Airport Concession: MMA2 As Symbol Of Looking Inward

With MMA2 serving as the first airport concession experiment in Nigeria, authorities are again looking to attract public-private partnership for Nigeria’s four major airports, as the government struggles to fund capital projects and restrain public debts. WOLE SHADARE writes that the government should look inward to apply a model that has been adjudged to work  

Fast pace

The airport concession by the Federal Government is said to be moving fast towards actualization amid calls by some segments of aviation stakeholders seeking a halt of the process. As it stands, the Ministry of Aviation is to mid-wife the process as the four major aerodromes in Lagos, Abuja, Port-Harcourt, and Kano could be handed to the private sector as early as the second quarter of 2022.

The Minister of Aviation, Senator Hadi Sirika has continued to explain why Federal Government took the decision to concession some of the country’s airports, saying despite the huge potential abound, that the airports are currently operating at a sub-optimal level.

According to the minister, the Federal Government is proposing between 20 and 30 years programme for the would-be concessionaire even as he declared that infrastructure concessions of this nature come with a significant financial obligation which any responsible concessionaire will no doubt be keen to recoup.

Under the concession policy, the Federal Government gave a  condition that the 20 to 30 years duration may be extended depending on performance and Nigeria’s best interest and that the duration was not set in stone and will be subject to negotiation and then final approval by the Federal Executive Council.

MMA2

Stakeholders’ confidence

The minister explained that the concession policy that the Federal Government was starting with the most strategic assets saying the successful delivery of the concession programme would give all stakeholders the confidence required to consider other possibilities in the sector.

The concession Sirika declared applied to the non-aeronautic assets of the airports located in the Passenger and Cargo terminals, stressing that they are thus comprised of the assets from the entry door of the airport to the point of the embarking plane, and from deplaning to the exit doors.

Not a few had urged the Federal Government Federal to adopt a more ambitious airport concession model that can leverage increased private sector participation alongside government involvement at all levels.

Another perspective

A UK-based legal practitioner and commentator, Dr. Ikpenmosa Uhumuavbi, said the government should consider using the Design, Build, Finance, Operate, Maintain and Transfer concession model, which he described as capable of addressing the challenges surrounding its execution.

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According to him, since the private sector investors are better at managing risks, the DBFOM model is capable of apportioning substantial parts of the risks to them in an efficient and effective manner.

He said, “The DBFOM model is also beneficial because it enables the government to leverage the financial, technical, and operational competencies of the private sector in the design, construction, financing, operation, maintenance, and delivery of the most sophisticated airports projects across the country.

“Shrinking analyses of its complex usage have suddenly found vents within government circles. Adjustments in developing economies, the paucity of public infrastructure, and the insufficiency of funds to meet infrastructural requirements make a strong case for alternative funding sources.

The assertion by Uhumuavbi points to the direction that rather than apply the Design, Build, Finance, Operate, Maintain and Transfer concession like the case with Murtala Muhammed Airport 2 (MMA2), the government is considering handing the project to firms to help increase the revenue base of the airport rather than the firms investing in the building of new structures to manage and transfer the infrastructure to the government after a period of time.

Dr. Wale Babalakin

A rejected stone at inception

The 36 years concession granted to Bi-Courtney to Build, Operate, and Transfer (BOT) of the ultra-modern MMA2 was initially very unpopular at inception among policymakers in the sector and as such had suffered untold neglect and or outright rejection particularly from those who ought to know better are now embracing the idea after it became clear that government could no longer sustain enormously funds channeled into airport infrastructure. This certainly is not unconnected with the many positives that are derivable from the system.

The Delta state government had also towed the same path of concession by handing over the facility to the management of Asaba Airport Company which emerged victorious during the concession of the airport.

The Asaba International Airport was a concession to Asaba Airport Company on February 23, this year after a competitive bidding process.

No doubt, it is gratifying to hear from industry watchers, stakeholders – people who now reel out the indisputable advantages of allowing private initiatives to take center stage in the nation’s aviation industry; and why governments at all levels must support this laudable initiative and ultimately see to its logical formulation and eventual take-off.

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Aircraft positioning for take-off

 

Right model

But beyond the hues and cries by pro-concession campaigners, it remains to be seen how the government intends to go about it; which model it intends to follow, and or adopt without losing focus on the essence of such intervention. Worthy of note, also, is the threat posed by unions in the industry – people who are said to be in opposition to every policy of the government no matter how altruistic they appear; a thing other nations of the world have utilized to their own advantage. The opponents of concession are worried and frightened that the process may not be transparent which the government has dismissed, describing it as the most transparent process ever taken by the government.

Many of the experts, who were worried by the state of all the government-managed airports across the country said the only guaranty for the continued survival of the weather-beaten airports dotting the landscape of the country is a concession.

Although some of them have raised some pertinent questions about the proposed idea, it was obvious that private investors are the best managers of any government enterprise that is established for profit-making, as exemplified by the managers of MMA2.

Nigerian airlines

 

Business-oriented terminal

Investigation by Aviation Metric shows that that the efficiency in the way the terminal is being managed attracted even airlines that have their operational base at the General Aviation Terminal (GAT), known as domestic airport terminal 1 (MMA1) and they routed some of their flights from MMA2.

Spokesman of one of the airlines that started operating at MMA2 since 2008, said that the terminal management is bereft of the encumbrances that bedevil the operator of other airport facilities because it is private sector-driven; it is business-oriented and has defined standard of operation without interferences.

“There are a lot of things we enjoy at that terminal which we don’t hope to have in the other terminals we operate in. MMA2 ambiance is cool, naturally, it’s inviting. There has been an uninterrupted power supply for over a decade.

“This is as a result of a deliberate effort to deliver. The facility upgrade is done as at when due. They have well laid out plan to keep the facility in top shape. It’s a systemic arrangement. They also have a modern training center with top facilities.

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“The center was certified by the regulatory agency, the Nigerian Civil Aviation Authority (NCAA). It is now being used even by other concessionaires, businesses around the airport for regulated training. No need to incur unnecessary foreign exchange especially with IATA, ICAO-backed training sessions,” the airline official said.

The fate of other airports

As the Federal Government pushes through its airport concession agenda, stakeholders have raised concerns over the fate of over 18 other airports. The four major aerodromes generate over 80 percent of the total annual earnings of all the airports in the country.

Aviation was one of the fastest-growing sectors in Nigeria before the COVID-19 outbreak in 2020. For example, the sector grew by 13% in 2019 compared to the overall Gross Domestic Product (GDP) growth of 2.2%. The number of passengers on domestic flights at the nation’s 31 airports was about six million in the first half of that year alone.

To put this scale in perspective, domestic passenger traffic was less than five million in Kenya and only 415, 000 in Ghana in the whole of 2018. Seventy-six percent of the traffic in Nigeria goes through the four airports that have now been proposed for concession.

African airlines

The scale and growth of Nigeria’s aviation sector growth are partly attributable to privatization reforms that were introduced in 2000. The reforms, which, despite their evident successes have been accompanied by cases of contract frustration and recurrent regulatory disputes. One example is the aborted partnership between the government and Virgin Atlantic to establish a national airline in 2004. Another is the concession of the MMA2 terminal to Bi-Courtney Aviation Services Limited (BASL) which is owned by Nigerian businessman, Dr. Wale Babalakin. The latter is particularly instructive.

Last line

The Nigeria opportunity is characterized by risks from the direction and frequency of fiat. Not a few are of the opinion that the amendments to the Infrastructure Concession Regulatory Commission (ICRC) Act 2005 would help to protect investments and pave the way to give ICRC ‘disciplinary powers’ over concessionaires.

Wole Shadare