Recently, Nigeria signed a $500 million (about N80 billion) facility in China to build four new international airport terminals. How useful are four terminals to a crumbling economy?
Come May 2015, Nigeria will have additional four brand new airport terminals to the existing 22. The new terminals will be modern in all definitions says government officials and the developer, China Civil Engineering Construction Corporation (CCECC). It will also launch Nigeria into the league of countries with highly commercialised and viable airport terminals with huge duty free opportunities.
The terminals, to be built from scratch in 20 months before May 2015, will be located in Abuja, Lagos, Kano and Port Harcourt. This project is financed under a $500 million facility obtained from the Chinese government. The facility to be paid back in 30 years after a 10-year grace period has 3 percent interest rate ($15 million) on it. Effectively, that takes the cost of the four terminals to $515 million (about N82 billion).
Terms and conditions of the loan suggest that the contractor, CCECC will be financed directly by Chinese EXIM Bank. This means Nigerian government will not have access to the $500 million thus, eliminating the avenues for fraud. This also guarantees that the projects will not be abandoned, like some other Nigerian government’s projects, that loans were obtained to execute.
Recall the Coordinating Minister for Economy/Finance Minister, Dr Ngozi Okonjo-Iweala had remarked at the MoU signing ceremony about two weeks ago in China that the federal government is elated that the loan deal for the financing of the construction of the terminals has finally been sealed because “developing airport and aviation infrastructure is a major priority to the federal government. The simultaneous construction of four international airports will create employment and other value chains that will help to grow and expand the frontiers of the Nigerian economy.”
The Aviation Minister, Princess Stella Adaeze Oduah also in far away China said work would start immediately. According to her the simultaneous construction of four international airports, in addition to the on-going work on 16 airport terminals nearing completion will create ready employment for the youthful population which accounts for 44 percent of the estimated 170 million people.
The president of CCECC, Yuan Li made a commitment to the deal when a delegation of Nigerian government officials paid him a courtesy/facility inspection visit at the corporate headquarters of his company in Beijing. He said the delivery period of 20 months is sacrosanct and the quality of the work will be high comparable to similar projects executed by the company in other parts of the world.
Li said CCECC is the biggest Chinese company doing business in Nigeria, with local staff strength of about 20,000 and an expatriate quota of 1,000 Chinese citizens.
How viable will the new airports be?
The viability of an aviation industry isn’t far removed from the economic viability of a nation, say experts. Thus how well the new terminals and indeed existing terminals will be is a function of how robust the Nigerian economy will be. A robust economy will naturally lead to huge economic activities necessitating business and pleasure travels. With increased travels, the fastest means of travel becomes one of the biggest beneficiaries.
What are the fundamentals that should make the airport viable?
Statistics from the Central Bank of Nigeria (CBN) show that the Gross Domestic Product (GDP) in Nigeria expanded 6.60 percent in the first quarter of 2013 over the same quarter of 2012. Nigeria GDP Annual Growth Rate averaged 6.79 percent from 2005 until 2013, reaching an all time high of 8.60 percent in December of 2010.
Projections from 2013 to 2016 by TadingEconomis.com shows that on the whole, the Nigeria economy is projected to follow a steady growth pattern in the next four years with real GDP growth expected at 6.74 percent in 2013 and inflation rate of 9.74 percent, coupled with rising exports and imports.
It noted that rising imports and exports are expected to lead to higher trade merchandise trade values over the 2013 to 2016 forecast period. This suggests improved economic activities in Nigeria, a cheering news of some sort to the aviation industry as well particularly where the economy will be more dependent on non-oil exports.
Also with the anticipated reforms in the power sector gaining some traction, the Nigerian real sector should also be looking up positively. The real sector, economist say, is the driver of any economy.
Nigeria’s airports economics projections
In 2012, statistics showed there were 9 million domestic passenger movement and 5 million international passenger movements, making a total of 14,370,795. This figure was a slight decline from 2011 that was 14, 900,995. But this figure is already looking higher in 2013 as the ministry projects 12 million passengers this year.
The ministry of aviation projects that by 2015, when all 22 federal airports are remodelled, at least 16 million Nigerians will be able to travel through the airports, 4 million more the current 12 million passengers. That figure is projected to grow by 10 percent every year with improved facilities at the nation’s airports nationwide. When the airports begin to witness such huge traffic the nation’s economy will grow and the GDP will improve.
The minister of aviation told our correspondent sometime last year that Nigerian airports potentials now stand at N70 billion annually but on completion of the new terminals, she projects an annual revenue of N150 billion from the airports.
In addition, she said when the aerotropolis concept comes alive with the cluster of activities and commercial hubs around the airport, revenue will rise remarkably. She said as a safe guard to profitability, the management of these airports to a large extent will be done by private professional airport managers even though they will remain Nigeria’s assets.
The Coordinated General Manager, Corporate Communications, Aviation Parastatals, Mr Yakubu Dati said, “The four airports are key and important. We are saying Nigeria should take its pride of place in the aviation industry. With a population approaching 170 million, we are not a population to be toyed with. Airports have gone beyond avenues for transportation but centre of activities. With these airports, we can leverage on the trickle down economic effect.
“For instance, a lot of money can be made from Cargo exports. In 2011, about $245 million was made from the export of perishable products from Africa. Nigeria had zero share from these huge exports yet, we are talking of countries like Ghana, Cote Devoir, South Africa etc. So with these new facilities, Nigeria can also benefit from these huge exports.
“So rather than have a terminal where people just fly, we will have a recreational centre of some sort where people can relax and enjoy themselves. At the end of the day, the aviation industry will contribute significantly to Nigeria’s GDP.
“Let’s consider Dubai. What has made Dubai thick are the airports. You can shop, eat, sleep and even live at their airports without even going into the city if you don’t want to. This is the type of concept we are looking at. Looking at the aerotropolis concept, we want a business hub around the airport where people can say, fly into Lagos, hold meetings, conferences at the airport and go back without necessary going into the town. This saves you time and cost.”
Experts react
Engr. Sheri A. Kyari, the Founder/Executive Director, the Centre for Aviation Safety and Research (CAS-R) said the terminals will be economically viable with the benefit of history. “When the Murtala Muhammed International Airport Lagos was constructed over 30 years ago, the capacity utilisation was very low then. Gradually we grew to full capacity and we have outgrown the capacity. But at the time it was constructed, passenger passage at the airport was less than 1 million annually, now you have over 5 million passengers per year. There is need to improve our capacity because we have outgrown the capacity.
“We know of three airlines in the offing now – Hak Air, Discovery Airline and Air Peace. In addition we are looking at First Nation resuming flights operations again. We are also looking at Chanchangi Airlines and IRS increasing their fleet and Dana Air re-fleeting as well.
“When you look at all these prospects, there is need for some kind of expansion. And looking at the four airports – Lagos, Abuja, Kano and Port Harcourt – they are the hubs in Nigeria. With increased influx of foreign airlines too and with the opportunity of landing in one or two airports, there could be an upsurge of passengers.”
Also Captain Tito Omaghoni, President Concerned Aviation Professionals said, “The new terminals will engender the aerotropolis project. The project will see huge businesses – hotels, shopping malls, rail tracks and other services sprig up around the airports.”
Sunday trust
No comments:
Post a Comment