Louis Ibah
At the African Heads of State meeting held under the auspices of the African Union (AU) on January 28, 2018, in Addis Ababa, Ethiopia, President Muhammadu Buhari, signed the Single African Air Transport Market (SAATM) deal, an open skies treaty which gave the right to airlines in 23 African countries to have unrestrained entry and exit into Nigerian international airports.
The criticism that trailed Nigeria’s participation in the SAATM treaty by aviation stakeholders is yet to die, when it emerged last week that the Federal Government also plans to sign the African Single Free Trade Area (AfCFTA) treaty at the African Heads of States meeting scheduled for March 21 – 22, 2018 in Kigali, Rwanda.
Indeed, just like SAATM, the AfCFTA is a flagship project of the African Union Agenda 2063 and is aimed at creating a single continental market for goods and services, with free movement of business persons and investments.
However, according to investors in Nigeria’s domestic airline industry, Nigeria participation in both AfCFTA and SAATM are decisions taken in a haste in the light of several unresolved concerns that have the potential of impacting the Nigerian economy negatively.
Demerits for Nigeria
Chairman of the Airline Operators of Nigeria, Capt. Nogie Meggison listed some of the problems that mars Nigeria competing favourably in the two treaties to include the following: First, Meggison said the basic issue of free movement of people and trade is an integral aspect of the declaration that will go a long way to determine the fairness of the two deals. Sadly,he noted that it is a well-known fact that Nigerians who are suppose to be traveling within Africa under these deals, require as a prerequisite visas to 34 African countries. Only within West Africa are Nigerians allowed free movements with visa issued at entry points. countries granting exemptions. Local airlines therefore insist that this is an issue that first needs to be addressed. “Before opening the skies for SAATM and AfCFTA, first open the visas in Africa for Nigerians,” Meggison said.
“We are also concerned that the timing is not right as there are several unresolved issues faced on daily basis by Nigerian airlines and Manufacturers.
“For instance, foreign airlines are exempted from VAT both in Nigeria and in their home country. But Nigerian airlines have to pay VAT. And JetA1 is a lot cheaper in many other African countries and mostly subsidized by the government for their airlines. On the contrary, airlines in Nigeria are made to pay exorbitant prices in excess of N250 per litre for the same aviation fuel (Jet A1) bought far cheaper in other countries.
“Similarly, Customs Tariff (Importation Duty, Levies and Taxes) is not uniform across the continent. This poses a challenge to the AfCFTA because it will impact significantly on its success and gains or otherwise to Nigeria.
“Furthermore, airlines in Nigeria are made to pay various kinds of navigational charges which they should ordinarily be exempted from in line with global best practice. These charges range from Terminal Navigational charges to enroute navigation charges, Over-flight charges, clearance charges, and extension charges. Even foreign airlines,including African airlines that will be taking advantage of the SAATM and AfCFTA don’t pay enroute charges or extension charges in their country which the Nigerian airlines are forced to pay in Nigeria.
Imbalance in market access
The Airline Operators of Nigeria (AON) are also holding the belief that the SAATM/AfCFTA programme is targeted at exploiting the Nigerian market by other African countries.
Said Meggison, “We believe this is so because Nigeria has the largest population in Africa, is currently the largest economy in the continent, has a young population that travels extensively around the world (it is a known fact that out of every five black people in the world one of them is a Nigerian).
“Furthermore, Nigeria is about the only country in Africa with lucrative multiple destinations with significant traffic to various parts of the continent. While we have about 6 – 7 international entry points (Lagos, Abuja, Kaduna, Kano, Port Harcourt, Enugu, and Calabar) while about 80 per cent of the other countries only have one. This creates an imbalance in market access and puts Nigeria at a disadvantage.
For instance, Nigerian airlines can only fly into Accra airport in Ghana; Kigali airport alone in Rwanda; Addis Ababa airport only in Ethiopia; or Abidjan airport as a single destination in Cote d’Ivoire. Yet all the African airlines that will sign up to these free trade deals can fly freely into virtually all our major entry points including Lagos, Abuja, Port Harcourt, Kano, Kaduna, Enugu, and Calabar taking our Nigerian traffic out of the country and thereby resulting in huge capital flight to the detriment of domestic airlines, the Nigerian economy and loss of jobs. This kind of trade deal is certainly to the detriment of Nigeria and should be discontinued.
“Nigeria cannot afford to rush into signing of AfCFTA which will give unfettered access into the Nigerian market and is likely to erode the good work government has so far put in place to diversify the economy and reverse the gains of the present administration in reviving the economy out of recession,” said Meggison
“The AON considers it as unfair and a complete disconnect that airlines who are the fulcrum of the implementation of SAATM/AfCFTA were not carried along in the decision process leading up to the signing of these Treaties and Firm Commitment to the process which will ultimately affect the future aviation of Nigeria in many years to come and the survival of our airlines who take a loan at over 25 per cent interest rate and are not in a level playing field with most of the other African airlines that are 100 per cent government funded or subsidised,” he added.
The way forward
It is worthy of note that about 80 per cent of the Nigerian GDP is generated from the private sector. To this end therefore, airlines, manufacturers and other businesses provide critical socio-economic services to the Nigerian economy should be protected at all times by the government.
For Nigeria to derive maximum benefits from the SAATM and AfCFTA treaties, it must first go back to the drawing board and conduct an Impact Assessment Studies to ascertain the likely impact of such an immediate implementation of SAATM/AfCFTA on the Nigerian domestic airline market, the economy in terms of capital flight and on the employment of its teeming youths who cannot find jobs as things currently stand.
The Federal government should be guided by the fact that only 23 countries out of 54 nations in Africa (less than 50 per cent ) have committed themselves to these treaties. Those countries yet to sign the deals no doubt, are trying to protect their markets until they can realistically compete in the single market space in Africa. As it stands, there is enough evidence to suggest that Nigeria is simply not ready to handle the level of unfair competition that the full implementation of SAATM or the signing of AfCFTA will bring upon the country. It will be counter productive. Nigeria should therefore put its domestic industry in order first and empower its domestic businesses to effectively compete in these free trade deals.