April 14, 2023/CSL Research
Recently the Minister Minister of Aviation, Hadi Sirika noted that except for Nigeria Air project that is about 98% completed, 90% of the aviation development roadmap has been achieved. He noted that the successful completion of the roadmap would increase the contribution of the industry to the economy from the current 0.6% to 5%, amounting to c. US$14.2billion. The ministry of aviation, in 2016, launched a 12-point framework for the sector. This included establishment of a national carrier, development of agro-allied /cargo terminals, establishment of Maintenance, Repairs and Overhaul (MRO) centre, Aviation Leasing Company (ALC), Aerotropolis (airport cities), Aviation & Aerospace University and concession of the four airports.
In recent years, airline operators have been hit by pertinent concerns. First, was the scarcity and rising cost of aviation fuel (which accounts for c.40% of their operational costs), with the attendant impact on the cost of operations and conditions of service. Beyond the high cost of aviation fuel, the current acute shortage of FX is also a big problem for airline operators. For domestic airlines, carrying out operational activities such as servicing their aircraft has
become almost impossible amidst the acute scarcity of forex. The scarcity of FX is also constraining international carriers from repatriating accumulated funds from tickets sold in naira.
The aviation sector was one of the sectors worst hit by the pandemic, causing airlines to abandon the skies and punctuating the interesting prospects of that year. The sector recorded -36.98% in 2020 from a GDP growth of 13.2% in 2019. Currently, the sector which was once on its knees has gotten back to its feet as the green shoots of recovery are emerging. From the Q4 2022 GDP report, the sector posted a growth of 26.23% in 2022 from 19.7% in 2021, returning to pre-pandemic levels.
We believe the aviation sector is set for growth, but a major part of the growth prospect is the establishment of the national air carrier. In November last year, the federal high court, Lagos Judicial Division, issued an order of interim injunction restraining the Federal Government from executing the proposed establishment of the national carrier – Nigeria Air. The registered trustees of the Airline Operators of Nigeria who were the Plaintiffs in the suit,
alleged that the sale of shares of the proposed airline violated the Companies and Allied Matters Act, as well as that of the Securities and Exchange Commission. Among other things, the indigenous airlines (Plaintiff) requested the court to stop the national carrier deal and withdraw the Air Transport License (ATL) already issued to Nigeria Air by the Federal Government/Nigerian Civil Aviation Authority as it did not pass through the normal security clearance. Despite the restraining order, the Minister says the airline will commence operations by May 2023 in partnership with Ethiopian Airline.
