The dark side of Ibom Air
The airline is seen in many circles as the most visible accomplishment of the Udom Emmanuel administration which has so far earned over N1.5trillion from FAAC, IGR, refunds from the Federal Government and other sources.
In his first term, the governor has been poorly assessed by many commentators for a dismal record; and the constant release of streams of negative indices from the Nigeria Bureau of Statistics on the state has not been helpful to his reputation as a ‘first class banker.’ Placed side by side with his predecessors, this governor does not measure up in terms of achievement. It is therefore understandable that the propaganda machinery of the government went on overdrive to celebrate the new venture.
But beyond the ecstasy of the launch flight, Ibom Air has a dark side that is quite troubling. Everything about this airline is hidden from the public, and in utmost secrecy – just like other ventures which the administration claims to have done. Nobody knows the equity shareholding of the government; who the technical partners, directors and management team are and how much the government has spent on the project so far.
A press release issued by the airline is signed by the nebulous ‘Ibom Air Management’, without a name put on it. We understand that the three aircraft in its fleet are on lease. Is it wet lease or dry lease? The sheer opacity of this business enterprise casts a pall of doubt on the sincerity of its business case. But if the cloudiness is not enough worry, the gloomy business prospects are. Airline business the world over is very risky and difficult to operate profitably.
The margins are thin, especially in the emerging markets where revenues are earned in local currency; but expenses like maintenance, spares, lease amortization, insurance premiums and so on are incurred in foreign currency, typically the dollar. You have to deal with exchange rate risks, in addition to fuel cost which usually takes over 85 per cent to 90 per cent of the operating expense.
With only three Bombardier aircraft (each carries maximum of 80 passengers or thereabout) and charging an introductory fare of N15, 000 per passenger (about 40 per cent less than competition), Ibom Air’s profitability is far from sight.
Why do you think Okada Air, Nigeria Airways, Chachangi Airlines, Bellview Airlines, Harka Airline, Triax Airlines, ADC Airlines, Al Barka Air, and so on are no more flying?
In terms of job creation, which is the most important factor in a government-owned business ventures, Ibom Air is a non-starter. The top management positions, for inexplicable reasons, are all occupied by non-Akwa Ibom people.
Total new jobs created so far is not up to 50, for an investment which is conservatively estimated at N10 billion or more! For a development economist, what comes to mind is: couldn’t such a tidy sum have been invested in a better venture that would bring more benefits? The Central Bank Governor, Godwin Emefiele, recently announced that Nigeria spends $500m (N180 billion) yearly to import palm oil.
If Governor Udom Emmanuel had invested half of what he used to set up the airline (or perhaps far less) to create and replant 1,000 hectares of oil palm estate across our state, Akwa Ibom would have benefitted far more from it than what Ibom Air would ever achieve in its life time. An oil palm estate of that size with corresponding investments in oil mills would employ over 2,000 persons and earn at least 10 per cent of the nation’s yearly import bill.
The success of Okomu Oil Palm Estate in Edo State should be inspiring enough to Akwa Ibom government. I am sure that in the course of his long career in banking, our governor has come across this name. Okomu was established in 1976 as a Federal Government pilot project aimed at rehabilitating oil palm production in Nigeria.
At inception, the pilot project covered a surveyed area of 15, 580 hectares out of which 12, 500 hectares could be planted with oil palm. It was incorporated on December 3, 1979 as a limited liability company. As part of efforts to shore up its revenue base, the company acquired and installed a 1.5 T/h Fresh Fruit Bunches (FFB) mill in 1985 to begin to process its FFB.
Prior to the installation of the mill, the company derived its revenue from the sale of FFB. By December 31, 1989, 5, 055 hectares of the estate had been planted. The company also began infrastructural developments on the estate at that period. The facilities included office blocks, workshops/stores, staff quarters, a petrol station, a powerhouse and a primary school for children of the company’s staff members.
In 1990, the Technical Committee on Privatisation and Commercialisation (TCPC) privatised The Okomu Oil Palm Company on behalf of the Federal Government of Nigeria. It has since grown to become Nigeria’s leading oil palm company with total area of 33, 000 ha of which 17, 245 ha is currently planted with oil palm trees and 7, 335 ha with rubber trees. Another 4, 000 ha of oil palm trees is to be planted within the next year and 1, 500 ha of rubber trees by 2020. Currently, the company operates two 30 T/h oil mills and another two 30 T/h oil mills are planned to be operating by 2020 or 2021.
The privatisation of the Okomu Oil Palm Company Plc has been a great success and a huge encouragement for the Nigerian agricultural sector, with profound positive consequences of stable socio-economic growth for the region where it is implanted. The success of the company was further exemplified by the strong increase of its net income which allowed doubling of its dividend. This company has consistently posted profits in the last 10 years, a period during which most other agricultural initiatives in the country had either folded up or were performing sub-optimally.
What is most inspiring is not just the growth and profitability of the company but the fact that The Okomu Oil Palm Company Plc is ranks 10th among listed companies with the largest turnovers quoted on the Nigerian Stock Exchange (NSE). It is the only agro-business in the NSE’s top 16 companies with the largest turnovers.
According to the June /July issue of the Bottomline magazine, The Okomu Oil Palm Company Plc is the 9th company with the highest profits before tax among companies quoted on the NSE, and the only agro-business on the Exchange’s top 16.
Today, what is now known as The Okomu Oil Palm Company Plc has transformed into an economic success, earning presidential commendations and rated as one of the top 10 companies on the Nigerian Stock Exchange in terms of turnover.
The excellent quality of oil produced by Okomu has guaranteed a premium selling price on the local market, which absorbs the whole production. Just as it is expanding in size, its corporate environment is also expanding.
Currently, 3, 451 people are directly and indirectly employed by the company (permanent and several independent sub-contractors). All these have added up to place it on top in the burgeoning oil palm business and to position it as an emerging leader in rubber production. In 2017, Okomu grossed N20 billion in total revenue. Shouldn’t our governor have created our own Okomu instead of an airline?
Etim is a banker and journalist.