Air Cargo potentials lie fallow but illegal charges cost Nigeria $250bn

From left: Ikechi Uko, organiser, AviaCargo Conference; Sadiku Fafindadi, Commercial and Business Development, FAAN, Grp. Capt. John Ojikutu, former commandant of Lagos airport; Capt. Rabiu Yadudu; MD, FAAN; Obiora Udoyeh, AGM, Procurement, FAAN and Mrs. Faithful Hope-Ivbaze, Acting GM, Corporate Affairs, FAAN at the CHINET22 Aviation and Cargo Conference held in Lagos recently

 

 

 

Posted by Sade Williams

Stakeholders in the Nigerian Aviation sector gathered I’m Lagos recently at the 2022 Aviation and Cargo Conference tagged CHINET, convened by travel expert and consultant, Ikechi Uko, to brainstorm on different issues beleaguering the growth of air cargo business in Nigeria, seizing the opportunity to proffer solutions to them.

Organised under the broad theme: “The Role of Insurance and Regulation in the Growth of AviaCargo and Export Business in Nigeria”, some of the stakeholders opined that lack of modern infrastructure, lack of corporate governance, policy and regulation, high cost of aviation fuel, inadequate funding and resources, high cost of operation, insecurity, insurance and corruption, are among factors stunting the business of cargo, especially, export in Nigeria.

Chief among the speakers are Managing Director/CEO, Nigeria Export Processing Zones Authority  (NEPZA) Prof. Adesoji Adesugba.

According to him, government agencies at airports have done a disservice to import and export in the country by mounting complicated roadblocks in the form of extortions, harassment and multiple charges on export goods, costing the country $250 billon on agro-export produce to the country alone.

While speaking through assistant Director, Investor Promotion at NEPZA, Augustine Onyekwere, Adesugba said only five out of the 16 sundry charges at airports are legal, while 11 are illegal. He added that some of this alone has caused international cargo airlines to prefer flying out of Nigeria empty.

“Among the 16 sundry charges tracked for goods coming in or departing the country via airports, only five are officially recognised. Nigeria’s import-to- export airfreight ratio imbalance stood at 87:13 from available statistics. The implication according to cargo agencies is loss of at least about $250 billon on agro-export produce to the country.”, he said.

He said the Federal Government of Nigeria in order to support the Aviation industry and stimulate multiplier effects in the economy in May 2021 designated, the four major International Airports (Lagos, Abuja, Kano and Port Harcourt) respectively as Special Economic Zones to enable the companies operating at these airports enjoy the benefits of the Free zone scheme.

He stated that Special Economic Zones (SEZ) are designed to accelerate investment in the Aviation sector and its value chain, improve the utilization of the airports, generate more revenues for the Federal Government as well as attract more local and foreign direct Investment and increase aviation contribution to the GDP.

According to him, SEZ can grow the aviation and cargo export in Nigeria with the incentives and concessions available in the Nigeria Free Zones with concepts like tax holidays, one stop approvals as well as 100% foreign ownership of businesses.

“Complete tax holiday from all Federal, State and Local Government taxes, rates, customs duties and levies, one-stop approvals for all permits, operating licenses and incorporation papers. Duty-free, tax-free import of raw materials and components for goods destined for re-export. Duty-free importation of capital goods, consumer goods, machinery, equipment, and furniture.

While advocating Aviacargo guidelines to chart a clear way forward to harness  the untapped prospects in cargo business, Managing Director, Federal Airports Authority of Nigeria (FAAN) , Captain Rabiu Yadudu with stakeholders partnership and cooperation, including the insurance companies Aviacargo in Nigeria will receive a boost.

In his presentation titled: ‘Developing An Aviacargo Guideline For Nigeria’, Yadudu said the guidelines should be the starting point to writing the wrongs, the mistakes that have been our impediments over the years.

”In this document we should be able to identify these impediments and chart implementable actions plan that will be followed by all stakeholders to achieve our common goal, which is to reverse the deficits in imports/exports ratio and domestic cargo distribution. The plan should chart a way by which we should be steadily increasing our exports data on goods and mails by a minimum of 25% and 10% respectively, year on year for the next five years starting in 2023 and using the 2021 data as benchmark.

”The guidelines must address the way out of current challenges like Complaints of duplicity of functions among the several government agencies at the airports, Multiplicity of taxes and charges, Administrative bottlenecks, Lack of automation of processes, Bridging the Turn-around time in cargo facilitation, Optimal and modern cargo infrastructure and facilities, Lack of interest by local airlines in domestic cargo operations, Lack of adequate insurance coverage in the cargo facilitation; Lack of adequate standardization and certification of cargo items, particularly farm produce and Substandard packaging.”, he said.

While charging the stakeholders to collaborate on permanent solution in Africa, he said ; ”We really need to collaborate to find a lasting solution to these challenges. And, the time to start is now! In my opinion, having an operational single window for export will be a starting point and FAAN is willing and able to provide the enabling facilities. I call on all the aviation cargo stakeholders to brace up to this demand by nominating one or two persons to collaborate and form a committee to formulate an implementable Aviacargo document that will serve as a guideline for a seamless cargo operation that will help take us to becoming a preferred airports for cargo businesses in Africa. ”

Yadudu said FAAN has all it takes to support insurance companies to partner with local airlines and cargo handlers in doing business.

He added that, with its land mass of over 18,780 hectares of land in its 22 airports, the agency has the capacity of partnering with any company to build a massive modern cargo warehouses comparable with any of such facility in the world.

“Recently, we acquired additional 12.5 hectares of land for Abuja airport, bringing the total to 31,280 hectares”.

The FAAN boss explained that there is huge potential in aviacargo based on the statistics of five years from 2017-2021 of import and export of goods and mails.

According to him, in 2017, import and export recorded a sub-total of 168,706,874, 2018: 164,938,399, 2019: 172,048,640, 2020: 147,470,438 and 2021: 217, 814, 39.

While the sub-total for export and import mails was 39,019595 in 2017, 2018 : 47,318, 513, 2019: 55, 625,908, 2020: 44,587,736 and 2021 : 74,010,178.

“Nigeria imports more than she exports through air cargo. In 2017, about 168.7 tons of goods transited through our airports, and importation accounted for about 66% of this total, while export of goods accounted for the balance of 34%. There was a 52% increase in the total volume of goods and mails that passed through our airports in 2021 compared to 2020 data”.

He noted that with 204, 649 tons of cargo, Nigeria’s Murtala Muhammed International Airport, Lagos, Nigeria is ranked among the top five air cargo airports in Africa in 2001.

Nigeria is behind Jomo Kenyatta International Airport, Kenya with 363, 204 tons of cargo, Cairo International Airport, Egypt (333,536 tons), Oliver Reginald International Airport, South Africa (304, 018), and the Addis Ababa Bole International Airport, Ethiopia with 226, 417 tons of cargo that moved through the aerodromes according to the Airports Council International statistics.

The FAAN boss, however, expressed disappointment that the nation still has a long way to go in domestic air cargo facilitation, saying that it was his belief that it can do much better given the country’s population and agricultural capacity and output.

“It is not news that many of our farm produce is transported by road and as such most of the produce got damaged and lost quality in transit. This calls for urgent aviacargo intervention as it is one of the major reasons for food scarcity and high prices in some parts of the country.’’

Speaking on the sideline of the event, Group Captain John Ojikutu, a former commandant of Lagos airport, called on domestic airline operators to look in the direction of cargo operations to complement the passenger traffic, adding that the prospect in the local cargo business is huge.

”I have repeatedly said to our local airlines operators to go for Cargo business to balance up the drop in the passengers traffic. Get aircraft for minimum of 20 tons or 20,000kg and charge minimum of N250/kg; the earnings is sufficient for 50 passengers at N100,000/passenger which they may not likely get. Again, the cargo traversing the country’s north and south, east and west annually is over 100m tons; the air cargo is just about 200,000 metric tons  which is less than half a million. Private Airlines should work towards just 5million metric tons or 20%. There is no magic in this but simple economic sense.”, he said.

Commissioner for Insurance, National Insurance Commission (NAICOM)Mr. Sunday Thomas, who spoke through the Director of Policy and Regulations, Mr. Leonard Akah explained that in aviation insurance, the highest shareholders could take from their funds “is not more than five percent.”

“This is to protect you because usually the third party’s liabilities sometimes could be overwhelming because life has no value,” he said.

He spoke on the role of Insurance Regulation in Growing Aviation and Cargo Business in Nigeria.

He stated that while every airline operator is required to insure their businesses 100 percent as stipulated by the law, many of them are not finding it easy to pay their premiums as and when due.

“So they are breaking it into bits, some monthly and all that but our law says no premium, no cover. So if you don’t pay, you are on your own and you can’t fly if you don’t have insurance. This is an issue, even to access the foreign exchange because the parts, everything is foreign, even to access this currency is not easy,” he said.

Thomas listed other challenges to aviation insurance to include sabotaging local content Act requirements, insufficient technical expertise, instalmental premium payment, limited local capacity and nature of reinsurance cover.

He advocated more capital injection to enable more local retention, enhanced cooperation among NAICOM, the NCAA and NCMB and more engagements with airline operators.

 

 

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