Making Nigeria a regional aviation hub
THE crisis in the aviation sector has deepened, compounding the country’s economic difficulties. With the price of kerosene skyrocketing, and flights grounded and disrupted, the situation has never been worse. As many of Nigeria’s highways and railways have been made unsafe by terrorists, the transportation system is in trouble, fueling inflation and disrupting businesses and social activities. The federal government must think outside the box and find lasting solutions.
Worse, unable to repatriate their earnings in dollars and other restrictive conditions, international airlines are reducing flight frequencies to the country or suspending flights altogether.
Hitherto sold at less than 300 Naira per litre, aviation fuel is now at an outrageous price of 900 Naira per liter and there is no respite in sight for beleaguered operators. Airline ticket prices were subsequently out of reach for many. This had a negative impact on businesses and dealt a severe blow to the struggling economy.
Operators say continued shortages of aviation fuel and foreign currency, which has forced some airlines out of business, will lead to further job losses and reduced capacity. Characteristically, the president, Major General Muhammadu Buhari (retired), and his aviation minister, Hadi Sirika, have no effective response.
The dollar liquidity crisis has further aggravated the situation. According to the International Air Transport Association, around $600 million in foreign airline revenue is trapped in Nigeria. Emirates, unable to repatriate its $85 million in revenue, has reduced its frequency of flights to Nigeria. It is also suspending all flights there from September 1. This aggravates the crisis. It is the responsibility of the Central Bank of Nigeria to address liquidity issues and facilitate the repatriation of trapped income.
The benefits of the aviation sector to the economy cannot be overstated. IATA data offers an illuminating perspective on the importance of air travel; from jobs to flows of trade, tourism, investment and connections between cities.
Airlines, airport operators, airport businesses (restaurants and retail), aircraft manufacturers and air navigation service providers employ 20,000 people in Nigeria. By purchasing goods and services from local suppliers, the sector supports an additional 35,000 jobs. In addition, it is estimated to support an additional 16,000 jobs through the wages it pays its employees, which are then mostly spent on consumer goods and services.
Foreign tourists who fly into Nigeria and spend their money in the local economy also support an additional 169,000 jobs. A total of 241,000 jobs are supported by air transport and tourists arriving by plane. Cumulatively, the airline industry, including airlines and its supply chain, adds $600 million to Nigeria’s GDP, research shows. Spending by foreign tourists supports another $1.1 billion of GDP, totaling $1.7 billion. A total of 0.4% of the country’s GDP is supported by air transport sector inputs and foreign tourists arriving by air. It’s rather weak.
Air transport contributes in a unique way to building bridges between cities; therefore, the flow of goods, people, investments and ideas that drive economic development must flow unhindered to maximize their contribution to consumers and the economy at large.
Instead of Sirika’s obsession with floating a state-promoted “national carrier”, the government should bolster the sector and make Nigeria the main regional aviation hub in West and Central Africa. Formerly state-owned airlines in Europe and the Americas have been privatized, and many airports have also been sold to private investors. With its horrible record, the Nigerian government has no business as an airline owner or co-owner.
Instead, the government should facilitate a favorable operating environment and strengthen regulatory bodies to perform their functions effectively. Currently, Nigeria is losing the advantage and opportunities of aviation to Ghana, Ethiopia and South Africa. The airline industry contributes $5.2 billion to South Africa’s GDP, and foreign tourists visit another $4.3 billion, IATA said.
Due to its low capacity, passenger facilitation in Nigeria is rated at 1.8/10, below the African average of 3/10. On the World Economic Forum’s Travel and Tourism Competitiveness Index, the country ranks 127th in visa openness and 69th out of 136 countries in cost competitiveness. Nigeria’s facilitation of air cargo through its customs and border regulations ranks 68th out of 124 countries in the Air Trade Facilitation Index and 36th out of 135 countries in the E-Cargo Usability Index.
The Enabling Trade Index ranks Nigeria 127th out of 136 countries for facilitating the free movement of goods across borders and to their destination. The Nigerian air transport market is projected under the current trends scenario to grow by 174% over the next 20 years, resulting in an additional 9.4 billion passenger trips by 2037. If satisfied, this increased demand would support approximately $4.7 billion of GDP and nearly 555,700 jobs.
Unfortunately, budget constraints, not employing professionals, scarcity of foreign currency, sustainability of waiver on aircraft and spare parts, dilapidated and aging infrastructure and obsolete equipment, deplorable airport facilities and equipment , along with stranded airline funds, could make the 2037 forecast a mirage. .
Although the roadmap for the aviation sector was unveiled in 2016, implementation, as usual in these climates, is slow. Sirika’s misguided Nigeria Air project has failed to fly despite consuming 14.6 billion naira since 2019, 14% of which was allegedly funneled into ‘working capital, consultancy and transaction advisors’ fees “.
To fill the gaps in the sector, experts say the right kind of workforce, skill building and effective partnerships are needed. When fully developed and equipped with capabilities, the Nigerian aviation sector could become the regional hub strategically positioned to take advantage of the expected growth of the African market due to its proximity to Europe, the Middle East and the rest of Africa.
Small Rwanda, recognizing that air transport is crucial for its development, has positioned itself to become a regional hub of services and tourism. It is investing $789 million 2019-2030, revealed Aviation Benefits Beyond Borders, a branch of the Air Transport Action Group (Geneva, Switzerland).
Such a visionary response should be the government’s goal and not the pursuit of the elusive “streaks” of a doomed Nigeria Air.