Worried by the non-viability and continuous poor ranking of Nigerian airports among the worst in the world, the Federal Government recently hosted the 59th Airports Council International (ACI) Conference in Lagos. The conference, which drew participants from around the world, also sought to attract investments to grow the infrastructure at some of Nigeria’s airports.
Importance of viable airports
Aviation has become a catalyst for sustainable social, economic and human development, directly and indirectly supporting 6.8 million jobs and generating 72.5 billion dollars in Gross Domestic Product (GDP).
Airports serve as veritable gateways to this development and prosperity. Airports facilitate speedy connectivity of persons into various countries and continents, it also boost tourism and trade which in turn foster economic growth and new opportunities for respective countries.
The rapidly-expanding air traffic being witnessed in today’s world can only be sustained and optimised through the continued development at modernisation of local aviation infrastructure, particularly at airports.
Nigeria has about 22 airports scattered across various states of the federation. However, of these airports, only the Murtala Muhammed Airport, Lagos and the Nnamdi Azikiwe International Airport, Abuja are considered to be economical viable given the volume of traffic attracted on a daily basis and the associated revenue. This, perhaps, explains why the Federal Government is targeting the two airports for concessioning. Labour has however kicked against the isolation of the vibrant airports for conecssioning, while leaving out the non-viable ones for the Federal Airports Authority of Nigeria (FAAN) to grapple with how to source for funds to keep them afloat. Without doubt, over the years, the secret of the survival of Nigeria’s other low revenue yielding airports has been in the stream of revenue from the viable Lagos and Abuja airports. Labour fears that once Lagos and Abuja airports are removed from FAAN’s revenue stream, it amounts to cutting off the source of oxygen supply to the other airports and the state of their infrastructure is certainly bound to go from worse to worst.
Managing Director of the Federal Airports Authority of Nigeria (FAAN), Mr. Saleh Dunoma who spoke at the event noted that the evolving nature of airport management around the world demands a transformation of Nigerian airports into viable, sustainable business entities.
“We must work towards the transformation of our airports who now mostly serve as public service providers and not commercial enterprises that are efficiently managed to generate more revenues and subsequently declare profits,” said Dunoma.
What then can Nigeria do to attract investments to grow the infrastructure at its airports?
At the ACI conference, the International Civil Aviation Organization (ICAO) said that with most African states like Nigerian battling with paucity of funds from internationally generated revenue to funds core infrastructure projects like airports, a better alternative was to be found in public financing options.
Sadly, ICAO noted that a number of factors had marred the ability of most African states accessing these public-financing options.
“It has become increasingly difficult however, for many African states and airport operators to mobilize the significant and dependable funding and investments required for high quality aviation infrastructure,” said ICAO President, Dr. Bernard Aliu.
Cause of impediments
In Nigeria, investors apathy has been linked to the risk associated with a lack of sufficient institutional, legal and regulatory enabling frameworks something, which makes it very difficult for financial institutions to invest in airport projects. The ongoing litigation associated with the breach of the concessioning of the domestic terminal of the Murtala Muhammed Airport Lagos (MMA2) to Bi-Courtney Aviation Services Limited by the Federal Government has often been cited as an example of Nigeria’s lack of respect for the terms of contract in enters into with private firms.
ICAO however said a country like Nigeria can deliver tremendous support to an airport operator like FAAN looking for investments by taking pragmatic measures to realize transparent, stable and predictable regulatory climates, whether for direct investment, business reform, private finance initiatives, or public-private partnerships (PPP).
“No investor wants to project out their proposed returns based on one eventuality, only to see those goal posts being moved by a government half way through a project after they have made their financial commitment,” said ICAO President, Dr. Bernard Aliu.
“For states with limited access to investment finances, it is therefore critical to include major airport infrastructure needs in the priority list of international public finance and assistance for development projects,” said Aliu.
Nearness to market
One of the banes to the viability of airports in Nigeria is in their wrong locations, which fails to attract the requisite traffic over time. In fact, most airports are established for political rather than economic purposes. Some airports lack the feasibility studies that show their viability. Profit drives investments. It follows therefore that no investor would want to commit funds into a project with low utilisation and poor returns on investment.
ICAO however suggests that FAAN as an operator should draw up a priority list to clearly demonstrate where financing is required. “This can be accomplished through gap-analyses of forecast demand, future capacity need and current infrastructure deficiencies,” Aliu said.
“The last priority in that due focus must also be placed on investment in so-called ‘soft infrastructure’ such as human capacity development. Financial investment and enhancements in human capacity are directly linked and completely dependent on each other over the longer term,” Aliu added.