20 October 2017

Nigeria: Experts Hinge Aviation Growth On Zero Percent Interest Loans

Stakeholders in the aviation sector have called for special interventions, especially a zero per cent interest loan facility, to drive Nigerian aviation industry in the next 33 years.

The experts, who spoke at the Nigerian Travel Mart colloquium 2017 in Lagos, were unanimous that only by such intervention from the Federal Government can the industry attract requisite infrastructural development to tap into the 2050 growth projection for global air travel.

International Air Transport Association (IATA) has projected that the global passenger traffic will rise from 2.4 billion to 16 billion, with huge revenue in trillions of dollars for Gross Domestic Product of countries by 2050. The clearing house for about 275 airlines in the world also projected that technologically advanced aircraft will operate the airspace, transporting two to 2000 passengers at a go.

Former Director General of the Nigerian Civil Aviation Authority (NCAA), Dr. Harold Demuren, said Nigeria is at a vantage position to be part of the exponential growth, if only the country can get its hearts together and set the priorities right.

Demuren said the current challenges are though huge in Nigeria and across the continent, but the population strength in Nigeria is the potential waiting to be tapped.

He said Nigeria of about 182 million today will be 400 million by 2050 and "at about half a billion population size, we are already there".

"We are already a natural hub to make the most of exponential growth in aviation. That is why we need to improve on infrastructure; improve our airports to be able to attract the market.

"This is where financing is very important. The current interest rate of 23 per cent is killing. Airlines cannot survive under it when the profit margin at max is about four per cent. So, if some initiatives of the government can offer aviation zero per cent, why not? Those that are against where the loans are coming from should not complain. Instead they should go and set up their own," Demuren said.

Chairman Aso Savings and Loans, Abuja, Ali Magashi, reiterated the need for a national carrier to maximize the potential of the aviation industry in Nigeria.

Magashi said while the country was hasty in liquidating Nigeria Airways in 2004, other countries like Ethiopia, South Africa, Kenya, Rwanda and others like Emirates, Qatar, Britain, and U.S. among others have developed the sector on the winds of their national carriers.

He added that though Nigeria is already behind, all machinery must be set in motion to evolve a national carrier as part of government's responsibility to create functional multimodal transport system. And after the airline is off the ground with supporting infrastructure, then government can start reinforcing with private sector partnerships because "aviation is actually not just another business".

Meanwhile, logistics industry like aviation, maritime and rail has been estimated to require at least N41.3 trillion ($135 billion) worth of investment to achieve vision 2050 growth projection.

Chief Executive Officer of RTC Advisory Services Limited, Opeyemi Agbaje, noted that aviation industry would need about N15.3 trillion ($50 billion) to develop the industry, marine transport will require also require N15.3 trillion ($50 billion) while rail will require N10.7 trillion worth of investment.

Agbaje, in a paper titled: "Raising capital to finance a vision 2050 plan" also stated that Africa as continent requires about N244.8 trillion ($800 billion) to grow the sector in 2050.

He hinted that the total amount of Foreign Direct Investment (FDI) that came to Africa in 2016 was N18.2 trillion ($59.4 billion) while he put the total FDI into Nigeria aviation at N1.3 trillion ($4.5 billion) in the same year.

He added that the answer to the development of aviation industry infrastructure challenges is global FDI.

On how to attract global FDI inflow into Nigerian aviation, Agbaje said it requires "a stable macroeconomic environment, forward-looking and proactive policy, a clear and compelling vision for the industry shared by all stakeholders including government and the private sector and regulation that seeks to foster industry transformation (not just collect revenues)."

Agbaje added that when the above are put in place, the investors and financial institutions, global and domestic should do the rest.

Vice President, Pricing and Revenue Management Copa Airlines, Panama, Chris Amenechi, at the panel session, said while the private sector have significant role in preparing the industry for projected growth, the government has a responsibility to support all investors and also create business-friendly environment.

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