MINISTERIAL PRESS STATEMENT ON FISCAL STIMULUS MEASURES IN RESPONSE TO THE COVID-19 PANDEMIC & OIL PRICE FISCAL SHOCK
1. His Excellency, Mr. President, on Monday, 9th March 2020, set up a Committee comprising senior government officials, including:
a. Hon. Minister of Finance, Budget & National Planning (‘HMFBNP’) – Chairperson;
b. Hon. Minister of State for Budget & National Planning (‘HMSBNP’);
c. Hon. Minister of State for Petroleum Resources (‘HMSPR’);
d. Governor of the Central Bank of Nigeria (‘CBN’); and
e. Group Managing Director of the Nigerian National Petroleum Corporation (‘NNPC’).
2. Pursuant to the meeting with Mr. President, the Committee was mandated to recommend fiscal measures for Mr. President’s kind consideration and approval. In this regard, the Committee recognised that Nigeria is currently facing significant fiscal risks due to the current global economic disruption caused by the COVID-19 crisis. Furthermore, Nigeria is exposed to the risks of both a pronounced decline in oil prices and spikes in risk aversion in the global capital markets.
3. Although similar challenges were experienced in 2008/2009 as well as in 2015/2016, Nigeria has considerably lower fiscal buffers now than in previous economic downturns. The decline in international oil prices and domestic production may be magnified if a severe outbreak of COVID-19 occurs, despite ongoing efforts to curtail the spread of the Pandemic through compulsory lockdown of Lagos and Ogun States, as well as the Federal Capital Territory (‘FCT’).
4. To directly address these health and economic challenges, Mr. President has approved the following Fiscal Stimulus Package, as part of an Integrated Policy Framework to ensure that Nigeria’s healthcare system, fiscal position and economy are sufficiently supported to weather these shocks. This Fiscal Stimulus Package comprises various measures as indicated in greater detail below.
ESTABLISHMENT OF A N500 BILLION COVID-19 CRISIS INTERVENTION FUND
5. Mr. President has approved the establishment of a N500 billion COVID-19 Crisis Intervention Fund. The establishment of this COVID-19 Crisis Intervention Fund will involve drawing much-needed cash resources from various Special Funds and Accounts, in consultation with and with the approval of the National Assembly. The N500 billion is proposed to be utilized to:
a) Upgrade healthcare facilities as earlier identified by the Presidential Task Force on COVID-19 and approved by Mr. President;
b) Finance the Federal Government’s Interventions to support States in improving healthcare facilities;
c) Finance the creation of a Special Public Works Programme; and
d) Fund any additional interventions that may be approved by Mr. President.
6. With regards to the Special Public Works Program, Mr. President had previously approved a Pilot Special Public Works Programme in eight (8) States to be implemented by the National Directorate of Employment (‘NDE’) from February 2020 to April 2020. Mr. President has now approved that this Programme be extended to all 36 States and the FCT from October 2020 to December 2020. The selected timeframe is to ensure that the Programme is implemented after the planting season is over, and it will result in the employment of about 774,000 Nigerians (that is, 1,000 people per each Local Government). N60 billion in allowances and operational costs has been earmarked from the COVID-19 Crisis Intervention Fund for this initiative.
7. The Federal Ministry of Finance, Budget and National Planning is also evaluating how best to extend the Special Public Works Programme, to provide modest stipends for iterant workers to undertake Roads Rehabilitation, Social Housing Construction, Urban and Rural Sanitation, Health Extension and other critical services. This intervention will be undertaken in conjunction with the key Federal Ministries responsible for Agriculture, Environment, Health and Infrastructure, as well as the States, to financially empower individuals who lose their jobs due to the economic crisis.
8. Further details regarding the operation of the N500 billion COVID-19 Crisis Intervention Fund will be announced once the consultations with the National Assembly and the key Ministries are concluded.
ENHANCED FINANCIAL SUPPORT TO THE STATES FOR CRITICAL HEALTHCARE EXPENDITURE
9. The Nigeria Centre for Disease Control (‘NCDC’) has access to a Regional Disease Surveillance Systems (‘REDISSE’) facility from the World Bank in the sum of US$90 million, out of which US$8 million has been drawn. We have requested to fully draw down on the outstanding balance of US$82 million. The Government has also requested for additional financing in the sum of US$100 million from the REDISSE project to meet COVID-19 emergency needs in all the 36 States and the FCT, through the NCDC and Federal Ministry of Health. This will enable us to expand the capacity of intensive Care Units (‘ICUs’), enhance laboratory capacity, accelerate the procurement of test kits, strengthen surveillance mechanisms as well as improve information management.
10. We deeply appreciate the support we have received so far from our partners at the World Bank. We are continuing our engagements with the World Bank, the African Development Bank and the Islamic Development Bank to access concessional funding to support the implementation of the 2020 Budget. We have also applied for funding from the International Monetary Fund’s COVID-19 Rapid Credit Facility to draw from our existing holdings with the World Bank Group / International Monetary Fund. This loan will not be tied to any conditionalities. However, it is important to clarify that Nigeria does not intend to negotiate or enter into a formal programme with the International Monetary Fund, at this time, or in the foreseeable future.
11. The Federal Government has provided N102.5 billion in resources to be available for direct interventions in the healthcare sector. Of this sum, N6.5 billion has already been made available to the NCDC for critical expenditure. The Federal Government remains committed to supporting the States in these difficult times, particularly those States that are currently battling with the COVID-19 Pandemic. Lagos State has already been provided N10 billion in emergency funding. As the situation in the FCT and other States at the forefront of our efforts unfolds, explicit criteria are to be agreed with the Federal Ministry of Health and the NCDC to determine when funds would be released to the affected States and the FCT. More funds are to be provided from the proposed COVID-19 Crisis Intervention Fund to address emerging and priority funding needs as these arise.
12. To complement these initiatives, we are taking steps to activate, release and (where necessary) enhance the hazard allowances provided in the remuneration structure of the Federal health sector workers. The Federal Government enjoins the affected States to take similar measures.
13. We take this opportunity to recognise the patriotism and sacrifice of our frontline healthcare workers, whose critical roles in combatting the COVID-19 Pandemic place their health and lives at risk. We thank all of you for your heroic efforts to protect your fellow citizens from disease and death. The Federal Government hereby assures our frontline healthcare workers of adequate insurance, compensation and support during, and in the aftermath of the COVID-19 Pandemic.
AUGMENTATION TO THE STATES’ FAAC ALLOCATIONS & MORATORIUM ON STATES’ DEBTS
14. Based on the fiscal assumptions underpinning the 2020 Appropriation Act, monthly Federation Account Allocation Committee (‘FAAC’) disbursements to the Federal and State Governments were projected at N888.5 billion. However, due to the significant drop in international oil prices, FAAC monthly disbursements have declined in recent months to N716.3 billion in January and N647.4 billion in February 2020. Our experience shows that monthly average FAAC receipts must average at least N650 billion for the Federal and State Governments to meet their current obligations. Unfortunately, we project that monthly receipts may decline to below N400 billion, over the next 3 to 6 months.
15. To address these emerging fiscal risks, Mr. President has approved that the sum of US$150 million be withdrawn from the Nigeria Sovereign Investment Authority (‘NSIA’) Stabilization Fund to support the June 2020 FAAC disbursement. The Stabilization Fund was created for such emergencies and is to be utilized for this purpose. We are also exploring other options to augment FAAC disbursements over the course of the 2020 fiscal year.
16. Mr. President has also approved that the Federal Ministry of Finance, Budget and National Planning should engage with the CBN to agree on a Debt and Interest Moratorium for States on Federal Government and CBN-funded loans, in order to create fiscal space for the States given the projected shortfalls in FAAC allocations. Accordingly, once monthly average FAAC receipts fall below a specific threshold, interest and capital payments by States, shall be suspended till monthly average FAAC receipts exceed the threshold. The details of this Moratorium will be expeditiously worked out with a view to submitting the final proposals for Mr. President’s guidance and final approvals. This intervention is vital to create fiscal space for the States, as they deal with the health and economic impact of the crisis. States will also be encouraged to explore similar arrangements for their outstanding debts to Commercial Banks.
ENSURING ADEQUATE SUPPLIES OF ESSENTIAL FOOD ITEMS & CRITICAL MEDICAL SUPPLIES, AS WELL APPROPRIATE STEWARDSHIP OF DONATED ITEMS & FUNDS
17. The responses to the COVID-19 Pandemic and the impact of the 14-days lockdown, will have a significant impact on the transportation, distribution and availability of essential food items and medical supplies. Furthermore, the Government recognises the adverse implications of these extraordinary decisions on our market women, farmers, traders and smaller businesses.
18. The Finance Act, 2019 fortuitously provided significant tax relief for Micro, Small and Medium-sized Enterprises (‘MSMEs’). Corporate tax rates for Medium-sized Enterprise were cut from 30% to 20%, and Small / Micro Enterprises are completely exempt from corporate taxation. This tax relief will be invaluable for businesses in the large informal sector that earn N25 million or less in a financial year. The Finance Act, 2019 has also expanded the VAT Exemption List for essential food, medical supplies and other basic items that are critical in our efforts to address the COVID-19 Pandemic.
19. We deeply appreciate the overwhelming show of solidarity by public-spirited individuals and corporate bodies towards combating the COVID-19 Pandemic through financial and material contributions. In this regard, the Government recognises its responsibility to put an adequate framework in place for the collection, management and reporting of these donations. Accordingly, the Federal Ministry of Finance, Budget and National Planning is developing a comprehensive framework for the transparent management of the contributions.
20. In the interim, Mr. President has approved the restructuring of the Treasury Single Account (‘TSA’) in order to better mobilize cash donations from the generality of our people and corporate bodies across the nation, create flexibility and build a coalition with financial institutions while maintaining the sanctity of the TSA. Going forward, the COVID-19 Donor Accounts, which will form part of the existing TSA arrangement shall be opened with the following banks:
a) Zenith Bank
b) Access Bank
c) Guaranty Trust Bank,
d) UBA; and
e) First Bank.
21. These accounts will be linked to the main TSA for ease of monitoring and reporting.
22. I will be issuing circulars and Ministerial Orders to ensure that charitable donations by benevolent companies to support our COVID-19 Pandemic efforts are tax deductible, pursuant to Section 25 of the Companies Income Tax Act.
AMENDMENT OF 2020 APPROPRIATION ACT
23. The 2020 Appropriation Act was based on certain fiscal assumptions, which we have been compelled to revisit given the emerging economic realities. Specifically, projected Oil Revenues have been significantly affected in that:
a. Dated Brent Oil Prices fell to as low as US$19.125/barrel (as at Friday 3rd April 2020) as compared with the 2020 Budget Benchmark of US$57/barrel; and
b. Oil production in 2020 year-to-date is 2.0mbpd as compared with the 2020 Budget’s projection of 2.18mbpd.
24. We are therefore revising the benchmark oil price for 2020 to US$30/barrel and oil production to 1.7mbpd. We have similarly had to adjust downwards our Non-Oil Revenue projections including various tax and customs receipts, as well as proceeds of privatisation exercises. In this regard, the Budget Office is currently working on a revised 2020 – 2022 Medium-Term Expenditure Framework / Fiscal Strategy Paper (‘MTEF/FSP’) as well as an Amendment to the 2020 Appropriation Act.
25. The proposed Amended Budget will provide for the COVID-19 Crisis Intervention Fund and other adjustments required due to the decline in international oil prices. We have also commenced engagements with the Leadership and key Committees of the National Assembly to discuss our plans, such that once the Executive’s 2020 Amendment Budget is completed, we shall expeditiously seek the requisite Presidential and Legislative approvals.
26. The emerging health and economic risks resulting from the COVID-19 Pandemic and decline in international oil prices pose existential threats to Nigeria’s economy, healthcare system, national security, as well as the lives of our citizens. Accordingly, extra-ordinary measures will be required, as the situation evolves, to address these challenges.
27. I will continue to work closely with my colleagues at the Ministries of Finance, Budget and National Planning; Industry, Trade and Investment; Petroleum Resources; Health; as well as the CBN, to pursue greater coherence and coordination of Nigeria’s fiscal, monetary as well as trade policies, during the difficult days and months ahead. The Economic Sustainability Committee chaired by His Excellency, the Vice President, will continue to coordinate our efforts and strategies, as well as provide regular updates to Mr. President.
28. In closing, I wish to reassure our citizens and residents that the Federal Government remains committed to working closely with the National Assembly, the State Governments, Multilateral Organisations, the Donor Community, and the International Community at large, to alleviate the suffering of our people due to the ongoing economic and healthcare challenges.
29. I would like to particularly appreciate the extensive understanding and support that we have received from our development partners, especially the World Bank, the International Monetary Fund, the African Development Bank and the Islamic Development Bank in our efforts to grapple with the COVID-19 crisis.
30. Thank you for your time and attention, as well as your continued cooperation with the various measures Government has taken, at this time, to protect the health and lives of our citizens, our economy, as well as our national security.
ZAINAB SHAMSUNA AHMED
Honourable Minister of Finance, Budget & National Planning
DEFINING A NATIONAL SELF INTEREST-LESSONS FROM A BASA AGREEMENT GONE SOUR
By Tunde Adeniji
The DG NCAA Captain Musa Nuhu recently issued a Press release, conveying the decision of the Honourable Minister of Aviation Sen. Sirika Hadi to replace the operating schedule approval for 21 frequencies/week given to Emirates airlines with 1 weekly Frequency. He had relied on the spirit and letter of the Bilateral Services Agreement (BASA) between the two countries in responding to the single slots weekly offered to Air Peace at Sharjah Airport. The DG’s letter ended with his assurance to members of the public that national interests in all Aviation matters will be jealously protected.
The Aviation Policy and Strategic group discussed the fallout from this decision exhaustively, deconstructing the issues involved, even as its erudite members put forward many good suggestions about how to proceed. The engagements have been rich and enlightening and our intention in contributing to this discourse is to focus on the need to define a National Self Interest in a robust policy framework to guide future BASA/external Aviation relations engagements.
This need is justified based on our experience as a Nation which seems to suggest that we may be haunted yet again by the many decision makers who fell into the trap described below by Jon Moen:
“People who are managing a (financial or economic) crisis are not immune from personal motivations…Sometimes the people in charge don’t know at first that their personal motivations and past experiences might not be compatible with what is best for the greater good.”
We view National Self Interest ‘’As the overriding purpose governing the state’s relationship with the outside world, it serves two purposes. It gives policy a general orientation towards the external environment. More importantly, it serves as the controlling criterion of choice in immediate situations. The dominant view of national interest, in other words, dictates the nature of a state’s long-term effort in foreign policy and governs what it does in a short-term context’’.
The concept of Bilateral Air Services Agreement (BASA) is the outcome of the compromise between the Open Skies advocacy of the US and the strong opposition by the UK and European countries, as a protection from their inability to compete with the formidable dominance of the US in post WW2 world. The delegates at the Chicago convention therefore agreed to a regime that allowed every country complete and exclusive sovereignty over its airspace with the provision that permissions were to be negotiated between contracting states on a bilateral basis. There are at least three different models of BASA, with varying levels of liberality, as may be agreed by the parties to it. We may therefore consider is a contract that should be mutually negotiated like any other
Slots on the other hand ‘’is the most emotive subject in civil aviation. It is the approval from an appropriate authority to take off at a particular time at one airport and land at its destination at another time. The difficulty arises in so called coordinated airports i.e., congested airports where there are severe capacity limits at certain times of the day. It subsequently dictates the difference between operating a route or not’’-D.H. Bunker
The Adam Smith model of Self-interest as the motivator of economic activity with competition as regulator to ensure the market runs efficiently without intervention, is situated below:
“It is not from the benevolence (kindness) of the government (of UAE), Its flag carrier (Emirates), or Airport (Sharjah) that we expect access to Air Peace, but from their regard to their own interest.”
It is important to state at the outset that the self-interest we advocate is (in the words of Lauren Hall) consistent with the demands of justice and becomes the germ from which virtuous, fair behaviour grows, to drive the larger economic engine of society.
In clear economic terms slots represents a barrier to entry and airlines awarded slots benefit from an economic rent. A system established to ensure stability has slowly become the property of the airlines. Slots are sold at a remarkable premium or used as a tool to exert unfair competitive pressures. It has been reported that many European countries who oppose the sale of slots, do so on the principle that, a private firm cannot benefit from a public good (Mackay 2008)
The decision to operate slot system or not remain those of the relevant airport and can be considered “its own internal cuisine‘’ just as ‘’A country’s motivation is its own concern, but the righteousness of its actions is the concern of all’’.
Nigeria like other states deliberately follow certain policies in pursuit of their national interest. The current face off with UAE, shows clearly that we have been a bit too eager to give than to receive or at least gave out before we received.
Our BASA is seemingly driven by the needs and ease of other countries. We have offered multiple entry points to countries, even where our own carriers have faced issues with slots for decades. These incongruities have never been convincingly explained to operators and other stakeholders
We have a unique opportunity to review our thinking and position in this area, especially as our slow adoption of Single African Air Transport Market (SSATM) and African Continental Free Trade Areas (AfCFTA) is totally in sharp contrast to our rush to embrace these dominant international brands
Our policies can start by ensuring that the investment by Nigerian carriers is complimented by access to the best of our facilities as no other country will ever offer them same.
A crisis, they say, is a terrible thing to waste, and so we suggest that the minimum positive outcome from this saga should be a comprehensive policy paper that will spell out in clear terms, how Nigeria will take actions that will reduce to the barest costs and increase to maximum benefits its engagements to further our National Aviation Interests.
Plateau State Impeachment: Justice, not Truce
ON October 27, the media reported the unexpected impeachment of the Speaker of the Plateau House of Assembly, Ayuba Abok, by eight lawmakers. The state government, it was quietly hinted, saw him as antagonistic and uncooperative.
Hon Abok had been critical of Governor Simon Lalong’s handling of the insecurity crisis in the state, and had in August given the governor a two-week ultimatum to protect the people. Since he had the majority of lawmakers on his side, the harassed Speaker and his supporters reportedly met outside the assembly complex and fought back.
Soon after, however, by a police sleight of hand, his opponents led by Yakubu Sanda, who had been purportedly elected Speaker by 6am, regrouped and entered the assembly complex after Hon Abok had been escorted out by the police.
Even though the media reported that eight lawmakers were behind the impeachment, Hon Abok and his supporters believed six assembly members were involved, whom they proceeded to suspend on the same day.
Up till November 4, the media had tried unsuccessfully to get the governor’s position on the alleged impeachment. They seemed to believe that
They seemed to believe that he was not averse to the impeachment, and had been touchy about criticisms leveled against him for what his opponents termed his inexpert handling of insecurity in Plateau State. In fact, his critics see him as a stooge of the federal government which had been accused of taking sides in the conflict on the Plateau.
Mr Lalong has, however, reiterated that he is tackling insecurity in Plateau State to the best of his ability, and with utmost resolution and impartiality. The state’s lawmakers are not so sure, leading to the testy exchange between the legislature and the state government. The acrimony boiled over on October 27, and has persisted despite moves to reach a truce. But what the state needs is not truce, nor even peace, but justice to start with; for there can be no peace without justice, as Nigeria’s acrimonious national politics exemplifies.
Whether six or eight legislators, it is impossible to defend an impeachment that was inspired and executed by a minority, not to say a minority that was strikingly and flagrantly less than two-thirds. The APC has 15 members; only eight consented to the impeachment.
To support truce is to confer legitimacy on a lie and a behavior that flagrantly violates the constitution. Such violations must never be appeased, nor negotiated. It does not matter whether the governor is right in his seemingly pro-Abuja method of tackling insecurity in Plateau State, or whether he is wrong to nod and wink at the October 27 insurrectionists in the state legislature; what is important is that the law must neither be flouted nor the constitution desecrated. Mr Lalong has an obligation not just to rule the state and build schools, hospitals and bridges; he also has a far weightier and nobler obligation to protect the rule of law in the state, if necessary with his last drop of blood. To keep silent in the face of such violations is to give the impression of complicity, not the quiet and dignified contemplation many associate with leaders. And when he decides to speak out on the issue, he needs to eschew the nugatory and indecisive balance often practiced by dissembling and unprincipled leaders.
Mr Lalong must in addition ask himself whether the measures he had adumbrated to fight insecurity in Plateau State have been effective, or whether in fact the victims of massacres in the state regard him as empathetic enough. Furthermore, he must ask himself whether by his actions and statements he had not given the impression of running a federal outpost rather than a federating state. Then, finally, he must ask himself whether his position as governor does not obligate him, in line with his oaths, to protect, preserve and defend the constitution, regardless of whose ox is gored.
Does he have an idea of what is fair, equitable and just, or has he elevated politics and executive machinations above justice and lawmaking? If he is not too far committed one way or the other to outside and vested interests, as his critics insist, he should reexamine the issues raised by his critics, find ways to mollify them, and give the state he is privileged to administer a great leadership capable of protecting and entrenching his legacy.
The contrived crisis in the House of Assembly may be the governor’s chance to reorient his administration, side with the people, and rethink the principles by which he claims to rule the state. He must recall that in October 2006, under the Olusegun Obasanjo presidency, eight lawmakers issued a notice of impeachment against one of his predecessors, Joshua Dariye, for various infractions, including money laundering. By November, Mr Dariye was impeached, despite the clear illegality of the process. In March 2007 and April of the same year, the Court of Appeal and Supreme Court respectively restored him. The courts faulted the process. Fifteen years later, lightning is striking the same place twice, with eight lawmakers playing mischief and violating the constitution.
Mr Lalong is at liberty to rally as much support as possible for his legislative agenda, and any other sensible agenda he might cherish; what he does not have the freedom to do is to conspire against the constitution, which his reticence seems to imply. Indeed, the governor’s ominous detachment is matched only by the artful neutrality of the police, with the former claiming that the legislative crisis is strictly the problem of lawmakers, and the latter pretending to be doing everything to prevent a breakdown of law and order
(First published in The Nation)
Airports for Concession, Not Privatisation
The Honourable Minister of State for Aviation has recently briefed the public and industry stakeholders of government plans to concede certain airports to private investors as part of larger plans to privatise some public enterprises. Following the Honourable Minister’s briefings, there have been some emotional reactions from the public and more too from aviation stakeholders who ordinarily should be better informed of what has, over the years, been the financial travails of the sector but yet find the government plans of airport concession unacceptable.
The government probably decided on concession and privatisation or outright sale because of the failed commercialisation of most public sector services and enterprises. There were public enterprises that were fully commercialised like the NLG and the refineries which were expected to operate as profit-making commercial ventures without any subsidies from the government. These are expected to raise funds from the capital market for capital projects without a government guarantee and were expected to use private-sector procedures in running their businesses.
There were other enterprises like FAAN and NAMA which were partially commercialised and were expected to cover their operational costs from their internally generated revenues (IGR). This category of enterprises enjoyed grants from the government to finance their capital projects, just as the federal government had done in the past for them with the ₦19.5 billion aviation intervention fund in 2007, the grant of about $200 million from the BASA fund for the refurbishment of some airports, and the $500 million loan from China for the redevelopment of the major international airports.
Using the air traffic and passenger traffic statistics of 2014-15, the expected yearly revenue from FAAN in particular, whose facilities are planned for concession, is reported to be about N65 billion from both aeronautical (N61.5 billion) and non-aeronautical (N4.5 billion) sources. However, the chunks of revenue earnings generated have not substantially impacted on the airport infrastructures and services. For instance MMA alone that is reported to be generating about ₦2 billion monthly is worth more than ₦3 billion monthly or ₦36 billion ($100 million annually) in earnings from passenger service charge aircraft landing and parking, on both international and domestic traffic and various concession on non aeronautical services within and around the airport. Unfortunately, the airport does enjoy up to 5% of the revenue for the periodic maintenance of the airport infrastructure and services. If MMA is given out for concession today in the global market, it could generate conservatively about ₦110 billion ($300 milliom). Today the total IGR earnings on the twenty international airports is less than ₦70 billion ($190 million).
The problems of government enterprises in the sector are largely caused by the incessant huge debts of the domestic airline operators to the public operators and weak accountability of the regulator particularly of the NCAA, which has the critical role to play in checking the excesses of both the airlines’ operators and the public operators FAAN and NAMA.
The Nigerian aviation sector is just one of the three major means of transportation, providing air transport services to less than 10 million Nigerians, compared to the road and rail providing transportation services for over 60 million Nigerians annually. Air services enjoy government patronage the most, with various forms of intervention, grants, and guaranteed loans. All these are in addition to the huge revenues generated that have not significantly developed or improved the airports’ infrastructure and facilities for sustaining safe air operations. There has been no efficient and effective oversight by the responsible authority to ensure that the sector in the last sixteen years complied with a five-year budget plan as required by the Nigerian Civil Aviation Regulations 2006, Part 18.10.5.
What has developed over the years in the industry is a mixed system, one of partial commercialisation, where the government injects subsidies or intervention funds into the public enterprises, and full commercialisation, where the government gives autonomy to some public enterprises in the sector. What the government plans to develop now, and what is developing worldwide, is privatisation and concession, where the government extends partnerships to private enterprises and investors to develop the sector. This is a concept that is being adopted by most developing countries whose aviation infrastructures are expanding fast but whose development funds are limited, as with our own case. Most countries are finding it a positive advantage to adopt the policies of public-private partnership (PPP), full commercialisation, and concession of public enterprises. These options offer government savings for other social sectors of the economy and reduce unnecessary costs and duplication of efforts.
Privatisation or outright sale of public enterprises to private investors in Nigeria, as articulated by a Social group in 1988 as part of Structural Adjustment Programme (SAP), could be emotive and controversial “Privatisation is a means of exposing public enterprises to private investors or bringing private ownership, control and management into public enterprises. The objective is to increase productivity and efficiency, and to improving the financial health of the public enterprises with sufficient savings for the government from the suspended government subsidies.”
Broadly defined, privatisation could include concession and all forms of PPP; but if narrowly defined, it would exclude concession and could mean outright sales. However, whatever definition is being applied, the objective is securing private investors’ management and operational expertise and investment, Similar to the MM2 concession to Bi-Courtney.
It still seems to some stakeholders that the concession of MM2 was shrouded in some kind of executive secrecy. The government, therefore, needs to assure stakeholders that the planned concession is with better intentions. Generally, there are three key features of a concession. Firstly, it does not involve the sale or transfer of ownership of physical assets, only the right to use the assets and operate the enterprise. Secondly, agreements are for a limited period of time, up to or less than thirty years depending on the context, content, and sector. Thirdly, the government, the owner of the assets must retain much involvement on the oversight in the concession through regulatory agencies.
It is expected that whatever the government would give out for concession would be well defined along these three features in order to avoid the pitfalls of past attempts. The government must bear in mind existing agreements or concessions with the Chinese government on the development of the four airports of Lagos, Port Harcourt, Abuja, and Kano, ditto with similar agreements with Bi-Courtney. The government must also be mindful of the fact that about twelve out of about twenty federal airports are joint users with the military, these include the international airports.
The government should be very clear in its plan as to what assets or infrastructure it would give for concession without disrupting the agreements with existing private operators and joint-users arrangements with the military. The plan for airport concession now should not include those aeronautical infrastructures, facilities, and systems that are necessary and critical for the conduct of flight operations, rescue operations, emergency management services, airport security systems, and national security. These are the state’s responsibility and mandatory obligatory functions to the ICAO as contained in various annexes to the Chicago Convention, essentially on aerodrome standards, air traffic control services, and airport security and so on. All these could be fully commercialized, as they are the practices elsewhere. The concession, on the other hand, should not be different from the one between the government and Bi-Courtney, and essentially for non-aeronautical infrastructural facilities and services which includes operations and management of the passenger, cargo terminal buildings and the handling facilities; aircraft parking areas with handling facilities, car, trucks, parks and toll gates.
All aeronautical facilities that are left in FAAN’s assets after the concession of non-aeronautical facilities could be merged with NAMA assets. Runways, taxiways and their associated lighting, and emergency and rescue management systems could remain part of the universal air traffic services systems. NAMA could, therefore, be fully commercialised like the ATNS of South Africa. FAAN, on the other hand, should function as a commercial holding company to oversee the management of the airports under concession.
The government should ensure that future management of the remaining domestic airports is included in the concession plans. In other words, none of these domestic airports should be left behind; otherwise, the initial reasons for the concession would be defeated. Therefore, for every international airport terminal available for concession to a company, three to four of the domestic airports should be given along with the concession.
The concession of airports, like that of the seaports in 2006, will increase capacity, invariably increasing air, passenger, and cargo traffic. It will reduce budget allocations to airports and increase revenue generation. The ports’ concession increased the capacity by over 300%; the cargo has increased from 7 million tons to about 25 million tons, and it has reduced budget allocations but has increased port revenue generation.
In addition to all these, the government should concern itself with the designing of achievable policies and programmes that would enable it to meet contemporary visions for the industry in this twenty-first century. Such policies should ensure that the responsible aviation authority provides the baseline for implementation of the concession, and the investors provide regular business plans every five years to meet the requirements of the Nigerian Civil Aviation Regulations, 2006, Part 18.10.5. The first-line approach is to ask: has the NCAA been ensuring that Bi-Courtney Airport Services complied regularly with the NCAR provision?
(Group Captain John Ojikutu (rtd) is an Aviation Security Consultant and Secretary General of the Aviation Safety Round Table Initiative)
This opinion article was written in May, 2016.
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