The South African government, led by finance minister Enoch Godongwana, is looking for evidence-based and data-driven solutions to economic problems, ... including high unemployment, low growth and endemic poverty.
Towards the end of October this year, the federal government of Nigeria closed the prequalification phase for the concession of Nigeria’s four major airports. This comes three years after the current government first disclosed its plans to liberalise the sector.
The four airports to be concessioned are the Murtala Muhammad International Airport, Lagos; Nnamdi Azikiwe International Airport, Abuja; Aminu Kano International Airport, Kano; and Port Harcourt International Airport.
In a document that the government used to advertise its aviation PPP plans and announce the request for bids, the permanent secretary at the federal ministry of aviation, Hassan Musa, implied that only the non-aeronautical operations would be affected. He added that the concession is in the government’s aviation sector roadmap, which is aimed at improving service delivery at the airports.
“The execution of this project is meant to achieve the federal government’s objective in terms of air transport value chain growth by developing and profitably managing customer-centric airport facilities for safe, secure and efficient carriage of passengers and goods at world-class standards of quality,” he said.
In 2019, air transportation’s contribution to GDP rose by 32.9% to N198.62bn ($483m) from N149.35bn in 2018. Even with this growth, it only accounted for 0.14% of the GDP against 3.2% in South Africa. The sector has been heavily affected by the Covid-19 pandemic since 2020, as air transportation was grounded following lockdowns and movement restrictions to prevent the cross-border spread of the virus. By the second quarter of 2021, the aviation sector’s contribution to GDP had dipped by 50.09% to 0.05%, from 0.09% in Q2 2018.
James Odaudu, spokesman of the ministry of aviation, told local newspaper ThisDay, that the just-concluded process was the prequalification phase.
This means that the companies have only expressed their interest to bid for the concession of the airport facilities and those that will be selected to bid – after reviews have been completed by the federal government under the supervision of the Infrastructure Concession Regulatory Commission (ICRC), Nigeria’s PPP-regulatory agency – will be the ones that have met the standard requirements.
Although the federal government and the regulatory agency are keeping a tight lid on who the bidders are, an investigation by local media revealed that about 13 companies have shown initial interest in the process.
Bi-Courtney Aviation Services Limited (BASL), the operator of Murtala Muhammed Airport Terminal Two, Lagos, is reported to be one of them. The company won the airport concession contract in 2003, the country’s first since Nigeria’s return to civilian rule in 1999. The marked difference in how efficiently the terminal is run, compared to others at the Lagos airport, features prominently in the defence of the plan to concession the four airports, and is even at the core of the company’s arguments that the new rounds of concession favour them.
Another indigenous company that is reportedly participating in the prequalification phase is the Maevis Nigeria Limited. Like BASL, it has had an aviation-related concession contract with the federal government, but was sacked over revenue receipt disagreement, among other issues.
The Federal Airport Authority of Nigeria (FAAN) had in 2010 alleged that Maevis Nigeria Limited owed it about N17bn, an allegation the company denied, claiming that between 2008 and 2012, they only earned N3.8bn while they remitted N44.8bn to FAAN. Maevis was in charge of aeronautical and non-aeronautical revenue collection and the provision of equipment for airlines boarding cards, bag tags and other travel services at the Lagos and Abuja airports.
[…] when the private sector takes over the airports that generate money and [they are] now in the hands of concessionaires, where will they get money to pay staff?
Some of the international concessionaires that have reportedly shown interest in the process include operator of the Singapore’s Changi Airport, the Changi Airport Group (Singapore) Pte Ltd (CAG), which is wholly owned by Singaporean government’s finance ministry and handles infrastructure development, cargo/freight management and security etc.; the operator of France’s Charles de Gaulle Airport, Groupe ADP, which runs other airports, such as Orly Airport and Le Bourget Airport; and operators of one of Ethiopia’s airports.
In order to increase their chances, local and international companies are reported to have synergised: local ones collaborating with foreign to strengthen their capacity proposition and foreign ones partnering with the local operators to fulfil the local content requirements of the federal government.
Against the odds of labour resistance
Since the government made its airport concession plans public, the government-employed airport workers – through their labour unions – have voiced their opposition to the decision, largely because they fear they may lose their jobs en masse when the private operators finally take over.
In August last year, the airport workers under the aegis of Association of Nigerian Aviation Professionals (ANAP) and the National Air Transport Employees of Nigeria (NUATE) protested against the planned concession. They claimed that the fact that previous concessions haven’t been successful, is enough reason for the federal government not to go ahead with the plan. They added that the process was opaque and thus would lead to massive loss of jobs.
Abdulazeez Sanni, secretary of the NUATE, wondered why the government was only moving to concession of viable airports and how the government hopes to pay the salaries of workers from the revenues generated by the unviable ones by the time the private operators must have taken over control of the four viable airports.
“We have 22 airports in the country, four are viable, most especially Lagos. Now they want to single out the viable ones and concession them. When the private sector takes over the airports that generate money and [are] now in the hands of concessionaires, where will they get money to pay staff?” he said.
Although the federal government has assured the workers that the airports are currently understaffed and that the concessionaires will employ more workers, the labour unions do not seem to be convinced. They have sent petitions to the House of Representatives, Nigeria’s lower national legislative chamber, making a case for the suspension of the concession process.
…the committee moved to avert further crisis that will be caused by any industrial action by the labour unions, and therefore had to suspend the concession process…
Early last month, the House of Representatives suspended the concession process indefinitely, citing the complaints of job loss and opacity by the labour unions. The chairman of the House Committee on Aviation, Nnolim Nnaji, explained that considering the disruptions caused Covid-19 in the sector, the committee moved to avert further crisis that will be caused by any industrial action by the labour unions, and therefore had to suspend the concession process pending the time when the contentious issues will be resolved.
When contacted for comments on the labour dispute and their perspectives on the transformative impact that the concession could have on the aviation industry, the general manager of corporate affairs at the Federal Airport Authority of Nigeria (FAAN), Henrietta Yakubu, told The Africa Report that airport concession is the “prerogative” of the federal government and thus she had no comments on the matter.
Learning from shaky past
This is not the first time that Nigeria is attempting the concession of parts of its airports since it returned to democratic rule. However, a concession of this scale is a first. In 2000, the federal government concessioned the MMA2 terminal after a fire incident made the terminal inoperable.
Sanderton Ventures Limited (SVL) won the bid, but due to its failure to meet the standard terms of the agreement, it had to relinquish the contract to the second-placed Bi-Courtney Aviation Services Limited (BASL) to redevelop the terminal. The federal government signed a Build, Operate and Transfer (BOT) agreement with BASL in 2003 and the terminal was commissioned some four years later.
BASL later sued the succeeding government for slashing its 36-year MM2 terminal management agreement to 10 years and blocking the second contract to run the General Aviation Terminal (GAT) of the domestic wing of the Lagos airport.
These issues put some of the concerns by stakeholders about the ongoing concession into perspective. The question that remains is whether the federal government will be transparent and fair enough to ensure that the most qualified bidders win the contract the very first time and if they are going to stick to the terms of the agreement throughout its duration, which the aviation minister says will last at least 20 years.
This is how the government can ensure that the country doesn’t lose out on the benefits of the concession, such as massive foreign and domestic private investment to facilitate modern airport infrastructure delivery with minimal government spending and reduction of government foreign exchange woes; job creation; competitive pricing; and growth and productivity along the whole aviation business value chain.
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