Faulty policies keep Nigeria’s aviation sector from flying high - BUSINESSDAY
NOVEMBER 14, 2022
Since the first aircraft in Nigeria landed in Kano city, in 1925, the aviation sector has continued to experience slow and piecemeal growth, with policies strangulating airlines and the industry generally. For a future where travel is affordable, yet profitable for operators, these need to change.
These policies range from multiple taxations, the absence of refineries causing fuel prices to skyrocket and foreign exchange rates. Airlines continue to struggle with operating costs such as taxes, surcharges and maintenance costs which have risen because of the scarcity of foreign exchange.
The aviation fuel crisis which began in late February and deteriorated further through the months of March to May has further worsened and is currently threatening the ability of airlines to continue operations with the price of JetA1 rising from N200 in December 2021 to over N400 per litre in February. Currently, the price has skyrocketed to over N800 per litre.
Nigeria’s domestic airlines are in a ‘life and death’ struggle to secure the Forex they need to acquire their spare parts to maintain their aircraft. This is a major influence on how quickly a grounded aircraft can be fixed and restored to its flight schedule, which in turn has a huge impact on the schedule reliability of domestic airlines.
BusinessDay’s checks show that aviation fuel currently takes about 45 percent of operating cost, labour 17 percent, aircraft rent and ownership 8.5 percent, non-aircraft rents and ownership 7 percent, professional services 4.5 percent, landing fees 2 percent, food and beverage 1.5 percent, maintenance materials 13 percent, transport-related 1.5 percent.
Stakeholders say if the right policies are put in and implemented, the country’s aviation sector would have been able to ride on the back of these policies to cushion the effects of the global economic crisis as a result of the oil prices.
In the last 50 years of commercial air travel in Nigeria, over four dozen of airlines have come and gone as a result of politics, mismanagement of funds, corruption, high cost of aviation fuel or financial loss.
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.
Olumide Ohunayo, an aviation analyst said forex and the crippling fuel price, which has continued to increase uncontrollably. He said at this time, the funds for foreign airlines are not being remitted which has also put stress on the naira ticket in international routes.
This is the time government needs to address the foreign exchange crisis and mitigate the continuous rise in fuel prices, he said.
“Not having a refinery for aviation fuel has held us down in this situation. The government can however assist and work on the taxes associated with airline operations. This would help reduce the cost a bit. The airlines on their part cannot continue to run a subsidized system at the expense of safety.
“A fuel surcharge ranging between 25 to 40 percent would be charged depending on the routes and the removal of five percent NCAA fees. It is better for them to operate profitably instead of them to struggle in operations,” he said.
According to him, there would be an aggregate effect on the economy if the government does not work on the variables; from security to the forex crisis to the fuel crisis.
Roland Iyayi, the chief executive officer of Topbrass Aviation and former managing director of the Nigerian Airspace Management Agency said airlines are failing because the environment in which they operate is extremely harsh and not even conducive for growth.
“We have a multiplicity of charges in the industry that are inconsistent with the purpose of growing the industry. On one hand, we have government agencies that are supposed to be cost recovery agencies geared to grow their Internally Generated Revenues, which is an inconsistent objective with the industry growth,” Iyayi said.