As Nigeria Air returns in April, I smell a rat

As I never flew on a Nigeria Airways flight, I would not know if it was true that passengers often had rats for company on board flights of the defunct national career. I can smell a rat though, both literally and figuratively, in the reported April return of Nigeria Airway’s fourth and latest reincarnation as […]

As I never flew on a Nigeria Airways flight, I would not know if it was true that passengers often had rats for company on board flights of the defunct national career. I can smell a rat though, both literally and figuratively, in the reported April return of Nigeria Airway’s fourth and latest reincarnation as Nigeria Air.

So far, not much information about Nigeria Air is publicly available, other than pictures, on social media, of what it would look like. If only pictures of planes can fly. But three weeks ago, the Minister of Aviation, Senator Hadi Sirika broke the eerie silence surrounding the Nigeria Air project when he disclosed that the airline is finally due to start flying by April next year.

The aviation minister said that the new national career would be owned as follows: 49 per cent by “strategic equity partners”, 46 per cent by “Nigerians”, while the federal government will own just five per cent of the shares. The company, the minister noted effusively, will create 70,000 jobs, which, according to him, “are higher than the total number of civil servants in this country”. The company, the minister explained further, will take off with three aircraft in April, and grow its fleet to 30 within 2-5 years.

It is in all of these that I smell a rat. Or to use another of our metaphors, something is fishy here. I do not claim to be an expert in aviation, but I will think of myself as an expert in commonsense, and well, in public policy. So many things about this purported project don’t add up, whichever way one looks at it. The policy arithmetics does not add up. The economics absolutely does not add up either. In fact, even the ‘big grammar’—and we will come to that shortly. And it is these that I wish to interrogate further today.

First, policymaking and implementation in Nigeria is generally a comedy of errors, across all sectors of the economy and society. Still, you will struggle to find an area of public policy in Nigerian governance where foolhardiness screams louder than in our aviation industry. The late American development economist, Albert Otto Hirschman once thought that it would be cheaper and more economically efficient for developing countries to focus more on their aviation sectors rather than spending scarce billions to copy European rail and road transport networks that were built in the 19th century with largely forced labour: aviation is faster, and all you need are airports and planes to connect two or more ends.

Hirschman’s argument does not need to be ‘true’ all the time to be valid or make sense. For a country like Nigeria, a fully developed aviation sector will transform the economy in no time. But where are we at? Relative to its population, Nigeria must have the most underdeveloped aviation industry in the world by any metrics: the number of airports, the size of the market, the number and diversity of carriers, and well, even passenger experience, after all, we are talking about a country where millions of 50-year-olds have never flown on a plane.

According to the Nigerian Civil Aviation Authority (NCAA), Nigeria has a total of 20 airports, 23 ‘active’ domestic airlines, and some 22 foreign careers and an overall market size of $1.7bn annually. That means an airport per every 10 million people and roughly one domestic airline for the same population size. If underdeveloped has any meaning, it is this! But what has been the government’s solution to it?

Perhaps the dominant thinking among aviation policy officials since 2003, when the corpse of the Nigeria Airways was finally laid to rest, was to exhume it in one form or another, as Virgin Nigeria, Air Nigeria, and now Nigeria Air. But this preoccupation with a national carrier in the form of a partnership with some external or do ‘gooders’ (read investors) has only blinded our officials from seeing other opportunities for making the same thing happen.

There are sensible cultural, political and economic reasons for having a national carrier in the aviation industry. It is a way of marketing the country and promoting its image among the comity of nations and peoples of the world, it would help to reduce the capital flight that would have gone to any external partners or investors, would promote local jobs in the industry, and so on. But it does not have to involve Virgin Atlantic or some “strategic equity partners”, whatever that means. And this is where economics comes into the discussion.

There are just a few simple questions Nigerians should ask the aviation minister. First, if the federal government would own no more than five per cent of the proposed Nigeria Air, why should the government bother with it? This question is important because the federal government has reportedly budgeted N14bn for “consultancy and advisory services” for the Nigeria Air project over three years. Out of this amount, about half (N6.25bn) has reportedly been disbursed.

What kind of policy or business thinking is this? Why spend this amount of money on a company only to end up owning just five per cent of it? If the foreign strategic equity partners and local investors who, together, would own 95 per cent of the company are so confident of their investment, why wouldn’t they commit money for consultancy and advisory services to the company?

Why would the government not simply have them own 100 per cent of the business and then tax them as it would tax any other businesses? What is the size of the business and how much are the shares worth? No serious business person (and the Nigerian government is supposed to be acting as a business person here) will pay out such a sum for consultancy services for owning five per cent shares in a company the market value of which is unknown.

Surely, if the company remains viable over the long term, the total accruals from taxes would be more than the five per cent ownership stake? The answer is simple: the local investors and so-called strategic partners are probably not sure of the viability of the company, so they would rather the Nigerian government make the first plunge and take the risks. Otherwise, they should be happy to commit funds for consultancy and take-off and own 100 per cent of the company.

This is where the big grammar does not help. What is a strategic equity partner? Who are they, and where do they come from? And which local investors would own 46 per cent of the company? In Nigeria, these may be no more than fronts for somebody else, otherwise, why are their identities shrouded in secrecy just four months to the take-off of such a huge business? In Nigerian policymaking, big words are often a cover used to befuddle shady or shoddy deals, so it is only fair for Nigerians to demand public revelation of these investors, foreign or local. At least, when Sir Richard Branson first took over the carcass of the Nigeria Airways, everyone knew who he was. As we await answers to all these basic questions, I am still smelling a rat in the Nigeria Air flight yet to take off.