Concerns as FG moves to concession four airports

The concession of airports is part of the aviation roadmap unveiled by the Minister of Aviation

Last Monday’s advertisement by the federal government through the Ministry of Aviation inviting prospective bidders for the concession of four airports is a testament to the resolve of the Muhammadu Buhari-led administration to give the airports to private entities despite misgivings and reservations trailing the move, Daily Trust reports.

The concession of airports is part of the aviation roadmap unveiled by the Minister of Aviation, Senator Hadi Sirika. However, it has dragged on for over six years since the birth of the administration, because the move met stiff resistance from some stakeholders in the industry, especially the labour unions.

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Also, retirees of the Federal Airports Authority of Nigeria (FAAN), including a body of former managing directors and directors of the authority, stoutly opposed the move.

Apart from airport concession, other projects highlighted in the move include the establishment of a national carrier, Maintenance, Repair and Overhaul (MRO) and Aviation Leasing Company (ALC).

Among the projects highlighted in the roadmap, the airport concession particularly generated tension and uneasy calm in the industry with stakeholders sharply divided over the issue.

The airports slated for concession are the Murtala Mohammed International Airport (MMIA), Lagos; Nnamdi Azikiwe International Airport (NAIA), Abuja; Malam Aminu Kano Airport, Kano; and the Port Harcourt International Airport, Rivers State.

These are the four major airports generating the largest chunk of aviation revenue for the federal government.

A recent statistics revealed that out of 22 airports under FAAN’s management, the four major ones generated 87 per cent, while the remaining 18 recorded 13 per cent aviation revenue.

It was on this premise that some stakeholders kicked against the concession of the four airports. Others also argued that the government must address pending issues over past concessions before talking about giving new airports to private concerns more so when the airports under contention have undergone infrastructural upgrade with government funding.

For instance, the airport terminals have undergone remodelling which was done with a $500m loan secured in 2013 from the China Exim Bank by the administration of former President Goodluck Jonathan.

A group of former managing directors and directors of FAAN warned that the concession of the airport terminals built through a Chinese-funded loan of $500m could land the country into trouble following the Mezzanine Clause identified in the loan agreement.

Mezzanine Finance is a business terminology where the debt is converted to equity after the timeframe for the loan must have expired. With that, if the borrower cannot pay back the loan within the period specified, the lender gets a share of equity instead which is used as security. With the clause, the Chinese could lay claim to the infrastructure should the host country default in payment.

In a letter to the House of Representatives Committee on Aviation, which recently intervened in the contentious issue of concession, the airport professionals raised the alarm that in the case that Nigeria is unable to pay back the loan, China could seize the facilities in line with the Mezzanine Clause.

Aviation unions, including the National Union of Air Transport Employees (NUATE), Air Transport Services Senior Staff Association of Nigeria (ATSSSAN) and Association of Nigeria Aviation Professionals (ANAP), insist the concession programme violates the act establishing FAAN.

The general secretaries of NUATE, ATSSSAN and ANAP, Comrades Ocheme Aba, Frances Akinjole and Abdulrazak Saidu, respectively, in a joint statement, said the federal government had not done due diligence in the concession arrangement. They also said FAAN had not been carried along in the concession.

At a stakeholders’ meeting last week to give an update on the concession, a former Minister of Aviation, Osita Chidoka, picked a hole in the process, saying the Minister of Aviation, Sen Sirika, had been “sold” to the Bureau of Public Enterprises (BPE).

According to him, the ongoing concession process is tantamount to selling the largest assets controlled by FAAN to the private sector.

Chidoka, in his contribution at the virtual stakeholders’ forum, disagreed with the Infrastructural Concession Regulatory Commission (ICRC) and the BPE on the concession approach.

He said, “I think the first thing we should have done was to corporatise; that is to say turn these terminals, a block of terminals (Lagos Zone) into a company owned wholly by FAAN and then make FAAN a regulator so that FAAN will be the regulatory agency of the aviation terminal buildings; which is part of their responsibility. And then the responsibility for the aeronautical side of the issue will be that of a department in FAAN, while FAAN serves as the regulator of airports.

“So if we take the Lagos airport zone for instance, take the airport in Akure, Ibadan and group them together into an airport and make it a company, then we can sell 51 per cent of that to a concessionaire to come and run the airport while the Nigerian state, the state government that owned the airport before we took it over, the workers inside the airport have shares.”

Chidoka, therefore, warned against repeating the experience with the privatisation of the electricity Distribution Companies (DisCos) in the power sector, saying, “If we take away these airports just like we did with the DisCos, the 80 per cent granted to the DisCos, they have not been able to fund even metering to buy meters. They don’t even have the wherewithal to meter the customers.”

But Sen Sirika has defended the concession project, stating that it would not lead to job losses. He insisted it is a terminal concession and not the entire airport facilities that would be concessioned.

He said the airports would be given out to private concerns for 30 years to operate, envisaging that through the arrangement, the airports would be able to yield more revenues for the government.

Responding to a frequently asked question on the concession, the federal government allayed the fear of workers, saying it would not lead to any job loss nor would it affect the servicing of the Chinese loan.

The passenger terminal development works handled by the CCECC, according to the ministry “are a small part of this, and the federal government has every intention to service its obligation.”

The government further explained that it was “looking for partners who have the financial, technical and operational capabilities to manage these assets profitably and responsibly.”

Besides, it said FAAN would remain the manager of the airports, even as it noted that other aviation agencies would continue to play their roles at the airports.

The ministry explained that, “FAAN will continue to play its role as statutorily required. Any material changes to FAAN will need to come via an act of law. Infrastructure concessions are very complex and sensitive programmes. They often require years of planning and preparation to secure the requisite inputs and approvals from the relevant regulatory bodies.”

To underscore the government’s commitment to transparency and doing the right thing with the concession, the ministry involved the ICRC and the Bureau of Public Enterprises (BPE) from the beginning. And in June last year, the minister received certificates of compliance from the commission, giving approval to the project and indicating that it is in line with the procurement process.

The minister said, “With these certificates of compliance we will go ahead to the Federal Executive Council for approval for the full business of concession to proceed, and that will turn the airport terminals to their full potentials in private hands as millions of dollars would be pumped into the airports.”

The acting Director General of ICRC, Mr Michael Ohiani, who participated in a stakeholders’ conference recently, explained that the concession was not the same thing as privatisation.

He explained that there would be no room for “portfolio investors”, but those who would bring value to the airports under concession. Besides, he said the commission issued a certificate of compliance to the ministry having been satisfied with the process.

Not daunted with the criticism over the move, the ministry, in compliance with the Infrastructure ICRC and National Policy on Public-Private Partnership (N4P), released a request for qualification for the concession.

In the document signed by the Permanent Secretary, Federal Ministry of Aviation, Engr Hassan Musa, the four major commercial airports and surrounding communities are intended to develop into efficient, profitable, self-sustaining commercial hubs which will create more jobs and develop local industries through a Public-Private Partnership (PPP).

The ministry further stated that: “The terminals’ concession is one of the critical projects under the Aviation Sector Roadmap of the FGN and fits well within the scope of the ministry’s strategic plan for the sector. 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.”

Sindy Foster, an aviation analyst and Managing Partner for Avaero Capitals, in a chat with Daily Trust, however, expressed concern over the development.

She said, “The government borrowed money for these terminals. The Lagos one is not even open or functional. Now you are going to enter into a management concession; not even a Build, Operate and Transfer (BOT) concession, because you have already built it. You have already invested the money that you borrowed to build these terminals and now you are going to transfer these public assets to private corporations for 30 years.

“So far to date, there is no obvious plan how FAAN is going to be able to afford to maintain and upgrade the remaining airports after the cash-cows are concessioned. The impact on the rest of the aviation sector needs to be part of the consideration. That sadly appears to be missing.

Another expert, Mr Chris Aligbe, flayed the criticisms trailing the concession, insisting the government means well with the concession.

He also dismissed the suggestion by Chidoka, wondering why he refused to corporatise FAAN when he was in the saddle as minister.

With the insistence of the government to go ahead with the concession, stakeholders and observers patiently await those investors; whether local or foreigners, who would take over the management of the airports.