalakin narrated his experience about airport facility concession and how his company developed the domestic terminal of the Lagos airport, known as MMA2 and reiterated that government does not keep to agreements.

Babalakin said he chose to go for the concession when Public, Private Partnership (PPP) was decided on and his company built the terminal and started operation in 2007, noting that since 14 years ago the terminal has remained the best in Nigeria.

“Then came a proposal for PPP, nobody has done one before, so it was plunging into the unknown. The guarantors did not have an idea, the group we represented had never done it before, the concessionaire was just taking a leap of faith. I just want to let you know that one of the most important things in infrastructure development is the rigour, the intellectual work in producing design. Nobody gave us the chance of completing this project (MMA2), nobody. I remember once or twice the Minister threatened to cancel it, but when he was summoned, the only reason he gave was that it is not possible for anybody to finish it, that even a bank would sweat to finish it. And we said by the grace of God we would finish the project.

“We took our model from South Africa. South Africa finished the domestic terminal around 2003/2004. Since then that domestic terminal has been enhanced to an international terminal with a domestic wing, and it is still developing. Nigeria is not moving forward. Whatever you see here (MMA2) is less than 30 per cent of what we planned. But unfortunately the bane of Nigerian development is that the regulator (FAAN) sometimes is the handicap to development. We finished this airport on the understanding that it will be the only domestic terminal in Lagos,” Babalakin said.

He expressed sadness that as part of the agreement was supposed to have the General Aviation Terminal (GAT), now known as Terminal 1 of the domestic facilities of Lagos airport. To his dismay, FAAN took the terminal and developed it and has been managing it since then.

“The worst thing that can happen to an entrepreneur is for your competitor to have government money and you have to generate every kobo. It is up to let the world know that it is totally unacceptable for a regulator to be competing in the same sphere; it is totally unacceptable. If you are a regulator, regulate. But you can’t be competing when you have regulatory powers to hinder your competitor and you are still competing. As you all know, the case of the GAT, we had won the arbitration, we have won in the high court, and six court of appeal decisions were dismissed, and we have won in the supreme court; yet it has not been handed over to us. On a small note, you are being unkind to Bi-Courtney, but on a larger note, you are de-marketing Nigeria.

“Anybody who wants to invest in Nigeria, the first thing they are going to ask is to find out is what happened to the other concessionaires. And if you are an international body and you find out that the resolution process produced a result that was ignored, you will not bring your money to that country. The investors you will find will be those who are cavalier, those who don’t have a very serious setup,” Babalakin who is a practicing lawyer said.

Keeping To Agreements
Babalakin said that the failure to keep to agreements would continue to be a sore point in Public, Private Partnership with the federal government.

He explained that this is because there would always be a disagreement on every deal signed and also recalled that under the agreement that approved BASL to develop MMA2, it was agreed that regional flight operations should emanate from his terminal.

“We have been granted permission to start regional flights from this terminal. We have signed an agreement with government, till date there is no implementation of the agreement. All the airlines want to start regional flight from here. We have prepared everything, I believe about a third of this place (the terminal) has not even been used yet and it has never been opened, all preparatory for regional flight had been done. Why are we unfair to the airlines? Why should an airline bring a passenger from Abuja to Lagos, and then because it wants to go to Ghana, it has to taxi to international terminal. The fuel cost for taxiing from here to international runway is enormous. We do this either because we don’t care or we don’t know. But gentlemen, we need to make the authorities know that it is only fair for us to commence regional flight from here,” Babalakin said.

But THISDAY checks revealed that domestic and regional flight operations cannot take place in the same terminal; unless there are clear-cut separation, whereby domestic passengers and passengers on regional destinations would not have a point of contact. Industry security experts said it is against the International Civil Aviation Organisation (ICAO) regulations. However, Babalakin said that the terminal facility effectively separates the two types of travellers.

But many industry stakeholders support the plan to concession the airports but doubt government’s sincerity.
The Chief Operating Officer of Tropical Arctic Logistics (TAL), Femi Adeniji said he is against airport concession because he is doubtful that government would do the right thing.
He noted that without the unions support for the concession they would eventually abort the concession agreements after commitments have been made.

“I am totally against the airport concession because the government interference would not allow this to work. They would not honor any agreement if executed and because concession works somewhere else does not mean it would work in Nigeria. A country where work ethics is very low, no dedication to work, customer service is seen as doing you a favor. The bottom line is the inexperience of any local organization on concession and the government sentiments of not allowing outsider to do the right thing would not help either.

“The unions would carry over the issues with FAAN and inefficient attitude to the new operator. Concession would not work in present Nigeria. Lots of cleaning needs to be complied with prior: repairs of airport equipment such as boarding bridge, passengers lobby, toilets, luggage conveyor belts, lights around the airport terminals, airconditioning system, water leaks from the roof, roads around airport, parking lots operation, touts issues, security, luggage carts replacement etc. Aviation needs the right Minister that would turn things around, airports should give you a good impression of the country,” he said.