Aviation as catalyst for Nigeria’s growth

x-rays how Nigeria’s aviation sector could rub off on the economy and add significantly to her Gross Domestic Product (GDP) if the right steps are taken

The financial turbulence of the past few years threw a spotlight on many key industries and their respective roles in growth or decline of the Nigerian economy.

Little notice was taken of one sector that has consistently been creating and supporting jobs while making significant, to say the very least, contributions to the global economy – the aviation industry.

Aviation crawls

The aviation industry in Nigeria is crawling and needs to be injected with serious tinkering. It is unbelievable that aviation contributes just three per cent to the country’s GDP, which could actually rise to between eight and 10 per cent because of the enormous potentials in the sector coupled with the huge population that Nigeria is blessed with.

The aviation industry is a catalyst for the economic growth of any nation. The countries that are using aviation as a tool to grow their economies are many within Africa and in the world.

A former Assistant Secretary General of Airline Operators of Nigeria (AON), Mohammed Tukur, stated that the first thing that comes to mind is Emirates, citing its case with Ryanair, and the tourism that it has helped to grow.

He said : “So most countries use aviation as a catalyst for their economic growth and we in this country have to also look that way. We have to look at it as a tool that we can use to create economic growth via either foreign direct investment or creating tourism and also bringing people, connecting commerce and all that.”

Good policy formulation

The federal government, he said, should have a deliberate policy to ensure that the nation has a sustainable aviation industry.

He said : “I believe the present administration is looking at the policy on aviation, the roadmap and the strategy going forward”.

Current statistics shows that the Nigerian aviation market is servicing over 600 million people in West and Central Africa; this is half of the continent, twice the United States and far greater than continental Europe.

Global aviation’s GDP contribution is around one and a half times the size of the pharmaceutical industry ($270 billion GDP) or the textile industry ($286 billion GDP) and a third bigger than the motor production industry ($322 billion GDP).

Impact of sector

Air transport directly employs over 5.5 million people and contributes $425 billion to global GDP, which is more than several members of the G20.

Nigeria and many other parts of Africa would continue to witness reduction in the growth of the sector because all the components of aircraft such as tyres, hydraulic and spare parts are not manufactured in the country, which leads to huge loss of what the country would have retained if it had aircraft maintenance hangar and some of the components manufactured in Nigeria. Aside that, airlines have their airplanes insured abroad, just as all the insurance companies in Nigeria do not have the capacity to insure two aircraft. This has put a considerable strain on the finances of the carriers because of the high premium they pay once Nigeria is classified as high risk for aviation.

Time to revamp

It is against this backdrop that the country is taking steps to rejig, revamp and re-strategise aviation to achieve maximum benefits. But how quickly the country revamps its aviation is very crucial. The signs of a better aviation industry where airlines and others can be profitable seem not to be in sight for now because of decades of rots that pervaded the entire aviation system.

Other climes

In the Middle East, visionary leaders have long realised the aviation industry’s potential to drive economic growth and consequently invested heavily in establishing world class airlines that, in no small measure, create jobs, facilitate global trade and stimulate economic growth. ATAG’s data on the Middle East paints an incredible picture: by 2010, the region’s air transport industry created direct and indirect employment for 2.7 million people. It also contributed $129 billion to the region’s GDP.

In the UAE, which is home to three carriers that are expanding at an exponential pace — Emirates, Etihad Airways and flydubai — government has committed itself to facilitating this growth. This commitment is apparent in the UAE General Civil Aviation Authority (GCAA)’s sustained efforts to enter into air transport agreements with countries across the globe.

Infrastructure upgrade

The main issue that the sector needs to address is lack of infrastructure. The aviation industry has grown over the years in Nigeria. So for airlines but most them have died. But the infrastructure has remained stagnant. It is just recently that the Nigerian government started looking at airport buildings renovation but they are yet to look at the airside, which has to do with the tarmac expansion, finger expansion, the taxiway expansion, runways and all the likes.

The country has also not looked at infrastructure such as landing aids and landing at night. These will increase the utilization of the airports that will give the airlines profitability because they will be operating at different number of hours. What we also tend to forget is that the parastatals must be re-engineered to face modern reality. Air navigation service should be commercialised. The regulators should regulate in such a way that they don’t choke the airlines.

Bilateral air pact

There is the need for the country to protect domestic airlines whenever the issue of Bilateral Air Services Agreement (BASA) comes up, so that the small market they have is protected from the airlines that are coming in. In Nigeria, carriers are paying 17, 18 or even 21 per cent interest rate, while their counterparts outside the country are paying 3 to 4 per cent or at most five per cent and they are enjoying tenure of about 15 years.

Tax holiday

Most of the challenges have to do with the hostile environment. The IATA (International Air Transport Association) suggests that start-up airlines should be given three years of honeymoon time to enjoy tax exemption and for the airport environment to give free landing and parking and other charges. Some countries give three to four years of free navigational charges so that they can grow. But in Nigeria, before an airline even goes into operation, government agencies are already sending bills.

Last line

Nigeria, which has large market for aviation, has not yet tapped into the full potential of this critical sector which can raise the country’s GDP. It’s high time government declare emergency in this sector before it collapses.

Wole Shadare