How Ghana displaced Nigeria as W ’ Africa ’ s aviation hub

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How Ghana displaced Nigeria as W’Africa’s
aviation hub

By Louis Ibah

After losing its ranking as the largest African
economy to South Africa, it appears that Nigeria is
also on the brink of losing its leadership position,

as the eagle-king of sub-Saharan Africa skies to
next door neighbour, Ghana. Most analysts are
quick to point out that the ongoing economic
recession in the country has not in any way helped
Nigeria’s quest to maintain its stronghold as the
big boy of the sub-region.
In Nigeria, the airlines are grossly over burdened
by taxes and charges from government agencies,
rising overheads, epileptic and excessively priced
aviation fuel of between N200 to N270 per litre,
and scarcity of required for routine oversea’s
repairs and maintenance costs. It is also needed
for purchase of spare parts as they contend with
excessive bank loan interest of 26 per cent, as
well as training of pilots and other technical
personnel abroad on regular basis.
Analysts, however, insist that Nigeria needs a
vibrant aviation industry to drive its transport and
logistics business if its dreams to diversify the
economy and come out of recession are to be
achieved.
But the myriad of challenges earlier listed, coupled
with the economic downturn, have forced some of
the country’s existing airlines to fold up, while
some foreign carriers have similarly parked out of
the country. Every recent attempts to attract new
investors into the industry have yielded no positive
fruits given the weighty challenges facing the
sector.
The good old days
About two years ago, Nigeria had served as the
aviation hub for the West African sub-region. The
aviation sector reform programme launched by
President Goodluck Jonathan led to significant
improvement in the state of infrastructure in 22 of
the nation’s airports and created a new wave of
enthusiasm among Nigerians and airline
passengers. The country’s domestic airlines like
Arik Air, Aero Contractors, Medview and Dana Air
who felt the domestic market had become too
small for them to launch operation into the sub-
regional market. In the good old days, these
Nigerian carriers were enjoying an obvious
monopoly of routes within the sub-region
operating daily scheduled and chartered flights to
countries like Ghana, Togo, The Gambia, Benin
Republic, Liberia, Sierra Leone, Cameroon and even
as far as Sao Tome and Principe. Arik as a
Nigerian carrier was also acting as a quasi-
national carrier for Benin Republic. The presence of
Nigerian banks, insurance, telecommunications,
entertainment and film, manufacturing, Nigerian
students, and even oil and gas operators in the
sub-region had led to a surge in traffic thus
propelling Nigerian airlines operations into these
routes.
Several years ago, Abuja and Lagos, two of
Nigeria’s major cities also played host to a lot of
trade, diplomatic, health and academic conferences
which also attracted passengers into the country
from the sub-region. The local carriers also
benefitted from uninterrupted supply of aviation
fuel.
Internationally, the Bilateral Air Service Agreement
(BASA) signed by the Nigerian government with 88
countries had similarly led to an influx of
international airlines flying into the Lagos, Enugu,
Abuja, Kano and Port Harcourt airports. The
disposable incomes of Nigerians were also
sufficient to allow them travel all over the world for
vacations and other businesses. Data released by
the Nigerian Civil Aviation Authority (NCAA) in
2014, showed revenues generated by foreign
airlines from ticket sales to be in excess of N231
billion, while local airlines made about N73 billion.
The fortunes recorded by these airlines also meant
more revenues in taxes and royalties to the Federal
Government’s coffers. It also meant a big source
of funding to such regulators and service providers
like the NCAA, Nigerian Airspace Management
Agency (NAMA), the Nigerian College of Aviation
Technology (NCAT), Nigerian Meteorological
Agency (NIMET) and the Accident and Investigation
Bureau (AIB); these agencies take five per cent out
of each ticket sold by any airline in Nigeria to run
their operations.
Bad times
With the Nigerian economy sliding into recession,
the fortunes of the local airline industry also fell
along with it. Two of the carriers (Aero Contractors
and Dana Air) were forced to withdraw their
operations in the West African market, leaving Arik
and Medview, which apparently are struggling to
cope with pressure created by the scarcity of
foreign exchange as well as aviation fuel.
The local airline industry is also said to be hugely
indebted to local banks and service providers in
the industry like Federal Airports Authority of
Nigeria (FAAN), NAMA, Nigerian Civil Aviation
Authority (NCAA) and NIMET. The debts are
estimated to be in the region of N50 billion, an
ugly trend that led to the Asset Management
Company of Nigeria (AMCON) buying over some of
such debts in most of the existing airlines to allow
them to stay in operation. And these challenges
explain why some of these airlines opted to exit
the West African routes.
On the international front, Iberia and United Airlines
withdrew their operations from Nigeria earlier in the
year citing the inability to repatriate earnings made
in Nigeria to their headquarters overseas as a
result of a new Central Bank of Nigeria (CBN)
policy on forex withdrawals. With the exchange rate
of the naira now going for above N412 to $1,
existing foreign airlines have also increased the
cost of air tickets by about 80 per cent to reflect
rising cost of doing business in Nigeria.
It is even rumoured in the industry that other
international airlines could pull out in the months
ahead if the operating environment remains hostile
to their operations. What most local operators
have, however, refused to openly acknowledge is
the large scale fraud going on in the airline
industry. At present for instance, most airlines are
operated as a one man business and that leaves a
lot of room for all sorts of graft. “It is corruption
that killed Aero,” one airline official told Daily Sun
recently. “Even when AMCON bought over its debts
and took over its operation, it could not deal with
the mismanagement and misapplication and even
outright stealing of funds in Aero,” the official
alleged. Although corruption has had a dire
consequence on the Nigerian airline industry, it
appears that in the last three months, it is the high
cost as well as the scarcity of foreign exchange
(forex) and aviation fuel (Jet A1) that wreaked the
most havoc on the airline industry.
Ghana benefits
Nigeria’s loss is perhaps Ghana’s gain as the
foreign exchange crisis has pushed some of the
foreign airlines to relocate their ticketing and sales
offices from Nigeria to Ghana. Leading the pack of
airlines that had to move their ticketing base out of
Nigeria are Delta Airlines, British Airways and
Virgin Atlantic.
Intending travellers to the United States of America
(USA) and the United Kingdom (UK) sometimes
have to get their tickets through sales outlets in
Ghana where some airlines now consider some
what a safe haven for their businesses. Today,
there are stories of some Nigerians who now prefer
to fly into Ghana and from there fly out to Europe
and America. It is a lot cheaper that way as the
airfares are lower than getting them in Nigeria. And
relocating foreign airlines’ ticketing offices to
Ghana had led to severe losses in revenue to
Nigerian travel and tour industry. It, nonetheless,
translated into massive gains in revenue for
Ghanaian travel agents and banks.
The Ghanaian government sensing the crisis in the
Nigerian aviation industry, especially with the forex
and fuel supply crisis, swung into action with new
policies that ensured they took better opportunity
of the Nigerian situation. For instance, the
Ghanaian government saw the Nigerian crisis as an
avenue to make Accra the hub of the sub-region
and quickly announced a cut in the pump price of
aviation fuel by 20 per cent, which meant aviation
fuel was sold for about N110 per litre in Ghana as
against the N230-N270 in Nigeria.
Even both countries are importing aviation fuel,
why is Ghana selling at N110 per litre as against
N200 and above in Nigeria? The simple answer is
the desire to attract more airline businesses away
from Nigeria to Ghana. And that it has successfully
done. A lot of foreign airlines flying into the West
African sub-region now refuel in Ghana and no
longer in Nigeria in order to beat the expensive
fuel prices in Nigeria. Who gains? It is the oil
marketers in Ghana as well as the banks in that
country that are the greatest beneficiaries of the
crisis in the Nigerian aviation sector. Ghana, it
must be stated, also rakes in some incomes from
the charges paid by the airlines any time they land
or park in the country’s airport. Although there has
been no data to state the actual loss in revenue
and jobs to Nigeria in recent months, it would not
be out of place to say the figure could run into
several millions of dollars.
Way out
In a release by the Chairman of the Airline
Operators of Nigeria (AON), Captain Nogie
Meggison, the operators had lamented that the
industry had sunk into its worst state of financial
woes and that only a direct Federal Government
financial bailout could salvage the industry from
imminent collapse.
“We call on the Federal Government to, as a matter
of urgency, come up with a strategy to seek, for
the first time, direct intervention funding to airlines
to save the aviation sector from total collapse
considering that without the airlines, there is no
aviation,” lamented Meggison.
Most aviation stakeholders in Nigeria would readily
agree that what airline operators need as bailout in
the ‘immediate term’ is not really the injection of
fresh funds into their business or even the
acquisition of new aircraft on low interest rates for
them by the government. Rather, taking away
some of the arbitrary taxation by regulatory
agencies as well as the provision of requisite
infrastructure and the steady supply of fuel would
suffice by assisting them in the short term to
stabilise, even faster than getting direct
government funds.
“What most operators would appreciate in the form
of a bailout would be for the Federal Government
to order an immediate stop on the payment of
Value Added Tax (VAT) on air transportation
because air transport is the only transport service
being made to pay VAT in Nigeria,” an airline
official told Daily Sun.
“That would ease their burden a lot. Road, rail and
waterway transportation services are VAT
exempted. The airlines also need uninterrupted
fuel supply; that would be a great bailout if the
government can work with marketers to achieve
that as fuel accounts for more than 40 per cent of
cost of operation for the airlines,” he added.
For Nigerian pilots, the best form of bailout for the
domestic airline industry is for the government to
legislate the mergers of the airlines. “The Federal
Ministry of Aviation should foster an arrangement
through incentives that will bring about mergers of
airlines, culminating in the emergence of one or
two mega-carriers, which can become global
players,” said Balami Isaac David, President,
National Association of Aircraft Pilots and
Engineers (NAAPE).
“The government could, through Bank of Industry
(BoI), adopt a carrot and rod method. The carrot
could be offering soft loans to merger carriers that
achieve a certain level of capitalisation while the
rod would withdraw or suspend the Air Operator
Certificate (AOC) of airlines that fail to meet
prescribed capitalisation after a given time or
restrict them to particular hubs only,” David
added.
Nigerian carriers have the capacity to dominate the
West African airspace, create thousands of jobs for
citizens and contribute more to the GDP of the
country but that would only be achieved if the
right environment is created for them to thrive.

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