Nigeria’s Aviation Industry Is a Mess, and needs a turn around plan
Nigeria wants to be among the 20th largest economies in the world by 2020, but for it to achieve this status it needs to make dramatic improvements to its aviation industry. Early in 2015, former Minister of Aviation, Mrs. Stella Oduah, laid out reforms for the airline industry but up till now, there is very little improvement in Nigeria’s aviation sector.
In December 2016, several passengers became stranded at airports across the country due to the shortage of aviation fuel. Many flights were delayed while other were canceled, leaving many passengers in stranded and frustrated.
Operators may be quick to blame the December’s canceled flight on the surge in air travel during Christmas. Such anomalies do not happen; they are usually a result of deep-seated effectiveness facing the aviation industry in Nigeria. Years of neglect by government officials and failure of operators to improve their service has plunged the counties air industry into one of the worst periods in its history.
The Realities of Recession
Nigeria officially entered into recession in 2016 with the prices of goods and services skyrocketing at an alarming rate. One industry that was severely hit by this was the aviation sector. As a result, many airlines to shut down operation in Nigeria- with the existing ones just barely surviving.
Aviation is an international industry hence forex plays a significant role. The scarcity of much-needed forex by airline operators would almost bring any carrier down to its knees. The Central Bank of Nigeria, CBN, in a bid to save the country from total collapse from recession had to devalue the Naira. Most airlines have to pay double for goods and services from overseas. One key product needed by airline operators is spare parts. But Nigeria doesn’t manufacture any form of aircraft components. Many of the countries aircraft out of service due to the substantial cost of purchasing spare parts overseas.
One key product needed by airline operators is spare parts. But Nigeria doesn’t manufacture any form of aircraft components. Many of the countries aircraft out of service due to the substantial cost of purchasing spare parts overseas.
The World Bank affirms that Nigeria would get out of recession in the 2017 but if the present condition prevails many airlines would fail due the increasing cost of operation caused by recession. One way the government can tackle this problem is to subsidize the cost of importation of major spare parts used by airlines in the country.
Aviation Fuel Scarcity
Aviation fuel, Jet A1, accounts for over 30 percent of operation cost of an airline. Yet, its scarcity in recent times will cause many airlines to go out of business.
Nigeria has three state-owned petroleum refineries, but none of them produces the aviation fuel needed by airlines. Airlines have to import the fuel from other countries at a very high cost. It now cost twice what operators paid for aviation fuel some months back.
One of the leading issues is the scarcity of dollars caused by the recession. Since the devaluation of the naira, the cost of Jet A1 has increased significantly from N105 to about N230 in Lagos. In some parts of Nigeria, the cost of Jet A1 fuel could go as high as N270 per liter.
The problem needs an urgent solution by the government. Arik Airline for instance; Nigeria’s largest airline, requires 500,000 liters of fuel daily to operate its 100 flights but it’s struggling to get 150,000 liters of aviation fuel for its flights. This scarcity has led many airlines in Nigeria to get the much-needed aviation fuel from Ghana. Last year, the Ghanaian authority slashed the cost of aviation fuel by 20% in a bid to make Accra the hub of travel in West Africa.
According to Nigeria’s Minister of Aviation, Hadi Sirika, “Talk is on-going with major fuel marketers, the Ministry of Petroleum and the Central Bank of Nigeria to resolve the crisis. Very soon, the country will be out of this, as we cannot be relying on Ghana for aviation fuel.” But this sounds more political than a strong commitment by the government to ending this crisis of scarcity of aviation fuel.
Poor State of Airports.
In a stunning move, the federal government has decided to close the capital city airport, Abuja airport for six weeks. The closure will run from February to March – to allow for rehabilitation of the runway which has been in dangerous states for some months. Many air travelers who were told to make use of the smaller Kaduna airports in reaching the nation’s capital.
Over the years, the Nigerian government has paid little attention to maintenance of its infrastructure. Leading to many of its facilities to deteriorate leading to loss of value. This same lack of care is crippling Nigeria’s aviation sector. In a 2013 survey carried out by Skytrax Aviation, a UK-based aviation consultancy group, found that no Nigerian airport was among the Best 10 Airports in Africa. Dramatically illustrating how airports in Nigeria are underperforming. Popular aviation website, sleepingairports.net ranked Nigeria as one of the worst in Africa.
There needs to be a firm resolve by the aviation authorities to bring its airports to world-class standards. One way the government can do this is by handling off the management of its airports and facilities to private investors. This method has proved quite useful in other African countries like South Africa.
AMCON Take Over of Arik Air.
Arik Air has been taken over by the Asset Management Corporation of Nigeria. Arik Air is Nigeria and West Africa’s biggest air carrier accounting for 55% of air travel in Nigeria.
This measure had become necessary looking at the worrisome state of Arik Air’s debt. According to the spokesman for AMCON, Jude Nwauzor, Arik Air is indebted to the tune of $425 million to several creditors. Arik Airline could go under without these measures, disrupting the social-economic balance of many Nigerians.
But this problem didn’t start now. Last year, AMCON took over Nigeria’s oldest airline, Aero-Contractors. Between 2011 and now, AMCON had pumped in N20 billion into the airline but that was not enough to revive it. Recently, AMCON took over Nigeria’s leading air charter service, OAS Helicopters, making it the third air firm to be taken over by AMCON in four months.
No doubt Nigerian airlines are struggling – in 40 years Nigeria has seen 35 airlines fail. The Nigerian government needs to play a significant role in resuscitating air sector in Nigeria. Its policymakers need to come up with a workable economic plan that can revive its fledging economy. It needs to make the Naira stronger by promoting consumption of locally manufactured goods and giving local entrepreneurs the necessary support to grow. Its three main refineries – Kaduna, Warri and Port-Harcourt- needs to be revived to start producing the much-needed aviation fuel required for smooth operation of its airlines.
If Nigeria wants to grow its average yearly air passengers from 15 million to over 70 million and join the league of countries with world-class air transportation, it needs to give private investors a chance. Nigeria needs its air transport to work for its economy to grow.