• Wednesday, July 24, 2024
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BusinessDay

Policy Design – Aviation smiles as auto groans

Aviation and destiny

There seems to be a world of difference in the fortunes, and hence, body temperatures of the operators in the automobile and aviation industries in Nigeria, following policy actions that have impacted their current fortunes. For the aviation industry, it looks like a thanksgiving era, as operators have begun to sing songs of praise to the government for supporting them. Apart from complementing the tourism and hospitality sectors, the aviation industry also promotes both domestic and international trade and supports diplomatic relations among nations. Merely flying the flag of a country into other lands contributes to her prestige and general economic well-being. Therefore, the aviation sector contributes significantly to the Nigerian economy.

The pandemic has many victims but the aviation industry seems to be one of the worst-hit. Once the news of the virus burst, steps were taken across the globe to prevent its spread. Those steps, necessary as they were, had consequences and brought collateral damages to economic agents, especially those involved in personal and human-traffic oriented services; notably aviation and hospitality. The initial global reaction against COVID 19 was to minimize travels and reduce human contact. Accordingly, airlines shut down flights and grounded aeroplanes, thereby cutting off their revenues and laying off workers. It was reported that Virgin Australia Group alone grounded over 100 aircraft, suspending flights on both their international and domestic routes. In Nigeria, the government introduced a number of measures, which also brought the sector untold pain.

We have demonstrated an uncanny capacity to consistently act inconsistently. Policy reversal or what has become known as policy summersault, driven largely by official corruption, is a rife in government

Things may have begun to turn around for the airline industry, or so it seems, courtesy of the federal government. Industry operators confirm that the government had earlier supported them with N4 billion and effectively represented their interest in the new Finance Act. They now enjoy five per cent duty on loans, zero duty and zero Value-Added Tax on imported aeroplanes. According to the Nigerian Civil Aviation Authority, the country has twenty 20 airports, in addition to many regulated airstrips and heliports. There are 23 active domestic airlines, 554 licensed pilots; 913 licensed engineers and 1700 cabin staff. The Nigerian aviation industry may be relatively small in size but it is very significant even in the international reckoning. For one, despite all the challenges confronting the country, Nigeria is still an important destination for over 22 foreign carriers, who recognize its potentials as Africa’s largest economy and most populous country. Nigeria’s attractiveness, as an aviation destination, has earned it Bilateral Air Services Agreements with over 78 countries.

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The foregoing seems to demolish the argument of those who claim that the current support for the industry is misplaced, because according to them, only a small number of people travel by air, compared to road transport. Looking at the Air Traffic Data published by the National Bureau of Statistics, the critics seem to have a point. As at the second quarter of 2018, the total number of passengers who passed through Nigerian airports reached 3,845,853, a figure that is hardly up to two per cent of the over 205 million people in the country. But that seems to be the end of their point. The relatively low number of air travellers does not diminish the fact that they constitute the elite, who drive the economy, and the political class, however we previewed them, that give the country its policy direction, right or wrong. In this regard, I believe we have not even done much for an industry so strategic to both our national prestige, and economic and political sustenance.

My interest is actually in the ability of government to sustain whatever support they have given the aviation industry. We have demonstrated an uncanny capacity to consistently act inconsistently. Policy reversal or what has become known as policy summersault, driven largely by official corruption, is a rife in government. I wrote a piece last week titled “The Far Side of the 2020 Finance Act”, in which I took a look at the treatment given to the Automobile Industry in the Finance Act. Precisely, the Act lowered duty on imported transport vehicles, as a means of fighting inflation, which government blames on high cost of transportation, effectively withdrawing the incentives given to investors in that sector, and which attracted a lot of investment into that sector.

One of the airlines, the popular Air peace, has responded to the current government support to the aviation industry by ordering 13 brand new airplanes, partly perhaps, because of the zero duty incentive. That’s a bit scary, in an environment in which personal interest could engineer policy reversal at very short notice. I hope that operators in the airline industry will not wake up one day to find that the rug has been pulled from their feet. I also hope that the zero duty on the import of airplanes will last until all the planes being ordered by players come in. To have them carry then can, like their counterparts in the auto industry, without consultation (I hear the discussion with operators in the automotive industry is now about to begin, ex post), may be too much for the economy to bear. Let us begin to make broadly impactful decision on the bases of broad-based consideration.