Nigeria: Burden of Managing State-Owned Airports

3 April 2020

The Federal Airports Authority of Nigeria is faced with the challenge of managing unprofitable airports built by state governments, which further depletes its revenues.

Recently there have been reactions that the Federal Airports Authority of Nigeria (FAAN) is facing the challenge of extending its personnel, expertise and resources to take over and manage about three additional airports built by state government that are out rightly unprofitable.

Some senior officials of the agency spoke to THISDAY and provided a background to the development.

According to these FAAN officials who pleaded to remain annonymous, many states built airports without considering the economic implications. Sometimes they just decide to build airport to ease the movement of the governor, his executive, members of the house of assembly and senior officers of government. In addition, they vote huge amount of money, which in order of priority would serve the state better if more hospitals, schools, water scheme or mechanized agriculture were explored. But the choice to build an airport is always the desire to satisfy the upper segment of the citizens in the state who take all the decisions.

Then after the airport is built, the state government would realise that building an airport is one thing, but maintaining it is another. It would realise that the cost of maintaining the airport in five years could come up to the same amount used in building it.

Realising that they would not be able to fund it, the governor of the state would start wooing the federal government, possibly through the Minister of Aviation, or the Ministry itself and during the Federal Executive Council meetings, he would use the access to talk to more key people at the centre.

Then one day, the FAAN Managing Director might receive a message that he has been directed to take over the management of one particular airport.

Generally, FAAN is usually made to believe that it is for national security that it is given the custodian of managing the airports. The state that handed its airport to the agency would not fund the maintenance.

THISDAY learnt that the state built airports under consideration that FAAN could be called to take over are four, situated in four northern states.

Ego Trip

Many Nigerians believe that building airports by some state governments is engaging in ego trip because they knew the airports would not generate any revenue.

Industry experts have frowned at the huge amount of money that should be deployed to provide critical infrastructure like water, roads, health institutions and schools are "dumped' in unprofitable ventures that only serve few highly placed individuals, while essential amenities that would serve majority of the population are lacking.

The stakeholders also noted that many existing state airports, after gulping huge resources are not even functional because they don't receive regular flights and they are also not well maintained because of the huge cost of maintenance.

States that already have their own airports include Jigawa, Bauchi, Gombe, Kebbi, Delta, Bayelsa, Warri (managed by private concerns), Taraba and the states that are already building airports include Ogun, Osun, Ekiti, Anambra, Nasarawa, Jigawa and Ebonyi.

Some of the projects have already gulped huge resources from the states' coffers.

Industry stakeholder with the Etimfri Group, Amos Akpan, said most state governments in Nigeria do not need an airport in their short and medium term development programmes and argued that they should use the money earmarked for airport development to provide infrastructure that is within the global basic minimal indices of development.

"In doing so, the state government would have deployed the commonwealth of the state for the benefit of the greater number of the people of the state," he said.

Akpan, disclosed that an airport that would accommodate double isle aircraft like Boeing B747 and 787 or Airbus A340 would cost about $1 billion (N360 billion) inclusive of at least three gates, terminal facilities, warehouses, perimeter fencing, and a four thousand meters runway.

"It will cost about N50 million per month to maintain its operational status. This level of cost is the reason we see most state airports in yet-to-be completed status. They are opened for services while the other phases of the construction will be on going," he said.

Akpan, noted that the Delta state government has taken the best option by the concession of their airport to private investors and private management, remarking that this was possible because it is one of the few state airports that have prospects that could attract private investment.

"Let me re-emphasise that while airport is one of the indices of development, it is not on the top of the list among the basic minimal indices even within the transport sector for our states.

"The indices of development applicable to a defined territory with defined number of human residents include availability of drinkable and usable water in every home or compound; accommodation for every unit of family; accessible basic health care for every citizen and family unit; opportunity for every resident to acquire elementary education that can be used as baseline to further gain the skills to ply a trade and ability for the residents of the state/territory to afford two meals a day," the industry consultant said.

He noted that to meet the above basic indices, the government of that state must choose and execute projects that will lead to the provision of those basics minimal infrastructures first.

Financial Burden

THISDAY learnt that FAAN basically generates huge revenue from the Lagos and Abuja airports. Few years ago FAAN's aeronautical and non-aeronautical revenue from the Murtala Muhammed International Airport hovered around N5.5 billion monthly. The total revenue it earned from other airports was put at N15 billion which was N45 billion per annum. This is the amount of money that is used to maintain FAAN's 22 airports, after deducting 25 per cent that compulsorily goes into the federal government coffers. Now the agency would soon be managing additional three to four airports built by the states in which the states would not be defraying the cost of their maintenance.

FAAN officials who spoke to THISDAY said that this explains why the agency is finding it difficult to upgrade most facilities at the airports under its management because it is forced to take up the burden of funding the maintenance of airports the state governments shouldn't have been built in the first place or if built should be managed and maintained by them.

Liabilities

Industry consultant and CEO of Belujane Konsult, Chris Aligbe, told THISDAY in an interview in Lagos that it is very sad that most of these state owned airports are liabilities.

"The only airport built by a state government that is not a very serious liability, is Owerri airport. But if you check what Owerri airport is earning it is not enough to sustain it. There are only two airports in this country that are doing well, Murtala Muhammed International Airport and Abuja.

"Abuja earns 18 per cent of FAAN's total revenue. But that is just enough to sustain Abuja, not enough to spend on any other airport. The only airport that generates from where you can take money is MMIA Lagos.

"But if you were to leave the funds generated by MMIA Lagos to be spent on Lagos, our Lagos airport would have been a different thing all together. But what they earn they immediately begin to spend on all other airports. They have all their staff there, they have to do maintenance, they have to keep them running because people will always abuse them if nothing is happening. But all other airports are liabilities."

Aligbe, said apart from the state owned airport in Asaba and Uyo, none of the other state owned airports is generating enough revenue to maintain them.

"I do know that it is not FAAN that is asking for these airports, it is political pressures. These state governors, they will start the project, announce that they are bringing development to the people, there will be a fanfare and they will refer the airport project as dividends of democracy but these are liabilities of democracy because they spend so much resources on them and they have no idea what these airports will do in the future.

"Some of them build and say it is for hajj operation, which is conducted once or twice and after that the airport is dead. Nothing will be happening there; maybe you are lucky, one flight can come in or you have executive flight flying into the airport for one function or the other and after that they go and that is all the airport will see.

"Yet, FAAN must keep their staff there, keep maintaining the terminal, and doing everything that is necessary. The Nigerian Civil Aviation Authority (NCAA), which is the regulatory authority, must have oversight there.

"The Nigerian Airspace Management Agency (NAMA) must have their staff at the control tower. These are all liabilities. So FAAN is bearing so many liabilities and the parastatals are bearing so much liability on these state built airports.

"So the government should take a very strict decision that any state that builds an airport that FAAN will not take it over. States will find how to run the airports. If FAAN is providing services they should be paid," Aligbe said.

The Belujane CEO said many airports built by the states were indebted to FAAN, but because FAAN is a government agency it cannot take a decisive decision of withdrawing its services from those airports, which would automatically ground the facilities as hosts to flight operations.

"FAAN belongs to the government, employees are government employees, so they cannot say no to the executive when the executive says take over this airport and the executives do this under pressure. "Before ever FAAN should be made to take over any state owned airport, the National Assembly should come in because I think we need a very stringent law.

"Those who are looking at the budget, who are approving federal budget, they should say FAAN should not acquire this airport or that one. Or the people who are handing over to them must say this is what they will contribute annually in running the airport and if they don't provide it; then FAAN will not run the airport for them," Aligbe added.

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