The Managing Director of Worldscope International Logistics Limited, Dr Segun Musa, in this interview with OLUSEGUN KOIKI, speaks on the state of air freight services, state governments’ recent push for new cargo airports, upward review of tariffs and the bottlenecks in cargo operations nationwide.

What is your assessment of the current state of the air cargo business in Nigeria?
The air freight business is still at a very low level in Nigeria compared to what is obtainable elsewhere. The air freight business is highly regulated because of the peculiarity of the business. At times, people even say it is over-regulated. The business is a business of volume. The higher the volume, the lower the rates. This means that if you are to be an active player, you must have the volume. If you have the volume, you control the freight.

Even if you don’t have an aircraft that flies your routes of convenience, as long as you have volume, you control the freight charge. We have so many components for the freight, but because you have volume, you are at an advantageous position to influence the rate of the freight charge.

Again, we also need actors with a wide pool of knowledge and a business-minded approach to supervise the aviation industry; they understand what it takes to run an aviation business. As we speak, we have multiple taxes, levies and charges in aviation.

And if you have multiple charges and levies, it does not make the aviation business viable, because whatever you charge for aircraft bringing in cargo will be an additional charge on freight.

Again, most of our cargo exports go through our neighbouring countries because they relax most of their taxes, levies and charges. So, when they pick from Ghana for instance, what they pay is like half of what they pay in Nigeria. The kind of freight rate they give to Ghana, for instance, will be different from the freight rate they give to Nigeria.

When you bring volume to the country, and you are going back with an empty aircraft, they will add up whatever is going to be the cost of the return leg on the same freight.

You have more advantage if you can build traffic volume. And part of the way to build volume is to see how you can relax most of these multiple charges and levies here and there.

Cargo business is still at a very low range; we have not advanced our cargo business like most of the developed countries in Europe, America, Asia and the rest of them. That is why we are not much of an active player as we speak.

Again, we don’t have enough aircraft coming to pick up cargo. The ones that even come around don’t have cargo to pick. Also, we don’t have enough warehouses because if you are to make Lagos, for instance, a hub or you want to make Nigeria a hub, you must have the incentives that will encourage people to bring in their aircraft. If they are coming and the volume is reasonable, a lot of people will divert their cargo from the seaport, land borders and take them through the air. But when the rate is too high, everybody would prefer to go by sea.

How much do you think Nigeria loses to cargo diversion to neighbouring African countries yearly?
If you look at the figure, we will be losing about $500 million monthly to cargo diversion to neighbouring African countries, which is about $6 billion yearly in terms of revenue that we would have generated.

Does Nigeria require specialised cargo airports?
Specialised cargo airports can be valuable, but only if properly planned. Many state governments construct cargo airports without conducting feasibility studies or engaging key stakeholders. A viable cargo airport requires freight forwarders who control cargo volume and determine where shipments go; ground handling companies that manage cargo and ensure smooth operations, and airlines that operate competitive cargo services.

Without adequate cargo volume and incentives, even well-built airports remain underutilised. Passenger flights alone cannot sustain a cargo airport, as they do not generate enough revenue.

Personally, I think what the State governments are doing is unhealthy competition , and there is a misplacement of priority. Most of them did not do their due diligence before constructing cargo airports. It is sad when you see neighbouring states building the same cargo airport beside each other. It’s uncalled for.

Are Nigeria’s airports properly equipped to handle large-scale cargo operations?
We are still lagging because when you look at other airports, the kind of equipment they have, we don’t have them here, even though we have a bit of that. Some of the handling companies have a few pieces of equipment, but they are not enough, and because they are not enough, or they don’t have the capacity, they have to go out and rent or hire from elsewhere to support what they have.

This, however, kills time and aside from that, it also increases the cost implication. We are not well-equipped, because we don’t have the capacity. It is when you have the capacity that anybody who wants to bring this cargo will think of your port as an alternative port to bring in their cargo.

Some of the cargo that should have come through chartered freighters to Nigeria is being diverted to seaports because they know they don’t have the equipment to withstand damage.

How can the country improve digitalisation in freight operations?
The problem is not about digitalisation; some of these agencies are digitalised in their operation, but they need to advance that digital process to full automation. Someone using a computer in the office will tell you he is digitalised, but when you’re talking about full automation, it means that once any data gets to you, it must be processed immediately.

And if there is any reason for you to query that data, your response to the query must be instant as well. It should not be something that the importer will have to come and see you or he needs to come and defend himself physically before you. All your conversations must be online.

Probably, the seaport can accommodate some of these bottlenecks because of the period the shipment will take before it lands, but not the same for aviation.

How has price volatility affected your operations?
The truth of the matter is that the airport’s cargo operations are a premium passage. Whichever entity is using the airport expects to pay higher charges than those of seaports or land borders. Notwithstanding, when these charges become excessive and the costs of doing business at the airport become unbearable, people will begin to look for alternatives.

Most of the cargo that comes through the airports is needed urgently, but some of it can also be warehoused. So those that need to be warehoused can decide to go by sea and when there is a sharp decline in air freight cargo, it becomes an issue because the maintenance of the ground handling becomes an issue. They won’t be able to break even or even maintain their equipment and they will continue to agitate for an increase in charges until the sector collapses.

At one stage, we signed an agreement under the Economic Community of West African States (ECOWAS), which we called the Common External Tariff. This puts us on our toes because some of these neighbouring countries have modern infrastructure and they are trying to be as automated as possible. So, we felt that we should start applying the dictates of the Common External Tariff, which means you have to bring your cargo to your preferred port.

Most of the time, the problems are from the state actors like the Federal Airports Authority of Nigeria (FAAN), the Nigeria Civil Aviation Authority (NCAA), the Nigeria Customs Service (NCS) and others. These state actors are given targets to meet and when they are given targets, they put aside the regulatory aspect and think of how to maximise revenues. So, they come up with all kinds of charges like the one we had with FAAN recently.

The upward review charges by FAAN have increased the cost of doing business at the airports. If it becomes unbearable, a lot of business owners will take their businesses away from the airport to the seaports. So, what they want to maximise, eventually, they won’t be able to do so.

What is your view about government policy in air freight?
Government policies have not been favourable to the air cargo sub-sector. Number one, we don’t need to have multiple agencies at the airports. Even seaports are complaining of this challenge. When you have the same number of agencies that regulate the same cargo and doing virtually almost the same thing, it frustrates business and creates a bottleneck in the system.

Cargo business is supposed to be very fast because it’s a premium passage. You have to pay a lot of money to freight cargo and when you are now subjected to different agencies doing all these checks that are supposed to have been done by a scanner, it increases the number of periods that you are supposed to have exited or exported your cargo. These bottlenecks also create room for corrupt practices and delays in the clearance process.