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Wednesday, September 28, 2022
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Urgent need for a local content policy in Nigeria’s aviation industry

By Collins Okeke

Aviation is one of the most fascinating industries in the world. It is a means of transportation that connects people, cultures, and businesses across continents. It also facilitates international trade and promotes tourism.

With more than 5000 airlines that operate over 25,578 aircraft at more than 41, 500 airports, the aviation industry supports 65.5 million jobs around the world and supports $2.7 trillion (3.6 per cent) of the world’s gross domestic product (GDP). If aviation were a country, it would rank 20th in size by GDP.

That equates to the GDP of Switzerland or Argentina. Regrettably, the aviation industry in Nigeria is yet to contribute significantly to the country’s economic growth.

Despite the potential of the sector to create employment and spur the development of other industries such as hospitality and tourism, the aviation industry in Nigeria has one of the highest turnovers of registered domestic airlines in the world.

It is also known for parading airlines with the shortest lifespan of 5 to 10 years. No fewer than 150 airlines were registered as of 2000. Only 28 survived till 2006. In 2007 alone, 7 air licenses were withdrawn by the Nigerian Civil Aviation Authority. The situation is not fundamentally different today as most Nigerian airlines are struggling to stay afloat.

A lot of factors have been advanced for the abysmal failure of Nigerian airlines but the most fundamental is the absence of a local content policy in the aviation industry in Nigeria.

AIR SERVICE AGREEMENTS

The Aviation industry in Nigeria as in other parts of the world is governed by air service agreements or treatises. Nigeria is a signatory to over 90 Bilateral Air Service Agreements (BASA). Bilateral Air Service Agreements (“BASAS”) are treaties signed between countries to allow international commercial air transport services between territories.

Nigeria also has an open skies treaty known as the Single African Air Transport Market with about 27 other member states of the African Union as well as other potential signatories. Most of these treaties are entered into without adequate consideration of their impact on the aviation industry in Nigeria.

The result is that most air service agreements are skewed in favour of foreign airlines against Nigerian airlines. Currently, over 25 foreign airlines operate flights into Nigeria from multiple destinations. While only one Nigerian airline operates internationally.

One or two Nigerian airlines operate on regional routes. Some have argued that the establishment of a national carrier would balance out Nigeria’s air service agreements and other international obligations, however, the reality is that the national carrier would be subject to the same difficulties faced by private local airlines.

As such, the focus should be on creating a more conducive business environment within which a national carrier and private airlines can thrive which is why a Nigerian Aviation local content policy is imperative.

THE FLY NIGERIA Bill

The Fly Nigeria bill promoted by Olisa Agbakoba Legal (OAL) is the first real effort at developing a Nigerian Aviation local content policy.  The Bill is similar to the Coastal and Inland Shipping (Cabotage) Act 2003 which opened up an N10 trillion local maritime economy. It is modelled after the Fly America Act of 1974.

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The Fly Nigeria Bill is designed to create an enabling legal and policy environment for indigenous airlines in Nigeria.

It seeks to protect and give market share to Nigerian airlines. It prevents public funds from being ferried away by foreign airlines but ploughed back into Nigerian airlines to generate employment, revenue, access to capital, foreign investment, career projection for core professionals, and most importantly ignite a dash for codeshare and alliance with Nigerian carriers.

The Fly Nigeria Bill essentially states that Nigerian carriers shall be used for all commercial foreign air travel of employees/property, dependents, consultants, contractors, and grantees when air travel is funded by the government.

General provisions of the Bill require that Nigerian flag carriers be used regardless of added cost or travel time implications to the traveller. The Bill will apply to non-Nigerian nationals and non-Nigerian companies or their representatives both within Nigeria and ex-territorially.

The Bill provides a balance against some existing, largely obsolescent, and, in many cases, inequitable bilateral Nigerian/non-Nigerian Air Transport Agreements. The Bill also accepts Code Sharing (Airline Alliances) of flights by Nigerian and non-Nigerian flag carriers utilizing the equipment of the non-Nigerian flag carrier.

If a Nigerian flag air carrier has the arrangement to provide passenger service in international air transportation on the aircraft of a non-Nigerian air carrier under a “code-share” arrangement, the ticket must identify the Nigerian Flag air carrier’s designated code and flight number.

The bill also provides some exceptions to when a flight would be by a non-Nigerian carrier such as; if the total travel time is 10 hours or more; if the airport abroad is an interchange point, and use of a Nigerian carrier would require the traveller to wait six (6) hours or more to make a connection or would extend the total travel time six (6) hours or more and if travel by non-Nigerian carrier would eliminate two (2) or more aircraft changes en route.

Further, for all short-distance travel of origin and destination, the use of a non-Nigerian carrier is permissible if the elapsed travel time on a scheduled flight from origin to destination airport by a non-Nigerian carrier is three (3) hours or less and service by Nigerian carrier would double the travel time.

Other exceptions are emergencies, budget constraints, etc.

CONCLUSION

The Aviation industry in Nigeria needs an urgent boost to contribute to the country’s economic transformation. A Nigerian Aviation local content policy articulated in the OAL Fly Nigeria Bill can provide the boost.

If the Fly Nigeria Bill is adopted and passed, it will reserve commercial transportation of goods and services to airlines flying Nigerian flags and owned by Nigerians and ensure government spending on air travel (estimated to be over N100 billion annually) originates and terminates with airlines flying Nigerian flags.

The Fly Nigeria Bill will enable the government to recoup investments in the national carrier (which is about $300 million) and provide steady cargo, revenue, and passengers for Indigenous Airlines.

It would also trigger an increase in the number of indigenous airline operators and that would no doubt create more jobs, develop premium manpower and encourage the establishment of aircraft maintenance facilities.

It will create more air routes which would in turn facilitate tourism and trade, more travel agencies and hotels, etc. which would generate economic growth, provide more jobs, and increase revenues from taxes. Aviation policymakers should consider and embrace a Nigerian Aviation local content policy by adopting and passing the OAL Fly Nigeria Bill.

  • Okeke is an Associate Partner/Head, Public Sector Practice Group at OAL

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