Experts decry decline in Aviation Foreign Direct Investment

… Says sector needs $50bn to fix infrastructure

From Suleiman Idris, Lagos

Over the last four years, Foreign Direct Investment (FDI) into the Nigeria aviation sector has decline compared to the three preceding years, an expert disclosed in Lagos on Tuesday.
Beginning from 2013, investment in the sector dropped from $5.6 billion, representing 0.39 percent share of the world and 10.75 percent of Africa investment to $4.4 billion, representing 0.25 percent and 7.49 percent of the world and Africa shares of the funds.
On the reverse, the industry witnessed an increase from $6 billion in 2010 to $7 billion in 2012, rising from 0.44 to 0.47 and 14.0 and 12.92 of the World and Africa investment in the same sector, Opeyemi Agbaje, an investment analyst and Chief Executive Officer of RTC Advisory Services Limited said.
Speaking at the 2017 annual colloquium of the Nigeria Travel Market with the theme ‘Vision 2050: How to fast track Nigeria’s aviation’, the experts posited that the sector requires massive investment with strong regulatory oversight to jump start the huge foreign investment needed to turn around the fortune of the sector.
Speaking on the topic “Raising Capital to Finance a Vision 2050 Plan”, Opeyemi said that by 2050, the Nigerian aviation industry will require an estimated $50 billion for the next 30 years to meet the infrastructural gap bedevilling the sector in order to position Nigeria as a hub in Sub Saharan Africa.
He added that the answer to the development of aviation industry infrastructure challenges is global FDI.
According to him, to attract global FDI flows into Nigerian aviation, Agbaje stated that it requires a stable macroeconomic environment, forward-looking and proactive policy, a clear and compelling vision for the industry shared by all stakeholders including government and the private sector and regulation that seeks to foster industry transformation (not just collect revenues).
Speaking on the need to establish a national carrier to fast track the vision, Chairman of Aso Savings and Loans Plc, Ali Magashi said that the establishment of the national carrier is imperative as aviation is part of the macroeconomic infrastructure of government and that it helps to support and stimulate other sectors of businesses.
“If we had developed a national carrier, we will not be where we are today. The government must learn to support the industry. All over the world, the government is the biggest supporter of airlines,” he told the gathering.
The industry he explained is also a high capital, high risk, long gestation and low margin returns business, as such it cannot favourably compete with other less risky and higher return private sector investment opportunities.
On the role of the National Carrier in the growth of tourism, he said that a national airline is an embassy with wings, transporting its country’s talents, skills, commerce, culture, cuisine, human resource and goodwill around the world.
“Dubai and Singapore have successfully made their airlines their main brand, driving their national identity and growth strategy, and so have Ethiopian Airline and Egypt Air done here in Africa.” He explained.
Magashi, who is the Chief Executive Officer of Kitari Consult Limited, added that according to the World Bank, every one per cent of government fund spent efficiently on infrastructure leads to an equivalent one percent growth in GDP.
He also listed challenges bedevilling the establishment of a National Carrier to include: political will and sincerity of purpose, adding that for this to work, the presidency will have to drive this with all the political might and sincerity of purpose to avoid political interference while the process of aircraft purchase and other related procurement processes should be done government to government with governments of selected aircraft manufacturers, to avoid extra third party added costs.

He said that the process of feasibility and business plan should be open and transparent and should involve local stakeholders for hands-on local market input and in using Federal Character, merit should determine recruitment, not politics and/or federal character, especially at the executive management level.

“ Competence, experience and success story track records should guide the process of executive recruitment – for example a minimum qualification experience of managing an airliner with a minimum of a hundred line airplanes for accountable manager and post holders.”

Founder of Evergreen Apple Hangar, Lagos, Dr Harold Demuren enthused that despite the challenges the Nigerian aviation is facing the future for the sector is bright, adding the United States is very proud today because it is driven by vision.

He pointed out that by 2050, Africa will grow and that Nigeria will be the epic centre for aviation.

The former Director General of the Nigerian Civil Aviation Authority (NCAA) said “ Nigeria has a large population of youths who are very knowledgeable in Information Communication Technology (ICT),”.

Nigeria, he said is a natural hub for aviation because it has population and a very large, market, which according to him are the attraction.

“ Despite the current challenges, the future of aviation in this country is bright and would be driven by a projected increase in population from over 180 million as we have to about 399 million by 2050.” He explained.

Demuren added that high speed train will compete with aviation in 2050, adding that in the same year most of the airlines would go low cost.