Tuesday, 28 September 2021 03:24

[OPINION] Concession Plan for Four Nigerian Airports - Reuben Abati

 

Hadi Sirika, Minister of Aviation has since announced the proposed concession of four of Nigeria’s major airports: Murtala Muhammad International Airport Lagos, Abuja, Port Harcourt International Airport, Mallam Aminu Kano International Airport, Kano, and Nnamdi Azikiwe International Airport, Abuja. Despite huge investments in these airports, they have continued to operate at sub-optimal levels, and have emerged as poster units for gross inefficiency. The concession which could last for 20 to 30 years, extendable on the grounds of good performance, would involve only the non-aeronautical assets of the airports. It is essentially a public-private partnership, with the Federal Aviation Authority of Nigeria (FAAN) still in control of the aeronautical operations.

In August 2021, the Transaction Advisors for the new model issued a Request for Qualifications (RFQ), a call for interested parties to submit their bids. Sirika argued that the concession of the airports will boost the country’s revenue and grow the country’s air transport value chain. He assured industry workers that there will be no job losses on account of the concession. Private sector involvement was expected to raise the capacity and profile of the airports.  Every company interested in the aviation sector PPP was expected to have a minimum net worth of N30 billion. Interested international parties were asked to partner with local companies in line with Nigeria’s local content development policy. Private investors will own, upgrade infrastructure, operate and recoup their investments - a win-win “Nigerian Airports Concession Strategy”.

Airport concession is a popular private public partnership option in the global aviation industry.  In Brazil, Japan, France, and Eastern Europe investors engage in similar deals. In 2009, the London Gatwick Airport was subjected to the same process. Other airports around the world in this class include the La Guardia in New York, the Western Sydney Airport in Australia, Clark Airport in Manila, Sangster International Airport in Jamaica, and Sofia Airport in Bulgaria. Back home, Nigeria had its first experience of airport concession in 2003 when as part of the early efforts of the Nigeria Infrastructure Concession Regulatory Commission (ICRC), the Second Terminal of the Murtala Muhammad International Airport, the Domestic Wing in Lagos was handed over to Bi-Courtney Aviation Services Limited (BASL). Concession agreements require diligence, certainty, integrity and the sanctity of contracts.

But what we observe is that the current Airports Concession Strategy is about to end up like that other big project under Hadi Sirika’s watch as Nigeria’s Aviation Minister: that is, the proposed launch of a national carrier called Nigeria Air.  The national carrier was unveiled in 2018 at the Fanborough International Airshow in England. The National Assembly approved money for it. We were told aircraft had been ordered. Minister Sirika continued for a while to tell us that the national carrier would be airborne before 2023. Hmm. Minister of Information, Lai Mohammed, reportedly said the project was not getting off the ground, and had to be suspended, due to “investor apathy.” We seem to be travelling the same route with the concession plan involving the aforementioned four airports. Sirika must be worried that he is fast becoming the promoter of big ideas that die and end up as a waste of state resources and everyone’s energy and time. As someone who has had significant experience in the aviation sector, he should know better, and can do better, but we have not yet seen any concrete evidence of his “expertise and experience.”  

It is particularly striking that no investor of serious concern, except maybe one or two, has responded to the RFQ issued by the Federal Government in August for the four airports under concession. Last week, the Permanent Secretary, Ministry of Aviation announced an extension of the deadline by four weeks, now ending October 25, 2021. Will the investors seize this new opportunity and rush in to make their bids? No.  I suspect we would end up at this same point by that same deadline. There are international investing groups that are strictly interested in airport concessions around the world. They jump at every opportunity. It is their field of play. For them to have ignored Nigeria so blatantly says something about our country’s business environment and the intelligence profiling of Nigeria’s aviation sector. It has nothing to do with the COVID-19 pandemic. What we are dealing with as in the case of the suspended Nigeria Air project, is simply investor apathy. There is Adebayo Ogunlesi, a Nigerian who bought three UK airports, including Gatwick. in six years. Has he shown interest in Nigerian airports?  Why should investors snub Nigeria’s aviation sector? The evidence is in full sight.

Nigeria is an uncertain and unstable business environment. Nigerian authorities also do not respect agreements. Aviation requires humongous, long-term investment. It is not a portfolio, the-tree-branch-breaks-the-bird-flies kind of investment. In the Aviation sector with regard to concession, a major trigger of apathy among other investors would also be the maltreatment of the Bi-Courtney Aviation Services Limited (BASL), the first company to run, upgrade and sustain an airport in Nigeria under a PPP arrangement. Bi-Courtney is a Nigerian Company. It is a veritable demonstration of the workability of the Federal Government policy on local content development. But the same Government has been at war with BASL over the concession for more than ten years. Under the agreement signed with the Federal Government of Nigeria, BASL was meant to maintain the MM2 as it is known for 36 years. A new government unilaterally reduced that to 10 years without reference to the agreement.  BASL was also in 2003 granted the concession to run the GAT terminal of the Murtala Muhammad Airport, the old domestic wing of the Lagos Airport. A new Nigerian administration also blocked that. Bi-Courtney went to court and won, all the way, to the Supreme Court. Nonetheless, the Federal Government of Nigeria has pointedly ignored its own Supreme Court. And on top of it all, Bi-Courtney which has “a right of first refusal” over the General Aviation Terminal (GAT) in Lagos is not even being given a chance.

I can understand the obsession with the fact that foreign investors are not forthcoming – who wants to do business in a country and a sector where no one respects agreements and things can change overnight? I also understand why the Federal Government says state governments of Nigeria should not submit any bids – those who mismanage Nigeria know and understand each other.  The sub-nationals are even worse than the Federal Government. State governments should in fact also concession their own airports, and the airlines that they have set up. There is no guarantee that those investments will live beyond the particular Governor who put them in place.

Extending the deadline for the submission of bids for the concession of the four airports under reference may not change anything. The Federal Government must review its strategy and be seen to be prepared to act in good faith. It must ensure a level playing field for every interested stakeholder in the private sector. It must respect the judgements of the Supreme Court in the matter between it and Bi-Courtney and demonstrate respect for the sanctity of contracts and agreements. It must also show political wisdom. With the current tone and flavour of Nigerian politics, it would be an invitation to crisis to concession an airport in Lagos without Yoruba involvement, the Aminu Kano airport without the major or minor investor being a Northerner, or the Enugu Airport without Igbo representation, or the Port Harcourt Airport without the people of the South South being in charge one way or the other.  This may not be ideal but it is nothing unusual in this context. In some other parts of the world, community-based stakeholders and their interests are prioritised. What Nigeria’s Airport Concession Strategy needs is a re-think, a re-set, transparency and a heavy dose of common sense, the lack of which has so far hobbled Minister Sirika’s plans.  

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