20 November 2018

Nigeria: Unease Over Impending Hike in Passenger Service Charge

Lagos — There is an unease in the aviation sector over planned increment in the passenger service charge (PSC) by the Federal Airports Authority of Nigeria (FAAN).

Though there has not been a clear-cut pronouncement on the increase, the proposal to that effect is already generating ripples in the industry.

The PSC is a charge collected from passengers travelling from both domestic and international airports. It is used by FAAN to maintain infrastructure at the airport and to improve passenger facilitation.

For the domestic, N1000 is paid per passenger while $50 is charged on every international passenger.

Nigerian airports process about 15 million passengers annually comprising both domestic and international.

The Managing Director of FAAN, Engr. Saleh Dunoma, disclosed that the authority generated N38 billion from PSC in 2017.

Daily Trust learnt that the proposal to jack up the PSC was hinged on high cost of operations and the naira devaluation crisis rocking the country's economy.

A source pointed out that the last time passenger charge was increased was in 2011.

As at 2011, the dollar to naira exchange rate was around N162/1$ while the exchange rate now is pegged at N306/1$ at the Central Bank of Nigeria (CBN) inter-bank rate and N362/1$ at the parallel market.

"It is more than eight years now and you will agree with me that things are no longer the same," a source said justifying the rationale for the increment.

The source added, "Again, don't forget that following the currency devaluation, virtually all service providers in the aviation sector have jacked up their prices in line with current market reality. The cost of ticket has also soared significantly.

"So we are spending more to provide services at the airport yet the income from passenger service charge has remained the same in the last eight years".

Daily Trust learnt that the planned increment in PSC is being justified with the construction of four new terminals in Lagos, Abuja, Port Harcourt and Kano from the $500m concessionary loan obtained from the China Import and Export Bank.

Already, the new terminal at Port Harcourt International Airport has been commissioned with the other three nearing completion.

"So, as we commence the repayment of the loan, we need to make more money commensurate with the improved services at the airports to enable us seamlessly service the loan," the source also said.

However, stakeholders are sharply divided over the planned increase.

Instructively, airline operators who have groaned consistently over high charges said the planned increment cannot be justified.

The Chief Operating Officer of Dana Air, Mr. Obi Mbanuzuo, in an interview with Daily Trust said the argument on high cost of operation by FAAN did not add up, saying FAAN does not use the money collected from PSC for upgrade of facilities as all its capital projects are heavily subsidized by government.

He also noted that out of all the aviation agencies, FAAN is the highest revenue collector in the industry.

However, an analyst, Dan Aibangbe, said the Passenger Service Charge in Nigeria is far low compared to the regional and international averages.

"Such review is well in line with the general guide and standards obtainable under IATA," he said.

Another aviation analyst, John Ojikutu said, "If the international airports are planned for concessions, there should be no hurry about increase in the PSC. Any increase to sustain airports infrastructure, periodic maintenance, without government intervention will not be less than $10 or N3,500 per domestic passenger if the airports are eventually given out for concessions."

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