Introduction

Nigeria experienced an economic recession in 2016 which affected all sectors, including aviation. This led to the exit of some international airlines that had operated in Nigeria for decades. However, the country experienced an improvement of activities in the aviation industry in 2017, resulting in a 12.8% growth rate.

The inability of foreign airlines to repatriate their earnings led to the cessation of their operations in Nigeria. Iberia and United Airlines exited the Nigerian market, while others reduced their operations to the bare minimum. However, with the gradual release of foreign airline funds, airlines have been able to recommence their operations in Nigeria. The trapped foreign airline funds thus decreased from $575 million in 2016 to $175 million by the end of 2017.

In addition, the reduction in the volatility of foreign exchange and the recent control of the inflation rate have aided the growth of the sector and the economy as a whole. This growth is demonstrated by the fact that the aviation sector contributed $8.2 billion to Nigeria's gross domestic product (GDP) in 2017. However, in order to fully exploit the aviation industry's economic potential, the government must increase its involvement in the development process.

Industry potential

The aviation industry is a catalyst for socioeconomic development in both developing and developed nations. It provides the fastest and safest means of transportation of people and cargo locally and internationally, thereby promoting commerce and industry – two of the major determinants of any country's GDP. The aviation industry offers diverse opportunities, including:

  • transportation;
  • tourism;
  • air ambulance services;
  • regular charter on demand (ie, air taxi services);
  • pilot training; and
  • air services for humanitarian aid activities.

While emerging economies like the United Arab Emirates and Ethiopia are making great strides to exploit the sector, Nigeria's lack of reliable aviation service providers has jeopardised its ability to grow and attract business.

Challenges

For the aviation sector to generate more income for Nigeria, the government must address a number of challenges to maximise the sector's full potential. The first such challenge is improving compliance with the International Civil Aviation Organisation (ICAO) global standards. In this regard, it is essential for Nigeria to:

  • align its infrastructure programmes and plans at the national and regional level with the ICAO global strategic plans for aviation; and
  • develop common and interoperable air transport systems.

Only two airports in Nigeria currently comply with the ICAO global standards.

Further, despite the growth experienced in 2017, it remains difficult for aviation stakeholders to access funds or ensure financing for the modernisation and expansion of their infrastructure (eg, airports, runways, telecoms equipment, air cargo warehousing and meteorology facilities).

In addition, the slow implementation of the Yamoussoukro Decision (a multilateral agreement between Africa's 54 countries designed to liberalise the continent's aviation market) has created regulatory impediments to operational freedom and investments, resulting in lower connectivity across the continent and a lack of competitiveness among African airlines.

Further, Nigeria's requisite skill shortages – in addition to its lack of adequately trained pilots, air traffic controllers, engineers and aviation security and tourism industry personnel – are considerable short-term obstacles to growth. Nigeria needs more and better trained personnel to not only meet current aviation standards, but also increase the sector's efficiency.

Proposed policies and programmes

Notwithstanding the challenges facing the sector, President Muhammed Buhari's administration has, by way of its recent pronouncements and policies (which include the full implementation of an aviation roadmap), shown that it is ready to maximise the industry's economic potential and stimulate the growth of the country's economy.

Some of these policies and programmes include:

  • a comprehensive security threat and vulnerability assessment;
  • the development of a new security strategy in partnership with international security organisations;
  • the procurement of modern, state-of-the-art equipment;
  • the commencement of an airport certification programme and manpower capacity development through the Federal Airports Authority of Nigeria training school;
  • the concession of the four major international airports in Lagos, Port Harcourt, Abuja and Kano after an infrastructure upgrade;
  • the plan to re-establish a national carrier, which will help the country to gain optimal benefits from the Bilateral Aviation Safety Agreement and the Multilateral Aviation Safety Agreement;
  • the establishment of a world-class maintenance repair overhaul facility that will attract clients from around the world;
  • the establishment of an aviation leasing company to address the challenges of Nigeria's limited access to capital and high-debt profile, an inadequate number of aircraft in local airline fleets and the high cost of leasing; and
  • the completion of agro-allied and cargo terminals at designated airports across the country.

Comment

The aviation sector contributes approximately $400 million to the Nigerian economy each year. With a population of over 180 million, an aviation sector that can adequately cater for the nation's demands could generate increased income from both its citizens and international travellers. It could also positively impact business operations and expansion, the investment climate and the labour market.

Further, the efficient and effective implementation of the above roadmap will provide abundant and far-reaching economic benefits for both Nigeria and the wider African continent. Not only will it help the government to achieve its diversification goals, it will also serve as a means to create job opportunities for citizens, enhance tourism sustainability, promote efficient trade and ultimately grow the national economy.

Fostering the aviation industry could be one of the driving forces of regional integration for both the country and the continent. Adopting a model that is similar to that of the United Arab Emirates or Ethiopia, but tailored to the peculiarities of the Nigerian economy, will help the government to create a developed and globally competitive aviation industry. To this end, the industry must continue to innovate, transform and reinvent to meet growing demand.

For further information please contact Ademola Makinwa 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.

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