By Louis Ibah
Managing Director/CEO, Nigerian Aviation Handling Company (NAHCO), Mr. Norbert Bielderman, says the ongoing economic recession offers Nigeria the greatest opportunity to grow its export industry, create wealth for citizens, and boost the economy.
Bielderman, a Dutch, has spent the last seven years working in Nigeria. In this interview held at NAHCO headquarter in Lagos, he said the devaluation of the naira and the attendant inflation has led to a drop in imports into the country from the aviation sector. Bielderman who decried the exorbitant charges and rents paid by business owners in various airports across the country said for the country to effectively unlock its export potentials for national prosperity, the government must take urgent steps to create the right investment climate for private sector investors to thrive.
Impact of recession
I am sure that you know very well that we have been in a recession since the middle of 2015 in Nigeria. What I can say is that the ongoing recession has affected every investor in the aviation industry, be it the airlines, the owners of the airports, or ground-handling companies like ours. We are all feeling the pinch of this recession.
But I can also say that in Nahco we had survived the challenges posed by the recession to our operations in 2015 and 2016. But I don’t have a crystal ball to see into the future, but going by what is happening, thee are no clear indications to suggest that the recession would go very soon. What this means for Nahco is that our vision for the year has to be geared towards the sustenance of our operations.
But we have new projects that we have lined up so that we can meet our obligations to our shareholders and those that patronise us.
That means we have to sustain our revenue growth through good cost control. How will we do this? As everyone knows the airlines that do business with us at present have difficulties, especially the domestic airlines that are struggling. International carriers are also having their challenges and they are either cancelling or reducing the number of flights coming into Nigeria. Also some foreign airlines are downsizing the type of the aircraft they bring into the country, meaning that fewer numbers of passengers and cargo can go on such flights. All these have an immediate impact on our operations and revenue.
Under a recession organisations adopt more creative strategies to survive. Creativity means thinking outside the box; having to look at other sources of income that are related to your industry. So for us at Nahco, we have developed other subsidiaries. We have a subsidiary for clearing of cargo, we have a company in the free trade zone, and we have plans to diversify into other projects in West Africa. We have set up a Nahco agric-zone that will deal with perishable goods and we are working in partnership with a South African based company on this project. We are looking at a site in the northern part of the country where there are lots of farms and farmers. You know farmers will always farm but they may not know how to get maximum benefit for their investment. So this new subsidiary company will assist those who want to make money through exports of perishable goods while others would continue to sell to the local market.
It is a long-term project that will be very beneficial to farmers and Nahco. That’s part of our own creative ways to survive.
State of Nigeria’s airfreight business
What I can say is that airfreight has been declining in Nigeria since the second half of 2015. One only therefore imagines what happened in 2016, which was not a good year at all with regards to cargo business. As you also know Nigeria is an import dependent country. Most of the products consumed in the country are usually imported. But given the present circumstances we find ourselves, there is an ongoing effort to boost the exports of commodities out of Nigeria and this is a very good idea.
But on the import side, we also have recorded a tremendous decline in the volume of imported goods and the reason is because of the inflation in the country as well as the unemployment crisis and the fact that a lot of people now don’t have the money to import goods as in previous years. And I also have to note that the devaluation of the naira has not been very helpful to importers. So a lot of Nigerians or those living in Nigeria now go for locally made products or foods. For instance, imported oranges from South Africa for which consumers in Nigeria would like to buy would now be going for N300 and this is outrageous. So you now have the consumers of the South African oranges now buying more of Nigerian oranges. And it is the same thing with very many products that were hitherto imported. Now, with the devaluation of the naira we expect exports to be boosted, but since export of good is still at its infancy stage in Nigeria, we are not really seeing the numbers go up and the impact felt in the economy. But there has been movements. Here, I am specifically talking about our operations; imports for years used to be about 90 per cent against 10 per cent exports. But at present, if we are to say that things have changed, then what we have is a situation of about 80 per cent import as against 20 per cent export. That is why I said there is movement definitely towards more exports. And interestingly, there has been an increase in the volume of perishable goods being exported, even though that to me is also done on a small scale when viewed against the potentials that we have in the country. There are opportunities for such large-scale export of goods, which everyone is looking up to Nigeria to kick-start and this, is where the majority of citizens and the economy will benefit greatly. And we are doing all we can as a company to see how we can assist Nigerians export goods.
Impact of the shutdown of Abuja airport
I think the government has one or two things that they can do to assist ground-handling companies like ours to remain in business, continue to create jobs for Nigerians and grow the economy. Let me give you an example, everyone knows that the Abuja airport is about to be shut down to enable them fix the runway. But what you hear everyone talk about is the impact on the airlines. You hear people say “it is bad for the international airlines, it is bad for the domestic carriers, it is bad for passenger.” But no one seems to care about what happens to the others, no one talks about a critical operator like the ground handling companies. We even sent a letter to the Minister of State for Aviation and told him if they close down Abuja airport for six weeks, it will affect our businesses. First, you know very well that some international airlines will not come to Nigeria if they have to chose between flying directly into Kaduna instead of Abuja airport. And for the type of business we do, we have to move our equipment and staff to Kaduna to cope with the new challenges of the alternate airport.
And it will certainly cause us a fortune to move heavy equipment to Kaduna. And it will also cost us money to pay for accommodation for our staff in Kaduna for the six weeks they will be spending there. We don’t have to go to the airlines to assist us. But we requested from the Minister of Aviation and said “sir, what incentives can we get because this arrangement will cost of millions and millions of naira.” Our Kaduna station is small. But we haven’t received any support or response yet from the Minister of Aviation.
Exorbitant airport rents, charges
There is one other challenge that the government has to step in and assist those doing business in the airports in Nigeria. And this has to do with the rents or charges that we are paying. These charges I must confess are very exorbitant. I give you a few examples. If we needed an airport pass for our vehicles which is compulsory for all vehicles that enter into the airport, we now pay so much. I have been in this country for about seven years and airport pass (stickers pasted on car windshields) when I first came it used to be N5,000 which is very reasonable or a fair price. Mind you, this is just a piece of paper that you are paying for. But I tell you that the price of this paper has continued to increase in recent years from N5,000 to N15,000 to N50,000 and then at this moment we are communicating it is sold for N150,000 per vehicle! Just to get that piece of triangular paper pasted on your vehicle in order to be allowed to enter the airport, you are charged N150,000? I have more than 400 vehicles, and at the Lagos airport, and if you do a quick calculation it will cost me more than N60million to get an apron pass for my vehicles. This is ridiculous. Now, we also have some offices at the airport and one day they just woke up and increased the rents by 100 per cent, you either take it or you leave it. We have no choice, because we need the offices, and we need passes for our vehicles and our staff to come in and work. So we have to pay.
The third example, is that twice a month we have to bring in diesel trucks from our external suppliers because our equipment runs on diesel. For this diesel trucks to be allowed to enter the airport through the gate and go to our maintenance facility just half a kilometer down the road inside to offload and come out, every time this happens, we have to N150,000 for this truck to enter through the gate. And the diesel suppler tells you he cant pick that bill because really his contract with you is just restricted to supplying you diesel.
We have complained about all these ridicuius costs to our business the cost we are being charged is so high is that we just cant tell anyone that we can be chased out of busijnes because we cannot transfer this cost to anyone. The airlines would take it. So he government has to look at this issue. The NCAA which is the regulator of te industry has to step in and see how it regulates these charges in another way to assist operators and those doing busineses at the airports.
For us it is also a struggle at this moment of recession because we also have to be cost effective as I pointed out earlier the patronage from airlines are reducing flights and domestic carriers are also having problems with forex and fuel that do business with us is also reducing. And don’t forget that every year we pay a five per cent concession fee from all our revenue whch goes automatically to the federal governemntr and the airport authority of Nigeria. and five per cent of our revenue is a lot of money and you should expect that yoy will get access to do businerds fairly.
Yes, there are some challenges that as a country we have to resolve if we must boost exports like it is done in so many other countries.
Before you start exporting perishable on a large scale, you must first of al know the market that you wish to export to and the type of goods that such a market accept.
Is it the US or Uk or the whole of Europe that we want to face as a country and say we are going to focus on exporting to this country? That is usually a good way to start in developing a plan or export programme. The good thing is that we have Nigerians living and working all over the world. So there is a room to freight any nigerian typical product to anycountry. But here we are looking at large scale export of products. So we must work on some specifics to get results.
And the problem with saying lets focus on Europe is that you will have some challenges with the Eurpoean Union. Maybe with Brexit things may be easier for nigerian exports. But the UE as hery stringest rules and regulations as regards imports and perishable goods in general. They have standards on sizes, lenthhs, quality, quantity that may sound very ridiculous. So the question is are we ready in Nigeria to fulfil all these requirements to say let us go to Europe?
So we have discussed some of these things with the British-Nigerian export council. We are not a company to boost the exports, but we only provide the logistics, and the airlines do the remaining part of the job. But we assist the much we can.