BusinessDay

Transport industry faces further squeeze

Nigeria’s transport sector was squeezed further in the first half of this year as the Russia-Ukraine war triggered a surge in fuel prices.

While passenger traffic is gradually gaining momentum after the global lockdown as a result of COVID-19, predictions about growth this year have yet to materialise.

There were high expectations that the aviation roadmap which was unveiled in 2015 was expected to kick off by the first half of 2022 but this has been delayed.

On the roadmap unveiled by Hadi Sirika, minister of aviation, are the national carrier, airport concession, aviation leasing company, aircraft maintenance organisation, aerotropolis and an improved workforce.

But seven years down the line and the first half of 2022 seems to have gone without signs of the road map kicking off.

After the launch of the national carrier, Nigeria Air and the issuance of its Air Transport License, the arrival date of the three aircraft as required by the Nigeria Civil Aviation Authority for the take-off of the carrier and its 95 percent foreign partners and indigenous private investors are still unknown.

After several adverts in the newspaper on the airport concessions, the federal government is yet to announce preferred bidders for the project.

The four airports selected for concession include the Lagos, Abuja, Kano and Port Harcourt airports.

The unions, under the auspices of the Air Transport Senior Staff Association of Nigeria and the National Union of Air Transport Employees, have since said that they would do everything legally possible to stop the planned concession of the airports, stressing that the process is not run in a transparent manner.

Cracks in the plan to concession four international airports were obvious when the Federal Government late last year advertised an extension in the timeline for the submission of bids for their takeover.

Industry experts have however said the airport concession project may never see the light of day until the government stops being slow in addressing the pending debt crisis and rash of existing concessions around those airports which is scaring away genuine investors.

Another huge project in the aviation road map is the aircraft leasing company. This is also another project still at its ‘dream’ stage.

Read also: Gas adoption can transform Nigeria’s transport sector – ADLG

The federal government had said the leasing company would provide opportunities for Nigerian and African airlines in order to boost fleet size; alleviate the problems of aircraft leasing and the attendant high insurance premium charges.

The Ministry of Aviation said the aircraft leasing company has been structured as a joint venture between the government and the private sector, adding that its business objectives would be to initially lease aircraft from international lessors and subsequently sub-lease to African airlines and in the future acquire and own its aircraft.

But the first half of 2022 is gone and yet, no leasing company has agreed to pitch a tent in Nigeria as Nigerian airlines still find it difficult to lease new aircraft because of trust issues between the lessors and the Nigerian carriers.

This has forced Nigerian airlines to buy and own their aircraft at a huge cost and this is also why many Nigerian operators acquire older equipment because it is what they could afford; except now that Air Peace and Ibom Air have blazed the trail by acquiring new aircraft.

Investigation shows that Nigeria loses over $2 billion annually to the absence of an aviation leasing company for airlines in the country.

The Maintenance, Repair and Overhaul facility, which will be sited at the Nnamdi Azikiwe International Airport, Abuja, is expected to run through Public-Private Partnership under the Build, Operate and Transfer model and is supposed to have the capacity to service both Narrow Body (Jet and Turboprop) and Wide Body aircraft. This project has also failed to kick off, making airlines pay billions of naira annually for aircraft maintenance.

A-C- check on a Boeing 737, which is conducted between 12 to 18 months, costs an airline between $800,000 to $ 1 million. This amount does not include the cost of ferrying the aircraft abroad and other charges. On the other hand, carrying out a C-check in an Aero facility will cost between N50 million to N60 million on an aircraft.

In addition to these challenges, Nigeria has failed to leverage its population and geographical advantages to develop an aviation hub for Africa.

While Nigeria is blessed with a strong geographical location for connectivity, the country has failed to build strong airlines and invest in airport infrastructures to get it to the status of an aviation hub.

Aviation experts over the years have expressed worry over the development in the aviation industry, which they said portended a bleak future for the industry in Nigeria.

The transport sector is also facing myriads of issues as the current Russia-Ukraine conflict, which began in February, has played a larger role in the unpredictable mobility of persons in the first half of the year due to the role they play in the crude oil market.

The beginning of the year knocked people off-balance, with a spike in oil prices that resulted in a price increase of over 200 percent for diesel, which is sold for about N750–N800.

In March, there was a resurgence of petrol queues in Lagos, Abuja, and other cities across the country, reigniting concerns about another nationwide scarcity of the commodity. In June, there was another re-emergence of petrol queues due to scarcity and rising prices in some states.

According to the National Bureau of Statistics, the average price per litre paid by consumers for Automotive Gas Oil (diesel) climbed to its highest level in the last three months in May. The average retail price of fuel has risen in the last three months, from N539.3 in March to N671.1 in May, according to the National Bureau of Statistics.

Six attacks along transportation routes (road, rail, and air) had occurred in the past two weeks of April, posing a threat to the safety of lives and livelihoods in Kaduna. Kidnappings, bombings, and heightened levels of unease along various transportation travel routes have bombarded them.

The transportation system, where end consumers bear the greater expense, has been impacted by the abrupt and ongoing spike in diesel price, and scarcity of fuel, which has resulted in a generally high price level for products and services.

The contribution of the sector to real GDP in the Q1 2022 totalled 1.10 percent, a fall from 1.38 percent recorded in the preceding year, and in real terms, the transport sector grew by -17.41 percent in the first quarter of 2022.

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