Airport Concession: The Best for the Aviation Sector?

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The Problem Statement

When the move by the Federal Government to concession four major airports (Lagos, Abuja, Kano, and Port Harcourt) as part of its developmental plan for the Aviation Sector was initiated in 2015, it was met by a brick wall of opposition from employee unions within the aviation sector who feared job losses due to a Lean Strategy for Human Capital Optimization these private sector financiers would bring along. Some stakeholders within the Aviation Sector also felt the Nation is still in its infancy stage to embrace a concession form of arrangement whilst other stakeholders particularly those in the private sector felt this concession agreement and arrangement will bring massive gains to the infrastructural development of the Aviation Sector.

It is no doubt that the aviation sector is suffering from a significant infrastructure deficit compared with other African countries. Being such an important sector for the economy, it is imperative that this deficit be reduced as much and as soon as possible. Most Nigerian airports are in deplorable conditions and require immediate infrastructural attention. Therefore, the desire of the Federal Government to concession the international airports to enable it to compete at par with other International Airports across Africa and the World. When an International Airport is put under a concession agreement, it unlocks innovation and allows for efficient and effective management of an Airport and full optimization of its assets/resources.

The Policy Solution

In 2015 the federal government announced its intention to grant concessions for Nigeria’s four major airports. In light of Nigeria’s existing economic climate, many experts and stakeholders in the aviation industry have backed this resolution. According to the Minister of Aviation, the concession is a deliberate policy towards bridging infrastructural deficit in the nation’s airports. The minister, who gave a graphic picture of the extent of damage of Abuja Airport runway showing cracks and ditches, assured that the infrastructural challenges in the nation’s aerodromes would be a thing of the past.

In simplifying the Policy Position of the Ministry of Aviation, we need to understand the basic principles that govern the administration of a Concession Agreement, what it means and how it is executed for the mutual benefit of all stakeholders. Concessions are a type of public-private partnership (PPP) that differs from other PPP models in how they operate. In a concession, ultimate ownership of the asset or infrastructure remains with the government, while part of the commercial risk of providing and operating the asset or infrastructure is transferred to a private concessionaire.

With concession, investors become responsible for developing the airport and making sure it measures up to global standards. The airports are improved to meet modern traffic and traveler-friendly demands which most Nigerian airports lack. The operational efficiency and profitability of the airports will increase and the non-oil sector of the economy will grow.

Therefore, the granting of concession agreements for Nigeria’s major airports is necessary due to their condition and the slowing economy. Following the drop in oil prices, the government’s revenue has substantially decreased. Also, the government needs private sector participation and resources to improve the country’s economy.

Now, these are some of the benefits of the concession agreement:

  • To aid the development of world-class airports with efficient service delivery;
  • To eliminate the issues of accountability and political interference that are usually associated with government-controlled infrastructure;
  • To help the government in prioritizing scarce resources that could be utilized in other areas of the economy; and
  • To enhance expertise and further the development of new technologies, as private sector participants have higher levels of expertise and access to newer technologies that aid the smooth running of airports.

NIGAC Constructive Position/Take

Now, the issue is not about concession but continuity in the concession policy and facilitation of laws to protect and fast-track the success of the programme because concession seems to be the only alternative to ensure that modern aviation services enjoyed in other parts of the world are also experienced here. To this end, concession seems to be the best alternative to revamp the aviation sector if there are transparency and accountability with a strict legal framework that ensures a change in Government doesn’t breakdown the concession agreement.

The Federal Government and the Infrastructure Concession Regulatory Commission (ICRC) are responsible for ensuring that concession agreements achieve the required effect for the sector and economy in general. However, the aeronautical part of the airports should not be concessioned for security purposes and because they are part of the national assets. Nigeria’s aviation sector is suffering from a significant infrastructure deficit compared with other African countries. Being such an important sector for the economy, it is imperative that this deficit be reduced as much and as soon as possible. Given today’s economic climate, a concession is the most effective and reliable way of addressing this issue. Certainly, the concession of the airports will aid effective and efficient management of the airports and adequate utilization of the abundant skilled manpower in the aviation sector and these changes will create more jobs, expand the size and capacity of the airports, and of course attract more investors to Nigeria, the Investment Destination of Choice for Private Capital.

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