Africa: Punch Editorial urges Nigeria’s govt. not to bungle airport concession process in aviation sector

Nigerian airlines sirika airports covid airspace Concession

In view of the infrastructural challenges in the country’s aviation sector and the controversies that characterised concession agreements in the industry, a newspaper editorial, Punch, as urged the Federal Government not to bungle the airport concession process for four major airports it initiated.

The editorial while commending the government for kick-starting the process added that it must be transparent, corruption-free and the assets must end up in the hands of globally recognised operators.

The editorial reads:
After decades of hesitancy, the Federal Government’s recent invitation of bids from investors to run terminal operations at four “international airports” on a concession basis has been welcomed with cautious optimism by stakeholders.

READ: Africa: Nigeria aviation stakeholders apprehensive over fate of 18 airports as govt. move to concession 4 major ones
In an advertorial, the Federal Ministry of Aviation invited bids from “reputable” airport developers, financiers, operators, or consortia for pre-qualification for the concession of selected terminals under the Public-Private Sector Partnership format.

Long overdue, the transfer of the aviation business is the right way to go, but more indispensably, the process must be transparent, corruption-free and the assets must end up in the hands of globally recognised operators.

Any other outcome will be disastrous to the economy that is already reeling on all fronts and to a sector that has been severely hit by the COVID-19-induced global meltdown. Getting it right this time cannot be overemphasised.

Globally, concessions, Build-Operate-Transfer and Design-Build-Operate projects are options available to governments to draw in private sector investment into infrastructure asset development and management.

Under successive governments, privatisation and concessions in Nigeria have been disreputable, marred by manipulation, cronyism, the exclusion of the best-qualified operators, and frequent revocation of contracts.

The result has been the transfer of assets to the unqualified and the incompetent, and costly financial penalties, ultimately depriving the country of the targeted benefits of massive foreign and domestic private investment, infrastructure delivery, job creation and value chain-wide productivity.

READ: Africa: Aviation Ministry targets 241000 jobs from concession of four Nigerian Airports
The President, Major General Muhammadu Buhari (retd.), who has no signature privatisation transaction to his name after six years in office, should make a difference by doing this round right.

Under the programme, terminal operations at the Lagos, Kano, Abuja, and Port Harcourt airports are being offered to private operators on the PPP model. As one of the “critical projects” of the government’s economic recovery road map, it aims to develop and profitably manage “customer-centred airport facilities for safe, secure and efficient carriage of passengers and goods at world-class standards of quality.”

Privatisation of the airports and other state-owned commercial assets has been in the pipeline for decades. This segment kicked off last year when the Minister of Aviation, Hadi Sirika, received approvals from the Infrastructure Concession Regulatory Commission, and the National Council on Privatisation.

Full privatisation of all commercial assets in line with global trends, and under global best regulatory and liberalised practices rather than piecemeal concessions, should be the ultimate objective. The airports are “international” only in name; they are decrepit, lacking in modern infrastructure and badly run.

The minister, the NCP and the Bureau of Public Enterprises must not fail Nigerians once more. The national interest and achieving the objectives of privatisation must be uppermost.

Concessions are primed to attract investment for infrastructure, to stimulate growth, expansion and jobs down the aviation value chain, impact on the transport, hospitality and tourism sectors and serve as gateways to investors in other sectors of the economy.

Experts say aviation “provides the only rapid worldwide transportation network, which makes it essential for global business. It generates economic growth, creates jobs, and facilitates international trade and tourism.” Airports also provide local businesses access to the international marketplace, says IATA.

Forbes magazine reported that the aviation industry supports 65.5 million jobs worldwide and $2.7 trillion of global GDP. In Nigeria, despite its underperformance, the IATA estimates its gross value-added at $1.7 billion, supporting 241,000 jobs. This pales beside South Africa where the air transport sector supports 472,000 jobs and contributes $9.4 billion or 3.2 per cent to GDP, compared to Nigeria’s minuscule 0.4 per cent.

The bidding and award processes must eliminate unqualified adventurers and emergency consortia. The eligibility requirements of technical, operational, and financial capability, a minimum net worth of N30 billion and support from “credible financial institutions in support of the consortium’s ability to manage and operate the airport terminals” disqualifies domestic operators.

Deliberately, the process should target the global champions. Apart from the controversial Murtala Muhammed Airport Terminal Two concession, arguably no other local firm is currently engaged in running any large-scale international airport operation. Unqualified local emergency consortia ruined the 2013 power sector privatisation, prolonging Nigeria’s power crisis and costing the government N1.7 trillion in support.

Only international firms with name recognition and the required financial and technical muscle, able to draw in other investors and Foreign Direct Investment, should be pre-qualified.
While the observations and misgivings of labour unions should be critically addressed, the imperative of privatisation cannot be derailed.

It is irrational to continue the current template where only two – Lagos and Abuja –are turning a profit out of the 22 airports operated by the Federal Airports Authority of Nigeria, draining funds away from infrastructure and social services. Over 50 per cent of European airports now have private ownership, freeing the much-needed government funds and enhancing efficiency.

Airport Council International says 14 per cent of airports globally have private sector participation and these account for 40 per cent of global traffic. Many countries are privatising their airports and they look for the best. Pioneering Britain unloaded airports to a Spanish firm, Ferrovial, that once managed seven of its airports; three of the UK’s best airports are currently run by a consortium headed by a Nigerian.

The government must avoid the mistakes of the past. Federal lawmakers assess over 80 per cent of Nigeria’s privatised companies to have failed in contrast to the 37 per cent acknowledged by the BPE. Agreements were skewed against the country; non-essential assets were not separated from the bids, thus paving the way for asset-stripping by unscrupulous concessionaires.

In the aviation sector, concessions for toll gate management, and MMA 2, have been bitter, leading to litigation and huge financial liabilities for FAAN. The cycle of wrangling, revocation and litigation has marred concessions for Ajaokuta Steel, Lagos-Ibadan Expressway, Lagos Trade Fair Complex and Tafawa Balewa Complex, among others.

It is corruption that underpins these transactions as desperate public officials collude with unqualified individuals to corner assets they cannot manage. The country suffers both in terms of the tangible benefits lost and deepens its reputation as a bad destination for international investment. The airport concession should mark a point of departure from this ill-repute.

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