States with airports are wasting resources – Capt. Muhammed Joji

The question of high cost of aviation fuel is still on the front burner and this has impacted on the cost of flying tremendously. The new minister of aviation has instituted a committee to seek ways to reduce the cost of aviation fuel. What exactly is happening now? When the minister came on board, she […]

The question of high cost of aviation fuel is still on the front burner and this has impacted on the cost of flying tremendously. The new minister of aviation has instituted a committee to seek ways to reduce the cost of aviation fuel. What exactly is happening now?

When the minister came on board, she had a meeting with us, on the 11th of July this year. In attendance were airlines, parastatals and other stakeholders. The idea was to find out why the airlines’ charges have gone up by 100 percent within a period of about six months.

In 1990, a litre of aviation fuel was 31 kobo, while PMS was 33 kobo. Today, we buy aviation fuel for N190. That is 65,000 percent increase within two decades. Where else in the world do you have the cost of doing business go up over a decade by 65,000 percent?

Recently, the Country Director of the World Bank in Nigeria, Mr. Onno Ruhl decried the high cost of doing business in Nigeria. That is why there is poor investment in the country.

We can’t compete. That is why if you look at the traffic statistics, intra Africa, where you have the Kenya airways etc, last year, Africa carriers carried a total of 272,303 passengers. Nigerian carriers could only carry 24,028 passengers because we can’t compete. They are subsidizing. In the intercontinental, where you have foreign airlines, they carried a total of 951,926 passengers, Nigerian carriers, only 59,000.

For example, South Africa invested $2.8 billion in aircraft. South Africa Airways is a state wholly owned enterprise. They don’t pay VAT, customs duties and navigational charges. Kenya is a public and private company. They don’t pay navigational charges while flying in Kenya.

The same thing goes for Ethiopia airline. But look at Nigeria, over $3billon investments in the airline business, all private investment because there is no government airline. I can confidently say there are negative returns on investments because we are highly indebted.

Nigeria as a country today depends 100 percent on revenue from crude oil. All the giant companies rely on aircrafts for oil exploration; both offshore and onshore cannot be optimized without the support of helicopters. We are the backbone of the economy of this country.

There is an underlining assumption that airline business is lucrative and that Nigeria should levy us well enough. This is not only gross ignorance but a deliberate attempt to extort money from investors who invested their hard earned money in such a risky business.

The celebrated bailout fund was largely in favour of creditor banks that craftily included the airlines to recover their money. When you get bailout, you can’t get the money yourself. You have to go through the bank. The bank will tell you when it takes its 60 percent, you have 40 percent left. How do I renew my equipment? How do I pay FAAN? How do I pay NCAA and NAMA and the rest of them?

There is a trend now, each president will have an airport built in his home state even if it is not economically viable. Often the infrastructures are left to rot when the president is out of office; example Katsina airport and one is about taking off in Bayelsa. What do you say of this?

It is the culture of racism and incompetence plus complacency. Every minister appointed today wants to do something for his own people. They come from a village or a town. What do you want him to do? Steal government money? They will ask later, what did you do when you were a minister? Remember the ministerial nominee from Taraba. He was refused by his people because he didn’t do well for his people. That means, if you are there, you work for your people and not for your country.

State governments have started building airports even though the responsibility of managing airports is placed on the central government by ICAO. Akwa-Ibom and Delta States are examples. Others are planning to do so. Delta State is said to be in negotiation with FAAN to take management control. Won’t this constitute a problem in the industry?

The problem first of all is with the distribution of resources and that makes people have too much money in their hands to play around. Look at Rivers, sectoral allocations, a state with 25 local government areas with I million population having a monthly allocation of N5billion while Kano with 44 local government areas and 9.5 million population has N2.5 billion as monthly allocation. How can you control such a person?

When people have too much money in their hands, they create all sorts of problems. Instead of using the money for poverty alleviation…look at the purchase of Aero plane by the Rivers State government. There are enough passenger airlines that fly on time in and out of the states. There are 22 to 24 foreign airlines that fly into and out of Nigeria every day. Why do you have to buy your own plane? Even the queen of England doesn’t have her own plane, the same goes for British  Prime Minister.

The proliferation of airports is a way of wasting money. Nothing stops you from constructing an airstrip. It’s about 1,500 meters long with simple navigational aids. But these guys will go and build mega airports like the Heathrow airport without navigational aids and lights. They believe that the runway alone is an airport, it is not!

Increase in passenger service charges (PSC) has been another topical issue in recent times.

Like I said, it all boils down to cost of doing business. The last time we had a meeting with the minster, we told her that the FAAN charges needed to be reduced by 50 percent. Our airport charges are one of the most high in the world. We are paying over N23,000 per square meter at the Abuja airport. The most expensive in the world. It is more expensive than Ikoyi, Lagos, and more than most choice areas in Abuja. That cost must be reduced.

Where else on earth can you attract investors by reducing ground premises? The normal leasehold is 99 years. But FAAN said, “we reduce it to 25 years.”

The Value Added Tax (VAT) is another contentious issue. There is nowhere in the world where passengers pay VAT.  If you look at the VAT decree 102 of 1992, it discriminated between foreign and local airlines. Airlines don’t pay VAT; road, rail, motorways don’t pay VAT but we air travellers pay VAT. Why? We once drew the attention of the minister to schedule three of the VAT document of 1999. These exempted all commercial vehicles.

Aircrafts used for transportation of passengers are deemed to be commercial vehicles. The general agreement on trade and tariff services exempt payment of duties on spare parts, aircraft parts.

Former president Olusegun Obasanjo inaugurated a 10-man committee following three successive air mishaps in 2005. The committee recommended waiver on customs duties on aircraft engines and spare parts. It was accepted by government. It is called SO170. The second was for the removal of 5 percent VAT. It is never charged on transportation in any part of the world because it drives the economy. We were given a letter in 2005, up till today, customs did not implement it. There seems to be a deliberate attempt not to solve this problem and now the air fares have gone up. People are returning to the roads which are already in bad shape.