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Why foreign airlines dread operating within Nigeria—Daily Times investigation

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–IGR, jobs affected

BY CHUKWUEMEKE IWELUNMO

Government’s inconsistent policies, lack of trust, the rather quick resort to breaching of or non-adherence to agreements over the years, have been fingered for the stunted growth of the nation’s aviation industry, investigations by The Daily Times revealed.

Findings showed that foreign investors are scared of putting their money in Nigeria, despite the huge potential in the country, especially in the sector that is capital-intensive, with political interference and government’s inability to keep to agreements chief among issues potential investors hold against the country.

For instance, many foreign counterparts have torn up agreements reached between them and Federal Government agencies, citing what they saw as the latter’s inability to honour agreements in backing out in the last minute.

Experts are agreed that if foreign airlines operate here, such would help jerk up government’s internally generated revenue (IGR) from sundry ancillary businesses and positively impact the job market.

With the return of democracy in 1999 (24 years ago), the aviation industry witnessed some level of growth, though stunted, especially during the President Olusegun Obasanjo administration.

More soul-lifting was that many foreign investors invaded the aviation sector at the time and invested in various viable projects such as hangars, partnering start-up airlines, catering services, cargo handling and others. Their publicly stated strategic thinking was that the investments would be sustainable and provide steady jobs for Nigerians.

The era heralded new airlines, but most did not last long in their operational lifespan. The policies introduced did not favour investors amid a harsh economic environment. These led to the killing of many such projects.

Checks showed that, for instance, Richard Branson of Virgin Atlantic introduced and invested on Virgin Nigeria with fanfare.

Within few months of operation, the airline started having issues of slot handling, the ‘Nigerian factor’ – bywords for corruption, deliberate placing of hurdles to elicit failure, as well as other unethical practices – started manifesting. These eventually led to the winding down of the promising airline.

Most foreign investors have criticized the high level of government policy somersault coupled with official interference as another daunting mountain to climb in attempting to invest in the sector.

Some well-heeled Nigerians abroad are scared of coming home to invest because of the political situation and the security challenges in the country as their investments are not guaranteed any oxygen to live.

At a time, installation of navigational aids by the Nigerian Airspace Management Agency (NAMA) was stalled in some parts of the North following the rate of insurgency in the region.

Some Diasporan Nigerians who invested huge sums of money in aviation development projects regretted coming home to plough in their hard-earned money.

HIC Hilton project was constructing a five-star hotel at the Murtala Mohammad International Airport (MMIA), Ikeja.

About halfway into the construction, legal action was instituted against the promoters of the project, stalling the facility, seemingly for years on end.

This was after necessary agreements were reached between the HIC team and the government team represented by Federal Airports Authority of Nigeria (FAAN).

Another case is that of the operators of MMA2, Bi-Courtney Aviation Services.

The tenure of the firm’s Build, Operate and Transfer (BOT) as negotiated in the agreement is known only to those who signed the documents as there were many versions of the said agreement.

The accurate interpretation of the length of the firm’s operation of the terminal before handing over to FAAN has been a bone of contention between the latter and Bi-Courtney. While some said the agreement reached was for 12 years, others claimed 36 years.

According to aviation stakeholders, policy somersaults remained the greatest challenge impeding development in the aviation sector.

They recalled that as a very capital-intensive venture, the sector should be handled with care and investors protected by luring them with incentives.

The issue of foreign airlines’ stalled funds in Nigeria is another matter that discouraged foreign participation in the sector.

The stalled funds, said to be in billions of Naira, has made the country a laughing stock before the International Air Transport Association (IATA) and remained worrisome and embarrassing to aviation stakeholders and a source of great embarrassment to the government.

Nigeria is ranked highest with $818.2 million of foreign airlines’ accumulated funds from tickets sold in Naira equivalent to the dollar rate and which should be repatriated to various countries of the airlines.

The total trapped funds globally amount to $2.27 billion, with Nigeria, Bangladesh, Algeria, Pakistan, and Lebanon, in that order, having the highest figures.

Integrity issues

Nigeria is regarded as a country where agreements are not honoured. The IATA has warned the Federal Government several times against the continued withholding of the airlines’ funds.

This, aviation stakeholders revealed, has been responsible for the high international airfares, some of which have risen to N2.5 million a seat on international flights, as foreign airlines are getting back their funds indirectly.

From available reports, foreign airlines operating in Nigeria made $1.1billion in 2022 despite foreign exchange challenges.

It is now becoming increasing difficult for Nigerian aviation operators to get assistance from their international counterparts with the latter citing alleged lack of trust on the part of many of the former, poor government attitude towards investors, official policy somersaults and non-adherence to agreements.

Speaking on this development, an aviation analyst, Olumide Ohunayo, said the trapped foreign airlines’ funds is a bad omen for the country and can scare away foreign investors.

According to him, to potential investors, the trapped funds amount to an accident waiting to happen.

Ohunayo said: “The current neglect and circumstances leading to not making agreement and in other private sectors like MMA2 and its cancellation of agreement without a cause and the interference of unions in pushing a position of government on issues that have to do with private sectors, are unacceptable.

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“We have not been able to attract investors. These are things we need to correct… we also need to give confidence to those investors by seeing how you treat the foreign airlines who are relatives of those countries.”

He urged Nigeria to repay the trapped funds and also ensure that the judiciary is efficient so that injured parties in any disagreement can access quick and effective justice to assuage their hurt.

“We need to work on a lot of things and effectiveness in the judiciary too”, he said.

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