For the Nigerian aviation industry 2018 began on a relatively high note, particularly following the country's recovery from recession. In 2017, the sector experienced a number of milestones which should serve as leverage for building success as the country becomes an air travel hub in West Africa. Some of these positive developments include the country's increased ranking in the global aviation safety rating in the Level 3 State Safety Programme Implementation Process, joining countries including the United States and the United Kingdom.
Further, the Murtala Muhammed Airport in Lagos and the Nnamdi Azikiwe International Airport in Abuja received International Civil Aviation Organisation (ICAO) certification from the Nigerian Civil Aviation Authority, which serves as an endorsement of its safety standards and alignment with global best practices. Another major achievement was the rehabilitation of the Nnamdi Azikiwe International Airport within the initial timeframe and prescribed budget.
Arguably one of the most significant developments occurred on 28 May 2017, when Vice President Yemi Osinbajo initiated one of the greatest reforms to affect the nation's aviation sector; the signing of the Executive Order on Ease of Doing Business in Nigeria. This order has enhanced safety, security and passenger facilitation within and around Nigerian airports. The order bans touting by official and unofficial personnel at airports and requires that on-duty staff are properly identifiable by their uniform and official cards.
Finally, Nigeria invited key global industry players to the country when it hosted the ICAO World Aviation Forum in November 2017. This was a record breaking event as it was the first time that it has been hosted outside of the ICAO's headquarters in Montreal, Canada. The event attracted the global aviation community to Nigeria and Minister of Aviation Sirika Hadi endeavoured to showcase the nation's aviation potential to foreign investors.
This update provides a review of the Nigerian aviation sector in 2018.
The aviation sector is poised for greater expansion as a result of the developments within the industry. According to the National Bureau of Statistics in its gross domestic product (GDP) Report,(1) the air transportation and storage sector grew by 10.22% in the first quarter of 2018 from 4.71% in the fourth quarter of 2017 and 0.48% in the third quarter of 2017.
The growth experienced in the sector is primarily due to an increase in the sale of tickets within the country, which has been stimulated by the relatively stable economy. In the past year, the naira has maintained a reliable margin in the exchange rate against the US dollar and other globally tradable currencies.
The stability in the economy has renewed stakeholder trust in the aviation industry. As a result, foreign airlines have increased the frequency with which they operate in the country and have opened more routes through Nigeria.
This is a promising indication for the aviation industry, as increased travel will help to achieve the objective of becoming the primary travel hub in West Africa and ultimately generate more revenue for the country. Some of the foreign airlines opening new routes in Nigeria include:
- Delta Airlines;
- RwandAir; and
- Emirates.
In addition, Nigeria was among the member nations to ratify the Single African Air Transport Market (SAATM). It is expected that the SAATM will triple passenger movement in the West African coastal region and throughout the rest of Africa, thereby boosting the GDP of member nations.
Stakeholders in the aviation industry have recently recommenced discussing the creation of a new national air carrier. In 1958, the first national airline was established and despite possessing a fleet of over 30 aircrafts, its debt exceeded $60 million by the time that it was liquidated in 2003. Since then, the nation has had issues with national and foreign investors when attempting to create a successful national airline.
The most recent attempt to establish an airline occurred in May 2017 when the Federal Executive Council (FEC) approved the allocation of N1.52 billion ($4.99 million) to finance:
- the preparatory steps towards reintroducing a national airline;
- the establishment of an aviation leasing company;
- the concession of Nigeria's airports;
- the establishment of a maintenance, repair and overhaul facility; and
- the development of aerotropolis and agro cargo terminals.
The FEC also announced the appointment of the Lufthansa Group as the transaction adviser and tasked it with designing a plan for the establishment of the airline. Before the unveiling of the Lufthansa Group as the transaction adviser, the government indicated that it was in talks with Boeing and Airbus about leading a consortium of airline companies to facilitate the re-establishment of the airline. However, in 2018 Lufthansa presented an offer that the federal government found unfavourable. This led to the cancellation of the offer and Lufthansa being replaced by Airline Management Group as the adviser for the project.
The benefits of a national carrier cannot be overemphasised. It would create more jobs, increase the level of skill and development in the sector, and work towards the achievement of the nation's objective of becoming the primary travel hub in West Africa and a major tourist location.
However, the government would have to create a favourable environment for the success of the airline. The energy and telecommunications sector has proven that the privatisation of industries leads to faster innovation and the growth of sectors which in turn generates more revenue for the nation. In its plan to re-establish and maintain the national airline, the federal government should consider the privatisation of the prospective national carriers and possibly own a minimum stake in the airline in order to reduce political interference and maintain efficiency levels.
An analysis of aviation trends conducted by Oxford Economic in collaboration with the International Air Transport Association found that the role of aviation and the development of its infrastructure is instrumental in the growth of a country's economy. The research concluded that global economic growth is linked to and dependent on growth in aviation.
Despite the fluctuation of the naira and the inability to purchase aviation fuel, the aviation sector has made great strides in recent times. The federal government should consider viable ways to re-establish a national carrier and explore the ways in which it can be operated successfully. This would help to achieve the industry objectives of:
- providing cheaper air fare particularly for Nigerian citizens;
- transforming the country into the primary travel hub in West Africa;
- increasing tourism to the country; and
- improving the overall economy.
For further information please contact Esomchukwu Azike at George Etomi & Partners by telephone (+234 1 462 1660) or email ([email protected]). The George Etomi & Partners website can be accessed at www.geplaw.com.
Endnotes
(1) National Bureau of Statistics, GDP Report (Q1 2018).
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