Africa: Nigeria Requires $3 Trillion To Address Infrastructure Deficit In Aviation Sector

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Nigeria will require $3 trillion to address infrastructure deficit in aviation sector according to a study by the African Development Bank (AFDB).

This is just as Aviation Safety Round Table Initiative (ASRTI), a professional body in the sector urged the government to commence the process of modernizing the infrastructures in the industry to attract air traffic growth and more patronage of air transportation

According to thewillnigeria.com, this translates to $30 billion per year over the next 30 years in infrastructure spending.

Nigeria is ranked 23rd out of 54 countries in Africa in terms of infrastructural development, scoring less than 30 per cent by the African Development Bank (AFDB) rating.

To fix the infrastructural needs at airports alone across the country will require over N1.5 trillion or $5 billion, according to the survey. The estimate is in line with the Federal Government’s aviation development roadmap, which is aimed at transforming 24 airports to world standard through the public and private sector investment model.

A few years ago, the African Development Bank (AfDB), following the survey of the infrastructural gaps, disclosed that the country’s needs were indeed huge and the Federal Government could not afford the cost amid other competing social obligations.

READ: Africa: Chinet: Growing Air Cargo Value Chain in Nigeria’s Aviation Sector

Also, the International Air Transport Association (IATA) has called on member states to improve their airport infrastructure in order to secure the aviation industry for the future.
According to IATA, due to the fast growing passenger traffic projected to rise to 7.8 billion in 2036, there is a need to urgently address infrastructure challenges in order to secure the industry’s future.

But stakeholders in Nigeria’s aviation industry have called for private capital investment and good corporate governance as factors that can address the huge aviation infrastructure deficit in the country.

Speaking at the Business Breakfast Meeting of Aviation Safety Round Table Initiative (ASRTI) held recently, with the theme, ‘Financing Aviation Infrastructure Deficit In Nigeria Using Private Capital: Challenges and Prospects,’ the Chief Executive Officer of Quorum Aviation, Mr Abiola Lawal, said that, going by the AFDB study, it was obvious that this could be equated to spending six times the size of the projected 2021 budget of about N13.08 trillion.

Regretting that Nigeria depends heavily on oil and gas earnings for most of its foreign exchange earnings, which is over 70 per cent, Lawal identified the factors hindering infrastructure funding as lack of proper sustainable fiscal incentives; concerns about continuity of government policies and transparency concerns.

Other challenges, according to Lawal, include inconsistent legal framework, contract enforceability and extremely long circle to put contracts together.

READ: Africa: Are Aviation Agencies the killers of Non-Oil export?

Citing an example with the Asaba Airport, the aviation expert said, “Asaba Airport concession took us almost 5 years. The current government concession of four airports will take a similar timeframe.”

Listing other challenges of employing private capital funding infrastructure, Lawal added, “In Nigeria, there is relatively low Return On Investment (RoI) and relatively high risk. There is also limited access to equity capital, in addition to lack of specialised domestic Private Equity (PE) firms with aviation focus and capacity.

Others are high cost of capital in form of high interest rate, which is 20 per cent average with banks. Even intervention funds High Single Digit (nine percent). Also, there are short tenure facilities, which are too short for infrastructure funding in the long term. There are difficult collateral requirements”.

Proffering solutions, Lawal stated that there is a need for massive private equity funding in aviation infrastructure, viable PPP structure and incentives.

According to him, there should also be an access to a very low single digit debt of 2.5 per cent and a long term debt tenure of 10 to 20 years.

Explaining further, he said, “There should be specialised instrument to derisk investment, Sovereign Wealth Fund investment in infrastructure. Others are Ease of Doing Business, p to multilateral DFIs, such as the World Bank, AFDB, and AFC. There should also be focus on viable airports to develop and attract private capital”.

In his presentation, President of ASRTI, Dr Gbenga Olowo, emphasised the need for the country to begin to address the existing infrastructure challenges and take advantage of existing improvement prospects.

Prof Bamidele Badejo of the Department of Geography, Olabisi Onabanjo University said that although there was a need for private capital investment in aviation infrastructure, the Infrastructure Concession and Regulatory Commission (ICRC) should collaborate with the industry to first, identify specific existing deficits, while private capital entrepreneurs must make full disclosures of their assets and liabilities and prove their competence before approval, as against what has happened over the years that contributed to failure of Public Private Partnerships on infrastructure.

While presenting his paper, the former President of the International Civil Aviation Organisation (ICAO) and current coordinator of International Partners For Aviation Development, Innovation and Sustainability (IPADIS), Dr. Olumuyiwa Aliu, noted that corporate governance had become a cultural problem in Nigeria, considering the fact that Nigerians are in the Diaspora helping other countries with their infrastructure challenges and getting applauses.

The importance of good corporate governance was emphasised by all the speakers at the event, including Mr. Raphael Kuuchi, Consulting Director, African Airlines Association (AFRAA), Mrs Adebimpe Ajimotokin of Guarantee Trust Bank and Engr Femi Adeniji.

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