Thursday, 1st June 2023

Aviation economics, national security and the law

By ‘Femi D. Ojumu
15 June 2022   |   3:28 am
From the starting blocks, let’s explode the myth that civil aviation, in the 21st Century, is the preserve of wealthy elites. It is not! Domestic and international air travel facilitates trade, tourism and bilateral relations..

An aircraft

From the starting blocks, let’s explode the myth that civil aviation, in the 21st Century, is the preserve of wealthy elites. It is not! Domestic and international air travel facilitates trade, tourism and bilateral relations amongst countries. It raises revenue for governments and creates employment within the aviation industry and the supply chains serving the latter; especially the energy, hospitality, logistics and security sectors.

Globally, the aviation industry had a turnover of USD 876 billion in 2019. Owing to the COVID-19 pandemic outlier effects, this shrunk 56.1% to $34 billion in 2020. 2021 witnessed a 26.5% upward trend to USD 487 billion. The prognosis for 2022 is optimistic with countries easing travel restrictions, rising confidence amongst travellers and the beneficial effects of the financial support airlines received from their governments totalling USD 243 billion to cushion the adverse effects of the pandemic.

In Nigeria, aviation is exclusively within the legislative competence of the Federal (not the state!) Government, by virtue of the provisions of section 4, part 1, sub-section 4, of the Constitution of the Federal Republic of Nigeria 1999 as amended “the Constitution” viz: “aviation, including airports, safety of aircraft and carriage of passengers and goods by air”. Decree 45 of 1976 established the Nigerian Airports Authority (NAA), the precursor to the Federal Airports Authority of Nigeria (FAAN), with the core objectives of developing and maintaining all airports and facilities therein for safe operation of aircraft and advancing economic activities relevant to air travel inter alia. FAAN was established under the section (1) 1 of the Federal Airports Authority of Nigeria Act 1996.

Further afield, the UK’s Civil Aviation Authority (CAA) pretty much oversees aviation regulation as it relates to ensuring the highest safety standards, effectively managing security risks, reducing environmental impacts of aviation on local communities, reducing carbon emissions, whilst optimising competitiveness and equity in air travel. The US equivalent is the Federal Aviation Administration (FAA), which aims to provide the safest and most efficient aerospace systems globally.

Broadly, aviation policy and regulations are harmonised globally. The International Civil Aviation Organisation (ICAO), a specialized agency of the United Nations, aspires to enable member states synthesise civil aviation regulations, standards and procedures and organisation in this connection.

Upon that foundation, attention turns to aviation economics and national security starting with some historical context. On September 15, 1978, an adult’s ticket from Lagos to Benin on the nation’s flagship carrier, Nigeria Airways, was N22 (where N represents naira); a child’s ticket was N11.00. In the same period, a Lagos/London round trip cost approximately N270.00. Virtually all the world’s top airlines had Lagos offices and Nigeria was a key international hub. Driven by robust global oil demand, the country’s petrodollar economy was buoyant, N1.00 exchanged for £3.80 sterling and interest rates, according to World Bank estimates, hovered at approximately -6.3%.

The country’s population then was 69, 271,914. There were effective alternative transport links across the country via rail, arterial road networks and waterways. The Port Harcourt and Warri refineries were operating at capacity. Oil prices were USD14.57. Terrorism and kidnapping were barely heard of in Nigeria.

Fast forward 44 years later to 2022, and the Nigerian “Eldorado” has turned a hellish 180 degrees. The population is approximately 212,000,00. USD1 is exchanged for N602 in the parallel market and circa N418.88 on official markets. The aforementioned refineries (and the Kaduna Refinery commissioned in 1980) are barely functioning. Interest rates are 13%. Brent crude retails at USD 123. Travelling interstate on Nigerian roads or via rail, is now a preserve for the bravest of the brave.

That’s because kidnapping, terrorism, child abductions are almost daily occurrences. Extreme as these heinous crimes are, perversely, they barely make front page news excepting so-called “high profile” instances. For example, on Sunday, June 5, 2022, terrorists bombed St. Francis Xavier Church, Owo, Ondo State, South Western Nigeria, killing at least 40 people and critically injuring many more. These innocent and vulnerable people were doing what millions of people do every time: worshipping the God they profess to believe in at a most sacred place; a church!

The Methodist Prelate Samuel Uche was kidnapped in the South East on May 30, 2022 alongside two senior Methodist Bishops. They were released only after the Church was able to raise N100 million in ransom payments. On March 28, 2022, terrorists exploded bombs on the Abuja -Kaduna rail track, derailing the northbound train, killing several people and kidnapping over 60 persons. Okechukwu Okoye, a South Eastern state legislator, was kidnapped on May 15, 2022 and decapitated. The perverse statistics are just that. In 2019, over 1, 244 people died in Nigeria on account of terrorist attacks. Statista reports that: “Nigeria remains one of the countries with the highest terrorism threat levels in the world…the number of attacks to both civil and military targets increased.”

Now, what’s the nexus between aviation economics, national security and the law – the subject matter of this piece? Distinctly, a linear correlation. Because interstate road and rail travel in Nigeria, has become an extremely precarious affair for the even lion-hearted, given the heightened insecurity across all states. The audacity of the terrorists often overwhelms the combined security afforded by the combined forces of the Army, Police and Civil Defence. The stark reality of major national security lapses bears little overstating. The strategic and operational gaps therein necessarily justify a constitutional and procedural review of the role of the armed forces, the police and state security in the defence of the realm.

The combination of all these security lapses means that a lot of Nigerians nowadays avoid travelling by road and rail, opting instead, for air travel. Alas, the costs of air travel have increased exponentially driven largely by inflationary pressures and the prohibitively expensive costs of jet A1 (aviation) fuel in Nigeria and beyond. Jet A1 fuel, is imported to Nigeria from mostly Russia and is subject to the laws of demand and supply coupled with the weakness of the national currency (naira) Nigeria against the dollar.

Some mathematics illustrate the point. The Boeing 737 and Embraer E195 E2 are common commercial aircrafts in Nigeria. At the time of writing, the cost of a gallon of jet A1 fuel is approximately USD 3.936. At capacity, both aircraft types utilise circa 3,500 gallons of fuel. That translates to N1, 466, 500 using official exchange rates (with onerous requirements) at N418.88 to USD1; or, N2,107, 000, using parallel market rates (which are freely bought and sold on most high streets in the major cities) at N602 to USD1.

Likewise, a round way Lagos/Abuja trip in May 2022 cost approximately N110, 000. The same trip in the same period in 2021 cost approximately N55, 000 or 50% less. Added to this, there is wage stagflation. Accessing the official foreign exchange market is cumbersome to say the least for individuals and corporates. Yet, domestic (all!) airlines must access jet A1 to fly amidst competing regulatory compliance obligations. Compounding the picture is the Ukrainian Russian debacle. Russia is a major exporter of jet A1. All this in an industry reeling from the strikingly severe aftershocks of COVID-19 when several local and international airlines went bust under the weight of crippling wet lease debts.

The corollary is not rocket science. The costs of airline travel are often passed on to the flying public, who in a practical sense in Nigeria at least, have no serious alternative because interstate roads and rail track are extremely dangerous to ply given rising terrorism and kidnapping in the country.

In the final analysis, sound policy ought, reasonably, to strive for the best outcomes for citizens and lasting societal order. Inescapably therefore, these considered recommendations spring forth. One, in a progressive democracy, which Nigeria aspires to be, everything hangs on societal order. The state must completely re-strategise, re-order and re-energise the current security configuration. Afterall, aviation is only part of the complex whole of an integrated rail, road and maritime transport architecture. Without effective coordination therein, the problem remains.

Two, the case for wholly privatising the moribund Kaduna, Warri, Port Harcourt state-owned refineries should be reconsidered as a policy priority. The rationale is straightforward. Private enterprise catalyses efficiency and innovation. Plus, the profit incentive exists for investors to optimise asset utilisation for efficiency gains and return on investments.

Three, the country albeit a leading crude oil exporter, with approximately 2 million barrels of oil per day, generating circa N14trillion (USD 34.7 billion) in 2021; expends vast resources importing refined petroleum products. In 2021, the country expended USD 1.04 billion on the latter. That’s patently unsustainable. Equally, the state has a role to play seeking a denouement in the Russian Ukrainian crisis first on purely humanitarian grounds. And on the grounds of economic sustainability. We don’t need Einstein to confirm that the crisis has triggered extra territorial inflation whether its with energy prices in Europe, bottlenecks in food supplies and wheat imports to Africa or the constraints in the free-flow of refined petroleum products, including jetA1 to Nigeria and other places.

Four, citizens must do the needful too. Democratic credence does not rest in political creeds and rhetoric. The civic obligation rests on citizens to robustly cross-examine the policies and ideological foundations of the contending political parties and candidates in the imminent 2023 elections, against the criteria of proven integrity, evidential performance track-records, originality of thought on reactivating and improving security and well being of the people, innovative ideas of economic resurgence and capacity to embed sustainable societal order. Of course, citizens should seize the opportunity to obtain their voters’ cards.

Five, a constitutional review is necessary to accomplish some of these proposals. Revamping security will, of necessity, include State and Neighbourhood Policing; licences for new private refineries should reasonably include provisions on carbon capture, eliminating gas flaring and energy recycling. Plus, the aviation industry should drive innovation in reducing carbon emissions and options for blending renewable aviation fuel with orthodox fuel types.

Synthetising these policy proposals, alongside the political will, should help break the unholy trinity: insecurity, rising aviation costs and a staid constitutional framework.
Ojumu is Principal Partner at Balliol Myers LP, a firm of legal practitioners in Lagos, Nigeria.

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