Murtala Muhammed International Airport, being constructed by the Chinese

THE Honourable Minister of State for Aviation had recently briefed the public and the industry stakeholders of government plans to concession certain airports to private investors as part of the larger plans to privatize some public enterprises.

Following the Honourable Minister’s Briefings, there had been some emotional reactions from the public and more too from the aviation stakeholders who ordinarily should be better informed of what had over the years been the financial travails of the sector, but yet, find the government plans of airports concession unacceptable.

Government probably decided on Concession and Privatization or Outright Sale options because of the failed commercialization of most of the public sector services and enterprises. There were public enterprises that were fully commercialized like the NLG and the refineries which were expected to operate as profit-making commercial ventures without any subsidies from the government.

These are expected to raise funds from the capital market for capital projects without government guarantee and were expected to use private sector procedures in running their businesses.

There were other enterprises like FAAN and NAMA which were partially commercialized and were expected to cover their operational costs from their internally generated revenues (IGR). These category of enterprises enjoy grants from government to finance their capital projects just as the Federal government had done in the past for FAAN and NAMA with the N19.5bn aviation intervention fund in 2007; the grant of about $200m from BASA fund for the refurbishment of some airports and the $500m loan from China for the redevelopment of the major international airports.

The Nigerian aviation sector is just one of the three major means of transportation providing air transport services to less than 10 million Nigerians compare to the road and rail providing transportation services for over 120 million Nigerians. Unlike the road and rail transportation services, the air services enjoyed more government patronage with the various forms of intervention, grants and guarantee loans.

All these are in addition to the huge generated revenues that had not significantly developed or improved the airports infrastructure and facilities for sustaining safe air operations. There had been no efficient and effective oversight by the responsible authority to ensure that the sector in the last sixteen years, complied with the regular 5-year Budget Plans as required by the Nigerian Civil Aviation Regulations 2006, Part 18.10.5.

What had developed over the years in the industry was a mixed systems, one of partial commercialization where governments were injecting subsidies or intervention funds into the public enterprises and full commercialization where government had given autonomy to some public enterprises in the sector. What government plans to develop now and which is developing worldwide are Privatization and Concession where governments are extending partnerships to private enterprises and investors to develop the sector. This is a concept that is being adopted by most developing countries whose aviation infrastructures are expanding fast but whose development funds are limited as with our own case. Most countries are finding it a positive advantage to adopt the policies of public – private – partnership, full commercialization and concession of public enterprises. These options offer government savings for other social sectors of the economy and reduce unnecessary costs and duplication of efforts.

As articulated by Drs. Igbuzoh and Starr, of the Socio- Economic Rights Initiative (SERI), Privatization or Outright Sales of public enterprises to private investors in Nigeria could be emotive and controversial as it did in 1988 when it was introduced as part of Gen Ibrahim Babangida’s Structural Adjustment Programme (SAP). Both economists had said, “Privatization involves the sale of tangible public assets such as equipment and infrastructure; it is a means of exposing public enterprises to private investors or bringing private ownership, control and management into public enterprises. The objective is to increase productivity and efficiency, and to improving the financial health of the public enterprises with sufficient savings for government from the suspended government subsidies.”

If broadly defined, Privatization could include Concession and all forms of Public – Private – Partnership (PPP); but if narrowly defined, it would exclude Concession and could mean Outright Sales. However, wherever definition is being applied, the objective is the same, which is securing private investors management and operational expertise and investment as was the case with the MM2 Concession to Bi-Courtney.

It would still seem to some stakeholders that the Concession of MM2 was shrouded in some kind of executive secrecy, government therefore need to assuage the stakeholders that the planed Concession is with better intentions.

Generally, there are three key features of Concession which are: firstly, it does not involve the sale or transfer of ownership of physical assets; only the right to use the assets and operate the enterprise. Secondly, the Agreements are for a limited period of time up to about 30 years depending on the context, content and sector and thirdly, government as the owner of the assets must retain much involvement on the oversight in the Concession through the Regulatory Agencies.

It is expected that whatever government would give out for Concession would be well-defined along these three features in order to avoid the pitfalls of the past attempts. Government must bear in mind existing Agreements or concession with the China government on the development of the four airports of Lagos, Port Harcourt, Abuja, Kano, etc. with similar Agreement with Bi-Courtney on part of Murtala Mohammed Airport. Government must also be mindful of the facts that about 12 out of about 20 Federal Airports are joint-users with the military and these include the international airports.

Government should be very clear in its plan on what assets or infrastructure it would give for concession without disrupting the equilibrium of the existing Agreements and joint-users arrangement. It should ensure that it includes the future of the remaining domestic airports in its concession plans. None of these should be left behind otherwise, the initial reasons for the concession would be defeated.

In addition to all these, government should concern itself with the designing of achievable policies and programmes that would enable it meet contemporary visions for the industry in this 21st century. Such policies should ensure that the responsible aviation authority provide the baselines for the implementation of the Concession, and the investors too, provide regular Business Plans every 5 year to meet with requirements of the Nigerian Civil Aviation Regulations, 2006, Part 18.10.5.

This write-up was sent in by Group Captain John Ojikutu (RTD)

CEO, Centurion Securities


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