• Sunday, June 23, 2024
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Explainer: What to know about airport concession in Nigeria

Keyamo suspends Nigeria Air project, announces MMIA’s closure for repairs

In 2016, the Federal Government of Nigeria (FGN) developed a strategy and commenced a process of inviting private sector operational and investment expertise into the aviation infrastructure sector, with the objective of opening up the sector to foreign investment and technical partnerships.

The airport concession process, which came out of the above strategy, went through regulatory and governance checkpoints including necessary diligence, bidding, negotiations, and documentation for transactions of this nature internationally.

All steps, approvals and processes were complied with under the supervision of the Infrastructure Concession Regulatory Commission (ICRC).

Several dozens of investors and operators indicated interest, submitted bids, and were screened based on their technical and investment capacity.

The ministry of aviation said it was guided by world-class consultants, and the resulting commercial agreements keep the government in control of all the aeronautical operations and revenues within the airports, while the selected concessionaires are empowered to provide investment and technical expertise into the landside and terminal management services.

The concessions are designed with the objective of positively transforming the passengers’ travel experience by upgrading the quality and operation of the terminals to world-class standards.

Following the successful completion of the process, an international consortium, comprised of Corporacìon America Airports (CAAP) and Mota Engil Group (Mota Engil) along with their local Nigerian partners, secured the concessions to invest, upgrade and operate landside and terminal operations at the Nnamdi Azikiwe International Airport (NAIA), Abuja, and Mallam Aminu Kano International Airport (MAKIA), Kano.

CAAP

Founded in 1998, CAAP is a private airport operator, currently operating 53 airports in six countries across Latin America and Europe (Argentina, Brazil, Uruguay, Ecuador, Armenia, and Italy).

In 2021, CAAP Airports served 35.7 million passengers, 57.6 percent lower than the 84.2 million served prior to the pandemic (in 2019), of which approximately 23 percent were international, 63 percent were domestic and 14 percent were transit passengers. Listed on the New York Stock Exchange, CAAP earned consolidated revenues of $1.4 billion across its global business in 2022.

Mota-Engil

Founded in 1946, Mota-Engil Group is a multinational with operations focused on construction and infrastructure management in the segments of engineering and construction, environment and services, transport concessions and energy.

Mota-Engil is a leader in Portugal with a consolidated position in the rank of the 30 largest European construction groups. Listed on Euronext, Mota Engil is present in 24 countries, in three distinct geographical areas, namely Europe, Africa and Latin America, with more than 38,500 employees and a turnover of €3.8 billion across its global business in 2022.

With the award of the Kano and Abuja Airport terminal concessions to the CAAP-Mota Engil Consortium, alongside their local Nigerian partners, it is expected that the federal government would help in attracting the international investors into the Nigerian aviation infrastructure market, in line with its original strategy and goals.

It is anticipated that the successful execution of this strategy by the federal government and its private sector partners will deliver a significantly improved passenger experience for Nigerian travelers, attract foreign direct investment into the country, and support an increased revenue profile to the government from the airport operations through private sector investment and day-to-day operational management of the landside and terminal operations, while the FGN remains fully responsible for aeronautical operations and revenues at the airports.

Issues with Lagos, PH airport concession

Many had looked forward to the concession of all four international airports including Murtala Muhammed International Airport (MMIA), Lagos and Port Harcourt International Airport, Port Harcourt.

However, these two airports have not successfully gone through the concession process.

Last year, the Federal Ministry of Aviation announced that the preferred bidder for MMIA, Lagos, is TAV/NAHCO/PROJECT PLANET LIMITED(PPL) Consortium and Sifax/Changi Consortium has also been selected as the reserve bidder for MMIA.

On the other hand, the federal government had revealed that no company made a bid for Port-Harcourt airport as concession towards the privatisation of the nation’s airports was unveiled.

Hadi Sirika, minister of aviation and aerospace, said the Request for Proposals phase of the Nigeria Airports Concession Programme, which came to a close on September 19, 2022, has seen the emergence of preferred and reserve bidders for three out of four airports and cargo terminals as approved for concession under the programme.

However, Lagos airport concession has been delayed because disgruntled parties had taken the case to court on the ground that the selected bidder breached the specific precept of the Request for Qualification.

One of the bidders, Sifax Group of Companies Limited, had filed a suit seeking disqualification of two preferred bidders.

Sifax Group had asked the Federal High Court in Lagos to disqualify two French firms, Tav Airports Holding Company and GMR Airport Limited.

Sifax stated that both firms, owned by the same company, Airport De Paris (ADP), submitted separate bids for MMIA and were shortlisted for the next phase of the concession – contrary to the rules.

Sifax, in its submission to the court, alleged that Tav Airports Holding Company breached the specific precept of the Request for Qualification, which states that no applicant is entitled to bid for any of the specific assets twice under any guise or form.

The plaintiff, therefore, sued the Attorney-General and Minister of Justice of Nigeria, the FGN and the Minister of Aviation, NAHCO Aviance Plc, the Infrastructure Concession Regulatory Commission (ICRC), Tav Airports Holding and GMR Airport, as the first to seventh defendants.

A source at Sifax said: “Lagos airport was concessioned last year to TAV/NAHCO/PROJECT PLANET LIMITED(PPL) Consortium but Sifax is challenging this in court. Sifax also bid for Lagos airport and they said they prefer Lagos airport to any other airport.

“In order to compensate Sifax, the minister gave them the national carrier as a consortium to the preferred bidder. Sifax said they never bid for the national carrier and so they are not showing any interest in the national carrier. Since the case on the concession of Lagos airport is still in court, the concession process is still being delayed.”

Also in a letter dated November 3, 2021, which was addressed to the Minister of Aviation, Femi Falana, a senior advocate of Nigeria, had insisted the minister to disqualify three firms, TAV Consortium, GMR Consortium and ADP for violating the requests for qualification process.

Falana said two consortium owned by ADP Airport De Paris submitted expression of interest in a public notice, however pointed out that the first consortium led by TAV Airport Holding, ADP owns 49 per cent of its shares, while the second submission done by GMR Airports Limited, ADP also owns 46 percent of the company’s shares.

In a related development, aviation workers’ unions have continued to oppose the concession of the airports, especially Lagos airport.

The workers, under the aegis of National Union of Air Transport Employees (NUATE), Air Transport Services Senior Staff Association of Nigeria and the Association of Nigeria Aviation Professionals said details of the concession plan have shown it is only benefitting the minister and not Nigeria.

Ocheme Abah, secretary general of NUATE, said some of the loopholes found in the project include extending the scope of the concession to the surroundings of the terminals, up to FAAN housing estates without taking such into account in the assets valuation; arbitrary fixing of profit sharing ratio (60:40) in favour of the concessionaire; laying the ostrich in connection with existing concessions and plethora of live litigations over the airports to be concessioned; being dangerously silent on labour issues.

“While stating that the terminals require no further investments for the envisaged period of the concession, yet without any real basis determined, humongous investment budgets for intending concessionaires have been observed. There is also the issue of overlooking the wiser choice of going for management contract option instead of concession, considering that the airports in question are all brand new; overlooking the very serious implication of handing such important national security assets over to foreigners.

“Based on these and many more issues raised by us over the obnoxious OBC, the FAAN management set up a management/Unions Committee to scrutinise our objections. The committee, which consisted of representatives from the Ministry of Aviation, the ICRC, the management of FAAN and the unions failed to offer any pragmatic solution to the imbroglio. Not even the Transaction Adviser himself could explain the Outline BuisnessDay Case,” Abah said.