How legal framework stalls airport concession plan
The Federal Government’s plan to push airports’ ownership and operations to private investors that are equipped with both the know-how and financial muscle is straightforward. But details get complicated and hobbled in backwater in the absence of an agreeable legal framework and yet unresolved credibility hangover. WOLE OYEBADE writes.
When Hadi Sirika delivered his concluding lines at the aviation stakeholders’ forum held at the Sheraton Hotel, Lagos that evening, he got a rousing applause from all, except a few. The aviation workers unions’ segment of the hall was not impressed by what the larger audience saw as a commonsense approach to transform the air travel sector. It’s been five years since that event, and the comrades have been proven right.
The Aviation Minister, Sirika, shortly after he was sworn in 2015 began to sell an aviation road map to whoever cares to listen. Contained in the agenda was the plan to float a new national carrier, concession all airports, establish aircraft leasing company and homegrown Maintenance Repair and Overhaul (MRO) facility, among others. None of these has seen the light of the day.
As of last week, the aviation workers, led by the Nigeria Labour Congress (NLC), are up in arms against further moves to concession airports. The coalition of aviation workers unions, including National Union of Air Transport Employees (NUATE), Air Transport Services Senior Staff Association of Nigeria (ATSSSAN) and Association of Nigeria Aviation Professional (ANAP), has threatened to shut the airspace in protest.
Though workers’ anxiety over looming job losses had been consistently dismissed as an illusion, the concession plan is already enmeshed in transparency doubts and lack of an agreeable legal framework. Significantly, the Federal Government is yet to resolve the bitter brawl of a similar concession that has continued to taint the government’s reputation as one that cannot keep agreement or trustworthy. Worst still, stakeholders have said that the new Federal Airports Authority of Nigeria (FAAN) Bill, currently before the National Assembly, will do more harm than favours to the aviation sector angling for scarce private investors.
Assets or liabilities?
The Federal Government has and operates 22 airports nationwide. That is a record in Africa, but not one to envy. At least 19 out of the 22 are listed as unviable and operating at a loss.
Except the trio of Murtala Muhammed International Airport (MMIA), Lagos, Nnamdi Azikiwe International Airport (NAIA), Abuja, and Port Harcourt International Airport (PHIA), Rivers State, none of the other 19 airports has sufficient revenue to cover the cost of operations alone.
Investigations by The Guardian showed that additional funding from high-traffic Lagos and Abuja airports’ excess revenue to the tune of N26.1 billion had cushioned the operational cost deficits incurred by the unviable airports in 2017, 2018 and 2019.
Aviation Minister, Hadi Sirika, recently reiterated his defence for concession of the major airports despite protests, saying the government has no money to invest in aviation infrastructure.
Sirika explained that at stake was the concession of the terminals and not the airports as a whole, as misinterpreted by some people. He said unlike what the past administration tried to do by selling off the airports, the government’s dwindling revenue made it imperative to consider private partnership in the provision of airport infrastructure.
“What we are trying to do is to keep assets of the people for the people. We are not trying to sell the assets of Nigerians like the last administration tried to do. What we are doing is for good service delivery. They will revert back to the people. What they are doing is to assist to provide these facilities. Government has no money to pump into airports,” Sirika said.
Concerns over right framework
The government had since 2017 begun moves to concession all the 22 airports, beginning with the big four in Lagos, Abuja, Port Harcourt and Kano. Coincidentally, the big four are beneficiaries of a 2013 loan deal between Nigeria and China to build four new terminals for the four airports. Abuja and Port Harcourt currently use the new terminals, while that of Lagos and Kano were yet uncompleted.
Following the recent concession approval by the Infrastructure Concession Regulatory Commission (ICRC), the workers’ unions became more agitated. They requested for the details of a $500 million worth of Chinese loan deal to build the four terminals, especially the add-on plan to concession the terminals. Government’s response didn’t come their way.
The General Secretary of NUATE, Ocheme Aba, observed that there remains no clarity on the question of the semi-concession that already exists through the Chinese loan facility.
Aba said: “Equally important is the loud silence over the issue of primacy of national security, especially at this time and the foreseeable future. They failed to situate issues within the national security architecture, the potential fact of the four foremost international gateways being held in private, most likely foreign hands.
“We hasten, though, to let it be known that we are unambiguously strewn to the national cause and the genuine interest of the workers of FAAN. We are completely extricated from any narrow or selfish motives. Therefore, we shall remain unwavering in our stated commitment to deny this clandestine Public Private Partnership (PPP) the benefit of daylight.”
Unresolved FAAN/BASL tango over MMA2
Also troubling for stakeholders is the current status of the premiere public private partnership venture in the sector – the Murtala Muhammed Airport two (MMA2), Lagos – built and operated by Bi-Courtney Aviation Services Limited (BASL).
It would be recalled that the old domestic terminal (now MMA2), like all other terminals nationwide used to be managed by FAAN until fire razed it in May 2000. Government of the day considered the cost of replacing the facility too burdensome, and opted for private investors that could shoulder the weight under a Public-Private Partnership Scheme.
The plan completely transferred all development and operating risks to the private sector, specifically on a Build-Operate-Transfer (BOT) arrangement. The venture is first of its kind in Nigeria.
Biddings were received and the lot eventually fell on Bi-Courtney limited, a wholly indigenous conglomerate and the parent company of Bi-Courtney Aviation Services Limited (BASL). The contract was awarded in 2003.
From equity of the owners/proprietor and loans from six banks, the terminal was completed and commenced operations on May 7, 2007. While the domestic terminal seamlessly ran better than international airports in the country and remains a pride of both friends and foes, it has also been a subject of serious legal tussle between BASL and FAAN/FG almost since inception. And this battle, unfortunately still ongoing, has been described as a low point and a bad advertisement for the concession plan of the current administration.
Part of the agreements was that BASL will operate the facility, as the sole domestic terminal in Lagos for a period of 10 to 15 years, with addendum for extension to 36 years as is the case for most of such investments globally, given the huge capital intensive nature of the venture.
BASL had later sought to explore the 36-year concession window, to help investors recoup the heavy investment that was described as “unprecedented” since the venture was first of its kind. The Guardian gathered that though BASL had the sympathy and goodwill of the then governments (Obasanjo and later Yar’Adua-led era), much to the displeasure of BASL’s landlord, FAAN.
For FAAN, BASL was riding on undue preferences, courtesy of friends within the government circle. While BASL maintains that the short-lived Yar’ Adua administration had approved the 36 years concession period, FAAN insisted that the initial 10 to 15 years agreement was sacrosanct.
It was amidst the conflict that FAAN awarded the construction of General Aviation Terminal (GAT), Lagos, to rival operations of MMA2 and contravene part of the BASL/FAAN agreement, especially the monopoly clause.
When tested at an Arbitration Panel and law courts, up to the Court of Appeal, the rulings were in favour of BASL, including the allocation of the GAT to BASL and the endorsement of a 36 years concession period.
The Guardian learnt that there is a subsisting judgment of N132 billion in favour of Bi-Courtney, due to FAAN’s “illegal” operation of the GAT. This judgment was obtained in 2012 but still not obeyed till date.
A legal practitioner and aviation enthusiast, Kehinde Agunbiade, said it was quite disappointing that the current administration, like the other before it, allowed the conflict of interest to drag for this long.
“In case they are missing it, you cannot put something on nothing and expect it to stand. The only foundation upon which the government can leverage to woo both foreign and local investors into aviation business is the MMA2 success story. Unfortunately, the same government has created a mess of a good selling point.
“From what I know, FAAN has been unable to keep the agreement it reached ab initio. Again, it has failed to obey court orders on the same issue. And you think any credible investors will want to do business with an entity that cannot keep its words?
“Again, the Section 2 of FAAN Act provides for a governing board for FAAN, with members serving a four year term. FAAN has not had board members in the last five years. All of these are illegalities that should have been addressed. That is why I think we are putting the cart before the horse in this matter,” Agunbiade said.
New bill, fresh booby-traps
Though the FAAN Bill currently before the National Assembly aims to enhance the airport concession plan, potential investors are beginning to pick holes in the draft. In a recommendation submitted to the House Committee, one of the stakeholders observed that the Section 1 (3) of the FAAN Bill unconstitutionally gave blanket ownership of all airports to FAAN, when not all are owned by the Authority.
“The provision must be properly defined. The functions of FAAN cannot apply to privately-owned airports and terminals. FAAN cannot operate airports and terminals that do not belong to it. The same applies to Section 7 of the FAAN Bill. FAAN cannot within the law carry out commercial and non-aeronautical activities at all airports in Nigeria. It can only exercise such powers at airports and terminals operated by it.
“We, as stakeholders, canvass that Section 6(1) should be rephrased with a clear proviso that the functions of FAAN under Section 6 of FAAN Bill are without prejudice to functions contractually imposed on private operators and concessionaires of terminals such as Bi-Courtney Limited at MMA2 and the GAT.
“The position of FAAN in the FAAN Bill is incongruous. FAAN cannot be an operator and a regulator in the same sphere. This clearly creates a conflict of interest situation. First, it enables FAAN to have the power to suppress the business of other private companies using regulatory powers. Second, it enables FAAN to be able to compete with private companies and businesses using government funds.”
The stakeholders urged FAAN to elect either on the side of a regulator or an operator. As a regulator, it could continue with the concession plan, but as an operator, then it should completely divest all regulatory powers in the aviation sector.
Chairman, Bi-Courtney Aviation Services Limited (BASL), Dr. Wale Babalakin (SAN), earlier said that the inability of the Federal Government to honour agreements it signed with the private investors was the bane of low capital inflow and underdevelopment of the sector.
Babalakin said: “Only private sector can finish projects on schedule because they have the funds. If MMA2 had been allowed to go at its pace, we would have expanded and built airport terminals better than they have in Accra. We had plans to build a monorail that will link Lagos airport international terminal to the domestic terminal. We had plans to build a power plant for Lagos airport,” he said.
Former Director-General of Nigerian Civil Aviation Authority (NCAA), Dr. Harold Demuren, on his part, warned that nobody would invest in aviation in the country until all concession issues pending in court are not resolved.
Demuren said: “We need to resolve all issues regarding policy inconsistencies that came with many of these concessions. We inherited problems with Chief Harry Akande and Dr. Wale Babalakin’s concessions and FAAN should sit down to resolve all lingering issues before we go ahead with this new exercise.”
Stakeholders, however, called on the government to make the concession exercise very transparent with a view not to replace public monopoly with private sector monopoly, but one that would truly serve the interest of Nigerians.